San Beda College of Law

54
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ CARRIAGE goods or passengers for compensation. (Home

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

COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws);
Robespierre CU (Law on Intellectual Property)
 San Beda College of Law
55
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 ticket, unless the
attempt be with the knowledge and consent
of the carrier;
e. One who has boarded a wrong vehicle, has
been properly informed of such fact, and on
alighting, is injured by the carrier;
f. Invited guests and accommodation
passengers. (Lara vs. Valencia)
g. One who rides any part of the vehicle which
is unsuitable or dangerous or which he
knows is not designed or intended for
passengers.
COMMERCIAL LAW COMMITTEE
CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws);
Robespierre CU (Law on Intellectual Property)
MEMORY AID IN COMMERCIAL LAW
DEFENSES OF A COMMON CARRIER IN THE
CARRIAGE OF GOODS
1. CASO FORTUITO/FORCE MAJEURE
Requisites:
a. Must be the proximate and only cause of the
loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after the
occurrence of the disaster (Art. 1739)
c. Carrier has not negligently incurred in delay
in transporting the goods (Art. 1740)
Fire is not considered a natural disaster or calamity
as it arises almost invariably from some act of man.
(Eastern Shipping Lines Inc. vs. IAC)
Mechanical defects are not force majeure if the
same was discoverable by regular and adequate
inspections. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed. p.120-122)
2. ACTS OF PUBLIC ENEMY
Requisites:
a. Must be the proximate and only cause of the
loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after the act
causing the loss, deterioration or destruction of
the goods (Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute defense
b. Contributory: partial defense. (Art. 1741)
4. CHARACTER OF THE GOODS OR DEFECTS IN
THE PACKING OR IN THE CONTAINER
Even if the damage should be caused by the
inherent defect/character of the goods, the common
carrier must exercise due diligence to forestall or
lessen the loss. (Art. 1742)
The carrier which, knowing the fact of improper
packing of the goods upon ordinary observation, still
accepts the goods notwithstanding such condition, is
not relieved of liability or loss or injury resulting
therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)
5. ORDER OR ACT OF PUBLIC AUTHORITY
Said public authority must have the power to issue
the order (Art. 1743). Consequently, where the officer
acts without legal process, the common carrier will be
held liable. (Ganzon v. CA 161 SCRA 646)
Diligence in the selection and supervision of
employees under Article 2180 of the Civil Code cannot
be interposed as a defense by the common carrier
because the liability of the carriers arises from the
breach of the contract of carriage. The defense under
said articles is applicable to negligence in quasi-delicts
under Art. 2176. (Del Prado v. Manila Electric Co., 52
Phil 900)
LIABILITY OF A COMMON CARRIER FOR
DEATH OR INJURIES TO PASSENGERS DUE TO
ACTS OF ITS EMPLOYEES AND OTHER
PASSENGERS OR STRANGERS
 San Beda College of Law
56
MEMORY AID IN COMMERCIAL LAW

FOR ACTS OF The employee must be Art. 1763

FOR ACTS OF ITS OTHER on duty at the time of the
EMPLOYEES PASSENGERS OR act. (Maranan v. Perez)
STRANGERS
Required diligence and defense The carrier is liable when its personnel allowed a
Extraordinary diligence Ordinary diligence passenger to drive the vehicle causing it to collide with
Nature of liability another vehicle resulting to the injuries suffered by the
other passengers. (MRR vs. Ballesteros, 16 SCRA
Tort; however, Not absolute; limited by
641)

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

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

From the time the goods are unconditionally placed in
the possession of, and received by the carrier for
transportation until the same are delivered actually or
constructively by the carrier to the consignee or to the
person who has the right to receive them. (Art. 1736)
It remains in full force and effect even when they are
temporarily unloaded or stored in transit unless the
shipper or owner has made use of the right of stoppage
in transitu. (Art. 1737)
It continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the
place of destination until the consignee has bee
advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or
otherwise dispose of them. (Art. 1738)
Delivery of goods to the custom authorities is not
delivery to the consignee. (Lu Do v. Binamira, 101 Phil
120)
Presumption of negligence
The duty of a common carrier to provide safety to its
passengers so obligates it not only during the course
of the trip, but for so long as the passengers are within
its premises and where they ought to be in pursuance
to the contract of carriage. (LRTA v. Navidad, [2003])
All persons who remain on the premises within a
reasonable time after leaving the conveyance are to
be deemed passengers, and what is a reasonable
time or a reasonable delay within this rule is to be
determined from all the circumstances, and includes a
reasonable time to see after his baggage and prepare
for his departure. (La Mallorca v. CA, 17 SCRA 739 ;
Abiotiz Shipping Corporation v. CA, 179 SCRA 95)
It is the duty of common carriers of passengers to
stop their conveyances a reasonable length of time in
order to afford passengers an opportunity to enter,
and they are liable for injuries suffered from the
sudden starting up or jerking of their conveyances
while doing so. The duty which the carrier of
passengers owes to its patrons extends to persons
boarding the cars as well as to those alighting
therefrom (Dangwa Trans Co., Inc. vs. CA 202 SCRA
574).

Art.1735 Civil Code Art.1755 Civil Code

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

COMMERCIAL LAW COMMITTEE

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

Defenses

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

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

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

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

COMMERCIAL LAW COMMITTEE

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

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 OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws);
Robespierre CU (Law on Intellectual Property)
RULES ON PASSENGERS BAGGAGE Inc.)
IN THE CUSTODY OF IN THE CUSTODY
THE PASSENGERS OF THE COMMON However, the carrier cannot limit its liability for injury
(HAND-CARRIED) CARRIER to, or loss of, goods shipped where such injury or loss
(CHECKED-IN) was caused by its own negligence.
Legal nature of the baggage (Shewaram vs. PAL, 17 SCRA 606)
Necessary deposit Considered as
goods SPECIAL RULES ON LIABILITES OF AIRLINE
Required diligence by the common carrier CARRIERS
Diligence of a depositary Extraordinary 1. In case of flight diversion due to bad weather or
(ordinary diligence) diligence other circumstances beyond the pilots control, the
Applicable rules relation between the carrier and the passenger
Arts. 1998 and 2000-2003 Arts. 1733-1753 continues until the latter has been landed at the port of
destination and has left the carriers premises. The
CONCURRING CAUSES OF ACTION ARISING carrier should necessarily exercise extraordinary
FROM THE NEGLIGENT ACT OF THE COMMON diligence in safeguarding the comfort, convenience
CARRIER and safety of its stranded passengers until they have
1. Culpa contractual (breach of contract) reached their final destination. (Philippine Airlines vs.
Only the carrier is primarily liable and not the driver, CA, 226 SCRA 423)
because there is no privity between the driver and the 2. Even where overbooking of passengers is allowed
passenger. as a commercial practice, the airline company would
Basis: Art.1759, NCC. still be guilty of bad faith and still be liable for damages
No defense of due diligence in the selection and if it did not properly inform passenger that it could
supervision of employees. breach the contract of carriage even if they were
confirmed passengers. (Zalamea vs. CA, 228 SCRA
2. Culpa aquiliana (quasi-delict) 23)
The carrier and driver are solidarily liable as joint 3. An open-dated ticket constitutes a complete
tortfeasors. contract between the carrier and passenger. Hence,
the airline company is liable if it refused to confirm a
Basis: Art. 2180, NCC.
passengers flight reservation. (Singson vs. CA, 282
Defense of due diligence in the selection and
SCRA 149)
supervision of employees is available. Exception:
4. An airline company which issued a confirmed ticket
maritime tort resulting in collision. (See notes on
to a passenger covering successive trips on different
Collision)
airlines can be held liable for damages occasioned by
bumping off by one of the successive airlines.
3. Culpa criminal (criminal negligence)
(Lufthansa German Airlines vs. CA, 238 SCRA 290)
The driver is primarily liable. The carrier is 5. An airline ticket providing that carriage by
subsidiarily liable only if the driver is convicted and successive air carriers is to be regarded as a single
declared insolvent. operation is to make the issuing carrier liable for the
Basis: Art. 100, RPC. tortuous conduct of the other carrier. A printed
provision in the ticket limiting liability only to its own
In case of injury to a passenger due to the conduct is not enough to rebut that liability. (KLM
negligence of the driver of the bus on which he is Royal Dutch Airlines vs. CA, 65 SCRA 237)
riding and of the driver of another vehicle, the drivers
as well as the owners of the two vehicles are jointly II. CODE OF COMMERCE
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 A. OVERLAND TRANSPORTATION
driver of the other vehicle arises from quasi-delict. (Arts. 349-379)
(Fabre vs. CA)
Applicability
LIMITATIONS AS TO CARRIERS LIABILITY 1. Domestic land and water/maritime transportation.
(Pandect of Commercial Law and Jurisprudence,
INVALID AS BEING VALID &
Justice Jose Vitug, 1997 ed.)
CONTRARY TO PUBLIC ENFORCEABLE
2. Domestic Air Transportation. (Commercial Law
POLICY
Review, Cesar Villanueva, 2004 ed.)
1. One exempting the 1. One limiting the
carrier from any and all liability of the carrier to
IMPORTANT CONCEPTS:
liability for loss or damage an agreed valuation,
1. Bill of lading
occasioned by its own unless the shipper
2. Obligations of the carrier
negligence. declares a higher value
3. Right of abandonment
2. An unqualified and pays a higher rate
4. Notice of damage
limitation of liability to an of freight
5. Combined carrier agreement
agreed valuation. (H.E. Heacock
Company vs.
BILL OF LADING
Macondray & Company
 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. 2004 ed. p.68)
In case of carriage by railway, the carrier is
exempted from liability if carriage is insisted upon by
the shipper, provided its objections are stated in the
bill of lading.
However, when a common carrier accepts cargo for
shipment for valuable consideration, it takes the risk of
delivering it in good condition as when it was loaded.
(PAL vs. CA)
B. Duty to deliver the goods
Not only to transport the goods safely but to the
person indicated in the bill of lading. The goods
should be delivered to the consignee or any other
person to whom the bill of lading was validly
transferred or negotiated.
Time of delivery
Stipulated in No stipulation
Contract/Bill of Lading
1. Carrier is bound to 1. Within a reasonable
fulfill the contract and is time. ARTICLE 366 COGSA Sec.3 (6)
liable for any delay; no 2. Carrier is bound to Applicability
matter from what cause forward them in the 1st 1. Domestic/inter- 1. International/
it may have arisen. shipment of the same or island/coastwise overseas/foreign (from
similar goods which he transportation foreign country to
may make to the point of 2. Land, water, air Phils.)
delivery. (ART. 358 transportation Note: subject to the rule
Code of Commerce) 3. Carriage of goods on Paramount Clause
2. Water/maritime
Effects of delay transportation
a. Merely suspends and generally does not 3. Carriage of goods
terminate the contract of carriage Notice of damage
b. Carrier remains duty bound to exercise 1. Condition precedent 1. Not a condition
extraordinary diligence 2. 24-hour period for precedent
c. Natural disaster shall not free the carrier from claiming latent damage 2. 3-day period for
responsibility (Art.1740) claiming latent damage
d. If delay is without just cause, the contract limiting Prescriptive period
the common carriers liability cannot be availed of in None provided; Civil One year from the date
case of loss or deterioration of the goods (Art.1747) Code applies. of delivery (delivered
but damaged goods), or
RIGHT OF CONSIGNEE TO ABANDON GOODS date when the vessel
Instances: left port or from the
1. Partial non-delivery, where the goods are useless date of delivery to the
without the others (Art. 363); arrastre (non-delivery
2. Goods are rendered useless for sale or or loss).
consumption for the purposes for which they are
properly destined (Art. 365); and
3. In case of delay through the fault of the carrier COMBINED CARRIER AGREEMENT (ART. 373)
(Art. 371). GENERAL RULE: In case of a contract of
transportation of several legs, each carrier is
NOTICE OF DAMAGE (ART. 366) responsible for its particular leg in the contract.
Requisites for applicability: EXCEPTION: A combined carrier agreement where
1. Domestic/inter-island/coastwise transportation a carrier makes itself liable assuming the obligations
2. Land/water/air transportation and acquiring as well the rights and causes of action of
3. Carriage of goods those which preceded it.
4. Goods shipped are damaged
Rules: A. MARITIME COMMERCE
a. Patent damage: shipper must file a claim against (Arts. 573-869)
the carrier immediately upon delivery (it may be
oral or written) IMPORTANT CONCEPTS:
b. Latent damage: shipper should file a claim against 1. Merchant vessel
the carrier within 24 hours from delivery. 2. Maritime lien and Preference of Credit
Note: These rules does not apply to misdelivery of 3. Doctrine of limited liability
goods. (Roldan vs. Lim Ponzo) 4. Causes of revocation of voyage
Purpose of notice: To inform the carrier that the 5. Participants in maritime commerce
shipment has been damaged, and it is charged with 6. Charter party
liability therefore, and to give it an opportunity to make 7. Loans on bottomry and respondentia
an investigation and fix responsibility while the matter 8. Accidents in maritime commerce
is fresh.
The filing of notice of claim is a condition precedent MARITIME/ADMIRALTY LAW
for recovery. It is the system of laws which particularly relates to
Shorter period may be stipulated by the parties the affairs and business of the sea, to ships, their
because it merely affects the shippers remedy and crews and navigation, and to maritime conveyance of
does not affect the liability of the carrier. (PHILAMGEN persons and property. (Notes and Cases on the Law
vs. Sweetlines, Inc.) on Transportation and Public Utilities, Aquino &
Prescriptive Period Hernando, citing Francisco, p.254)
Not provided by Article 366. Thus, in such absence,
Civil Code rules on prescription apply. Maritime laws apply only to maritime trade and sea
If despite the notice of claim, the carrier refuses to voyages. (Pandect of Commercial Law and
pay, action must be filed in court. Jurisprudence, Justice Jose Vitug, 1997 ed.)
1. No bill of lading was issued: within
6 years Arrastre service is not maritime in character. It
2. Bill of lading was issued: within 10 refers to a contract for the unloading of goods from a
years. vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA
244) following preferences in following preferences in
the order stated: the order stated:
CHARACTERISTICS OF MARITIME TRANSACTION 1. Judicial costs of the 1. Expenses and fees
1. Real - similar to transactions over real property with proceedings; allowed and costs
respect to effectivity against third persons which is 2. Taxes due the taxed by the court and
done through registration. (Rubiso vs. Rivera, 37 Phil. Philippine Government; taxes due to the
72). The evidence of real nature is shown by: 1) the 3. Salaries and wages Government;
limitation of the liability of the agents to the actual of the Captain and 2. Crews wages;
value of the vessel and the freight money; and 2) the Crew of the vessel 3. General average;
right to retain the cargo and embargo and detention of during its last voyage; 4. Salvage, including
the vessel (Luzon Stevedoring Corp v. CA, 156 SCRA 4. General average or contract salvage;
169); salvage including 5. Maritime liens arising
2. Hypothecary - the liability of the owner of the value contract salvage, prior in time to the
of the vessel is limited to the vessel itself (Doctrine of bottomry loans, and recording of the
Limited Liability). indemnity due shippers preferred mortgage;
for the value of goods 6. Damages arising out
The real and hypothecary nature of maritime law transported but which of tort; and
simply means that the liability of the carrier in were not delivered to 7. Preferred mortgage
connection with losses related to maritime contracts is the consignee; registered prior in time.
confined to the vessel, which stands as the guaranty 5. Costs of repair and
for their settlement. (Aboitiz Shipping Corp. vs. equipment of the
General Accident Fire and Life Assurance Corp. 217 vessel, and
SCRA 359). provisioning of food,
supplies and fuel during
MERCHANT VESSEL its last voyage; and
Vessel engaged in maritime commerce, whether 6. Preferred mortgages
foreign or otherwise. (Bar Review Materials in registered prior in time.
Commercial Law, Jorge Miravite, 2002 ed.)
Constitutes property which may be acquired and
Effect of sale: All pre-existing claims in the vessel
transferred by any of the means recognized by law.
are terminated. They will then be satisfied from the
They shall continue to be considered as personal
proceeds of the sale subject to the order of preference.
property. (Arts. 573, 585)
They are susceptible to maritime liens such as for DOCTRINE OF LIMITED LIABILITY
the repair, equipping and provisioning of the vessel in (HYPOTHECARY RULE)
the preparation of a voyage, as well as mortgage
Cases where applicable:
liabilities, in satisfaction of which a vessel may be
1. Art. 587 civil liability for indemnities to third
validly arrested and sold. (Ship Mortgage Decree of
persons
1978)
2. Art. 590 indemnities from negligent acts of
the captain (not the shipowner or ship agent)
MARITIME LIEN
3. Art. 837 collision
It constitutes a present right of property in the ship, a 4. Art. 643 liability for wages of the captain
jus in re, to be afterward enforced in admiralty by and the crew and for advances made by the
process in rem. (PNB vs. CA, 337 SCRA 381) ship agent if the vessel is lost by shipwreck
If the maritime lien arose prior to the recording of a or capture
preferred mortgage, it shall have priority over the said
mortgage lien. (PNB vs. CA, 337 SCRA 381) GENERAL RULE: The liability of shipowner and ship
agent is limited to the amount of interest in said vessel
ORDER OF PREFERENCE IN CASE OF SALE OF such that where vessel is entirely lost, the obligation is
VESSEL extinguished. (Luzon Stevedoring v. Escano, 156
SCRA 169) The interest extends to: 1) the vessel
R.A. 6106 P.D. 1521 itself; 2) equipments; 3) freightage; and 4) insurance
Effectivity date proceeds. (Chua v. IAC, 166 SCRA 183)
1969 1978 EXCEPTIONS:
Applicability 1. Claims under Workmens Compensation (Abueg
vs. San Diego 77 Phil 730);
Overseas shipping only Both domestic and
2. Injury or damage due to shipowner or to the
overseas shipping
concurring negligence of the shipowner and the
Kind of sale
captain;
Judicial Judicial and
3. The vessel is insured (Vasquez vs. CA 138
extrajudicial
SCRA 553).
Order of Preference 4. Expenses for repair on vessel completed before
A preferred mortgage The preferred mortgage loss;
shall have priority over lien shall have priority 5. In case there is no total loss and the vessel is not
all claims against the over all claims against abandoned;
vessel, except the the vessel, except the
6. Collision between two negligent vessels;
Abandonment of the vessel is necessary to limit the
liability of the shipowner. The only instance were
abandonment is dispensed with is when the vessel is
entirely lost (Luzon Stevedoring vs. CA 156 SCRA
169).
RIGHT OF SHIPOWNER OR SHIP AGENT TO
ABANDON VESSEL
Instances:
1. In case of civil liability from indemnities to third
persons (Art. 587);
2. In case of leakage of at least of the contents of a
cargo containing liquids (Art. 687); and
3. In case of constructive loss of the vessel (Sec. 138,
Insurance Code).
RIGHT OF ABANDONMENT
3. Embargo A proclamation or order of a state,
usually issued in time of war or threatened
hostilities, prohibiting the departure of ships or
goods from some or all the ports of such state
until further order.
PARTICIPANTS IN MARITIME COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who has possession, control and
management of the vessel and the consequent right to
direct her navigation and receive freight earned and
paid, while his possession continues.

SHIPOWNER OR SHIP CONSIGNEE Ship agent (naviero)

AGENT Person entrusted with provisioning and representing
What may be abandoned the vessel in the port in which it may be found; also
Vessel Goods shipped includes the shipowner.
Instances Not a mere agent under civil law; he is solidarily
1. In case of civil liability 1. Partial non-delivery, liable with the ship owner.
from indemnities to third where the goods are Powers and functions:
persons (Art. 587); useless without the 1. Capacity to trade;
2. Sec. 138, Insurance others (Art. 363); 2. Discharge duties of the captain, subject to
Code; 2. Goods are rendered Art.609;
3. In case of leakage of useless for sale or 3. Contract in the name of the owners with respect
at least of the consumption for the to repairs, details of equipment, armament,
contents of a cargo purposes for which they provisions of food and fuel, and freight of the
containing liquids (Art. are properly destined vessel, and all that relate to the requirements of
687) (Art. 365); and navigation;
3. In case of delay 4. Order a new voyage, make a new charter or
through the fault of the insure the vessel after obtaining authorization
carrier (Art. 371). from the shipowner or if granted in certificate of
Effects appointment.
1. Transfer of ownership 1. Transfer of
of the vessel from the ownership on the goods Civil Liabilities of the Shipowner And Ship Agent
shipowner to the from the shipper to the 1. All contracts of the captain, whether authorized or
shippers or insurer. carrier. not, to repair, equip and provision the vessel; (Art.
2. In case of (2), the 2. Carrier should pay 586)
insurer must pay the the shipper the market 2. Loss and damage to the goods loaded on the
insured as if there was value of the goods at vessel without prejudice to their right to free
actual total loss of the the point of destination. themselves from liability by abandoning the
vessel. vessel to the creditors. (Art. 587)

CAUSES OF REVOCATION OF VOYAGE
1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art. 640)
Terms:
1. Interdiction of commerce A governmental
prohibition of commercial intercourse intended to
bring about an entire cessation for the time being
of all trade whatever.
2. Blockade A sort of circumvallation of a place by
which all foreign connection and correspondence
is, as far as human power can effect it, to be cut
off.
Duty of Ship Agent to Discharge the Captain and
Members of the Crew
If the seamen contract is not for a definite period or
voyage, he may discharge them at his discretion. (Art.
603)
If for a definite period, he may not discharge them
until after the fulfillment of their contracts, except on
the following grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to its cargo
through malice or manifest or proven negligence.
(Art. 605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders of ships.
The terms have the same meaning, but are
particularly used in accordance with the size of the
vessel governed and the scope of transportation, i.e.,
large and overseas, and small and coastwise,
respectively.
Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government of the
country under whose flag he navigates.
Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required physical and
mental examinations required for licensing
him as such. (Art. 609)
Inherent powers:
1. Appoint crew in the absence of ship agent;
2. Command the crew and direct the vessel to
its port of destination;
3. Impose correctional punishment on those
who, while on board vessel, fail to comply
with his orders or are wanting in discipline;
4. Make contracts for the charter of vessel in
the absence of ship agent.
5. Supply, equip, and provision the vessel; and
6. Order repair of vessel to enable it to
continue its voyage. (Art. 610)
Sources of funds to comply with the inherent powers
of the captain (in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
Duties:
1. Bring on board the proper certificate and
documents and a copy of the Code of
Commerce;
2. Keep a Log Book, Accounting Book and
Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and
unloading of the cargo;
5. Be on deck while leaving or entering the
port;
6. Protest arrivals under stress and in case of
shipwreck;
7. Follow instructions of and render an
accounting to the ship agent;
8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by deceased
passengers and crew members;
10. Comply with the requirements of customs,
health, etc. at the port of arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or leaving a
port. (Art. 612)
A ships captain must be accorded a reasonable
measure of discretionary authority to decide what the
safety of the ship and of its crew and cargo specifically
requires on a stipulated ocean voyage (Inter-Orient
Maritime Enterprises Inc. vs. CA).
No liability for the following:
1. Damages caused to the vessel or to the
cargo by force majeure;
2. Obligations contracted for the repair,
equipment, and provisioning of the vessel
unless he has expressly bound himself
personally or has signed a bill of exchange
or promissory note in his name. (Art. 620)
Solidary Liabilities of the Ship Agent/Shipowner
for Acts Done by the Captain towards Passengers
and Cargoes
1. Damages to vessel and to cargo due to lack
of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of marine
regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No liability under the following circumstances:
1. If, before beginning voyage, captain attempts to
change it, or a naval war with the power to which
the vessel was destined occurs;
2. If a disease breaks out and be officially declared
an epidemic in the port of destination;
3. If the vessel should change owner or captain.
(Art. 647)
Sailing Mate/First Mate
Second chief of the vessel who takes the place of
the captain in case of absence, sickness, or death and
shall assume all of his duties, powers and
responsibilities. (Art. 627)
Duties:
1. Provide himself with maps and charts with
astronomical tables necessary for the
discharge of his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on
consultation with the captain and the officers
of the boat, following the decision of the
captain in case of disagreement;
4. Responsible for all the damages caused to
the vessel and the cargo by reason of his
negligence. (Arts. 628 - 631)
Second Mate
Takes command of the vessel in case of the inability
or disqualification of the captain and the sailing mate,
assuming in such case their powers and
responsibilities.
Third in command
Duties:
 1. Preserve the hull and rigging of the vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment of the
vessel, if laid up. (Art. 632)
Engineers
Officers of the vessel but have no authority except in
matters referring to the motor apparatus. When two or
more are hired, one of them shall be the chief
engineer.
Duties:
1. In charge of the motor apparatus, spare
parts, and other instruments pertaining to
the engines;
2. Keep the engines and boilers in good
condition;
3. Not to change or repair the engine without
authority of the captain;
4. Inform the captain of any damage to the
motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining the
engine. (Art. 632)
Crew
The aggregate of seamen who man a ship, or the
ships company.
Hired by the ship agent, where he is present and in
his absence, the captain hires them, preferring
Filipinos, and in their absence, he may take in
foreigners, but not exceeding 1/5 of the crew. (Art.
634)
Classes of Seamans Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman While
Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
The seamans heirs are entitled to payment as
follows:
1. If death is natural:
a. compensation up to time of death if engaged
on wage
b. if by voyage - half of amount if death occurs
on voyage out; and full, if on voyage in
c. if by shares - none, if before departure; full,
if after departure
2. if death is due to defense of vessel - full payment;
3. 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 BAREBOAT OR CONTRACT OF
part thereof is let/leased by the owner to another DEMISE CHARTER AFFREIGHTMENT
person for a specified time or use. (Planters Products, (TIME OR VOYAGE
Inc. vs. CA, 226 SCRA 476) CHARTER)
Parties: Charterer becomes Owner remains liable as
1. Ship owner or ship agent liable to others caused carrier and must answer
2. Charterer by its negligence for any breach of duty
Classes: Charterer regarded as Charterer is not
1. Bareboat or demise The charterer provides crew, owner pro hac vice for regarded as owner.
food and fuel. The charterer is liable as if he were the the voyage
owner, except when the cause arises from the Owner of vessel The vessel owner
unworthiness of the vessel. The shipowner leases to relinquishes possession, retains possession,
the charterer the whole vessel, transferring to the latter command and command and
the entire command, possession and consequent navigation to charterer navigation of the ship
control over the vessels navigation, including the
master and the crew, who thereby become the
charters servants. It transforms a common carrier into Common carrier is Common carrier is not
a private carrier. converted to private converted to a private
The charterer becomes the owner of the carrier. carrier.
vessel pro hac vice, just for that one particular
purpose only. Because the charterer is treated
as owner pro hac vice, the charterer assumes the
customary rights and liabilities of the shipowner to PERSONS WHO MAY MAKE A CHARTER
third persons and is held liable for the expense of 1. Owner or owners of the vessel, either in
the voyage and the wages of the seamen. whole or in majority part, who have legal
2. Contract of Affreightment A contract whereby the control and possession of the vessel
owner of the vessel leases part or all of its space to 2. Charterer may subcharter entire vessel to 3 rd
haul goods for others. person only if not prohibited in original
The shipowner retains the possession, charter. (Art.679)
command and navigation of the ship, the 3. Ship agent if authorized by the owner/s or
charterer merely having use of the space in the given such power in the certificate of
vessel in return for his payment of the charter appointment. (Art.598)
hired. 4. Captain in the absence of the ship agent or
Kinds: consignee and only if he acts in accordance
a. Time charter vessel is chartered for a fixed with the instructions of the agent or owner
period of time or duration of voyage. and protects the latters interests. (Art.609)
b. Voyage or trip charter the vessel is leased
for one or series of voyages usually for REQUISITES OF A VALID CHARTER PARTY
purposes of transporting goods for charterer. 1. Consent of the contracting parties
2. Existing vessel which should be placed at
LEASE CHARTER PARTY the disposition of the shipper
If for a definite period, Charterer may rescind 3. Freight
lessee cannot give up charter party by paying 4. Compliance with Art. 652 of the Code of
the lease by paying a half of the freightage Commerce
portion of the amount agreed upon.
agreed upon.
If the leased property is The new owner is not
sold to one who knows compelled to respect the
of the existence of the charter party so long as Clauses Which May Be Included In a Charter Party
lease, the new owner he can load the vessel
must respect the lease. with his own cargo. (Art. Jason clause Clause paramount or
689) paramount clause
Civil law concept Commercial law concept

CHARTER PARTY BILL OF LADING

An entire or complete More like a private
contract. receipt which the
captain gives to accredit
goods received from
persons
Consensual contract Real contract
 A stipulation in a charter A clause in a charter tonnage or alongside the cargo;
party that in case of a party providing that the flag; vessel; 4. Embargo;
maritime accident for COGSA shall apply, 3. Failure to 2. Sale by the and
which the shipowner is even though the place the owner of the 5. Inability of
not responsible by law, transportation is vessel at the vessel before the vessel to
contract or otherwise, domestic, subject to the charterers loading by the navigate.
the cargo shippers, extent that any term of disposal; charterer;
consignees or owners the bill of lading is 4. Return of
shall contribute with the repugnant to the the vessel due
shipowner in general COGSA or applicable to pirates,
average. (Pandect of law, then to the extent enemies or
Commercial Law and thereof the provision of bad weather;
Jurisprudence, Justice the bill of lading is void. 5. Arrival at a
Jose Vitug, 1997 ed.) (Pandect of Commercial port for repairs.
Law and Jurisprudence,
Justice Jose Vitug, 1997 Terms:
ed.) 1. Primage - bonus to be paid to the captain after
the successful voyage.
2. Demurrage the sum fixed in the charter party as
a remuneration to the owner of the ship for the
detention of his vessel beyond the number of
days allowed by the charter party for loading or
unloading or for sailing.
Rights and Obligations of Parties 3. Deadfreight the amount paid by or recoverable
from a charterer of a ship for the portion of the
SHIPOWNER OR SHIP CHARTERER ships capacity the latter contracted for but failed
AGENT to occupy.
4. Lay Days - days allowed to charter parties for
1. If the vessel is 1. To pay the agreed
loading and unloading the cargo.
chartered wholly, not to charter price;
5. Extra Lay Days days which follow after the lay
accept cargo from 2. To pay freightage
days have elapsed.
others; on unboarded cargo;
2. To observe 3. To pay losses to
USUAL FORMS OF CONSUMMATING CONTRACTS
represented capacity; others for loading
1. C.I.F. cost, insurance and freight;
3. To unload cargo uncontracted cargo and
2. F.O.B. - free on board;
clandestinely placed illicit cargo;
3. F.A.S. - free alongside ship; and
4. To substitute 4. To wait if the
4. C. & F. - cost and freight.
another vessel if load is vessel needs repair;
less than 3/5 of 5. To pay expenses
TRANSSHIPMENT OF GOODS
capacity; for deviation. (Arts.
The act of taking cargo out of one ship and loading it
5. To leave the port if 679-687)
in another, or the transfer of goods from the vessel
the charterer does not
stipulated in the contract of affreightment to another
bring the cargo within
vessel before the place of destination named in the
the lay days and extra
contract has been reached, or the transfer for further
lay days allowed;
transportation from one ship or conveyance to another.
6. To place in a
vessel in a condition to It is not dependent on the ownership of the
navigate; transporting ships or in the change of carriers, but
7. to bring cargo to rather on the fact of actual physical transfer of cargo
nearest neutral port in from one vessel to another.
case of war or blockade. If done without legal excuse, however competent
(Arts. 669-678) and safe the vessel into which the transfer is made, is
a violation of contract and infringement of right of
shipper and subjects carrier to liability if freight is lost
Rescission of a Charter Party event by cause otherwise excepted. (Magellan
Manufacturing vs. CA, 201 SCRA 102)
At charterers At Fortuitous
request shipowners causes
LOAN ON BOTTOMRY AND RESPONDENTIA
(Art 688) request (Art. 690)
(Art. 689) A real, unilateral, aleatory contract, by virtue of
1. By 1. If the extra 1. War or which one person lends to another a certain amount of
abandoning lay days interdiction of money or goods on things exposed to maritime risks,
the charter and terminate commerce; which amount, with its earnings, is to be returned if the
paying half of without the 2. Blockade; things are safely transported, and which is lost if the
the freightage; cargo being 3. Prohibition latter are lost.
2. Error in placed to receive
 could not have been loaded, the balance will
LOAN ON LOAN ON be considered a simple loan. (ART.727)
BOTTOMRY RESPONDENTIA 3. If the effects on which the money is taken is
Definition not subjected to any risk. (ART.729)
Loan made by Loan taken on security
shipowner or ship of the cargo laden on a Note: Under existing laws, the parties to a loan,
agent guaranteed by vessel, and repayable whether ordinary or maritime, may agree on any rate
vessel itself and upon safe arrival of of interest. (CB Circular 905)
repayable upon arrival cargo at destination.
of vessel at destination. (Art. 719)
(Art. 719) MARINE INSURANCE LOAN ON
BOTTOMRY OR
RESPONDENTIA
Who may contract Indemnity is paid after the Indemnity is paid in
Shipowner or ship Only the owner of the loss has occurred advance by way of
agent. Outside of the cargo. a loan
residence of the In case of loss of the vessel In case of loss of
owners - the captain. due to a risk insured the vessel due to a
Common elements: against, the obligation of marine peril, the
1. Exposure of security to marine peril; the insurer becomes obligation of the
2. Obligation of the debtor conditioned only absolute borrower to pay is
upon safe arrival of the security at the point extinguished
of destination. Consensual contract Real contract
Forms:
1. Public instrument Hypothecary Nature of Bottomry/ Respondentia
2. Policy signed by the contracting parties and GENERAL RULE: The obligation of the borrower to
the broker taking part therein pay the loan is extinguished if the goods given as
3. Private instrument (Art. 720) security are absolutely lost by reason of an accident of
Contents: the sea, during the voyage designated, and if it is
1. Kind, name and registry of the vessel; proven that the goods were on board.
2. Name, surname and domicile of the captain; EXCEPTIONS:
3. Names, surnames and domiciles of the 1. Loss due to inherent defect;
borrower and the lender; 2. Loss due to the barratry on the part of the
4. Amount of the loan and the premium captain;
stipulated; 3. Loss due to the fault or malice of the borrower;
5. Time for repayment; 4. The vessel was engaged in contraband; and
6. Goods pledged to secure repayment; 5. The cargo loaded on the vessel be different in
7. Voyage during which the risk is run (Art.721) from that agreed upon.

Concurrence of Marine Insurance and Loan on

Bottomry/Respondentia
BOTTOMRY/ ORDINARY LOAN 1. The insurable interest of the owner of a ship
RESPONDENTIA (MUTUUM) hypothecated by bottomry is only the excess
of the value over the amount secured by
Not subject to Usury Subject to Usury Law bottomry. (Sec. 101, Insurance Code)
Law 2. The value of what may be saved in case of
shipwreck shall be divided between the
Liability of the borrower Not subject to any
lender and the insurer in proportion to the
is contingent on the contingency (absolute
interest of each one. (Art. 735)
safe arrival of the liability)
vessel or cargo at
Note: If a vessel is hypothecated by bottomry only the
destination
excess is insurable, since a loan on bottomry partakes
of the nature likewise of an insurance coverage to the
The last lender is a The first lender is a extent of the loan accommodation. The same rule
preferred creditor preferred creditor would apply to the hypothecation of the cargo by
respondentia. (Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997 ed.)
WHEN LOAN ON BOTTOMRY OR RESPONDENTIA
REGARDED AS SIMPLE LOAN ACCIDENTS IN MARITIME COMMERCE
1. Lender loaned an amount larger than the 1. Averages
value of the object due to fraudulent means 2. Arrival Under Stress
employed by the borrower. (ART.726) 3. Collision
2. Full amount of the loan is not used for the 4. Shipwreck
cargo or given on the goods if all of them
AVERAGE
 An extraordinary or accidental expense incurred Right to recover
during the voyage in order to preserve the cargo, No reimbursement There may be
vessel or both, and all damages or deterioration reimbursement
suffered by the vessel from departure to the port of Kinds (not exclusive)
destination, and to the cargo from the port of loading to Art. 809 Art. 811
the port of consignment. (Art. 806) Procedure for recovery
The person whose property has been saved must 1. Assembly and
contribute to reimburse the damage caused or deliberation
expense incurred if the situation constitutes general 2. Resolution of the
average. captain
Classes: 3. Entry of the
1. Particular or Simple Average resolution in the
2. Gross or General Average logbook
Where both vessel and cargo are saved, it is 4. Detailed minutes
general average; where only the vessel or only the 5. Delivery of the
cargo is saved, it is particular average. minutes to the maritime
Expenses incurred to refloat a vessel, which judicial authority of the
accidentally ran aground, in order to continue its first port, within 24
voyage, do not constitute general average. Not only is hours from arrival,
there absence of a marine peril, common safety factor, 6. Ratification by
and deliberateness. It is the safety of the property, and captain under oath.
not the voyage, which constitutes the true foundation (Arts. 813-814)
of general average. (A. Magsaysay, Inc. vs. Agan,
G.R.No. L-6393, Jan. 31, 1955) GOODS NOT COVERED BY GENERAL AVERAGE
EVEN IF SACRIFICED
1. Goods carried on deck. (ART.855)
PARTICULAR OR GROSS OR GENERAL 2. Goods not recorded in the books or records
SIMPLE of the vessel. (ART.855 (2))
Definition 3. Fuel for the vessel if there is more than
Damages or expenses Damages or expenses sufficient fuel for the voyage. (Rule IX,
caused to the vessel or deliberately caused in York-Antwerp Rule)
cargo that did not inure order to save the
to the common benefit, vessel, its cargo or both Jettison
and borne by respective from real and known Act of throwing cargo overboard in order to lighten
owners. (Art. 809) risk. (Art. 811) the vessel.
Requisites Order of goods to be cast overboard:
1. common danger; 1. Those which are on the deck, preferring the
2. deliberate heaviest one with the least utility and value;
sacrifice; 2. Those which are below the upper deck,
3. success; beginning with the one with greatest weight
4. proper formalities and smallest value. (Art. 815)
and legal steps.
Liability Jettisoned goods are not res nullius nor deemed
The owner of the goods All the persons having abandoned within the meaning of civil law so as to be
which gave rise to the an interest in the vessel the object of occupation by salvage. (Pandect of
expense or suffered the and the cargo therein at Commercial Law and Jurisprudence, Justice Jose
damage shall bear this the time of the Vitug, 1997 ed.)
average. (Art. 810) occurrence of the In order that the jettisoned goods may be included
average shall contribute in the gross or general average, the existence of the
to satisfy this average. cargo on board should be proven by means of the bill
(Art. 812) of lading. (Art. 816)
The insurers
(Art.859) and lenders York-Antwerp (Y-A) Rules on Determining Liability
on bottomry and for Averages With Regard To Deck Cargo
respondentia shall 1. Deck cargo is allowed only in
likewise contribute. domestic/coastwise/inter-island shipping, and is
(Art.732). prohibited in international/overseas/foreign shipping.
Number of interests involved 2. If deck cargo is loaded with the consent of the
Only one interest Several interests shipper on overseas trade, it must always contribute to
involved involved general average, but should the same be jettisoned, it
Share in the damage or expense would not be entitled to reimbursement because there
100% share In proportion to the is violation of the Y-A Rules.
value of the owners 3. If deck cargo is loaded with the consent of the
property saved shipper on coastwise shipping, it must always
contribute to general average and if jettisoned would proper minutes shall be signed and entered
be entitled to reimbursement. in the log book;
Reason: In domestic shipping, voyages are usually 5. Objections and protests shall likewise be
short and the seas are generally not rough. In entered in the minutes.
overseas shipping, the vessel is exposed for many
days to perils of the sea. COLLISION
Impact of two vessels both of which are moving.
DOMESTIC INTERNATIONAL
Deck cargo is allowed Deck cargo is not Allision
allowed Impact between a moving vessel and a stationary
With shippers consent one.
General average Particular average
Without shippers consent Nautical Rules to Determine Negligence
Captain is liable Captain is liable 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
ARRIVAL UNDER STRESS (ARRIBADA)
to the one who arrived later, unless it can be
The arrival of a vessel at the nearest and most proved that there was no fault on its part.
convenient port instead of the port of destination, if 2. When two vessels meet, the smaller should give
during the voyage the vessel cannot continue the trip the right of way to the larger one.
to the port of destination. 3. A vessel leaving port should leave the way clear
for another which may be entering the same port.
When lawful When Who bears 4. The vessel which leaves later is presumed to
unlawful expenses: have collided against one which has left earlier.
5. There is a presumption against the vessel which
The inability to 1. Lack of The shipowner sets sail in the night.
continue provisions due or ship agent is 6. There is a presumption against the vessel with
voyage is due to negligence to liable in case of spread sails which collides with another which is
to lack of carry according unlawful arrival at anchor and cannot move, even when the crew
provisions, to usage and under stress. of the latter has received word to lift anchor, when
well-founded customs; But they shall there was not sufficient time to do so or there was
fear of seizure, 2. Risk of not be liable for fear of a greater damage or other legitimate
privateers, enemy not well the damages reason.
pirates, or known or caused by 7. There is a presumption against an improperly
accidents of manifest reason of a moored vessel.
the sea 3. Defect of lawful arrival. 8. There is a presumption against a vessel which
disabling it to vessel due to (Art. 821) has no buoys to indicate the location of its
navigate. (Art. improper repair; anchors to prevent damage to vessels which may
819) and approach it.
4. Malice, 9. Vessels must have proper look-outs or persons
negligence, trained as such and who have no other duty aside
lack of foresight therefrom. (Smith Bell v. CA)
or skill of
captain. (Art. Nautical Rules as to Sailing Vessel and Steamship
820) 1. Where a steamship and a sailing vessel are
approaching each other from opposite directions,
It is the duty of the captain to continue the voyage or on intersecting lines, the steamship from the
without delay after the cause of the arrival under stress moment the sailing vessel is seen, shall watch
has ceased failing in such duty renders him liable. with the highest diligence her course and
However, in case the cause has been risk of enemies, movements so as to be able to adopt such timely
there must first be an assembly before departure. (Art. means of precaution as will necessarily prevent
825) the two boats from coming in contact.
Steps: 2. The sailing vessel is required to keep her course
1. Captain should determine during the voyage unless the circumstances require otherwise.
if there is well founded fear of seizure,
privateers and other valid grounds; Zones of Time in the Collision of Vessels
2. Captain shall assemble the officers and 1. First zone all time up to the moment when risk of
summon the persons interested in the cargo collision begins.
who may attend the meeting but without a No rule is as yet applicable for none is necessary.
right to vote; 2. Second zone time between moment when risk of
3. The officers shall determine and agree if collision begins and moment it becomes a practical
there is well-founded reason after examining certainty.
the circumstances. The captain shall have It is in this period where conduct of the vessels is
the deciding vote; primordial. It is in this zone that vessels must strictly
4. The agreement shall be drafted and the observe nautical rules, unless a departure therefrom
becomes necessary to avoid imminent danger.
3. Third zone time when collision is certain and time
of impact.
An error in this zone would no longer be legally
consequential.
Error in Extremis - sudden movement made by a
faultless vessel during the third zone of collision with
another vessel which is at fault during the 2nd zone.
Even if such sudden movement is wrong, no
responsibility will fall on said faultless vessel. (Urrutia
and Co. v. Baco River Plantation Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
Vessel at fault is liable for damage caused to
innocent vessel as well as damages suffered by the
owners of cargo of both vessels. (Art. 826)
2. Both vessels at fault
Each vessel must bear its own loss, but the shippers
of both vessels may go against the shipowners who
will be solidarily liable. (Art. 827)
3. Vessel at fault not known
Each vessel must bear its own loss, but the shippers
of both vessels may go against the shipowners who
will be solidarily liable. (Art. 828)
Doctrine of Inscrutable Fault In case of
collision where it cannot be determined which
between the two vessels was at fault, both
vessels bear their respective damage, but both
should be solidarily liable for damage to the cargo
of both vessels.
4. Third vessel at fault
The third vessel will be liable for losses and
damages. (Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss. (Art. 830)
The doctrine of res ipsa loquitur applies in case a
moving vessel strikes a stationary object, such as a
bridge post, dock, or navigational aid. (Far Eastern
Shipping v. CA, Luzon Stevedoring vs. CA)
Even if the cause of action against the common
carrier is based on quasi-delict, the defense of due
diligence in the selection and supervision of
employees is unavailing in case of a maritime tort
resulting in collision. It is not a civil tort governed by
the Civil Code but a maritime one governed by Arts.
826-839 of the Code of Commerce. (Manila Steamship
vs. Insa Abdulhaman)
Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied in collision
cases because of Art.827 of the Code of Commerce.
(Notes and Cases on the Law on Transportation and
Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite to recovery of
damages arising from collisions and other maritime
accidents.
It is a written statement made under oath by the
captain of a vessel after the occurrence of an accident
or disaster in which the vessel or cargo is lost or
damaged, with respect to the circumstances attending
such occurrence, for the purpose of recovering losses
and damages.
Excuses for not filing protest: 1) where the
interested person is not on board the vessel; and 2) on
collision time, need not be protested. (Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a
hurricane or when the captain believes that
the cargo has suffered damages or
averages (Art. 624).
Who makes: Captain
When made: within 24 hours from the time the
collision took place.
Before whom made: competent authority at the point
of collision or at the first port of arrival, if in the
Philippines and to the Philippine consul, if the collision
took place abroad. (Art. 835)
SHIPWRECK
It is the loss of the vessel at sea as a consequence
of its grounding, or running against an object in sea or
on the coast. It occurs when the vessel sustains
injuries due to a marine peril rendering her incapable
of navigation.
If the wreck was due to malice, negligence or lack of
skill of the captain, the owner of the vessel may
demand indemnity from said captain. (Art. 841)
The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from a vessel.
Applicability: Overseas trade only. (Commercial
Law Review, C. Villanueva, 2004 ed.)
Significance: When a person brings in cargo from
abroad, he cannot unload and deliver the cargo by
himself. The unloading must be done by the arrastre
operator, which will then deliver the cargo to the
importer. (Commercial Law Review, C. Villanueva,
2004 ed.)
Nature of business: It is a public utility, discharging
functions which are heavily invested with public
interest.
Liability:
1. Similar to a warehouseman (Lua Kian v. Manila
Railroad)
2. Similar to a common carrier (Northern Motors v.
Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may be held
liable, the consignee must prove that the damage was
due to the negligence and while the goods are in the
custody of the arrastre operator. (Hartford Fire
Insurance v. E. Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse or pier to
the holds of the vessel. (Chief of Staff vs. CIR)
 As understood in the port business, the term
consists of the handling of cargo from the hold of the
ship to the dock, in case of pier-side unloading; or to a
barge, in case of unloading at sea. (Anglo-Fil Trading
Corp. vs. Lazaro)
The loading on the ship of outgoing cargo is also
part of stevedoring work. (Ibid.)
CONTAINERIZATION/ SAID-TO-CONTAIN/
SHIPPERS LOAD AND COUNT SYSTEM
System whereby the shipper loads his cargoes in a
specially designed container, seals the container and
delivers it to the carrier for transportation. The carrier
does not participate in the counting of the merchandise
for loading into the container, the actual loading, and
the sealing of the container. (US Lines v. Comm. Of
Customs, ICTSI v. Prudential Guarantee)
The matter of quantity, description and conditions of
the cargo inside the container is the sole responsibility
of the shipper, unless there is stipulation to the
contrary. (US Lines vs. Comm. Of Customs, Reyma
Brokerage v. Phil. Home Assurance)
Note: In order to attribute to the carrier any damage to
the shipment that may be found, inspection of the
goods should be done at pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA
(C.A. No. 65)
APPLICABILITY
The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from foreign
port to Philippine port).
It can be applied in domestic sea transportation if
agreed upon by the parties. (Clause paramount or
paramount clause)
IMPORTANT FEATURES:
1. Amount of carriers liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIERS LIABILITY
Under the Sec. 4(5), the liability limit is set at $500
per package or customary freight unit unless the
nature and value of such goods is declared by the
shipper. This is deemed incorporated in the bill of
lading even if not mentioned in it. (Eastern Shipping
vs. IAC, 150 SCRA 463)
Note that Art. 1749, NCC applies to domestic/inter-
island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a. Patent damage: shipper should file a claim with
the carrier immediately upon delivery
b. Latent damage: shipper should file a claim with
the carrier within three days from delivery.
Note: The filing of a notice of claim is not a condition
precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo should be
brought within one year after:
a. Delivery of the goods (delivered but
damaged goods); or
b. The date when the goods should have been
delivered (non-delivery). (Sec. 3[6])
Loss or Damage as applied to the COGSA
contemplates a situation where no delivery at all was
made by the shipper of the goods because the same
had perished, gone out of commerce, or disappeared
in such a way that their existence is unknown or they
cannot be recovered. Thus, it is inapplicable in case of
misdelivery or conversion. (Ang vs. American
Steamship Agencies Inc.) and damage arising from
delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA).
In such instance the, Civil Code rules on prescription
shall apply.
The one-year prescriptive period is suspended by:
1. The express agreement of the parties
(Universal Shipping Lines, Inc. vs. IAC, 188
SCRA 170)
2. The filing of an action in court until it is
dismissed. (Stevens & Co. vs. Nordeutscher
Lloyd, 6 SCRA 180)
The one-year period shall run from delivery of the
last package and is not suspended by extrajudicial
demand. (Dole Phils.,Inc. vs. Maritime Co.,148 SCRA
118)
The one-year period shall run from delivery to the
arrastre operator and not to the consignee. (Union
Carbide Phils, Inc. vs. Manila Railroad Co.,SCRA 359)
The insurer exercising its right of subrogation is
bound by the one-year prescriptive period. However, it
does not apply to the claim against the insurer for the
insurance proceeds. (Fil. Merchants Ins. Co. vs.
Alejandro; Mayer Steel Pipe Corp. vs. CA)
IV. WARSAW CONVENTION OF 1929 (WC)
PURPOSE: To protect the emerging air transportation
industry and to secure the uniformity of recovery by
the passengers.
APPLICABILITY
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or goods.
The WC shall also apply to fortuitous transportation
by aircraft performed by an air transportation
enterprise.
International transportation - any transportation in
which the place of departure and the place of
destination are situated either:
1. Within the territories of two High Contracting
Parties regardless of whether or not there be a
break in the transportation or transshipment, or
2. Within the territory of a single High Contracting
Party, if there is an agreed stopping place within
 a territory subject to the sovereignty, mandate or
authority of another power, even though that
power is not a party to the Convention. (round
trip, Am. Jur.)
Transportation to be performed by several
successive air carriers shall be deemed to be one
undivided transportation, if it has been regarded by the
parties as a single operation, whether it has been
agreed upon under the form of a single contract or of a
series of contracts, and it shall not lose its international
character merely because one contract or a series of
contracts is to be performed entirely within a territory
subject to the sovereignty, suzerainty, mandate, or
authority of the same High Contracting Party. (Art. 1
Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the Convention
are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSENGER BAGGAGE AIR WAYBILL
TICKET CHECK
Passenger Checked-in Goods to be
baggage shipped
LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the accident
causing it took place on board the aircraft or in the
course of its operations of embarking or disembarking;
(Art. 17)
2. Destruction, loss or damage to any baggage or
goods, if it took place during the transportation by air;
(Art. 18) and
Transportation by air The period during which the
baggage or goods are in the charge of the carrier,
whether in an airport or on board an aircraft, or, in
case of a landing outside an airport, in any place
whatsoever.
It includes any transportation by land or water
outside an airport if such takes place in the
performance of a contract for transportation by air, for
the purpose of loading, delivery, or transshipment.
3. Delay in the transportation of passengers, baggage
or goods. (Art. 19)
Note: The Hague Protocol amended the WC by
removing the provision that if the airline took all
necessary steps to avoid the damage, it could
exculpate itself completely (Art. 20(1)). (Alitalia vs.
IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended by
Guatemala Protocol, 1971; Alitalia vs. IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of value
and payment of a supplementary sum by consignor,
carrier is liable to not more than the declared sum
unless it proves the sum is greater than actual value.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of value
and payment of a supplementary sum by consignor,
carrier is liable to not more than the declared sum
unless it proves the sum is greater than actual value.
An agreement relieving the carrier from liability or
fixing a lower limit is null and void. (Art. 23)
Carrier is not entitled to the foregoing limit if the
damage is caused by willful misconduct or default on
its part. (Art. 25)
Thus, the WC does not operate as an exclusive
enumeration of the instances of an absolute limit of the
extent of liability. It does not preclude the application
of the Civil Code and other pertinent local laws. It
does not regulate or exclude liability for other breaches
of contract by the carrier, or misconduct of its
employees, or for some particular or exceptional type
of damage. (Alitalia vs. CA)
In PanAm v. IAC, the WC was applied as regards
the limitation on the carriers liability, there being a
simple loss of baggage without any improper conduct
on the part of the officials or employees of the airline
or other special injury sustained by the passenger.
In KLM Royal v. Tuller, the WC has invariably been
held inapplicable, or as not restrictive of the carriers
liability, where there was satisfactory evidence of
malice or bad faith attributable to its officers and
employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES
1. Notice of claim
A written complaint must me made within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from receipt of
baggage/goods
The complaint is a condition precedent. Without the
complaint, the action is barred except in case of fraud
on the part of the carrier. (Art. 26)
2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation stopped.
(Art. 29)
In United Airlines vs. Uy the two-year prescriptive
period was not applied where the airline employed
delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against the
carrier in which the accident or delay occurred.
EXCEPTION: Agreement or contract whereby the
first carrier assumed liability for the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an action
against the first carrier and the carrier in
which the damage occurred
b. Passenger or consignee can file an action
against the last carrier and the carrier in
which the damage occurred.
These carriers are jointly and severally liable.
(Art. 30)
A contract of international carriage by air, although
performed by different carriers under a series of airline
tickets constitutes a single operation. Members of the
International Air Transportation Association (IATA) are
under a general pool partnership agreement wherein
they act as agent of each other in the issuance of
tickets to contracted passengers to boost ticket sales
worldwide and at the same time provide passengers
easy access to airlines which are otherwise
inaccessible in some parts of the world. (American
Airlines vs. CA)
Under a general pool partnership agreement, the
ticket-issuing airline is the principal in a contract of
carriage while the endorsee-airline is the agent. The
obligation of the former remained and did not cease
even when the breach occurred not on its own flight
but on that of another airline which had undertaken to
carry the passengers to one of their destinations.
(China Airlines vs. Chiok)
JURISDICTION
At the option of the plaintiff, the action for damages
may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of business;
c. Court where it has a place of business
through which the contract has been made; or
d. Court of the place of destination. (Art. 28(1))
NOTE: It is the passengers ultimate destination not p. 616)
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.
CONTRACT OF TOWAGE
A contract whereby one vessel, usually motorized,
pulls another, whether loaded or not with merchandise,
from one place to another, for a compensation. It is a
contract for services rather than a contract of carriage.
 convenience or a certificate of public convenience and
SALVAGE TOWAGE necessity.
EXCEPTIONS:
Governed by special Governed by Civil
1. Warehouses;
law (Act No. 2616) Code on contract of
2. Animal drawn vehicles and bancas moved
lease
by oar or sail;
Requires success, Success is not 3. Airships, except for the fixing of maximum
otherwise no payment required rates for fare and freight;
4. Radio companies, except for rates fixing;
Must be done with the Only the consent of the 5. Public services owned or operated by the
consent of the tugboat owner is government, except as to rates fixing;
captain/crewmen needed 6. Ice plants; and
7. Public markets.
Vessel must be Vessel need not be
involved in an accident involved in an accident
PUBLIC SERVICE
A person who owns, operates, manages or controls
Fees distributed Fees belong to the in the Philippines for hire or compensation, with
among crewmen tugboat owner general or limited clientele, whether permanent,
occasional or accidental, and done for general
business purposes, any common carrier or public
RULES ON SALVAGE REWARD
utility, ice plants, power and water supplies,
1. The reward is fixed by the RTC judge in the
communication and similar public services. (Sec. 13b,
absence of agreement or where the latter is
CA 146)
excessive. (Sec. 9)
2. The reward should constitute a sufficient A casual or incidental service devoid of public
compensation for the outlay and effort of the character and interest is not brought within the
salvors and should be liberal enough to offer an category. The question depends on such factors as
inducement to others to render services in similar the extent of services, whether such person or
emergencies in the future. company has held himself or itself out as ready to
3. If sold (no claim being made within 3 months from serve the public or a portion of the public generally.
publication), the proceeds, after deducting (Luzon Stevedoring vs. PSC)
expenses and the salvage claim, shall go to the
owner; if the latter does not claim it within 3 NOTE: The Public Service Commission created under
years, 50% of the said proceeds shall go to the the Public Service Law has already been abolished
salvors, who shall divide it equitably, and the under P.D. No. 1 and other issuances. It has been
other half to the government. (Secs. 11-12) replaced by the following government agencies: LTO;
4. If a vessel is the salvor, the reward shall be LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC; CAB;
distributed as follows: and MIA.
a. 50% to the shipowner;
b. 25% to the captain; and
CERTIFICATE OF CERTIFICATE OF
PUBLIC PUBLIC
c. 25% to the officers and crew in proportion to CONVENIENCE CONVENIENCE AND
their salaries. (Sec. 13) (CPC) NECESSITY (CPCN)

Taking passengers from a sinking ship, without

rendering any service in rescuing the vessel, is not a An authorization An authorization
salvage service, being a duty of humanity and not for issued by the issued by the
reward. appropriate appropriate
government agency for government agency for
VI. PUBLIC SERVICE ACT the operation of public the operation of public
(C.A. No. 146) services for which no service for which a
franchise, either prior franchise is
PURPOSES: municipal or required by law; e.g.
1. To secure adequate, sustained service for legislative, is required telephone and other
the public at the least possible cost; by law, e.g., common services.
2. To protect the public against unreasonable carriers.
charges and poor, inefficient service;
3. To protect and secure investments in public
services;
4. To prevent ruinous competition.
A CPC or a CPCN constitutes neither a franchise
AUTHORITY TO OPERATE PUBLIC SERVICES nor a contract, confers no property right, and is a mere
GENERAL RULE: No public service shall operate license or a privilege. The holder of said certificate
without having been issued a certificate of public does not acquire a property right in the route covered
thereby. Nor does it confer upon the holder any
proprietary right or interest or franchise in the public 164 SCRA 36)
highways. Revocation of this certificate deprives him of
no vested right. New and additional burdens, alteration UNLAWFUL ACTS OF PUBLIC UTILITY
of the certificate, or even revocation or annulment COMPANIES
thereof is reserved to the State. (Luque vs. Villegas, 1. Engagement in public service business without
30 SCRA 408) first securing the proper certificate;
2. Providing or maintaining unsafe, improper or
It is a property and has a considerable value and inadequate service as determined by the proper
can be the subject of sale or attachment. (Cogeo- authority;
Cubao Operators and Drivers Assn. vs. CA, 207 3. Committing any act of unreasonable and unjust
SCRA 343, Raymundo vs. Luneta Motor Co.) preferential treatment to any particular person,
corporation or entity as determined by the proper
REQUREMENTS FOR GRANTING CPC OR CPCN authority;
1. Applicant must be a citizen of the Philippines or a 4. Refusing or neglecting to carry public mail upon
corporation or entity 60% of the capital of which is request. (Secs. 18 and 19)
owned by such citizens;
2. Applicant must prove public necessity; ACTS REQUIRING PRIOR APPROVAL
3. Applicant must prove that the operation of the 1. Establish and maintain individual or joint rates;
public service proposed and the authorization to 2. Establish and operate new units;
do business will promote the public interest on a 3. Issue free tickets;
proper and suitable manner; 4. Issue any stock or stock certificates representing
4. Applicant must have sufficient financial capability an increase of capital;
to undertake the proposed services and meeting 5. Capitalize any franchise in excess of the amount
the responsibilities incident to its operation. actually paid to the Government;
6. Sell, alienate, mortgage or lease property,
certificates or franchise.
POWERS POWERS
REQUIRING PRIOR EXERCISABLE Under Sec. 20(g) of C.A. No. 146, the sale, etc. may
NOTICE AND WITHOUT PRIOR be negotiated and completed before the approval by
HEARING NOTICE AND the proper authority. Its approval is not a condition
HEARING precedent to the validity of the contract. The approval
is necessary only to protect public interest.
1. Issuance of CPC 1. Investigation any
or CPCN; matter concerning PRIOR OPERATOR/OLD OPERATOR RULE
2. Fixing of rates, public service; The rule allowing an existing franchised operator to
tolls, and charges; 2. Requiring invoke a preferential right within the authorized
3. Setting up of operators to furnish territory as long as he renders satisfactory and
standards and safe, adequate, and economical service.
classifications; proper service; The policy is not to issue a certificate to a second
4. Establishment of 3. Requiring public operator to cover the same field and in competition
rules to secure services to pay with a first operator who is rendering sufficient,
accuracy of all meters expenses of adequate and satisfactory service. The prior operator
and all measuring investigation; must first be given an opportunity to improve its
appliances; 4. Valuation of service, if inadequate or deficient.
5. Issuance of properties of public Purpose: To prevent ruinous and wasteful
orders requiring utilities; competition in order that the interests of the public
establishment or 5. Examination and would be conserved and preserved.
maintenance of test of measuring
extension of facilities; appliances; It subordinates the prior applicant rule which gives
6. Revocation, or 6. Grant of special the first applicant priority only if things and
modification of CPC permits to make extra circumstances are equal.
or CPCN; or special trips in
7. Suspension of CPC territories specified in Where the operator either fails or neglects to make
or CPCN, except the certificate; the improvement or effect the increase in services,
when it is necessary 7. Uniform especially when given the opportunity, new operators
to avoid serious and accounting system and should be given the chance to give the services
irreparable damage or furnishing of annual needed by the public.
inconvenience to the reports;
public or private 8. Compelling PRIOR APPLICANT RULE
interest, in which compliance with the
Presupposes a situation when two interested
case, a suspension laws and regulations.
persons apply for a certificate to operate a public utility
not more than 30
in the same community over which no person has as
days may be ordered,
yet granted any certificate. If it turns out, after the
prior to the hearing.
hearing, that the circumstances between the two
(Soriano v. Medina,
applicants are more or less equal, then the applicant
who applied ahead of the other, will be granted the
certificate.
RATE-FIXING POWER
The rate to be fixed must be just, founded upon
conditions which are fair and reasonable to both the
owner and the public.
A rate is just and reasonable if it conforms to the
following requirements:
1. One which yields to the carrier a fair return
upon the value of the property employed in
performing the service; and
2. One which is fair to the public for the service
rendered.
REGISTERED OWNER RULE
The registered owner of a certificate of public
convenience is liable to the public for the injuries or
damages suffered by third persons caused by the
operation of said vehicle, even though the same had
been transferred to a third person.
The registered owner is not allowed to escape
responsibility by proving that a third person is the
actual and real owner Reason: It would be easy for
him, by collusion with others or otherwise, to transfer
the responsibility to an indefinite person, or to one who
possesses no property with which to respond
financially for the damage or injury done. (Erezo, et al.
vs. Jepte 102 Phil 103).
2. The registered owner is primarily liable for all the
consequences flowing from the operations of the
carrier.
The public has the right to assume that the
registered owner is the actual or lawful owner
thereof. It would be very difficult and often
impossible, as a practical matter, for the public to
enforce their rights of action that they may have
for injuries inflicted by the vehicle if they should
be required to prove who the actual owner is.
(Benedicto vs. IAC, 187 SCRA 547)
3. The thrust of the law in enjoining the kabit system
is to identify the person upon whom responsibility
may be fixed with the end in view of protecting
the riding public (Lim vs. CA 373 SCRA 394).
4. The registered owner cannot recover from the
actual owner and the latter cannot obtain transfer
of the vehicle to himself, both being in pari
delicto. (Teja Marketing vs. IAC)
5. For the better protection of the public, both the
registered owner and the actual owner are jointly
and severally liable with the driver. (Zamboanga
Transportation Co. vs. CA)

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