COMMERCIAL LAW

REVIEWER/TRANSPORTATION LAW

TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ CARRIAGE

 A contract whereby a person, natural or juridical,
obligates to transport persons, goods, or both, from one
place to another, by land, air or water, for a price or
compensation.
 Classifications:
1.Common or Private
2.Goods or Passengers
3.For a fee (for hire) or Gratuitous
4.Land, Water/maritime, or Air
5.Domestic/inter-island/coastwise or
International/foreign
 It is a relationship which is imbued with the public
interest.

COMMON CARRIER
 Persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their services to the public (Art. 1732, Civil Code).

 Art. 1732 of the New Civil Code avoids any distinction

between one whose principal business activity is the
carrying of persons or goods or both and one who does
such carrying only as an ancillary activity (sideline). It also
avoids a distinction between a person or enterprise
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REVIEWER/TRANSPORTATION LAW

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
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REVIEWER/TRANSPORTATION LAW

these goods;
3. No monopoly is favored (Batangas Trans. vs.
Orlanes, 52 PHIL 455);
4.Provides public convenience.

PRIVATE CARRIER
 One which, without being engaged in the business of
carrying as a public employment, undertakes to deliver
goods or passengers for compensation. (Home Insurance
Co. vs. American Steamship Agency, 23 SCRA 24)

 TESTS WHETHER CARRIER IS COMMON OR

PRIVATE:
 The SC in First Philippine Industrial Corporation vs. CA
(1995) reiterated the following tests:
1.It must be engaged in the business of carrying goods
for others as a public employment and must hold itself
out as ready to engage in the transportation of goods
generally as a business and not as a casual
occupation;
2.It must undertake to carry goods of the kind to which
its business in confined;
3.It must undertake to carry by the method by which his
business is conducted and over its established roads;
and
4.The transportation must be for hire.

 In National Steel Corp. vs. CA (1997) the SC held that

the true test of a common carrier is the carriage of goods
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REVIEWER/TRANSPORTATION LAW

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 out for Contracts with particular
all people individuals or groups only
indiscriminately
2. As to required diligence
Extraordinary Ordinary diligence is
diligence is required required
3. As to regulation
Subject to State Not subject to State
regulation regulation
4. Stipulation limiting liability
Parties may not agree Parties may limit the
on limiting the carrier’s liability, provided it
carrier’s liability is not contrary to law,
except when morals or good customs
provided by law
5. Exempting circumstance
Prove extraordinary caso fortuito, Art. 1174 NCC
diligence and Art.
1733, NCC
6.Presumption of negligence
There is a No presumption of fault or
presumption of fault negligence
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REVIEWER/TRANSPORTATION LAW

or negligence
7.Governing law
Law on common Law on obligations and
carriers contracts

GOVERNING LAWS
A. Domestic/inter-island/coastwise
 Applicable to Land, Water, and Air transportation
1. Civil Code - primary
2. Code of Commerce (Arts. 349, 379, 573-734, 580,
806-845) - suppletory

B. International/foreign/overseas (Foreign
country to Philippines)
 Applicable to Water/maritime and Air transportation
 The law of the country of destination generally applies.
1. Civil Code - primary
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of Goods by Sea Act
(COGSA)
b. Air: Warsaw Convention

I. NEW CIVIL CODE

(Arts. 1732-1766)

REQUIREMENT OF EXTRAORDINARY DILIGENCE

 Rendition of service with the greatest skill and utmost
foresight. (Davao Stevedore Co. v. Fernandez)
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REVIEWER/TRANSPORTATION LAW

 Rationale:
1.From the nature of the business and for reasons of
public policy (Art. 1733)
2.Relationship of trust
3.Business is impressed with a special public duty
4.Possession of the goods
5.Preciousness of human life
 A common carrier is not an absolute insurer of all risks
of travel.

COVERAGE
1. Vigilance over goods (Arts. 1734-1754); and
2. Safety of passengers (Arts. 1755-1763).

PASSENGER
 A person who has entered into a contract of carriage,
express or implied, with the carrier. They are entitled to
extraordinary diligence from the common carrier.

 The following are not considered passengers, and are

entitled to ordinary diligence only:
a.One who has not yet boarded any part of a vehicle
regardless of whether or not he has purchased a
ticket;
b.One who remains on a carrier for an unreasonable
length of time after he has been afforded every safe
opportunity to alight;
c. One who has boarded by fraud, stealth, or deceit;
d.One who attempts to board a moving vehicle,
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REVIEWER/TRANSPORTATION LAW

although he has a ticket, unless the attempt be with

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

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)
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REVIEWER/TRANSPORTATION LAW

2.ACTS OF PUBLIC ENEMY

 Requisites:
a.Must be the proximate and only cause of the loss
b.Exercise of due diligence to prevent or minimize the loss
before, during or after the act causing the loss,
deterioration or destruction of the goods (Art. 1739)

3. NEGLIGENCE OF THE SHIPPER OR OWNER

a. Sole and proximate cause: absolute defense
b. Contributory: partial defense. (Art. 1741)

4. CHARACTER OF THE GOODS OR DEFECTS IN THE

PACKING OR IN THE CONTAINER
 Even if the damage should be caused by the inherent
defect/character of the goods, the common carrier must
exercise due diligence to forestall or lessen the loss. (Art.
1742)
 The carrier which, knowing the fact of improper packing
of the goods upon ordinary observation, still accepts the
goods notwithstanding such condition, is not relieved of
liability or loss or injury resulting therefrom. (Southern
Lines, Inc. v. CA, 4 SCRA 258)

5.ORDER OR ACT OF PUBLIC AUTHORITY

 Said public authority must have the power to issue the
order (Art. 1743). Consequently, where the officer acts
without legal process, the common carrier will be held
liable. (Ganzon v. CA 161 SCRA 646)
 Diligence in the selection and supervision of employees
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REVIEWER/TRANSPORTATION LAW

under Article 2180 of the Civil Code cannot be interposed

as a defense by the common carrier because the liability of
the carriers arises from the breach of the contract of
carriage. The defense under said articles is applicable to
negligence in quasi-delicts under Art. 2176. (Del Prado v.
Manila Electric Co., 52 Phil 900)

LIABILITY OF A COMMON CARRIER FOR

DEATH OR INJURIES TO PASSENGERS DUE TO ACTS
OF ITS EMPLOYEES AND OTHER PASSENGERS OR
STRANGERS

FOR ACTS OF OTHER

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

 The carrier is liable when its personnel allowed a

passenger to drive the vehicle causing it to collide with
another vehicle resulting to the injuries suffered by the
other passengers. (MRR vs. Ballesteros, 16 SCRA 641)
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REVIEWER/TRANSPORTATION LAW
 CARRIAGE OF GOODS CARRIAGE OF
PASSENGERS
Parties
1.Common carrier 1.Common carrier
2.Shipper 2.Passenger
3.Consignee
Cause of liability
Delay in delivery, loss, Death or injury to the
destruction, or deterioration passengers
of the goods
Duration of liability

From the time the goods are The duty of a common

unconditionally placed in the
possession of, and received
by the carrier for
transportation until the same
are delivered actually or
constructively by the carrier
to the consignee or to the
person who has the right to
receive them. (Art. 1736)
 It remains in full force
and effect even when they
are temporarily unloaded or
stored in transit unless the
shipper or owner has made
use of the right of stoppage
in transitu. (Art. 1737)
 It continues to be
operative even during the
time the goods are stored in
a warehouse of the carrier at
the place of destination until
carrier to provide safety
to its passengers so
obligates it not only
during the course of the
trip, but for so long as
the passengers are within
its premises and where
they ought to be in
pursuance to the contract
of carriage. (LRTA v.
Navidad, [2003])
 All persons who remain
on the premises within a
reasonable time after
leaving the conveyance
are to be deemed
passengers, and what is a
reasonable time or a
reasonable delay within
this rule is to be
determined from all the
the consignee has bee circumstances, and
advised of the arrival of the
includes a reasonable
goods and has had
time to see after his
reasonable opportunity
baggage and prepare for
thereafter to remove them his departure. (La
or otherwise dispose of Mallorca v. CA, 17 SCRA
them. (Art. 1738) 739 ; Abiotiz Shipping
 Delivery of goods to the Corporation v. CA, 179
custom authorities is not SCRA 95)
delivery to the consignee.  It is the duty of
(Lu Do v. Binamira, 101 Phil
common carriers of
120) 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 Art.1755 Civil Code

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

1.Ordinary circumstance: 1. Exercise of

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

1. Reduction of degree of Stipulation limiting liability

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

 The diligence required in

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

1.That the goods are Dispensing with or

transported at the risk of lessening the
the owner or shipper; extraordinary
2.That carrier will not be liable responsibility of a
for any loss, destruction or common carrier for the
deterioration of the goods; safety of passengers
3.That the carrier need not imposed by law by
observe any diligence in the stipulation, by posting of
custody of the goods; notices, by statements on
4.That the carrier shall tickets or otherwise. (Art.
exercise a degree of 1757)
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 carrier’s liability for
 acts committed by thieves
or robbers who do not act
with grave or irresistible
threat, violence or force is
dispensed with or
diminished;
7.That the carrier is not
responsible for the loss,
destruction or deterioration
of the goods on account of
the defective condition of
the car, vehicle, ship or
other equipment used in the
contract of carriage. (Art.
1745)

RULES ON PASSENGERS’ BAGGAGE

IN THE CUSTODY OF THE IN THE CUSTODY OF

PASSENGERS THE COMMON
(HAND-CARRIED) CARRIER
(CHECKED-IN)
Legal nature of the baggage
Necessary deposit Considered as “goods”
Required diligence by the common carrier
Diligence of a depositary Extraordinary diligence
(ordinary diligence)
Applicable rules
Arts. 1998 and 2000-2003 Arts. 1733-1753

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 CARRIER’S LIABILITY

INVALID AS BEING VALID & ENFORCEABLE
CONTRARY TO PUBLIC
POLICY
1. One exempting the 1. One limiting the liability of
carrier from any and all the carrier to an agreed
liability for loss or damage valuation, unless the shipper
occasioned by its own declares a higher value and
negligence. pays a higher rate of freight
2. An unqualified limitation (H.E. Heacock Company vs.
of liability to an agreed Macondray & Company Inc.)
valuation.

 However, the carrier cannot limit its liability for injury to,
or loss of, goods shipped where such injury or loss was
caused by its own negligence.
(Shewaram vs. PAL, 17 SCRA 606)

SPECIAL RULES ON LIABILITES OF AIRLINE

CARRIERS
1. In case of flight diversion due to bad weather or other
circumstances beyond the pilot’s control, the relation
between the carrier and the passenger continues until the
latter has been landed at the port of destination and has left
the carrier’s premises. The carrier should necessarily
exercise extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers until they
have reached their final destination. (Philippine Airlines vs.
CA, 226 SCRA 423)

2. Even where overbooking of passengers is allowed as a

commercial practice, the airline company would still be guilty
of bad faith and still be liable for damages if it did not
properly inform passenger that it could breach the contract
of carriage even if they were confirmed passengers.
(Zalamea vs. CA, 228 SCRA 23)

3. An open-dated ticket constitutes a complete contract

between the carrier and passenger. Hence, the airline
company is liable if it refused to confirm a passenger’s flight
reservation. (Singson vs. CA, 282 SCRA 149)
4. An airline company which issued a confirmed ticket to a
passenger covering successive trips on different airlines can
be held liable for damages occasioned by “bumping off” by
one of the successive airlines. (Lufthansa German Airlines
vs. CA, 238 SCRA 290)

5. An airline ticket providing that carriage by successive air

carriers is to be regarded as a “single operation” is to make
the issuing carrier liable for the tortuous conduct of the
other carrier. A printed provision in the ticket limiting liability
only to its own conduct is not enough to rebut that liability.
(KLM Royal Dutch Airlines vs. CA, 65 SCRA 237)

II. CODE OF COMMERCE

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
Contract/Bill of
Lading
1. Carrier is bound to
fulfill the contract and is
liable for any delay; no
matter from what cause
it may have arisen.
No stipulation
1. Within a reasonable time.
2. Carrier is bound to forward
them in the 1st shipment of
the same or similar goods
which he may make to the
point of delivery. (ART. 358
Code of Commerce)

Effects of delay
a.Merely suspends and generally does not terminate
the contract of carriage
b.Carrier remains duty bound to exercise extraordinary
diligence
c. Natural disaster shall not free the carrier from
responsibility (Art.1740)
d.If delay is without just cause, the contract limiting
 the common carrier’s 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 shipper’s remedy and does not affect
the liability of the carrier. (PHILAMGEN vs. Sweetlines, Inc.)
Prescriptive Period
 Not provided by Article 366. Thus, in such absence, Civil
Code rules on prescription apply.
 If despite the notice of claim, the carrier refuses to pay,
action must be filed in court.
1. No bill of lading was issued: within 6 years
2. Bill of lading was issued: within 10 years.
ARTICLE 366 COGSA Sec.3 (6)
Applicability
1. Domestic/inter- 1.International/
island/coastwise overseas/foreign (from
transportation foreign country to Phils.)
2. Land, water, Note: subject to the rule on
air Paramount Clause
transportation 2. Water/maritime
3. Carriage of transportation
goods 3. Carriage of goods
Notice of damage
1. 1.Not a condition
Conditio precedent
n 2.3-day period for
preceden claiming latent
t damage
2. 24-hour
period
for
claiming
latent
damage
Prescriptive period
None provided; Civil One year from the date of
Code applies. delivery (delivered but
 damaged goods), or date
when the vessel left port or
from the date of delivery to
the arrastre (non-delivery 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.

MARITIME COMMERCE
(Arts. 573-869)

IMPORTANT CONCEPTS:
1.Merchant vessel
2.Maritime lien and Preference of Credit
3.Doctrine of limited liability
4.Causes of revocation of voyage
5.Participants in maritime commerce
6.Charter party
7.Loans on bottomry and respondentia
8.Accidents in maritime commerce

MARITIME/ADMIRALTY LAW
 It is the system of laws which particularly relates to the
affairs and business of the sea, to ships, their crews and
navigation, and to maritime conveyance of persons and
property. (Notes and Cases on the Law on Transportation
and Public Utilities, Aquino & Hernando, citing Francisco,
p.254)
 Maritime laws apply only to maritime trade and sea
voyages. (Pandect of Commercial Law and Jurisprudence,
Justice Jose Vitug, 1997 ed.)

 Arrastre service is not maritime in character. It refers to a

contract for the unloading of goods from a vessel. (ICTSI vs.
Prudential Guarantee, 320 SCRA 244)

CHARACTERISTICS OF MARITIME TRANSACTION

1. Real - similar to transactions over real property with
respect to effectivity against third persons which is done
through registration. (Rubiso vs. Rivera, 37 Phil. 72). The
evidence of real nature is shown by: 1) the limitation of the
liability of the agents to the actual value of the vessel and
the freight money; and 2) the right to retain the cargo and
embargo and detention of the vessel (Luzon Stevedoring
Corp v. CA, 156 SCRA 169);
2. Hypothecary - the liability of the owner of the value of the
vessel is limited to the vessel itself (Doctrine of Limited
Liability).

 The real and hypothecary nature of maritime law simply

means that the liability of the carrier in connection with
losses related to maritime contracts is confined to the vessel,
which stands as the guaranty for their settlement. (Aboitiz
Shipping Corp. vs. General Accident Fire and Life Assurance
Corp. 217 SCRA 359).

MERCHANT VESSEL
 Vessel engaged in maritime commerce, whether foreign
or otherwise. (Bar Review Materials in Commercial Law,
Jorge Miravite, 2002 ed.)
 Constitutes property which may be acquired and
transferred by any of the means recognized by law. They
shall continue to be considered as personal property. (Arts.
573, 585)
 They are susceptible to maritime liens such as for the
repair, equipping and provisioning of the vessel in the
preparation of a voyage, as well as mortgage liabilities, in
satisfaction of which a vessel may be validly arrested and
sold. (Ship Mortgage Decree of 1978)

MARITIME LIEN
 It constitutes a present right of property in the ship, a jus
in re, to be afterward enforced in admiralty by process in
rem. (PNB vs. CA, 337 SCRA 381)
 If the maritime lien arose prior to the recording of a
preferred mortgage, it shall have priority over the said
mortgage lien. (PNB vs. CA, 337 SCRA 381)

ORDER OF PREFERENCE IN CASE OF SALE OF VESSEL

R.A. 6106 P.D. 1521

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

 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 Workmen’s 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 ¾ of the contents of a
cargo containing liquids (Art. 687); and
3. In case of constructive loss of the vessel (Sec. 138,
Insurance Code).

RIGHT OF ABANDONMENT

SHIPOWNER OR CONSIGNEE
SHIP AGENT
What may be abandoned
Vessel Goods shipped
Instances
1. In case of civil 1. Partial non-delivery, where the goods
liability from are useless without the others (Art.
indemnities to third 363);
persons (Art. 587); 2. Goods are rendered useless for sale
2. Sec. 138, or consumption for the purposes for
Insurance Code; which they are properly destined (Art.
3. In case of leakage 365); and
of at least ¾ of the 3. In case of delay through the fault of
contents of a cargo the carrier (Art. 371).
containing liquids
(Art. 687)

Effects
1. Transfer of 1. Transfer of ownership on the
ownership of the goods from the shipper to the
vessel from the carrier.
shipowner to the 2. Carrier should pay the shipper the
shippers or market value of the goods at the
 insurer. point of destination.
2. In case of (2),
the insurer must
pay the insured
as if there was
actual total loss
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 ship’s captain must be accorded a reasonable measure

of discretionary authority to decide what the safety of the
ship and of its crew and cargo specifically requires on a
stipulated ocean voyage (Inter-Orient Maritime Enterprises
Inc. vs. CA).

 No liability for the following:

1.Damages caused to the vessel or to the cargo by force
majeure;
2.Obligations contracted for the repair, equipment, and
provisioning of the vessel unless he has expressly bound
himself personally or has signed a bill of exchange or
promissory note in his name. (Art. 620)

Solidary Liabilities of the Ship Agent/Shipowner for

Acts Done by the Captain towards Passengers and
Cargoes
1.Damages to vessel and to cargo due to lack of skill and
negligence;
2.Thefts and robberies of the crew;
3.Losses and fines for violation of laws;
4.Damages due to mutinies;
5.Damages due to misuse of power;
6.For deviations;
7.For arrivals under stress;
8.Damages due to non-observance of marine regulations.
(Art. 618)

C. OFFICERS AND CREW

1.Sailing Mate/First Mate
2.Second Mate
3.Engineers
4.Crew
 No liability under the following circumstances:
1.If, before beginning voyage, captain attempts to change it,
or a naval war with the power to which the vessel was
destined occurs;
2.If a disease breaks out and be officially declared an
epidemic in the port of destination;
3.If the vessel should change owner or captain. (Art. 647)

Sailing Mate/First Mate

 Second chief of the vessel who takes the place of the
captain in case of absence, sickness, or death and shall
assume all of his duties, powers and responsibilities. (Art.
627)
 Duties:
1.Provide himself with maps and charts with astronomical
tables necessary for the discharge of his duties;
2.Keep the Binnacle Book;
3.Change the course of the voyage on consultation with
the captain and the officers of the boat, following the
decision of the captain in case of disagreement;
4.Responsible for all the damages caused to the vessel
and the cargo by reason of his negligence. (Arts. 628 -
631)

Second Mate
 Takes command of the vessel in case of the inability or
disqualification of the captain and the sailing mate, assuming
in such case their powers and responsibilities.
 Third in command
 Duties:
1.Preserve the hull and rigging of the vessel;
2.Arrange well the cargo;
3.Discipline the crew;
4.Assign work to crew members;
5.Inventory the rigging and equipment of the vessel, if laid
up. (Art. 632)

Engineers
 Officers of the vessel but have no authority except in
matters referring to the motor apparatus. When two or more
are hired, one of them shall be the chief engineer.
 Duties:
1.In charge of the motor apparatus, spare parts, and other
instruments pertaining to the engines;
2.Keep the engines and boilers in good condition;
3.Not to change or repair the engine without authority of
the captain;
4.Inform the captain of any damage to the motor
apparatus;
5.Keep an Engine Book;
6.Supervise all personnel maintaining the engine. (Art.
632)

Crew
 The aggregate of seamen who man a ship, or the ship’s
company.
 Hired by the ship agent, where he is present and in his
absence, the captain hires them, preferring Filipinos, and in
their absence, he may take in foreigners, but not exceeding
1/5 of the crew. (Art. 634)

Classes of Seaman’s Contracts

1.By the voyage;
2.By the month; and
3. By share of profits or freightage.

Just Causes for the Discharge of Seaman While

Contract Subsists
1.Perpetration of a crime;
2.Repeated insubordination, want of discipline;
3.Repeated incapacity and negligence;
4.Habitual drunkenness;
5.Physical incapacity;
6.Desertion. (Art. 637)

Rules in case of Death of a Seaman

 The seaman’s heirs are entitled to payment as follows:
1.If death is natural:
a.compensation up to time of death if engaged on wage
b.if by voyage - half of amount if death occurs on voyage
out; and full, if on voyage in
c. if by shares - none, if before departure; full, if after
departure
2.if death is due to defense of vessel - full payment;
3.if captured in defense of vessel - full payment;
4.if captured due to carelessness - wages up to the date of
the capture. (Art. 645)

Complement of the Vessel

 All persons on board, from the captain to the cabin boy,
necessary for the management, maneuvers, and service,
thus including the crew, the sailing mates, engineers,
stokers and other employees on board not having specific
designations.
 Does not include the passengers or the persons whom
the vessel is transporting.

D. SUPERCARGOES
 Persons who discharges administrative duties assigned to
him by ship agent or shippers, keeping an account and
record of transaction as required in the accounting book of
the captain. (Art. 649)

E. PILOT
 A person duly qualified, and licensed, to conduct a vessel
into or out of ports, or in certain waters.

 The term generally connotes a person taken on board at

a particular place for the purpose of conducting a ship
through a river, road or channel, or from a port.

 Master pro hac vice for the time being in the command
and navigation of the ship.

 While in exercising his functions a pilot is in sole

command of the ship and supersedes the master for the
time being in the command and navigation of the ship, the
master does not surrender his vessel to the pilot and the
pilot is not the master. There are occasions when the
master may and should interfere and even displace the pilot,
as when the pilot is obviously incompetent or intoxicated
(Far Eastern Shipping Company vs. CA).

 Compulsory Pilotage – States possessing harbors have

enacted laws or promulgated rules requiring vessels
approaching their ports to take on board pilots licensed
under the local laws. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. & Hernando,
R.P. 2004 ed. p. 518)

Liablity of Pilot
GENERAL RULE: On compulsory pilotage grounds, the
Harbor Pilot is responsible for damage to a vessel or to life
or property due to his negligence.
EXCEPT:
1. Accident caused by force majeure or natural calamity
provided the pilot exercised prudence and extra diligence to
prevent or minimize damages.
2. Countermand or overrule by the master of the vessel in
which case the registered owner of the vessel is liable.
(Sec.11, Art.III PPA Admin Order 03-85)

SPECIAL CONTRACTS OF MARITIME COMMERCE

 1.Charter party
2.Bill of lading
3.Contract of transportation of passengers on sea voyages
4.Loan on bottomry
5.Loan on respondentia
6.Marine insurance

CHARTER PARTY
 A contract by virtue of which the owner or agent binds
himself to transport merchandise or persons for a fixed
price.
 A contract by which an entire ship, or some principal part
thereof is let/leased by the owner to another person for a
specified time 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 vessel’s
navigation, including the master and the crew, who thereby
become the charter’s 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 CHARTE
R
PARTY
If for a Charterer
definite may
period, rescind
lessee charter
cannot party by
give up paying
the lease half of
by paying the
a portion freightag
of the e agreed
amount upon.
agreed
upon.
If the The new
leased owner is
property not
is sold tocompelle
one who d to
knows of respect
the the
existence charter
of theparty so
lease, thelong as
new he can
owner load the
must vessel
respect with his
the lease.own
cargo.
(Art. 689)
Civil law Commerc
concept ial law
concept

CHARTE BILL OF
R PARTY LADING
An entire More like
or a private
complete receipt
contract. which the
captain
gives to
accredit
goods
received
from
persons
Consensu Real
al contract
contract

BAREBO CONTRA
AT OR CT OF
DEMISE AFFREI
CHARTE GHTME
R NT
(TIME
OR
VOYAGE
CHARTE
R)
Charterer Owner
becomes remains
liable to liable as
others carrier
caused and must
by its answer
negligenc for any
e breach of
duty
Charterer Charterer
regarded is not
as owner regarded
pro hac as owner.
vice for
the
voyage
Owner of The
vessel vessel
relinquish owner
es retains
possessio possessio
n, n,
command command
and and
navigatio navigatio
n to n of the
charterer ship
Common Common
carrier is carrier is
converted not
to private converted
carrier. 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 3 rd 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 latter’s 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
clause paramo
unt or
paramo
unt
clause
A A clause
stipulatio in a
n in a charter
charter party
party that providing
in case of that the
a COGSA
maritime shall
accident apply,
for which even
the though
shipowne the
r is not transport
responsib ation is
le by law, domestic,
contract subject to
or the
otherwise extent
, the that any
cargo term of
shippers, the bill of
consigne lading is
es or repugnan
owners t to the
 shall COGSA or
contribut applicabl
e with e law,
the then to
shipowne the
r in extent
general thereof
average. the
(Pandect provision
of of the bill
Commerc of lading
ial Law is void.
and (Pandect
Jurisprud of
ence, Commerc
Justice ial Law
Jose and
Vitug, Jurisprud
1997 ed.) ence,
Justice
Jose
Vitug,
1997 ed.)

Rights and Obligations of Parties

SHIPOW CHARTE
NER OR RER
SHIP
AGENT
1.If 1.To pay
the the
ves agreed
sel charter
is price;
 cha2.To pay
rter freightag
ed e on
wh unboarde
olly d cargo;
, 3.To pay
not losses to
to others
acc for
ept loading
car uncontra
go cted
fro cargo
m and illicit
oth cargo;
ers 4.To wait if
; the
2.To vessel
obs needs
erv repair;
e 5.To pay
rep expenses
res for
ent deviation
ed . (Arts.
cap 679-687)
acit
y;
3.To
unl
oad
car
go
cla
nde
 stin
ely
pla
ced
4.To
sub
stit
ute
ano
the
r
ves
sel
if
loa
d is
less
tha
n
3/5
of
cap
acit
y;
5.To
lea
ve
the
por
t if
the
cha
rter
er
doe
 s
not
bri
ng
the
car
go
wit
hin
the
lay
day
s
and
ext
ra
lay
day
s
allo
we
d;
6.To
pla
ce
in a
ves
sel
in a
con
diti
on
to
nav
igat
 e;
7.to
bri
ng
car
go
to
nea
res
t
neu
tral
por
t in
cas
e
of
war
or
blo
cka
de.
(Ar
ts.
669
-
678
)

Rescission of a Charter Party

At At Fortu
chart shipo itous
erer’ wner caus
s ’s es
requ requ (Art.
est est 690)
(Art (Art.
688) 689)

1. By 1. If 1.
aband the War
oning extra or
the lay interd
chart days iction
er termi of
and nate comm
payin witho erce;
g half ut the 2.
of the cargo Block
freigh being ade;
tage; place 3.
2. d Prohi
Error along bition
in side to
tonna the receiv
ge or vessel e
flag; ; cargo
3. 2. ;
Failur Sale 4.
e to by Emba
place the rgo;
the owne and
vessel r of 5.
at the the Inabili
chart vessel ty of
erer’s befor the
dispo e vessel
sal; loadin to
4. g by navig
 Retur the ate.
n of chart
the erer;
vessel
due
to
pirate
s,
enemi
es or
bad
weath
er;
5.
Arriva
l at a
port
for
repair
s.

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 ship’s 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 LOAN
ON ON
BOTTO RESPO
MRY NDENTI
 A
Definition
Loan Loan
made by taken on
shipown security
er or of the
ship cargo
agent laden on
guarante a vessel,
ed by and
vessel repayabl
itself and e upon
repayabl safe
e upon arrival of
arrival of cargo at
vessel at destinati
destinati on. (Art.
on. (Art. 719)
719)
Who may contract
Shipown Only the
er or owner of
ship the
agent. cargo.
Outside
of the
residenc
e 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)

BOTTO ORDIN
MRY/ ARY
RESPO LOAN
NDENTI (MUTU
A UM)
Not Subject
subject to Usury
to Usury Law
Law
Liability Not
of the subject
borrower to any
is continge
continge ncy
nt on the (absolute
safe liability)
arrival of
the
vessel or
cargo at
destinati
on
The last The first
lender is lender is
a a
preferred 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 LOAN
INSURAN ON
CE BOTTO
MRY
OR
RESPO
NDENT
IA
Indemnity Indemn
is paid ity is
after the paid in
loss has advanc
occurred e by
way of
a loan
In case of In case
loss of the of loss
vessel due of the
to a risk vessel
insured due to
against, a
the marine
obligation peril,
of the
the
insurer obligati
becomes on of
absolute the
borrow
er to
pay is
extingui
shed
Consensua Real
l contract contrac
t

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 MARITIME COMMERCE

1.Averages
2.Arrival Under Stress
3.Collision
4.Shipwreck

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)

PARTIC GROSS
ULAR OR
OR GENER
SIMPLE AL
Definition
Damages Damages
or or
expenses expenses
caused to deliberat
the vessel ely
or cargo caused
that did in order
not inure to save
to the the
common vessel,
benefit, its cargo
and or both
borne by from real
respectiv and
e owners. known
(Art. 809) risk.
(Art.
811)
 Requisites
1.commo
n
danger
;
2.deliber
ate
sacrific
e;
3.succes
s;
4.proper
formali
ties
and
legal
steps.
Liability
The All the
owner of persons
the goods having
which an
gave rise interest
to the in the
expense vessel
or and the
suffered cargo
the therein
damage at the
shall bear time of
this the
average. occurren
(Art. 810) ce of the
average
shall
 contribut
e to
satisfy
this
average.
(Art.
812)
 The
insurers
(Art.859)
and
lenders
on
bottomry
and
responde
ntia shall
likewise
contribut
e.
(Art.732)
.
Number of
interests involved
Only one Several
interest interests
involved involved
Share in the
damage or
expense
100% In
share proportio
n to the
value of
the
 owner’s
property
saved
Right to recover
No There
reimburse may be
ment reimburs
ement
Kinds (not
exclusive)
Art. 809 Art. 811
Procedure for
recovery
1.Assem
bly and
deliber
ation
2.Resolu
tion of
the
captain
3.Entry
of the
resoluti
on in
the
logboo
k
4.Detaile
d
minute
s
5.Deliver
y of
the
 minute
s to
the
mariti
me
judicial
authori
ty of
the
first
port,
within
24
hours
from
arrival,
6.Ratifica
tion 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.
DOMEST INTERN
IC ATIONA
L
Deck Deck
cargo is cargo is
allowed not
allowed
With shipper’s
consent
General Particular
average average
Without shipper’s
consent
Captain is Captain
liable 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.

Whe Whe Who

n n bear
lawf unla s
ul wful expe
nses:

The 1.Lac The

inabili k of shipo
ty to pro wner
conti visi or
nue ons ship
voyag due agent
e is to is
due negl liable
to igen in
lack ce case
of to of
provis carr unlaw
ions, y ful
well- acc arriva
found ordi l
ed ng under
fear to stress
of usa . But
seizur ge they
e, and shall
privat cust not
eers, oms be
pirate ; liable
s, or 2.Risk for
accid of the
ents ene dama
of the my ges
sea not cause
disabl well d by
ing it kno reaso
to wn n of a
navig or lawful
ate. man arriva
(Art. ifest l.
819) 3.Def (Art.
ect 821)
of
vess
el
due
to
imp
rop
 er
rep
air;
and
4.Mali
ce,
negl
igen
ce,
lack
of
fore
sigh
t or
skill
of
capt
ain.
(Art
.
820
)

 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 look-outs” or persons trained
as such and who have no other duty aside therefrom.
(Smith Bell v. CA)

Nautical Rules as to Sailing Vessel and Steamship

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

Zones of Time in the Collision of Vessels

1. First zone – all time up to the moment when risk of
collision begins.
 No rule is as yet applicable for none is necessary.
2. Second zone – time between moment when risk of
collision begins and moment it becomes a practical
certainty.
 It is in this period where conduct of the vessels is
primordial. It is in this zone that vessels must strictly
observe nautical rules, unless a departure therefrom
becomes necessary to avoid imminent danger.
3. Third zone – time when collision is certain and time of
impact.
 An error in this zone would no longer be legally
consequential.
 Error in Extremis - sudden movement made by a faultless
vessel during the third zone of collision with another vessel
which is at fault during the 2nd zone. Even if such sudden
movement is wrong, no responsibility will fall on said
faultless vessel. (Urrutia and Co. v. Baco River Plantation
Co., 26 PHIL 632)

Cases Covered By Collision and Allision

1. One vessel at fault
 Vessel at fault is liable for damage caused to innocent
vessel as well as damages suffered by the owners of cargo
of both vessels. (Art. 826)
2. Both vessels at fault
 Each vessel must bear its own loss, but the shippers of
both vessels may go against the shipowners who will be
solidarily liable. (Art. 827)
3. Vessel at fault not known
 Each vessel must bear its own loss, but the shippers of
both vessels may go against the shipowners who will be
solidarily liable. (Art. 828)
 Doctrine of Inscrutable Fault – In case of collision
where it cannot be determined which between the two
vessels was at fault, both vessels bear their respective
damage, but both should be solidarily liable for damage to
the cargo of both vessels.
4. Third vessel at fault
 The third vessel will be liable for losses and damages.
(Art. 831)
5. Fortuitous event/force majeure
 No liability. Each bears its own loss. (Art. 830)

 The doctrine of res ipsa loquitur applies in case a moving

vessel strikes a stationary object, such as a bridge post,
dock, or navigational aid. (Far Eastern Shipping v. CA, Luzon
Stevedoring vs. CA)
 Even if the cause of action against the common carrier is
based on quasi-delict, the defense of due diligence in the
selection and supervision of employees is unavailing in case
of a maritime tort resulting in collision. It is not a civil tort
governed by the Civil Code but a maritime one governed by
Arts. 826-839 of the Code of Commerce. (Manila Steamship
vs. Insa Abdulhaman)

 Doctrine of Last Clear Chance and Rule on Contributory

Negligence cannot be applied in collision cases because of
Art.827 of the Code of Commerce. (Notes and Cases on the
Law on Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed.)

MARITIME PROTEST
 Condition precedent or prerequisite to recovery of
damages arising from collisions and other maritime
accidents.
 It is a written statement made under oath by the captain
of a vessel after the occurrence of an accident or disaster in
which the vessel or cargo is lost or damaged, with respect to
the circumstances attending such occurrence, for the
purpose of recovering losses and damages.
 Excuses for not filing protest: 1) where the interested
person is not on board the vessel; and 2) on collision time,
need not be protested. (Art. 836)
 Cases applicable:
1.Collision (Art. 835);
2.Arrival under stress (Art. 612(8));
3.Shipwrecks (Arts. 612(15), 843);
4.Where the vessel has gone through a hurricane or when
the captain believes that the cargo has suffered
damages or averages (Art. 624).
 Who makes: Captain
 When made: within 24 hours from the time the collision
took place.
 Before whom made: competent authority at the point of
collision or at the first port of arrival, if in the Philippines and
to the Philippine consul, if the collision took place abroad.
(Art. 835)

SHIPWRECK
 It is the loss of the vessel at sea as a consequence of its
grounding, or running against an object in sea or on the
coast. It occurs when the vessel sustains injuries due to a
marine peril rendering her incapable of navigation.
 If the wreck was due to malice, negligence or lack of skill
of the captain, the owner of the vessel may demand
indemnity from said captain. (Art. 841)
 The rules on collision or allision, as may be pertinent, can
equally apply to shipwrecks.

SPECIAL CONCEPTS
ARRASTRE SERVICE
 A contract for the unloading of goods from a vessel.
 Applicability: Overseas trade only. (Commercial Law
Review, C. Villanueva, 2004 ed.)
 Significance: When a person brings in cargo from
abroad, he cannot unload and deliver the cargo by himself.
The unloading must be done by the arrastre operator, which
will then deliver the cargo to the importer. (Commercial
Law Review, C. Villanueva, 2004 ed.)
 Nature of business: It is a public utility, discharging
functions which are heavily invested with public interest.
 Liability:
1.Similar to a warehouseman (Lua Kian v. Manila Railroad)
2.Similar to a common carrier (Northern Motors v. Prince
Line)
3.Solidary liability with the common carrier
Note: In order that the arrastre operator may be held liable,
the consignee must prove that the damage was due to the
negligence and while the goods are in the custody of the
arrastre operator. (Hartford Fire Insurance v. E. Razon, Inc.)

STEVEDORING SERVICE
 The carriage of goods from the warehouse or pier to the
holds of the vessel. (Chief of Staff vs. CIR)
 As understood in the port business, the term consists of
the handling of cargo from the hold of the ship to the dock,
in case of pier-side unloading; or to a barge, in case of
unloading at sea. (Anglo-Fil Trading Corp. vs. Lazaro)
 The loading on the ship of outgoing cargo is also part of
stevedoring work. (Ibid.)

CONTAINERIZATION/ “SAID-TO-CONTAIN”/
“SHIPPER’S LOAD AND COUNT” SYSTEM
 System whereby the shipper loads his cargoes in a
specially designed container, seals the container and delivers
it to the carrier for transportation. The carrier does not
participate in the counting of the merchandise for loading
into the container, the actual loading, and the sealing of the
container. (US Lines v. Comm. Of Customs, ICTSI v.
Prudential Guarantee)
 The matter of quantity, description and conditions of the
cargo inside the container is the sole responsibility of the
shipper, unless there is stipulation to the contrary. (US Lines
vs. Comm. Of Customs, Reyma Brokerage v. Phil. Home
Assurance)

Note: In order to attribute to the carrier any damage to the

shipment that may be found, inspection of the goods should
be done at pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA (C.A.
No. 65)
APPLICABILITY
 The transportation must be:
1.Water/maritime transportation;
2.for the carriage of goods; and
3.overseas/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 carrier’s liability
2.Notice of damage
3.Prescriptive period

AMOUNT OF CARRIER’S LIABILITY

 Under the Sec. 4(5), the liability limit is set at $500 per
package or customary freight unit unless the nature and
value of such goods is declared by the shipper. This is
deemed incorporated in the bill of lading even if not
mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA 463)
 Note that Art. 1749, NCC applies to domestic/inter-
island/coastwise trade.

NOTICE OF DAMAGE (SEC. 3(6))

 Rules:
a.Patent damage: shipper should file a claim with the carrier
immediately upon delivery
b.Latent damage: shipper should file a claim with the carrier
within three days from delivery.

Note: The filing of a notice of claim is not a condition

precedent.
PRESCRIPTIVE PERIOD
 Action for loss or damage to the cargo should be brought
within one year after:
a.Delivery of the goods (delivered but damaged goods); or
b.The date when the goods should have been delivered
(non-delivery). (Sec. 3[6])

 “Loss or Damage” as applied to the COGSA contemplates

a situation where no delivery at all was made by the shipper
of the goods because the same had perished, gone out of
commerce, or disappeared in such a way that their existence
is unknown or they cannot be recovered. Thus, it is
inapplicable in case of misdelivery or conversion. (Ang vs.
American Steamship Agencies Inc.) and damage arising from
delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). In
such instance the, Civil Code rules on prescription shall
apply.

 The one-year prescriptive period is suspended by:

1.The express agreement of the parties (Universal
Shipping Lines, Inc. vs. IAC, 188 SCRA 170)
2.The filing of an action in court until it is dismissed.
(Stevens & Co. vs. Nordeutscher Lloyd, 6 SCRA 180)

 The one-year period shall run from delivery of the last

package and is not suspended by extrajudicial demand.
(Dole Phils.,Inc. vs. Maritime Co.,148 SCRA 118)

 The one-year period shall run from delivery to the

arrastre operator and not to the consignee. (Union Carbide
Phils, Inc. vs. Manila Railroad Co.,SCRA 359)

 The insurer exercising its right of subrogation is bound by

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

IV. WARSAW CONVENTION OF 1929 (WC)

PURPOSE: To protect the emerging air transportation

industry and to secure the uniformity of recovery by the
passengers.
APPLICABILITY
 The transportation must be:
1.International transportation;
2.Air transportation; and
3.Carriage of passengers, baggage or goods.
 The WC shall also apply to fortuitous transportation by
aircraft performed by an air transportation enterprise.

 International transportation - any transportation in which

the place of departure and the place of destination are
situated either:
1. Within the territories of two High Contracting Parties
regardless of whether or not there be a break in the
transportation or transshipment, or
2. Within the territory of a single High Contracting Party, if
there is an agreed stopping place within a territory subject
to the sovereignty, mandate or authority of another
power, even though that power is not a party to the
Convention. (“round trip”, Am. Jur.)

 Transportation to be performed by several successive air

carriers shall be deemed to be one undivided transportation,
if it has been regarded by the parties as a single operation,
whether it has been agreed upon under the form of a single
contract or of a series of contracts, and it shall not lose its
international character merely because one contract or a
series of contracts is to be performed entirely within a
territory subject to the sovereignty, suzerainty, mandate, or
authority of the same High Contracting Party. (Art. 1 Sec.3)

WHEN INAPPLICABLE
1.When public policy is contradicted;
2.If the requirements under the Convention are not
complied with.

IMPORTANT CONCEPTS:
1. Transportation documents
a.Passenger ticket
b.Baggage check
c. Air way bill
2. Liability of the carrier for damages
a.Death or injury to passengers
b.Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement

PASS BAG AIR

ENG GAG WAY
ER E BILL
TICK CHEC
ET K
Passe Check Good
nger ed-in s to
bagga be
ge shipp
ed
LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the accident causing it
took place on board the aircraft or in the course of its
operations of embarking or disembarking; (Art. 17)
2. Destruction, loss or damage to any baggage or goods, if it
took place during the “transportation by air”; (Art. 18) and
 Transportation by air – The period during which the
baggage or goods are in the charge of the carrier, whether
in an airport or on board an aircraft, or, in case of a landing
outside an airport, in any place whatsoever.
It includes any transportation by land or water outside an
airport if such takes place in the performance of a contract
for transportation by air, for the purpose of loading, delivery,
or transshipment.
3. Delay in the transportation of passengers, baggage or
goods. (Art. 19)

Note: The Hague Protocol amended the WC by removing

the provision that if the airline took all necessary steps to
avoid the damage, it could exculpate itself completely (Art.
20(1)). (Alitalia vs. IAC, 192 SCRA 9)

LIMIT OF LIABILITY (Art. 22, as amended by

Guatemala Protocol, 1971; Alitalia vs. IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit

2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of value and
payment of a supplementary sum by consignor, carrier is
liable to not more than the declared sum unless it proves the
sum is greater than actual value.
3. Hand-carried baggage
 $1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of value and
payment of a supplementary sum by consignor, carrier is
liable to not more than the declared sum unless it proves the
sum is greater than actual value.

 An agreement relieving the carrier from liability or fixing a

lower limit is null and void. (Art. 23)
 Carrier is not entitled to the foregoing limit if the damage
is caused by willful misconduct or default on its part. (Art.
25)

 Thus, the WC does not operate as an exclusive

enumeration of the instances of an absolute limit of the
extent of liability. It does not preclude the application of the
Civil Code and other pertinent local laws. It does not
regulate or exclude liability for other breaches of contract by
the carrier, or misconduct of its employees, or for some
particular or exceptional type of damage. (Alitalia vs. CA)

 In PanAm v. IAC, the WC was applied as regards the

limitation on the carrier’s liability, there being a simple loss
of baggage without any improper conduct on the part of the
officials or employees of the airline or other special injury
sustained by the passenger.

 In KLM Royal v. Tuller, the WC has invariably been held

inapplicable, or as not restrictive of the carrier’s liability,
where there was satisfactory evidence of malice or bad faith
attributable to its officers and employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES
1. Notice of claim
 A written complaint must me made within:
a.3 days from receipt of baggage
b.7 days from receipt of goods
c. In case of delay, 14 days from receipt of baggage/goods
 The complaint is a condition precedent. Without the
complaint, the action is barred except in case of fraud on the
part of the carrier. (Art. 26)

2. Prescriptive period
 Action must be filed within 2 years from:
a.date of arrival at the destination
b.date of expected arrival
c. date on which the transportation stopped. (Art. 29)

 In United Airlines vs. Uy the two-year prescriptive period

was not applied where the airline employed delaying tactics.

RULE IN CASE OF VARIOUS SUCCESSIVE CARRIERS

1.Carriage of passengers
GENERAL RULE: Action is filed only against the carrier in
which the accident or delay occurred.
EXCEPTION: Agreement or contract whereby the first
carrier assumed liability for the whole journey.
2.Carriage of baggage or goods
a.Passenger or consignor can file an action against the
first carrier and the carrier in which the damage
occurred
b.Passenger or consignee can file an action against the
last carrier and the carrier in which the damage
occurred.
  These carriers are jointly and severally liable. (Art. 30)

 A contract of international carriage by air, although

performed by different carriers under a series of airline
tickets constitutes a single operation. Members of the
International Air Transportation Association (IATA) are under
a general pool partnership agreement wherein they act as
agent of each other in the issuance of tickets to contracted
passengers to boost ticket sales worldwide and at the same
time provide passengers easy access to airlines which are
otherwise inaccessible in some parts of the world. (American
Airlines vs. CA)

 Under a general pool partnership agreement, the ticket-

issuing airline is the principal in a contract of carriage while
the endorsee-airline is the agent. The obligation of the
former remained and did not cease even when the breach
occurred not on its own flight but on that of another airline
which had undertaken to carry the passengers to one of
their destinations. (China Airlines vs. Chiok)

JURISDICTION
 At the option of the plaintiff, the action for damages may
be filed in the:
a.Court of domicile of the carrier;
b.Court of its principal place of business;
c. Court where it has a place of business through which the
contract has been made; or
d.Court of the place of destination. (Art. 28(1))
NOTE: It is the passenger’s “ultimate destination” not “an
agreed stopping place” that determines the country where
suit is to be filed.
 The forum of action provided in Art. 28(1) is a matter of
jurisdiction rather than of venue. (Santos III vs. Northwest;
2A C.J.S.)
 V. SALVAGE LAW (Act No. 2616)

SALVAGE
 Two concepts:
1.Services one person renders to the owner of a ship or
goods, by his own labor, preserving the goods or the ship
which the owner or those entrusted with the care of them
have either abandoned in distress at sea, or are unable to
protect or secure.
2.Compensation allowed to persons by whose voluntary
assistance a ship at sea or her cargo or both have been
saved in whole or in part from impending sea peril, or such
property recovered from actual peril or loss, as in cases of
shipwreck, derelict or recapture.
 Requisites:
1.Valid object of salvage;
2.Object must have been exposed to marine peril (not
perils of the ship);
3.Services rendered voluntarily (neither an existing duty
nor out of a pre-existing contract);
4.Services are successful, total or partial.
 Subjects of Salvage:
1. Ship itself;
2. Jetsam – goods which are cast into the sea, and there
sink and remain under water;
3. Floatsam or Flotsam – goods which float upon the sea
when cast overboard;
4. Ligan or Lagan – goods cast into the sea tied to a buoy,
so that they may be found again by the owners (p.173,
Judge Diaz).
 Persons who have no right to a reward for salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite of opposition of
the Captain or his representative;
 3. In accordance with Sec. 3 of the Salvage Law, a person
who fails to deliver a salvaged vessel or cargo to the
Collector of Customs.

 Derelict – a ship or her cargo which is abandoned and

deserted at sea by those who are in charge of it, without
any hope of recovering it, or without any intention of
returning to it.

 The intention of those in charge must be ascertained. If

those in charge left with the intention of returning, or of
procuring assistance, the property is not derelict, but if they
quitted the property with the intention of finally leaving it, it
is derelict and a change of their intention and an attempt to
return will not change its nature (Erlanger & Galinger vs.
Swedish East Asiatic Co. Ltd.).

 If it is clear that the intention to return is slight, the

salvage which was done thereafter is considered valid.
(Notes and Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 616)

CONTRACT OF TOWAGE
 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.

SALVAG TOWAG
E E
Governe Governe
d by d by Civil
special Code on
law (Act contract
 No. of lease
2616)
Requires Success
success, is not
otherwis required
e no
payment
Must be Only the
done consent
with the of the
consent tugboat
of the owner is
captain/c needed
rewmen
Vessel Vessel
must be need not
involved be
in an involved
accident in an
accident
Fees Fees
distribut belong
ed to the
among tugboat
crewmen owner

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.

CERTIF CERTIF
ICATE ICATE
OF OF
PUBLIC PUBLIC
CONVE CONVE
NIENCE NIENCE
 (CPC) AND
NECESS
ITY
(CPCN)
An An
authoriza authoriza
tion tion
issued issued
by the by the
appropri appropri
ate ate
governm governm
ent ent
agency agency
for the for the
operatio operatio
n of n of
public public
services service
for which for which
no a prior
franchise franchise
, either is
municipa required
l or by law;
legislativ e.g.
e, is telephon
required e and
by law, other
e.g., services.
common
carriers.

 A CPC or a CPCN constitutes neither a franchise nor a

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

 It is a “property” and has a considerable value and can be

the subject of sale or attachment. (Cogeo-Cubao Operators
and Drivers Assn. vs. CA, 207 SCRA 343, Raymundo vs.
Luneta Motor Co.)

REQUREMENTS FOR GRANTING CPC OR CPCN

1.Applicant must be a citizen of the Philippines or a
corporation or entity 60% of the capital of which is owned
by such citizens;
2.Applicant must prove public necessity;
3.Applicant must prove that the operation of the public
service proposed and the authorization to do business will
promote the public interest on a proper and suitable
manner;
4.Applicant must have sufficient financial capability to
undertake the proposed services and meeting the
responsibilities incident to its operation.
POWER POWER
S S
REQUI EXERCI
RING SABLE
PRIOR WITHO
NOTICE UT
AND PRIOR
HEARI NOTICE
NG AND
HEARIN
G

1.Issuan 1.Investi
ce of gation
CPC or any
CPCN; matter
2.Fixing concer
of ning
rates, public
tolls, service
and ;
charge 2.Requiri
s; ng
3.Settin operat
g up ors to
of furnish
standa safe,
rds adequa
and te, and
classifi proper
cation service
s; ;
4.Establi 3.Requiri
shmen ng
 t of public
rules service
to s to
secure pay
accura expens
cy of es of
all investi
meter gation;
s and 4.Valuati
all on of
measu propert
ring ies of
applia public
nces; utilities
5.Issuan ;
ce of 5.Examin
orders ation
requiri and
ng test of
establi measu
shmen ring
t or applian
mainte ces;
nance 6.Grant
of of
extens special
ion of permit
faciliti s to
es; make
6.Revoc extra
ation, or
or special
modifi trips in
cation territor
of CPC ies
 or specifi
CPCN; ed in
7. the
Suspensi certific
on of ate;
CPC or 7.Unifor
CPCN, m
except accoun
when it ting
is system
necessar and
y to furnish
avoid ing of
serious annual
and reports
irrepara ;
ble 8.Compe
damage lling
or compli
inconve ance
nience with
to the the
public or laws
private and
interest, regulat
in which ions.
case, a
suspensi
on not
more
than 30
days
may be
ordered,
prior to
the
hearing.
(Soriano
v.
Medina,
164
SCRA
36)

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.
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 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)

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)