Transpo-Law Review (Aquino)

San Beda College of Law
54
MEMORY AID
IN
COMMERCIAL LAW
TRANSPORTATION LAWS
CONTRACT
OF
TRANSPORTATION/
CARRIAGE
A contract whereby a person, natural or
juridical, obligates to transport persons,
goods, or both, from one place to another, by
land, air or water, for a price or
compensation.
Classifications:
1. Common or Private
2. Goods or Passengers
3. For a fee (for hire) or Gratuitous
4. Land, Water/maritime, or Air
5. Domestic/inter-island/coastwise or
International/foreign
It is a relationship which is imbued with the
public interest.
COMMON CARRIER
Persons, corporations, firms or associations
engaged in the business of carrying or
transporting passengers or goods or both, by
land, water, or air, for compensation, offering
their services to the public (Art. 1732, Civil
Code).
Art. 1732 of the New Civil Code avoids any
distinction 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
(sideline).
It also avoids a distinction
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.
Neither does the law distinguish between
a carrier offering its services to the general
public that is the general community or
population and one who offers services or
solicits business only from a narrow segment
of the general population.
A person or entity is a common carrier
even if he did not secure a Certificate of
Public Convenience (De Guzman vs. CA, 168
SCRA 612).
It makes no distinction as to the means of
transporting, as long as it is by land, water or
air.
It does not provide that the
transportation should be by motor vehicle.
(First Philippine Industrial Corporation vs. CA)
One is a common carrier even if he has no
fixed and publicly known route, maintains no
terminals, and issues no tickets (Asia
Lighterage Shipping, Inc. vs. CA).
Characteristics:
1. Undertakes to carry for all people
indifferently and thus is liable for
refusal without sufficient reason
(Lastimoso vs. Doliente, October 20,
1961);
2. Cannot lawfully decline to accept a
particular class of goods for carriage
to the prejudice of the traffic in these
goods;
3. No monopoly is favored (Batangas
Trans. vs. Orlanes, 52 PHIL 455);
4.
Provides public convenience.
PRIVATE CARRIER
One which, without being engaged in the
business of carrying as a public employment,
undertakes to deliver goods or passengers for
compensation. (Home Insurance Co. vs.
American Steamship Agency, 23 SCRA 24)
TESTS WHETHER CARRIER IS COMMON
OR PRIVATE:
The SC in First Philippine Industrial
Corporation vs. CA (1995) reiterated the
following tests:
1. It must be engaged in the business
of carrying goods for others as a
public employment and must hold
itself out as ready to engage in the
transportation of goods generally as
a business and not as a casual
occupation;
2. It must undertake to carry goods of
the kind to which its business in
confined;
3. It must undertake to carry by the
method by which his business is
conducted and over its established
roads; and
4. The transportation must be for hire.
In National Steel Corp. vs. CA (1997) the SC
held that the true test of a common carrier is
the carriage of goods or passengers provided
it has space for all who opt to avail
themselves of its transportation for a fee.
COMMON CARRIER
PRIVATE
CARRIER
1. As to availability
Holds himself out for Contracts
with
all
people particular individuals
indiscriminately
or groups only
2. As to required diligence
Extraordinary
Ordinary diligence is
diligence is required
required
3. As to regulation
Subject
to
State Not subject to State
regulation
regulation
4. Stipulation limiting liability
Parties may not agree Parties may limit the
on
limiting
the carriers
liability,
carriers
liability provided it is not
except when provided contrary
to
law,
by law
morals
or
good
customs
5. Exempting circumstance
Prove
extraordinary caso
fortuito,
Art.
diligence and Art. 1174 NCC
1733, NCC
6.Presumption of negligence
There
is
a No presumption of
presumption of fault fault or negligence
or negligence
7.Governing law
COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)

55
MEMORY AID
Law on common
carriers
Law on obligations
and contracts
e.
GOVERNING LAWS
A. Domestic/inter-island/coastwise
Applicable to Land, Water, and Air
transportation
1. Civil Code - primary
2. Code of Commerce (Arts. 349, 379,
573-734, 580, 806-845) - suppletory
B. International/foreign/overseas
(Foreign country to Philippines)
Applicable to Water/maritime and Air
transportation
The law of the country of destination
generally applies.
1. Civil Code - primary
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of Goods
by Sea Act (COGSA)
b. Air: Warsaw Convention
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT
OF
EXTRAORDINARY
DILIGENCE
Rendition of service with the greatest skill
and utmost foresight. (Davao Stevedore Co. v.
Fernandez)
Rationale:
1. From the nature of the business and
for reasons of public policy (Art.
1733)
2. Relationship of trust
3. Business is impressed with a special
public duty
4. Possession of the goods
5. Preciousness of human life
A common carrier is not an absolute insurer
of all risks of travel.
COVERAGE
1. Vigilance over goods (Arts. 1734-1754);
and
2. Safety of passengers (Arts. 1755-1763).
PASSENGER
A person who has entered into a contract of
carriage, express or implied, with the carrier.
They are entitled to extraordinary diligence
from the common carrier.
The following are not considered
passengers, and are entitled to ordinary
diligence only:
a. One who has not yet boarded any
part of a vehicle regardless of
whether or not he has purchased a
ticket;
b. One who remains on a carrier for an
unreasonable length of time after he
has been afforded every safe
opportunity to alight;
c. One who has boarded by fraud,
stealth, or deceit;
d. One who attempts to board a
moving vehicle, although he has a
f.
g.
IN
COMMERCIAL LAW
ticket, unless the attempt be with

the knowledge and consent of the
carrier;
One who has boarded a wrong
vehicle, has been properly informed
of such fact, and on alighting, is
injured by the carrier;
Invited guests and accommodation
passengers. (Lara vs. Valencia)
One who rides any part of the
vehicle which is unsuitable or
dangerous or which he knows is not
designed or intended for passengers.
DEFENSES OF A COMMON CARRIER IN

THE CARRIAGE OF GOODS
1. CASO FORTUITO/FORCE MAJEURE
Requisites:
a. Must be the proximate and only
cause of the loss
b. Exercise of due diligence to prevent
or minimize the loss before, during or
after the occurrence of the disaster (Art.
1739)
c. Carrier has not negligently incurred
in delay in transporting the goods (Art.
1740)
Fire is not considered a natural disaster or
calamity as it arises almost invariably from
some act of man. (Eastern Shipping Lines Inc.
vs. IAC)
Mechanical defects are not force majeure if
the same was discoverable by regular and
adequate inspections. (Notes and Cases on
the Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.120122)
2. ACTS OF PUBLIC ENEMY
Requisites:
a. Must be the proximate and only
cause of the loss
b. Exercise of due diligence to prevent
or minimize the loss before, during or
after
the
act
causing
the
loss,
deterioration or destruction of the goods
(Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute
defense
b.
Contributory: partial defense. (Art.
1741)
4. CHARACTER OF THE GOODS OR DEFECTS
IN THE PACKING OR IN THE CONTAINER
Even if the damage should be caused by the
inherent defect/character of the goods, the
common carrier must exercise due diligence
to forestall or lessen the loss. (Art. 1742)
The carrier which, knowing the fact of
improper packing of the goods upon ordinary
observation,
still
accepts
the
goods
notwithstanding such condition, is not
relieved of liability or loss or injury resulting
therefrom. (Southern Lines, Inc. v. CA, 4 SCRA
258)
5.
ORDER OR ACT OF PUBLIC AUTHORITY


56
MEMORY AID
Said public authority must have the power
to issue the order (Art. 1743). Consequently,
where the officer acts without legal process,
the common carrier will be held liable.
(Ganzon v. CA 161 SCRA 646)
Diligence in the selection and supervision
of employees under Article 2180 of the Civil
Code cannot be interposed as a defense by
the common carrier because the liability of
the carriers arises from the breach of the
contract of carriage. The defense under said
articles is applicable to negligence in quasidelicts under Art. 2176. (Del Prado v. Manila
Electric Co., 52 Phil 900)
IN
FOR ACTS OF ITS

EMPLOYEES
COMMERCIAL LAW
FOR ACTS OF
OTHER
PASSENGERS OR
STRANGERS
Required diligence and defense

Extraordinary
Ordinary diligence
diligence
Nature of liability
Tort; however,
Not absolute; limited
The employee must by Art. 1763
be on duty at the
time of the act.
(Maranan v. Perez)
The carrier is liable when its personnel
allowed a passenger to drive the vehicle
causing it to collide with another vehicle
resulting to the injuries suffered by the other
passengers. (MRR vs. Ballesteros, 16 SCRA
641)
LIABILITY OF A COMMON CARRIER FOR

DEATH OR INJURIES TO PASSENGERS DUE
TO ACTS OF ITS EMPLOYEES AND OTHER
PASSENGERS OR STRANGERS
CARRIAGE OF GOODS
CARRIAGE OF PASSENGERS
Parties
1.
2.
3.
Common carrier
Shipper
Consignee
Delay in delivery, loss, destruction, or

deterioration of the goods
1.
2.
Common carrier
Passenger
Cause of liability
Death or injury to the passengers
Duration of liability
From the time the goods are unconditionally

placed in the possession of, and received by the
carrier for transportation until the same are
delivered actually or constructively by the
carrier to the consignee or to the person who
has the right to receive them. (Art. 1736)
It remains in full force and effect even when
they are temporarily unloaded or stored in
transit unless the shipper or owner has made
use of the right of stoppage in transitu. (Art.
1737)
It continues to be operative even during the
time the goods are stored in a warehouse of the
carrier at the place of destination until the
consignee has bee advised of the arrival of the
goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose
of them. (Art. 1738)
Delivery of goods to the custom authorities is
not delivery to the consignee. (Lu Do v.
Binamira, 101 Phil 120)
The duty of a common carrier to provide safety

to its passengers so obligates it not only during
the course of the trip, but for so long as the
passengers are within its premises and where
they ought to be in pursuance to the contract
of carriage. (LRTA v. Navidad, [2003])
All persons who remain on the premises within
a reasonable time after leaving the conveyance
are to be deemed passengers, and what is a
reasonable time or a reasonable delay within
this rule is to be determined from all the
circumstances, and includes a reasonable time
to see after his baggage and prepare for his
departure. (La Mallorca v. CA, 17 SCRA 739 ;
Abiotiz Shipping Corporation v. CA, 179 SCRA
95)
It is the duty of common carriers of
passengers to stop their conveyances a
reasonable length of time in order to afford
passengers an opportunity to enter, and they
are liable for injuries suffered from the sudden
starting up or jerking of their conveyances
while doing so. The duty which the carrier of
passengers owes to its patrons extends to
persons boarding the cars as well as to those
alighting therefrom (Dangwa Trans Co., Inc. vs.
CA 202 SCRA 574).


57
MEMORY AID
IN
COMMERCIAL LAW
Presumption of negligence
Art.1735 Civil Code
Art.1755 Civil Code
Reason: As to when and how goods were Reason: The contract between the passenger
damaged in transit is a matter peculiarly within and the carrier imposes on the latter the duty
the knowledge of the carrier and its employees. to transport the passenger safely; hence the
(Mirasol v. Dollar, 53 PHIL 124)
burden of explaining should fall on the carrier.
Mere proof of delivery of goods to a carrier in
good order and the subsequent arrival of the
same goods at the place of destination in bad
order makes for a prima facie case against the
carrier. (Coastwise Lighterage Corp. v. CA, 245
SCRA 796)
Defenses
1.
2.
Ordinary circumstance: Exercise of

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

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

carried gratuitously, but not for willful acts or
gross negligence. (Art. 1758)
The diligence required in the carriage of the

goods may be reduced by only one degree, from
extraordinary to ordinary diligence or diligence
of a good father of a family. (Art. 1744, Art.
1745, no. 4)
Void stipulations
1. That the goods are transported at the risk
of the owner or shipper;
2. That carrier will not be liable for any loss,
destruction or deterioration of the goods;
Dispensing with or lessening the extraordinary

responsibility of a common carrier for the
safety of passengers imposed by law by
stipulation,
by
posting
of
notices,
by


58
MEMORY AID
3. That the carrier need not observe any
diligence in the custody of the goods;
4. That the carrier shall exercise a degree of
diligence less than that of a good father of a
family over the movable transported;
5. That the carrier shall not be responsible for
the acts or omissions of his or its employees;
6. That the carriers liability for acts
committed by thieves or robbers who do not
act with grave or irresistible threat, violence or
force is dispensed with or diminished;
7. That the carrier is not responsible for the
loss, destruction or deterioration of the goods
on account of the defective condition of the
car, vehicle, ship or other equipment used in
the contract of carriage. (Art. 1745)
IN
COMMERCIAL LAW
statements on tickets or otherwise. (Art. 1757)

RULES ON PASSENGERS BAGGAGE

IN THE CUSTODY OF
IN THE CUSTODY
THE PASSENGERS
OF THE COMMON
(HAND-CARRIED)
CARRIER
(CHECKED-IN)
Legal nature of the baggage
Necessary deposit
Considered
as
goods
Required diligence by the common
carrier
Diligence
of
a Extraordinary
depositary
(ordinary diligence
diligence)
Applicable rules
Arts. 1998 and 2000- Arts. 1733-1753
2003
CONCURRING
CAUSES
OF
ACTION
ARISING FROM THE NEGLIGENT ACT OF
THE COMMON CARRIER
1. Culpa contractual (breach of contract)
Only the carrier is primarily liable and not
the driver, because there is no privity
between the driver and the passenger.
Basis: Art.1759, NCC.
No defense of due diligence in the selection
and supervision of employees.
2. Culpa aquiliana (quasi-delict)
The carrier and driver are solidarily liable as
joint tortfeasors.
Basis: Art. 2180, NCC.
Defense of due diligence in the selection
and supervision of employees is available.
Exception: maritime tort resulting in collision.
(See notes on Collision)
3. Culpa criminal (criminal negligence)
The driver is primarily liable. The carrier is
subsidiarily liable only if the driver is
convicted and declared insolvent.
Basis: Art. 100, RPC.
In case of injury to a passenger due to the
negligence of the driver of the bus on which
he is riding and of the driver of another
vehicle, the drivers as well as the owners of
the two vehicles are jointly and severally
liable for damages. It makes no difference
that the liability of the bus driver and owner
springs from contract while that of the owner
and driver of the other vehicle arises from
quasi-delict. (Fabre vs. CA)
LIMITATIONS AS TO CARRIERS LIABILITY
INVALID AS BEING
VALID &
CONTRARY TO
ENFORCEABLE
PUBLIC POLICY
1. One exempting the 1. One limiting the
carrier from any and liability of the carrier
all liability for loss or to
an
agreed
damage occasioned by valuation, unless the
its own negligence.
shipper declares a
2.
An
unqualified higher value and
limitation of liability to pays a higher rate of
an agreed valuation.
freight
(H.E.
Heacock
Company
vs.
Macondray
Company Inc.)
&
However, the carrier cannot limit its liability

for injury to, or loss of, goods shipped where
such injury or loss was caused by its own
negligence.
(Shewaram vs. PAL, 17 SCRA 606)
SPECIAL RULES ON LIABILITES OF
AIRLINE CARRIERS
1. In case of flight diversion due to bad
weather or other circumstances beyond the
pilots control, the relation between the
carrier and the passenger continues until the
latter has been landed at the port of
destination and has left the carriers
premises. The carrier should necessarily
exercise
extraordinary
diligence
in
safeguarding the comfort, convenience and
safety of its stranded passengers until they
have
reached
their
final
destination.
(Philippine Airlines vs. CA, 226 SCRA 423)
2. Even where overbooking of passengers is
allowed as a commercial practice, the airline
company would still be guilty of bad faith and
still be liable for damages if it did not properly
inform passenger that it could breach the
contract of carriage even if they were
confirmed passengers. (Zalamea vs. CA, 228
SCRA 23)
3. An open-dated ticket constitutes a
complete contract between the carrier and
passenger. Hence, the airline company is
liable if it refused to confirm a passengers
flight reservation. (Singson vs. CA, 282 SCRA
149)
4. An airline company which issued a
confirmed ticket to a passenger covering
successive trips on different airlines can be
held liable for damages occasioned by
bumping off by one of the successive
airlines. (Lufthansa German Airlines vs. CA,
238 SCRA 290)
5. An airline ticket providing that carriage by
successive air carriers is to be regarded as a
single operation is to make the issuing
carrier liable for the tortuous conduct of the
other carrier. A printed provision in the ticket
limiting liability only to its own conduct is not
enough to rebut that liability. (KLM Royal
Dutch Airlines vs. CA, 65 SCRA 237)
II. CODE OF COMMERCE
A.
OVERLAND TRANSPORTATION
(Arts. 349-379)
Applicability
1. Domestic land and water/maritime
transportation. (Pandect of Commercial Law
and Jurisprudence, Justice Jose Vitug, 1997
ed.)
2. Domestic Air Transportation. (Commercial
Law Review, Cesar Villanueva, 2004 ed.)
IMPORTANT CONCEPTS:
1. Bill of lading
2. Obligations of the carrier
3.
4.
5.
Right of abandonment
Notice of damage
Combined carrier agreement
6.
BILL OF LADING
The written acknowledgment of receipt of
goods and agreement to transport them to a
specific place to a person named or to his
order.
Rules:
1. It is not indispensable for the creation of a
contract of carriage. (Compania Maritima vs.
Insurance Company of North America, 12
SCRA 213)
7.
2. Ambiguity is construed against the carrier,

the contract being one of adhesion.
3. The consignee, although the instrument is
oftentimes drawn up only by the consignor
and carrier, becomes bound by all the
stipulations contained therein by making a
claim for loss on the basis of said bill of
lading. (Sea-Land Services Inc. vs. IAC)
4. The right of a party to recover for loss of
shipment consigned to him under a bill of
lading drawn up only by and between the
shipper and the carrier, springs from either a
relation of agency between him and the
shipper, or his status as stranger in whose
favor some stipulation is made in said
contract, and who becomes a party thereto
when he demands fulfillment of that
stipulation. (Art. 1311 (2), (Mendoza vs. PAL
Inc.)
5. Acceptance of the bill of lading without
dissent raises the presumption that all the
terms therein where brought to the
knowledge of the shipper and agreed to by
him and, in the absence of fraud or mistake;
he is estopped from thereafter denying that
he assented to such terms. (Notes and Cases
on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed.
p.261)
Kinds:
1. On board - issued when the goods
have been actually placed aboard the
ship with very reasonable expectation
that the shipment is as good as on its
way.
2. Received - one in which it is stated that
the goods have been received for
shipment with or without specifying
the vessel by which the goods are to
be shipped.
3. Negotiable - one in which it is stated
that the goods referred to therein will
be delivered to the bearer or to the
order of any person named therein.
4. Non-negotiable - One in which it is
stated that the goods referred to
therein will be delivered to a specified
person.
5. Clean One which does not indicate
any defect in the goods.
Foul One which contains a notation

thereon indicating that the goods
covered by it are in bad condition.
Spent One which covers goods that

already have been delivered by the
carrier without a surrender of a signed
copy of the bill.
8. Through One issued by the carrier
who is obliged to use the facilities of
other carriers as well as his own
facilities
for
the
purpose
of
transporting the goods from the city of
the seller to the city of the buyer,
which bill of lading is honored by the
second and other interested carriers
who do not issue their own bills.
9. Custody One wherein the goods are
already received by the carrier but the
vessel indicated therein has not yet
arrived in the port.
10. Port One which is issued by the
carrier to whom the goods have been
delivered, and the vessel indicated in
the bill of lading by which the goods
are to be shipped is already in the port
where the goods are held for shipment.
Functions:
1. Best evidence of the existence of the
contract of carriage of cargo (Art. 353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver goods
as stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier cannot
ordinarily refuse to carry a particular class of
goods.
EXCEPTION: For some sufficient reason the
discrimination against the traffic in such
goods is reasonable and necessary. (Fisher vs.
Yangco Steamship Co. 31 Phil 1).
Instances when the carrier may validly
refuse to accept the goods include the ff:
1.) Goods sought to be transported are
dangerous objects, or substances including
dynamite and other explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger
like flood, capture by enemies and the like
7.) Goods like livestock will be exposed to
disease
8.) Strike
9.) Failure to tender goods on time. (Notes
and Cases on the Law on Transportation and
Public Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p.68)
In case of carriage by railway, the carrier is
exempted from liability if carriage is insisted
upon by the shipper, provided its objections
are stated in the bill of lading.
However, when a common carrier accepts
cargo for shipment for valuable consideration,
it takes the risk of delivering it in good

condition as when it was loaded. (PAL vs. CA)
B. Duty to deliver the goods
Not only to transport the goods safely but to
the person indicated in the bill of lading. The
goods should be delivered to the consignee or
any other person to whom the bill of lading
was validly transferred or negotiated.
Time of delivery
Stipulated in
Contract/Bill of
Lading
1. Carrier is bound to
fulfill the contract
and is liable for any
delay;
no
matter
from what cause it
may have arisen.
No stipulation
1.
Within
a
reasonable time.
2. Carrier is bound to
forward them in the
1st shipment of the
same
or
similar
goods which he may
make to the point of
delivery. (ART. 358
Code of Commerce)
Effects of delay
a. Merely suspends and generally does not
terminate the contract of carriage
b. Carrier remains duty bound to exercise
extraordinary diligence
c. Natural disaster shall not free the carrier
from responsibility (Art.1740)
d. If delay is without just cause, the
contract limiting the common carriers liability
cannot be availed of in case of loss or
deterioration of the goods (Art.1747)
RIGHT OF CONSIGNEE TO ABANDON
GOODS
Instances:
1. Partial non-delivery, where the goods are
useless without the others (Art. 363);
2. Goods are rendered useless for sale or
consumption for the purposes for which they
are properly destined (Art. 365); and
3. In case of delay through the fault of the
carrier (Art. 371).
NOTICE OF DAMAGE (ART. 366)
Requisites for applicability:
1. Domestic/inter-island/coastwise
transportation
2. Land/water/air transportation
3. Carriage of goods
4. Goods shipped are damaged
Rules:
a. Patent damage: shipper must file a claim
against the carrier immediately upon
delivery (it may be oral or written)
b. Latent damage: shipper should file a claim
against the carrier within 24 hours from
delivery.
Note: These rules does not apply to
misdelivery of goods. (Roldan vs. Lim Ponzo)
Purpose of notice: To inform the carrier that
the shipment has been damaged, and it is
charged with liability therefore, and to give it
an opportunity to make an investigation and
fix responsibility while the matter is fresh.
The filing of notice of claim is a condition

precedent for recovery.
Shorter period may be stipulated by the
parties
because
it merely affects the
shippers remedy and does not affect the
liability of the carrier. (PHILAMGEN vs.
Sweetlines, Inc.)
Prescriptive Period
Not provided by Article 366. Thus, in such
absence, Civil Code rules on prescription
apply.
If despite the notice of claim, the carrier
refuses to pay, action must be filed in court.
1. No bill of lading was issued:
within 6 years
2. Bill of lading was issued:
within 10 years.
ARTICLE 366
COGSA Sec.3 (6)
Applicability
1.
Domestic/inter- 1. International/
island/coastwise
overseas/foreign
transportation
(from
foreign
2. Land, water, air country to Phils.)
transportation
Note: subject to the
rule on Paramount
Clause
2. Water/maritime
transportation
Notice of damage
1. Condition
1. Not a condition
precedent
precedent
2. 24-hour period for
2. 3-day period for
claiming latent
claiming latent
damage
damage
Prescriptive period
None provided; Civil One year from the
Code applies.
date
of
delivery
(delivered
but
damaged goods), or
date
when
the
vessel left port or
from the date of
delivery
to
the
arrastre
(nondelivery or loss).
COMBINED CARRIER AGREEMENT (ART.
373)
GENERAL RULE: In case of a contract of
transportation of several legs, each carrier is
responsible for its particular leg in the
contract.
EXCEPTION: A combined carrier agreement
where a carrier makes itself liable assuming
the obligations and acquiring as well the
rights and causes of action of those which
preceded it.
2.
M
A
R
I
T
I
M
E
C
O
M
M
E
R
C
E
(Arts. 573-869)
IMPORTANT CONCEPTS:
1. Merchant vessel
2. Maritime lien and Preference of
Credit
3. Doctrine of limited liability
4. Causes of revocation of voyage
5. Participants in maritime commerce
6. Charter party
7. Loans on bottomry and respondentia
8. Accidents in maritime commerce
MARITIME/ADMIRALTY LAW
It is the system of laws which particularly
relates to the affairs and business of the sea,
to ships, their crews and navigation, and to
maritime conveyance of persons and
property. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino &
Hernando, citing Francisco, p.254)
Maritime laws apply only to maritime trade
and sea voyages. (Pandect of Commercial
Law and Jurisprudence, Justice Jose Vitug,
1997 ed.)
Arrastre service is not maritime in
character. It refers to a contract for the
unloading of goods from a vessel. (ICTSI vs.
Prudential Guarantee, 320 SCRA 244)
CHARACTERISTICS
OF
MARITIME
TRANSACTION
1. Real - similar to transactions over real
property with respect to effectivity against
third persons which is done through
registration. (Rubiso vs. Rivera, 37 Phil. 72).
The evidence of real nature is shown by: 1)
the limitation of the liability of the agents to
the actual value of the vessel and the freight
money; and 2) the right to retain the cargo
and embargo and detention of the vessel
(Luzon Stevedoring Corp v. CA, 156 SCRA
169);
2. Hypothecary - the liability of the owner of
the value of the vessel is limited to the vessel
itself (Doctrine of Limited Liability).
The real and hypothecary nature of
maritime law simply means that the liability
of the carrier in connection with losses related
to maritime contracts is confined to the
vessel, which stands as the guaranty for their

settlement. (Aboitiz Shipping Corp. vs.
General Accident Fire and Life Assurance
Corp. 217 SCRA 359).
MERCHANT VESSEL
Vessel engaged in maritime commerce,
whether foreign or otherwise. (Bar Review
Materials in Commercial Law, Jorge Miravite,
2002 ed.)
Constitutes property which may be acquired
and transferred by any of the means
recognized by law. They shall continue to be
considered as personal property. (Arts. 573,
585)
They are susceptible to maritime liens such
as for the repair, equipping and provisioning
of the vessel in the preparation of a voyage,
as well as mortgage liabilities, in satisfaction
of which a vessel may be validly arrested and
sold. (Ship Mortgage Decree of 1978)
MARITIME LIEN
It constitutes a present right of property in
the ship, a jus in re, to be afterward enforced
in admiralty by process in rem. (PNB vs. CA,
337 SCRA 381)
If the maritime lien arose prior to the
recording of a preferred mortgage, it shall
have priority over the said mortgage lien.
(PNB vs. CA, 337 SCRA 381)
ORDER OF PREFERENCE IN CASE OF SALE
OF VESSEL
R.A. 6106
P.D. 1521
Effectivity date
1969
1978
Applicability
Overseas shipping
Both domestic and
only
overseas shipping
Kind of sale
Judicial
Judicial and
extrajudicial
Order of Preference
A
preferred The
preferred
mortgage shall have mortgage lien shall
priority
over
all have priority over all
claims against the claims against the
vessel, except the vessel, except the
following
following
preferences in the preferences in the
order stated:
order stated:
1. Judicial costs of 1.
Expenses
and
the proceedings;
fees allowed and
2. Taxes due the costs taxed by the
Philippine
court and taxes due
Government;
to the Government;
3.
Salaries
and 2. Crews wages;
wages
of
the 3. General average;
Captain and Crew of 4. Salvage, including
the vessel during its contract salvage;
last voyage;
5. Maritime liens
4. General average arising prior in time
or salvage including to the recording of
contract
salvage, the
preferred
bottomry loans, and mortgage;
indemnity
due 6. Damages arising
shippers
for
the
value
of
goods
transported
but
which
were
not
delivered
to
the
consignee;
5. Costs of repair
and equipment of
the
vessel,
and
provisioning of food,
supplies and fuel
during
its
last
voyage; and
6.
Preferred
mortgages
registered prior in
time.
out of tort; and

7.
Preferred
mortgage registered
prior in time.
Effect of sale: All pre-existing claims in the

vessel are terminated. They will then be
satisfied from the proceeds of the sale subject
to the order of preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
Cases where applicable:
1. Art.
587
civil
liability
for
indemnities to third persons
2. Art. 590 indemnities from negligent
acts of the captain (not the
shipowner or ship agent)
3. Art. 837 collision
4. Art. 643 liability for wages of the
captain and the crew and for
advances made by the ship agent if
the vessel is lost by shipwreck or
capture
GENERAL RULE: The liability of shipowner

and ship agent is limited to the amount of
interest in said vessel such that where vessel
is entirely lost, the obligation is extinguished.
(Luzon Stevedoring v. Escano, 156 SCRA 169)
The interest extends to: 1) the vessel itself; 2)
equipments; 3) freightage; and 4) insurance
proceeds. (Chua v. IAC, 166 SCRA 183)
EXCEPTIONS:
1. Claims under Workmens Compensation
(Abueg vs. San Diego 77 Phil 730);
2. Injury or damage due to shipowner or to
the concurring negligence of the
shipowner and the captain;
3. The vessel is insured (Vasquez vs. CA 138
SCRA 553).
4. Expenses for repair on vessel completed
before loss;
5. In case there is no total loss and the
vessel is not abandoned;
6. Collision between two negligent vessels;
Abandonment of the vessel is necessary to
limit the liability of the shipowner. The only
instance were abandonment is dispensed with
is when the vessel is entirely lost (Luzon
Stevedoring vs. CA 156 SCRA 169).
RIGHT OF SHIPOWNER OR SHIP AGENT
TO ABANDON VESSEL
Instances:
1. In case of civil liability from indemnities to

third persons (Art. 587);
2. In case of leakage of at least of the
contents of a cargo containing liquids (Art.
687); and
3. In case of constructive loss of the vessel
(Sec. 138, Insurance Code).
RIGHT OF ABANDONMENT
SHIPOWNER OR
CONSIGNEE
SHIP AGENT
What may be abandoned
Vessel
Goods shipped
Instances
1. In case of civil 1.
Partial
nonliability
from delivery, where the
indemnities to third goods are useless
persons (Art. 587);
without the others
2.
Sec.
138, (Art. 363);
Insurance Code;
2.
Goods
are
3. In case of leakage rendered useless for
of at least of the sale or consumption
contents of a cargo for the purposes for
containing
liquids which
they
are
(Art. 687)
properly
destined
(Art. 365); and
3. In case of delay
through the fault of
the
carrier
(Art.
371).
Effects
1.
Transfer
of 1. Transfer
of
ownership
of
the ownership on the
vessel
from
the goods
from
the
shipowner
to
the shipper
to
the
shippers or insurer.
carrier.
2. In case of (2), the 2. Carrier
should
insurer must pay the pay the shipper the
insured as if there market value of the
was actual total loss goods at the point of
of the vessel.
destination.
CAUSES OF REVOCATION OF VOYAGE
1. War or interdiction of commerce;
2. Blockade;
3. Prohibition
to
receive
cargo
at
destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art.
640)
Terms:
1. Interdiction
of
commerce
A
governmental prohibition of commercial
intercourse intended to bring about an
entire cessation for the time being of all
trade whatever.
2. Blockade A sort of circumvallation of a
place by which all foreign connection and
correspondence is, as far as human
power can effect it, to be cut off.
3. Embargo A proclamation or order of a
state, usually issued in time of war or
threatened hostilities, prohibiting the
departure of ships or goods from some or
all the ports of such state until further
order.
PARTICIPANTS IN MARITIME COMMERCE

A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who has possession, control and
management of the vessel and the
consequent right to direct her navigation and
receive freight earned and paid, while his
possession continues.
Ship agent (naviero)
Person entrusted with provisioning and
representing the vessel in the port in which it
may be found; also includes the shipowner.
Not a mere agent under civil law; he is
solidarily liable with the ship owner.
Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject
to Art.609;
3. Contract in the name of the owners with
respect to repairs, details of equipment,
armament, provisions of food and fuel,
and freight of the vessel, and all that
relate to the requirements of navigation;
4. Order a new voyage, make a new charter
or insure the vessel after obtaining
authorization from the shipowner or if
granted in certificate of appointment.
Civil Liabilities of the Shipowner And
Ship Agent
1. All contracts of the captain, whether
authorized or not, to repair, equip and
provision the vessel; (Art. 586)
2. Loss and damage to the goods loaded on
the vessel without prejudice to their right
to free themselves from liability by
abandoning the vessel to the creditors.
(Art. 587)
Duty of Ship Agent to Discharge the
Captain and Members of the Crew
If the seamen contract is not for a definite
period or voyage, he may discharge them at
his discretion. (Art. 603)
If for a definite period, he may not discharge
them until after the fulfillment of their
contracts, except on the following grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to
its cargo through malice or manifest or
proven negligence. (Art. 605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders of ships.
The terms have the same meaning, but are
particularly used in accordance with the size
of the vessel governed and the scope of
transportation, i.e., large and overseas, and
small and coastwise, respectively.
Nature
1.
2.
3.
of position (3-fold character):

General agent of the shipowner;
Technical director of the vessel;
Representative of the government of
the country under whose flag he
navigates.
Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required
physical and mental examinations
required for licensing him as such.
(Art. 609)
Inherent powers:
1. Appoint crew in the absence of ship
agent;
2. Command the crew and direct the
vessel to its port of destination;
3. Impose correctional punishment on
those who, while on board vessel,
fail to comply with his orders or are
wanting in discipline;
4. Make contracts for the charter of
vessel in the absence of ship agent.
5. Supply, equip, and provision the
vessel; and
6. Order repair of vessel to enable it to
continue its voyage. (Art. 610)
Sources of funds to comply with the inherent
powers of the captain (in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art.
611)
Duties:
1. Bring on board the proper certificate
and documents and a copy of the
Code of Commerce;
2. Keep a Log Book, Accounting Book
and Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and
unloading of the cargo;
5. Be on deck while leaving or entering
the port;
6. Protest arrivals under stress and in
case of shipwreck;
7. Follow instructions of and render an
accounting to the ship agent;
8. Leave the vessel last in case of
wreck;
9. Hold in custody properties left by
deceased passengers and crew
members;
10. Comply with the requirements of
customs, health, etc. at the port of
arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or
leaving a port. (Art. 612)
A ships captain must be accorded a
reasonable measure of discretionary authority
to decide what the safety of the ship and of
its crew and cargo specifically requires on a
stipulated
ocean
voyage
(Inter-Orient
Maritime Enterprises Inc. vs. CA).
No liability for the following:

1. Damages caused to the vessel or to
the cargo by force majeure;
2. Obligations contracted for the repair,
equipment, and provisioning of the
vessel unless he has expressly
bound himself personally or has
signed a bill of exchange or
promissory note in his name. (Art.
620)
Solidary
Liabilities
of
the
Ship
Agent/Shipowner for Acts Done by the
Captain
towards
Passengers
and
Cargoes
1. Damages to vessel and to cargo due
to lack of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of
marine regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No
liability
under
the
following
circumstances:
1. If, before beginning voyage, captain
attempts to change it, or a naval war
with the power to which the vessel was
destined occurs;
2. If a disease breaks out and be officially
declared an epidemic in the port of
destination;
3. If the vessel should change owner or
captain. (Art. 647)
Sailing Mate/First Mate
Second chief of the vessel who takes the
place of the captain in case of absence,
sickness, or death and shall assume all of his
duties, powers and responsibilities. (Art. 627)
Duties:
1. Provide himself with maps and
charts with astronomical tables
necessary for the discharge of his
duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on
consultation with the captain and the
officers of the boat, following the
decision of the captain in case of
disagreement;
4. Responsible for all the damages
caused to the vessel and the cargo
by reason of his negligence. (Arts.
628 - 631)
Second Mate
Takes command of the vessel in case of the
inability or disqualification of the captain and
the sailing mate, assuming in such case their

powers and responsibilities.
Third in command
Duties:
1. Preserve the hull and rigging of the
vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment
of the vessel, if laid up. (Art. 632)
Engineers
Officers of the vessel but have no authority
except in matters referring to the motor
apparatus. When two or more are hired, one
of them shall be the chief engineer.
Duties:
1. In charge of the motor apparatus,
spare parts, and other instruments
pertaining to the engines;
2. Keep the engines and boilers in good
condition;
3. Not to change or repair the engine
without authority of the captain;
4. Inform the captain of any damage to
the motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining
the engine. (Art. 632)
Crew
The aggregate of seamen who man a ship,
or the ships company.
Hired by the ship agent, where he is present
and in his absence, the captain hires them,
preferring Filipinos, and in their absence, he
may take in foreigners, but not exceeding 1/5
of the crew. (Art. 634)
Classes of Seamans Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman
While Contract Subsists
1. Perpetration of a crime;
2. Repeated
insubordination,
want
of
discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
The seamans heirs are entitled to payment
as follows:
1. If death is natural:
a. compensation up to time of death if
engaged on wage
b. if by voyage - half of amount if death
occurs on voyage out; and full, if on
voyage in
c. if by shares - none, if before
departure; full, if after departure
2. if death is due to defense of vessel - full
payment;
3.
4.
if captured in defense of vessel - full

payment;
if captured due to carelessness - wages
up to the date of the capture. (Art. 645)
Complement of the Vessel

All persons on board, from the captain to the
cabin boy, necessary for the management,
maneuvers, and service, thus including the
crew, the sailing mates, engineers, stokers
and other employees on board not having
specific designations.
Does not include the passengers or the
persons whom the vessel is transporting.
D. SUPERCARGOES
Persons who discharges administrative
duties assigned to him by ship agent or
shippers, keeping an account and record of
transaction as required in the accounting
book of the captain. (Art. 649)
E. PILOT
A person duly qualified, and licensed, to
conduct a vessel into or out of ports, or in
certain waters.
The term generally connotes a person taken
on board at a particular place for the purpose
of conducting a ship through a river, road or
channel, or from a port.
Master pro hac vice for the time being in the
command and navigation of the ship.
While in exercising his functions a pilot is in
sole command of the ship and supersedes the
master for the time being in the command
and navigation of the ship, the master does
not surrender his vessel to the pilot and the
pilot is not the master. There are occasions
when the master may and should interfere
and even displace the pilot, as when the pilot
is obviously incompetent or intoxicated (Far
Eastern Shipping Company vs. CA).
Compulsory Pilotage States possessing
harbors have enacted laws or promulgated
rules requiring vessels approaching their
ports to take on board pilots licensed under
the local laws. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino,
T. & Hernando, R.P. 2004 ed. p. 518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage
grounds, the Harbor Pilot is responsible for
damage to a vessel or to life or property due
to his negligence.
EXCEPT:
1. Accident caused by force majeure or
natural calamity provided the pilot exercised
prudence and extra diligence to prevent or
minimize damages.
2. Countermand or overrule by the master of
the vessel in which case the registered owner
of the vessel is liable. (Sec.11, Art.III PPA
Admin Order 03-85)
SPECIAL
CONTRACTS
COMMERCE
1. Charter party
2. Bill of lading
OF
MARITIME
3.
4.
5.
6.
Contract
of
transportation
passengers on sea voyages
Loan on bottomry
Loan on respondentia
Marine insurance
of
CHARTER PARTY
A contract by virtue of which the owner or
agent binds himself to transport merchandise
or persons for a fixed price.
A contract by which an entire ship, or some
principal part thereof is let/leased by the
owner to another person for a specified time
or use. (Planters Products, Inc. vs. CA, 226
SCRA 476)
Parties:
1. Ship owner or ship agent
2. Charterer
Classes:
1. Bareboat or demise The charterer
provides crew, food and fuel. The charterer is
liable as if he were the owner, except when
the cause arises from the unworthiness of the
vessel. The shipowner leases to the charterer
the whole vessel, transferring to the latter the
entire command, possession and consequent
control over the vessels navigation, including
the master and the crew, who thereby
become the charters servants. It transforms
a common carrier into a private carrier.
The charterer becomes the owner of
the vessel pro hac vice, just for that one
particular purpose only.
Because the
charterer is treated as owner pro hac
vice,
the
charterer
assumes
the
customary rights and liabilities of the
shipowner to third persons and is held
liable for the expense of the voyage and
the wages of the seamen.
2. Contract of Affreightment A contract
whereby the owner of the vessel leases part
or all of its space to haul goods for others.
The shipowner retains the possession,
command and navigation of the ship, the
charterer merely having use of the space
in the vessel in return for his payment of
the charter hired.
Kinds:
a. Time charter vessel is chartered for
a fixed period of time or duration of
voyage.
b. Voyage or trip charter the vessel is
leased for one or series of voyages
usually for purposes of transporting
goods for charterer.
LEASE
If for
a definite
period, lessee cannot
give up the lease by
paying a portion of
the amount agreed
upon.
If the leased property
is sold to one who
knows
of
the
existence
of
the
lease, the new owner
must
respect
the
CHARTER PARTY
Charterer
may
rescind charter party
by paying half of the
freightage
agreed
upon.
The new owner is not
compelled to respect
the charter party so
long as he can load
the vessel with his
own cargo. (Art. 689)
lease.
Civil law concept
Commercial
concept
law
Clauses Which May Be Included In a

Charter Party
Jason clause
CHARTER PARTY
An entire or complete
contract.
Consensual contract
BAREBOAT OR
DEMISE CHARTER
Charterer
becomes
liable
to
others
caused
by
its
negligence
Charterer
regarded
as owner pro hac
vice for the voyage
Owner
of
vessel
relinquishes
possession,
command
and
navigation
to
charterer
Common carrier is
converted to private
carrier.
BILL OF LADING
More like a private
receipt which the
captain
gives
to
accredit
goods
received
from
persons
Real contract
CONTRACT OF
AFFREIGHTMENT
(TIME OR VOYAGE
CHARTER)
Owner remains liable
as carrier and must
answer
for
any
breach of duty
Charterer
is
not
regarded as owner.
The vessel owner
retains
possession,
command
and
navigation of the ship
Common carrier is
not converted to a
private carrier.
PERSONS WHO MAY MAKE A CHARTER

1. Owner or owners of the vessel,
either in whole or in majority part,
who
have
legal
control
and
possession of the vessel
2. Charterer may subcharter entire
vessel to 3rd person only if not
prohibited
in
original
charter.
(Art.679)
3. Ship agent if authorized by the
owner/s or given such power in the
certificate of appointment. (Art.598)
4.
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 latters interests.
(Art.609)
REQUISITES OF A VALID CHARTER PARTY
1. Consent of the contracting parties
2. Existing vessel which should be
placed at the disposition of the
shipper
3. Freight
4. Compliance with Art. 652 of the
Code of Commerce
A stipulation in a
charter party that in
case of a maritime
accident for which
the shipowner is not
responsible by law,
contract
or
otherwise, the cargo
shippers, consignees
or
owners
shall
contribute with the
shipowner in general
average. (Pandect of
Commercial Law and
Jurisprudence, Justice
Jose Vitug, 1997 ed.)
Clause paramount
or paramount
clause
A clause in a charter
party providing that
the
COGSA
shall
apply, even though
the transportation is
domestic, subject to
the extent that any
term of the bill of
lading is repugnant to
the
COGSA
or
applicable law, then
to the extent thereof
the provision of the
bill of lading is void.
(Pandect
of
Commercial Law and
Jurisprudence, Justice
Jose Vitug, 1997 ed.)
Rights and Obligations of Parties

SHIPOWNER OR
SHIP AGENT
1. If the vessel is
chartered wholly, not
to accept cargo from
others;
2. To
observe
represented capacity;
3. To unload cargo
clandestinely placed
4. To
substitute
another vessel if load
is less than 3/5 of
capacity;
5. To leave the port
if the charterer does
not bring the cargo
within the lay days
and extra lay days
allowed;
6. To place in a
vessel in a condition
to navigate;
7. to bring cargo to
nearest neutral port
in case of war or
blockade. (Arts. 669678)
CHARTERER
1. To
pay
the
agreed charter price;
2. To
pay
freightage
on
unboarded cargo;
3. To pay losses to
others for loading
uncontracted cargo
and illicit cargo;
4. To wait if the
vessel needs repair;
5. To pay expenses
for deviation. (Arts.
679-687)
Rescission of a Charter Party

At
At
Fortuitous
charterers
shipowner
causes
request
s request
(Art. 690)
(Art 688)
(Art. 689)
1.
By
1. If the extra
1. War or
abandoning
the
charter
and
paying
half of the
freightage;
2. Error in
tonnage
or
flag;
3. Failure to
place
the
vessel at the
charterers
disposal;
4. Return of
the
vessel
due
to
pirates,
enemies
or
bad weather;
5. Arrival at a
port
for
repairs.
lay
days
terminate
without the
cargo being
placed
alongside the
vessel;
2. Sale by
the owner of
the
vessel
before
loading
by
the
charterer;
interdiction
of commerce;
2. Blockade;
3. Prohibition
to receive
cargo;
4. Embargo;
and
5. Inability of
the vessel to
navigate.
Terms:
1. Primage - bonus to be paid to the captain
after the successful voyage.
2. Demurrage the sum fixed in the charter
party as a remuneration to the owner of
the ship for the detention of his vessel
beyond the number of days allowed by
the charter party for loading or unloading
or for sailing.
3. Deadfreight the amount paid by or
recoverable from a charterer of a ship for
the portion of the ships capacity the
latter contracted for but failed to occupy.
4. Lay Days - days allowed to charter
parties for loading and unloading the
cargo.
5. Extra Lay Days days which follow after
the lay days have elapsed.
USUAL
FORMS
OF
CONSUMMATING
CONTRACTS
1. C.I.F. cost, insurance and freight;
2. F.O.B. - free on board;
3. F.A.S. - free alongside ship; and
4. C. & F. - cost and freight.
TRANSSHIPMENT OF GOODS
The act of taking cargo out of one ship and
loading it in another, or the transfer of goods
from the vessel stipulated in the contract of
affreightment to another vessel before the
place of destination named in the contract
has been reached, or the transfer for further
transportation from one ship or conveyance
to another.
It is not dependent on the ownership of the
transporting ships or in the change of
carriers, but rather on the fact of actual
physical transfer of cargo from one vessel to
another.
If done without legal excuse, however
competent and safe the vessel into which the
transfer is made, is a violation of contract and
infringement of right of shipper and subjects
carrier to liability if freight is lost event by
cause
otherwise
excepted.
(Magellan
Manufacturing vs. CA, 201 SCRA 102)
LOAN
ON
BOTTOMRY
AND
RESPONDENTIA
A real, unilateral, aleatory contract, by
virtue of which one person lends to another a
certain amount of money or goods on things
exposed to maritime risks, which amount,
with its earnings, is to be returned if the
things are safely transported, and which is
lost if the latter are lost.
LOAN ON
BOTTOMRY
LOAN ON
RESPONDENTIA
Definition
Loan
made
by Loan
taken
on
shipowner or ship security of the cargo
agent
guaranteed laden on a vessel,
by vessel itself and and repayable upon
repayable
upon safe arrival of cargo
arrival of vessel at at destination. (Art.
destination.
(Art. 719)
719)
Who may contract
Shipowner or ship Only the owner of
agent.
Outside of the cargo.
the residence of the
owners
the
captain.
Common elements:
1. Exposure of security to marine peril;
2. Obligation of the debtor conditioned
only upon safe arrival of the security at
the point of destination.
Forms:
1. Public instrument
2. Policy signed by the contracting parties
and the broker taking part therein
3. Private instrument (Art. 720)
Contents:
1. Kind, name and registry of the vessel;
2. Name, surname and domicile of the
captain;
3. Names, surnames and domiciles of the
borrower and the lender;
4. Amount of the loan and the premium
stipulated;
5. Time for repayment;
6. Goods pledged to secure repayment;
7. Voyage during which the risk is run
(Art.721)
BOTTOMRY/
RESPONDENTIA
Not subject to Usury
Law
ORDINARY LOAN
(MUTUUM)
Subject
Law
to
Usury
Liability
of
the
borrower
is
contingent on the
safe arrival of the
vessel or cargo at
destination
Not subject to any

contingency
(absolute liability)
The last lender is a

preferred creditor
The first lender is a

preferred creditor
2.
WHEN
LOAN
ON
BOTTOMRY
OR
RESPONDENTIA REGARDED AS SIMPLE
LOAN
1. Lender loaned an amount larger than
the value of the object due to
fraudulent means employed by the
borrower. (ART.726)
2. Full amount of the loan is not used
for the cargo or given on the goods if
all of them could not have been
loaded,
the
balance
will
be
considered a simple loan. (ART.727)
3. If the effects on which the money is
taken is not subjected to any risk.
(ART.729)
of a ship hypothecated by bottomry

is only the excess of the value over
the amount secured by bottomry.
(Sec. 101, Insurance Code)
The value of what may be saved in
case of shipwreck shall be divided
between the lender and the insurer
in proportion to the interest of each
one. (Art. 735)
Note: If a vessel is hypothecated by bottomry

only the excess is insurable, since a loan on
bottomry partakes of the nature likewise of an
insurance coverage to the extent of the loan
accommodation. The same rule would apply
to the hypothecation of the cargo by
respondentia. (Pandect of Commercial Law
and Jurisprudence, Justice Jose Vitug, 1997
ed.)
ACCIDENTS IN MARITIME COMMERCE
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
Note: Under existing laws, the parties to a

loan, whether ordinary or maritime, may
agree on any rate of interest. (CB Circular
905)
MARINE INSURANCE
Indemnity is paid after
the loss has occurred
In case of loss of the
vessel due to a risk
insured against,
the
obligation of the insurer
becomes absolute
Consensual contract
LOAN ON
BOTTOMRY OR
RESPONDENTIA
Indemnity is paid
in advance by
way of a loan
In case of loss of
the vessel due to
a marine peril,
the obligation of
the borrower to
pay
is
extinguished
Real contract
Hypothecary
Nature
of
Bottomry/
Respondentia
GENERAL RULE: The obligation of the
borrower to pay the loan is extinguished if the
goods given as security are absolutely lost by
reason of an accident of the sea, during the
voyage designated, and if it is proven that the
goods were on board.
EXCEPTIONS:
1. Loss due to inherent defect;
2. Loss due to the barratry on the part of
the captain;
3. Loss due to the fault or malice of the
borrower;
4.
The vessel was engaged in contraband;
and
5. The cargo loaded on the vessel be
different in from that agreed upon.
Concurrence of Marine Insurance and
Loan on Bottomry/Respondentia
1. The insurable interest of the owner
AVERAGE
An extraordinary or accidental expense
incurred during the voyage in order to
preserve the cargo, vessel or both, and all
damages or deterioration suffered by the
vessel from departure to the port of
destination, and to the cargo from the port of
loading to the port of consignment. (Art. 806)
The person whose property has been saved
must contribute to reimburse the damage
caused or expense incurred if the situation
constitutes general average.
Classes:
1. Particular or Simple Average
2. Gross or General Average
Where both vessel and cargo are saved, it
is general average; where only the vessel or
only the cargo is saved, it is particular
average.
Expenses incurred to refloat a vessel,
which accidentally ran aground, in order to
continue its voyage, do not constitute general
average. Not only is there absence of a
marine peril, common safety factor, and
deliberateness. It is the safety of the
property, and not the voyage, which
constitutes the true foundation of general
average. (A. Magsaysay, Inc. vs. Agan,
G.R.No. L-6393, Jan. 31, 1955)
PARTICULAR OR
GROSS OR GENERAL
SIMPLE
Definition
Damages or expenses Damages or expenses
caused to the vessel deliberately caused in
or cargo that did not order
to
save
the
inure to the common vessel, its cargo or both
benefit, and borne by from real and known

respective
owners. risk. (Art. 811)
(Art. 809)
Requisites
1. common danger;
2. deliberate sacrifice;
3. success;
4. proper formalities
and legal steps.
Liability
The owner of the All the persons having
goods which gave an interest in the vessel
rise to the expense or and the cargo therein at
suffered the damage the
time
of
the
shall
bear
this occurrence
of
the
average. (Art. 810)
average shall contribute
to satisfy this average.
(Art. 812)
The insurers (Art.859)
and
lenders
on
bottomry
and
respondentia
shall
likewise
contribute.
(Art.732).
Number of interests involved
Only
one
interest Several
interests
involved
involved
Share in the damage or expense

100% share
In proportion to the
value of the owners
property saved
Right to recover
No reimbursement
There
may
be
reimbursement
Kinds (not exclusive)
Art. 809
Art. 811
Procedure for recovery
1. Assembly
and
deliberation
2. Resolution of the
captain
3. Entry
of
the
resolution
in
the
logbook
4. Detailed minutes
5. Delivery
of
the
minutes to the maritime
judicial authority of the
first port, within 24
hours from arrival,
6. Ratification
by
captain
under
oath.
(Arts. 813-814)
Jettison
Act of throwing cargo overboard in order to
lighten the vessel.
Order of goods to be cast overboard:
1. Those which are on the deck,
preferring the heaviest one with the
least utility and value;
2. Those which are below the upper
deck, beginning with the one with
greatest weight and smallest value.
(Art. 815)
Jettisoned goods are not res nullius nor
deemed abandoned within the meaning of
civil law so as to be the object of occupation
by salvage. (Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997 ed.)
In order that the jettisoned goods may be
included in the gross or general average, the
existence of the cargo on board should be
proven by means of the bill of lading. (Art.
816)
York-Antwerp (Y-A) Rules on Determining
Liability for Averages With Regard To
Deck Cargo
1. Deck
cargo
is
allowed
only
in
domestic/coastwise/inter-island shipping, and
is prohibited in international/overseas/foreign
shipping.
2.
3. If deck cargo is loaded with the consent
of the shipper on overseas trade, it must
always contribute to general average, but
should the same be jettisoned, it would not
be entitled to reimbursement because there
is violation of the Y-A Rules.
4. If deck cargo is loaded with the consent
of the shipper on coastwise shipping, it must
always contribute to general average and if
jettisoned
would
be
entitled
to
reimbursement.
Reason: In domestic shipping, voyages are
usually short and the seas are generally not
rough. In overseas shipping, the vessel is
exposed for many days to perils of the sea.
DOMESTIC
Deck cargo is allowed
INTERNATIONAL
Deck cargo is not
allowed
With shippers consent
General average
Particular average
Without shippers consent
Captain is liable
Captain is liable
ARRIVAL UNDER STRESS (ARRIBADA)

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.
GOODS NOT COVERED BY GENERAL

AVERAGE EVEN IF SACRIFICED
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or When lawful
records of the vessel. (ART.855 (2))
3. Fuel for the vessel if there is more
than sufficient fuel for the voyage. The inability to
(Rule IX, York-Antwerp Rule)
continue
voyage is due
When unlawful
Who
bears
expenses:
1. Lack
of
provisions due to
negligence to carry
The
shipowner or ship
agent is liable
to
lack
of
provisions,
well-founded
fear of seizure,
privateers,
pirates,
or
accidents
of
the
sea
disabling it to
navigate. (Art.
819)
according to usage
and customs;
2. Risk of enemy
not well known or
manifest
3. Defect
of
vessel
due
to
improper
repair;
and
4. Malice,
negligence, lack of
foresight or skill of
captain. (Art. 820)
in
case
of
unlawful
arrival
under
stress.
But
they shall not
be liable for
the damages
caused
by
reason of a
lawful arrival.
(Art. 821)
It is the duty of the captain to continue the

voyage without delay after the cause of the
arrival under stress has ceased failing in such
duty renders him liable. However, in case the
cause has been risk of enemies, there must
first be an assembly before departure. (Art.
825)
Steps:
1. Captain should determine during the
voyage if there is well founded fear
of seizure, privateers and other valid
grounds;
2. Captain shall assemble the officers
and summon the persons interested
in the cargo who may attend the
meeting but without a right to vote;
3. The officers shall determine and
agree if there is well-founded reason
after examining the circumstances.
The captain shall have the deciding
vote;
4. The agreement shall be drafted and
the proper minutes shall be signed
and entered in the log book;
5. Objections
and
protests
shall
likewise be entered in the minutes.
COLLISION
Impact of two vessels both of which are
moving.
Allision
Impact between a moving vessel and a
stationary one.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a
port, the farther one must allow the
nearer to enter first; if they collide, the
fault is presumed to be imputable to the
one who arrived later, unless it can be
proved that there was no fault on its part.
2. When two vessels meet, the smaller
should give the right of way to the larger
one.
3. A vessel leaving port should leave the
way clear for another which may be
entering the same port.
4. The vessel which leaves later is
presumed to have collided against one
which has left earlier.
5. There is a presumption against the vessel
which sets sail in the night.
6. There is a presumption against the vessel
with spread sails which collides with
7.
8.
9.
another which is at anchor and cannot

move, even when the crew of the latter
has received word to lift anchor, when
there was not sufficient time to do so or
there was fear of a greater damage or
other legitimate reason.
There is a presumption against an
improperly moored vessel.
There is a presumption against a vessel
which has no buoys to indicate the
location of its anchors to prevent damage
to vessels which may approach it.
Vessels must have proper look-outs or
persons trained as such and who have no
other duty aside therefrom. (Smith Bell v.
CA)
Nautical Rules as to Sailing Vessel and

Steamship
1. Where a steamship and a sailing vessel
are approaching each other from
opposite directions, or on intersecting
lines, the steamship from the moment
the sailing vessel is seen, shall watch
with the highest diligence her course and
movements so as to be able to adopt
such timely means of precaution as will
necessarily prevent the two boats from
coming in contact.
2. The sailing vessel is required to keep her
course unless the circumstances require
otherwise.
Zones of Time in the Collision of Vessels

1. First zone all time up to the moment
when risk of collision begins.
No rule is as yet applicable for none is
necessary.
2. Second zone time between moment
when risk of collision begins and moment it
becomes a practical certainty.
It is in this period where conduct of the
vessels is primordial. It is in this zone that
vessels must strictly observe nautical rules,
unless a departure therefrom becomes
necessary to avoid imminent danger.
3. Third zone time when collision is certain
and time of impact.
An error in this zone would no longer be
legally consequential.
Error in Extremis - sudden movement made
by a faultless vessel during the third zone of
collision with another vessel which is at fault
during the 2nd zone. Even if such sudden
movement is wrong, no responsibility will fall
on said faultless vessel. (Urrutia and Co. v.
Baco River Plantation Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
Vessel at fault is liable for damage caused to
innocent vessel as well as damages suffered
by the owners of cargo of both vessels. (Art.
826)
2. Both vessels at fault
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art.
827)
3. Vessel at fault not known
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art.
828)
Doctrine of Inscrutable Fault In case
of
collision
where
it
cannot
be
determined which between the two
vessels was at fault, both vessels bear
their respective damage, but both should
be solidarily liable for damage to the
cargo of both vessels.
4. Third vessel at fault
The third vessel will be liable for losses and
damages. (Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss. (Art.
830)
believes that the cargo has suffered

damages or averages (Art. 624).
Who makes: Captain
When made: within 24 hours from the time
the collision took place.
Before whom made: competent authority at
the point of collision or at the first port of
arrival, if in the Philippines and to the
Philippine consul, if the collision took place
abroad. (Art. 835)
The doctrine of res ipsa loquitur applies in

case a moving vessel strikes a stationary
object, such as a bridge post, dock, or
navigational aid. (Far Eastern Shipping v. CA,
Luzon Stevedoring vs. CA)
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from a
vessel.
Applicability: Overseas trade only.
(Commercial Law Review, C. Villanueva, 2004
ed.)
Significance: When a person brings in
cargo from abroad, he cannot unload and
deliver the cargo by himself. The unloading
must be done by the arrastre operator, which
will then deliver the cargo to the importer.
(Commercial Law Review, C. Villanueva, 2004
ed.)
Nature of business: It is a public utility,
discharging functions which are heavily
invested with public interest.
Liability:
1. Similar to a warehouseman (Lua Kian v.
Manila Railroad)
2. Similar to a common carrier (Northern
Motors v. Prince Line)
3. Solidary liability with the common carrier
Even if the cause of action against the

common carrier is based on quasi-delict, the
defense of due diligence in the selection and
supervision of employees is unavailing in case
of a maritime tort resulting in collision. It is
not a civil tort governed by the Civil Code but
a maritime one governed by Arts. 826-839 of
the Code of Commerce. (Manila Steamship vs.
Insa Abdulhaman)
Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied in
collision cases because of Art.827 of the Code
of Commerce. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino,
T. & Hernando, R.P. 2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite to
recovery of damages arising from collisions
and other maritime accidents.
It is a written statement made under oath by
the captain of a vessel after the occurrence of
an accident or disaster in which the vessel or
cargo is lost or damaged, with respect to the
circumstances attending such occurrence, for
the purpose of recovering losses and
damages.
Excuses for not filing protest: 1) where the
interested person is not on board the vessel;
and 2) on collision time, need not be
protested. (Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a
hurricane or when the captain
SHIPWRECK
It is the loss of the vessel at sea as a
consequence of its grounding, or running
against an object in sea or on the coast. It
occurs when the vessel sustains injuries due
to a marine peril rendering her incapable of
navigation.
If the wreck was due to malice, negligence
or lack of skill of the captain, the owner of the
vessel may demand indemnity from said
captain. (Art. 841)
The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
Note: In order that the arrastre operator may

be held liable, the consignee must prove that
the damage was due to the negligence and
while the goods are in the custody of the
arrastre operator. (Hartford Fire Insurance v.
E. Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse
or pier to the holds of the vessel. (Chief of
Staff vs. CIR)
As understood in the port business, the term
consists of the handling of cargo from the
hold of the ship to the dock, in case of pierside unloading; or to a barge, in case of
unloading at sea. (Anglo-Fil Trading Corp. vs.
Lazaro)
The loading on the ship of outgoing cargo
is also part of stevedoring work. (Ibid.)
CONTAINERIZATION/
SAID-TOCONTAIN/
SHIPPERS
LOAD
AND
COUNT SYSTEM
System whereby the shipper loads his
cargoes in a specially designed container,
seals the container and delivers it to the
carrier for transportation. The carrier does not
participate
in
the
counting
of
the
merchandise for loading into the container,
the actual loading, and the sealing of the
container. (US Lines v. Comm. Of Customs,
ICTSI v. Prudential Guarantee)
The matter of quantity, description and
conditions of the cargo inside the container is
the sole responsibility of the shipper, unless
there is stipulation to the contrary. (US Lines
vs. Comm. Of Customs, Reyma Brokerage v.
Phil. Home Assurance)
Note: In order to attribute to the carrier any
damage to the shipment that may be found,
inspection of the goods should be done at
pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA
ACT/COGSA (C.A. No. 65)
b.
damaged goods); or
The date when the goods should
have been delivered (non-delivery).
(Sec. 3[6])
Loss or Damage as applied to the COGSA

contemplates a situation where no delivery at
all was made by the shipper of the goods
because the same had perished, gone out of
commerce, or disappeared in such a way that
their existence is unknown or they cannot be
recovered. Thus, it is inapplicable in case of
misdelivery or conversion. (Ang vs. American
Steamship Agencies Inc.) and damage arising
from delay or late delivery (Mitsui O.S.K. Lines
Ltd. vs. CA). In such instance the, Civil Code
rules on prescription shall apply.
The one-year prescriptive period is
suspended by:
1. The express agreement of the
parties (Universal Shipping Lines,
Inc. vs. IAC, 188 SCRA 170)
2. The filing of an action in court until it
is dismissed. (Stevens & Co. vs.
Nordeutscher Lloyd, 6 SCRA 180)
APPLICABILITY
The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from
foreign port to Philippine port).
It can be applied in domestic sea
transportation if agreed upon by the parties.
(Clause paramount or paramount clause)
The one-year period shall run from delivery

of the last package and is not suspended by
extrajudicial demand. (Dole Phils.,Inc. vs.
Maritime Co.,148 SCRA 118)
IMPORTANT FEATURES:
1. Amount of carriers liability
2. Notice of damage
3. Prescriptive period
The insurer exercising its right of

subrogation is bound by the one-year
prescriptive period. However, it does not
apply to the claim against the insurer for the
insurance proceeds. (Fil. Merchants Ins. Co.
vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)
AMOUNT OF CARRIERS LIABILITY

Under the Sec. 4(5), the liability limit is set
at $500 per package or customary freight unit
unless the nature and value of such goods is
declared by the shipper. This is deemed
incorporated in the bill of lading even if not
mentioned in it. (Eastern Shipping vs. IAC,
150 SCRA 463)
Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a. Patent damage: shipper should file a
claim with the carrier immediately upon
delivery
b. Latent damage: shipper should file a
claim with the carrier within three days
from delivery.
Note: The filing of a notice of claim is not a
condition precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo
should be brought within one year after:
a. Delivery of the goods (delivered but
The one-year period shall run from delivery

to the arrastre operator and not to the
consignee.
(Union Carbide Phils, Inc. vs.
Manila Railroad Co.,SCRA 359)
IV. WARSAW CONVENTION OF 1929 (WC)

PURPOSE: To protect the emerging air
transportation industry and to secure the
uniformity of recovery by the passengers.
APPLICABILITY
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or
goods.
The WC shall also apply to fortuitous
transportation by aircraft performed by an air
transportation enterprise.
International
transportation
any
transportation in which the place of departure
and the place of destination are situated
either:
1. Within the territories of two High
Contracting Parties regardless of whether
or not there be a break in the
transportation or transshipment, or
2. Within the territory of a single High
Contracting Party, if there is an agreed
stopping place within a territory subject

to the sovereignty, mandate or authority
of another power, even though that
power is not a party to the Convention.
(round trip, Am. Jur.)
Transportation to be performed by several
successive air carriers shall be deemed to be
one undivided transportation, if it has been
regarded by the parties as a single operation,
whether it has been agreed upon under the
form of a single contract or of a series of
contracts, and it shall not lose its
international character merely because one
contract or a series of contracts is to be
performed entirely within a territory subject
to the sovereignty, suzerainty, mandate, or
authority of the same High Contracting Party.
(Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the
Convention are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSENGER
TICKET
Passenger
BAGGAGE
CHECK
Checked-in
baggage
AIR
WAYBILL
Goods to be
shipped
LIABILITY OF CARRIER FOR DAMAGES

1. Death or injury of a passenger if the
accident causing it took place on board the
aircraft or in the course of its operations of
embarking or disembarking; (Art. 17)
2. Destruction, loss or damage to any
baggage or goods, if it took place during the
transportation by air; (Art. 18) and
Transportation by air The period during
which the baggage or goods are in the charge
of the carrier, whether in an airport or on
board an aircraft, or, in case of a landing
outside an airport, in any place whatsoever.
It includes any transportation by land or
water outside an airport if such takes place in
the
performance
of
a
contract
for
transportation by air, for the purpose of
loading, delivery, or transshipment.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19)
Note: The Hague Protocol amended the WC
by removing the provision that if the airline
took all necessary steps to avoid the damage,
it could exculpate itself completely (Art.
20(1)). (Alitalia vs. IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended

by Guatemala Protocol, 1971; Alitalia vs.
IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more than
the declared sum unless it proves the sum is
greater than actual value.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more than
the declared sum unless it proves the sum is
greater than actual value.
An agreement relieving the carrier from
liability or fixing a lower limit is null and void.
(Art. 23)
Carrier is not entitled to the foregoing limit
if the damage is caused by willful misconduct
or default on its part. (Art. 25)
Thus, the WC does not operate as an
exclusive enumeration of the instances of an
absolute limit of the extent of liability. It does
not preclude the application of the Civil Code
and other pertinent local laws. It does not
regulate or exclude liability for other breaches
of contract by the carrier, or misconduct of its
employees, or for some particular or
exceptional type of damage. (Alitalia vs. CA)
In PanAm v. IAC, the WC was applied as
regards the limitation on the carriers liability,
there being a simple loss of baggage without
any improper conduct on the part of the
officials or employees of the airline or other
special injury sustained by the passenger.
In KLM Royal v. Tuller, the WC has
invariably been held inapplicable, or as not
restrictive of the carriers liability, where
there was satisfactory evidence of malice or
bad faith attributable to its officers and
employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES

1. Notice of claim
A written complaint must me made within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from
receipt of baggage/goods
The complaint is a condition precedent.
Without the complaint, the action is barred
except in case of fraud on the part of the

carrier. (Art. 26)
2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation
stopped. (Art. 29)
In United Airlines vs. Uy the two-year
prescriptive period was not applied where the
airline employed delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against
the carrier in which the accident or delay
occurred.
EXCEPTION: Agreement or contract whereby
the first carrier assumed liability for the whole
journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an
action against the first carrier and
the carrier in which the damage
occurred
b. Passenger or consignee can file an
action against the last carrier and
the carrier in which the damage
occurred.
These carriers are jointly and severally
liable. (Art. 30)
A contract of international carriage by air,
although performed by different carriers
under a series of airline tickets constitutes a
single
operation.
Members
of
the
International Air Transportation Association
(IATA) are under a general pool partnership
agreement wherein they act as agent of each
other in the issuance of tickets to contracted
passengers to boost ticket sales worldwide
and at the same time provide passengers
easy access to airlines which are otherwise
inaccessible in some parts of the world.
(American Airlines vs. CA)
Under a general pool partnership
agreement, the ticket-issuing airline is the
principal in a contract of carriage while the
endorsee-airline is the agent. The obligation
of the former remained and did not cease
even when the breach occurred not on its
own flight but on that of another airline which
had undertaken to carry the passengers to
one of their destinations. (China Airlines vs.
Chiok)
JURISDICTION
At the option of the plaintiff, the action for
damages may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of
business;
c. Court where it has a place of business
through which the contract has been
made; or
d.
Court of the place of destination. (Art.

28(1))
NOTE: It is the passengers ultimate
destination not an agreed stopping place
that determines the country where suit is to
be filed.
The forum of action provided in Art. 28(1)
is a matter of jurisdiction rather than of
venue. (Santos III vs. Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
Two concepts:
1. Services one person renders to the owner
of a ship or goods, by his own labor,
preserving the goods or the ship which the
owner or those entrusted with the care of
them have either abandoned in distress at
sea, or are unable to protect or secure.
2. Compensation allowed to persons by
whose voluntary assistance a ship at sea or
her cargo or both have been saved in whole
or in part from impending sea peril, or such
property recovered from actual peril or loss,
as in cases of shipwreck, derelict or
recapture.
Requisites:
1. Valid object of salvage;
2. Object must have been exposed to
marine peril (not perils of the ship);
3. Services
rendered
voluntarily
(neither an existing duty nor out of a
pre-existing contract);
4. Services are successful, total or
partial.
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea,
and there sink and remain under water;
3. Floatsam or Flotsam goods which float
upon the sea when cast overboard;
4. Ligan or Lagan goods cast into the sea
tied to a buoy, so that they may be found
again by the owners (p.173, Judge Diaz).
Persons who have no right to a reward
for salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite
of opposition of the Captain or his
representative;
3. In accordance with Sec. 3 of the Salvage
Law, a person who fails to deliver a salvaged
vessel or cargo to the Collector of Customs.
Derelict a ship or her cargo which is
abandoned and deserted at sea by those who
are in charge of it, without any hope of
recovering it, or without any intention of
returning to it.
The intention of those in charge must be
ascertained. If those in charge left with the
intention of returning, or of procuring
assistance, the property is not derelict, but if
they quitted the property with the intention of
finally leaving it, it is derelict and a change of
their intention and an attempt to return will
not change its nature (Erlanger & Galinger vs.

Swedish East Asiatic Co. Ltd.).
If it is clear that the intention to return is
slight, the salvage which was done thereafter
is considered valid. (Notes and Cases on the
Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p. 616)
CONTRACT OF TOWAGE
A contract whereby one vessel, usually
motorized, pulls another, whether loaded or
not with merchandise, from one place to
another, for a compensation. It is a contract
for services rather than a contract of carriage.
SALVAGE
TOWAGE
Governed by special
law (Act No. 2616)
Governed by Civil
Code on contract of
lease
Requires success,
otherwise no
payment
Success
required
Must be done with

the consent of the
captain/crewmen
Only the consent of

the tugboat owner
is needed
Vessel must be
involved in an
accident
Vessel need not be

involved
in
an
accident
Fees distributed
among crewmen
Fees belong to the

tugboat owner
is
not
RULES ON SALVAGE REWARD

1. The reward is fixed by the RTC judge in
the absence of agreement or where the
latter is excessive. (Sec. 9)
2. The reward should constitute a sufficient
compensation for the outlay and effort of
the salvors and should be liberal enough
to offer an inducement to others to
render services in similar emergencies in
the future.
3. If sold (no claim being made within 3
months from publication), the proceeds,
after deducting expenses and the
salvage claim, shall go to the owner; if
the latter does not claim it within 3 years,
50% of the said proceeds shall go to the
salvors, who shall divide it equitably, and
the other half to the government. (Secs.
11-12)
4. If a vessel is the salvor, the reward shall
be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c.
25% to the officers and crew in

proportion to their salaries. (Sec. 13)
Taking passengers from a sinking ship,

without rendering any service in rescuing the
vessel, is not a salvage service, being a duty
of humanity and not for reward.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)

PURPOSES:
1. To secure adequate, sustained
service for the public at the least
possible cost;
2. To protect the public against
unreasonable charges and poor,
inefficient service;
3. To protect and secure investments in
public services;
4. To prevent ruinous competition.
AUTHORITY
TO
OPERATE
PUBLIC
SERVICES
GENERAL RULE: No public service shall
operate without having been issued a
certificate of public convenience or a
certificate
of public
convenience
and
necessity.
EXCEPTIONS:
1. Warehouses;
2. Animal drawn vehicles and bancas
moved by oar or sail;
3. Airships, except for the fixing of
maximum rates for fare and freight;
4. Radio companies, except for rates
fixing;
5. Public services owned or operated by
the government, except as to rates
fixing;
6. Ice plants; and
7. Public markets.
PUBLIC SERVICE
A person who owns, operates, manages or
controls in the Philippines for hire or
compensation, with general or limited
clientele, whether permanent, occasional or
accidental, and done for general business
purposes, any common carrier or public
utility, ice plants, power and water supplies,
communication and similar public services.
(Sec. 13b, CA 146)
A casual or incidental service devoid of
public character and interest is not brought
within the category. The question depends on
such factors as the extent of services,
whether such person or company has held
himself or itself out as ready to serve the
public or a portion of the public generally.
(Luzon Stevedoring vs. PSC)
NOTE: The Public Service Commission
created under the Public Service Law has
already been abolished under P.D. No. 1 and
other issuances. It has been replaced by the
following government agencies: LTO; LTFRB;
ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
MIA.
CERTIFICATE OF
PUBLIC
CONVENIENCE
(CPC)
CERTIFICATE
OF
PUBLIC
CONVENIENCE
AND
NECESSITY
(CPCN)
An authorization
issued
by
the
appropriate
government agency
for the operation of
public services for
which no franchise,
either municipal or
legislative,
is
required by law,
e.g.,
common
carriers.
An authorization
issued
by
the
appropriate
government agency
for the operation of
public service for
which
a
prior
franchise is required
by
law;
e.g.
telephone and other
services.
A CPC or a CPCN constitutes neither a

franchise nor a contract, confers no property
right, and is a mere license or a privilege. The
holder of said certificate does not acquire a
property right in the route covered thereby.
Nor does it confer upon the holder any
proprietary right or interest or franchise in the
public highways. Revocation of this certificate
deprives him of no vested right. New and
additional
burdens,
alteration
of
the
certificate, or even revocation or annulment
thereof is reserved to the State. (Luque vs.
Villegas, 30 SCRA 408)
It is a property and has a considerable
value and can be the subject of sale or
attachment. (Cogeo-Cubao Operators and
Drivers Assn. vs. CA, 207 SCRA 343,
Raymundo vs. Luneta Motor Co.)
REQUREMENTS FOR GRANTING CPC OR
CPCN
1. Applicant must be a citizen of the
Philippines or a corporation or entity 60%
of the capital of which is owned by such
citizens;
2. Applicant must prove public necessity;
3. Applicant must prove that the operation
of the public service proposed and the
authorization to do business will promote
the public interest on a proper and
suitable manner;
4. Applicant must have sufficient financial
capability to undertake the proposed
services and meeting the responsibilities
incident to its operation.
POWERS
REQUIRING
PRIOR NOTICE
AND HEARING
1. Issuance
of
CPC or CPCN;
2. Fixing of rates,
tolls, and charges;
3. Setting up of
standards
and
classifications;
4. Establishment
of rules to secure
accuracy
of
all
POWERS
EXERCISABLE
WITHOUT PRIOR
NOTICE AND
HEARING
1. Investigation
any
matter
concerning
public
service;
2. Requiring
operators to furnish
safe, adequate, and
proper service;
3. Requiring public
services
to
pay
meters
and
all
measuring
appliances;
5. Issuance
of
orders
requiring
establishment
or
maintenance
of
extension
of
facilities;
6. Revocation, or
modification of CPC
or CPCN;
7. Suspension of
CPC
or
CPCN,
except when it is
necessary to avoid
serious
and
irreparable damage
or
inconvenience
to the public or
private interest, in
which
case,
a
suspension
not
more than 30 days
may be ordered,
prior
to
the
hearing. (Soriano v.
Medina, 164 SCRA
36)
expenses
of
investigation;
4. Valuation
of
properties of public
utilities;
5. Examination
and
test
of
measuring
appliances;
6. Grant of special
permits
to
make
extra or special trips
in
territories
specified
in
the
certificate;
7. Uniform
accounting
system
and furnishing of
annual reports;
8. Compelling
compliance with the
laws
and
regulations.
UNLAWFUL ACTS OF PUBLIC UTILITY

COMPANIES
1. Engagement in public service business
without
first
securing
the
proper
certificate;
2. Providing
or
maintaining
unsafe,
improper or inadequate service as
determined by the proper authority;
3. Committing any act of unreasonable and
unjust preferential treatment to any
particular person, corporation or entity as
determined by the proper authority;
4. Refusing or neglecting to carry public
mail upon request. (Secs. 18 and 19)
ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint
rates;
2. Establish and operate new units;
3. Issue free tickets;
4. Issue any stock or stock certificates
representing an increase of capital;
5. Capitalize any franchise in excess of the
amount actually paid to the Government;
6. Sell, alienate,
mortgage or lease
property, certificates or franchise.
Under Sec. 20(g) of C.A. No. 146, the sale,
etc. may be negotiated and completed before
the approval by the proper authority. Its
approval is not a condition precedent to the
validity of the contract. The approval is
necessary only to protect public interest.
PRIOR OPERATOR/OLD OPERATOR RULE
The rule allowing an existing franchised
operator to invoke a preferential right within
the authorized territory as long as he renders
satisfactory and economical service.
The policy is not to issue a certificate to a

second operator to cover the same field and
in competition with a first operator who is
rendering
sufficient,
adequate
and
satisfactory service. The prior operator must
first be given an opportunity to improve its
service, if inadequate or deficient.
Purpose: To prevent ruinous and wasteful
competition in order that the interests of the
public would be conserved and preserved.
inexistent under Art. 1409, Civil Code.

Effects:
1. The transfer, sale, lease or assignment of
the privilege granted is valid between the
contracting parties but not upon the
public or third persons. (Gelisan vs.
Alday, 154 SCRA 388)
It subordinates the prior applicant rule

which gives the first applicant priority only if
things and circumstances are equal.
Where the operator either fails or neglects
to make the improvement or effect the
increase in services, especially when given
the opportunity, new operators should be
given the chance to give the services needed
by the public.
PRIOR APPLICANT RULE
Presupposes a situation when two interested
persons apply for a certificate to operate a
public utility in the same community over
which no person has as yet granted any
certificate. If it turns out, after the hearing,
that the circumstances between the two
applicants are more or less equal, then the
applicant who applied ahead of the other, will
be granted the certificate.
RATE-FIXING POWER
The rate to be fixed must be just, founded
upon conditions which are fair and reasonable
to both the owner and the public.
A rate is just and reasonable if it conforms to
the following requirements:
1. One which yields to the carrier a fair
return upon the value of the property
employed in performing the service;
and
2. One which is fair to the public for the
service rendered.
2.
REGISTERED OWNER RULE

The registered owner of a certificate of
public convenience is liable to the public for
the injuries or damages suffered by third
persons caused by the operation of said
vehicle, even though the same had been
transferred to a third person.
The registered owner is not allowed to
escape responsibility by proving that a third
person is the actual and real owner Reason: It
would be easy for him, by collusion with
others or otherwise, to transfer the
responsibility to an indefinite person, or to
one who possesses no property with which to
respond financially for the damage or injury
done. (Erezo, et al. vs. Jepte 102 Phil 103).
3.
KABIT SYSTEM
A system whereby a person who has been
granted a certificate of public convenience
allows other persons who own motor vehicles
to operate under such license, for a fee or
percentage of such earnings. It is void and
4.
5.
The registered owner is primarily liable

for all the consequences flowing from the
operations of the carrier.
The public has the right to assume
that the registered owner is the actual or
lawful owner thereof. It would be very
difficult and often impossible, as a
practical matter, for the public to enforce
their rights of action that they may have
for injuries inflicted by the vehicle if they
should be required to prove who the
actual owner is. (Benedicto vs. IAC, 187
SCRA 547)
The thrust of the law in enjoining the
kabit system is to identify the person
upon whom responsibility may be fixed
with the end in view of protecting the
riding public (Lim vs. CA 373 SCRA 394).
The registered owner cannot recover
from the actual owner and the latter
cannot obtain transfer of the vehicle to
himself, both being in pari delicto. (Teja
Marketing vs. IAC)
For the better protection of the public,
both the registered owner and the actual
owner are jointly and severally liable with
the driver. (Zamboanga Transportation
Co. vs. CA)

Transpo-Law Review (Aquino)

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Transpo-Law Review (Aquino)

Uploaded by

Copyright:

Available Formats

San Beda College of Law

Provides public convenience.

COMMERCIAL LAW COMMITTEE

San Beda College of Law

ticket, unless the attempt be with

DEFENSES OF A COMMON CARRIER IN

ORDER OR ACT OF PUBLIC AUTHORITY

COMMERCIAL LAW COMMITTEE

San Beda College of Law

FOR ACTS OF ITS

Required diligence and defense

LIABILITY OF A COMMON CARRIER FOR

Delay in delivery, loss, destruction, or

From the time the goods are unconditionally

The duty of a common carrier to provide safety

COMMERCIAL LAW COMMITTEE

San Beda College of Law

Ordinary circumstance: Exercise of

1. Reduction of degree of diligence to ordinary

Stipulation limiting liability when a passenger is

The diligence required in the carriage of the

Dispensing with or lessening the extraordinary

COMMERCIAL LAW COMMITTEE

San Beda College of Law

statements on tickets or otherwise. (Art. 1757)

COMMERCIAL LAW COMMITTEE

RULES ON PASSENGERS BAGGAGE

However, the carrier cannot limit its liability

2. Ambiguity is construed against the carrier,

Foul One which contains a notation

Spent One which covers goods that

it takes the risk of delivering it in good

The filing of notice of claim is a condition

vessel, which stands as the guaranty for their

out of tort; and

Effect of sale: All pre-existing claims in the

GENERAL RULE: The liability of shipowner

1. In case of civil liability from indemnities to

PARTICIPANTS IN MARITIME COMMERCE

of position (3-fold character):

No liability for the following:

the sailing mate, assuming in such case their

if captured in defense of vessel - full

Complement of the Vessel

Clauses Which May Be Included In a

PERSONS WHO MAY MAKE A CHARTER

Rights and Obligations of Parties

Rescission of a Charter Party

Not subject to any

The last lender is a

The first lender is a

of a ship hypothecated by bottomry

Note: If a vessel is hypothecated by bottomry

Note: Under existing laws, the parties to a

benefit, and borne by from real and known

Share in the damage or expense

ARRIVAL UNDER STRESS (ARRIBADA)

GOODS NOT COVERED BY GENERAL

It is the duty of the captain to continue the

another which is at anchor and cannot

Nautical Rules as to Sailing Vessel and

Zones of Time in the Collision of Vessels

believes that the cargo has suffered

The doctrine of res ipsa loquitur applies in