San Beda College of Law

MEMORY AID

IN

COMMERCIAL LAW

TRANSPORTATION LAWS
CONTRACT
OF
TRANSPORTATION/ CARRIAGE
A contract whereby a person,
natural or juridical, obligates to
transport persons, goods, or both,
from one place to another, by land,
air or water, for a price or
compensation.
Classifications:
1. Common or Private
2. Goods or Passengers
3. For a fee (for hire) or
Gratuitous
4. Land, Water/maritime, or Air
5. Domestic/interisland/coastwise or
International/foreign
It is a relationship which is
imbued with the public interest.
COMMON CARRIER
Persons, corporations, firms or
associations
engaged
in
the
business
of
carrying
or
transporting passengers or goods
or both, by land, water, or air, for
compensation,
offering
their
services to the public (Art. 1732,
Civil Code).
Art. 1732 of the New Civil Code
avoids any distinction between one
whose principal business activity is
the carrying of persons or goods or
both and one who does such
carrying only as an ancillary
activity (sideline). It also avoids a
distinction between a person or
enterprise offering transportation
service on a regular or scheduled
basis and one offering such service
on an occasional, episodic or
unscheduled basis.
Neither does the law distinguish
between a carrier offering its
services to the general public that
is the general community or
population and one who offers
services or solicits business only
from a narrow segment of the
general population.

A person or entity is a common

carrier even if he did not secure a
Certificate of Public Convenience
(De Guzman vs. CA, 168 SCRA
612).
It makes no distinction as to the
means of transporting, as long as it
is by land, water or air. It does not
provide that the transportation
should be by motor vehicle. (First
Philippine Industrial Corporation vs.
CA)
One is a common carrier even if
he has no fixed and publicly known
route, maintains no terminals, and
issues no tickets (Asia Lighterage
Shipping, Inc. vs. CA).
Characteristics:
1. Undertakes to carry for all
people indifferently and thus
is liable for refusal without
sufficient reason (Lastimoso
vs. Doliente, October 20,
1961);
2. Cannot lawfully decline to
accept a particular class of
goods for carriage to the
prejudice of the traffic in
these goods;
3. No monopoly is favored
(Batangas Trans. vs. Orlanes,
52 PHIL 455);
4. Provides public convenience.
PRIVATE CARRIER
One which, without being
engaged in the business of
carrying as a public employment,
undertakes to deliver goods or
passengers
for
compensation.
(Home Insurance Co. vs. American
Steamship Agency, 23 SCRA 24)
TESTS WHETHER CARRIER IS
COMMON OR PRIVATE:
The SC in First Philippine
Industrial Corporation
vs. CA
(1995) reiterated the following
tests:
1. It must be engaged in the

San Beda College of Law

MEMORY AID

business of carrying goods

for others as a public
employment and must hold
itself out as ready to engage
in the transportation of
goods
generally
as
a
business and not as a casual
occupation;
2. It must undertake to carry
goods of the kind to which
its business in confined;
3. It must undertake to carry
by the method by which his
business is conducted and
over its established roads;
and
4. The transportation must be
for hire.
In National Steel Corp. vs. CA
(1997) the SC held that the true
test of a common carrier is the
carriage of goods or passengers
provided it has space for all who
opt to avail themselves of its
transportation for a fee.
COMMON
PRIVATE
CARRIER
CARRIER
1. As to availability
Holds
himself Contracts with
out
for
all particular
people
individuals
or
indiscriminately groups only
2. As to required diligence
Extraordinary
Ordinary
diligence
is diligence
is
required
required
3. As to regulation
Subject to State Not subject to
regulation
State
regulation
4. Stipulation limiting liability
Parties may not Parties
may
agree
on limit
the
limiting
the carriers
carriers liability liability,
except
when provided it is
provided by law not contrary to
law, morals or
good customs
5. Exempting circumstance
Prove
caso
fortuito,

IN

COMMERCIAL LAW

extraordinary
Art. 1174 NCC
diligence
and
Art. 1733, NCC
6.Presumption of negligence
There
is
a No presumption
presumption of of
fault
or
fault
or negligence
negligence
7.Governing law
Law on
Law
on
common
obligations and
carriers
contracts
GOVERNING LAWS
A.
Domestic/interisland/coastwise
Applicable to Land, Water, and Air
transportation
1. Civil Code - primary
2. Code of Commerce (Arts.
349, 379, 573-734, 580,
806-845) - suppletory
B.
International/foreign/overseas
(Foreign
country
to
Philippines)
Applicable to Water/maritime and
Air transportation
The law of the country of
destination generally applies.
1. Civil Code - primary
2. Code of Commerce suppletory
3. Others - suppletory
a. Water/maritime: Carriage
of Goods by Sea Act
(COGSA)
b. Air: Warsaw Convention
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT
OF
EXTRAORDINARY DILIGENCE
Rendition of service with the
greatest skill and utmost foresight.
(Davao
Stevedore
Co.
v.
Fernandez)
Rationale:
1. From the nature of the
business and for reasons of

San Beda College of Law

MEMORY AID

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
1734-1754); and
2. Safety of passengers
1755-1763).

(Arts.
(Arts.

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

IN

COMMERCIAL LAW

unsuitable or dangerous or
which he knows is not
designed or intended for
passengers.
DEFENSES
OF A COMMON
CARRIER IN THE CARRIAGE OF
GOODS
1. CASO
FORTUITO/FORCE
MAJEURE
Requisites:
a. Must be the proximate and
only cause of the loss
b. Exercise of due diligence to
prevent or minimize the loss
before, during or after the
occurrence of the disaster (Art.
1739)
c. Carrier has not negligently
incurred in delay in transporting
the goods (Art. 1740)
Fire is not considered a natural
disaster or calamity as it arises
almost invariably from some act of
man. (Eastern Shipping Lines Inc.
vs. IAC)
Mechanical defects are not force
majeure
if
the
same
was
discoverable
by
regular
and
adequate inspections. (Notes and
Cases
on
the
Law
on
Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004
ed. p.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)

San Beda College of Law

MEMORY AID

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)

COMMERCIAL LAW

LIABILITY OF A COMMON
CARRIER FOR
DEATH
OR
INJURIES
TO
PASSENGERS DUE TO ACTS OF
ITS EMPLOYEES AND OTHER
PASSENGERS OR STRANGERS
FOR ACTS OF
OTHER
PASSENGERS
OR
STRANGERS
Required diligence and defense
Extraordinary
Ordinary
diligence
diligence
Nature of liability
Tort; however,
Not absolute;
The employee limited by Art.
must
be
on 1763
duty
at
the
time of the act.
(Maranan
v.
Perez)
FOR ACTS OF
ITS
EMPLOYEES

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
CARRIAGE OF GOODS

IN

articles is applicable to negligence

in quasi-delicts under Art. 2176.
(Del Prado v. Manila Electric Co., 52
Phil 900)

The carrier is liable when its

personnel allowed a passenger to
drive the vehicle causing it to
collide
with
another
vehicle
resulting to the injuries suffered by
the other passengers. (MRR vs.
Ballesteros, 16 SCRA 641)
CARRIAGE OF PASSENGERS

Parties
1. Common carrier
2. Shipper
3. Consignee

1. Common carrier
2. Passenger

Cause of liability
Delay in delivery, loss, destruction, Death or injury to the passengers
or deterioration of the goods
Duration of liability
From the time the goods
unconditionally placed in
possession of, and received by
carrier for transportation until
same are delivered actually

are
the
the
the
or

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

San Beda College of Law

MEMORY AID

IN

COMMERCIAL LAW

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)

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).
Presumption of negligence

Art.1735 Civil Code

Reason: As to when and how goods
were damaged in transit is a
matter
peculiarly
within
the
knowledge of the carrier and its
employees. (Mirasol v. Dollar, 53
PHIL 124)
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)

Art.1755 Civil Code

Reason: The contract between the
passenger and the carrier imposes
on the latter the duty to transport
the passenger safely; hence the
burden of explaining should fall on
the carrier.

San Beda College of Law

MEMORY AID

IN

COMMERCIAL LAW

Defenses
1. Ordinary
circumstance:
1. Exercise of extraordinary
Exercise of extraordinary
diligence (Art. 1756)
diligence (Art. 1735)
2. Caso fortuito
2. Special circumstances:
a. Flood,
storm,
earthquake, lighting, or
other natural disaster or
calamity
(plus
force
majeure)
b. Act
of
the
public
enemy in war, whether
international or civil
c. Act or omission of the
shipper or the owner of
goods
d. The character of the
goods or defects in the
packing
or
in
the
containers
e. Order
or
act
of
competent
public
authority (Art. 1734)
Valid stipulations
1. Reduction of degree of diligence
to ordinary diligence, provided it
be:
a) In writing, signed by the
shipper or owner;
b) Supported by a valuable
consideration other than the
service rendered by the
carriers; and
c) Reasonable, just and not
contrary to public policy.
(Art. 1744)
2. Fixed amount of liability: A
contract fixing the sum to be
recovered by the owner or shipper
for the loss, destruction or
deterioration of the goods, if it is
reasonable and just under the
circumstances and has been fairly
and freely agreed upon. (Art. 1750)
3. Limited liability for delay: An
agreement limiting the common
carriers liability for delay on

Stipulation limiting liability when a

passenger is carried gratuitously,
but not for willful acts or gross
negligence. (Art. 1758)

San Beda College of Law

MEMORY AID

IN

COMMERCIAL LAW

family. (Art. 1744, Art. 1745, no. 4)

Void stipulations
1. That the goods are transported
at the risk of the owner or
shipper;
2. That carrier will not be liable
for any loss, destruction or
deterioration of the goods;
3. That the carrier need not
observe any diligence in the
custody of the goods;
4. That the carrier shall exercise
a degree of diligence less than
that of a good father of a family
over the movable transported;
5. That the carrier shall not be
responsible for the acts or
omissions of his or its employees;
6. That the carriers liability for
acts committed by thieves or
robbers who do not act with grave
or irresistible threat, violence or
force is dispensed with or
diminished;
7. That
the
carrier
is
not
responsible
for
the
loss,
destruction or deterioration of the
goods on account of the defective
condition of the car, vehicle, ship
or other equipment used in the

Dispensing with or lessening the

extraordinary responsibility of a
common carrier for the safety of
passengers imposed by law by
stipulation, by posting of notices,
by statements on tickets or
otherwise. (Art. 1757)

San Beda College of Law

MEMORY AID

IN

COMMERCIAL LAW

contract of carriage. (Art. 1745)

RULES ON PASSENGERS BAGGAGE

IN THE
IN THE
CUSTODY OF
CUSTODY OF
THE
THE
PASSENGERS
COMMON
(HANDCARRIER
CARRIED)
(CHECKEDIN)
Legal nature of the baggage
Necessary
Considered as
deposit
goods
Required diligence by the
common carrier
Diligence of a Extraordinary
depositary
diligence
(ordinary
diligence)
Applicable rules
Arts. 1998 and Arts.
17332000-2003
1753
CONCURRING CAUSES OF ACTION
ARISING FROM THE NEGLIGENT
ACT OF THE COMMON CARRIER
1. Culpa contractual (breach of
contract)
Only the carrier is primarily liable
and not the driver, because there is no
privity between the driver and the
passenger.
Basis: Art.1759, NCC.
No defense of due diligence in the
selection
and
supervision
of
employees.
2. Culpa aquiliana (quasi-delict)
The carrier and driver are solidarily
liable as joint tortfeasors.
Basis: Art. 2180, NCC.
Defense of due diligence in the
selection
and
supervision
of
employees is available. Exception:
maritime tort resulting in collision.
(See notes on Collision)
3. Culpa criminal (criminal negligence)
The driver is primarily liable. The
carrier is subsidiarily liable only if the
driver is convicted and declared
insolvent.
Basis: Art. 100, RPC.
In case of injury to a passenger due

to the negligence of the driver of the

bus on which he is riding and of the
driver of another vehicle, the drivers
as well as the owners of the two
vehicles are jointly and severally liable
for damages. It makes no difference
that the liability of the bus driver and
owner springs from contract while that
of the owner and driver of the other
vehicle
arises
from
quasi-delict.
(Fabre vs. CA)
LIMITATIONS AS TO CARRIERS
LIABILITY
INVALID AS
VALID &
BEING
ENFORCEABL
CONTRARY TO
E
PUBLIC
POLICY
1.
One 1. One limiting
exempting the the liability of
carrier from any the carrier to
and all liability an
agreed
for
loss
or valuation,
damage
unless
the
occasioned
by shipper
its
own declares
a
negligence.
higher
value
2.
An and pays a
unqualified
higher rate of
limitation
of freight
liability to an (H.E. Heacock
agreed
Company vs.
valuation.
Macondray &
Company Inc.)
However, the carrier cannot limit its
liability for injury to, or loss of, goods
shipped where such injury or loss was
caused by its own negligence.
(Shewaram vs. PAL, 17 SCRA 606)
SPECIAL RULES ON LIABILITES OF
AIRLINE CARRIERS
1. In case of flight diversion due to
bad weather or other circumstances
beyond the pilots control, the relation
between
the
carrier
and
the
passenger continues until the latter
has been landed at the port of
destination and has left the carriers
premises.
The
carrier
should
necessarily
exercise
extraordinary
diligence in safeguarding the comfort,

convenience and safety of its stranded

passengers until they have reached
their final destination. (Philippine
Airlines vs. CA, 226 SCRA 423)
2. Even where overbooking of
passengers
is
allowed
as
a
commercial
practice,
the
airline
company would still be guilty of bad
faith and still be liable for damages if
it did not properly inform passenger
that it could breach the contract of
carriage even if they were confirmed
passengers. (Zalamea vs. CA, 228
SCRA 23)
3. An open-dated ticket constitutes a
complete contract between the carrier
and passenger.
Hence, the airline
company is liable if it refused to
confirm
a
passengers
flight
reservation. (Singson vs. CA, 282
SCRA 149)
4. An airline company which issued a
confirmed ticket to a passenger
covering successive trips on different
airlines can be held liable for damages
occasioned by bumping off by one
of the successive airlines. (Lufthansa
German Airlines vs. CA, 238 SCRA
290)
5. An airline ticket providing that
carriage by successive air carriers is
to be regarded as a single operation
is to make the issuing carrier liable for
the tortuous conduct of the other
carrier. A printed provision in the
ticket limiting liability only to its own
conduct is not enough to rebut that
liability. (KLM Royal Dutch Airlines vs.
CA, 65 SCRA 237)
II. CODE OF COMMERCE

A. OVERLAND TRANSPORTATION
(Arts. 349-379)

Applicability
1. Domestic land and water/maritime
transportation.
(Pandect
of
Commercial Law and Jurisprudence,
Justice Jose Vitug, 1997 ed.)
2.
Domestic
Air
Transportation.
(Commercial Law Review, Cesar
Villanueva, 2004 ed.)

IMPORTANT CONCEPTS:
1. Bill of lading
2. Obligations of the carrier
3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
BILL OF LADING
The written acknowledgment of
receipt of goods and agreement to
transport them to a specific place to a
person named or to his order.
Rules:
1. It is not indispensable for the
creation of a contract of carriage.
(Compania Maritima vs. Insurance
Company of North America, 12 SCRA
213)
2. Ambiguity is construed against the
carrier, the contract being one of
adhesion.
3. The consignee, although the
instrument is oftentimes drawn up
only by the consignor and carrier,
becomes bound by all the stipulations
contained therein by making a claim
for loss on the basis of said bill of
lading. (Sea-Land Services Inc. vs.
IAC)
4. The right of a party to recover for
loss of shipment consigned to him
under a bill of lading drawn up only by
and between the shipper and the
carrier, springs from either a relation
of agency between him and the
shipper, or his status as stranger in
whose favor some stipulation is made
in said contract, and who becomes a
party thereto when he demands
fulfillment of that stipulation. (Art.
1311 (2), (Mendoza vs. PAL Inc.)
5. Acceptance of the bill of lading
without
dissent
raises
the
presumption that all the terms therein
where brought to the knowledge of
the shipper and agreed to by him and,
in the absence of fraud or mistake; he
is estopped from thereafter denying
that he assented to such terms.
(Notes and Cases on the Law on

Transportation and Public Utilities,

Aquino, T. & Hernando, R.P. 2004 ed.
p.261)
Kinds:
1. On board - issued when the
goods have been actually placed
aboard the ship with very
reasonable expectation that the
shipment is as good as on its
way.
2. Received - one in which it is
stated that the goods have been
received for shipment with or
without specifying the vessel by
which the goods are to be
shipped.
3. Negotiable - one in which it is
stated that the goods referred to
therein will be delivered to the
bearer or to the order of any
person named therein.
4. Non-negotiable - One in which it
is stated that the goods referred
to therein will be delivered to a
specified person.
5. Clean One which does not
indicate any defect in the goods.
6. Foul One which contains a
notation thereon indicating that
the goods covered by it are in
bad condition.
7. Spent One which covers goods
that already have been delivered
by the carrier without a surrender
of a signed copy of the bill.
8. Through One issued by the
carrier who is obliged to use the
facilities of other carriers as well
as his own facilities for the
purpose of transporting the
goods from the city of the seller
to the city of the buyer, which bill
of lading is honored by the
second and other interested
carriers who do not issue their
own bills.
9. Custody One wherein the goods
are already received by the
carrier but the vessel indicated
therein has not yet arrived in the
port.
10.Port One which is issued by the

carrier to whom the goods have

been delivered, and the vessel
indicated in the bill of lading by
which the goods are to be
shipped is already in the port
where the goods are held for
shipment.
Functions:
1. Best evidence of the existence of
the contract of carriage of cargo
(Art. 353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver
goods as stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier
cannot ordinarily refuse to carry a
particular class of goods.
EXCEPTION: For some sufficient
reason the discrimination against the
traffic in such goods is reasonable and
necessary.
(Fisher
vs.
Yangco
Steamship Co. 31 Phil 1).
Instances when the carrier may
validly refuse to accept the goods
include the ff:
1.) Goods sought to be transported
are dangerous objects, or substances
including
dynamite
and
other
explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in
overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward
danger like flood, capture by enemies
and the like
7.) Goods like livestock will be
exposed to disease
8.) Strike
9.) Failure to tender goods on time.
(Notes and Cases on the Law on
Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 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 1.
Within
a
bound to fulfill reasonable
the
contract time.
and is liable for 2. Carrier is
any delay; no bound
to
matter
from forward them in
what cause it the
1st
may
have shipment of the
arisen.
same or similar
goods which he
may make to
the point of
delivery. (ART.
358 Code of
Commerce)
Effects of delay
a. Merely suspends and generally
does not terminate the contract of
carriage
b. Carrier remains duty bound to
exercise extraordinary diligence
c. Natural disaster shall not free the
carrier from responsibility (Art.1740)
d. If delay is without just cause, the
contract limiting the common carriers
liability cannot be availed of in case of
loss or deterioration of the goods
(Art.1747)
RIGHT
OF
CONSIGNEE
TO
ABANDON GOODS
Instances:
1. Partial non-delivery, where the
goods are useless without the others

(Art. 363);
2. Goods are rendered useless for
sale or consumption for the purposes
for which they are properly destined
(Art. 365); and
3. In case of delay through the fault
of the carrier (Art. 371).
NOTICE OF DAMAGE (ART. 366)
Requisites for applicability:
1. Domestic/inter-island/coastwise
transportation
2. Land/water/air transportation
3. Carriage of goods
4. Goods shipped are damaged
Rules:
a. Patent damage: shipper must file a
claim
against
the
carrier
immediately upon delivery (it may
be oral or written)
b. Latent damage: shipper should file
a claim against the carrier within 24
hours from delivery.
Note: These rules does not apply to
misdelivery of goods. (Roldan vs. Lim
Ponzo)
Purpose of notice: To inform the
carrier that the shipment has been
damaged, and it is charged with
liability therefore, and to give it an
opportunity to make an investigation
and fix responsibility while the matter
is fresh.
The filing of notice of claim is a
condition precedent for recovery.
Shorter period may be stipulated by
the parties because it merely affects
the shippers remedy and does not
affect the liability of the carrier.
(PHILAMGEN vs. Sweetlines, Inc.)
Prescriptive Period
Not provided by Article 366. Thus, in
such absence, Civil Code rules on
prescription apply.
If despite the notice of claim, the
carrier refuses to pay, action must be
filed in court.
1. No bill of lading was
issued: within 6 years
2. Bill of lading was issued:
within 10 years.
ARTICLE 366
COGSA Sec.3
(6)

Applicability
1.
Dom 1. International
estic/inter/
island/coastwis overseas/foreig
e transportation n (from foreign
2.
Land, country
to
water,
air Phils.)
transportation
Note: subject
3.
Carri to the rule on
age of goods
Paramount
Clause
2.
Water/maritim
e
transportation
3. Carriage of
goods
Notice of damage
1.
1. Not a
Condition
condition
precedent
precedent
2.
2. 3-day period
24-hour period for claiming
for claiming
latent damage
latent damage
Prescriptive period
None provided; One year from
Civil
Code the date of
applies.
delivery
(delivered but
damaged
goods), or date
when
the
vessel left port
or from the
date
of
delivery to the
arrastre (nondelivery
or
loss).
COMBINED CARRIER AGREEMENT
(ART. 373)
GENERAL RULE: In case of a contract
of transportation of several legs, each
carrier is responsible for its particular
leg in the contract.
EXCEPTION: A combined carrier
agreement where a carrier makes
itself liable assuming the obligations
and acquiring as well the rights and
causes of action of those which
preceded it.

2. MARI
TIME
COM
MER
CE
(Arts. 573-869)
IMPORTANT CONCEPTS:
1. Merchant vessel
2. Maritime lien and Preference of
Credit
3. Doctrine of limited liability
4. Causes of revocation of voyage
5. Participants
in
maritime
commerce
6. Charter party
7. Loans
on
bottomry
and
respondentia
8. Accidents
in
maritime
commerce
MARITIME/ADMIRALTY LAW
It is the system of laws which
particularly relates to the affairs and
business of the sea, to ships, their
crews and navigation, and to maritime
conveyance of persons and property.
(Notes and Cases on the Law on
Transportation and Public Utilities,
Aquino & Hernando, citing Francisco,
p.254)
Maritime laws apply only to
maritime trade and sea voyages.
(Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997
ed.)
Arrastre service is not maritime in
character. It refers to a contract for
the unloading of goods from a vessel.
(ICTSI vs. Prudential Guarantee, 320
SCRA 244)
CHARACTERISTICS OF MARITIME
TRANSACTION
1. Real - similar to transactions over
real
property
with
respect
to
effectivity against third persons which
is done through registration. (Rubiso
vs. Rivera, 37 Phil. 72). The evidence
of real nature is shown by: 1) the
limitation of the liability of the agents
to the actual value of the vessel and

the freight money; and 2) the right to

retain the cargo and embargo and
detention of the vessel (Luzon
Stevedoring Corp v. CA, 156 SCRA
169);
2. Hypothecary - the liability of the
owner of the value of the vessel is
limited to the vessel itself (Doctrine of
Limited Liability).
The real and hypothecary nature of
maritime law simply means that the
liability of the carrier in connection
with losses related to maritime
contracts is confined to the vessel,
which stands as the guaranty for their
settlement. (Aboitiz Shipping Corp. vs.
General Accident Fire and Life
Assurance Corp. 217 SCRA 359).
MERCHANT VESSEL

Vessel
engaged
in
maritime
commerce,
whether
foreign
or
otherwise. (Bar Review Materials in
Commercial Law, Jorge Miravite, 2002
ed.)
Constitutes property which may be
acquired and transferred by any of the
means recognized by law. They shall
continue to be considered as personal
property. (Arts. 573, 585)
They are susceptible to maritime
liens such as for the repair, equipping
and provisioning of the vessel in the
preparation of a voyage, as well as
mortgage liabilities, in satisfaction of
which a vessel may be validly arrested
and sold. (Ship Mortgage Decree of
1978)
MARITIME LIEN
It constitutes a present right of
property in the ship, a jus in re, to be
afterward enforced in admiralty by
process in rem. (PNB vs. CA, 337 SCRA
381)
If the maritime lien arose prior to the
recording of a preferred mortgage, it
shall have priority over the said
mortgage lien. (PNB vs. CA, 337 SCRA
381)
ORDER OF PREFERENCE IN CASE

OF SALE OF VESSEL
R.A. 6106
P.D. 1521
Effectivity date
1969
1978
Applicability
Overseas
Both domestic
shipping only
and overseas
shipping
Kind of sale
Judicial
Judicial and
extrajudicial
Order of Preference
A
preferred The preferred
mortgage shall mortgage lien
have
priority shall
have
over all claims priority over all
against
the claims against
vessel, except the
vessel,
the
following except
the
preferences in following
the
order preferences in
stated:
the
order
1.
Judicial stated:
costs of the 1.
Expenses
proceedings;
and
fees
2. Taxes due allowed
and
the Philippine costs taxed by
Government;
the court and
3. Salaries and taxes due to
wages of the the
Captain
and Government;
Crew of the 2.
Crews
vessel during wages;
its last voyage; 3.
General
4.
General average;
average
or 4.
Salvage,
salvage
including
including
contract
contract
salvage;
salvage,
5.
Maritime
bottomry
liens
arising
loans,
and prior in time to
indemnity due the recording
shippers
for of
the
the value of preferred
goods
mortgage;
transported
6.
Damages
but which were arising out of
not delivered tort; and
to
the 7.
Preferred
consignee;
mortgage
5.
Costs
of registered
repair
and prior in time.

equipment of
the vessel, and
provisioning of
food, supplies
and fuel during
its last voyage;
and
6.
Preferred
mortgages
registered
prior in time.
Effect of sale: All pre-existing claims
in the vessel are terminated. They will
then be satisfied from the proceeds of
the sale subject to the order of
preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
Cases where applicable:
1. Art. 587 civil liability for
indemnities to third persons
2. Art. 590 indemnities from
negligent acts of the captain
(not the shipowner or ship
agent)
3. Art. 837 collision
4. Art. 643 liability for wages of
the captain and the crew and
for advances made by the ship
agent if the vessel is lost by
shipwreck or capture

GENERAL RULE: The liability of

shipowner and ship agent is limited to
the amount of interest in said vessel
such that where vessel is entirely lost,
the obligation is extinguished. (Luzon
Stevedoring v. Escano, 156 SCRA 169)
The interest extends to: 1) the vessel
itself; 2) equipments; 3) freightage;
and 4) insurance proceeds. (Chua v.
IAC, 166 SCRA 183)
EXCEPTIONS:
1. Claims
under
Workmens
Compensation (Abueg vs. San
Diego 77 Phil 730);
2. Injury or damage due to shipowner
or to the concurring negligence of
the shipowner and the captain;
3. The vessel is insured (Vasquez vs.
CA 138 SCRA 553).

4. Expenses for repair on vessel

completed before loss;
5. In case there is no total loss and
the vessel is not abandoned;
6. Collision between two negligent
vessels;
Abandonment of the vessel is
necessary to limit the liability of the
shipowner. The only instance were
abandonment is dispensed with is
when the vessel is entirely lost (Luzon
Stevedoring vs. CA 156 SCRA 169).
RIGHT OF SHIPOWNER OR SHIP
AGENT TO ABANDON VESSEL
Instances:
1.
In case of civil liability from
indemnities to third persons (Art.
587);
2.
In case of leakage of at least
of the contents of a cargo containing
liquids (Art. 687); and
3.
In case of constructive loss of
the vessel (Sec. 138, Insurance Code).
RIGHT OF ABANDONMENT
SHIPOWNER
CONSIGNEE
OR SHIP
AGENT
What may be abandoned
Vessel
Goods shipped
Instances
1. In case of 1. Partial noncivil
liability delivery, where
from
the goods are
indemnities to useless
third
persons without
the
(Art. 587);
others
(Art.
2. Sec. 138, 363);
Insurance
2. Goods are
Code;
rendered
3. In case of useless for sale
leakage of at or
least of the consumption
contents of a for
the
cargo
purposes
for
containing
which they are
liquids
(Art. properly
687)
destined (Art.
365); and
3. In case of
delay through

the fault of the

carrier
(Art.
371).
Effects
1.
Transfer 1. Transfer
of
of ownership of ownership on
the vessel from the goods from
the shipowner the shipper to
to the shippers the carrier.
or insurer.
2. Carrier
2.
In case should pay the
of
(2),
the shipper
the
insurer
must market value
pay the insured of the goods at
as if there was the point of
actual total loss destination.
of the vessel.
CAUSES
OF
REVOCATION
OF
VOYAGE
1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at
destination;
4. Embargo;
5. Inability of the vessel to navigate.
(Art. 640)
Terms:
1. Interdiction of commerce A
governmental
prohibition
of
commercial intercourse intended to
bring about an entire cessation for
the time being of all trade
whatever.
2. Blockade A sort of circumvallation
of a place by which all foreign
connection and correspondence is,
as far as human power can effect
it, to be cut off.
3. Embargo A proclamation or order
of a state, usually issued in time of
war or threatened hostilities,
prohibiting the departure of ships
or goods from some or all the ports
of such state until further order.
PARTICIPANTS
IN
MARITIME
COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot

A.
SHIPOWNERS
AND
SHIP
AGENTS
Shipowner (proprietario)
Person who has possession, control
and management of the vessel and
the consequent right to direct her
navigation and receive freight earned
and paid, while his possession
continues.
Ship agent (naviero)
Person entrusted with provisioning
and representing the vessel in the
port in which it may be found; also
includes the shipowner.
Not a mere agent under civil law; he
is solidarily liable with the ship owner.
Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain,
subject to Art.609;
3. Contract in the name of the owners
with respect to repairs, details of
equipment, armament, provisions
of food and fuel, and freight of the
vessel, and all that relate to the
requirements of navigation;
4. Order a new voyage, make a new
charter or insure the vessel after
obtaining authorization from the
shipowner
or
if
granted
in
certificate of appointment.
Civil Liabilities of the Shipowner
And Ship Agent
1. All contracts of the captain,
whether authorized or not, to
repair, equip and provision the
vessel; (Art. 586)
2. Loss and damage to the goods
loaded on the vessel without
prejudice to their right to free
themselves
from
liability
by
abandoning the vessel to the
creditors. (Art. 587)
Duty of Ship Agent to Discharge
the Captain and Members of the
Crew
If the seamen contract is not for a
definite period or voyage, he may
discharge them at his discretion. (Art.
603)

 If for a definite period, he may not

discharge them until after the
fulfillment of their contracts, except
on the following grounds:
a. Insubordination
in
serious
matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or
to its cargo through malice or
manifest or proven negligence.
(Art. 605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders
of ships.
The terms have the same meaning,
but
are
particularly
used
in
accordance with the size of the vessel
governed
and
the
scope
of
transportation,
i.e.,
large
and
overseas, and small and coastwise,
respectively.
Nature 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
nonobservance
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
part
thereof
is
let/leased by the owner to another
person for a specified time or use.
(Planters Products, Inc. vs. CA, 226
SCRA 476)
Parties:
1. Ship owner or ship agent
2. Charterer
Classes:
1. Bareboat or demise The charterer
provides crew, food and fuel. The
charterer is liable as if he were the
owner, except when the cause arises
from the unworthiness of the vessel.
The shipowner leases to the charterer
the whole vessel, transferring to the
latter the entire command, possession
and consequent control over the
vessels navigation, including the
master and the crew, who thereby
become the charters servants. It

transforms a common carrier into a

private carrier.
The charterer becomes the
owner of the vessel pro hac vice,
just for that one particular purpose
only.
Because the charterer is
treated as owner pro hac vice, the
charterer assumes the customary
rights
and
liabilities
of
the
shipowner to third persons and is
held liable for the expense of the
voyage and the wages of the
seamen.
2. Contract of Affreightment A
contract whereby the owner of the
vessel leases part or all of its space to
haul goods for others.
The shipowner retains the
possession,
command
and
navigation
of
the
ship, the
charterer merely having use of the
space in the vessel in return for his
payment of the charter hired.
Kinds:
a. Time charter vessel is
chartered for a fixed period of
time or duration of voyage.
b. Voyage or trip charter the
vessel is leased for one or
series of voyages usually for
purposes of transporting goods
for charterer.
LEASE
If for a definite
period, lessee
cannot give up
the lease by
paying
a
portion of the
amount agreed
upon.
If the leased
property is sold
to
one
who
knows of the
existence
of
the lease, the
new
owner
must
respect
the lease.
Civil

CHARTER
PARTY
Charterer may
rescind charter
party by paying
half
of
the
freightage
agreed upon.

The new owner

is
not
compelled
to
respect
the
charter
party
so long as he
can load the
vessel with his
own cargo. (Art.
689)
law Commercial law

concept

concept

CHARTER
BILL OF
PARTY
LADING
An entire or More
like
a
complete
private receipt
contract.
which
the
captain gives to
accredit goods
received from
persons
Consensual
Real contract
contract
BAREBOAT OR
DEMISE
CHARTER
Charterer
becomes liable
to
others
caused by its
negligence
Charterer
regarded
as
owner pro hac
vice for the
voyage
Owner
of
vessel
relinquishes
possession,
command and
navigation
to
charterer
Common
carrier
is
converted
to
private carrier.

CONTRACT OF
AFFREIGHTME
NT (TIME OR
VOYAGE
CHARTER)
Owner remains
liable as carrier
and
must
answer for any
breach of duty
Charterer is not
regarded
as
owner.
The
vessel
owner
retains
possession,
command and
navigation
of
the ship
Common
carrier is not
converted to a
private carrier.

PERSONS WHO MAY MAKE A

CHARTER
1. Owner or owners of the vessel,
either in whole or in majority
part, who have legal control and
possession of the vessel
2. Charterer may subcharter entire
vessel to 3rd person only if not
prohibited in original charter.

(Art.679)
3. Ship agent if authorized by the
owner/s or given such power in
the certificate of appointment.
(Art.598)
4. Captain in the absence of the
ship agent or consignee and
only if he acts in accordance
with the instructions of the
agent or owner and protects the
latters interests. (Art.609)
REQUISITES OF A VALID CHARTER
PARTY
1. Consent of the contracting
parties
2. Existing vessel which should be
placed at the disposition of the
shipper
3. Freight
4. Compliance with Art. 652 of the
Code of Commerce

Clauses Which May Be Included In

a Charter Party
Jason clause

A stipulation in
a charter party
that in case of
a
maritime
accident
for
which
the
shipowner
is
not responsible
by
law,
contract
or
otherwise, the
cargo shippers,
consignees or
owners
shall
contribute with
the shipowner
in
general
average.
(Pandect
of
Commercial
Law
and

Clause
paramount or
paramount
clause
A clause in a
charter
party
providing that
the
COGSA
shall
apply,
even
though
the
transportation
is
domestic,
subject to the
extent that any
term of the bill
of
lading
is
repugnant
to
the COGSA or
applicable law,
then
to
the
extent thereof
the provision of
the
bill
of
lading is void.

Jurisprudence,
Justice
Jose
Vitug,
1997
ed.)

(Pandect
of
Commercial
Law
and
Jurisprudence,
Justice
Jose
Vitug,
1997
ed.)

nearest neutral
port in case of
war
or
blockade. (Arts.
669-678)
Rescission of a Charter Party
At
At
Fortuito
chartere shipown
us
rs
ers
causes
request
request
(Art.
(Art
(Art.
690)
688)
689)

Rights and Obligations of Parties

SHIPOWNER
OR SHIP
AGENT
1. If the vessel
is
chartered
wholly, not to
accept
cargo
from others;
2. To observe
represented
capacity;
3. To
unload
cargo
clandestinely
placed
4. To
substitute
another vessel
if load is less
than
3/5
of
capacity;
5. To leave the
port
if
the
charterer does
not bring the
cargo
within
the lay days
and extra lay
days allowed;
6. To place in a
vessel
in
a
condition
to
navigate;
7. to
bring
cargo
to

CHARTERER
1. To pay the
agreed charter
price;
2. To
pay
freightage on
unboarded
cargo;
3. To
pay
losses
to
others
for
loading
uncontracted
cargo and illicit
cargo;
4. To wait if
the
vessel
needs repair;
5. To
pay
expenses
for
deviation.
(Arts. 679-687)

1.
By
abandoni
ng
the
charter
and
paying
half
of
the
freightag
e;
2. Error in
tonnage
or flag;
3. Failure
to place
the
vessel at
the
charterer
s
disposal;
4. Return
of
the
vessel
due
to
pirates,
enemies
or
bad
weather;
5. Arrival
at a port
for
repairs.

1. If the
extra lay
days
terminate
without
the cargo
being
placed
alongside
the
vessel;
2. Sale by
the
owner of
the
vessel
before
loading
by
the
charterer;

1. War or
interdictio
n of
commerc
e;
2.
Blockade;
3.
Prohibitio
n to
receive
cargo;
4.
Embargo;
and
5.
Inability
of the
vessel to
navigate.

Terms:
1. Primage - bonus to be paid to the
captain
after
the
successful
voyage.

2. Demurrage the sum fixed in the

charter party as a remuneration to
the owner of the ship for the
detention of his vessel beyond the
number of days allowed by the
charter party for loading or
unloading or for sailing.
3. Deadfreight the amount paid by
or recoverable from a charterer of
a ship for the portion of the ships
capacity the latter contracted for
but failed to occupy.
4. Lay Days - days allowed to charter
parties for loading and unloading
the cargo.
5. Extra Lay Days days which follow
after the lay days have elapsed.
USUAL
FORMS
OF
CONSUMMATING CONTRACTS
1. C.I.F. cost, insurance and freight;
2. F.O.B. - free on board;
3. F.A.S. - free alongside ship; and
4. C. & F. - cost and freight.
TRANSSHIPMENT OF GOODS
The act of taking cargo out of one
ship and loading it in another, or the
transfer of goods from the vessel
stipulated
in
the
contract
of
affreightment to another vessel before
the place of destination named in the
contract has been reached, or the
transfer for further transportation from
one ship or conveyance to another.
It is not dependent on the
ownership of the transporting ships or
in the change of carriers, but rather on
the fact of actual physical transfer of
cargo from one vessel to another.
If done without legal excuse,
however competent and safe the
vessel into which the transfer is made,
is a violation of contract and
infringement of right of shipper and
subjects carrier to liability if freight is
lost event by cause otherwise
excepted. (Magellan Manufacturing vs.
CA, 201 SCRA 102)
LOAN
ON
BOTTOMRY
AND
RESPONDENTIA
A real, unilateral, aleatory contract,
by virtue of which one person lends to

another a certain amount of money or

goods on things exposed to maritime
risks, which amount, with its earnings,
is to be returned if the things are
safely transported, and which is lost if
the latter are lost.
LOAN ON
BOTTOMRY

LOAN ON
RESPONDENT
IA
Definition
Loan made by Loan taken on
shipowner or security of the
ship
agent cargo laden on
guaranteed by a vessel, and
vessel
itself repayable
and repayable upon
safe
upon arrival of arrival of cargo
vessel
at at destination.
destination.
(Art. 719)
(Art. 719)
Who may contract
Shipowner or Only the owner
ship
agent. of the cargo.
Outside of the
residence
of
the owners the captain.
Common elements:
1. Exposure
of security to
marine peril;
2. Obligation
of the debtor
conditioned only upon safe
arrival of the security at the
point of destination.
Forms:
1. Public instrument
2. Policy
signed
by
the
contracting parties and the
broker taking part therein
3. Private instrument
(Art.
720)
Contents:
1. Kind, name and registry of
the vessel;
2. Name,
surname
and
domicile of the captain;
3. Names,
surnames
and
domiciles of the borrower
and the lender;
4. Amount of the loan and the
premium stipulated;
5. Time for repayment;

6. Goods pledged to secure

repayment;
7. Voyage during which the risk
is run (Art.721)

BOTTOMRY/
RESPONDEN
TIA

ORDINARY
LOAN
(MUTUUM)

Not subject to Subject

Usury Law
Usury Law
Liability of the
borrower
is
contingent on
the safe arrival
of the vessel
or cargo at
destination

to

Not subject to
any
contingency
(absolute
liability)

The last lender The first lender

is a preferred is a preferred
creditor
creditor
WHEN LOAN ON BOTTOMRY OR
RESPONDENTIA
REGARDED
AS
SIMPLE LOAN
1. Lender loaned an amount larger
than the value of the object due
to fraudulent means employed
by the borrower. (ART.726)
2. Full amount of the loan is not
used for the cargo or given on
the goods if all of them could
not have been loaded, the
balance will be considered a
simple loan. (ART.727)
3. If the effects on which the
money is taken is not subjected
to any risk. (ART.729)
Note: Under existing laws, the parties
to a loan, whether ordinary or
maritime, may agree on any rate of
interest. (CB Circular 905)
MARINE
INSURANCE

LOAN ON
BOTTOMRY
OR
RESPONDE

Indemnity is paid
after the loss has
occurred
In case of loss of
the vessel due to
a risk insured
against,
the
obligation of the
insurer becomes
absolute
Consensual
contract

NTIA
Indemnity is
paid
in
advance by
way of a
loan
In case of
loss of the
vessel
due
to a marine
peril,
the
obligation of
the borrower
to pay is
extinguished
Real
contract

Hypothecary Nature of Bottomry/

Respondentia
GENERAL RULE: The obligation of
the borrower to pay the loan is
extinguished if the goods given as
security are absolutely lost by reason
of an accident of the sea, during the
voyage designated, and if it is proven
that the goods were on board.
EXCEPTIONS:
1. Loss due to inherent defect;
2. Loss due to the barratry on the
part of the captain;
3. Loss due to the fault or malice of
the borrower;
4.
The vessel was engaged in
contraband; and
5. The cargo loaded on the vessel be
different in from that agreed upon.
Concurrence of Marine Insurance
and
Loan
on
Bottomry/Respondentia
1. The insurable interest of the
owner of a ship hypothecated
by bottomry is only the excess
of the value over the amount
secured by bottomry. (Sec. 101,
Insurance Code)
2. The value of what may be
saved in case of shipwreck shall
be divided between the lender
and the insurer in proportion to
the interest of each one. (Art.
735)

Note: If a vessel is hypothecated by

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

MARITIME

AVERAGE
An extraordinary or accidental
expense incurred during the voyage in
order to preserve the cargo, vessel or
both, and all damages or deterioration
suffered by the vessel from departure
to the port of destination, and to the
cargo from the port of loading to the
port of consignment. (Art. 806)
The person whose property has
been saved must contribute to
reimburse the damage caused or
expense incurred if the situation
constitutes general average.
Classes:
1. Particular or Simple Average
2. Gross or General Average
Where both vessel and cargo are
saved, it is general average; where
only the vessel or only the cargo is
saved, it is particular average.
Expenses incurred to refloat a
vessel,
which
accidentally
ran
aground, in order to continue its
voyage, do not constitute general
average. Not only is there absence of
a marine peril, common safety factor,
and deliberateness. It is the safety of
the property, and not the voyage,
which constitutes the true foundation
of general average. (A. Magsaysay,
Inc. vs. Agan, G.R.No. L-6393, Jan. 31,
1955)

PARTICULAR
GROSS OR
OR SIMPLE
GENERAL
Definition
Damages
or Damages
or
expenses
expenses
caused to the deliberately
vessel or cargo caused
in
that did not order to save
inure to the the vessel, its
common
cargo or both
benefit,
and from real and
borne
by known
risk.
respective
(Art. 811)
owners.
(Art.
809)
Requisites
1. common
danger;
2. deliberate
sacrifice;
3. success;
4. proper
formalities
and legal
steps.
Liability
The owner of All the persons
the
goods having
an
which gave rise interest in the
to the expense vessel and the
or suffered the cargo therein
damage
shall at the time of
bear
this the occurrence
average. (Art. of the average
810)
shall
contribute
to
satisfy
this
average. (Art.
812)
The insurers
(Art.859) and
lenders
on
bottomry and
respondentia
shall likewise
contribute.
(Art.732).
Number of interests involved
Only
one Several
interest
interests
involved
involved

Share in the damage or

expense
100% share
In
proportion
to the value of
the
owners
property saved
Right to recover
No
There may be
reimbursement reimbursement
Kinds (not exclusive)
Art. 809
Art. 811
Procedure for recovery
1. Assembly
and
deliberation
2. Resolution of
the captain
3. Entry of the
resolution
in
the logbook
4. Detailed
minutes
5. Delivery of
the minutes to
the
maritime
judicial
authority
of
the first port,
within
24
hours
from
arrival,
6. Ratification
by
captain
under
oath.
(Arts. 813-814)
GOODS
NOT
COVERED
BY
GENERAL
AVERAGE
EVEN
IF
SACRIFICED
1. Goods
carried
on
deck.
(ART.855)
2. Goods not recorded in the
books or records of the vessel.
(ART.855 (2))
3. Fuel for the vessel if there is
more than sufficient fuel for the
voyage. (Rule IX, York-Antwerp
Rule)
Jettison
Act of throwing cargo overboard in
order to lighten the vessel.
Order of goods to be cast overboard:

1. Those which are on the deck,

preferring the heaviest one with
the least utility and value;
2. Those which are below the
upper deck, beginning with the
one with greatest weight and
smallest value. (Art. 815)
Jettisoned goods are not res nullius
nor deemed abandoned within the
meaning of civil law so as to be the
object of occupation by salvage.
(Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997
ed.)
In order that the jettisoned goods
may be included in the gross or
general average, the existence of the
cargo on board should be proven by
means of the bill of lading. (Art. 816)
York-Antwerp
(Y-A)
Rules
on
Determining Liability for Averages
With Regard To Deck Cargo
1. Deck cargo is allowed only in
domestic/coastwise/inter-island
shipping,
and
is
prohibited
in
international/overseas/foreign
shipping.
2. If deck cargo is loaded with the
consent of the shipper on overseas
trade, it must always contribute to
general average, but should the same
be jettisoned, it would not be entitled
to reimbursement because there is
violation of the Y-A Rules.
3. If deck cargo is loaded with the
consent of the shipper on coastwise
shipping, it must always contribute to
general average and if jettisoned
would be entitled to reimbursement.
Reason: In domestic shipping,
voyages are usually short and the
seas are generally not rough. In
overseas shipping, the vessel is
exposed for many days to perils of the
sea.
DOMESTIC

INTERNATION
AL
Deck cargo is Deck cargo is
allowed
not allowed
With shippers consent

General
Particular
average
average
Without shippers consent
Captain is liable
Captain is
liable
ARRIVAL
UNDER
STRESS
(ARRIBADA)
The arrival of a vessel at the nearest
and most convenient port instead of
the port of destination, if during the
voyage the vessel cannot continue the
trip to the port of destination.
When
lawful

When
unlawful

Who
bears
expense
s:

The
inability
to
continue
voyage is
due
to
lack
of
provision
s,
wellfounded
fear
of
seizure,
privateer
s,
pirates,
or
accidents
of
the
sea
disabling
it
to
navigate.
(Art. 819)

1. Lack of
provisions
due
to
negligenc
e to carry
according
to usage
and
customs;
2. Risk of
enemy
not
well
known or
manifest
3. Defect
of vessel
due
to
improper
repair;
and
4. Malice,
negligenc
e, lack of
foresight
or skill of
captain.
(Art. 820)

The
shipowne
r or ship
agent is
liable in
case
of
unlawful
arrival
under
stress.
But they
shall not
be liable
for
the
damages
caused
by reason
of
a
lawful
arrival.
(Art. 821)

It is the duty of the captain to

continue the voyage without delay
after the cause of the arrival under
stress has ceased failing in such duty
renders him liable. However, in case
the cause has been risk of enemies,

there must first be an assembly before

departure. (Art. 825)
Steps:
1. Captain
should
determine
during the voyage if there is
well founded fear of seizure,
privateers and other valid
grounds;
2. Captain shall assemble the
officers
and
summon
the
persons interested in the cargo
who may attend the meeting
but without a right to vote;
3. The officers shall determine and
agree if there is well-founded
reason after examining the
circumstances.
The captain
shall have the deciding vote;
4. The agreement shall be drafted
and the proper minutes shall be
signed and entered in the log
book;
5. Objections and protests shall
likewise be entered in the
minutes.
COLLISION
Impact of two vessels both of which
are moving.
Allision
Impact between a moving vessel and
a stationary one.
Nautical
Rules
to
Determine
Negligence
1. When two vessels are about to
enter a port, the farther one must
allow the nearer to enter first; if
they collide, the fault is presumed
to be imputable to the one who
arrived later, unless it can be
proved that there was no fault on
its part.
2. When two vessels meet, the
smaller should give the right of
way to the larger one.
3. A vessel leaving port should leave
the way clear for another which
may be entering the same port.
4. The vessel which leaves later is
presumed to have collided against
one which has left earlier.
5. There is a presumption against the

vessel which sets sail in the night.

6. There is a presumption against the
vessel with spread sails which
collides with another which is at
anchor and cannot move, even
when the crew of the latter has
received word to lift anchor, when
there was not sufficient time to do
so or there was fear of a greater
damage or other legitimate reason.
7. There is a presumption against an
improperly moored vessel.
8. There is a presumption against a
vessel which has no buoys to
indicate the location of its anchors
to prevent damage to vessels
which may approach it.
9. Vessels must have proper lookouts or persons trained as such
and who have no other duty aside
therefrom. (Smith Bell v. CA)
Nautical Rules as to Sailing Vessel
and Steamship
1. Where a steamship and a sailing
vessel are approaching each other
from opposite directions, or on
intersecting lines, the steamship
from the moment the sailing vessel
is seen, shall watch with the
highest diligence her course and
movements so as to be able to
adopt such timely means of
precaution as will necessarily
prevent the two boats from coming
in contact.
2. The sailing vessel is required to
keep her course unless the
circumstances require otherwise.
Zones of Time in the Collision of
Vessels
1. First zone all time up to the
moment when risk of collision begins.
No rule is as yet applicable for none
is necessary.
2.
Second zone time between
moment when risk of collision begins
and moment it becomes a practical
certainty.
It is in this period where conduct of
the vessels is primordial. It is in this
zone that vessels must strictly
observe nautical rules, unless a

departure
therefrom
becomes
necessary to avoid imminent danger.
3. Third zone time when collision is
certain and time of impact.
An error in this zone would no longer
be legally consequential.
Error in Extremis - sudden
movement made by a faultless vessel
during the third zone of collision with
another vessel which is at fault during
the 2nd zone. Even if such sudden
movement is wrong, no responsibility
will fall on said faultless vessel.
(Urrutia and Co. v. Baco River
Plantation Co., 26 PHIL 632)
Cases Covered By Collision and
Allision
1. One vessel at fault
Vessel at fault is liable for damage
caused to innocent vessel as well as
damages suffered by the owners of
cargo of both vessels. (Art. 826)
2. Both vessels at fault
Each vessel must bear its own loss,
but the shippers of both vessels may
go against the shipowners who will be
solidarily liable. (Art. 827)
3. Vessel at fault not known
Each vessel must bear its own loss,
but the shippers of both vessels may
go against the shipowners who will be
solidarily liable. (Art. 828)
Doctrine of Inscrutable Fault In
case of collision where it cannot be
determined which between the two
vessels was at fault, both vessels
bear their respective damage, but
both should be solidarily liable for
damage to the cargo of both
vessels.
4. Third vessel at fault
The third vessel will be liable for
losses and damages. (Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss.
(Art. 830)
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 quasidelict, 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-TOCONTAIN/ SHIPPERS LOAD AND
COUNT SYSTEM
System whereby the shipper loads
his cargoes in a specially designed
container, seals the container and
delivers
it
to
the
carrier
for
transportation. The carrier does not
participate in the counting of the
merchandise for loading into the
container, the actual loading, and the
sealing of the container. (US Lines v.
Comm. Of Customs, ICTSI v. Prudential
Guarantee)
The matter of quantity, description
and conditions of the cargo inside the
container is the sole responsibility of
the shipper, unless there is stipulation
to the contrary. (US Lines vs. Comm.
Of Customs, Reyma Brokerage v. Phil.
Home Assurance)
Note: In order to attribute to the
carrier any damage to the shipment
that may be found, inspection of the
goods should be done at pier-side.
(Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA
ACT/COGSA (C.A. No. 65)
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
PASSEN
GER
TICKET
Passenge
r

BAGGAG
E CHECK

AIR
WAYBILL

Checkedin
baggage

Goods to
be
shipped

LIABILITY
OF
CARRIER
FOR
DAMAGES
1. Death or injury of a passenger if the
accident causing it took place on
board the aircraft or in the course of
its operations of embarking or
disembarking; (Art. 17)
2. Destruction, loss or damage to any
baggage or goods, if it took place
during the transportation by air;
(Art. 18) and
Transportation by air The period
during which the baggage or goods
are in the charge of the carrier,
whether in an airport or on board an
aircraft, or, in case of a landing
outside an airport, in any place
whatsoever.
It includes any transportation by
land or water outside an airport if such
takes place in the performance of a
contract for transportation by air, for
the purpose of loading, delivery, or
transshipment.
3. Delay in the transportation of
passengers, baggage or goods. (Art.
19)
Note: The Hague Protocol amended
the WC by removing the provision that
if the airline took all necessary steps
to avoid the damage, it could
exculpate itself completely (Art.
20(1)). (Alitalia vs. IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as
amended by Guatemala Protocol,
1971; Alitalia vs. IAC)
1. Passengers

GENERAL RULE: $100,000 per

passenger
EXCEPTION: Agreement to a higher
limit

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

other special injury sustained by the

passenger.
In KLM Royal v. Tuller, the WC has
invariably been held inapplicable, or
as not restrictive of the carriers
liability, where there was satisfactory
evidence of malice or bad faith
attributable to its officers and
employees. (Alitalia vs. IAC)

ACTION FOR DAMAGES

1. Notice of claim
A written complaint must me made
within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from
receipt of baggage/goods
The complaint is a condition
precedent. Without the complaint, the
action is barred except in case of
fraud on the part of the carrier. (Art.
26)
2. Prescriptive period
Action must be filed within 2 years
from:
a. date of arrival at the destination
b. date of expected arrival
c. date
on
which
the
transportation stopped. (Art.
29)
In United Airlines vs. Uy the twoyear prescriptive period was not
applied where the airline employed
delaying tactics.
RULE IN CASE OF VARIOUS
SUCCESSIVE CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only
against the carrier in which the
accident or delay occurred.
EXCEPTION: Agreement or contract
whereby the first carrier assumed
liability for the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file
an action against the first

carrier and the carrier in which

the damage occurred
b. Passenger or consignee can file
an action against the last
carrier and the carrier in which
the damage occurred.
These carriers are jointly and
severally liable. (Art. 30)
A contract of international carriage
by air, although performed by
different carriers under a series of
airline tickets constitutes a single
operation.
Members
of
the
International
Air
Transportation
Association (IATA) are under a general
pool partnership agreement wherein
they act as agent of each other in the
issuance of tickets to contracted
passengers to boost ticket sales
worldwide and at the same time
provide passengers easy access to
airlines
which
are
otherwise
inaccessible in some parts of the
world. (American Airlines vs. CA)
Under a general pool partnership
agreement, the ticket-issuing airline is
the principal in a contract of carriage
while the endorsee-airline is the
agent. The obligation of the former
remained and did not cease even
when the breach occurred not on its
own flight but on that of another
airline which had undertaken to carry
the passengers to one of their
destinations.
(China Airlines vs.
Chiok)
JURISDICTION
At the option of the plaintiff, the
action for damages may be filed in
the:
a. Court of domicile of the carrier;
b. Court of its principal place of
business;
c. Court where it has a place of
business through which the
contract has been made; or
d. Court of the place of destination.
(Art. 28(1))
NOTE: It is the passengers ultimate
destination not an agreed stopping

place that determines the country

where suit is to be filed.
The forum of action provided in Art.
28(1) is a matter of jurisdiction rather
than of venue. (Santos III vs.
Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
Two concepts:
1. Services one person renders to the
owner of a ship or goods, by his own
labor, preserving the goods or the ship
which the owner or those entrusted
with the care of them have either
abandoned in distress at sea, or are
unable to protect or secure.
2. Compensation allowed to persons
by whose voluntary assistance a ship
at sea or her cargo or both have been
saved in whole or in part from
impending sea peril, or such property
recovered from actual peril or loss, as
in cases of shipwreck, derelict or
recapture.
Requisites:
1. Valid object of salvage;
2. Object must have been exposed
to marine peril (not perils of the
ship);
3. Services rendered voluntarily
(neither an existing duty nor
out of a pre-existing contract);
4. Services are successful, total or
partial.
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into
the sea, and there sink and remain
under water;
3. Floatsam or Flotsam goods which
float upon the sea when cast
overboard;
4. Ligan or Lagan goods cast into the
sea tied to a buoy, so that they may
be found again by the owners (p.173,
Judge Diaz).
Persons who have no right to a
reward for salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in
spite of opposition of the Captain or
his representative;

3. In accordance with Sec. 3 of the

Salvage Law, a person who fails to
deliver a salvaged vessel or cargo to
the Collector of Customs.
Derelict a ship or her cargo which
is abandoned and deserted at sea by
those who are in charge of it, without
any hope of recovering it, or without
any intention of returning to it.
The intention of those in charge
must be ascertained. If those in
charge left with the intention of
returning, or of procuring assistance,
the property is not derelict, but if they
quitted the property with the intention
of finally leaving it, it is derelict and a
change of their intention and an
attempt to return will not change its
nature (Erlanger & Galinger vs.
Swedish East Asiatic Co. Ltd.).
If it is clear that the intention to
return is slight, the salvage which was
done thereafter is considered valid.
(Notes and Cases on the Law on
Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed.
p. 616)
CONTRACT OF TOWAGE
A contract whereby one vessel,
usually motorized, pulls another,
whether
loaded
or
not
with
merchandise, from one place to
another, for a compensation. It is a
contract for services rather than a
contract of carriage.
SALVAGE
TOWAGE
Governed by Governed by
special
law Civil Code on
(Act No. 2616) contract
of
lease
Requires
Success is not
success,
required
otherwise no
payment
Must be done
Only
the
with the
consent of the
consent of the tugboat owner

captain/crewm
en

is needed

Vessel must
be involved in
an accident

Vessel
need
not
be
involved in an
accident
Fees belong to
the
tugboat
owner

Fees
distributed
among
crewmen

RULES ON SALVAGE REWARD

1. The reward is fixed by the RTC
judge in the absence of agreement
or where the latter is excessive.
(Sec. 9)
2. The reward should constitute a
sufficient compensation for the
outlay and effort of the salvors and
should be liberal enough to offer
an inducement to others to render
services in similar emergencies in
the future.
3. If sold (no claim being made within
3 months from publication), the
proceeds,
after
deducting
expenses and the salvage claim,
shall go to the owner; if the latter
does not claim it within 3 years,
50% of the said proceeds shall go
to the salvors, who shall divide it
equitably, and the other half to the
government. (Secs. 11-12)
4. If a vessel is the salvor, the reward
shall be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in
proportion to their salaries.
(Sec. 13)
Taking passengers from a sinking
ship, without rendering any service in
rescuing the vessel, is not a salvage
service, being a duty of humanity and
not for reward.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)
PURPOSES:

1. To secure adequate, sustained

service for the public at the
least possible cost;
2. To protect the public against
unreasonable charges and poor,
inefficient service;
3. To
protect
and
secure
investments in public services;
4. To prevent ruinous competition.
AUTHORITY TO OPERATE PUBLIC
SERVICES
GENERAL RULE: No public service
shall operate without having been
issued
a
certificate
of
public
convenience or a certificate of public
convenience and necessity.
EXCEPTIONS:
1. Warehouses;
2. Animal drawn vehicles and
bancas moved by oar or sail;
3. Airships, except for the fixing of
maximum rates for fare and
freight;
4. Radio companies, except for
rates fixing;
5. Public
services
owned
or
operated by the government,
except as to rates fixing;
6. Ice plants; and
7. Public markets.
PUBLIC SERVICE
A person who owns, operates,
manages or controls in the Philippines
for hire or compensation, with general
or
limited
clientele,
whether
permanent, occasional or accidental,
and done for general business
purposes, any common carrier or
public utility, ice plants, power and
water supplies, communication and
similar public services. (Sec. 13b, CA
146)
A casual or incidental service
devoid of public character and interest
is not brought within the category. The
question depends on such factors as
the extent of services, whether such
person or company has held himself
or itself out as ready to serve the
public or a portion of the public
generally. (Luzon Stevedoring vs. PSC)

NOTE: The Public Service Commission

created under the Public Service Law
has already been abolished under P.D.
No. 1 and other issuances. It has been
replaced by the following government
agencies: LTO; LTFRB; ATO; BOE; NTC;
NEA; ERB; NWRC; CAB; and MIA.
CERTIFICATE
OF PUBLIC
CONVENIENC
E (CPC)
An
authorization
issued by the
appropriate
government
agency for the
operation
of
public services
for which no
franchise,
either
municipal
or
legislative, is
required
by
law,
e.g.,
common
carriers.

CERTIFICATE
OF
PUBLIC
CONVENIENC
E
AND
NECESSITY
(CPCN)
An
authorization
issued by the
appropriate
government
agency for the
operation
of
public service
for which a
prior franchise
is required by
law;
e.g.
telephone and
other services.

A CPC or a CPCN constitutes neither

a franchise nor a contract, confers no
property right, and is a mere license
or a privilege. The holder of said
certificate does not acquire a property
right in the route covered thereby. Nor
does it confer upon the holder any
proprietary right or interest or
franchise in the public highways.
Revocation of this certificate deprives
him of no vested right. New and
additional burdens, alteration of the
certificate, or even revocation or
annulment thereof is reserved to the
State. (Luque vs. Villegas, 30 SCRA
408)
It is a property and has a
considerable value and can be the
subject of sale or attachment. (CogeoCubao Operators and Drivers Assn. vs.

CA, 207 SCRA 343, Raymundo vs.

Luneta Motor Co.)
REQUREMENTS FOR GRANTING
CPC OR CPCN
1. Applicant must be a citizen of the
Philippines or a corporation or
entity 60% of the capital of which
is owned by such citizens;
2. Applicant
must
prove
public
necessity;
3. Applicant must prove that the
operation of the public service
proposed and the authorization to
do business will promote the public
interest on a proper and suitable
manner;
4. Applicant must have sufficient
financial capability to undertake
the proposed services and meeting
the responsibilities incident to its
operation.
POWERS
REQUIRING
PRIOR
NOTICE AND
HEARING

POWERS
EXERCISABLE
WITHOUT
PRIOR
NOTICE AND
HEARING

1. Issuance
of
CPC
or
CPCN;
2. Fixing
of
rates,
tolls,
and charges;
3. Setting up
of standards
and
classifications
;
4. Establishm
ent of rules to
secure
accuracy
of
all
meters
and
all
measuring
appliances;
5. Issuance
of
orders
requiring
establishment

1. Investigatio
n any matter
concerning
public service;
2. Requiring
operators
to
furnish
safe,
adequate, and
proper service;
3. Requiring
public services
to
pay
expenses
of
investigation;
4. Valuation of
properties
of
public utilities;
5. Examinatio
n and test of
measuring
appliances;
6. Grant
of
special permits

or
maintenance
of extension
of facilities;
6. Revocation
,
or
modification
of
CPC
or
CPCN;
7. Suspension
of
CPC
or
CPCN, except
when
it
is
necessary to
avoid serious
and
irreparable
damage
or
inconvenienc
e
to
the
public
or
private
interest,
in
which case, a
suspension
not more than
30 days may
be
ordered,
prior to the
hearing.
(Soriano
v.
Medina, 164
SCRA 36)

to make extra
or special trips
in
territories
specified in the
certificate;
7. Uniform
accounting
system
and
furnishing
of
annual reports;
8. Compelling
compliance
with the laws
and
regulations.

UNLAWFUL
ACTS
OF
PUBLIC
UTILITY COMPANIES
1. Engagement in public service
business without first securing the
proper certificate;
2. Providing or maintaining unsafe,
improper or inadequate service as
determined
by
the
proper
authority;
3. Committing
any
act
of
unreasonable
and
unjust
preferential treatment to any
particular person, corporation or
entity as determined by the proper
authority;
4. Refusing or neglecting to carry
public mail upon request. (Secs.
18 and 19)

ACTS
REQUIRING
PRIOR
APPROVAL
1. Establish and maintain individual
or joint rates;
2. Establish and operate new units;
3. Issue free tickets;
4. Issue
any
stock
or
stock
certificates
representing
an
increase of capital;
5. Capitalize any franchise in excess
of the amount actually paid to the
Government;
6. Sell, alienate, mortgage or lease
property, certificates or franchise.
Under Sec. 20(g) of C.A. No. 146,
the sale, etc. may be negotiated and
completed before the approval by the
proper authority. Its approval is not a
condition precedent to the validity of
the
contract.
The
approval
is
necessary only to protect public
interest.
PRIOR OPERATOR/OLD OPERATOR
RULE
The rule allowing an existing
franchised operator to invoke a
preferential right within the authorized
territory as long as he renders
satisfactory and economical service.
The policy is not to issue a certificate
to a second operator to cover the
same field and in competition with a
first operator who is rendering
sufficient, adequate and satisfactory
service. The prior operator must first
be given an opportunity to improve its
service, if inadequate or deficient.
Purpose: To prevent ruinous and
wasteful competition in order that the
interests of the public would be
conserved and preserved.
It subordinates the prior applicant
rule which gives the first applicant
priority
only
if
things
and
circumstances are equal.
Where the operator either fails or
neglects to make the improvement or
effect the increase in services,
especially when given the opportunity,
new operators should be given the

chance to give the services needed by

the public.
PRIOR APPLICANT RULE
Presupposes a situation when two
interested persons apply for a
certificate to operate a public utility in
the same community over which no
person has as yet granted any
certificate. If it turns out, after the
hearing, that
the
circumstances
between the two applicants are more
or less equal, then the applicant who
applied ahead of the other, will be
granted the certificate.

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)

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).
KABIT SYSTEM
A system whereby a person who has
been granted a certificate of public

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)