San Beda College of Law

54
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ 4. Provides public convenience.

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

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
 San Beda College of Law
55
MEMORY AID IN COMMERCIAL LAW

Law on common Law on obligations ticket, unless the attempt be with

carriers and contracts
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
the knowledge and consent of the
carrier;
e. One who has boarded a wrong
vehicle, has been properly informed
of such fact, and on alighting, is
injured by the carrier;
f. Invited guests and accommodation
passengers. (Lara vs. Valencia)
g. One who rides any part of the
vehicle which is unsuitable or
dangerous or which he knows is not
designed or intended for passengers.
DEFENSES OF A COMMON CARRIER IN
THE CARRIAGE OF GOODS
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.120-
122)
2. ACTS OF PUBLIC ENEMY
 Requisites:
a. Must be the proximate and only
cause of the loss
b. Exercise of due diligence to prevent
or minimize the loss before, during or
after the act causing the loss,
deterioration or destruction of the goods
(Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute
defense
b. Contributory: partial defense. (Art.
1741)
4. CHARACTER OF THE GOODS OR DEFECTS
IN THE PACKING OR IN THE CONTAINER
 Even if the damage should be caused by
the inherent defect/character of the goods,
the common carrier must exercise due
diligence to forestall or lessen the loss. (Art.
1742)
 The carrier which, knowing the fact of
improper packing of the goods upon ordinary
observation, still accepts the goods
notwithstanding such condition, is not
relieved of liability or loss or injury resulting
therefrom. (Southern Lines, Inc. v. CA, 4 SCRA
258)
5. ORDER OR ACT OF PUBLIC AUTHORITY

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
 San Beda College of Law
56
 Said public authority must have the power
to issue the order (Art. 1743). Consequently,
where the officer acts without legal process,
the common carrier will be held liable.
(Ganzon v. CA 161 SCRA 646)
 Diligence in the selection and supervision
of employees under Article 2180 of the Civil
Code cannot be interposed as a defense by
the common carrier because the liability of
the carriers arises from the breach of the
contract of carriage. The defense under said
articles is applicable to negligence in quasi-
delicts under Art. 2176. (Del Prado v. Manila
Electric Co., 52 Phil 900)
LIABILITY OF A COMMON CARRIER FOR
DEATH OR INJURIES TO PASSENGERS
DUE TO ACTS OF ITS EMPLOYEES AND
OTHER PASSENGERS OR STRANGERS
CARRIAGE OF GOODS
Parties
1. Common carrier
2. Shipper
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or
deterioration of the goods
Duration of liability
From the time the goods are unconditionally
placed in the possession of, and received by the
carrier for transportation until the same are
delivered actually or constructively by the
carrier to the consignee or to the person who
has the right to receive them. (Art. 1736)
 It remains in full force and effect even when
they are temporarily unloaded or stored in
transit unless the shipper or owner has made
use of the right of stoppage in transitu. (Art.
1737)
 It continues to be operative even during the
time the goods are stored in a warehouse of the
carrier at the place of destination until the
consignee has bee advised of the arrival of the
goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose
of them. (Art. 1738)
 Delivery of goods to the custom authorities is
not delivery to the consignee. (Lu Do v.
Binamira, 101 Phil 120)
COMMERCIAL LAW COMMITTEE
 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
MEMORY AID IN COMMERCIAL LAW
FOR ACTS OF
FOR ACTS OF ITS OTHER
EMPLOYEES 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)
CARRIAGE OF PASSENGERS
1. Common carrier
2. Passenger
Death or injury to the passengers
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).
 San Beda College of Law
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. Ordinary circumstance: Exercise of 1. Exercise of extraordinary diligence

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

1. Reduction of degree of diligence to ordinary Stipulation limiting liability when a passenger is

diligence, provided it be: carried gratuitously, but not for willful acts or
a) In writing, signed by the shipper or gross negligence. (Art. 1758)
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 carrier’s liability for delay
on account of strikes or riots (Art. 1748)
4. Stipulation limiting liability to the value of the
goods appearing in the bill of lading, unless the
shipper or owner declares a greater value. (Art.
1749)

 The diligence required in the carriage of the

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

Void stipulations
4. That the carrier shall exercise a degree of
diligence less than that of a good father of a Dispensing with or lessening the extraordinary
family over the movable transported; responsibility of a common carrier for the
5. That the carrier shall not be responsible safety of passengers imposed by law by
for the acts or omissions of his or its stipulation, by posting of notices, by

COMMERCIAL LAW COMMITTEE

 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
 San Beda College of Law
58
MEMORY AID IN COMMERCIAL LAW

employees; statements on tickets or otherwise. (Art. 1757)

6. That the carrier’s liability for acts
committed by thieves or robbers who do not
act with grave or irresistible threat, violence or
force is dispensed with or diminished;
7. That the carrier is not responsible for the
loss, destruction or deterioration of the goods
on account of the defective condition of the
car, vehicle, ship or other equipment used in
the contract of carriage. (Art. 1745)

COMMERCIAL LAW COMMITTEE

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

LIMITATIONS AS TO CARRIER’S LIABILITY

INVALID AS BEING VALID &
A. OVERLAND TRANSPORTATION
CONTRARY TO ENFORCEABLE (Arts. 349-379)
PUBLIC POLICY
Applicability
1. One exempting the 1. One limiting the
1. Domestic land and water/maritime
carrier from any and liability of the carrier
transportation. (Pandect of Commercial Law
all liability for loss or to an agreed
and Jurisprudence, Justice Jose Vitug, 1997
damage occasioned by valuation, unless the
ed.)
its own negligence. shipper declares a
2. Domestic Air Transportation. (Commercial
2. An unqualified higher value and
Law Review, Cesar Villanueva, 2004 ed.)
limitation of liability to pays a higher rate of
an agreed valuation. freight
IMPORTANT CONCEPTS:
(H.E. Heacock
1. Bill of lading
Company vs.
2. Obligations of the carrier
 3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
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)
2. Ambiguity is construed against the carrier,
the contract being one of adhesion.
3. The consignee, although the instrument is
oftentimes drawn up only by the consignor
and carrier, becomes bound by all the
stipulations contained therein by making a
claim for loss on the basis of said bill of
lading. (Sea-Land Services Inc. vs. IAC)
4. The right of a party to recover for loss of
shipment consigned to him under a bill of
lading drawn up only by and between the
shipper and the carrier, springs from either a
relation of agency between him and the
shipper, or his status as stranger in whose
favor some stipulation is made in said
contract, and who becomes a party thereto
when he demands fulfillment of that
stipulation. (Art. 1311 (2), (Mendoza vs. PAL
Inc.)
5. Acceptance of the bill of lading without
dissent raises the presumption that all the
terms therein where brought to the
knowledge of the shipper and agreed to by
him and, in the absence of fraud or mistake;
he is estopped from thereafter denying that
he assented to such terms. (Notes and Cases
on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed.
p.261)
 Kinds:
1. On board - issued when the goods
have been actually placed aboard the
ship with very reasonable expectation
that the shipment is as good as on its
way.
2. Received - one in which it is stated
that the goods have been received for
shipment with or without specifying
the vessel by which the goods are to
be shipped.
3. Negotiable - one in which it is stated
that the goods referred to therein will
be delivered to the bearer or to the
order of any person named therein.
4. Non-negotiable - One in which it is
stated that the goods referred to
therein will be delivered to a specified
person.
5. Clean – One which does not indicate
any defect in the goods.
6. Foul – One which contains a notation
thereon indicating that the goods
covered by it are in bad condition.
7. Spent – One which covers goods that
already have been delivered by the
carrier without a surrender of a signed
copy of the bill.
8. Through – One issued by the carrier
who is obliged to use the facilities of
other carriers as well as his own
facilities for the purpose of
transporting the goods from the city of
the seller to the city of the buyer,
which bill of lading is honored by the
second and other interested carriers
who do not issue their own bills.
9. Custody – One wherein the goods
are already received by the carrier but
the vessel indicated therein has not
yet arrived in the port.
10. Port – One which is issued
by the carrier to whom the goods have
been delivered, and the vessel
indicated in the bill of lading by which
the goods are to be shipped is already
in the port where the goods are held
for shipment.
 Functions:
1. Best evidence of
the existence of the contract of
carriage of cargo (Art. 353)
2. Document of
title
3. Receipt of cargo
4. Contract to
transport and deliver goods as
stipulated
5. Symbol of the
goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier cannot
ordinarily refuse to carry a particular class of
goods.
EXCEPTION: For some sufficient reason the
discrimination against the traffic in such
goods is reasonable and necessary. (Fisher
vs. Yangco Steamship Co. 31 Phil 1).
 Instances when the carrier may validly
refuse to accept the goods include the ff:
1.) Goods sought to be transported are
dangerous objects, or substances including
dynamite and other explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger
like flood, capture by enemies and the like
7.) Goods like livestock will be exposed to
disease
8.) Strike
9.) Failure to tender goods on time. (Notes
and Cases on the Law on Transportation and
Public Utilities, Aquino, T. & Hernando, R.P. destined (Art.
2004 ed. p.68) 365); and
 In case of carriage by railway, the carrier is 3. In case of delay
exempted from liability if carriage is insisted through the fault
upon by the shipper, provided its objections of the carrier
are stated in the bill of lading. (Art. 371).
 However, when a common carrier accepts
cargo for shipment for valuable consideration, NOTICE OF DAMAGE (ART. 366)
it takes the risk of delivering it in good  Requisites for applicability:
condition as when it was loaded. (PAL vs. CA) 1. Domestic/inter-
island/coastwise transportation
B. Duty to deliver the goods 2. Land/water/air
 Not only to transport the goods safely but transportation
to the person indicated in the bill of lading. 3. Carriage of
The goods should be delivered to the goods
consignee or any other person to whom the 4. Goods shipped
bill of lading was validly transferred or are damaged
negotiated.  Rules:
a. Patent damage: shipper must file a claim
Time of delivery against the carrier immediately upon
Stipulated in No stipulation delivery (it may be oral or written)
Contract/Bill of b. Latent damage: shipper should file a claim
Lading against the carrier within 24 hours from
1. Carrier is bound to 1. Within a delivery.
fulfill the contract reasonable time. Note: These rules does not apply to
and is liable for any 2. Carrier is bound to misdelivery of goods. (Roldan vs. Lim Ponzo)
delay; no matter forward them in the Purpose of notice: To inform the carrier that
from what cause it 1st shipment of the the shipment has been damaged, and it is
may have arisen. same or similar charged with liability therefore, and to give it
goods which he may an opportunity to make an investigation and
make to the point of fix responsibility while the matter is fresh.
delivery. (ART. 358  The filing of notice of claim is a condition
Code of Commerce) precedent for recovery.
 Shorter period may be stipulated by the
Effects of delay parties because it merely affects the
a. Merely suspends and shipper’s remedy and does not affect the
generally does not liability of the carrier. (PHILAMGEN vs.
terminate the contract of Sweetlines, Inc.)
carriage Prescriptive Period
b. Carrier remains duty bound  Not provided by Article 366. Thus, in such
to exercise extraordinary absence, Civil Code rules on prescription
diligence apply.
c. Natural disaster shall not  If despite the notice of claim, the carrier
free the carrier from refuses to pay, action must be filed in court.
responsibility (Art.1740) 1. No bill of lading was issued:
d. If delay is without just within 6 years
cause, the contract limiting
the common carrier’s 2. Bill of lading was issued:
liability cannot be availed of within 10 years.
in case of loss or ARTICLE 366 COGSA Sec.3 (6)
deterioration of the goods Applicability
(Art.1747) 1. Domest 1. Internationa
ic/inter- l/
RIGHT OF CONSIGNEE TO ABANDON island/co overseas/foreign
GOODS astwise (from foreign
 Instances: transpor country to Phils.)
1. Partial non- tation Note: subject to the
delivery, where 2. Land, rule on Paramount
the goods are water, Clause
useless without air 2. Water/maritime
the others (Art. transpor transportation
363); tation 3. Carriage of goods
2. Goods are 3. Carriag
rendered useless e of
for sale or goods
consumption for Notice of damage
the purposes for 1. 1.
which they are C Not
properly
 2. 2. the actual value of the vessel and the freight
2 3- money; and 2) the right to retain the cargo
and embargo and detention of the vessel
Prescriptive period (Luzon Stevedoring Corp v. CA, 156 SCRA
None provided; Civil One year from the 169);
Code applies. date of delivery 2. Hypothecary - the liability of the owner of
(delivered but the value of the vessel is limited to the vessel
damaged goods), or itself (Doctrine of Limited Liability).
date when the
vessel left port or  The real and hypothecary nature of
from the date of maritime law simply means that the liability
delivery to the of the carrier in connection with losses
arrastre (non- related to maritime contracts is confined to
delivery or loss). the vessel, which stands as the guaranty for
their settlement. (Aboitiz Shipping Corp. vs.
COMBINED CARRIER AGREEMENT (ART. General Accident Fire and Life Assurance
373) Corp. 217 SCRA 359).
GENERAL RULE: In case of a contract of
MERCHANT VESSEL
transportation of several legs, each carrier is
responsible for its particular leg in the  Vessel engaged in maritime commerce,
contract. whether foreign or otherwise. (Bar Review
Materials in Commercial Law, Jorge Miravite,
EXCEPTION: A combined carrier agreement
2002 ed.)
where a carrier makes itself liable assuming
the obligations and acquiring as well the  Constitutes property which may be
rights and causes of action of those which acquired and transferred by any of the means
preceded it. recognized by law. They shall continue to be
considered as personal property. (Arts. 573,
585)
A. MARITIME COMMERCE  They are susceptible to maritime liens such
(Arts. 573-869) as for the repair, equipping and provisioning
of the vessel in the preparation of a voyage,
IMPORTANT CONCEPTS: as well as mortgage liabilities, in satisfaction
1. Merchant vessel of which a vessel may be validly arrested and
2. Maritime lien and Preference of sold. (Ship Mortgage Decree of 1978)
Credit
3. Doctrine of limited liability MARITIME LIEN
4. Causes of revocation of voyage  It constitutes a present right of property in
5. Participants in maritime commerce the ship, a jus in re, to be afterward enforced
6. Charter party in admiralty by process in rem. (PNB vs. CA,
7. Loans on bottomry and respondentia 337 SCRA 381)
8. Accidents in maritime commerce  If the maritime lien arose prior to the
recording of a preferred mortgage, it shall
MARITIME/ADMIRALTY LAW have priority over the said mortgage lien.
 It is the system of laws which particularly (PNB vs. CA, 337 SCRA 381)
relates to the affairs and business of the sea,
to ships, their crews and navigation, and to
maritime conveyance of persons and ORDER OF PREFERENCE IN CASE OF SALE
property. (Notes and Cases on the Law on OF VESSEL
Transportation and Public Utilities, Aquino &
Hernando, citing Francisco, p.254) R.A. 6106 P.D. 1521
Effectivity date
 Maritime laws apply only to maritime trade 1969 1978
and sea voyages. (Pandect of Commercial Applicability
Law and Jurisprudence, Justice Jose Vitug, Overseas shipping Both domestic and
1997 ed.) only overseas shipping
Kind of sale
 Arrastre service is not maritime in Judicial Judicial and
character. It refers to a contract for the extrajudicial
unloading of goods from a vessel. (ICTSI vs. Order of Preference
Prudential Guarantee, 320 SCRA 244) A preferred The preferred
mortgage shall have mortgage lien shall
CHARACTERISTICS OF MARITIME priority over all have priority over all
TRANSACTION claims against the claims against the
1. Real - similar to transactions over real vessel, except the vessel, except the
property with respect to effectivity against following following
third persons which is done through preferences in the preferences in the
registration. (Rubiso vs. Rivera, 37 Phil. 72). order stated: order stated:
The evidence of real nature is shown by: 1) 1. Judicial costs of 1. Expenses and
the limitation of the liability of the agents to the proceedings; fees allowed and
2. Taxes due the costs taxed by the 3. The vessel is insured (Vasquez vs. CA
Philippine court and taxes due 138 SCRA 553).
Government; to the Government; 4. Expenses for repair on vessel completed
3. Salaries and 2. Crew’s wages; before loss;
wages of the 3. General average;
Captain and Crew of 4. Salvage, including 5. In case there is no total loss and the
the vessel during its contract salvage; vessel is not abandoned;
last voyage; 5. Maritime liens 6. Collision between two negligent vessels;
4. General average arising prior in time
or salvage including to the recording of  Abandonment of the vessel is necessary to
contract salvage, the preferred limit the liability of the shipowner. The only
bottomry loans, and mortgage; instance were abandonment is dispensed
indemnity due 6. Damages arising with is when the vessel is entirely lost (Luzon
shippers for the out of tort; and Stevedoring vs. CA 156 SCRA 169).
value of goods 7. Preferred
transported but mortgage registered RIGHT OF SHIPOWNER OR SHIP AGENT
which were not prior in time. TO ABANDON VESSEL
delivered to the  Instances:
consignee; 1. In case of civil liability from
5. Costs of repair indemnities to third persons (Art.
and equipment of 587);
the vessel, and 2. In case of leakage of at least ¾ of
provisioning of food, the contents of a cargo containing
supplies and fuel liquids (Art. 687); and
during its last 3. In case of constructive loss of the
voyage; and vessel (Sec. 138, Insurance Code).
6. Preferred
mortgages RIGHT OF ABANDONMENT
registered prior in
time. SHIPOWNER OR CONSIGNEE
SHIP AGENT
 Effect of sale: All pre-existing claims in the What may be abandoned
vessel are terminated. They will then be Vessel Goods shipped
satisfied from the proceeds of the sale Instances
subject to the order of preference. 1. In case of civil 1. Partial non-
liability from delivery, where the
DOCTRINE OF LIMITED LIABILITY indemnities to third goods are useless
(HYPOTHECARY RULE) persons (Art. 587); without the others
 Cases where applicable: 2. Sec. 138, (Art. 363);
1. Art. 587 – civil Insurance Code; 2. Goods are
liability for indemnities to third 3. In case of leakage rendered useless for
persons of at least ¾ of the sale or consumption
contents of a cargo for the purposes for
2. Art. 590 –
containing liquids which they are
indemnities from negligent acts of
(Art. 687) properly destined
the captain (not the shipowner or
(Art. 365); and
ship agent)
3. In case of delay
3. Art. 837 –
through the fault of
collision
the carrier (Art.
4. Art. 643 –
371).
liability for wages of the captain and
Effects
the crew and for advances made by
1. Transfer of 1. Transfer
the ship agent if the vessel is lost by
ownership of of
shipwreck or capture
the vessel ownersh
from the ip on
GENERAL RULE: The liability of shipowner
shipowner to the
and ship agent is limited to the amount of
the shippers goods
interest in said vessel such that where vessel
or insurer. from
is entirely lost, the obligation is extinguished.
2. In case of the
(Luzon Stevedoring v. Escano, 156 SCRA 169)
(2), the shipper
The interest extends to: 1) the vessel itself; 2)
insurer must to the
equipments; 3) freightage; and 4) insurance
pay the carrier.
proceeds. (Chua v. IAC, 166 SCRA 183)
insured as if 2. Carrier
EXCEPTIONS: there was should
1. Claims under Workmen’s Compensation actual total pay the
(Abueg vs. San Diego 77 Phil 730); loss of the shipper
2. Injury or damage due to shipowner or to vessel. the
the concurring negligence of the market
shipowner and the captain; value of
 the Civil Liabilities of the Shipowner And
goods Ship Agent
at the 1. All contracts of the captain, whether
point of authorized or not, to repair, equip and
destinat provision the vessel; (Art. 586)
ion. 2. Loss and damage to the goods loaded on
the vessel without prejudice to their right
CAUSES OF REVOCATION OF VOYAGE to free themselves from liability by
1. War or interdiction of commerce; abandoning the vessel to the creditors.
2. Blockade; (Art. 587)
3. Prohibition to receive cargo at
destination; Duty of Ship Agent to Discharge the
4. Embargo; Captain and Members of the Crew
5. Inability of the vessel to navigate. (Art.  If the seamen contract is not for a definite
640) period or voyage, he may discharge them at
his discretion. (Art. 603)
Terms:  If for a definite period, he may not
1. Interdiction of discharge them until after the fulfillment of
commerce – A governmental prohibition their contracts, except on the following
of commercial intercourse intended to grounds:
bring about an entire cessation for the a. Insubordination in serious matters;
time being of all trade whatever. b. Robbery;
2. Blockade – A c. Theft;
sort of circumvallation of a place by d. Habitual drunkenness;
which all foreign connection and e. Damage caused to the vessel or to its
correspondence is, as far as human cargo through malice or manifest or
power can effect it, to be cut off. proven negligence. (Art. 605)
3. Embargo – A
proclamation or order of a state, usually B. CAPTAINS AND MASTERS
issued in time of war or threatened  They are the chiefs or commanders of
hostilities, prohibiting the departure of ships.
ships or goods from some or all the ports
 The terms have the same meaning, but are
of such state until further order.
particularly used in accordance with the size
of the vessel governed and the scope of
PARTICIPANTS IN MARITIME COMMERCE
transportation, i.e., large and overseas, and
A. Shipowners and ship agents
small and coastwise, respectively.
B. Captains and masters of the vessel
 Nature of position (3-fold character):
C. Officers and crew of the vessel
1. General agent of the
D. Supercargoes
shipowner;
E. Pilot
2. Technical director of the
vessel;
A. SHIPOWNERS AND SHIP AGENTS
3. Representative of the
Shipowner (proprietario)
government of the country under
 Person who has possession, control and
whose flag he navigates.
management of the vessel and the
 Qualifications:
consequent right to direct her navigation and
1. Filipino citizen;
receive freight earned and paid, while his
2. Legal capacity to contract;
possession continues.
3. Must have passed the
required physical and mental
Ship agent (naviero)
examinations required for licensing
 Person entrusted with provisioning and
him as such. (Art. 609)
representing the vessel in the port in which it
 Inherent powers:
may be found; also includes the shipowner.
1. Appoint crew in the
 Not a mere agent under civil law; he is
absence of ship agent;
solidarily liable with the ship owner.
2. Command the crew and
 Powers and functions: direct the vessel to its port of
1. Capacity to trade; destination;
2. Discharge duties of the captain, subject 3. Impose correctional
to Art.609; punishment on those who, while on
3. Contract in the name of the owners with board vessel, fail to comply with his
respect to repairs, details of equipment, orders or are wanting in discipline;
armament, provisions of food and fuel, 4. Make contracts for the
and freight of the vessel, and all that charter of vessel in the absence of
relate to the requirements of navigation; ship agent.
4. Order a new voyage, make a new charter 5. Supply, equip, and provision
or insure the vessel after obtaining the vessel; and
authorization from the shipowner or if 6. Order repair of vessel to
granted in certificate of appointment. enable it to continue its voyage. (Art.
610)
 Sources of funds to comply with the 2. Thefts and robberies of the
inherent powers of the captain (in successive crew;
order): 3. Losses and fines for
1. From the consignee of the violation of laws;
vessel; 4. Damages due to mutinies;
2. From the consignee of the 5. Damages due to misuse of
cargo; power;
3. By drawing on the ship 6. For deviations;
agent; 7. For arrivals under stress;
4. By a loan on bottomry; 8. Damages due to non-
5. By sale of part of the cargo. observance of marine regulations.
(Art. 611) (Art. 618)
 Duties:
1. Bring on board the proper C. OFFICERS AND CREW
certificate and documents and a 1. Sailing Mate/First Mate
copy of the Code of Commerce; 2. Second Mate
2. Keep a Log Book, 3. Engineers
Accounting Book and Freight Book; 4. Crew
3. Examine the ship before the  No liability under the following
voyage; circumstances:
4. Stay on board during the 1. If, before beginning voyage, captain
loading and unloading of the cargo; attempts to change it, or a naval war
5. Be on deck while leaving or with the power to which the vessel was
entering the port; destined occurs;
6. Protest arrivals under stress 2. If a disease breaks out and be officially
and in case of shipwreck; declared an epidemic in the port of
7. Follow instructions of and destination;
render an accounting to the ship 3. If the vessel should change owner or
agent; captain. (Art. 647)
8. Leave the vessel last in
case of wreck; Sailing Mate/First Mate
9. Hold in custody properties  Second chief of the vessel who takes the
left by deceased passengers and place of the captain in case of absence,
crew members; sickness, or death and shall assume all of his
10. Comply with the duties, powers and responsibilities. (Art. 627)
requirements of customs, health,  Duties:
etc. at the port of arrival; 1. Provide himself with maps
11. Observe rules to avoid and charts with astronomical tables
collision; necessary for the discharge of his
12. Demand a pilot while duties;
entering or leaving a port. (Art. 612) 2. Keep the Binnacle Book;
3. Change the course of the
 A ship’s captain must be accorded a voyage on consultation with the
reasonable measure of discretionary captain and the officers of the boat,
authority to decide what the safety of the following the decision of the captain
ship and of its crew and cargo specifically in case of disagreement;
requires on a stipulated ocean voyage (Inter- 4. Responsible for all the
Orient Maritime Enterprises Inc. vs. CA). damages caused to the vessel and
the cargo by reason of his
 No liability for the following: negligence. (Arts. 628 - 631)
1. Damages caused to the
vessel or to the cargo by force Second Mate
majeure;  Takes command of the vessel in case of
2. Obligations contracted for the inability or disqualification of the captain
the repair, equipment, and and the sailing mate, assuming in such case
provisioning of the vessel unless he their powers and responsibilities.
has expressly bound himself  Third in command
personally or has signed a bill of  Duties:
exchange or promissory note in his 1. Preserve the hull and
name. (Art. 620) rigging of the vessel;
2. Arrange well the cargo;
Solidary Liabilities of the Ship 3. Discipline the crew;
Agent/Shipowner for Acts Done by the 4. Assign work to crew
Captain towards Passengers and members;
Cargoes 5. Inventory the rigging and
1. Damages to vessel and to equipment of the vessel, if laid up.
cargo due to lack of skill and (Art. 632)
negligence;
Engineers
 Officers of the vessel but have no authority
except in matters referring to the motor
apparatus. When two or more are hired, one
of them shall be the chief engineer.
 Duties:
1. In charge of the motor
apparatus, spare parts, and other
instruments pertaining to the
engines;
2. Keep the engines and
boilers in good condition;
3. Not to change or repair the
engine without authority of the
captain;
4. Inform the captain of any
damage to the motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel
maintaining the engine. (Art. 632)
Crew
 The aggregate of seamen who man a ship,
or the ship’s company.
 Hired by the ship agent, where he is
present and in his absence, the captain hires
them, preferring Filipinos, and in their
absence, he may take in foreigners, but not
exceeding 1/5 of the crew. (Art. 634)
Classes of Seaman’s Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman
While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of
discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
 The seaman’s heirs are entitled to
payment as follows:
1. If death is natural:
a. compensation up to time of
death if engaged on wage
b. if by voyage - half of
amount if death occurs on voyage
out; and full, if on voyage in
c. if by shares - none, if before
departure; full, if after departure
2. if death is due to defense of vessel - full
payment;
3. if captured in defense of vessel - full
payment;
4. if captured due to carelessness - wages
up to the date of the capture. (Art. 645)
Complement of the Vessel
 All persons on board, from the captain to
the cabin boy, necessary for the
management, maneuvers, and service, thus
including the crew, the sailing mates,
engineers, stokers and other employees on
board not having specific designations.
 Does not include the passengers or the
persons whom the vessel is transporting.
D. SUPERCARGOES
 Persons who discharges administrative
duties assigned to him by ship agent or
shippers, keeping an account and record of
transaction as required in the accounting
book of the captain. (Art. 649)
E. PILOT
 A person duly qualified, and licensed, to
conduct a vessel into or out of ports, or in
certain waters.
 The term generally connotes a person
taken on board at a particular place for the
purpose of conducting a ship through a river,
road or channel, or from a port.
 Master pro hac vice for the time being in
the command and navigation of the ship.
 While in exercising his functions a pilot is in
sole command of the ship and supersedes the
master for the time being in the command
and navigation of the ship, the master does
not surrender his vessel to the pilot and the
pilot is not the master. There are occasions
when the master may and should interfere
and even displace the pilot, as when the pilot
is obviously incompetent or intoxicated (Far
Eastern Shipping Company vs. CA).
 Compulsory Pilotage – States possessing
harbors have enacted laws or promulgated
rules requiring vessels approaching their
ports to take on board pilots licensed under
the local laws. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino,
T. & Hernando, R.P. 2004 ed. p. 518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage
grounds, the Harbor Pilot is responsible for
damage to a vessel or to life or property due
to his negligence.
EXCEPT:
1. Accident caused by force majeure or
natural calamity provided the pilot exercised
prudence and extra diligence to prevent or
minimize damages.
2. Countermand or overrule by the master of
the vessel in which case the registered owner
of the vessel is liable. (Sec.11, Art.III PPA
Admin Order 03-85)
SPECIAL CONTRACTS OF MARITIME
COMMERCE
1. Charter party
2. Bill of lading
3. Contract of transportation of
passengers on sea voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance
CHARTER PARTY
 A contract by virtue of which the owner or
agent binds himself to transport merchandise
or persons for a fixed price.
 A contract by which an entire ship, or some
principal part thereof is let/leased by the
owner to another person for a specified time accredit goods
or use. (Planters Products, Inc. vs. CA, 226 received from
SCRA 476) persons
 Parties: Consensual contract Real contract
1. Ship owner or ship agent
2. Charterer BAREBOAT OR CONTRACT OF
 Classes: DEMISE CHARTER AFFREIGHTMENT
1. Bareboat or demise – The charterer (TIME OR VOYAGE
provides crew, food and fuel. The charterer is CHARTER)
liable as if he were the owner, except when Charterer becomes Owner remains liable
the cause arises from the unworthiness of the liable to others as carrier and must
vessel. The shipowner leases to the charterer caused by its answer for any
the whole vessel, transferring to the latter the negligence breach of duty
entire command, possession and consequent Charterer regarded Charterer is not
control over the vessel’s navigation, including as owner pro hac regarded as owner.
the master and the crew, who thereby vice for the voyage
become the charter’s servants. It transforms Owner of vessel The vessel owner
a common carrier into a private carrier. relinquishes retains possession,
 The charterer becomes the owner of possession, command and
the vessel pro hac vice, just for that one command and navigation of the ship
particular purpose only. Because the navigation to
charterer is treated as owner pro hac charterer
vice, the charterer assumes the Common carrier is Common carrier is
customary rights and liabilities of the converted to private not converted to a
shipowner to third persons and is held carrier. private carrier.
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 PERSONS WHO MAY MAKE A CHARTER
or all of its space to haul goods for others. 1. Owner or owners of the vessel,
 The shipowner retains the possession, either in whole or in majority part,
command and navigation of the ship, the who have legal control and
charterer merely having use of the space possession of the vessel
in the vessel in return for his payment of
2. Charterer may subcharter entire
the charter hired.
vessel to 3rd person only if not
 Kinds: prohibited in original charter.
a. Time (Art.679)
charter – vessel is chartered for a 3. Ship agent if authorized by the
fixed period of time or duration of owner/s or given such power in the
voyage. certificate of appointment. (Art.598)
b. Voya 4. Captain in the absence of the ship
ge or trip charter – the vessel is agent or consignee and only if he
leased for one or series of voyages acts in accordance with the
usually for purposes of transporting instructions of the agent or owner
goods for charterer. and protects the latter’s interests.
(Art.609)
LEASE CHARTER PARTY
If for a definite Charterer may REQUISITES OF A VALID CHARTER PARTY
period, lessee cannot rescind charter party 1. Consent of the contracting parties
give up the lease by by paying half of the 2. Existing vessel which should be
paying a portion of freightage agreed placed at the disposition of the
the amount agreed upon. shipper
upon. 3. Freight
If the leased property The new owner is not 4. Compliance with Art. 652 of the
is sold to one who compelled to respect Code of Commerce
knows of the the charter party so
existence of the long as he can load
lease, the new owner the vessel with his
must respect the own cargo. (Art. 689)
lease. Clauses Which May Be Included In a
Civil law concept Commercial law Charter Party
concept
Jason clause Clause paramount
or paramount
clause
CHARTER PARTY BILL OF LADING
An entire or complete More like a private
contract. receipt which the
captain gives to
A stipulation in a A clause in a charter cargo
charter party that in party providing that within
case of a maritime the COGSA shall the lay
accident for which apply, even though days
the shipowner is not the transportation is and
responsible by law, domestic, subject to extra
contract or the extent that any lay days
otherwise, the cargo term of the bill of allowed;
shippers, consignees lading is repugnant to 6. To
or owners shall the COGSA or place in
contribute with the applicable law, then a vessel
shipowner in general to the extent thereof in a
average. (Pandect of the provision of the conditio
Commercial Law and bill of lading is void. n to
Jurisprudence, Justice (Pandect of navigat
Jose Vitug, 1997 ed.) Commercial Law and e;
Jurisprudence, Justice 7. to bring
Jose Vitug, 1997 ed.) cargo to
nearest
neutral
port in
case of
war or
Rights and Obligations of Parties blockad
e. (Arts.
SHIPOWNER OR CHARTERER 669-
SHIP AGENT 678)
1. If the 1. To pay the
vessel agreed charter
is price; Rescission of a Charter Party
charter 2. To pay At At Fortuitous
ed freightage on charterer’s shipowner’s causes
wholly, unboarded cargo; request request (Art. 690)
not to 3. To pay losses to (Art 688) (Art. 689)
accept others for loading
cargo uncontracted cargo 1. By 1. If the extra 1. War or
from and illicit cargo; abandoning lay days interdiction
others; 4. To wait if the the charter terminate of commerce;
2. To vessel needs repair; and paying without the 2. Blockade;
observe 5. To pay half of the cargo being 3. Prohibition
represe expenses for freightage; placed to receive
nted deviation. (Arts. 679- 2. Error in alongside the cargo;
capacit 687) tonnage or vessel; 4. Embargo;
y; flag; 2. Sale by and
3. To 3. Failure to the owner of 5. Inability of
unload place the the vessel the vessel to
cargo vessel at the before navigate.
clandes charterer’s loading by
tinely disposal; the
placed 4. Return of charterer;
4. To the vessel
substitu due to
te pirates,
another enemies or
vessel if bad weather;
load is 5. Arrival at a
less port for
than 3/5 repairs.
of
capacit Terms:
y; 1. Primage - bonus
5. To to be paid to the captain after the
leave successful voyage.
the port 2. Demurrage – the
if the sum fixed in the charter party as a
charter remuneration to the owner of the ship for
er does the detention of his vessel beyond the
not number of days allowed by the charter
bring
the
 party for loading or unloading or for Shipowner or ship Only the owner of
sailing. agent. Outside of the cargo.
3. Deadfreight – the residence of the
the amount paid by or recoverable from owners - the
a charterer of a ship for the portion of the captain.
ship’s capacity the latter contracted for Common elements:
but failed to occupy. 1. Exposure of security to marine peril;
4. Lay Days - days 2. Obligation of the debtor conditioned
allowed to charter parties for loading and only upon safe arrival of the security at
unloading the cargo. the point of destination.
5. Extra Lay Days – Forms:
days which follow after the lay days have 1. Public instrument
elapsed. 2. Policy signed by the contracting parties
and the broker taking part therein
USUAL FORMS OF CONSUMMATING 3. Private instrument (Art. 720)
CONTRACTS Contents:
1. C.I.F. – cost, insurance and freight; 1. Kind, name and registry of the vessel;
2. F.O.B. - free on board; 2. Name, surname and domicile of the
3. F.A.S. - free alongside ship; and captain;
4. C. & F. - cost and freight. 3. Names, surnames and domiciles of the
borrower and the lender;
TRANSSHIPMENT OF GOODS 4. Amount of the loan and the premium
 The act of taking cargo out of one ship and stipulated;
loading it in another, or the transfer of goods 5. Time for repayment;
from the vessel stipulated in the contract of 6. Goods pledged to secure repayment;
affreightment to another vessel before the 7. Voyage during which the risk is run
place of destination named in the contract (Art.721)
has been reached, or the transfer for further
transportation from one ship or conveyance
to another.
BOTTOMRY/ ORDINARY LOAN
 It is not dependent on the ownership of the
RESPONDENTIA (MUTUUM)
transporting ships or in the change of
carriers, but rather on the fact of actual Not subject to Usury Subject to Usury
physical transfer of cargo from one vessel to Law Law
another.
 If done without legal excuse, however Liability of the Not subject to any
competent and safe the vessel into which the borrower is contingency
transfer is made, is a violation of contract and contingent on the (absolute liability)
infringement of right of shipper and subjects safe arrival of the
carrier to liability if freight is lost event by vessel or cargo at
cause otherwise excepted. (Magellan destination
Manufacturing vs. CA, 201 SCRA 102) The last lender is a The first lender is a
preferred creditor preferred creditor
LOAN ON BOTTOMRY AND
RESPONDENTIA
 A real, unilateral, aleatory contract, by WHEN LOAN ON BOTTOMRY OR
virtue of which one person lends to another a RESPONDENTIA REGARDED AS SIMPLE
certain amount of money or goods on things LOAN
exposed to maritime risks, which amount, 1. Lender loaned an amount larger
with its earnings, is to be returned if the than the value of the object due to
things are safely transported, and which is fraudulent means employed by the
lost if the latter are lost. borrower. (ART.726)
2. Full amount of the loan is not used
for the cargo or given on the goods if
LOAN ON LOAN ON all of them could not have been
BOTTOMRY RESPONDENTIA loaded, the balance will be
Definition considered a simple loan. (ART.727)
Loan made by Loan taken on 3. If the effects on which the money is
shipowner or ship security of the cargo taken is not subjected to any risk.
agent guaranteed laden on a vessel, (ART.729)
by vessel itself and and repayable upon
repayable upon safe arrival of cargo Note: Under existing laws, the parties to a
arrival of vessel at at destination. (Art. loan, whether ordinary or maritime, may
destination. (Art. 719) agree on any rate of interest. (CB Circular
719) 905)

Who may contract

MARINE INSURANCE LOAN ON
BOTTOMRY OR
 RESPONDENTIA  The person whose property has been saved
Indemnity is paid after Indemnity is paid must contribute to reimburse the damage
the loss has occurred in advance by caused or expense incurred if the situation
way of a loan constitutes general average.
In case of loss of the In case of loss of  Classes:
vessel due to a risk the vessel due to 1. Particular or Simple Average
insured against, the a marine peril, 2. Gross or General Average
obligation of the insurer the obligation of  Where both vessel and cargo are saved, it
becomes absolute the borrower to is general average; where only the vessel or
pay is only the cargo is saved, it is particular
extinguished average.
Consensual contract Real contract  Expenses incurred to refloat a vessel,
which accidentally ran aground, in order to
Hypothecary Nature of Bottomry/ continue its voyage, do not constitute general
Respondentia average. Not only is there absence of a
GENERAL RULE: The obligation of the marine peril, common safety factor, and
borrower to pay the loan is extinguished if the deliberateness. It is the safety of the
goods given as security are absolutely lost by property, and not the voyage, which
reason of an accident of the sea, during the constitutes the true foundation of general
voyage designated, and if it is proven that the average. (A. Magsaysay, Inc. vs. Agan,
goods were on board. G.R.No. L-6393, Jan. 31, 1955)
EXCEPTIONS:
1. Loss due to inherent defect;
2. Loss due to the barratry on the part of PARTICULAR OR GROSS OR
the captain; SIMPLE GENERAL
3. Loss due to the fault or malice of the Definition
borrower; Damages or Damages or
4. The vessel was engaged in contraband; expenses caused to expenses
and the vessel or cargo deliberately caused
5. The cargo loaded on the vessel be that did not inure to in order to save the
different in from that agreed upon. the common benefit, vessel, its cargo or
and borne by both from real and
Concurrence of Marine Insurance and respective owners. known risk. (Art.
Loan on Bottomry/Respondentia (Art. 809) 811)
1. The insurable interest of the owner Requisites
of a ship hypothecated by bottomry 1. common
is only the excess of the value over danger;
the amount secured by bottomry. 2. deliberate
(Sec. 101, Insurance Code) sacrifice;
2. The value of what may be saved in 3. success;
case of shipwreck shall be divided 4. proper
between the lender and the insurer formalities and
in proportion to the interest of each legal steps.
one. (Art. 735) Liability
The owner of the All the persons
Note: If a vessel is hypothecated by bottomry goods which gave having an interest in
only the excess is insurable, since a loan on rise to the expense or the vessel and the
bottomry partakes of the nature likewise of suffered the damage cargo therein at the
an insurance coverage to the extent of the shall bear this time of the
loan accommodation. The same rule would average. (Art. 810) occurrence of the
apply to the hypothecation of the cargo by average shall
respondentia. (Pandect of Commercial Law contribute to satisfy
and Jurisprudence, Justice Jose Vitug, 1997 this average. (Art.
ed.) 812)
 The insurers
ACCIDENTS IN MARITIME COMMERCE (Art.859) and
1. Averages lenders on bottomry
2. Arrival Under Stress and respondentia
3. Collision shall likewise
4. Shipwreck contribute.
(Art.732).
AVERAGE
Number of interests involved
 An extraordinary or accidental expense
Only one interest Several interests
incurred during the voyage in order to
involved involved
preserve the cargo, vessel or both, and all
Share in the damage or expense
damages or deterioration suffered by the
100% share In proportion to the
vessel from departure to the port of
value of the owner’s
destination, and to the cargo from the port of
property saved
loading to the port of consignment. (Art. 806)
 Right to recover general average, but should the
No reimbursement There may be same be jettisoned, it would not be
reimbursement entitled to reimbursement because
Kinds (not exclusive) there is violation of the Y-A Rules.
Art. 809 Art. 811 3. If deck cargo is loaded with the
Procedure for recovery consent of the shipper on
1. Assembly and coastwise shipping, it must always
deliberation contribute to general average and
2. Resolution of the if jettisoned would be entitled to
captain reimbursement.
3. Entry of the  Reason: In domestic shipping, voyages are
resolution in the usually short and the seas are generally not
logbook rough. In overseas shipping, the vessel is
4. Detailed minutes exposed for many days to perils of the sea.
5. Delivery of the
minutes to the DOMESTIC INTERNATIONAL
maritime judicial Deck cargo is allowed Deck cargo is not
authority of the allowed
first port, within With shipper’s consent
24 hours from General average Particular average
arrival, Without shipper’s consent
6. Ratification by Captain is liable Captain is liable
captain under
oath. (Arts. 813- ARRIVAL UNDER STRESS (ARRIBADA)
814)  The arrival of a vessel at the nearest and
most convenient port instead of the port of
GOODS NOT COVERED BY GENERAL destination, if during the voyage the vessel
AVERAGE EVEN IF SACRIFICED cannot continue the trip to the port of
1. Goods carried on deck. (ART.855) destination.
2. Goods not recorded in the books or
records of the vessel. (ART.855 (2)) When When Who bears
3. Fuel for the vessel if there is more lawful unlawful expenses:
than sufficient fuel for the voyage.
(Rule IX, York-Antwerp Rule) The inability 1. Lack of The
to continue provision shipowner or
Jettison voyage is s due to ship agent is
 Act of throwing cargo overboard in order to due to lack negligenc liable in case
lighten the vessel. of provisions, e to carry of unlawful
 Order of goods to be cast overboard: well-founded accordin arrival under
1. Those which are on the fear of g to stress. But
deck, preferring the heaviest one seizure, usage they shall not
with the least utility and value; privateers, and be liable for
2. Those which are below the pirates, or customs; the damages
upper deck, beginning with the one accidents of 2. Risk of caused by
with greatest weight and smallest the sea enemy reason of a
value. (Art. 815) disabling it not well lawful arrival.
to navigate. known or (Art. 821)
 Jettisoned goods are not res nullius nor (Art. 819) manifest
deemed “abandoned” within the meaning of 3. Defect of
civil law so as to be the object of occupation vessel
by salvage. (Pandect of Commercial Law and due to
Jurisprudence, Justice Jose Vitug, 1997 ed.) improper
 In order that the jettisoned goods may be repair;
included in the gross or general average, the and
existence of the cargo on board should be 4. Malice,
proven by means of the bill of lading. (Art. negligenc
816) e, lack of
foresight
York-Antwerp (Y-A) Rules on or skill of
Determining Liability for Averages With captain.
Regard To Deck Cargo (Art. 820)
1. Deck cargo is allowed only in
domestic/coastwise/inter-island  It is the duty of the captain to continue the
shipping, and is prohibited in voyage without delay after the cause of the
international/overseas/foreign arrival under stress has ceased failing in such
shipping. duty renders him liable. However, in case the
2. If deck cargo is loaded with the cause has been risk of enemies, there must
consent of the shipper on overseas first be an assembly before departure. (Art.
trade, it must always contribute to 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 to innocent vessel as well as damages
presumption against the vessel which
sets sail in the night.
6. There is a 2. Both vessels at fault
presumption against the vessel with
spread sails which collides with another
which is at anchor and cannot move,
even when the crew of the latter has
received word to lift anchor, when there
was not sufficient time to do so or there
was fear of a greater damage or other
legitimate reason.
7. There is a
presumption against an improperly
moored vessel.
8. There is a of
presumption against a vessel which has
no buoys to indicate the location of its
anchors to prevent damage to vessels
which may approach it.
9. Vessels must
have “proper look-outs” or persons
trained as such and who have no other
duty aside therefrom. (Smith Bell v. CA)
Nautical Rules as to Sailing Vessel and
Steamship
1. Where a steamship and a sailing vessel
are approaching each other from
opposite directions, or on intersecting
lines, the steamship from the moment
the sailing vessel is seen, shall watch
with the highest diligence her course and
movements so as to be able to adopt
such timely means of precaution as will
necessarily prevent the two boats from
coming in contact.
2. The sailing vessel is required to keep her
course unless the circumstances require
otherwise.
Zones of Time in the Collision of Vessels
1. First zone – all time up to the moment
when risk of collision begins.
 No rule is as yet applicable for none is
necessary.
2. Second zone – time between moment
when risk of collision begins and moment
it becomes a practical certainty.
 It is in this period where conduct of the
vessels is primordial. It is in this zone that
vessels must strictly observe nautical rules,
unless a departure therefrom becomes
necessary to avoid imminent danger.
3. Third zone – time when collision is certain
and time of impact.
 An error in this zone would no longer be
legally consequential.
 Error in Extremis - sudden movement made
by a faultless vessel during the third zone of
collision with another vessel which is at fault
during the 2nd zone. Even if such sudden
movement is wrong, no responsibility will fall
on said faultless vessel. (Urrutia and Co. v.
Baco River Plantation Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
 Vessel at fault is liable for damage caused
suffered by the owners of cargo of both
vessels. (Art. 826)
 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
collision where it cannot be
determined which between the two
vessels was at fault, both vessels bear
their respective damage, but both should
be solidarily liable for damage to the
cargo of both vessels.
4. Third vessel at fault
 The third vessel will be liable for losses and
damages. (Art. 831)
5. Fortuitous event/force majeure
 No liability. Each bears its own loss. (Art.
830)
 The doctrine of res ipsa loquitur applies in
case a moving vessel strikes a stationary
object, such as a bridge post, dock, or
navigational aid. (Far Eastern Shipping v. CA,
Luzon Stevedoring vs. CA)
 Even if the cause of action against the
common carrier is based on quasi-delict, the
defense of due diligence in the selection and
supervision of employees is unavailing in
case of a maritime tort resulting in collision. It
is not a civil tort governed by the Civil Code
but a maritime one governed by Arts. 826-
839 of the Code of Commerce. (Manila
Steamship vs. Insa Abdulhaman)
 Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied in
collision cases because of Art.827 of the Code
of Commerce. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino,
T. & Hernando, R.P. 2004 ed.)
MARITIME PROTEST
 Condition precedent or prerequisite to
recovery of damages arising from collisions
and other maritime accidents.
 It is a written statement made under oath
by the captain of a vessel after the
occurrence of an accident or disaster in which
the vessel or cargo is lost or damaged, with
respect to the circumstances attending such
occurrence, for the purpose of recovering
losses and damages.
 Excuses for not filing protest: 1) where the
interested person is not on board the vessel;
and 2) on collision time, need not be
protested. (Art. 836)
 Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the
vessel has gone through a hurricane
or when the captain believes that
the cargo has suffered damages or
averages (Art. 624).
 Who makes: Captain
 When made: within 24 hours from the time
the collision took place.
 Before whom made: competent authority
at the point of collision or at the first port of
arrival, if in the Philippines and to the
Philippine consul, if the collision took place
abroad. (Art. 835)
SHIPWRECK
 It is the loss of the vessel at sea as a
consequence of its grounding, or running
against an object in sea or on the coast. It
occurs when the vessel sustains injuries due
to a marine peril rendering her incapable of
navigation.
 If the wreck was due to malice, negligence
or lack of skill of the captain, the owner of the
vessel may demand indemnity from said
captain. (Art. 841)
 The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
 A contract for the unloading of goods from
a vessel.
 Applicability: Overseas trade only.
(Commercial Law Review, C. Villanueva, 2004
ed.)
 Significance: When a person brings in
cargo from abroad, he cannot unload and
deliver the cargo by himself. The unloading
must be done by the arrastre operator, which
will then deliver the cargo to the importer.
(Commercial Law Review, C. Villanueva, 2004
ed.)
 Nature of business: It is a public utility,
discharging functions which are heavily
invested with public interest.
 Liability:
1. Similar to a warehouseman (Lua Kian v.
Manila Railroad)
2. Similar to a common carrier (Northern
Motors v. Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may
be held liable, the consignee must prove that
the damage was due to the negligence and
while the goods are in the custody of the
arrastre operator. (Hartford Fire Insurance v.
E. Razon, Inc.)
STEVEDORING SERVICE
 The carriage of goods from the warehouse
or pier to the holds of the vessel. (Chief of
Staff vs. CIR)
 As understood in the port business, the
term consists of the handling of cargo from
the hold of the ship to the dock, in case of
pier-side unloading; or to a barge, in case of
unloading at sea. (Anglo-Fil Trading Corp. vs.
Lazaro)
 The loading on the ship of outgoing cargo
is also part of stevedoring work. (Ibid.)
CONTAINERIZATION/ “SAID-TO-
CONTAIN”/ “SHIPPER’S LOAD AND
COUNT” SYSTEM
 System whereby the shipper loads his
cargoes in a specially designed container,
seals the container and delivers it to the
carrier for transportation. The carrier does not
participate in the counting of the
merchandise for loading into the container,
the actual loading, and the sealing of the
container. (US Lines v. Comm. Of Customs,
ICTSI v. Prudential Guarantee)
 The matter of quantity, description and
conditions of the cargo inside the container is
the sole responsibility of the shipper, unless
there is stipulation to the contrary. (US Lines
vs. Comm. Of Customs, Reyma Brokerage v.
Phil. Home Assurance)
Note: In order to attribute to the carrier any
damage to the shipment that may be found,
inspection of the goods should be done at
pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA
ACT/COGSA (C.A. No. 65)
APPLICABILITY
 The transportation must be:
1. Water/maritime
transportation;
2. for the carriage
of goods; and
3. overseas/interna
tional/foreign (from foreign port to
Philippine port).
 It can be applied in domestic sea
transportation if agreed upon by the parties.
(Clause paramount or paramount clause)
IMPORTANT FEATURES:
1. Amount of
carrier’s liability
2. Notice of
damage
3. Prescriptive
period
AMOUNT OF CARRIER’S LIABILITY
 Under the Sec. 4(5), the liability limit is set
at $500 per package or customary freight unit
unless the nature and value of such goods is
declared by the shipper. This is deemed
incorporated in the bill of lading even if not
mentioned in it. (Eastern Shipping vs. IAC,
150 SCRA 463)
 Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
 Rules:
a. Patent damage: shipper should file a
claim with the carrier immediately upon
delivery
b. Latent damage: shipper should file a
claim with the carrier within three days
from delivery.
Note: The filing of a notice of claim is not a
condition precedent.
PRESCRIPTIVE PERIOD
 Action for loss or damage to the cargo
should be brought within one year after:
a. Delivery of the goods
(delivered but damaged goods); or
b. The date when the goods
should have been delivered (non-
delivery). (Sec. 3[6])
 “Loss or Damage” as applied to the COGSA
contemplates a situation where no delivery at
all was made by the shipper of the goods
because the same had perished, gone out of
commerce, or disappeared in such a way that
their existence is unknown or they cannot be
recovered. Thus, it is inapplicable in case of
misdelivery or conversion. (Ang vs. American
Steamship Agencies Inc.) and damage arising
from delay or late delivery (Mitsui O.S.K. Lines
Ltd. vs. CA). In such instance the, Civil Code
rules on prescription shall apply.
 The one-year prescriptive period is
suspended by:
1. The express
agreement of the parties (Universal
Shipping Lines, Inc. vs. IAC, 188
SCRA 170)
2. The filing of
an action in court until it is
dismissed. (Stevens & Co. vs.
Nordeutscher Lloyd, 6 SCRA 180)
 The one-year period shall run from delivery
of the last package and is not suspended by
extrajudicial demand. (Dole Phils.,Inc. vs.
Maritime Co.,148 SCRA 118)
 The one-year period shall run from delivery
to the arrastre operator and not to the
consignee. (Union Carbide Phils, Inc. vs.
Manila Railroad Co.,SCRA 359)
 The insurer exercising its right of
subrogation is bound by the one-year
prescriptive period. However, it does not
apply to the claim against the insurer for the
insurance proceeds. (Fil. Merchants Ins. Co.
vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)
IV. WARSAW CONVENTION OF 1929 (WC)
PURPOSE: To protect the emerging air
transportation industry and to secure the
uniformity of recovery by the passengers.
APPLICABILITY
 The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or
goods.
 The WC shall also apply to fortuitous
transportation by aircraft performed by an air
transportation enterprise.
 International transportation - any
transportation in which the place of departure
and the place of destination are situated
either:
1. Within the territories of two High
Contracting Parties regardless of whether
or not there be a break in the
transportation or transshipment, or
2. Within the territory of a single High
Contracting Party, if there is an agreed
stopping place within a territory subject
to the sovereignty, mandate or authority
of another power, even though that
power is not a party to the Convention.
(“round trip”, Am. Jur.)
 Transportation to be performed by several
successive air carriers shall be deemed to be
one undivided transportation, if it has been
regarded by the parties as a single operation,
whether it has been agreed upon under the
form of a single contract or of a series of
contracts, and it shall not lose its
international character merely because one
contract or a series of contracts is to be
performed entirely within a territory subject
to the sovereignty, suzerainty, mandate, or
authority of the same High Contracting Party.
(Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the
Convention are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to
passengers
b. Loss or damage to baggage
or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSENGER BAGGAGE AIR
TICKET CHECK WAYBILL
Passenger Checked-in Goods to be
baggage shipped
LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the
accident causing it took place on board the
aircraft or in the course of its operations of
embarking or disembarking; (Art. 17)
2. Destruction, loss or damage to any
baggage or goods, if it took place during the
“transportation by air”; (Art. 18) and
 Transportation by air – The period during
which the baggage or goods are in the charge
of the carrier, whether in an airport or on
board an aircraft, or, in case of a landing
outside an airport, in any place whatsoever.
It includes any transportation by land or
water outside an airport if such takes place in
the performance of a contract for
transportation by air, for the purpose of
loading, delivery, or transshipment.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19)
Note: The Hague Protocol amended the WC
by removing the provision that if the airline
took all necessary steps to avoid the damage,
it could exculpate itself completely (Art.
20(1)). (Alitalia vs. IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended
by Guatemala Protocol, 1971; Alitalia vs.
IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more
than the declared sum unless it proves the
sum is greater than actual value.
3. Hand-carried baggage
 $1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more
than the declared sum unless it proves the
sum is greater than actual value.
 An agreement relieving the carrier from
liability or fixing a lower limit is null and void.
(Art. 23)
 Carrier is not entitled to the foregoing limit
if the damage is caused by willful misconduct
or default on its part. (Art. 25)
 Thus, the WC does not operate as an
exclusive enumeration of the instances of an
absolute limit of the extent of liability. It does
not preclude the application of the Civil Code
and other pertinent local laws. It does not
regulate or exclude liability for other
breaches of contract by the carrier, or
misconduct of its employees, or for some
particular or exceptional type of damage.
(Alitalia vs. CA)
 In PanAm v. IAC, the WC was applied as
regards the limitation on the carrier’s liability,
there being a simple loss of baggage without
any improper conduct on the part of the
officials or employees of the airline or other
special injury sustained by the passenger.
 In KLM Royal v. Tuller, the WC has
invariably been held inapplicable, or as not
restrictive of the carrier’s liability, where
there was satisfactory evidence of malice or
bad faith attributable to its officers and
employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES
1. Notice of claim
 A written complaint must me made within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from
receipt of baggage/goods
 The complaint is a condition precedent.
Without the complaint, the action is barred
except in case of fraud on the part of the
carrier. (Art. 26)
2. Prescriptive period
 Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation
stopped. (Art. 29)

 In United Airlines vs. Uy the two-year
prescriptive period was not applied where the
airline employed delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against
the carrier in which the accident or delay
occurred.
EXCEPTION: Agreement or contract
whereby the first carrier assumed liability for
the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an
action against the first carrier and
the carrier in which the damage
occurred
b. Passenger or consignee can file an
action against the last carrier and
the carrier in which the damage
occurred.
 These carriers are jointly and severally
liable. (Art. 30)
 A contract of international carriage by air,
although performed by different carriers
under a series of airline tickets constitutes a
single operation. Members of the
International Air Transportation Association
(IATA) are under a general pool partnership
agreement wherein they act as agent of each
other in the issuance of tickets to contracted
passengers to boost ticket sales worldwide
and at the same time provide passengers
easy access to airlines which are otherwise
inaccessible in some parts of the world.
(American Airlines vs. CA)
 Under a general pool partnership
agreement, the ticket-issuing airline is the
principal in a contract of carriage while the
endorsee-airline is the agent. The obligation
of the former remained and did not cease
even when the breach occurred not on its
own flight but on that of another airline which
had undertaken to carry the passengers to
one of their destinations. (China Airlines vs.
Chiok)
JURISDICTION
 At the option of the plaintiff, the action for
damages may be filed in the:
a. Court of domicile of the
carrier;
b. Court of its principal place
of business;
c. Court where it has a place
of business through which the
contract has been made; or
d. Court of the place of
destination. (Art. 28(1))
NOTE: It is the passenger’s “ultimate
destination” not “an agreed stopping place”
that determines the country where suit is to
be filed.
 The forum of action provided in Art. 28(1)
is a matter of jurisdiction rather than of
venue. (Santos III vs. Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
 Two concepts:
1. Services one person renders to the owner
of a ship or goods, by his own labor,
preserving the goods or the ship which the
owner or those entrusted with the care of
them have either abandoned in distress at
sea, or are unable to protect or secure.
2. Compensation allowed to persons by
whose voluntary assistance a ship at sea or
her cargo or both have been saved in whole
or in part from impending sea peril, or such
property recovered from actual peril or loss,
as in cases of shipwreck, derelict or
recapture.
 Requisites:
1. Valid object of salvage;
2. Object must have been
exposed to marine peril (not perils of
the ship);
3. Services rendered
voluntarily (neither an existing duty
nor out of a pre-existing contract);
4. Services are successful,
total or partial.
 Subjects of Salvage:
1. Ship itself;
2. Jetsam – goods which are cast into the sea,
and there sink and remain under water;
3. Floatsam or Flotsam – goods which float
upon the sea when cast overboard;
4. Ligan or Lagan – goods cast into the sea
tied to a buoy, so that they may be found
again by the owners (p.173, Judge Diaz).
 Persons who have no right to a reward
for salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite
of opposition of the Captain or his
representative;
3. In accordance with Sec. 3 of the Salvage
Law, a person who fails to deliver a salvaged
vessel or cargo to the Collector of Customs.
 Derelict – a ship or her cargo which is
abandoned and deserted at sea by those who
are in charge of it, without any hope of
recovering it, or without any intention of
returning to it.
 The intention of those in charge must be
ascertained. If those in charge left with the
intention 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 PURPOSES:
 A contract whereby one vessel, usually 1. To secure
motorized, pulls another, whether loaded or adequate, sustained service for the
not with merchandise, from one place to public at the least possible cost;
another, for a compensation. It is a contract 2. To protect the
for services rather than a contract of carriage. public against unreasonable charges
and poor, inefficient service;
3. To protect and
SALVAGE TOWAGE secure investments in public
services;
Governed by special Governed by Civil 4. To prevent
law (Act No. 2616) Code on contract of ruinous competition.
lease
Requires success, Success is not AUTHORITY TO OPERATE PUBLIC
otherwise no required SERVICES
payment GENERAL RULE: No public service shall
Must be done with Only the consent of operate without having been issued a
the consent of the the tugboat owner certificate of public convenience or a
captain/crewmen is needed certificate of public convenience and
necessity.
Vessel must be Vessel need not be
involved in an involved in an EXCEPTIONS:
accident accident 1. Warehouses;
2. Animal drawn
Fees distributed Fees belong to the vehicles and bancas moved by oar or
among crewmen tugboat owner sail;
3. Airships, except
RULES ON SALVAGE REWARD for the fixing of maximum rates for
1. The fare and freight;
reward is fixed by the RTC judge in the 4. Radio
absence of agreement or where the companies, except for rates fixing;
latter is excessive. (Sec. 9) 5. Public services
2. The owned or operated by the
reward should constitute a sufficient government, except as to rates
compensation for the outlay and effort of fixing;
the salvors and should be liberal enough 6. Ice plants; and
to offer an inducement to others to 7. Public markets.
render services in similar emergencies in
the future. PUBLIC SERVICE
3. If sold (no  A person who owns, operates, manages or
claim being made within 3 months from controls in the Philippines for hire or
publication), the proceeds, after compensation, with general or limited
deducting expenses and the salvage clientele, whether permanent, occasional or
claim, shall go to the owner; if the latter accidental, and done for general business
does not claim it within 3 years, 50% of purposes, any common carrier or public
the said proceeds shall go to the salvors, utility, ice plants, power and water supplies,
who shall divide it equitably, and the communication and similar public services.
other half to the government. (Secs. 11- (Sec. 13b, CA 146)
12)  A casual or incidental service devoid of
4. If a vessel public character and interest is not brought
is the salvor, the reward shall be within the category. The question depends on
distributed as follows: such factors as the extent of services,
a. 5 whether such person or company has held
0% to the shipowner; himself or itself out as ready to serve the
b. 2 public or a portion of the public generally.
5% to the captain; and (Luzon Stevedoring vs. PSC)

NOTE: The Public Service Commission

c. 2 created under the Public Service Law has
5% to the officers and crew in already been abolished under P.D. No. 1 and
proportion to their salaries. (Sec. 13) other issuances. It has been replaced by the
following government agencies: LTO; LTFRB;
 Taking passengers from a sinking ship, ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
without rendering any service in rescuing the MIA.
vessel, is not a salvage service, being a duty
of humanity and not for reward.

VI. PUBLIC SERVICE ACT

(C.A. No. 146)
 tolls, and public service;
CERTIFICATE OF CERTIFICATE OF charges; 2. Requiring
PUBLIC PUBLIC 3. Setting up of operators to
CONVENIENCE CONVENIENCE standards and furnish safe,
(CPC) AND NECESSITY classifications; adequate, and
(CPCN) 4. Establishment proper service;
of rules to 3. Requiring public
An authorization An authorization secure services to pay
issued by the issued by the accuracy of all expenses of
appropriate appropriate meters and all investigation;
government agency government agency measuring 4. Valuation of
for the operation of for the operation of appliances; properties of
public services for public service for 5. Issuance of public utilities;
which no franchise, which a prior orders 5. Examination
either municipal or franchise is required requiring and test of
legislative, is by law; e.g. establishment measuring
required by law, telephone and other or appliances;
e.g., common services. maintenance 6. Grant of special
carriers. of extension of permits to make
facilities; extra or special
6. Revocation, or trips in
modification of territories
 A CPC or a CPCN constitutes neither a CPC or CPCN; specified in the
franchise nor a contract, confers no property 7. Suspension of certificate;
right, and is a mere license or a privilege. The CPC or CPCN, 7. Uniform
holder of said certificate does not acquire a except when it is accounting
property right in the route covered thereby. necessary to avoid system and
Nor does it confer upon the holder any serious and furnishing of
proprietary right or interest or franchise in the irreparable annual reports;
public highways. Revocation of this certificate damage or 8. Compelling
deprives him of no vested right. New and inconvenience to compliance with
additional burdens, alteration of the the public or the laws and
certificate, or even revocation or annulment private interest, in regulations.
thereof is reserved to the State. (Luque vs. which case, a
Villegas, 30 SCRA 408) suspension not
more than 30 days
 It is a “property” and has a considerable may be ordered,
value and can be the subject of sale or prior to the
attachment. (Cogeo-Cubao Operators and hearing. (Soriano v.
Drivers Assn. vs. CA, 207 SCRA 343, Medina, 164 SCRA
Raymundo vs. Luneta Motor Co.) 36)

REQUREMENTS FOR GRANTING CPC OR UNLAWFUL ACTS OF PUBLIC UTILITY

CPCN COMPANIES
1. Applicant must be a citizen of the 1. Engagement in public service business
Philippines or a corporation or entity 60% without first securing the proper
of the capital of which is owned by such certificate;
citizens; 2. Providing or maintaining unsafe,
2. Applicant must prove public necessity; improper or inadequate service as
3. Applicant must prove that the operation determined by the proper authority;
of the public service proposed and the 3. Committing any act of unreasonable and
authorization to do business will promote unjust preferential treatment to any
the public interest on a proper and particular person, corporation or entity as
suitable manner; determined by the proper authority;
4. Applicant must have sufficient financial 4. Refusing or neglecting to carry public
capability to undertake the proposed mail upon request. (Secs. 18 and 19)
services and meeting the responsibilities
incident to its operation. ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint
rates;
POWERS POWERS 2. Establish and operate new units;
REQUIRING EXERCISABLE 3. Issue free tickets;
PRIOR NOTICE WITHOUT PRIOR 4. Issue any stock or stock certificates
AND HEARING NOTICE AND representing an increase of capital;
HEARING 5. Capitalize any franchise in excess of the
amount actually paid to the Government;
1. Issuance of 1. Investigation 6. Sell, alienate, mortgage or lease
CPC or CPCN; any matter property, certificates or franchise.
2. Fixing of rates, concerning
 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.
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).

PRIOR OPERATOR/OLD OPERATOR RULE KABIT SYSTEM

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

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