LAW ON TRANSPORTATION AND PUBLIC UTILITIES
CHAPTER 1 Bill of lading – juridically a documentary proof of the stipulations and conditions
GENERAL CONSIDERATIONS
Contract of Transportation – person obligates himself to transport persons or
property from one place to another for a consideration.
2 KINDS:
1. CARRIAGE OF PASSENGERS
Parties: common carrier & passenger (carried gratuitously/reduced fare or not)
Passenger – one who travels in a public conveyance by virtue of contract,
express or implied, with the carrier as to the payment of fare or that which is
accepted as an equivalent thereof
Perfection:
2 types of contracts of carriage of PASSENGERS:
> Contract to carry (agreement to carry the passenger at some future date) –
consensual contract and perfected by mere consent
* AIRCRAFT – perfected even without issuance of ticket as long as there was
already meeting of minds with respect to the subject matter and consideration
> Contract of Carriage
– real contract; not until the facilities of the carrier are actually used can the
carrier be said to have assumed the obligation of the carrier; perfected by
actual use.
2. CARRIAGE OF GOODS
Parties: shipper & carrier
Shipper – the person who delivers the goods to the carrier for transportation;
pays the consideration or on whose behalf payment is made
Consignee – person to whom the goods are to be delivered. He may be the
shipper himself or a third person who is not actually a party to the contract
When Consignee is bound by Contract
> there are instances when the third-party consignee is bound by the
agreement between the shipper and the carrier even if the consignee is not the
contracting party where it was established that he accepted the bill of lading
and is trying to enforce the agreement:
Consignee becomes a party to the contract by reason of either:
1. The relationship of agency between the consignee and the
shipper/consignor
2. The unequivocal acceptance of the bill of lading delivered to
the consignee, with full knowledge of its contents
3. Availment of the stipulation pour autrui, i.e., when the
consignee, a third person, demands before the carrier the
fulfillment of the stipulation made by the consignor/shipper in
the consignee’s favor, specifically the delivery of the
goods/cargoes shipped
Perfection:
> contract to carry goods – consensual; mere consent
> contract of carriage - act of delivery of goods (goods are unconditionally
placed in the possession and control of the carrier and upon their receipt by the
carrier for transportation)
Carriage of Passengers (contract to carry)
> Even if no tickets were issued, a verbal contract to carry is already a binding
consensual contract. (British Airways, Inc. v. CA)
> Written contract not essential although it may obligatory by reason of the
regulations of railroad companies, or as a condition imposed in the contract by
the agreement of the parties themselves.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
agreed upon by both parties
AIRCRAFT
> there is a perfected contract to carry passengers even if no tickets have been
issued to said passengers so long as there was already a meeting of minds with
respect to the subject matter and the consideration
> perfected contract of carriage – if it can be established that the passenger”
1. had checked in at the departure counter,
2. passed through customs and immigration,
3. boarded the shuttle bus and proceeded to the rap of the aircraft and
4. that his baggage had already been loaded in the aircraft to be flown
with the passenger to his destination
BUSES, JEEPNEYS, AND STREET CARS
> once a public utility bus or jeepney stops, it is in effect making a continuing
offer to bus riders; perfected when passenger is already attempting to board
the vehicle
Continuing offer rule – it is the duty of the drivers to stop their conveyances for
a reasonable length of time in order to afford passengers an opportunity to
board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up of the carrier
TRAINS
– perfected when a person:
a. purchased a ticket/ possess sufficient fare with which to pay for
his passage
b. presented himself at the proper place and in a proper manner to
be transported
c. has a bona fide intention to use facilities of the carrier
CARRIER:
Common carriers (CC) (1732) PCFA
– 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.
(NOT the means of transportation)
– one that holds itself out as ready to engage in the transportation of
goods for hire as a public employment and not as a casual
occupation.
Tests for determining WON a party is a common carrier of goods:
1. He must be engaged in the business of carrying goods for others as a
public employment, and must hold himself out as ready to engage in
the transportation of goods for persons generally as a business and
not as a casual occupation.
2. He must undertake to carry goods of the kind to which his business is
confined.
3. He must undertake to carry by the method by which his business is
conducted and over his established roads.
4. Transportation must be for hire.
TRUE TEST
Not the quantity or extent of the business actually transacted, or the number
and character of the conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by the carrier that he has held
out to the general public as his business or occupation.
> if the undertaking is a single transaction, not part of the general business or
occupation engaged in, as advertised and held out to the general public, the
individual or the entity rendering such service is a private, not a common,
carrier.
Characteristics of Common carriers (CC):
 no distinction between one whose principal business is the
transportation of persons/goods and one who does such as an
ancillary business (sideline)
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  no distinction between regular or scheduled basis and one offering
such service on an occasional, episodic or unscheduled business
 still a CC even if services offered to a limited clientele (between the
general public and a narrow segment of the general population)
 Still considered a CC even if he did not secure a Certificate of Public
Convenience
 No distinction as to the means of transporting, as long as it is by
land, water or air
 The Civil Code does not provide that the transportation should be by
motor vehicle
 Still a CC even if he has no fixed and publicly know route, maintains
no terminals, and issues no tickets
 pipeline operators are CCs – not necessarily motor vehicles (Case:
First Philippine Industrial Corp. vs. CA)
Case: Jose Mendoza vs. Philippine Airlines Inc.
- The test of whether one is a common carrier by air is whether he
holds out that he will carry for hire, so long as he has room, goods of
everyone bringing goods to him for carriage, not whether he is
carrying as a public employment or whether he carries to a fixed
place
CHARTER PARTY:
- Contract by which an entire ship or some principal part thereof is let
by the owner to another person for a specified time or use.
Q: What is the effect of charter party?
A: It may transform a common carrier into a private carrier. However, it must be
a bareboat or demise charter where the charterer mans the vessel with his own
people and becomes, in effect, the owner for the voyage or service stipulated
2 types:
1. Contract of Affreightment
- involves the use of shipping space on vessels leased by
the owner in part or as a whole, to carry goods for
another
- CC = observe extraordinary diligence; in case of loss,
deterioration or destruction of goods of goods, CCs are
presumed to be at fault or have acted negligently
- 2 types
i. Time charter: vessel is leased to the charterer
for a fixed period of time
ii. Voyage charter: ship is leased for a single
voyage
2. Charter by demise/ Bareboat Charter
- whole vessel is let to the charterer with a transfer to him
of its entire command and possession and consequent
control over its navigation including the master and the
crew who are his servants.
- charter includes both vessel and crew—CC becomes
private carrier (PC) insofar as that particular voyage is
concerned
- if it is already a PC- ordinary diligence in the carriage of
goods will suffice
- PC = undertaking is a single transaction, not a part of the
general business or occupation, although involving the
carriage of goods for a fee; NO presumption of negligence
applies – whosoever alleges damage to or deterioration
of the goods carried has the burden of proving that the
cause was the negligence of the carrier.
Distinction between Common Carriers and Private Carriers
COMMON CARRIER PRIVATE CARRIER
Extraordinary diligence in the Ordinary diligence in the carriage of
vigilance over the goods they carry goods will suffice
In case of loss, destruction, or No such presumption applies to
deterioration of goods, they are private carriers, for whosoever alleges
presumed to have been at fault or to damage to or deterioration n of the
have acted negligently; burden of goods carried has the onus of proving
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
proving otherwise rests on them that the cause was the negligence of
the carrier
Cannot stipulate that it is exempt May validly enter into such stipulation
from liability for the negligence of its
agents or employees
Factors to be considered whether a carrier is common/private:
 Law applicable
o Common  Civil Code
o Private  contract
 Diligence required
o Common  extraordinary diligence
o Private  diligence of a good father of a family
 Burden of proof in relation to negligence
o Common – the carrier
o Private – on the party having a claim against the carrier
Case: Planters Products, Inc. vs. CA
- It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by
one or more persons, provided the charter is limited to the ship only,
as in the case of a time-charter or voyage-charter. It is only when the
charter includes both the vessel and its crew that a common carrier
becomes private
True Test of Common Carrier Is the carriage of passengers or goods, provided it
has space, for all who opt to avail themselves of its transportation service for a
fee
Generally, private carriage is undertaken by special agreement and the carrier
does not hold himself out to carry goods for the general public
Case: Estela Crisostomo vs. CA and Caravan Travel and Tours International
- By definition, a contract of carriage is one whereby a certain person
or association of persons obligate themselves to transport person,
thing or new from one place to another for a fixed price
- It is obvious from the above definition that respondent is not an
entity engaged in the business of transporting either passengers or
goods and is therefore, neither a private nor a common carrier. Its
covenant with its customers is simply to make travel arrangements
in their behalf.
- It is in this sense that the contract between the parties in this case
was an ordinary one for services and not one of carriage; it is thus
not bound under the law to observe extraordinary diligence in the
performance of its obligation.
COMMON CARRIERS vs. TOWAGE, ARRASTRE AND STEVEDORING
Towage
- A vessel is hired to bring another vessel to another place
- e.g. a tugboat may be hired by CC to bring the vessel to a port
(operator of tugboat not CC)
- in maritime law: towing for the mere purpose of expediting her
voyage without reference to any circumstances of danger
Arrastre
- Arrastre operator’s functions has nothing to do with the trade and
business of navigation nor to the use or operation of vessels
- Services are not maritime
- Functions of arrastre operator:
o Receive, handle, care for, and deliver all merchandise
imported and exported, upon or passing over
Government-owned wharves and piers in the port
o Record or check all merchandise which may be delivered
to said port ant shipside
o Furnish light, and water services and other incidental
service in order to undertake its arrastre service
- Such service is in face, no different from those of a depositary or
warehouseman
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Stevedoring
- involves the loading and unloading of coastwise vessels calling at
the port.
>>> Common carriers are public utilities, impressed with public interest and
concern subject to regulation by the state.
GOVERNING LAWS
- read summary of rules on page 40 of book
Article 1766 (Civil Code). In all matters not regulated by this Code, the
rights and obligations of common carriers shall be governed by the Code
of Commerce and by special laws.
NATURE OF BUSINESS
- Common Carriers exercise a sort of public office
- Consequently, common carriers are subject to regulation by the
State
REGISTERED OWNER RULE/REGISTRATION LAWS
- Governed by the Land Transportation and Traffic Code and
administered by the Land Transportation Office
- The registered owner of a vehicle is liable for any damage caused by
the negligent operation of the vehicle although the same was
already sold or conveyed to another person at the time of the
accident.
- The registered owner is liable to the injured party subject to his right
of recourse against the transferee or the buyer
- Applicable in case of lease
- Registered owner not liable if vehicle was taken from him without
his knowledge and consent.
Q: what is the purpose of such law?
A: The main aim of motor vehicle registration is to identify the owner so that if
any accident happens, or that any damage or injury is caused by the vehicle on
the public highways, responsibility therefor can be fixed on a definite individual
– the registered owner.
KABIT SYSTEM
- The “registered owner” rule is applicable to people involved on a “kabit
system”
- arrangement whereby a person who has been granted a certificate of
public convenience allows other persons who own motor vehicles to
operate them under his license, sometimes for a fee or percentage of the
earnings --- contrary to public policy (thus VOID and INEXISTENT)
- parties to the “kabit system” cannot invoke the same as against each
other either to enforce their illegal agreement or to invoke the same to
escape liability --- pari delicto rule
- having entered into an illegal contract, neither can seek relief from the
courts and each must bear the consequences of his acts
- also applicable to aircrafts and vessels – basic rule that no person can
operate a common carrier without securing a certificate of public
convenience and necessity.
Case: Dizon vs. Octavio
- the primary factors considered in the granting of a certificate of
public convenience for the business of public transportation is the
financial capacity of the holder of the license, so that liabilities
arising from accidents may be duly compensated
- Thus, for the safety of passengers and the public who may have been
wronged and deceived through the baneful kabit system, the
registered owner of the vehicle is not allowed to prove that another
person has become the owner so that he may be thereby relived of
responsibility
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
CHAPTER 2
OBLIGATIONS OF THE COMMON CARRIER
I. Obligations of the carrier
1. To accept passengers and goods without discrimination
2. To seasonably deliver the goods or bring the passenger to the
destination
3. To deliver the goods or bring the passenger to the proper place or
destination
4. To deliver the goods to the proper person
5. To exercise extraordinary diligence in the performance of its duties
A. DUTY TO ACCEPT
- A common carrier granted a certificate of public convenience is duty
bound to accept passengers or cargo without any discrimination.
- It is illegal for domestic ship operators to refuse to accept or carry
passengers or cargo without just cause. (Section 16, RA 9295)
Note: In air transportation, passengers with confirmed tickets who were not
allowed to board are provided with denied boarding compensation and priority
boarding rules.
No compensation for refusal if it is because of:
1. government requisition of the space
2. substitution of equipment of lesser capacity when required by
operational and or safety and/or other causes beyond the control of
the carrier, and
3. if arrangements have been made for the passenger to take another
flight in a comparable air transportation which will arrive not later
than three hours after the time of flight on which the confirmed
space is held is supposed to arrive. (Civil Aeronautics Board
Economic Regulation)
Grounds for Valid Refusal to Accept Goods
- GR: common carriers cannot lawfully decline to accept a particular class
of goods
- EXC: it appears that for some sufficient reason the discrimination
against the traffic in such goods is reasonable and necessary:
i. dangerous objects or substances including dynamites and
other explosives
ii. goods are unfit for transportation
iii. acceptance would result in overloading
iv. contrabands or illegal goods
v. goods injurious to health
vi. goods will be exposed to untoward danger like flood,
capture by enemies and the like
vii. goods like livestock will be exposed to diseases
viii. strike
ix. failure to tender goods on time
Case: Fisher v. Yangco
- factors in determining reasonable discrimination include:
i. suitability to the vessel for the transportation of such products;
ii. reasonable possibility of danger or disaster resulting from their
transportation in the form and under the conditions in which they
are offered for carriage; and
iii. the general nature of the business done by the carrier.
(1) Hazardous and Dangerous Substances
- Carrier not properly equipped to transport dangerous chemicals or
explosives may validly refuse to accept the same for transport.
- Those which are not authorized by the Maritime Industry Authority
to carry such goods may also validly refuse the same for transport.
- There must be a Special Permit to Carry from the MARINA. (accept
only if the said cargoes are covered by the necessary clearance from
appropriate government agencies)
(2) Unfit for Transport
- Carriers may refuse to accept goods that are unfit for transportation
- These goods may by nature be unfit for transportation or are unfit
because of improper packaging or defect in their containers.
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 - However, carriers may accept the goods and limit its liability by
stipulation.
If by reason of well-founded suspicion of falsity in the declaration as to the
contents of the package carrier should decide to examine and investigate it in
the presence of witnesses, with the shipper and consignee in attendance. If
declaration of shipper is true, expenses occasioned by the examination and of
repacking the packages shall be for the account of the carrier
Even if the cause of the loss, destruction or deterioration of the goods should
be caused by the character of the goods, or the faulty nature of the packing or
of the containers, the common carrier must exercise due diligence to forestall
or lessen the loss.
Inspection. Carrier is duty bound to conduct inspection when there is reason to
doubt the veracity of such representations [of the nature and value of the
goods to be carried]
TRANSPORTATION OF ANIMALS
> includes but not limited to the avoidance of abuse, maltreatment, cruelty, and
exploitation of animals by humans by maintaining appropriate standards of
accommodation, feeding and general care, the prevention and treatment of
disease and the assurance freedom from fear, distress, harassment, and
unnecessary discomfort and pain, and allowing animals to express normal
behavior.
DUTIES TO SPECIAL CLASSES OF PASSENGERS
> this includes specific rules on PWDs and senior citizens; carriers are mandated
to ensure that PWDs and senior citizens shall have equal access to air
transportation services in accordance with the mandate of BP 344 and
Expanded Senior Citizens Act of 2010.
B. DUTY TO DELIVER THE GOODS
 Time of Delivery
- Where a carrier has made an express contract, the goods must be
delivered within a specified time otherwise he is liable for any delay
(indemnity for damages).
- In the absence of any agreement, goods must be delivered at its
destination within a reasonable time (depending on the attending
circumstances, nature of the goods; expected date of arrival in the BOL
may be considered).
- In the absence of a special contract, a carrier is NOT an insurer against
delay in transportation of goods
Reasonable Time
> the expected date of arrival on the bill of lading may be considered
> depends on nature of the goods
 Consequences/Effects of Delay
- Excusable delays in carriage suspend, but do not generally terminate, the
contract of carriage; when the cause is removed, the master must proceed
with the voyage and make delivery.
- During the detention or delay, vessel continues to be liable as a common
carrier, not a warehouseman, and remains duty bound to exercise
extraordinary diligence.
Article 1740 (NCC). If common carrier negligently delays in transporting the
goods, a natural disaster shall not free it from responsibility.
Article 1747 (NCC). If common carrier delays , without just cause, in
transporting the goods or changes the stipulated or usual route, the contract
limiting its liability cannot be availed of in case of the loss, destruction, or
deterioration of the goods.
Note: read page 67 of book for other provisions.
PLACE OF DELIVERY
The goods should be delivered to the consignee in the places agreed upon by
the parties. If the specific place or warehouse is designated in the bill of lading,
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
the goods must be delivered in such place even if it is not the usual place of
delivery in the place of destination.
If the shipper should change the consignee of the goods without changing their
destination, the carrier shall comply with the new order provided the shipper
returns to the carrier the bill of lading and a new one is issued showing the
novation of the contract. However, the shipper must pay all expenses for the
change.
TO WHOM DELIVERED
The goods should be delivered to the consignee or any other person to whom
the bill of lading was validly transferred or negotiated.
CONFLICT BETWEEN CONSIGNEE AND SHIPPER
As when the shipper orders the shipping company to return or retain the goods
shipped while the consignee demands their delivery, an authority on
Commercial law, said that the right of the shipper to countermand the shipment
terminates when the consignee or legitimate holder of the bill of lading appears
with such bill of lading before the carrier and makes himself a party to the
contract.
EFFECT OF NEGOTIABLE BILL OF LADING
Under Art 1513 of NCC that a person whom a negotiable document of title has
been duly negotiated acquires:
1. Title to the goods as the person negotiating the document to him had or had
ability to convey to a purchaser in good faith for value and also such title to the
goods as the person to whose order the goods were to be delivered by the
terms of the document had or had ability to convey to a purchaser in good faith
for value; and
2. The direct obligation of the bailee
(1) Abandonment
- In case of delay through the fault of the carrier, the consignee may
refuse to accept the goods or may leave the goods in the hands of
the carrier. It must be communicated to the carrier in writing.
- This right must be exercised between the time of delay and before
the arrival of the goods at its destination.
- The carrier must pay the full value of the goods as if they had been
lost or mislaid.
Note: If abandonment is not made, indemnification for the losses and damages
by reason of the delay cannot exceed the current price which the goods would
have on the day and at the place they are to be delivered.
The value of the goods which the carrier must pay in case of loss or
misplacement shall be that what is declared in the bill of lading.
Consignee must not defer the payment of the expenses and transportation
charges of the goods otherwise carrier may demand the judicial sale of the
goods.
Case: Magellan Mfg. Marketing Corp. vs. CA
- Abandonment may also be made by virtue of stipulation or
agreement between parties
(2) Rights of Passengers in Case of Delay
- As to the rights and duties of the parties strictly arising out of delay,
the Civil Code is silent. However, the Code of Commerce provides for
such a situation:
ARTICLE 698. In case a voyage already begun should be interrupted, the
passengers shall be obliged to pay the fare in proportion to the distance
covered, without right to recover for losses and damages if the interruption is
due to fortuitous event of force majeure, but with a right to indemnity if the
interruption should have been caused by the captain exclusively. If the
interruption should be caused by the disability of the vessel and a passenger
should agree to await the repairs, he may not be required to pay any increased
price of passage, but his living expenses during the stay shall be for his own
account.
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Note: the carrier is liable for any loss or damage, including any pecuniary loss or
loss of profit, which the passenger may have suffered by reason thereof.
In case the vessel is not able to depart on time and the delay is unreasonable,
the passenger may opt to have his/her ticket immediately refunded without any
refund service fee from the authorized issuing/ticketing office.
 Where and to Whom Delivered
a. Place – Goods should be delivered to the consignee in the place
agreed upon by the parties.
The shipper may change the consignment of the goods provided that at the
time of ordering the change of the consignee the bill of lading signed by the
carrier be returned to him, in exchange for another wherein the novation of the
contract appears. The expenses occasioned by the change shall be for the
account of the shipper.
b. Consignee – Delivery must generally be made to the owner or
consignee or to someone lawfully authorized by him to receive the
goods for his account or to the holder of the negotiable instrument.
c. Delay to Transport Passengers – A carrier is duty bound to transport
the passenger with reasonable dispatch
Effect of Decision of Passenger
The SC explained that the carrier would have been liable for loss of income if
the plaintiff were unable to report to his office on the day he was supposed to
arrive were it not for the delay. This, however, assumes that he stayed in the
vessel and was with it when it thereafter resumed its voyage; but he did not.
Consequently, any further delay then in the plaintiff’s arrival at the port of
destination was caused by his decision to disembark. Had he remained on the
first vessel, he would have reached his destination at noon of November 13,
1991, thus been able to report to his office in the afternoon. He, therefore,
would have lost only the salary for half a day. (Trans-Asia Shipping Lines, Inc. vs
CA)
MARINA REGULATION
Effects of ‘delayed and unfinished voyage’ in inter-island vessels:
 vessel cannot continue or complete her voyage for any cause –
carrier is under obligation to transport the passenger to his/her
destination at the expense of the carrier including free meals and
lodging before the passenger is transported to his/her destination;
the passenger may opt to have his/her ticket refunded in full if the
cause of the unfinished voyage is due to the negligence of the carrier
or to an amount that will suffice to defray transportation cost at the
shortest possible route if the cause of the unfinished voyage is
fortuitous event.
 vessel is delayed in arrival at the port of destination – free meals
during mealtime
 delay in departure at the point of origin due to carrier’s negligence;
fortuitous event - free meals during mealtime; carrier not obliged to
serve free meals
 carrier is not obliged to inform passengers of sailing schedule of the
vessel
C. DUTY TO EXERCISE EXTRAORDINARY DILIGENCE
- Goods should be delivered in the same condition that they were
received and to transport the passengers without encountering any
harm or loss.
- Read page 75-77 for provisions
RATIONALE
The common carrier is not the insurer of the lives and properties of the
passenger and shipper. Nevertheless, the highest degree of care is required.
ARTICLE 1755. A common carrier is bound to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances. (Civil Code)
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
This extraordinary diligence required of common carriers is calculated to
protect the passengers from the tragic mishaps that frequently occur in
connection with rapid modern transportation. This high standard of care is
imperatively demanded by the preciousness of human life ad by the
consideration that every person must in every way be safeguarded against all
injury.
MEANING OF EXTRAORDINARY DILIGENCE
> to prove, the carrier must do more than merely show the possibility that some
other party could be responsible for the damage. It must prove that it used all
reasonable means to ascertain the nature and characteristics of the goods
tendered for transport and it exercised due care in handling them.
> In Compania Maritima v. CA, extraordinary diligence in the vigilance over the
goods tendered for shipment required the common carrier to know and to
follow the required precaution for avoiding damage to, or destruction of the
goods entrusted to it for safe carriage and delivery.
NON-DELIGABLE DUTY
> the carrier is accordingly responsible for the acts of the master, the crew, the
stevedore, and his other agents
- Presumption of Negligence
- Two conditions for the birth of the presumption of negligence:
1. there exists a contract between the passenger or the shipper and the
common carrier
2. the loss, deterioration, injury or death took place during the
existence of the contract
Doctrine of Proximate Cause – there is presumption of negligence
If the goods are lost, destroyed or deteriorated, common carriers are presumed
to have acted negligently, unless they prove that they observed extraordinary
diligence. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence.
EFFECT OF ACQUITTAL
> immaterial to the case of breach of contract
> criminal case will have no bearing on said independent civil action
- Duration of Duty:
(1) Carriage of Goods
- Due diligence should be exercised the moment the goods are
delivered to the carrier.
- Goods are deemed delivered to the carrier when the goods are
ready for and have been placed in the exclusive possession,
custody and control of the carrier for the purpose of their
immediate transportation and the carrier has accepted them
ARTICLE 1736. The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually
or constructively, by the carrier to the consignee or to the person who has a
right to receive them…
ARTICLE 1737. The common carrier’s duty to observe extraordinary diligence
over the goods 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. (Common carrier becomes a warehouseman –
ordinary diligence)
ARTICLE 1738. The extraordinary liability of the common carrier continues to be
operative even during the time the goods are stored in a warehouse of the
carrier at the place if destination, until the consignee has been advised of the
arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them.
STOPPAGE IN TRANSITU
Extraordinary diligence need not be exercised over the goods that are unloaded
temporarily if the shipper or owner has made use of the right of stoppage in
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transit. This is the right of an unpaid seller to resume possession of the goods at
the time while the goods are in transit, and he will then become entitled to the
same rights in regard to the goods as he would have if he had never parted with
the possession. The rights are available if:
1. the buyer of the goods is or becomes insolvent
2. the unpaid seller has parted with the possession of the goods
3. the goods are still in transit
> this is because in legal effect, the contract of carriage terminates when the
right is exercised
> carrier becomes ordinary bailee
DILIGENCE UP TO DELIVERY
> lasts until the time the goods are actually or constructively delivered by the
carrier to the consignee or the person who has the right to receive them
(2) Carriage of Passengers
By trains – the extraordinary responsibility of common carrier commences the
moment the person who purchases the ticket (or a ‘token’ or ‘card’) from the
carrier presents himself at the proper place and in a proper manner to be
transported with a bona fide intent to ride the coach.
* Mere purchase of a ticket does not of itself create the relation of carrier and
passenger but it is an element in the inception of the relation.
* A proper person who enters upon the carrier’s premises (station, ticketing
office, or waiting room) with the intention of becoming a passenger will
ordinarily be viewed as assuming the status of a passenger.
* One who goes to the railroad station to inquire as to the possibility of securing
passage on a freight train, which he knows, by the rules of the company, is not
allowed to carry passengers, and to secure passage thereon if possible, is not
entitled to the rights of a passenger but is a mere trespasser.
* One who rides upon any part of the vehicle or conveyance which is unsuitable
or dangerous, or which he knows is not intended for passengers, is not
presumed to be a passenger.
* One who secures free passage by fraud or stealth is precluded from recovery
for injuries sustained through the negligence of the carrier, for he has not
assumed the status of a passenger.
* A person riding on a freight train, on a driver’s pass or similar arrangement, to
look after livestock being transported and as incident to such transportation is,
generally regarded as a passenger for hire.
Carriage by sea – the duty of the carrier commences as soon as a person with
bona fide intention of taking passage places himself in the care of the carrier or
its employees
Motor vehicles like jeepneys and buses – are duty bound to stop their
conveyances for a reasonable length of time in order to afford passengers an
opportunity to board and enter, and they are liable for injuries suffered by
boarding passengers resulting from the sudden starting up or jerking of their
conveyances while they do so. Once a public utility bus or jeepney stops, it is
making a continuous offer to bus riders.
Case: Dangwa Transportation Company vs. CA
- When the bus is not in motion there is no necessity for a person who
wants to ride the same to signal his intention to board. A public utility
bus, once it stops, is in effect making a continuous offer to bus riders
- The premature acceleration of the bus in this case was a breach of such
duty
Case: La Mallorca vs. CA
- Duty to exercise utmost diligence with respect to passengers will not
ordinarily terminate until the passenger has, after reaching his
destination, safely alighted from the carrier’s conveyance or had a
reasonable opportunity to leave the carriers premises. And what is
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances.
Case: Aboitiz Shipping Corporation vs. CA
- Same ruling with La Mallorca vs. CA
- That reasonableness of time should be made to depend on the
attending circumstances of the case, such as the kind of common
carrier, the nature of its business, the customs of the place, and so
forth, and therefore precludes a consideration of the time element per
se without taking into account such other factors
- The primary factor to be considered is the existence of a reasonable
cause as will justify the presence of the victim on or near the
petitioner’s vessel. We believe there exists such a justifiable cause
(baggage were left)
HOW DUTY IS COMPLIED WITH
- There is no hard and fast rule in the exercise of extraordinary
diligence
- Common carrier binds itself to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of
a very cautious person, with due regard for all the circumstances.
- The duty even extends to the members of the crew or complement
operating the carrier
- Diligence of a good father of a family is not enough
- Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the former’s employees,
although such employees may have acted beyond the scope of their
authority or in violation of the orders of the common carriers.
- Common carrier is likewise liable for the acts of its employees and
strangers if the common carrier’s employees through the exercise of
the diligence of a good father of a family could have prevented or
stopped the act or omission
DUTY TO THIRD PERSONS
> the duty to exercise extraordinary diligence is primarily owed to the
passengers and the goods that are being transported
Exception:
Case: Kapalaran Bus Lines vs. Coronado
- While the immediate beneficiaries of the standard of extraordinary
diligence are the passengers and owners of cargo carried by a
common carrier they are not the only persons that the law seeks to
benefit.
- If common carriers carefully observed the statutory standard of
extraordinary diligence in respect of their own passengers, they
cannot help but simultaneously benefit pedestrians and the owners
and passengers of other vehicles who are equally entitled to the safe
and convenient use of our roads and highways
A reasonable man or a good father of a family in the position of the carrier must
exercise extraordinary diligence in the performance of his contractual
obligation.
- Generally, what should be determines is whether or not a
reasonable man, exercising extraordinary diligence, could have
foreseen and prevented the damage or loss that occurred.
EFFECT OF STIPULATION
A. GOODS
- The parties cannot stipulate that the carrier will NOT exercise ANY
diligence in the custody of goods
- The law allows a stipulation whereby the carrier will exercise a
degree of diligence which is less than extraordinary with respect to
goods.
Art. 1744. A stipulation between the common carrier and the shipper
owner limiting the liability of the former for the loss, destruction, or
deterioration of the goods to a degree less than extraordinary
diligence shall be valid, provided it be:
Page 6
 1. In writing, signed by the shipper/owner;
2. Supported by a valuable consideration other than the service
rendered by the common carrier (Note: Typically fare/freight); and
3. Reasonable, just and contrary to public policy.
B. PASSENGERS
- There can be no stipulation lessening the utmost diligence that is
owed to passengers.
Art. 1757. The responsibility of a common carrier for the safety of
passengers as required in Arts. 1733 and 1755 cannot be dispensed
with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise. (Note: Absolute; extraordinary at
all times.)
Gratuitous passenger – A stipulation limiting the common carrier’s liability for
negligence is valid, but not for willful acts of gross negligence. The reduction of
fare does not justify any limitation.
Case: Lara vs. Valencia
- Diligence owed to accommodation passengers is only ordinary
diligence
- However, this case is not controlling with respect to common
carriers because the defendant in the said case was not a common
carrier
EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA
A. SEAWORTHINESS
a. Warranty of Seaworthiness of Ship
- This is the first step that should be undertaken
- Extraordinary diligence requires that the ship which will
transport the passengers and goods is seaworthy.
- Seaworthiness of the vessel is impliedly warranted.
- The carrier shall be bound before and at the beginning of the
voyage to exercise due diligence to make the ship seaworthy.
b. No duty to inquire
- Because of the implied warranty of seaworthiness, shippers of
goods, when transacting with common carriers, are not
expected to inquire into the vessels seaworthiness,
genuineness of its licenses and compliance with all maritime
laws. Passengers cannot be expected to inquire every time they
board a common carrier, whether the carrier possesses the
necessary papers or that all the carrier’s employees are
qualified.
- It is the carrier that carries such burden of proving that the ship
is seaworthy.
- Sufficient evidence must be submitted and the presentation of
certificates of seaworthiness is not sufficient to overcome the
presumption of negligence.
c. Meaning of Seaworthiness
- A vessel must have such degree of fitness which an owner who
is exercising extraordinary diligence would require his vessel to
have at the commencement of the voyage, having regard to all
the probable circumstances of it. This includes fitness of the
vessel itself to withstand the rigors of voyage, fitness of the
vessel to store the cargoes and accommodate passengers to be
transported and that it is adequately equipped and properly
manned.
- Seaworthiness is that strength, durability and engineering skill
made a part of a ship’s construction and continued
maintenance, together with a competent and sufficient crew,
which would withstand the vicissitudes and dangers of the
elements which might reasonably be expected or encountered
during her voyage without loss or damage to her particular
cargo
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
Example: The carrier was able to establish that the ship itself was seaworthy
because the records reveal that the vessel was dry-docked and inspected by the
Phil. Coast Guard before its first destination.
A warranty of seaworthiness requires that it be properly laden, and provided
with a competent master, a sufficient number of competent officers and
seamen, and the requisite appurtenances and equipment.
The carrier shall be bound before and at the beginning of the voyage to exercise
due diligence to:
1. Make the ship seaworthy;
2. Properly man, equip, and supply the ship;
3. Make all parts of the ship in which goods are carried, fit and safe
for their reception, carriage, and preservation.
The carrier shall properly and carefully load, handle, stow, carry, keep, care for,
and discharge the goods carried.
Note: Seaworthiness is relative it its construction and its application depends on
the facts of a particular case (ex. Length and nature of the voyage)
Fitness of the Vessel Itself
- It is necessary that the vessel can be expected to meet the normal
hazards of the journey
- General Test of Seaworthiness: Whether the ship and its
appurtenances are reasonably fit to perform the service undertaken.
The ship must be “cargoworthy”
- Even if the vessel was properly maintained and is free from defect,
the carrier must not accept the goods that cannot properly be
transported in the ship
- The ship must be efficiently strong and equipped to carry the
particular kind of cargo which she has contracted to carry and her
cargo must be so loaded that it is safe for her to proceed on her
voyage.
The vessel must be adequately equipped and properly manned.
- On top of regular maintenance and inspection, Captains, masters or
patrons of vessels must prove the skill, capacity, and qualifications
necessary to command and direct the vessel.
- If the owner of a vessel desires to be the captain without having the
legal qualifications, he shall limit himself to the financial
administration of the vessel and shall entrust the navigation to a
qualified person.
Note: It is not an excuse that the carrier cannot afford the salaries of competent
and licensed crew or that latter is unavailable.
Proper Manning
Art. 609. Captains, masters or patrons of vessels must be:
1. Filipino
2. have legal capacity to contract in accordance with this code
3. prove the skill capacity and qualifications necessary to command and
direct the vessel, as established by marine or navigation laws,
ordinances, or regulations
4. must not be disqualified according to the same for the discharge of
the duties of the opposition
If the owner of a vessel desires to be the captain thereof, without having the
legal qualifications therefor, he shall limit himself to the financial administration
of the vessel, and shall in trust the navigation to a person possessing the
qualifications required by said ordinances and regulations.
Adequate Equipment
- With respect to vessels that carries passengers, the Maritime
Industry Authority prescribes rules which provide for indispensable
equipment and facilities
- ex. Exit doors, life boats, live vests
Page 7
B. OVERLOADING
- Duty to exercise due diligence likewise includes the duty to take
passengers or cargoes that are within the carrying capacity of the
vessel.
C. PROPER STORAGE
- The vessel itself may be suitable for the cargo but this is not enough
because the cargo must also be properly stored.
Cargo must generally not be placed on deck. The carrying of deck cargo raises
the presumption of unseaworthiness unless it can be shown that the deck cargo
will not interfere with the proper management of the ship.
NEGLIGENCE OF CAPTAIN AND CREW
- Failure on the part of the carrier to provide competent captain and
crew should be distinguished from the negligence of the said captain
and crew, because the latter is covered by the Limited Liability Rule
(liability of the shipowner may be limited to the value of the vessel).
- If the negligence of the captain and crew can be traced to the fact
that they are really incompetent, the Limited Liability Rule cannot be
invoked because the shipowner may be deemed negligent.
Rules on passenger safety
- Negligence on the part of the captain and crew as well as the
operator includes failure to comply with the regulation issued by the
Maritime Industry Authority (MARINA) on the safety of the
passengers
- Memorandum Circular No. 112: passengers do not merely contract
for transportation because they have the right to be treated by the
carrier and its employees with kindness, respect, courtesy and due
consideration. They are entitled to be protected against personal
conduct, injurious language, indignities and abuses from the said
carrier and its employees
- Read Memorandum Circular No. 114: p. 123
Case: Planters Products Inc. vs. CA
- The period during which private respondent was to observe the
degree of diligence required of it as a public carrier began from the
time the cargo was unconditionally placed in its charge after the
vessel’s holds were duly inspected and passed scrutiny by the
shipper, up to and until the vessel reached its destination and its hull
was re-examined by the consignee, but prior to unloading
- A ship owner is liable for damage to the cargo resulting from
improper stowage ONLY when the stowing is done by stevedores
employed by him, and therefore under his control and supervision,
not when the same is done by the consignee or stevedores under
the employ of the latter
DUTY TO TAKE PROPER ROUTE
The carrier is obligation to follow the usual reasonable commercial or
customary route. If there is no evidence of the usual route, the route is
presumed to be the direct geographical route. However, this may be modified
in many cases for navigational or other reasons.
1. Deviation
- If there is an agreement between the shipper and the carrier as to
the road over which the conveyance is to be made (subject to the
approval by the Maritime Industry Authority), the carrier may not
change the route, unless it be by reason of force majeure. Without
this cause, he shall be liable for all the losses which the goods may
suffer, aside from paying the sum stipulated for that case.
- When on account of the force majeure, the carrier had to take
another route which resulted to an increase in transportation
charges, he shall be reimbursed upon formal proof.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
Note: With respect to carriers by sea, the routes are subject to approval by
MARINA and the same cannot generally be changed without the authorization
from said administrative agency
2. Transshipment
- The act of taking cargo out of one ship and loading it into another; to
transfer 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.
- Transshipment of freight without legal excuse is a violation of the
contract and subjects the carrier to liability if the freight is lost even
by a cause otherwise excepted.
Note: there is transshipment whether or not the same person, firm or entity
owns the vessels (what matters is the actual physical transfer of cargo from one
vessel to another)
DUTY TO INSPECT IN CARRIAGE BY SEA
> a common carrier is entitled to fair representation of the nature and value of
the goods to be carried, with the concomitant right to rely thereon, and further
noting at this juncture that carrier has no obligation to inquire into the
correctness or sufficiency of such information.
> arises in the event that there should be reason to doubt the veracity of such
representations
> to be subjected to unusual search, there must exist proof that would justify
cause for apprehension that the baggage is dangerous as to warrant exhaustive
inspection, or even refusal to accept
EXTRAORDINARY DILIGENCE IN CARRIAGE BY LAND
A. CONDITION OF VEHICLE
- Common carriers that offer transportation by land are similarly
required to make sure that the vehicles that they are using are in
good order and condition (roadworthiness)
Rule on Mechanical Defects – If the carriers will replace certain parts of the
motor vehicle, they are duty bound to make sure that the parts that they are
purchasing are not defective. Hence, it is a long-standing rule that a carrier
cannot escape liability by claiming that the accident that resulted because of a
defective break or tire is due to a fortuitous event. This is true even if it can be
established that the tire that was subject of a blow-out is brand new. The duty
to exercise extraordinary diligence requires the carrier to purchase and use
vehicle parts that are not defective.
B. TRAFFIC RULES
- The carrier fails to exercise extraordinary diligence if it will not
comply with basic traffic rules. The Civil Code provides for a
presumption of negligence in case the accident occurs while the
operator of the motor vehicle is violating traffic rules.
In cases involving breach of contract of carriage, proof of violation of traffic
rules confirms that the carrier failed to exercise extraordinary diligence.
Case: Mallari Sr. and Jr vs. CA
- The rule is settled that a driver abandoning his proper lane for the
purpose of overtaking another vehicle in an ordinary situation has
the duty to see to it that the road is clear and not to proceed if he
cannot do so in safety
C. DILIGENCE IN THE SELECTION AND SUPERVISION
- Such defense is not available for common carriers
- Nevertheless, it is also required in the exercise of extraordinary
diligence
D. DUTY TO INSPECT
- There is no unbending duty to inspect each and every package or
baggage that is being brought inside the bus or jeepney. The carrier
is duty bound to conduct such inspection depending on the
circumstances.
Page 8
Case: Nocum vs. Laguna Tayabas Bus Company
- While it is true the passengers of appellant’s bus should not be made
to suffer for something over which they had no control, fairness
demands that in measuring a common carrier’s duty towards its
passengers, allowance must be given to the reliance that should be
reposed on the sense of responsibility of all the passengers in regard
to their common safety.
- It is to be presumed that a passenger will not take with him anything
dangerous to the lives and limbs of his co-passengers not to speak of
his own.
- Not to be lightly considered is the right to privacy to which each
passenger is entitled
- In other words, inquiry may be verbally made as to the nature of a
passenger’s baggage when such is not outwardly perceptible, but
beyond this, constitutional boundaries are already in danger of being
transgressed
- SC held that carrier has succeeded in rebutting the presumption of
negligence by showing that it has exercised extraordinary diligence
for the safety of its passenger, according to the circumstances of
each case
Note: although overland transportation are not bound nor empowered to make
an examination on the contents of packages or bags particularly those hand
carried by passengers, such is different with regards to an airline company.
EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR
- The aircraft must be in such a condition that it must be able to
withstand the rigors of flight.
Airworthiness – An aircraft, its engines propellers, and other components and
accessories, are of proper design and construction, and are safe for air
navigation purposes, such design and construction being consistent with
accepted engineering practice and in accordance with aerodynamic laws and
aircraft science.
Proof of airworthiness is not by itself sufficient to prove exercise of
extraordinary diligence.
Case: Japan Airlines vs. CA
- The fact that the flight was cancelled due to fortuitous event does
not mean that the carrier’s duty already ended. The carrier is still
obligated to look after the convenience and comfort of the
passenger
- Thus the carrier was obligated to make the necessary arrangements
to transport the passenger on the first available flight.
A. INSPECTION
- It is the duty of the carrier to make inquiry as to the general nature
of the articles shipped and of their value before it consents to carry
them; and its failure to do so cannot defeat the shipper’s right to
recovery of full value of the package if lost, in the absence of
showing of fraud or deceit on the part of the shipper.
Where a common carrier has reasonable ground to suspect that the offered
goods are of a dangerous character, the carrier has the right to know the
character of such goods and to insist inspection, if reasonable and practical
under the circumstances, as a condition of receiving and transporting such
goods. To be subjected to unusual search, other than the routinary inspection
procedure customarily undertaken, there must exist proof that would justify
cause for apprehension that the baggage is dangerous as to warrant exhaustive
inspection, or even refusal to accept carriage of the same.
Case: Northwest Airlines vs. Laya
- The fact that the plaintiff was greatly inconvenienced by the fact that
his attaché case was subjected to further inspection does not
warrant imposition of liability because he was not singled out and
discriminated by the employees of the carrier
- Protection of passengers must take precedence over convenience
- Nevertheless, the implementation of security measures must be
attended by basic courtesies
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
CHAPTER 3
OBLIGATIONS OF PASSENGER AND SHIPPER
– Shipper or passenger is bound by his contractual obligation
– Shipper or the carrier is bound to pay the consideration in the form
of freight or fare
– Shipper and passenger are also bound to exercise due diligence in
avoiding damage or injury
A. NEGLIGENCE OF SHIPPER OR PASSENGER
- The obligation to exercise due diligence is not limited to the carrier.
The shipper is obliged to exercise due diligence in avoiding damage
or injury.
- Nevertheless, contributory negligence on the part of the shipper/
passenger would only mitigate the carrier’s liability; it is not a total
excuse.
- However, if the negligence of the shipper/ passenger is the
proximate and only cause of the loss, then, the carrier shall not be
liable. The carrier may overcome the presumption of negligence
and may be able to prove that it exercised extraordinary diligence in
handling the goods or in transporting the passenger.
The carrier may be able to prove that the only cause of the loss of the
goods is any of the following:
1. Failure of the shipper to disclose the nature of the goods;
2. Improper marking or direction as to the destination;
3. Improper loading when he assumes such responsibility.
The shipper must likewise see to it that the goods are properly
packed; otherwise, liability of the carrier may either be mitigated or
barred depending on the circumstances.
Art. 1741. If the shipper or owner merely contributed to the loss,
destruction or deterioration of the goods, the proximate cause thereof
being the negligence of the common carrier, the latter shall be liable in
damages, which however, shall be equitably reduced.
Art. 1761. The passenger must observe the diligence of a good father of a
family to avoid injury to himself.
Art. 1762. The contributory negligence of the passenger does not bar recovery
of damages for his death or injuries, if the proximate cause thereof is the
negligence of the common carrier, but the amount of damages shall be
equitably reduced.
a. Last Clear Chance
A negligent carrier is liable to a negligent passenger in placing himself in peril, if
the carrier was aware of the passenger’s peril, or should have been aware of it
in the reasonable exercise of due care, had in fact an opportunity later than that
of the passenger to avoid an accident.
Last clear chance applies in a suit between the owners and drivers of colliding
vehicles. It does not arise where a passenger demands responsibility from the
carrier to enforce its contractual obligations. For it would be inequitable to
exempt the negligent driver of the carrier and its owner on the ground that the
other driver was likewise guilty of negligence.
b. Assumption of Risk
Passengers must take such risks incident to the mode of travel. Carriers are not
insurers of the lives of their passengers. Thus, in air travel, adverse weather
conditions or extreme climatic changes are some of the perils involved in air
travel, the consequence of which the passenger must assume or expect.
Page 9
However, there is no assumption of risk in a case wherein a passenger boarded
a carrier that was filled to capacity. The act of the passenger in taking the
extension chair does not amount to implied assumption of risk.
Note: there is also no assumption of risk by the mere fact that the carrier
posted notices against such liability
Problem: Although, there is a sign in the bus that says: “do not talk to the driver
while the bus is in motion, otherwise, the company would not assume
responsibility for any accident. Nonetheless, the passengers dared the driver to
race with another bus, as the bus speeds up in the attempt to overtake the
other bus, it failed to slow down. As a result, the bus turns turtle causing the
death and injuries to passengers. Is the bus company liable?
Answer: Yes. The bus company is obligated to exercise utmost diligence in
carrying passengers. This liability cannot be eliminated or limited by simply
posting notices. The passenger cannot be said to have assumed the risk of being
injured when he urged the driver to accept the dare. At most, the passengers
can only be said to be guilty of contributory negligence which would mitigate
the liability of the driver, since the proximate cause of the accident was the
driver’s willful and reckless act in running the race with the other bus.
Case: Cesar Isaac vs. A.L. Ammen Transportation Co, Inc.
- Where a carrier’s employee is confronted with a sudden emergency,
the fact that he is obliged to act quickly and without a chance for
deliberation must be taken into account, and he is not led to the
same degree of care that he would otherwise be required to exercise
in the absence of such emergency but must exercise only such care
as any ordinary prudent person would exercise under like
circumstances and conditions, and the failure on his part to exercise
the best judgment the case renders possible does no establish lack
of care and skill on his part which renders the company liable.
Case: Compania Maritima vs. CA and Vicente Concepcion
- While the act of private respondent in furnishing petitioner with an
inaccurate with of the payloader cannot successfully be used as an
excuse by petitioner to avoid liability to the damage thus caused,
said act constitutes a CONTRIBUTORY CIRCUMSTANCE to the
damage caused on the payloader, which mitigates the liability for
damages of petitioner in accordance with Article 1741.
Case: Philippine National Railways vs. CA
- While petitioner failed to exercise extraordinary diligence as
required by law, it appears that the deceased was chargeable with
contributory negligence.
- Since he opted to sit on the open platform between the coaches of
the train, he should have held tightly and tenaciously on the upright
metal bar found at the side of said platform to avoid falling off from
the speeding train
B. FREIGHT
a. Amount to be Paid
The regulation of rates is founded upon the valid exercise of the Police Power of
the state in order to protect the public from arbitrary and excessive rates while
maintaining the efficiency and quality of services rendered. The fixing of just
and reasonable rates involves a balancing of investor and the consumer
interest.
Although the consideration that should be paid to the carrier is still subject to
the agreement between parties, what can be agreed upon should not be
beyond the maximum amount fixed by appropriate government agency.
b. Who will pay
Although either of the shipper or the consignor may pay the freight before or at
time the goods are delivered to the carrier for shipment, nonetheless, it is the
consignor (whom the contract of carriage is made) who is primarily liable for the
payment of freight whether or not he is the owner of the goods. The obligation
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
to pay is implied from the mere fact that the consignor has placed the goods
with the carrier for the purpose of transportation.
c. Time to pay
Code of Commerce provides that in the absence of any agreement, the
consignee who is supposed to pay must do so within 24-hours from the time of
delivery.
Article 374. The consignees to whom the shipment was made may not defer
the payment of the expenses and transportation charges of the goods they
receive after the lapse of twenty-four hours following their delivery; and in case
of delay in this payment, the carrier may demand the judicial sale of the goods
transported in an amount necessary to cover the cost of transportation and the
expenses incurred.
(1) Carriage of Passengers by Sea
With respect to carriage of goods by sea, the tickets are purchased in advance.
Carriers are not supposed to allow passengers without tickets --- the carrier is
bound to observe a “No Ticket, No Boarding Policy”. The carrier shall collect/
inspect the passenger’s ticket within one hour from vessel’s departure as not to
disrupt resting or sleeping passengers.
If the vessel is not able to depart on time and the delay is unreasonable, the
passenger may opt to have his/ her ticket refunded without refund service fee.
Delayed voyage means “late departure of the vessel from its port of origin and/
or late arrival of the vessel to its port of destination”. Unreasonable delay
means “the period of time that has lapsed without just cause and is solely
attributable to the carrier which has prejudiced the transportation of the
passenger and/ or cargoes to their port of destination.
A passenger who failed to board the vessel can refund or revalidate the ticket
subject to surcharges. Revalidation means “the accreditation of the ticket that
is not used and intended to be used for another voyage.
(2) Carrier’s Lien
If consignor or the consignee fails to pay the consideration for the
transportation of goods, the carrier may exercise his lien in accordance with Art.
375 of Code of Commerce:
ARTICLE 375. The goods transported shall be especially bound to answer for
the cost of transportation and for the expenses and fees incurred for them
during their conveyance and until the moment of their delivery.
This special right shall prescribe eight days after the delivery has been made,
and once prescribed, the carrier shall have no other action than that
corresponding to him as an ordinary creditor.
DEMURRAGE
Demurrage is the compensation provided for the contract of affreightment for
the detention of the vessel beyond the time agreed on for loading and
unloading. It is the claim for damages for failure to accept delivery. In broad
sense, very improper detention of a vessel may be considered a demurrage.
Technically, liability for demurrage exists only when expressly stipulated in the
contract.
Using the term in broader sense, damages in the nature of demurrage are
recoverable for a breach of the implied obligation to load or unload the cargo
with reasonable dispatch, but only by the party to whom the duty is owed and
only against on who is a party to the shipping contract. Notice of arrival of
vessels or conveyances, or their placement for purposes of unloading is often a
condition precedent to the right to collect demurrage charges.
SHIPPER’S LOAD AND COUNT
> it may be stipulated in the Bill of Lading that the shipper has the sole
responsibility for the quantity, description and condition of the cargoes shipped
in container vans.
Page 10
> in this agreement, the contents are not required to be checked and
inventoried by the carrier at the port of loading or before said carrier enters the
port of unloading in the Philippines since it is the shipper who has the sole
responsibility for the quantity, description and condition of the cargoes shipped
in the container vans.
> a shipment under this arrangement is not inspected or inventoried by the
carrier whose duty is only to transport and deliver the containers in the same
condition as when the carrier received and accepted the containers for
transport.
DUTIES OF PASSENGER
> passenger must pay the proper fare for the transportation of said passenger.
He:
1. Must present himself in the proper place
2. Must present himself at the proper time
3. Is obligated not to bring such luggage that is in excess of the weight
and size prescribed by regulations or contract
4. Is prohibited from transporting prohibited materials or goods,
including animals.
TRAVEL DOCUMENTS
> it is the obligation of the passenger, not the carrier, to secure the appropriate
travel documents
>passenger must take ordinary care of his concerns
However, airline may be held liable if the loss of documents was due to the
negligence of its employee.
AIR TRANSPORTATION OF PASSENGERS
Civil Aviation Regulations provide for the following unacceptable conducts:
1. No person on board may interfere with a crew member in the
performance of his or her duties
2. Each passenger shall fasten his or her seat belt and keep it fastened
while the seat belt sign is lighted
3. No person on board an aircraft shall recklessly or negligently act or
omit to act in such a manner as to endanger the aircraft or persons
and property therein
4. No person may secrete himself or herself nor secret cargo on board
an aircraft
5. No person may smoke while the no-smoking sign is lighted
6. No person may smoke in any airplane lavatory
7. No person ma tamper with, disable or destroy any smoke detector
installed in any airplane lavatory
CHAPTER 4
DEFENSES OF COMMON CARRIERS
PROXIMATE CAUSATION
- Common carrier is presumed negligent the moment he fails to
deliver the goods to its destination or the moment the passenger did
not reach his destination while riding the carrier
- Not applicable to a contract of carriage
- Injured passenger or owner of goods need not prove causation to
establish his case
- Presumption arises upon the happening of the accident
Article 1734 (No other defense may be raised: exclusive or closed list)
1. Flood, storm, earthquake, lightning, or other natural disaster or calamity
2. Act of the public enemy in war, whether international or civil
3. Act or omission of the shipper or owner of the goods
4. The character of the goods or defects in the packing or in the containers
5. Order or act of competent public authority
6. Exercise of extraordinary diligence
Fortuitous Event – to be a valid defense must be established to be the
proximate cause of the loss
Note: Since common carrier is presumed is to be negligent, it has been
observed that the DOCTRINE of PROXIMATE CAUSE is INAPPLICABLE to a
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
contract of carriage. The injured passenger or owner of goods need not prove
causation to establish his case.
The absence of causal connection is only a matter of defense.
Requisites of Fortuitous Event:
1. The cause of the unforeseen and the unexpected occurrence, or of the
failure of the debtor to comply with his obligation, must be
independent of the human will
2. It must be impossible to foresee the event which constitutes the caso
fortuito, or if it can be foreseen, it must be impossible to avoid
3. The occurrence must be such as to render it impossible for the debtor
to fulfill his obligation in a normal manner
4. The obligor (debtor) must be free from any participation in or the
aggravation of the injury resulting to the creditor
Art. 1739. In order for the common carrier to be exempted from responsibility,
the natural disaster must have been the proximate and only cause of the loss.
However, the common carrier must exercise due diligence to prevent or
minimize loss before, during and after the occurrence of flood, storm or other
natural disaster in order that the common carrier may be exempted from
liability for the loss, destruction, or deterioration of the goods.
Fire – not considered as a natural calamity or disaster
Fire caused by FSELO– a natural calamity
Storm – the presence of strong winds caused by the monsoon are not within the
contemplation of Art. 1734
Hijacking – does not fall under the categories of exempting causes; the common
carrier is presumed to be at fault or to have acted negligently unless there is a
proof of extraordinary diligence on its part
Mechanical defects – damage or injury resulting from mechanical defects is not
a damage or injury that was caused by fortuitous event; carrier is liable to its
passengers for damages caused by mechanical defects of the conveyance
(breakage of a faulty drag-link spring, fracture of the vehicle’s right steering
knuckle, defective breaks)
- One of the reason why carrier is made liable despite the presence
of mechanical defect is the absence of privity between the
passenger and the manufacturer
Case: Juntilla v. Fontanar
- “Tire-blowouts” was not considered as fortuitous event although it was
alleged that the tires were in good condition; no evidence was presented
to show that the evidence were due to adverse road conditions – the
carrier must prove all angles.
- The explosion could have been caused by too much air pressure injected
into the tires and the fact that the jeepney was overloaded and speeding
at the time of the accident.
OTHER INVALID DEFENSES
1. Damage to cargo due to EXPLOSION of another cargo – not
attributable to peril of the seas or accidents of navigation.
2. Damage by WORMS and RATS resulting to damage to cargoes –
can’t be cited as an excuse by the carrier.
3. Damage by WATER through a port which had been left open or
insufficiently fastened on sailing.
4. Carrier cannot escape liabilities to third persons if damage was
caused by BARRATRY – where the master or crew of the ship
committed unlawful acts contrary to their duties – includes theft and
fraudulently running the ship ashore.
Cases:
1. Problem: A carrier bus on its way to its destination encountered an
engine failure, thus, it has to be repaired for 2 days. And while in the
repair shop, a typhoon came resulting to the spoilage of cargoes.
Answer: A typhoon although a natural disaster, is not a valid defense
if it is shown that it was not the only cause of the loss. Especially
Page 11
 when the facts indicate that the typhoon was foreseeable and could
have been detected through the exercise of reasonable care.
Cargoes should have been secured while the bus was being repaired
for 2 days.
2. Problem: A passenger told the driver that he has valuable items in
his bag which was placed under his feet and he asked the driver (to
which he is seated near) to watch for the bag while he is asleep.
(a) There have been incidents of throwing of stones at passing
vehicles in the North Express Way. While the bus was
traversing the super highway, a stone hurled from the overpass
and hit the passenger resulting to injuries. Can the passenger
hold the bus liable for damages?
Answer: Yes. The incident was foreseeable due the prior
incidents of stone hurling. The bus should have exercised
utmost diligence and employed adequate precautionary
measures to secure safety of passengers since the incident was
foreseeable. .
HOWEVER, if the stone throwing was entirely unforeseeable
and the carrier exercised the utmost diligence, then, the bus
can’t be held liable.
Nonetheless, the burden of proof is on the carrier to prove
such exercise of diligence. It is up to the carrier to overthrow
the presumption of negligence.
If the passenger decides to file a case, all the passenger has to
do is to prove that she was a passenger of the bus and that she
suffered injuries while on board the bus.
(b) Supposing that there were armed men who staged a hold-up
while the bus was speeding along the highway. One of them
stole the passenger’s bag and wallet while pointing a gun him.
Is the bus liable?
Answer: No. Hand-carried luggage are governed by necessary
deposit. Besides, theft with use of arms or through irresistible
force is a force majeure which exempts carriers from liability.
3. Hi-jacking cannot exculpate the carrier from liability if it is shown
that the employees of the carrier were not overwhelmed by the
hijackers and that there was no showing of irresistible force. Since,
there were 4 employers while there were only 2 hijackers and only
one of them was armed with bladed weapon.
ON THE OTHER HAND, a hijacking by 3 armed men is an event which
is considered to be beyond the control of the carrier. Thus, the
carrier may be adjudged from liability if it can be proven that the
hijacking was unforeseeable.
Case: Philippine American General Insurance Co. vs. MCG
- Even in cases where a natural disaster is the proximate and only
cause of the loss, a common carrier is still required to exercise due
diligence to prevent or minimize loss before, during and after the
occurrence of the natural disaster, for it to be exempt from liability
under the law for the loss of the goods
Case: Pilapil vs. CA
- Facts: a bystander alongside national highway hurled a stone at the
left side of the bus, hitting petition above his left eye which resulted
to partial loss of the left eye’s vision
- SC: A common carrier does not give its consent to become an insurer
of any and all risks to passengers and goods. It merely undertakes to
perform certain duties to the public as the law imposes, and holds
itself liable for any breach thereof.
- The law does not make the carrier an insurer of the absolute safety
of its passengers
- Article 1763: A common carrier is responsible for injuries suffered by
a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carrier’s employees
through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
o Clearly, a tort committed by a stranger which causes
injury to a passenger does not accord the latter a cause of
action against the carrier. The negligence for which a
common carrier is held responsible is the negligent
omission by the carrier’s employees to prevent the tort
from being committed when the same could have been
foreseen and prevented by them
Case: Franklin Gacal vs. PAL
- It is therefore not enough that the event should not have been
foreseen or anticipated, as is commonly believed, but it must be one
impossible to foresee or to avoid.
- The mere difficulty to foresee the happening is not the impossibility
to foresee the same
PUBLIC ENEMY
- Presupposes a state of war and refers to the government of a foreign
nation at war with the country to which the carrier belongs, though not
necessarily with that to which the owner of the gods owes allegiance.
- Thieves, rioter, and insurrectionists are not included. They are merely
private depredators for whose acts a carrier is answerable.
- Rebels in insurrection against their own government are generally not
embraced in the definition of public enemy. However, if the rebels hold a
portion of territory, they have declared their impendence, cast off their
allegiance and has organized armed hostility to the government, and the
authority of the latter is at the time overthrown, such an uprising may
take on the dignity of a civil war, and so matured and magnified, the
parties are belligerent and are entitled to belligerent rights.
- Depredation by pirates (which are enemy of all civilized nation) excuses
the carrier from liability.
- Common carriers may be exempted from responsibility only if the act of
the public enemy has been the proximate and only cause of the loss.
Moreover, due diligence must be exercised to prevent or at least minimize
the loss before, during and after the performance of the act of the public
enemy in order that the carrier may be exempted from liability for the
loss, destruction, or deterioration of the goods.
IMPROPER PACKING
Character of the goods and defects in the packaging or in the containers are
defenses available to the common carrier. Similarly, the Carriage of Good by Sea
Act provides that carrier shall not liable for:
1. Wastage in bulk or weight or any damages arising from the inherent
defect, quality or vice of goods;
2. Insufficiency of packing;
3. Insufficiency or inadequacy of the marks, or
4. Latent defects no discoverable by due diligence.
However, NCC likewise provides:
Art. 1742. Even if the loss, destruction, or deterioration of the goods should be
caused by the character of the goods, or the faulty nature of the packing or
the containers, the common carrier must exercise due diligence to forestall or
lessen the loss.
Thus, if the carrier accepted the goods knowing the fact of improper packing or
even if the carrier does not know but the defect was nonetheless apparent
upon ordinary observation, it is not relived from liability for loss or injury to
goods resulting therefrom.
Cases:
1. Problem: A carrier knowing that some of a cargo of sacks of rice had
big holes and others had openings just loosely tied with strings
resulting to the spillage of rice during the trip. Thus, there was
shortage in the delivery of the cargoes. When sued due to the
shortage, the carrier interposed a defense that it was not liable since
the shortage was due to the defective condition of the sacks. Decide.
Answer: Carrier must still exercise extraordinary diligence if the fact
of improper packing is known to the carrier or its servants, or
apparent upon ordinary observation. If the carrier accepted the
Page 12
 cargo without protests or exception notwithstanding such condition,
he is not relived of liability for damage resulting therefrom. Apply
Article 1742.
ORDER OF PUBLIC AUTHORITY
Art. 1743. If through the order of public authority the goods are
seized or destroyed, the common carrier is not responsible, provided said
public authority had power to issue order.
Cases:
1. Carrier was not excused from liability since the order of an acting
mayor was not considered as a valid order of a public authority. It is
required that public authority who issued the order must be duly
authorized to issue the order.
2. Carriage of Goods by Sea Act – provides that carrier shall not
responsible for loss or damage resulting from “arrest or restraint of
princes, rulers, or people, or seizure under legal process” and from
“quarantine restrictions”.
DEFENSES IN CARRIAGE OF PASSENGERS
- Primary defense of carrier is exercise of extraordinary diligence in
transporting passengers. Even if there is a fortuitous event, the carriers must
also present proof of exercise of extraordinary diligence.
Art. 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the carrier’s employees,
although such employees may have acted beyond the scope of their authority
or in violation of the orders of the common carriers.
The liability does not cease even upon proof that they exercised diligence in
the selection and supervision of their employees.
Art. 1763. Carrier is responsible for injuries suffered by a passenger on
account of the willful acts or negligence of other passengers or of strangers, if
the common carrier’s employees through the exercise of the diligence of a
good father of a family could have prevented or stopped the act or omission.
a. Employees
- Carrier is liable for the acts of its employees. It can’t escape liability
by claiming that it exercised due diligence in supervision and
selection of its employees (unlike in quasi-delicts).
Reasons for the rule:
1. Undertaking of the carrier requires that its passenger that full
measure of protection afforded by the exercise of high degree of
care prescribed by law, inter alia from violence and insults at the
hands of strangers and other passengers, but above all, from the acts
of the carrier’s own servants.
2. The liability of the carrier for the servant’s violation of duty to
performance of his contract to safely transport the passenger,
delegating therewith the duty of protecting the passenger with
utmost care prescribed by law.
3. As between the carrier and the passenger, the former must bear the
risk of wrongful acts or negligence of the carrier’s employees against
passenger, since it, and not the passenger, has the power to select
and remove them.
Rationale: On the other hand, if the ship owner derives profits from
the results of the choice of the captain and the crew, when the choice
turns out successful, it is also just that he should suffer the
consequences of an unsuccessful appointment, by application of the
rule of natural law contained in the partidas --- that he who enjoys
the benefits derived from a thing must likewise suffer the losses that
ensue therefrom
- Note: Willful acts of the employees include theft
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
b. Other Passengers and Third Persons
- With respect to acts of strangers and other passengers resulting in
injury to a passenger, the availability of such defense is also subject
to the exercise of a carrier of due diligence to prevent or stop the act
or omission.
- Negligence of the carrier need not be the sole cause of the damage
or injury to the passenger or the goods. The carrier would still be
liable even if the contractual breach concurs with the negligent act
or omission of another person.
Remember: the negligence of the other river in a collision is NOT a
prejudicial question to an action against the carrier’s company.
Article 1759. Common carriers are liable for the death of or injuries to
passenger through the negligence or willful acts of the former’s employees,
although such employees may have acted beyond the scope of their authority
or in violation of the orders of the common carriers.
PASSENGER’S BAGGAGES
- The term baggage has been defined to include whatever articles a
passenger usually takes with him for his own personal use, comfort and
convenience
- Rules that are applicable to goods that are being shipped are also
applicable to baggage delivered to the custody of the carrier. Arts.
1733. 1734 and 1736 of Civil Code are applicable.
- However, if the luggage was hand-carried, Arts. 1998, 2000-2003 shall
apply.
Distinction: W/N the baggage is in the personal custody of the passenger.
 if yes, hand carried baggage
 if no, checked-in baggage
Art. 1998. The deposit of effects made by the travelers in hotels or inns shall
also be regarded as necessary. The keepers of hotels or inns shall be
responsible for them as depositaries, provided that notice was given to them,
or to their employees, of the effects brought by the guests and that, on the
part of the latter, they take the precautions which said hotel-keepers or their
substitutes advised relative to the care and vigilance of their effects. (1783)
Art. 2000. The responsibility referred to in the two preceding articles shall
include the loss of, or injury to the personal property of the guests caused by
the servants or employees of the keepers of hotels or inns as well as
strangers; but not that which may proceed from any force majeure. The fact
that travelers are constrained to rely on the vigilance of the keeper of the
hotels or inns shall be considered in determining the degree of care required
of him. (1784a)
Art. 2001. The act of a thief or robber, who has entered the hotel is not
deemed force majeure, unless it is done with the use of arms or through an
irresistible force. (n)
Art. 2002. The hotel-keeper is not liable for compensation if the loss is due to
the acts of the guest, his family, servants or visitors, or if the loss arises from
the character of the things brought into the hotel. (n)
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest.
Any stipulation between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in articles 1998 to 2001 is suppressed
or diminished shall be void. (n)
Cases:
1. Despite the fact that the carrier gave notice that it shall not be liable
for baggage brought in by passengers, the carrier is still liable for lost
hand-carried luggage since it is governed by rules on necessary
deposits. Under Art. 20000, the responsibility of the depositary
includes the loss of property of the guest caused by strangers but
Page 13
 not that which may proceed from force majeure. Moreover, article
2001 considers theft as force majeure if it is done with use of arms
or through irresistible force.
2. Even if the passenger did not declare his baggage nor pay its charges
contrary to the regulations of the bus company, the carrier is still
liable in case of loss of the baggage. Since, it has the duty to exercise
extraordinary diligence over the baggage that was turned over to the
carrier or placed in the baggage compartment of the bus. The non-
payment of the charges is immaterial as long as the baggage was
received by the carrier for transportation.
CHAPTER 5
BILL OF LADING AND OTHER FORMALITIES
I. CONCEPTS, DEFINITION AND KINDS
Bill of Lading (BOL)
- a written acknowledgement, signed by the master of a vessel or
other authorized agent of the carrier that he has received the
described goods from the shipper, to be transported on the
expressed terms to be described the place of destination, and to be
delivered to the designated consignees of the parties.
- It operates as a (1) RECEIPT (2) as a CONTRACT (3) as a DOCUMENT
OF TITLE.
A BOL is not necessary for the perfection of a contract of carriage. Thus, the
obligation to exercise extraordinary diligence by the carrier is still required even
if there is no bill of lading.
In the absence of the bill of lading, disputes shall be determined on the basis of
the provisions in the New Civil Code and suppletory by the Code of Commerce.
KINDS of BILL of LADING:
1. Clean Bill of Does not contain any notation indicating any defect in
Lading the goods.
2. Foul Bill of One that contains the abovementioned notation.
Lading
3. Spent Bill of The goods are already delivered but the bill of lading
Lading was not yet returned (upon delivery, the carrier is
supposed to retrieve the covering bill of the goods)
4. Through Bill Issued by a carrier who is obliged to use the facilities of
of Lading 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 BOL is honored by
the second and other interested carriers who don’t
issue their own BOL.
5. On Board Bill -states that the goods have been received on board
the vessel which is to carry the goods.
-apparently guarantees the certainty of shipping as
well as the seaworthiness of the vessel to carry the
goods.
-basically means that the goods are already inside the
vessel
6. Received for -states that the goods have been received for shipment
Shipment Bill with or without specifying the vessel by which the
goods are to be shipped.
-issued when conditions are not normal and there is
insufficiency of shipping space.
7. Custody Bill The goods are already received by the carrier but the
of Lading vessel indicated therein has not yet arrived in the port.
8. Port Bill of The vessel indicated in the BOL that will transport the
Lading goods is already in the port.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
Note: A party to a maritime contract would require an on board bill of lading
because of its apparent guaranty of certainty of shipping as well as the
seaworthiness of the vessel which is to carry the goods.
Effectivity of BOL
- upon its delivery to and acceptance by the shipper.
- The acceptance of the bill without dissent raises the presumption
that all the terms therein were brought to the knowledge of the
shipper and agreed to by him, and in the absence of fraud or
mistake, he is stopped thereafter from denying that he assented to
such claims (whether he reads the bill or not)
THE 3-FOLD NATURE OF THE BILL OF LADING
- The three fold nature of a bill of lading is obviously applicable only to
carriage of goods
- As receipt and document of title: issued for goods
- As contract: applies to tickets issued to passengers
I. RECEIPT
- As comprehending all methods of transportation, a BOL may be
defined as a written acknowledgement of the receipt of goods and
an agreement to transport and to deliver them at a specified place to
a person named or on his order.
- Other terms, “shipping receipts”, “forwarders receipts”, and
“receipts for transportation”.
- (SC) the designation however is not material, and neither is the form
of the instrument. If it contains an acknowledgement by the carrier
of the receipt of goods for transportation it is, in legal effect a BOL.
- The issuance of a bill of lading carries the presumption that the
goods were delivered to the carrier issuing the bill, for immediate
shipment, and it is nowhere questioned that a bill of lading is prima
facie evidence of the receipt of the goods by the carrier
II. CONTRACT
- It expresses the terms and conditions of the agreement between the
parties; names the parties; includes consignees etc. It is the law
between the parties bound by its terms and conditions.
Contracts of Adhesion
- It is to be construed liberally in favor of the shipper who adhered to
such bill as it is a contract of adhesion. The only participation of the
party is the signing of his signature or his adhesion thereto.
- The shipper or passenger is bound by the terms and conditions if
there is no occasion to speak of ambiguities or obscurities
- If the words appear to be contrary to the evident intention of the
parties, the latter shall prevail over the former
ART. 24 (NCC). In all contractual property or other relations, when one of the
parties is at a disadvantage on account of his moral dependence, ignorance
indigence, mental weakness, tender age and other handicap, the court must be
vigilant for his protection.
Parole Evidence Rule
- BOL is covered by the parole evidence rule, that the terms of the
contract are conclusive upon the parties and evidence aliunde is not
admissible to vary or contradict a complete enforceable agreement,
subject to well defined exceptions
- The mistake contemplated as an exception to the parole evidence
rule is one which is a mistake of fact mutual to the parties.
- Note that if such is not raised inceptively in the complaint or in the
answer, a party cannot later on be permitted to introduce parole
evidence thereon
Bill of Lading as Evidence
- The BOL is the legal evidence of the contract and the entries thereof
constitutes prima facie evidence of the contract.
- All the essential elements of a valid contract (cause, consent, object)
are present when such bill are issued.
Page 14
III. ACTIONABLE DOCUMENT/DOCUMENT OF TITLE
- In a contractual obligation, the bill of lading can be categorized as an
actionable document under the Rules of Court. Hence, the bill of
lading must be properly pleaded either as causes of action or
defenses
- ART 1507 (NCC). A document of title 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 in such document is a negotiable
document of title.
- If the document of title contains the required words of negotiability
to make the instrument negotiable under Article 1507 of the NCC,
the document remains to be negotiable even if the words “not
negotiable” or non-negotiable are places thereon
o a. Bearer document- negotiated by delivery
o b. Order document- negotiated by indorsement of the
specified person so named
- Effects of negotiation. Negotiation of the document has the effect of
manual delivery so as to constitute the transferee the owner of the
goods.
BASIC STIPULATIONS
- Provided for in the Code of Commerce
- (for overland transportation, maritime commerce and electronic
documents, please refer to the textbook for the codal pp. 203-210)
PROHIBITED AND LIMITING STIPULATION
1. Exempting the carrier from any and all liability for loss or damage
occasioned by its own negligence - INVALID as it is contrary to public
policy.
2. Parties may stipulate that the diligence to be exercised by the carrier
for the carriage of goods be less than extraordinary diligence if it is:
a. in writing and signed by both parties
b. supported by a valuable consideration other than the
service rendered by the common carrier
c. the stipulation is just, reasonable and not contrary to law.
3. Providing an unqualified limitation of such liability to an agreed
valuation - INVALID
4. Limiting the liability of the carrier to an agreed valuation unless the
shipper declares a higher value and pays a higher rate of freight-
VALID and ENFORCEABLE.
Note: the purpose of limiting stipulations in the bill of lading is to protect the
common carrier. Such stipulation obliges the shipper/consignee to notify the
common carrier of the amount that the latter may be liable for in case of loss of
the goods
Remember:
1. The parties cannot stipulate so as to totally exempt the carrier from
exercising any degree of diligence whatsoever
2. The parties cannot stipulate that the common carrier shall exercise
diligence less than the diligence of a good father of a family
RECOVERY OF DAMAGES FROM CARRIER FOR CARRIAGE OF GOODS:
1. Inter-island - if goods arrived in damaged condition (Art. 366):
a. If damage is apparent, the shipper must file a claim immediately (it may be
oral or written);
b. If damage is not apparent, he should file a claim within 24 hours from
delivery.
The filing of claim under either (1) or (2) is a condition precedent for recovery.
If the claim is filed, but the carrier refuses to pay: enforce carrier’s liability in
court by filing a case:
a. within 6 year, if no bill of lading has been issued; or
b. within 10 years, if a bill of lading has been issued.
2. Overseas –where goods arrived in a damaged condition from a foreign port
to a Philippine port of entry: (COGSA)
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
a. upon discharge of goods, if the damage is apparent, claim should be filled
immediately;
b. if damage is not apparent, claim should be filled within 3 days from delivery.
Filing of claim is not a condition precedent, but an action must be filed against
the carrier within a period of 1 year from discharge; if there is no delivery, the
one-year period starts to run from the day the vessel left port (in case of
undelivered or lost cargo), or from delivery to the arrastre (in case of damaged
cargo).
Where there was delivery to the wrong person, the prescriptive period is 10
years because there is a violation of contract, and the carriage of goods by sea
act does not apply to misdelivery. (Ang v. American SS Agencies (19 SCRA 631)
CARRIAGE OF GOODS BY SEA ACT (C.A. No. 65)
- Applies suppletorily to the Civil Code if the goods are to be shipped
form a foreign port to the Philippines
- COGSA is applicable in international maritime commerce. It can be
applied in domestic sea transportation if agreed upon by the parties.
(paramount clause)
- Under the Sec. 4 (5), the liability limit is set at $500 per package
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 v. IAC, 150 SCRA 463).
- If by agreement, another maximum amount than that mentioned
may be fixed provided that such maximum shall not be less than
$500 and in no event shall the carrier be liable for more than the
amount of damage actually sustained
Note that Art. 1749 of the NCC applies to inter-island trade.
Meaning of Package
- If the goods are shipped in cartons, each carton is considered a
package even if they are stored in container vans
- When what ordinarily be considered packages are shipped in a
container supplied by the carrier and the number of such units is
disclosed in the shipping documents, each of those units and not the
container constitutes the package.
Prescriptive periods
- Suit for loss or damage to the cargo should be brought within one
year after:
a. delivery of the goods; or
b. the date when the goods should be delivered. (Sec. 3[6])
The one-year prescriptive period is suspended by:
1. express agreement of the parties (Universal Shipping Lines, Inc. v.
IAC, 188 SCRA 170)
2. when an action is filed in court until it is dismissed. (Stevens & Co. v.
Nordeutscher Lloyd, 6 SCRA 180)
Things to Remember:
1. Article 1757 provides that the responsibility of a common carrier to
exercise utmost diligence for the safety of PASSENGERS CANNOT be
dispensed with or lessened by stipulation or statement on tickets or
otherwise
2. Article 1750 of the Civil Code provides that a contract fixing the sum
that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the GOODS is VALID, if it is
REASONABLE and JUST under the circumstances, and has been
FAIRLY AND FREELY AGREED UPON
3. It is unfair to deny the shipper the right to declare the actual value of
his cargos and to recover such true value in case of loss or damage
Note: it has been suggested that the signature of the shipper in the
bill of lading with regards to the limitation applies only to reduction
of diligence and not to the stipulated amount to be paid.
4. It is unjust and contrary to public policy if the common carrier’s
liability for acts committed by thieves, or of robbers who do not act
with grave or irresistible threat, violence or force, is dispensed with
or diminished
Page 15
 5. The common carrier may EXEMPT itself from liability if he can prove
that:
a. He observed extraordinary diligence
b. The proximate and only cause of the incident is a
fortuitous event or force majeure
c. The proximate and only cause of the loss is the character
of the goods or defects in the packing or in the containers
d. The proximate and only cause of the loss is the order or
act of competent public authority
Note: to limit its liability or at least mitigate the same, the carrier can
cite CONTRIBUTORY NEGLIGENCE of the plaintiff and the DOCTIRNE
OF AVOIDABLE CONSEQUENCES
Case: Sea-Land Service Inc. vs. IAC
- Liability of a common carrier for loss of or damage to goods
transported by it under a contract of carriage is governed by the laws
of the country of destination
- COGSA is applicable up to the final port of destination and that the
fact that transshipment was made on an interisland vessel did not
remove the contract of carriage of goods from the operation of said
Act.
Case: Citadel Lines Inc. vs. CA
- The duty of the consignee is to prove merely that the goods were
lost. Thereafter, the burden is shifted to the carrier to prove that it
has exercised the extraordinary diligence required by law. And, its
extraordinary responsibility lasts from the times that goods are
unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee or to the person who
has the right to receive them
Case: Everett Steamship Corporation vs. CA
- Considering that the shipper did not declare a higher valuation it had
itself to blame for not complying with the situations
- The trial court’s ratiocination that private respondent could not have
“fairly and freely” agreed to the limited liability clause in the bill of
lading because the said conditions were printed in small letters does
not make the bill of lading invalid
Bill of Lading as Document of Title
 Bill of lading is a document of title under the Civil Code. It can be a
negotiable document of title.
A. Negotiability
- It is negotiable if it is deliverable to the bearer, or to the order of any person
named in such document. (Art. 1507, Civil Code)
a) Effect of Stamp or Notation “Non-Negotiable”
 the document remains to be negotiable even if the words “not-
negotiable” or “non-negotiable” are placed thereon. - Art. 1510 (Civil
Code)
B. How Negotiated
a) Bearer document (Art. 1508 and 1511)
- may be negotiated be delivery
b) Order document (Sec. 38, NIL and Art. 1509, NCC)
- can only be negotiated through the indorsement of the specified person so
named.
- such indorsement may be in blank, to bearer or to a specified person.
 Where a negotiable document of title is transferred for value by
delivery, and the endorsement of the transferor is essential for
negotiation, the transferee acquires a right against the transferor to
compel him to endorse the document. xxx (Art. 1515, Civil Code)
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
C. Effects of Negotiation
- has the effect of manual delivery so as to constitute the transferee the owner
of the goods
- results in the transfer of ownership because transfer of document likewise
transfers control over the goods
- refer to Art. 1513
CHAPTER 6
ACTIONS AND DAMAGES IN CASE OF BREACH
 Cause of action of a passenger and shipper:
a) against common carrier – based on culpa contractual or culpa aquiliana
b) on the part of the driver – based on either culpa delictual or culpa aquiliana
Note: The source of obligation based on culpa contractual is separate and
distinct from quasi-delict.
Article 1903 (last paragraph) – 2 things are apparent:
1. That when an injury is caused by the negligence of a servant or
employee there instantly arises a presumption of law that there was
negligence on the part of the master or the employer either in the
selection of the servant or employee, or in supervision over him
after the selection, or both.
2. That presumption is juris tantum and not juris et de jure (of law and
of right), and consequently may be rebutted
Note however: that Article 1903 of the Civil Code is not applicable to acts of
negligence which constitute the breach of contract. It is applicable only to culpa
contractual.
 The fundamental distinction between obligation of extra-contractual and
those which arise from contract, rests upon the fact that in cases of non-
contractual obligation it is the wrongful or negligent act or omission itself
which creates the vinculum juris, whereas in contractual relations the
vinculum (bond) exists independently of the breach of the voluntary duty
assumed by the parties when entering into the contractual relation.
CONCURRENT CAUSES OF ACTION
- There is one action but several causes of action
- The same act that breaches the contract may also be tort
Note: The cause of action of a passenger or shipper against the common carrier
can be culpa contractual or culpa aquiliana while the basis of liability on the
part of the driver is either culpa delictual or culpa aquiliana. The driver of the
carrier is not liable based on contract because there is NO PRIVITY of contract
between him and the passenger or shipper.
If the negligence of third persons concurs with the breach, the liability of the
third person who was driving the vehicle and/or his employer may be based on
quasi delict. The driver alone may be held criminally liable and civil liability may
be imposed upon him based on delict. In the latter case, the employer is
subsidiarily liable.
Remember: It does not make any difference that the liability of one springs
from the contract while that of the other arises from quasi-delict. If the owner
and driver of the other vehicle are not impleaded, the carrier may implead them
by filing a third party complaint.
 Solidary liability
- In case the negligence of the carrier’s driver and a third person
concurs, the liability of the parties – carrier and his driver, third
person – is joint and several.
NOTICE OF CLAIM AND PRESCRIPTIVE PERIOD
A. Overland Transportation of Goods and Coastwise Shipping
a) When to file a claim with carrier
- Art. 366 constitutes a condition precedent to the accrual of a
right of action against a carrier for damage caused to the
merchandise.
Page 16

 Under Art. 366 of the Code of Commerce, an action for damages is
barred if the goods arrived in damaged condition and no claim is filed
by the shipper within the following period:
1. Immediately if damage is apparent;
2. within twenty four (24) hours from delivery if damage is not
apparent.
- The period does not begin to run until the consignee has received
possession of the merchandise that he may exercise over it the
ordinary control pertinent to ownership.
- This provision applies even to transportation by sea within the
Philippines or coastwise shipping.
- Does NOT apply to misdelivery of goods.
Q: Why does it not apply to misdelivery of goods?
A: In such cases (misdelivery), there can be no question of claim for damages
suffered by the goods while in transport, since the claim for damages arises
exclusively out of the failure to make delivery.
Case: Monica Roldan vs. Lim Ponzo and Co.
- Article 366 of the Commercial Code is limited to cases of claims for
damage to goods actually turned over by the carrier and received by
the consignee.
 But the period prescribed in Art. 366 may be subject to modification by
agreement of the parties.
 The validity of a contractual limitation of time for filing the suit itself
against a carrier shorter than the statutory period thereof has generally
been upheld as such stipulation merely affects the shipper’s remedy
and does not affect the liability of the carrier.
b) Extinctive Prescription
- six (6) years if there is no written contract (bill of lading)
- ten (10) years if there is written contract
 This rule likewise applies to carriage of passengers for domestic
transportation.
B. International Carriage of Goods by Sea
 A claim must be filed with the carrier within the following period:
1. if the damage is apparent, the claim should be filed immediately
upon discharge of the goods; or
2. within 3 days from delivery, if damage is not apparent.
 Filing of claim is not condition precedent. Thus, regardless of whether
the notice of loss or damage has been given, the shipper can still bring
an action to recover said loss or damage within one year after the
delivery of the goods or the date when the goods should have been
delivered
a) Prescription
 Action for damages must be filed within a period of one (1) year from
discharge of the goods.
 The period is not suspended by an extra-judicial demand. (Why?
Transportation of goods by sea should be decided in as short a time as
possible)
o Case: Dole Philippines Inc. vs. Maritime Company of the
Philippines - the prescriptive period is not tolled or
interrupted by a written extra-judicial demand. Article
1155 is NOT applicable.
 The period does not apply to conversion or misdelivery.
 The one (1) year period refers to loss of goods and not to misdelivery.
- Damages arising from delay or late delivery are not the damage or loss
contemplated under the COGSA. The goods are not actually lost or
damaged. The applicable period is ten (10) years.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
Case: Domingo Ang vs. American Steamship Agencies
 What is to be resolved – in order to determine the
applicability of the prescriptive period of one year – is
whether or not there was loss of the goods subject
matter of the complaint.
 Loss contemplates merely 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. (Note: It is not
loss due to misdelivery or delivery to the wrong person.)
 This rule applies in collision cases. The one (1) year period starts not
from the date of the collision but when the goods should have been
delivered, had the cargoes been saved.
Case: Maritime Agencies and Services Inc. vs. CA
- When there is two destination of delivery, the one year period
should commence when the last item was delivered to the
consignee.
Insurance
 The insurer who is exercising its right of subrogation is also bound by
the one (1) year prescriptive period.
 However, it does not apply to the claim against the insurer for the
insurance proceeds. The claim against the insurer is based on contract
that expires in ten (10) years.
II. Recoverable Damages
 Damages – is the pecuniary compensation, recompense or
satisfaction for an injury sustained, or as otherwise expressed, the
pecuniary consequences which the law imposes for the breach of
some duty or violation of some rights.
A. Extent of Recovery (Contractual Breach: Art. 220, NCC)
 Carrier in good faith – is liable only to pay for the damages that are
the natural and probable consequences of the breach of the
obligation and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted.
 Carrier in bad faith or guilty of gross negligence – liable for all
damages, whether the same can be foreseen or not. Those which may
be reasonably attributed to the non-performance of the obligation.
Note: The carrier who may be compelled to pay has the right of recourse
against the employee who committed the negligent, willful or fraudulent act.
B. Kinds of Damages
Article 2216 provides that no proof of pecuniary loss is necessary in order that
moral, nominal, temperate, liquidated or exemplary damages may be
adjudicated. The assessment of such damages, except liquidated ones, is left to
the discretion of the court, according to the circumstances of each case.
However, proof of pecuniary loss is necessary if actual or compensatory
damages are being claimed.
a) Actual or Compensatory Damages
- only for the pecuniary loss suffered by him as he has duly proved
- not only the value of the loss suffered, but also that of the profits
which the obligee failed to obtain
- 2 Kinds:
1. the loss of what a person already possesses (daňo emergente);
2. the failure to receive as a benefit that would have pertained to him
(lucro cesante).
- It should be proven: cannot be decided based on the consideration
of the judge; not to be based on the perception, observation and
consideration of the judge
- With respect to restorative medical procedure: to be entitled to
actual damage, you need to have an EXPERT TESTIMONY. Without
such, you cannot recover.
Page 17

 Damages may be recovered: Art. 2205 (Civil Code)
1) For loss or impairment of earning capacity in cases of temporary or
permanent personal injury;
2) For injury to the plaintiff’s business standing or commercial credit.
 Damages cannot be presumed. The burden of proof rests on the
plaintiff who is claiming actual damages against the carrier.
 In case of goods – the plaintiff is entitled to their value at the time of
destruction. The award is the sum of money which plaintiff would have
to pay in the market for identical or essentially similar goods
 For personal injury and even death – the claimant is entitled to all
medical expenses as well as other reasonable expenses that he incurred
to treat his or her relative’s injuries.
 In case of death – the plaintiff is entitled to the amount that he spent
during the wake and funeral of the deceased. But, expenses after the
burial are not compensable.
 Read Art. 2206 (Civil Code):
 death caused by a crime or quasi-delict shall be at least
P3,000; [The amount of fixed damages is now P50,000.00]
 the defendant shall be liable for the loss of the earning
capacity of the deceased;
 If deceased is obliged to give support, recipient may
demand support from the person causing the death for a
period not exceeding five years
 Spouse, legitimate and illegitimate descendant and
descendants may demand moral damages for mental
anguish by reason of the death of the deceased
1) Loss of earning capacity
Net Earning Capacity = Life Expectancy x [Gross Annual Income less Necessary
Living Expenses]
 Life expectancy – (2/3 x 80 – age at death)
 Net earnings – based on the gross income of the victim minus the
necessary incidental living expenses which the victim would have
incurred if he were alive.
 Amount of living expenses must be established. In the absence of proof,
it is fixed at fifty (50%) of the gross income.
 Rules on loss of earning apply when the breach of the carrier resulted in
the plaintiff’s permanent incapacity.
2) Attorney’s fees
- refer to Art. 2208 of the Civil Code
- attorney’s fees may be awarded in an action for breach of contract
of carriage under par. 1,2,4,5,10 and 11 of Art. 2208.
- If awarded exemplary, one is entitled to attorney’s fees
- 2 kinds: ordinary (compensation to the lawyer); extraordinary
(indemnity as a form of damages suffered due to the breach of
contract)
- You can be awarded if you show that you were forced to litigate
and when you are entitled to exemplary damage.
- But this award is subject to the discretion of the court (you cannot
dictate – usually 10%-15%)
3) Interests
 12% per annum – if it constitutes a loan or forbearance of money
 6% per annum – if it does not constitute loan or forbearance of
money
 12% - for final judgment
Note: No interest, however, shall be adjudged on unliquidated claims for
damages except when or until the demand can be established with reasonably
certainty, the interest shall begin to run form the time the claim is made
judicially or extrajudicially.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
b) Moral Damages
- Includes physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation
and similar injury.
- Though incapable of pecuniary computation, moral damages may be
recovered if they were the proximate result of the defendant’s wrongful
act or omission.
- Moral damages are not awarded to punish the defendant but to
compensate the victim
- May be recovered when there is death or there is malice or bad faith. (in
transportation of passengers)
- Refer to Art. 2219 and 2220 (enumerates cases when moral damages may
be awarded)
- Generally, no moral damages may be awarded where the breach of
contract is not malicious.
- Moral damages may be awarded if the contractual negligence is
considered gross negligence.
- Subject to three conditions in transportation law:
o Death
o Malice or bad faith (must be done in the performance of
the contract of carriage)
o Physical Injuries
- Requisites:
o There must be an injury, whether physical, mental or
psychological, clearly sustained by the claimant
o There must be a culpable act or omission factually
established
o The wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant
o The award of damages is predicated on any of the cases
stated in Art. 2219.
- Factors to consider that could affect the amount to be recovered:
o The extent of humiliation may also determine the amount
of moral damages that can be awarded
o The extent of pain and suffering likewise determines the
award
o Official, political, social and financial standing of the
offended party and the business and financial position of
the offender affect the amount of damages
o The age of the claimant.
c) Nominal Damages
- Refer to Art. 2221-2223 (Civil Code)
- It is adjudicated in order that the right of plaintiff may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any
loss suffered by him.
- The assessment of nominal damages is left to the discretion of the court
according to the circumstances of the case.
- The award of nominal damages is also justified in the absence of
competent proof of the specific amounts of actual damages suffered.
- Cannot co-exist with actual damages.
- There is no loss in nominal damages, unlike in actual and temperate
damages, loss is present which is proven and not proven but rather
ascertained by the court, respectively.
Case: Japan Airlines vs. CA
- The award of moral damages was justified because JAL failed to
make necessary arrangement to transport the plaintiffs on the first
available connecting flight to Manila.
- Only Nominal damages were awarded in the absence of proof of
actual damages
d) Temperate or Moderate Damages
- More than nominal but less than compensatory damages.
- Art. 2224 provides:
 may be recovered when the court finds that some pecuniary loss has
been suffered but its amount cannot, from the nature of the case, be
provided with certainty.
- cannot co-exist with actual damages
Page 18
 - Definite proof of pecuniary loss cannot be offered, although the court is
convinced that there has been such loss.
e) Liquidated Damages
- Those agreed by the parties to a contract, to be paid in case of
breach thereof.
- Ordinarily, the court cannot change the amount of liquidated
damages agreed upon by the parties. However, Art. 2227 of the Civil
Code provides that liquidated damages, whether intended as an
indemnity or a penalty, shall be equitably reduced if they were
iniquitous or unconscionable.
f) Exemplary or Corrective Damages
- Requisites for the award of exemplary damages:
1. They may be imposed by way of example in addition to
compensatory damages, and only after the claimant’s right to them
has been established.
2. They cannot be recovered as a matter of right, their determination
depending upon the amount of compensatory damages that may be
awarded to the claimant.
3. The act must be accompanied by bad faith or done in wanton,
fraudulent, oppressive or malevolent manner.
Note: If gross negligence warrants the award of exemplary damages, with more
reason is its imposition justified when the act performed is deliberate, malicious
and tainted with bad faith. The rationale behind exemplary or corrective
damage is to provide an example or correction from public good.
 The award of exemplary damages in breach of contract of carriage is
subject to the provisions under Art. 2232-2235 of the Civil Code.
Case: Air France vs. Rafael Carrascoso and CA
- The inference of bad faith is there; it may be drawn from the facts
and circumstances set forth therein. The contract was averred to
establish the relation between the parties.
- Deficiency in the complaint in stating that there was bad faith, if any,
was cured by the evidence.
Case: Philippine Airlines Inc. vs. CA
- Moral damages are recoverable in a breach of contract of carriage
where the air carrier thought its agents acted fraudulently or in bad
faith.
- The contract of air carriage generates a relation attended with a
public duty. Neglect or malfeasance of the carrier’s employees
naturally could give ground for an action for damages.
MARITIME LAW
CHAPTER 10
GENERAL CONCEPTS
Maritime Law – is the system of laws which particularly relates to the affairs
and business of the sea, to ships, their crews and navigation and to marine
conveyance of persons and property
Governing Laws:
1. New Civil Code – primary law on maritime commerce
2. Book III Code of Commerce – applied suppletorily
3. Special Laws
a. Salvage Law (Act No. 2616)
b. Carriage of Goods by Sea Act (CA No. 65)
c. Ship Mortgage Decree of 1978 (PD 1521)
REAL AND HYPOTHECARY NATURE OF MARITIME LAW
Case: Philippine Shipping Company, et al. vs. Francisco Garcia Vergara
 That which distinguishes the maritime from the civil law and even
from the mercantile law in general is the real and hypothecary
nature of the former
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
 Evidence of this “real “ nature of maritime law:
o The limitation of the liability of the agents to the actual
value of the vessel and the freight money
o The right to retain the cargo and the embargo and
detention of the vessel even cases where the ordinary
civil law would not allow more than a personal action
against the debtor or person liable
 This repeals the civil law to such extent that, in certain cases where
the mortgaged property is lost no personal action lies against the
owner or agent of the vessel
 Two reasons why it is impossible to do away with these privileges:
o The risk to which the thing is exposed
o The real nature of maritime law, exclusively real,
according to which the liability of the parties is limited to
a thing to which is at mercy of the waves
Case: Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance
Corporation, Ltd.
 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 is hypothecated
for such obligations or which stands as the guaranty for their
settlement
 Purpose: It was designed to offset such adverse conditions and to
encourage people and entities to venture into maritime commerce
despite the risks and prohibitive cost of shipbuilding
 Thus, the liability of the vessel owner and agent arising from the
operation of such vessel were confined to the (1) vessel itself, (2) its
equipment, (3) freight, (4) and insurance if any, which limitation
served to induce capitalists into effectively wagering their resources
against the consideration of the large profits attainable in trade
Real – similar to transactions over real property where to effect against third
persons, registration is necessary
Hypothecary – the liability of the owner of the value of the vessel is limited to
the vessel itself
STATUTORY PROVISIONS
Article 837, 587, 590 and 643 – provides for limited liability of shipowner.
(read full provision)
Art. 837: civil liability incurred by the ship owner: liability limited to value of the
vessel + appurtenances + freightage earned during voyage
Art. 643: vessel and cargo lost by reason of capture or wreck: all rights shall be
extinguished, both as regards the crew to demand any wages whatsoever, and
as regards the ship agent to recover the advances made
If a portion of the vessel or of the cargo, or both, should be saved,
the crew engaged on wages, including the captain, shall retain their rights on
the salvage, so far as they go, on the remainder of the vessel as well on the
amount of the freightage of the cargo saved; but sailors who are engaged on
shares shall not have any right whatsoever on the salvage of the hull, but only
the portion of the freightage saved. If they should have worded to recover the
remainder of the shipwrecked vessel they shall be given from the amount of the
salvage an award in proportion of the efforts made and to the risks
encountered in order to accomplish the salvage
Art. 587: ship agent may exempt himself of the civil liabilities for the
indemnities in favor of third persons by abandoning vessel with all equipment
and freight it earned during voyage
Art. 590: co-owners civilly liable in proportion to their interest and may exempt
liability by abandonment of the part of the vessel belonging to him
Page 19
Limited liability rule – means that the liability of a shipowner for damages in
case of loss is limited to the value of his vessel.
 No vessel, no liability.
 The civil liability for collision is merely co-existent with the interest
in the vessel; if there was total loss, liability is also extinguished.
GR: If the ship is totally lost, liability is extinguished. If the ship or part thereof
still exists, he can escape liability by abandoning the vessel, its appurtenances
and its freight.
Case: Monarch Insurance Co., Inc. vs. Court of Appeals
 The total destruction of the vessel extinguishes maritime liens
because there are no longer any res to which it can attach. This
doctrine is based on the real and hypothecary nature of maritime
law.
Note: Since the Civil Code contains no provision regulating liability of
shipowners or agents in the event of total loss or destruction of the vessel,
Article 587 of the Code of Commerce governs.
Article 837, 587 and 590 of Code of Commerce cover only:
1. Liability to third persons
2. Acts of the captain
3. Collisions
If the vessel is co-owned, the limited liability to third persons shall be satisfied
by the co-owners in accordance with the following rules:
Art 590. The co-owners of the vessel shall be civilly liable in the proportion of
their contribution to the common fund for the results of the acts of the captain,
referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment,
before notary, of that part of the vessel belonging to him.
It is the shipowner who is entitled to limited liability.
EXCEPTIONS TO THE LIMITED LIABILITY RULE
1. Where the injury or death to a passenger is due either to the fault of
the shipowner, or to the concurring negligence of the shipowner and
the captain (NEGLIGENCE)
GR: Shipowner is liable for the negligence of the captain in collision
cases
---- liability is limited to value of the vessel
 Limited liability rule applies if the captain or the crew caused the
damage or injury as when unseaworthiness of the vessel was caused
by the negligence of the captain or crew during the voyage
 However, if the failure to maintain the seaworthiness of the vessel
can be ascribed to the shipowner alone or the shipowner
concurrently with the captain, then the limited liability principle
cannot be invoked --- LIABILITY FOR THE DAMAGES IS TO THE FULL
EXTENT (ex. Overloading, unseaworthiness even at the time of
departure)
2. Where the vessel is insured (INSURANCE)
 Limited liability rule does not apply to insurance claims
Case: Vasquez vs. CA
- The total loss of the vessel did not extinguish the liability of the
carrier’s insured
- Despite the loss of the vessel, therefore, its insurance answers
for the damages that a shipowner or agent, may be held liable
for by reason of the death of its passengers.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
3. In the workmen’s compensation claims (WORKER’S
COMPENSATION)
 The provisions of the Code of Commerce have no room in the
application of the Workmen’s Compensation Act which seeks to
improve, and aims at the amelioration of, the condition of laborers
and employees
 If an accident is compensable under the Workmen’s Compensation
Act, it must be compensated even when the workman’s right is not
recognized by or is in conflict with other provisions of the Civil Code
or of the Code of Commerce
 Liability under the Workmen’s compensation Act, even if the vessel
was lost, is still enforceable against the employer or shipowner.
4. Expenses for repairs and provisioning of the ship prior to the
departure thereof
5. The vessel is not abandoned (ABANDONMENT)
 Abandonment of the vessel, its appurtenances and the freightage is
an indispensable requirement before the shipowner or ship agent
can enjoy the benefits of the limited liability rule. If the carrier does
not want to abandon the vessel, he is still liable even beyond the
value of the vessel
 The only instance where abandonment is dispensed with is when the
vessel was entirely lost. In such case, the obligation is extinguished.
 Only shipowner and ship agent can make an abandonment
PROCEDURE FOR ENFORCEMENT
Case: Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance
Corporation, Ltd.
- Rights of the parties to claim against an agent or owner of vessel
may be compared to those of creditors against an insolvent
corporation whose assets are not enough to satisfy the totality of
claims as against it.
- Creditors must limit their recovery to what is left in the name of the
corporation
- In the sinking of a vessel, the claimants or creditors are limited in
their recovery to the remaining value of accessible assets. In the case
of lost vessel, these assets are the insurance proceeds and pending
freightage for the particular voyage
PROTESTS
- is the written statement by the master of a vessel or any authorized
officer, attested by proper officer or a notary, to the effect that
damages has been suffered by the ship
Required under the following cases:
1. When the vessel makes an arrival under stress
2. Where the vessel is shipwrecked
3. Where the vessel has gone through a hurricane or the captain
believe that the cargo has suffered damages or averages
4. Maritime collisions
Q: when is it not required?
A:
1. when it does not fall under the four cases mentioned above
2. when what is not involve is not a vessel
ADMIRALTY JURISDICTION (RTC)
- Section 19 (3) of BP 129 as amended by RA 7691
(3) In all actions in admiralty and maritime jurisdiction
where the demand or claim exceeds 300, 000 or in Metro
manila, where such demand or claim exceeds 400,000.
- if less  MTC
Page 20
3 concepts: (they are the same)
1. real and hypothecary --- the Supreme Court did not explain the literal
meaning of it.
- real: refers to the risk in maritime that’s why there are privileges for the
shipowner. Risks are certain to happen
- hypothecary: remember guaranty and collateral which is the vessel. For the
particular voyage, the guaranty is the vessel wherein if the vessel is lost, the
shipowner no longer has the liability
2. limited liability rule --- no literal explanation
- limited: it means that the liability is limited to the value of the vessel
-liability: assumption that the shipowner is liable for the losses. There are no
valid defenses that shipowner can invoke to escape liability. Same concept with
1479. Difference is that there is a fixed amount and there is qualification
-under the limited liability – no fixed amount but amount is confined on the
vessel
The question here: is this a right to limit the liability?
A: admittedly it is a right that only shipowner can exercise
Q; how to exercise?
A: by way of pleading. But do not follow the way it was filed in Yangco. Here it
was after judgment that the shipowner sought to abandon the ship to abandon
liability
But right now, it is a matter of procedure. To limit liability by abandoning the
vessel; IF it is a matter of procedure, you check the rules of civil procedure
Q: so when does shipowner inform the court the right to limit liability?
A: in a pleading and normally in an answer. IT will be raised as a defense. If
shipowner cannot allege, then that defense is deemed waiver. Therefore you
cannot seek abandonment after judgment was been rendered.
CASES:
Yangco vs. Lacerna
- even captain was aware of the typhoon and the vessel capsized, SC upheld
limited liability
Chua Hek Kong
- there being no exceptions, the court upheld limited liability
The more critical issue is on the EXCEPTIONS in the LLRule:
1. workmen’s compensation (Abueg case: the repairs constitute maritime lien)
2. insurance coverage--- if the vessel is lost in the course of voyage and it is
insured, is it automatic that the limited liability rule does not apply?
A: No. the basis of Supreme Court (Vasquez vs. CA --- court mentioned very little
about insurance: if the vessel is insured, the insurance proceeds shall answer
the credit)
If the plaintiff was injured or heirs will file action from insurance company, and
since shipowner cannot avail of limited liability, this is not advisable to the
plaintiff because it has no privity of contract with the insurance company
Q: when does insurance argument come in?
A: only when the shipowner will bring the insurance company to the case filed
by the plaintiff—by way of third party complaint. Once insurance company is
impleaded then this can be used: that the owner cannot avail of limited liability.
But no shipowner will ever implead the insurance. Because they will be the one
who will claim the insurance without telling the plaintiffs. In the case, there is
no proof that the vessel is insured. Even if we know outside court, it is insured
because in the court, there is no proof that the vessel is insured. Court will not
identify evidence not properly identified and recoded in court.
Q: is it really an exception in its strict sense?
A: Not really (CAPANAS). What is the implication if you properly invoke the
LLRule – the plaintiff cannot avail beyond the value of the vessel.
If not apply – plaintiff will recover more than the value of vessel subject to rules
on claiming of damages.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
But question, if vessel if covered with insurance, does this mean that plaintiff
can recover to the amount applied? No, they can only recover until the
coverage of the insurance proceeds.
3. Negligence
- common carrier is presumed negligent if common carrier. However, this does
not apply when there is an invocation on limited liability. (in all cases except
MONARCH vs. CA) --- the rest of the case, the court has found negligence based
on the facts presented. You cannot invoke presumption of negligence so that
limited liability rule will not apply.
Monarch _-- SC: since there is a presumption of negligence then LLR will not
apply. But SC also said that if LLR is invoked, the initial burden to invoke
negligence shifts to the shipowner. They should prove that there is no privity or
knowledge on the negligence of the ship captain.
Q: what is the relationship of Civil Code and LLR?
A: There is none. Under 1766 in all matters not provided by Civil Code, Code of
Commerce or Special law will apply. There is no rule in Civil Code in limited
liability rule thus Code of Commerce will apply. (but in monarch, this was not
applied--- all the negligence was related to the absence of exercising
extraordinary diligence)
Note: that in the subsequent cases, Consolidated of Aboitiz case: there were
findings of facts of the negligence of Aboitiz. The point is when it comes to LLR,
the Code of Commerce apply. You cannot invoke presumption of negligence. In
order to refute, petitioner should prove negligence.
REMEMBER: PROVE THE FACTS OF NEGLIGENCE. Not presumption.
Loadstar case
- the shipowner is aware of the typhoon
- insufficient manning – negligent
- Captain playing mahjong – there was negligence. But SC said that it was
negligent because the shipowner did not prove that it was the first. Supposedly
facts are established in court proceedings and not on presumption.
3. no vessel, no liability
- they all mean one and the same such that the liability of the shipowner for the
losses is confined to the value of the vessel and the freight, if any.
MARITIME PROTEST (4 INSTANCES) – REQUIRED (LOOK AT CODE OF
COMMERCE and above notes)
INSTANCES WHEN IT DOES NOT APPLY:
1. NOT based CODE OF COMMERCE AND BASED ON QUASI-DELICT THEN NOT
MARITIME PROTEST
2. when what was is involve is not a vessel (Lopez vs. Duruel: the motor boat is
not a vessel under maritime law, it is only engaged in bay traffic. A vessel in
maritime law, should be engaged in transporting goods, persons, or both from
one port to another)
(But to be sure: you file maritime and allege such even though not needed,
otherwise the case is dismissed)
Since a vessel is a personal property, it can be mortgaged…
Same concept with mortgage but different rule
- PD 1521:
Q: what about process of extra judicial foreclosure of vessel?
A: chattel mortgage law should govern
Q: what to remember under PD 1521?
A: Section 4
registration, non-waiver
Section17: priority of claims…
Q: are there claims in maritime law over and above preferred mortgage?
A: yes. Look at section 17.
Page 21

Case: Poliand Industrial
- facts shows that the proceeds debited from hardwood was for the
modification of the vessel (extended for vessels benefit), for crews wage
CHAPTER 11
VESSELS
1. General Concepts
 A vessel or watercraft is defined under PD No. 447 as any barge, lighter,
bulk carrier, passenger ship freighter, tanker, container ship, fishing
boats, or other artificial contrivance utilizing any source of motive power,
designed use or capable of being used as a means of transportation
operating either as a common carrier, including fishing vessels covered
under PD No. 43,
Except:
1. Those owned and/or operated by the Armed Forces of the Philippines
and by the Foreign Government for its Military Purpose.
2. Bancas, sailboat and other waterborne contrivance of less than three
tons capacity and not motorized.
Case: Yu Con vs. Ipil
- The word vessel serves to designate every kind of craft by whatever
particular or technical name it may not be known or which nautical
advancements may give it in the future
- The court held that a small vessel used for the transportation of
merchandise by sea and for the making of voyages from one port to
another of these Islands, equipped and victualed for this purpose by
its owner, is a vessel, within the purview of the Code of Commerce,
for the determination of the character and effect of the relations
created between the owners of the merchandise laden on it and its
owner
 When the mercantile code speaks of vessels, they refer solely and
exclusively to mercantile ships, as they do not include warships, and
furthermore, they almost always refer to craft which are not accessory to
another as in the case of launches, lifeboats and etc.
 Further, they refer exclusively to those which are engaged in the
transportation of passengers and freight from one port to another or
from one place to another
 They refer to merchant vessels and in NO WAY can they or should they be
understood as referring to pleasure craft, yachts, pontoons, health service
and harbor police vessels, etc.
 Ships ought to be understood in the sense of vessel serving the purpose
of maritime navigation or seagoing vessel, and not in the sense of vessel
devoted to the navigation of rivers
 The third book of the code of commerce, dealing with maritime
commerce, was evidently intended to define laws relative to merchant
vessels and maritime shipping; and as appears from said code, the vessel
intended in that book are such run by masters having special training with
elaborate apparatus of crew and equipment indicated in the code.
 Only vessels engaged in what is ordinarily known as maritime commerce
are within the provision of law conferring limited liability on the owner in
case of maritime disaster.
 Other vessel of minor nature not engaged in maritime commerce, such as
river boats and those carrying passengers from ship to shore, must be
governed, as to their liability to passenger, by the provision of the civil
code or other appropriate special provisions of law.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
Case: Augusto Lopez vs. Juan Duruelo, et. al
- The code of commerce are not applicable to small craft which are
only subject to administrative (customs) regulations in the matter of
port service and in the fishing industry
- Only vessels engaged in what is ordinarily known as maritime
commerce are within the provisions of law conferring limited liability
on the owner in case of maritime disaster
- It is therefore clear that a passenger on a boat like the Jison, in the
case before use, is not required to make protest as a condition
precedent to his right of action for the injury suffered by him in the
collision described in the complaint – article 835 of the Code of
Commerce does not apply
KINDS OF VESSELS (SOLAS 1974)
1. Passenger ship – a ship which carries more than twelve passengers
2. Cargo ship – any ship which is not a passenger ship
3. Tanker – a cargo ship constructed or adapted for the carriage in bulk
of liquid cargoes of an inflammable nature
4. Fishing vessel – vessel used for catching fish, whales, seals, walrus, or
other living resources of the sea
5. Nuclear ship – a ship provided with a nuclear power plant
6. New ship – a ship the keel of which is laid or which is at a similar
stage of construction on or after the date of coming into force of the
SOLAS 1974
7. Existing ship – a ship which is not a new ship
CONSTRUCTION, EQUIPMENT AND MANNING
The Construction, equipment and manning of vessel are subject to the rules
issued by the Maritime Industry Authority (MARINA) and consistent with Article
574 of the Code of Commerce
Article 574. Builders of vessels may employ the materials and follow, with
respect to their construction and rigging, the systems most suitable to their
interests. Ship owners and seamen shall be subject to what the laws and
regulations of the public administration on navigation, customs, health, safety
of vessels, and other similar matters.
VESSEL PERSONAL PROPERTY
Vessels are considered personal property under the Civil Law. The Code of
Commerce likewise expressly acknowledges the special nature of a vessel as
personal property.
Case: Philippine Refining Company vs. Jargue
- Vessels are personal property although occasionally referred to as a
peculiar kind of personal property
- They are subject to mortgage agreeably to the provisions of the
Chattel Mortgage Law
- The only difference between a chattel mortgage of a vessel and a
chattel mortgage of other personality is that it is not now necessary
for a chattel mortgage of a vessel to be noted in the registry of the
register of deeds, but it is essential that a record of documents
affecting the title to a vessel be entered in the record of the
Collector of Customs at the port of entry
Case: Rubiso and Calixto vs. Rivera
- Ships or vessels, whether moved by steam or by sail, partake, to a
certain extent, of the nature and conditions of real property, on
account of their value and importance in the world of commerce
- Transfer of vessels should be in writing and must be recorded in the
appropriate registry
2. OWNERSHIP
ACQUISITION
 Vessel may be acquired or transferred by any means recognized by laws.
Thus, vessel may be sold, donated and may even be acquired through
prescription.
 Under the present laws, vessels that are under the jurisdiction of MARINA
can be transferred only with notice to said administrative agency.
Page 22

A. Prescription (Code of Commerce)
Article 573. Merchant vessels constitute property which may be acquired and
transferred by any of the means recognized by law. The acquisition of a vessel
must appear in a written instrument, which shall not produce any effect with
respect to third persons if not inscribed in the registry of vessels.
The ownership of a vessel shall likewise be acquired by possession in good faith,
continued for three years, with a just title duly recorded.
In the absence of any of these requisites, continuous possession for ten years
shall be necessary in order to acquire ownership.
A captain may not acquire by prescription the vessel of which he is in command.
ARTICLE 575. Co-owners of vessels shall have the right of repurchase and
redemption in sales made to strangers, but they may exercise the same only
within the nine days following the inscription of the sale in the registry, and by
depositing the price at the same time.
B. Sale (Code of Commerce)
Article 576. In the sale of a vessel it shall always be understood as included the
rigging, masts, stores and engine of a streamer appurtenant thereto, which at
the time belongs to the vendor.
The arms, munitions of war, provisions and fuel shall not be considered as
included in the sale.
The vendor shall be under the obligation to deliver to the purchaser a certified
copy of the record sheet of the vessel in the registry up to the date of the sale.
Article 577. If the alienation of the vessel should be made while it is on a
voyage, the freightage which it earns from the time it receives its last cargo
shall pertain entirely to the purchaser, and the payment of the crew and other
persons who make up its complement for the same voyage shall be for his
account.
If the sale is made after the vessel has arrived at the port of its destination, the
freightage shall pertain to the vendor, and the payment of the crew and other
individuals who make up its complement shall be for his account, unless the
contrary is stipulated in either case.
Article 578. If the vessel being on a voyage or in a foreign port, its owner or
owners should voluntarily alienate it, either to Filipinos or to foreigners
domiciled in the capital or in a port of another country, the bill of sale shall be
executed before the consul of the Republic of the Philippines at the port where
it terminates its voyage and said instrument shall produce no effect with
respect to third persons if it is not inscribed in the registry of the consulate. The
consul shall immediately forward a true copy of the instrument of purchase and
sale of the vessel to the registry of vessels of the port where said vessel is
inscribed and registered.
In every case the alienation of the vessel must be made to appear with a
statement of whether the vendor receives its price in whole or in part, or
whether he preserves in whole or in part any claim on said vessel. In case the
sale is made to a Filipino, this fact shall be stated in the certificate of navigation.
When a vessel, being on a voyage, shall be rendered useless for navigation, the
captain shall apply to the competent judge on court of the port of arrival,
should it be in the Philippines; and should it be in a foreign country, to the
consul of the Republic of the Philippines, should there be one, or, where there
is none, to the judge or court or to the local authority; and the consul, or the
judge or court, shall order an examination of the vessel to be made.
If the consignee or the insurer should reside at said port, or should have
representatives there, they must be cited in order that they may take part in
the proceedings on behalf of whoever may be concerned.
CO-OWNER’S RIGHTS
If the vessel is sold to third persons, the co-owner is given the right of
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
redemption in accordance with Art 575:
Art 575. Co-owners of vessels shall have the right of repurchase and redemption
in sales made to strangers, but they may exercise the same only within the nine
days following the inscription of the sale in the registry, and by depositing the
price at the same time.
NATIONALITY OF VESSELS
Vessels that are duly registered in the Philippines are considered Philippine Flag
vessels. These ships are deemed to possess Philippine nationality within the
contemplation of the UNCLOS.
Flags of Convenience – there must be a genuine link between the State and the
ship in order to confer nationality over the ship; the absence of genuine link is
reflected in either the absence or minimal regulation of the registered vessels
by the country where the vessels are registered. The Philippines is not a “Flags
of Convenience” country.
REGISTRATION
 Vessels are now registered through MARINA. It is a long standing rule that
the person who is the registered owner of the vessel is presumed to be
the owner of the vessel.
 It is a settled rule that the sale or transfer of the vessel is not binding on
the third person unless the same is registered.
 All types of ships operating in Philippine waters, regardless of size and
utilization , whether with power or not, including those ships below three
gross tonnage, motorized or non-motorized are required to be registered
with MARINA, except
1. Warships and naval ships;
2. Ships of the Philippine Coast Guard
3. All ships of foreign registry temporarily used in the Philippine
waters
4. Inflatable boats used for rescue made of either a single or more
rubber tubing
SHIP'S MANIFEST
 Vessels are required to carry manifest coast-wise trade.
 A manifest is a declaration of the entire cargo. The object of a manifest is
to furnish custom officers with list of check against, to inform the revenue
officers what goods are being brought into a port of the country on a
vessel.
 The requirement that a vessel must carry a manifest is not complied with
even if a bill of lading can be presented. A bill of lading is just a
declaration of a specific cargo rather than the entire cargo
 Sec 906 of the Tariff and Custom Code provides that “manifest shall be
required for cargo and passengers transported from one place to another
only when one or both of such place is a port of entry.”
Logbook – the official record of a ship’s voyage which its captain is obligated by
law to keep wherein he records the decisions he has adopted, a summary of the
performance of the vessel, and other daily events. It is a respectable record that
can be relied upon when the entries therein are presented in evidence.
MORTGAGE
 Since the term personal property includes vessel, they are subject to
mortgage agreeably to the provisions of the Chattel Mortgage Law.
 Mortgage and other encumbrances over vessels are governed by the
provisions of presidential decree 1521 (Ship Mortgage Decree of 1978)
OTHER CODE OF COMMERCE PROVISIONS
 The provisions of the Code of Commerce reproduced hereunder are
deemed modified not only by the Civil Code but also by special laws
SAFETY REGULATIONS
 On February 23, 2000, the Maritime Industry Authority directed all
domestic shipowners and operators under Memorandum Circular No.
154 to strictly comply with existing Safety-Related Policies, Guidelines,
Rules and Regulations
 Rules include: (read book page 488-489)
 Monitoring of compliances shall be undertaken by the Authority and its
Page 23
 Maritime Regional Offices, together with the needed coordination with
the Philippine Coast Guard
The MARINA shall have the power to inspect vessels and all equipment on
board to ensure compliance with safety standards
CABOTAGE
- Right of foreign vessels to engage in coastwise shipping, that is, to
provide service from one place within the Philippines to another
place in the Philippines
- COGSA applies to carriage of goods under this law. However, foreign
carrier is not public service and not a common carrier.
CHAPTER 12
SHIP MORTGAGE AND MARITIME LIENS
PREFERRED MORTGAGE
A preferred mortgage shall constitute a lien upon the mortgaged vessel in the
amount of the outstanding mortgage indebtedness secured by the vessel. Upon
the default of any term or condition of the mortgage, such lien may be enforced
by the mortgagee by suit in remaining admiralty wherein the vessel itself may
be made a party defendant and be arrested in the manner provided by Sec 11
of PD 1521.
Requirements:
1. mortgage is recorded
2. an affidavit is filed with the record of such mortgage to the effect
that the mortgage is made in good faith and without any design to
hinder, delay, or defraud any existing or future creditor of the
mortgagor or any lien or of the mortgaged vessel
3. the mortgage does not stipulate that the mortgagee waives the
preferred status thereof
Additional requirements
4. mortgage should cover the whole of the vessel
5. the vessel must be of domestic ownership
Affidavit of Good Faith – required for the preferred status; likewise required for
Chattel Mortgage under which the mortgage is not valid as to third persons in
the absence of such affidavit
MARITIME LIEN
– A privileged claim on a vessel for some service rendered to it to
facilitate its use in navigation.
– A special property right in a ship given to a creditor by law as security
for a debt or claim subsisting from the moment the debt arises with
right to have the ship sold and debt paid out of the proceeds
– Inseparable from the vessel and until discharged, it follows the
vessel
– A maritime lien subsists notwithstanding the subsequent transfer of
the vessel
Characteristics of maritime lien:
1. maritime property
2. travels with the property--- it cannot be extinguished
3. enforceable in an action in rem--- action directed to the property (crescent
case: suit was filed against the vessel)
PREFERRED CLAIMS
Preferred mortgage lien should have priority over all claims against the vessel,
except the following claims in the order stated:
1. Expenses and fees allowed and costs taxed by the court and taxes
due to the Government
2. Crew’s wages
3. General average
4. Salvage; including contract salvage
5. Maritime liens arising prior in time to the recording of the preferred
mortgage
6. Damages arising out of the tort
7. Preferred mortgage register prior in time
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
– Notice of their existence is not necessary
– They do not arise from a specific agreement
– Claims not based on possession
– Possession of the vessel is not necessary for the maritime liens to
attach to the vessel
EXECUTORY CONTRACT DOCTRINE
A lien does not attach for breach of an executory contract even though the
contract is the type which normally gives rise to a lien
Waiver of Lien – there is no prevention of waiving right to a lien, or to the
preferred status of such lien, at any time by agreement or otherwise
Prescription and Laches – action must be brought within ten years from the
time the time of action accrues. Laches may also lie if there was unreasonable
delay on the part of the claimant in asserting his rights.
Maritime lien on necessaries (5 requisites) – brief yourself crescent petroleum
case
1. The “necessaries” must have been furnished to and for the benefit of
the vessel
2. The “necessities” must have been necessary for the continuation of
the voyage of the vessel
3. The credit must have been extended to the vessel
4. There must be necessity for the extension of the credit
5. The necessaries must be ordered by persons authorized to contract
on behalf of the vessel
The following persons shall be presumed to have authority from the owner to
procure repairs, supplies, towage, use of dry dock or marine railway, and other
necessaries for the vessel:
1. The managing owner
2. Ship’s husband
3. Master
4. Any person to whom the management of the vessel at the port of
supply is entrusted
Under section 22: persons authorize to procure repairs (presumed):
1. managing agent
2. ship’s husband --- agent of the vessel
MARITIME TORTS
 Civil wrongs committed on navigable waters
 Any conduct which is tortuous under general law and which is
connected with the ship or its uses creates a maritime lien
 Includes collision claims and personal injury claims
WHEN PROCEEDS NOT SUFFICIENT
If the proceeds of the sale should not be sufficient to pay all creditors included
in one number or grade, the residue shall be divided among them pro rata. All
credits not paid, whether fully or partially shall subsist as ordinary credits
enforceable by personal action against the debtor.
TESTS TO DETERMINE THE PRESENCE OF LIEN
1. Depends on the law of the country where the supplies were
furnished, which must be pleaded and proved
2. Multiple contact test. The following factors are considered:
a. Place of the wrongful act
b. Law of the flag
c. Allegiance or domicile of the injured
d. Allegiance of the defendant shipowner
e. Place of contract
f. Inaccessibility of foreign forum
g. Law of the forum
3. Factors provided in Restatement (Second) of Conflicts of Law
Page 24
WHO MAY CONSTITUTE PREFERRED SHIP MORTGAGE
Any citizen of the Philippines, or any association or corporation organized under
the laws of the Philippines, at least 60% of the capital of which is owned by the
citizens of the Philippines.
Purpose – for the purpose of financing the construction, acquisition, purchase of
vessels or initial operation of vessels. Purpose is important in determining the
presence of preference.
Formal requirements:
1. Mortgage is recorded
2. An affidavit is filed with the record of such mortgage (Affidavit of
Good faith)
3. Mortgage does not stipulate that the mortgagee waives the
preferred status
MORTGAGE WITH NON-MARITIME PROPERTY
In the case of a mortgage which includes property other than a vessel, the
mortgage shall not be held a preferred mortgage unless the mortgage provides
for the separate discharge of such property by the payment of a specified
portion of the mortgage indebtedness.
If a preferred mortgage so provides for the separate discharge, the amount of
the portion of such payment shall be endorsed upon the documents of the
vessel.
*Does not apply to mortgage over the “vessel and her freight”, because freight
in this situation is part of the vessel for such purpose.
If mortgagor does not pay:
1. judicial foreclosure – file actual case and implead the vessel as party
defendant (served to captain or authorized person); you can ask the court order
to arrest the vessel.
2. extrajudicial
- the problem with vessel, mortgagee is not in possession of the vessel. It is with
the mortgagor, you cannot sell the property not in your possession.
ARREST AND FORECLOSURE
In PD 1521—the order of arrest can be asked
Grounds to discharge
1. irregularly issued (mortgagee was defrauded. No due obligation yet)
2. posting of a bond to discharge. The bond to be posted is double the value of
the claim.
CHAPTER 13
PERSONS WHO TAKE PART IN MARITIME COMMERCE
In sum, the following are persons who take part in Maritime Commerce:
 SHIPOWNERS and SHIP AGENTS;
 CAPTAINS and MASTERS OF VESSELS;
 OFFICERS and CREW OF VESSELS
LIABILITY OF SHIPOWNERS AND SHIP AGENTS
SHIPOWNER V. SHIP AGENT
SHIPOWNER – the person who is primarily liable for damages sustained in the
operation of vessel.
Code of Commerce – places the primary responsibility on the owner of the
vessel.
(Uses the term naviero which has been construed to include shipowner, ship
agent and even the charterer who is considered as owner pro hac vice.)
SHIP AGENT (Code of Commerce) – the person entrusted with provisioning of
the vessel, or who represents her in the port in which she happens to be.
There is also the intention under the Code of Commerce to make the ship
agent solidarily liable with the owner. The solidary liability applies both for
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
breach of contract and extra-contractual obligations such as tort. The ship
agent, even though he is not the owner, is liable in every way to the
creditor for losses and damages without prejudice to his right against the
owner, the vessel and its equipment and freight. But his liability, however
is subject to the LIMITED LIABILITY RULE (Chapter 6 of the Aquino book).
When captain acts in excess of authority
The shipowner and the ship agent are liable in certain cases even if the captain
has exceeded his authority if the proceeds of an obligation redound to the
benefit of the vessel
Liability for entra-contractual obligations
> The owner and his agent are liable for the tortuous acts of his agent.
> they can make the captain liable for his negligence
PART-OWNERS
ART 589. If two or more persons should be part owners of a merchant vessel, a
partnership shall be presumed as established by the co-owners. This partnership
shall be governed by the resolutions of the majority of the members.
If the part owners should not be more than two, the disagreement of views, if
any, shall be decided by the vote of the member having the largest interest. If
the interests are equal, it should be decided by lot. The person having the
smallest share in the ownership shall have one vote; and proportionately the
other part owners as many votes as they have parts equal to the smallest one.
A vessel may not be detained, attached or levied upon in execution in its
entirety, for the private debts of a part owner, but the proceedings shall be
limited to the interest which the debtor may have in the vessel, without
interfering with the navigation.
ART 590. The co-owners of the vessel shall be civilly liable in the proportion of
their contribution to the common fund for the results of the acts of the captain,
referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment,
before notary, of that part of the vessel belonging to him.
ARTICLE 591. All the part owners shall be liable, in proportion to their respective
ownership, for the expenses for repairing the vessel, and for other expenses
which are incurred by virtue of a resolution of the majority. They shall likewise
be liable in the same proportion for the expenses for the maintenance,
equipment, and provisioning of the vessel, necessary for navigation.
ARTICLE 592. The resolution of the majority with regard to the repair,
equipment, and provisioning of the vessel in the port of departure shall bind the
minority, unless the minority members renounce their interests, which must be
acquired by the other co-owners, after a judicial appraisement of the value of
the portion or portions assigned. The resolutions of the majority relating to the
dissolution of the partnership and sale of the vessel shall also be binding on the
minority.
The sale of the vessel must be made at public auction, subject to the provisions
of the law of civil procedure, unless the co-owners unanimously agree otherwise,
saying always the right of repurchase and redemption provided for in Article
575.
ARTICLE 593. The owners of a vessel shall have preference in her charter over
other persons, under the same conditions and price. If two or more of them
should claim this right, the one having the greater interest shall be preferred;
and should they have equal interests, the matter shall be decided by lot.
Art. 594. The co-owners shall elect the manager who is to represent them in the
capacity of ship agent.
The appointment of director or ship agent shall be revocable at the will of the
members.
Page 25
Powers and Functions of Ship Agent
> one that provisions or represents the vessel
> whether he is at the same time the owner of the vessel, or manager for an
owner or for an association of co-owners, must have the capacity to trade and
must be recorded in the merchant’s registry of the province.
1. Appointed as local agent of the vessel, which duty includes
arrangement for the entrance and clearance of the vessel
2. Represented the vessel
3. Prepared the Notice of Readiness, the Statement of Facts, the
Completion Notice, the Sailing Notice and Custom’s Clearance
4. His employees were present at the port, one day before the arrival
of the vessel, where they stayed until it departed
5. Said employees were also present during the actual discharging of
the cargo
6. Prepared the needs of the vessel, like money, provision, water and
fuel
Powers:
1. Enter into contracts to provision ship
2. Purchase necessary supplies and fuel for the voyage
3. Right to represent the vessel in any action in a court or tribunal
(See pages 508- 509 for related provisions)
Effect of Ordinary Agent Only
Agent is not a ship agent if:
> its only function is limited to informing the consignee of the arrival of the
vessel in order for the latter to immediately take possession of the cargoes
> there’s no hand in the provisioning of the vessel
CAPTAINS V. MASTERS OF VESSELS
For purposes of Maritime Commerce:
The words “captain” and “master” have the same meaning; both being
chiefs or commanders of ships. Thus, the terms “captain” and “master”
are used synonymously in the Code of Commerce.
(Masters – those who command smaller ships engaged exclusively in coastwise
trading)
Qualifications
1. Filipino
2. Have legal capacity to contract
3. Prove the skill , capacity, and qualifications necessary to command
and direct a vessel
4. Must not be disqualified
(This provisions is now subject to rules provided under new special laws and
regulations)
MARINA regulations:
MASTER – the person having command of the ship. The same term is being used
both for domestic trade and international trade.
BOAT CAPTAIN – a person authorized by the MARINA to act as officer and/or in
command of a boat/ship or has the qualification/license to act as such.
3 Distinct Roles a captain commonly performs:
(Inter-Orient Maritime case)
1. He is a GENERAL AGENT OF THE SHIPOWNER;
2. He is a COMMANDER and TECHNICAL DIRECTOR of the vessel (most
important role for this has something to do with the operation and
preservation of the vessel during its voyage and the protection of the
passengers, if any, and crew and cargo);
3. He is a REPRESENTATIVE OF THE COUNTRY under whose flag he
navigates.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
Based on the first aforementioned role, the captain is regarded as the GENERAL
AGENT of the shipowner and as such, he:
a. Has authority to sign bills of lading;
b. Carry goods aboard and deal with the freight earned;
c. Agree upon rates and decide whether to take cargo;
d. Has legal authority to enter into contracts with respect to the vessel and
the trading of the vessel, subject to applicable limitations established by
statute, contract or instructions and regulations of the shipowner.
All aforementioned functions verily commits to the captain the governance,
care, and management of the vessel. Clearly then, the captain is vested with
both MANAGEMENT and FIDUCIARY functions.
Art 610. The following powers shall be inherent in the position of captain,
master or patron of a vessel:
1. To appoint or make contracts with the crew in the absence of the
ship agent, and to propose said crew, should said agent be present;
but the ship agent may not employ any member against the
captain’s express refusal.
2. To command the crew and direct the vessel to the port of its
destination, in accordance with the instructions he may have
received from the ship agent.
3. To impose, in accordance with the contracts and with the laws and
regulations of the merchant marine, and when on board the vessel,
correctional punishment upon those who fail to comply with his
orders or are wanting in discipline, holding a preliminary hearing on
the crimes committed on board the vessel on the seas, which crimes
shall be turned over to the authorities having jurisdiction over the
same at the first port touched.
4. To make contracts for the charter of the vessel in the absence of the
ship agent or its consignee, acting in accordance with the
instructions received and protecting the interests of the owner with
utmost care.
5. To adopt all proper measures to keep the vessel well supplied and
equipped, purchasing all that may be necessary for the purpose,
provided there is no time to request instruction from the ship agent.
6. To order, in similar urgent cases while on a voyage, the repairs on
the hull and engines of the vessel and in its rigging and equipment,
which are absolutely necessary to enable it to continue and finish its
voyage; bur if he should arrive at a point where there is a consignee
of the vessel, he shall act in concurrence with the latter.
ARTICLE 611 (Sources of funds)
In order to comply with the obligations mentioned in the preceding article, the
captain, when he has no funds and does not expect to receive any from the ship
agent, shall obtain the same in the successive order stated below;
1. By requesting said funds from the consignee of the vessel or
correspondents of the ship agent.
2. By applying to the consignees of the cargo or to those interested
therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by means of a loan on bottomry.
5. By selling a sufficient amount of the cargo to cover the sum
absolutely indispensable for the repair of the vessel and to enable it
to continue its voyage.
In these two last cases he must apply to the judicial authority of the port, if in
the Philippines, and to the consul of the Republic of the Philippines if in a
foreign country, and where there is none, to the local authority, proceeding in
accordance with the provisions of Article 538, and with the provisions of the law
of civil procedure.
ARTICLE 612. The following obligations shall be inherent in the office of captain:
1. To bring on board the proper certificate and documents
2. To have a copy of the Code of Commerce
3. To have three folioed and stamped books, placing at the beginning
of each one a memorandum of the number of folios it contains,
Page 26
 signed by the maritime authority, and in his absence by the
competent authority.
To keep a Log Book, Accounting Book and Freight Book
4. Before receiving cargo, to make with the officers of the crew and
two experts, if required by the shippers and passengers, an
examination of the vessel, in order to ascertain whether it is
watertight, with the rigging and engines in good condition, and with
the equipment required for good navigation, preserving under his
responsibility a certificate of the memorandum of his inspection,
signed by all those who may have taken part therein.
The experts shall be appointed, one by the captain of the vessel and
another by those who request its examination, and in case of
disagreement a third shall be appointed by the marine authority of
the port or by the authority, exercising his functions.
5. To remain constantly on board the vessel with the crew while the
cargo is being taken on board and to carefully watch the stowage
thereof;
Not to consent to the loading of any merchandise or matter of a
dangerous character, without the precautions which are
recommended for their packing, handling and isolation;
Not to permit the carriage on deck of any cargo which by reason of
its arrangement etc. which might endanger the safety of the vessel;
And if, on account of the nature of the merchandise, the special
character of the shipment, and principally the favorable season in
which it is undertaken, merchandise may be carried on deck, he
must hear the opinion of the officers of the vessel and have the
consent of the shippers and of the ship agent.
6. To demand a pilot at the expense of the vessel whenever required
by the navigation, and principally when he has to enter a port, canal,
or river, or has to take a roadstead or anchoring place with which
neither he nor the officers and crew are acquainted.
7. To be on deck on reaching land and to take command on entering
and leaving ports, canals, roadsteads, and rivers, unless there is a
pilot on board discharging his duties. He shall not spend the night
away from the vessel except for serious causes or by reason of
official business.
8. To present himself, when making a port in distress
 to the maritime authority if in the Philippines
 to the consul of the Republic of the Philippines if in a foreign
country, before 24 hours have elapsed, and to make a
statement of the name registry, and port of departure of the
vessel, of its cargo, and the cause of arrival which declaration
shall be visaed by the authority or consul, if after examining the
same it is found to be acceptable, giving the captain the proper
certificate proving his arrival in distress and the reasons
therefore. In the absence of the maritime authority or of the
consul, the declaration must be made before the local
authority.
9. To take the necessary steps before the competent authority in order
to record in the certificate of the vessel in the registry of vessels the
obligations which he may contract in accordance with Article 583
10. To place under good care and custody all the papers and belongings
of any members of the crew who might die on the vessel, drawing up
a detailed inventory, in the presence of passengers, or, in their
absence, of members of the crew as witnesses.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
11. To conduct himself according to the rules and precepts contained in
the instructions of the ship agent, being liable for all that which he
may do in violation thereof.
12. To inform the ship agent from the port at which the vessel arrives, of
the reason of his arrival etc.; to notify him of the cargo he may have
received, stating the names and domiciles of the shippers, freightage
earned, and amounts borrowed on bottomry loan; to advise him of
his departure, and of any operation and date which may be of
interest to him.
13. To observe the rules with respect to situation, lights and maneuvers
in order to avoid collisions.
14. To remain on board, in case the vessel is in danger, until all hope to
save it is lost, and before abandoning it, to hear the officers of the
crew, abiding by the decision of the majority; and if the boats are to
be taken to, he shall take with him, before anything else, the books
and papers, and then the articles of most value, being obliged to
prove, in case of the loss of the books and papers, that he did all he
could to save them.
15. In case of wreck, to make the proper protest in due form at the first
port of arrival, before the competent authority or the Philippine
consul, within 24 hours, specifying therein all the incidents of the
wreck, in accordance with subdivision 8 of this article.
16. To comply with the obligations imposed by the laws and regulations
on navigation, customs, health, and others.
DISCRETION OF CAPTAIN AND MASTER
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.
Presumption: A captain is knowledgeable as to the specific requirements of
seaworthiness and the particular risks and perils of the voyage he is to embark
upon.
Applicable Principle: The captain has control of ALL departments of service in
the vessel, and reasonable discretion as to its navigation.
Basic Principle in Admiralty Law: In navigating the vessel, the master must be
left free to exercise his own best judgment.
Requirements of Safe Navigation: The judgment and discretion of the captain
of a vessel may be confined within a straitjacket, even in this age of electronic
communications.
LIABILITY OF CAPTAINS AND MASTERS
ARTICLE 618. The captain shall be civilly liable to the ship agent, and the latter
to the third persons who may have made contracts with the former;
1. For all damages suffered by the vessel and its cargo by reason of
want of skill or negligence on his part. If a misdemeanor or crime has
been committed, he shall be liable in accordance with the Penal
Code.
2. For all the thefts committed by the crew, reserving his right of action
against the guilty parties.
3. For the losses, fines, and confiscation imposed an account of
violation of customs, police, health, and navigation laws and
regulations.
4. For the losses and damages caused by mutinies on board the vessel
or by reason of faults committed by the crew in the service and
defense of the same, if he does not prove that he made timely use of
all his authority to prevent or avoid them.
5. For those caused by the misuse of the powers and the non-
fulfillment of the obligation pertaining to him in accordance with
Articles 610 and 612.
Page 27
 6. For those arising by reason of his going out of his course or taking a
course which he should not have taken without sufficient cause, in
the opinion of the officers of the vessel, at a meeting with the
shippers or supercargoes who may be on board.
ARTICLE 619. The captain shall be liable for the cargo from the time it is
delivered to him at the dock or afloat alongside the vessel at the port of loading,
until he delivers it on the shore or on the discharging wharf at the port of
unloading, unless the contrary has been expressly agreed upon.
No liability for the following:
ARTICLE 620.
(1) The captain shall not be liable for the damages caused to the vessel or to the
cargo by force majeure; but he shall always be so for those arising through his
own fault, no agreement to the contrary being valid.
(2) Neither shall he be personally liable for the obligations he may have
contracted for the repair, equipment, and provisioning of the vessel, which shall
devolve upon the ship agent, unless the former has expressly bound himself
personally or has signed a bill of exchange or promissory note in his name.
ARTICLE 621
A captain who borrows money on the hull, engine, rigging or tackle of the
vessel, or pledges or sells merchandise or provisions outside of the cases and
without the formalities prescribed in this Code, shall be liable for the principal,
interests, and costs, and shall indemnify for the damages he may cause.
He who commits fraud in his accounts shall pay the amount defrauded and shall
be subject to the provisions of the Penal Code.
PILOTAGE: Who is a pilot?
Maritime Law: a person duly qualified, and licensed, to conduct a vessel into or
out of ports, or in certain waters.
Broad sense: includes both (1) those whose duty it is to guide vessels into or out
of ports, or in particular waters; and (2) those entrusted with the navigation of
vessels on the high seas.
General understanding: 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.
COMPULSORY PILOTAGE. In compulsory pilotage, states possessing harbors
enacted laws or promulgated rules requiring vessels approaching their ports to
take on board pilots licensed under local law. In the Philippines, compulsory
pilotage is being implemented in the Port of Manila, the latter being within the
Manila Pilotage District.
a. Master and Pilot
(See Far Eastern Shipping case on page 525 of the Aquino book for the SC
discussion on the duties of a pilot)
o Pilot supersedes the master for the time being in the command
and navigation of the ship
o His orders must be obeyed in ALL matters connected with her
navigation
o He becomes the master pro hac vice and should give directions
as to speed, course, stopping and reversing, anchoring, towing
and the like
o When licensed pilot in place where pilotage is compulsory: it is
his duty to insist on having effective control of the vessel, or to
decline to act as pilot
o Pilot does not take charge of entire vessel, but is deemed
merely the adviser of the master, who retains command and
control of the navigation even in localities where pilotage is
compulsory
o Master does not surrender his vessel to the pilot and the pilot
is not the master
o Master is not wholly absolved from his duties while a pilot is on
board, and may advise with or offer suggestions to pilot
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
o Master is still in command of the vessel, except so far as her
navigation is concerned and must cause the ordinary work of
the vessel to be properly carried on and the usual precaution
taken
o Master is bound to see that there is sufficient watch on deck,
men are attentive to their duties, engines are stopped,
towlines cast off, and anchors clear and ready to go at the
pilot’s order
In sum:
In sum, where a compulsory pilot is in charge of a ship, the master being
required to permit him to navigate it, if the master observes that the pilot is
incompetent or physically incapable, then it is the duty of the master to refuse
to permit the pilot to act. But if no such reasons are present, then the master is
justified in relying upon the pilot, but not blindly. Under the circumstances of
this case, if a situation arose where the master, exercising that reasonable
vigilance which the master of a ship should exercise, observed, or should have
observed, that the pilot was so navigating the vessel that she was going, or was
likely to go, into danger, and there was in the exercise of reasonable care and
vigilance an opportunity for the master to intervene so as to save the ship from
danger, the master should have acted accordingly.[83] The master of a vessel
must exercise a degree of vigilance commensurate with the circumstances.
b. Shipowner and Pilot
GENERAL RULE: the pilot is PERSONALLY LIABLE for damages caused by
his own negligence or default to the OWNERS of the vessel, and to THIRD
PARTIES for damages sustained in a collision. Such negligence of the pilot
in the performance of duty constitutes a MARITIME TORT.
In cases of COLLISION: the COLLIDING VESSEL is prima facie responsible,
hence, the burden of proof is upon the party claiming benefit of the
exemption from liability. Thus, it must be shown affirmatively that the
pilot was at fault, and that there was no fault on the part of the officers or
crew, which might have been conducive to the damage. The fact that the
law compelled the master to take the pilot does not exonerate the vessel
from liability. The injured party shall seek redress from the vessel. The
owners of the vessel are responsible to the injured party for the acts of
the pilot, and they must be left to recover the amount as well as they can
against him.
c. Pilot and his Association
The fact that the pilot is a member of an association does not make the
association jointly and severally liable. Article 2180 of the Civil Code does
not apply because there is NO EMPLOYER-EMPLOYEE Relationship.
Well-established is the rule that pilot associations are immune to
vicarious liability for the tort of their members. They are not the
employer of their members and exercise no control over them once they
take the helm of the vessel. They are also not partnerships because the
members do not function as agents for the association or for each other.
Pilots’ associations are also not liable for negligently assuring the
competence of their members because as PROFESSIONAL ASSOCIATIONS,
they made no guarantee of the professional conduct of their members to
the general public.
CODE OF COMMERCE PROVISIONS ON CAPTAINS (See page 528 of the Aquino
book)
OFFICERS AND CREW OF VESSELS
Seafarer – any person who employed, engaged or work onboard ships, whether
or not such ships are engaged in domestic or overseas trade
Marina Memo Circ. No. 148:
1. “Officer” means a member of the crew, other than the master, who
has been designated as such national law or regulation or, in the
absence of such designation, by collective agreement or custom.
2. “Master” means the person having command of a ship.
Page 28
 3. “Chief Mate” means an officer next in rank to the master and upon
whom the command of a ship will fall in the event of the incapacity
of the Master.
4. “Deck Officer” means an officer qualified in accordance with the
provisions of Chapter II of the Convention.
5. “Chief Engineer Officer” means a senior engineer officer responsible
for the mechanical propulsion and the operation and maintenance of
the mechanical and electrical installations of the ship.
6. “Second Engineer Officer” means the engineer officer next-in-rank to
the Chief Engineer and upon whom the responsibility for the
mechanical propulsion and the operation and maintenance of the
mechanical and electrical installation of the ship will fall in the event
of the incapacity of the Chief Engineer.
7. “Engineer Officer” means an officer qualified in accordance with the
provisions of chapter III of the Convention.
8. “Medical Practitioner” means a registered Doctor of Medicine in
charge of the medical department of a ship.
9. “Radio Officer” means a person holding an appropriate certificate
issued and recognized by the Administration under the provisions of
the Radio Regulations Act.
10. “Paramedic” are auxiliary medical personnel such as midwives, or
nurses with special training on administering first aid.
11. “Major Patron” (MAP) shall refer to a marine deck officer duly
registered and certificated to act as officer or master of vessel/ship
of not more than 500 GT navigating in the major coastwise trade
routes within the territorial limits of the Philippines.
12. “Minor Patron” (MIP) shall refer to a marine deck officer duly
registered and certificated to act as officer or master of vessel/ship
of not more than 250 GT navigating within a specified body of water
in the minor coastwise trade routes in the Philippines.
13. “Boat Captain” means a person authorized by the Administration to
act as officers and/or in command of a boat/ship or the
qualification/license to act as such.
14. “Marine Diesel Mechanic” (MDM) means a person authorized by the
Administration to operate and maintain the ship’s diesel engine/s or
the qualification/license to act as such.
15. “Electrician” means a licensed master electrician who is responsible
for the maintenance of the electrical and electronic installations of
the ship.
16. “Rating” means a member of the ship’s crew other than the master
or an officer.
COMPLEMENT OF A VESSEL (Art. 648, Code of Commerce)
-- all the persons on board from the captain to the cabin boy, necessary for the
management, maneuvers, and service, and therefore, it includes the CREW, the
SAILING MATES, ENGINEERS, STOKERS, and OTHER EMPLOYEES ON BOARD not
having specific designations; but it SHALL NOT INCLUDE the passengers or the
persons whom the vessel is transporting.
REGULATION OF MERCHANT MARINE PROFESSION
The practice of marine profession is now governed by special laws and pertinent
rules issued by the:
- MARINA;
- BOARD OF MARINE DECK OFFICERS;
- BOARD OF MARINE ENGINEER OFFICERS
MINIMUM SAFE MANNING
It is not enough that the officers manning the merchant vessel have all the
qualifications imposed by the Philippine Merchant Marine Officers Act and
other special laws or regulations. It is also required that there is sufficient
number of officers and crew that are serving in the vessel. (Quality and
Quantity)
SECURITY OF TENURE
The Labor Code provisions apply to OFFICERS and CREW of merchant
vessels in DOMESTIC Trade or COASTWISE Shipping. Hence, matters
concerning their dismissal or disciplinary action must be in accordance
with provisions of the Labor Code. For officers and crew who are working
in foreign vessels who are involved in overseas shipping, there must be
compliance with the applicable laws on overseas employment as well as
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
regulations issued by the Philippine Overseas Employment Administration
(POEA).
CODE OF COMMERCE PROVISIONS on Sailing Mates, Second Mate and Marine
Engineer, Crew, and Captain (See pages 548-560 of the Aquino book).
Parties --- those provided above… plus seamen, other members of the
complement including the stokers (in charge of boilers) and supercargo (agent
of the shippers who has authority to sell goods while on voyage)
4 maritime contracts
1. charter parties
2. Bottomry
3. Respondentia
4. Marine insurance (incorporated in the subject insurance)
ON PERSONS
Shipowner
- he has the privilege to invoke limited liability rule
- what if with a charter party with charterer, who can invoke the LLR?
No jurisprudence. Personal opinion of sir: distinguish on the type of
charter party. If affreightment, shipowner retains possession,
command and navigation of the vessel. If bareboat it is vested upon
the charterer.
- Jurisprudence: except for registration, the charterer is the temporary
owner of the vessel. With this, the charterer can invoke LLR (this part
no juris)
Note: there is not distinction of liability of shipowner and ship agent. They are
civilly liable
There is a situation in maritime law that shipowner and agent they are held
liable for the act or omission of a third person which is the ship captain or
master.
ACTS of CAPTAIN
Case: Yucon case and Sweetlines case
- In Yucon, money was entrusted to the captain and the money was
lost. SC concluded that shipowner was liable for the lost because the
captain failed to put up measures while in custody of the money. It
may not technically to an act but may refer to admission but would
fall under the term acts
- In Sweetlines, bound for Catbalogan but the captain chose to allow
the passengers to disembark in Tacloban. This time, this is the act of
captain. The SC concluded that the damages sustained by passengers
bound for Catbalogan are to shouldered by the shipowner
Indemnities in Favor of 3rd person: OTTA devt case sited in Walter Smith case
- In OTTA the owner of the pier was at the same time the owner of the
goods. SC, because there was a relationship of owner of vessel and
goods, then there is presumption of negligence new civil code
prevails
- Walter smith case: There was no relationship. Owner of port and
owner of goods are different. What was applied by court was the law
on torts. No presumption of negligence. There should be proof of
negligence. The owner of vessel proved that he exercised ordinary
diligence (required in ports). What was presented was the
competence of ship captain. The shipowner proved ordinary
diligence in choosing the ship captain
Contracts entered into by ship captain or master
Inter orient case: one role is they are the general agent of the shipowner. But if
the obligation contracted by the captain does not enure to the benefit of the
vessel, then the shipowner has no liability. There is no conflict because 586
obligations contracted by the shipper while 1759 death or injury of passenger as
result of contract of carriage.
Page 29
The case in point with the contracts entered into was the case Wing Kee. There
were supplies delivered. Ship agent was said to be liable. SC said at the time you
were still an agent you were liable but at the time agency was terminated you
are no longer liable.
If both SO and SA are sued, being solidarily liable, the SA has right of recourse
over SO.
Shipcaptain or master
- The difference is with regard to the tonnage of the vessel (higher:
captain; lower: master; major patron and minor patron)
- The question on the shipcaptain or master is the exercise of
discretion
- Inter orient case: captain Tayong did not want to proceed with the
voyage from Singapore to Africa because of lack of oxygen and
acetylene. But because of order of management he proceeded. He
was then ordered to repatriate and then another captain took his
place. He filed for illegal dismissal. The issue was the discretion
exercised by the captain. WON he has the discretion not to proceed
because of lack of supply. SC said you should emphasize reasonable
discretion--- it is the captain’s duty
- Inter Orient: triple roles of the captain --- general agent, commander
and technical manager, representative of country
Shipcaptain and harbor pilot
- Harbor pilot: distinguish if voluntary or compulsory
- Case cited by SC on proper relationship of captain and pilot. In far
eastern shipping case 521 3rd par --- there are occasion when the
master may and should interfere and even displace the pilot when
he is obviously incapacitate and intoxicated…. (look at the book)
- In this case, there is relevance on when the captain should interfere.
If it is voluntary (pilot engaged by shipowner) --- damages caused by
pilot, shipowner is liable. If compulsory, shipowner can escape
liability
- If compulsory distinguish whether there was circumstances that
would require the shipcaptain to interfere with the ship pilot. If
there are circumstances but captain did not interfere then
shipowner is liable. If there are circumstances and captain interfere
but still there is damage, the shipowner will not be liable.
- Cebu Port Authority --- covered by compulsory pilotage
Chiefmate or sailing mate (then there are engineers)
- 2008 case, citing the article the code of commerce specifying the
functions of chiefmate being second in command of the vessel…
Chiefmate is a managerial employee (as provided in labor code ---
loss of trust and confidence
- -
Seaman
- On security of tenure: distinguish DOMESTIN (labor code) abroad
(POEA)... there is a standard contract (POEA prepared and drafted it
and every seaman shall comply with this --- this is to protect Filipino
seaman working abroad) that will be signed by every seaman
stipulating the security of tenure, repatriation, benefits, etc.
- Difference for abroad: bigger income but contractual (after contract
go home)... Domestic, you can be a regular employee in accordance
with the labor code
- Jump Ship scenario: it is a valid ground to terminate a seaman
Shipcaptain should conduct preliminary investigation for crimes conducted on
board
CHAPTER 14
CHARTER PARTIES
Charter Parties
- a contract whereby the entire ship, or some of the principal part, is let by
the owner to a merchant or other person for a specified time or use for
the conveyance of goods, consideration of payment of freight
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
- it is a contract, hence, parties are free to stipulate upon such terms and
conditions that would suit their purposes subject to the caveat that these
should not be contrary to law or public policy
Parties
1. Charterer- merchant or a person who desires to lease ship or vessel owned
by another by transport of his or her goods for commercial purposes or persons
from one port to another
2. Shipowner (SO)
KINDS:
1. Bareboat or demise charterer – shipowner leases to the charterer the whole
vessel, transferring to the charterer the entire command, possession and
consequent control over the vessel’s navigation, including the master and the
crew, who becomes the charterer’s “servants”
- charterer becomes an owner “pro hac vice”
2. Contract of affreightment – charterer hires the vessel only, either for a
determinate period of time or for a single or consecutive voyage, with the SO
providing for the provision of the ship, wages of the master and crew, and
expenses for maintenance of the vessel
a. time charter – vessel is leased to a charterer for a fixed period of
time
b. voyage charter – vessel is leased for a single or particular voyage
EFFECT OF CHARTER ON CHARACTER OF CARRIER
Caltex v. Sulpicio Lines
There was a voyage charter; collision between MT Vector (tanker) and Doña Paz
(owned by Sulpicio); breach of contract filed by the passengers’ heirs against
Sulpicio; 3rd party complaint against registered owner of the tanker including
Caltex (that they were negligent and in bad faith by not seeing to it that the
tanker was seaworthy)
Issue: WON charterer shall be liable under Maritime Law?
Ruling: Liability cannot be attached to Caltex; the charter did not affect the
business of Sulpicio as a common carrier; rights and responsibilities of
ownership still rested on the owner
Planters Product v CA
- time charter; Planters purchased fertilizers from the US; voyage to
the Philippines ; upon arrival, shortage in the cargo was discovered ;
filed actions against carrier for damages ( breach of Contract) ; RTC
ruled in favor of the Planters; Ca reversed & absolved carrier as it
was converted from common carrier to private ;
Ruling : It cannot become a private carrier ; bareboat charter can
become a private carrier but in contract of affreightment remains as
common carrier ( action based on contract of carriage ; presumption
of negligence ) ; carrier was able to rebut the presumption of
negligence ( result the inherent character of the fertilizers)
Coastwise Lighterage v. CA
- WON private carrier would convert to a common carrier; contract of
affreightment
- Ruling : reiterated Planters ruling ; but was not able to rebut
presumption of negligence ; did not exercise EO diligence ( hired
unlicensed patron)
Home Insurance v. American Steamship
- case mostly used by the common carrier as defense ; Home
Insurance is subrogee (paid SMC of loss cargo shipped thru
American Steamship ; no reference as to what contract but there
was a mention that it was in affreightment
- Ruling : Common Carrier undertaking to carry special cargo
(chartered to special person only ) become a private carrier and
stipulation exempting owner from liability for loss due to the
negligence of its agents is valid;
Page 30
Shipowner can appoint senior officers for the vessel even if bareboat contract.
But technically it is an affreightment. Most conflicts will occur if these various
principles will have to be mixed.
The whereabouts of the vessel is important to know the time for loading and
unloading…
PERSONS WHO MAY MAKE CHARTER
1. Owner/s – either in whole or in majority part, who have legal control
and possession of the vessel, may validly enter into charter parties
with a charterer. A third person called a broker may, however,
intervene in the execution of the charter between the principals
2. Charterer – by himself, may subcharter the entire vessel to a third
person but only in the event that there is no prohibition in the
original charter regarding any subcharter
o Any cargo delivered by the second charterer for loading
may not generally be refused by the captain
o Independent contract by itself involving only the
charterer and the subcharterer and therefore does not
give rise to any contractual relation between the general
owner and the subcharterer
3. Part Owners – they are not precluded from chartering the same for
their own commercial purposes. They enjoy preference in the
charter of the vessel over other persons who offer equal conditions
and freight
4. Ship Agent – he not allowed to make contracts for a new charter
UNLESS he is properly or duly authorized by the owner, or by virtue
of an authority given by a resolution of the majority of the co-
owners
5. Captain or Master – it is one of the inherent powers of the captain or
master of the vessel to enter into valid and binding charter parties,
but only to the event of absence of the ship agent or consignee, and
only if the said captain or master acts in accordance with the
instructions of the agent or owner and protects the latter’s interests
a. Charter not affected if captain or master violated the
orders or instructions of the agent or owner
b. In above case, the agent or owner shall have a right of
action to recover damages against the erring captain or
master
REQUISITES OF A VALID CHARTER PARTY
1. consent of the contracting parties
2. an existing vessel which should be placed at the disposition of the
shipper
3. the freight
4. compliance with requirements of art 652 of Code of commerce
(Article 652 of the Code of Commerce provides that the charter party
shall contain, among others, the name, surname, and domicile of the
charterer, and if he states that he is acting by commission, that of the
person for whose account he makes the contract.)
Policy – marina
Implementing or enforcement --- Coastguard
2 conditions implied in charter party
1. seaworthiness (Caltex Phil Case) --- it need not be written in the charter party
2. --- look at book
JURISDICTION OF ADMIRALTY CASES
- depends on the jurisdictional amount
- important element of the contract = the subject matter of the
contract (nature and character)
International Harvester v Aragon
-involves loss of cargo shipped from LA to Manila; cargo owner filed an action
against common carrier
-SC said liability of petitioner was predicated upon the contract of carriage;
admiralty would involve all maritime contract in whatever form and wherever
made
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
Macondray v Delgado Brothers
- Delgado was an operator of a pier service ; WON operator exercised
its duty in loading and unloading of cargos ; no contract of carriage ;
obligation was only to load the to the ship ; no application of
admiralty
FRIEGHT OR FREIGHTAGE
- price of carriage
- shall accrue according to what is stipulated in the contract
- should there be no stipulation or if it is ambiguous , rules shall be
a. freight shall begin to run from the day of loading on the vessel
b. in charters with fixed period, the freight shall begin to run
upon that very day
c. If freight is charged according to weight , payment shall be
made according to gross weight , including the weight of the
containers
LAY DAYS- period of time stipulated for loading and unloading (provided for in
charter party); if no lay days provided for in the charter party, it is understood
that the charterer will unload and discharge cargoes within a reasonable time or
with reasonable diligence
The stipulated lay days do not begin to run against the consignee until the
vessel has arrived at the berth or other usual and customary place for loading
and unloading, and is in actual readiness to discharge its cargo in accordance
with its legal obligation.
Demurrage – a sum of money due by express contract for detention of the
vessel in loading, beyond time allowed for that purpose in that charter party;
sum of which is usually fixed by the parties in the charter party; liability for this
exists only when expressly stipulated
Deadfreight – where the charterer failed to occupy the leased portion of the
vessel, he may thereby be liable by the shipowner for the deadfreight that
occurred
RIGHTS AND OBLIGATIONS OF CHARTER PARTIES
1. Shipowner or Captain
a. Evident failure or refusal to receive cargo which had been
contracted to be transported – sure breach of charter
part, as to warrant a suit for damages by the charterer
b. Bound to observe, relative to the charter party, the
capacity of the vessel or that which is indicated expressly
in the registry, a margin greater than two percent
between that represented and her actual capacity which
is not allowable
c. Generally, any loss incurred by a shipper whose cargo is
refused on account of the receipt by the shipowner of a
greater amount of cargo belonging to other persons shall
be for the account of the shipowner in the form of
indemnity
d. If several charter parties, and due to lack of space,
preference shall be given to the person who is first in
loading his cargo, and the others shall have the
preference in the order of the dates of their charter.
i. In absence of priority, the charterers may
choose to load in proportion to the amounts
of weight or space that they may have
contracted, with a right to be indemnified for
the loss
e. May effect substitution in respect of the vessel which
had been initially chartered with that of another, so long
as the substitute vessel had been duly inspected and is
seaworthy
f. After 3/5 of the vessel is loaded, vessel may not be
substituted unless he procures the consent of the
charterers or shippers otherwise he is liable for damages
g. May not, if charter in whole, accept cargo from any other
person unless consent of the charterer is obtained
Page 31
 h. Liable for damages incurred by the charterer due to the
voluntary delay of the captain in putting to sea, provided
he was requested to put to sea at the proper time
2. Charterer
a. Right to subcharter the vessel to the third person only if
he is authorized by the shipowner
b. If he loads goods different from that contracted upon,
without the knowledge of the shipowner or captain, and
which results to damage due to confiscation, embargo,
detention and other causes, to the said shipowner, shall
be liable to indemnify the parties injured thereby
c. If illicit cargo with the knowledge of the shipowner –
charterer still jointly liable with the shipowner for all
damages caused to the other shippers
d. Charterers and shippers may not abandon goods
damaged due to inherent defects or by reason of
fortuitous events. It is only proper if the cargo (liquid)
may have leaked out and none remains except ¼ of their
contents
e. In case of bareboat charter:
i. Because contract bound to return the thing
leased, it is liable for the deterioration or loss
of the same
ii. When dry-docked for repairs but is lost due to
negligence
REPLACEMENT OF VESSEL
1. If, after receiving part of the freight, should not find sufficient to
make up at least 3/5 of the amount the vessel may hold, at the price
he may have fixed, he may substitute for the transportation another
vessel inspected and declared suitable for the same voyage.
Expenses for shipowner’s account
2. Substitution with the consent of the charters or shippers
LIEN ON CARGOES
1. Freightage
2. Expenses and duties arising therefrom, which must be reimbursed by
the shippers
3. For the part of the general average which may correspond to it
STIPULATION IN CHARTER PARTIES
GR: parties are free to stipulate subject to art 1744 to 1754 0f NCC
Art. 1744. A stipulation between the common carrier and the shipper or
owner limiting the liability of the former for the loss, destruction, or
deterioration of the goods to a degree less than extraordinary diligence shall
be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service
rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the
custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less
than that of a good father of a family, or of a man of ordinary
prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or
omission of his or its employees;
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible
threat, violence or force, is dispensed with or diminished;
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment
used in the contract of carriage.
Art. 1746. An agreement limiting the common carrier's liability may be
annulled by the shipper or owner if the common carrier refused to carry the
goods unless the former agreed to such stipulation.
Art. 1747. If the common carrier, without just cause, delays the transportation
of the goods or changes the stipulated or usual route, the contract limiting the
common carrier's liability cannot be availed of in case of the loss, destruction,
or deterioration of the goods.
Art. 1748. An agreement limiting the common carrier's liability for delay on
account of strikes or riots is valid.
Art. 1749. A stipulation that the common carrier's liability is limited to the
value of the goods appearing in the bill of lading, unless the shipper or owner
declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely
agreed upon.
Art. 1751. The fact that the common carrier has no competitor along the line
or route, or a part thereof, to which the contract refers shall be taken into
consideration on the question of whether or not a stipulation limiting the
common carrier's liability is reasonable, just and in consonance with public
policy.
Art. 1752. Even when there is an agreement limiting the liability of the
common carrier in the vigilance over the goods, the common carrier is
disputably presumed to have been negligent in case of their loss, destruction
or deterioration.
Art. 1753. The law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss, destruction or
deterioration.
Art. 1754. The provisions of Articles 1733 to 1753 shall apply to the
passenger's baggage which is not in his personal custody or in that of his
employee. As to other baggage, the rules in Articles 1998 and 2000 to 2003
concerning the responsibility of hotel-keepers shall be applicable.
ART. 653. If the cargo should be received without the charter party having been
signed, the contract shall be understood as executed In accordance with what
appears in the bill of lading, the sole evidence of title with regard to the cargo
for determining the rights and obligations of the ship agent, captain and
charterer
- If there is charter party or bill of lading (BOL) = no contract at all; but according
to Blanco, if there is delivery and receipt of cargo combined with the GF and
mutual consent = contract present, better than BOL
CHAPTER 15
LOANS ON BOTTOMRY AND RESPONDENTIA
LOAN ON BOTTOMRY – loan made by shipowner or ship agent guaranteed by
vessel itself and repayable upon arrival of vessel at destination; vessel/portion
LOAN ON RESPONDENTIA – loan, taken on security of the cargo laden on a
vessel, and repayable upon safe arrival of cargo at destination; cargo/goods
COMMON ELEMENTS OF LOANS ON BOTTOMRY AND RESPONDENTS:
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.
Page 32
Requisites of a Loan on Bottomry/Respondentia:
1. Shipowner borrows money for use, equipment or repair of vessel
2. For a definite term and with extraordinary interest called premium
3. Secured by pledged of vessel or portion thereof in the case on loan on
Bottomry; or pledge of goods in case of Respondentia
4. Loan repayment depends or conditioned on the safe arrival of goods for
respondentia and obligation to repay is extinguished if pledged goods
are lost (Respondentia)
5. Obligation to repay is extinguished if vessel is lost due to specified
marine perils in the course of voyage or within limited time (Bottomry)
- lender losses the right to institute the action which would pertain to him
Except: when the loss was
1. caused by inherent defect of the thing
2. through fault or malice of the borrower
3. through barratry on the part of the captain
4. caused by damages suffered by the vessel as a consequence of
being engaged in a contraband
5. loaded the goods on a vessel different from that designated in the
contract unless the change was caused by force majeure

FORMS OF A LOAN ON BOTTOMRY/RESPONDENTIA: 2. The lenders on bottomry or respondentia shall suffer in proportion to their
 May be executed by means of: respective interest, the general average which may take place in the things
1. public instrument upon which the loans were made.
2. policy signed by the contracting parties and the broker taking part therein
3. private instrument (Art. 720) 3. In case of shipwreck, the amount for payment of the loan shall be deduced to
the proceeds of the effects which have been saved but only after deducting the
GR: The captain cannot contract loans on respondentia secured by the cargo, costs of the salvage.
and should he do so, the contract shall be void. Neither can he borrow money
or Bottomry for his own transactions. 4. If the loan should be on the vessel or any of her parts, the freight earned
during the voyage for which the loan was contracted shall also be liable for its
EXCEPTIONS: payment, as far as it may reach.
1. On the portion of the vessel he owns, provided no money has been
previously borrowed on the whole vessel, nor exists any other kind of lien or 5. If the same vessel or cargo should be the object of the loan of Bottomry or
obligation chargeable against her. respondentia and maritime insurance, the value of what may be saved in case
2. When he is permitted to do so, he must necessarily state what interest he of shipwreck shall be divided between the lender and the insurer, in proportion
has in the vessel. to the legitimate interest of each one, taking in consideration, for this purpose
CONTENTS OF THE LOAN CONTRACT: only, the principal with respect to the
1. kind, name and registry of the vessel;
2. name, surname and domicile of the captain; Preference:
3. names, surnames and domiciles of the borrower and the lender; 1. loans made during the voyage over those made before the clearing
4. amount of the loan and the premium stipulated; of the vessel: graduated in the inverse order of their dates
5. time for repayment; 2. loans for the last voyage over prior ones
6. goods pledged to secure repayment; 3. if several loans have been made at the same port of arrival under
7. voyage during which the risk is run (Art.721) stress and for the same purpose, should be pro rata

WHO MAY CONTRACT: Maritime contracts include charter parties… and loans on bottomry and
respondentia are considered maritime contracts
1. Bottomry – by the ship owner or ship agent; outside of the residence of
Q: why do we have to study this topic? Are these relevant?
the owners, the captain. A: they are hardly used at present. However, we have to study this just in case
2. Respondentia – only the owner of the cargo this will be asked in the bar. Especially in the unique terms used in this topic...
DISTINCTIONS:
General provisions in contracts will govern
BOTTOMRY/ RESPONDENTIA ORDINARY LOAN

1. Not subject to Usury Law
2. Liability of the borrower is
contingent on the safe arrival of the
vessel or cargo at destination
3. The last lender is a preferred
creditor
4. Must have a collateral
5. Collateral is the vessel or cargo
subject to maritime risk
6. Must be in writing
7. To be binding on third person must
be recorded in the registry of vessels
of port of registry of the vessel
8. Loss of collateral extinguishes the
same
1. Subject to Usury Law
2. Not subject to any contingency
3. The first lender is a preferred
creditor
4. May or may not have collateral
5. Maybe property, real or
personal
6. Need not be in writing but
interest shall not be due unless
expressly stipulated in writing
7. Need not be registered
8. Does not extinguished if there is
a loss of the collateral (if any)
Basic provision you should not forget:
1. there should be a marine risk
2. the condition that the vessel or the goods has perished then the right of the
lender to collect everything as well as stipulated interest is extinguished
BOTTOMRY
- It may refer to the vessel
- The bottom or the hull or the kill of the vessel can be pledged in this
case
- The whole vessel can be a subject of a security or collateral
- PD. 1521: (is this different) --- loan is the principal, mortgage is the
accessory.
- The contract of bottomry is principal, the mortgage under PD 1521 is
merely a security
- In PD 1521 under section 4 it is a requirement that the whole of the
vessel must be mortgaged (no jurisprudence on this matter whether
a part of the vessel can be mortgaged)
- In bottomry the whole or the part of the vessel can be the subject
- IF the part of the vessel can be pledged, is it necessary that there
should be goods? No. no need for goods.

Consequences of loss of effects of the loans RESPONDENTIA

- The vessel should have goods. The goods must be laden in the vessel
1. Effects of loans be lost due to accident of the sea during the time, and on the - Is it necessary that the boat is on voyage? The vessel must be in the
occasion of the voyage which has been designated in the contract and proven actual course of voyage because this is the objective of the law.
that the cargo was on board Because if the vessel is docked in the port the owner can simply

ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños) Page 33
 obtain loans. And besides there is no risk when the vessel is docked
(but no jurisprudence)
Distinction of this two types of loan vs. SIMPLE LOAN (for purposes of the bar) --
- 5 differences
1. With respect to form --- can you validly execute a bottomry or respondentia
verbally? You cannot. Because under the code of commerce no judicial action
can arise when the contract is not reduced in writing. But this is not the case in
simple loan. But in simple loan you take note the statute of frauds… if not in
writing B and R, you can dismiss case due to failure to state cause of action.
Q: why hardly used at present?
A: because of sophistication. Captains can just call up any agent the shipowner
to deliver anything for the use of the vessel to deliver. … This contract was
recognized in medieval times.
CHAPTER 16
AVERAGES
ACCIDENTS IN MARITIME COMMERCE:
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
* Averages – an extra-ordinary 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 consignment. (Art. 806)
CLASSES OF AVERAGES:
A. Particular or Simple Average
B. Gross or General Average
A. Particular or Simple Average
Damage or expenses caused to the vessel or cargo that did not inure to
common benefit, and borne by respective owners. (809)
 The owner of the goods which gave rise to the expense or suffered the
damage shall bear this average. (Art. 810)
res perit domino applies
if the vessel or goods are hypothecated by loan on bottomry and
respondentia, the lender shall bear the loss in proportion to his interest
Examples: see article 809 of the code of commerce
RULES ON AVERAGES:
1. Averages is defined as damage deliberately caused or an expense
deliberately incurred due to a marine peril and which has resulted in
saving both vessel and cargo or only the vessel or cargo.
2. 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.
3. The person whose property has been saved must contribute to reimburse
the damage caused or expense incurred if the situation constitutes
general average.
B. Gross or General Average
 Damage or expenses deliberately caused in order to save the vessel, its cargo
or both from real and known risk. (Art. 811)
 All the persons having an interest in the vessel and the cargo therein at the
time of the occurrence of the average shall contribute to satisfy this average.
(Art. 812)
REQUISITES:
1. common danger present
2. arising from accidents of sea, disposition of authority
3. peril imminent and ascertained
4. part of vessel or cargo deliberately sacrificed
5. intended to save vessel or cargo
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
6. proper legal steps and authority taken
Common danger
- means both the ship and the cargo, after has been loaded, are subject to the
same danger, whether during the voyage, or in the port of loading or unloading,
that the danger arises from the accidents of the sea, disposition of authority, or
faults of men, provided that circumstances producing the peril should be
ascertained and imminent or may rationally be said to be certain and imminent
- When the measure of precaution adopted solely and exclusively for the
preservation of the vessel from the danger of seizure or capture and not for the
common safety is not considered as common danger
Deliberate Sacrifice
- voluntary sacrifice of a part for the benefit of the whole in order to justify the
average contribution
* voluntary jettison- the casting away of some portion of the associated
interests for the purpose of avoiding the common peril from the whole to a
particular portion of those interests
- the goods on board refer to in jettison should be proven by means of bill of
lading and with regards to those belonging to vessel by means of inventory
prepared before the departure
2 cases where there can also be general averages even if the sacrifice was not
made during the voyage:
a. where the sinking of the vessel is necessary to extinguish a fire in a
port, roadstead, creek or bay
b. where cargo is transferred to lighten the ship on account of a
storm to facilitate entry into a port
Art. 816: in order that the goods jettisoned may be included in the gross
average and the owners entitled to indemnity – it is necessary that the cargo’s
existence on board be proven by a bill of lading; and with regard to those
belonging to the vessel, by means of an inventory prepared before departure.
Art. 817: if in lightening of a vessel on account of a storm to facilitate its entry
to a port or roadstead, part of the cargo should be transferred to barges or
lighters and be lost, the owner of the said part is entitled to indemnity as if the
loss originated from a gross average, the amount being distributed between the
vessel and cargo from which it came.
If on the contrary the merchandise transferred should be saved and the vessel
should be lost, no liability may be demanded of the salvage.
Art. 818: if, as a necessary measure to extinguish a fire in a port, roadstead,
creek, or bay, it should be decided to sink any vessel, this loss shall be
considered gross average, to which the vessels saved should contribute.
Note: the loss or damage sustained by cutting away wreck or parts of the ship
which have been previously carried away or effectively lost by accident shall not
be made good as general average
Sacrifice must be Successful
- no general contribution can be demanded if the vessel and other cargo that
are sought to be saved were in fact not saved (art. 860)
- owners of the goods saved shall not be liable for the indemnification of those
jettisoned, lost or damaged
- hence when the sacrifice was not successful in saving the ship, there will be no
general contribution
Compliance with Legal Steps
- Procedure for recovery: (Art. 813-814)
1. There must be a resolution of the captain, adopted after a deliberation
with the other officers of the vessel and after hearing all persons
interested in the cargoes. If the latter disagree, the decision of the captain
should prevail but they shall register their objections.
2. The resolution must be entered in the logbook, stating the reasons and
Page 34
 motives for the dissent, and the irresistible and urgent causes if he acted
in his own accord. It must be signed, in the first case, by all persons
present in the hearing. In the second case, by the captain and all the
officers of the vessel.
3. The minutes must also contain a detail of all the goods jettisoned and
those injuries caused to those on board.
4. The captain shall deliver it to the maritime judicial authority of the first
port he may make, within 24 hours after his arrival, and to ratify it
immediately under oath.
- ORDER OF GOODS TO BE CAST OVERBOARD IN CASE OF JETTISON:
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)
Examples of General Average
Read Art 811 of the Code of Commerce
By Whom Borne
- shall be borne by those who benefited from the sacrifice; the shipowner and
the owner of the cargoes that were saved
Contribution may be imposed to;
a. insurers (Insurance Code of the Philippines)
- they are obliged to pay for the indemnification of the gross average provided
that the liability shall be limited to the proportion of contribution attaching to
his policy value where this is less than the contributing value of the thing
insured
b. lenders of bottomry and respondentia (Code of Commerce)
-obliged to pay in proportion to their respective interest, the general average
which may take place in the goods which the loan is made
Who is entitled to indemnity?
Owner of the goods which were sacrificed is entitled to receive the general
contribution
Except;
1. goods carried on desk unless the rule special law or
customs of the place allow the same
2. goods that are not recorded in the books or records of the
vessel
3. fuel of the vessel if there is more than sufficient fuel for
the voyage
EFFECT OF NEGLIGENCE
American Home Insurance v. CA
Art 848 states that claims shall not be admitted if they do not exceed 5% of the
interest which the claimant may have in the vessels or cargo if it is general
average, and 1% of the goods damaged if particular average… deducting in both
cases the expenses of appraisal, unless there is an agreement to the contrary.
It is clear that the damage of the cargo is particular average since the loss is less
than 1% to the value of the cargo and there appears to be no allegations as to
any agreement defendants and consignee of the goods to the contrary, by
express provision of law, plaintiff is barred from suing for recovery.
Law on averages does not apply if the CC is negligent.
YORK-ANTWERP RULES ON DETERMINING LIABILITY FOR CONTRIBUTION ON
AVERAGES
 Under the rule, deck cargo is permitted in coastwise shipping but prohibited
in overseas shipping.
1. If deck cargo is located 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.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
2. 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.
- may also be used to solve controversies where no provision of the
code of commerce is in point because the said rules embody the
custom of maritime states
AVERAGES
- the same concept that was existing in medieval times can be applied at
present
Relevance of averages (take note these ex. Connected to expenses under 806)
under 806 --- averages are:
o Extraordinary expenses – ex. If machine does not work,
you have to ask help of a tugboat… the expenses on the
use of tugboat is a question of averages. This is
extraordinary because it is not foreseen. --- assuming the
engine of the vessel was defective, can that be
considered an average? YES. (question now if it is
particular or general)
o Damages or deterioration suffered – refer to the physical
feature or attribute of the goods.
- these two are different
DISTINCTION OF PARTICULAR AND GENERAL AVERAGES
Hernandez – averages are losses. If there is a loss incurred, the loss will be
shouldered on where it falls. (ex. If you have goods transported from origin to
destination but in process it was damaged by sea water. The shipper or owner
will shoulder the loss. What will shipper do to recover loss? If insured go after
insurance. Insurance then files action against common carrier due to
negligence) --- if general average, there is special circumstance, the loss will not
be shouldered on where it falls but will be shouldered proportionately by
persons who have benefited the circumstance
4 requisites for general averages (see above notes) – MEMORIZE; MAGSAYSAY
VS. AGAN
1. common danger TO Both vessel and cargo
2. deliberate sacrifice
3. successful saving
4. compliance with the proper steps
If no special circumstance, it is a particular or simple average --- the owner of
the vessel will be the one who will shoulder the loss. The negligence of captain,
the owner of the vessel will shoulder. But if there is special circumstance, the
loss will be shouldered proportionately by those who benefited
Standard oil case – the ship captain will not release goods to the shipper unless
the shipper will contribute their share. The issue was the duty of the captain to
liquidate – he did not file for the appropriate proceeding, you should result to
legal liquidation. Captain here failed TO INITIATE proper proceeding thus
shipowner is liable for actions of captain
Q: is the duty of captain to initiate a condition precedent?
A: no. even if ship captain does not initiate, the shipowner can still file the
appropriate proceeding in court.
COMMON DANGER – both to vessel and cargo. If one invokes general average
then that person must prove what he allege. In standard oil since ship captain
invoked gen aver – they should be the one to prove. Failure to prove, they
cannot ask for contribution from owners of the goods.
It is also possible that there are no goods involved. Only extraordinary expense
Phil. Home assurance case --- discussed also in chapter 3 --- when it exploded,
vessel got burned, another vessel came to the rescue to extinguish the fire and
towed the vessel to the nearest destination. Goods were saved from the subject
vessel. The shipowner asked for contribution to the owner of the goods which
were saved. SC said, shipowner did not comply legal steps 813-815 thus you
cannot allege general averages.
Page 35
If the averages are not general, it is particular. The shipowner will be solely
liable… in the case of Magsaysay, there was no deliberate sacrifice.
SUCCESSFUL SAVING
- Both vessel and goods must be saved
- If vessel not saved, no general averages. Even if goods were saved
- You have to start with resolution, placing of reso in the log book,
accounting of goods thrown away starting those on deck and to
follow from those not on deck (read 83-815)
American Home insurance (take note this case--- bar)
- Transportation of TV sets, the shipcaptain was apprised of the
typhoon. Still captain continued with the journey. Then the typhoon
came and the captain directed that the TV sets should be jettison.
Saved vessel. Owner filed complaint. Is there general average? No. if
the shipowner is negligent, the law on general averages does not
apply.
Note that examples of the two types of averages are not exclusive. There is a
word “especially” thus there may be other example that may fall under this two
type of averages.
YORK AND TURP RULES
- THIS CAN be stipulated in a contract that this rule will apply in
respect to averages
- In the absence of stipulation in the contract in applying this rule,
such rule is inapplicable
Q: ordinary expenses are not averages because they are foreseeable, are there
instance that they can be considered to be extraordinary average
A; if the parties agree that the averages will cover ordinary expenses. The code
of commerce does not prohibit the inclusion of other expenses under averages.
CHAPTER 17
COLLISIONS
Collisions - impact of 2 vessels both of which are moving.
Allision - impact between a moving vessel and a stationary one.
 3 Zones of Time in the Collision of vessels:
1. First zone – all time up to the moment when risk of collision begins;
2. Second zone – time between moment when risk of collision begins and
moment it becomes a practical certainty;
3. Third zone – time when collision is certain and time of impact.
 Error in Extremis - sudden movement made by a faultless vessel during the
3rd 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).
 Rules on Collision of Vessels under Code of Commerce:
1. The collision may be due to the fault, negligence or lack of skill of the
captain, sailing mate, or any other member of the complement of the
vessel. The owner of the vessel at fault be liable for losses or damage.
(Art. 826)
2. The collision may be due to the fault of both vessels. Each vessel shall
suffer its own losses, but as regards the owner of cargoes both vessels
shall be jointly and severally liable. (Art. 827)
3. If it cannot be determined which vessel is at fault. Each vessel shall also
suffer its own losses and both shall be solidarily liable for losses or
damages on the cargoes. (Art. 828)
4. The vessels may collide with each other through fortuitous event or force
majeure. In this case each shall bear its own damage. (Art. 830)
5. Two vessels may collide with each other without their fault by reason of a
third vessel. The third vessel will be liable for losses and damages. (Art.
831)
6. A vessel which is properly anchored and moored may collide with those
nearby reasons of storm or other cause of force majeure. The vessel run
into shall suffer its own damage and expense. (Art. 832)
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
 Cases covered by collision and allision:
1. One vessel at fault – such vessel is liable for damage caused to innocent
vessel as well as damages suffered by the owners of cargo of both vessels.
2. Both vessels at fault – each vessel must bear its own loss, but the shippers
of both vessels may go against the ship owners who will be solidarily
liable.
3. Vessel at fault not known – same as rule as (2). (Doctrine of Inscrutable
Fault)
4. Third vessel at fault – same rule as (1).
5. Fortuitous event – no liability. Each bears its own loss.
Prerequisite to recovery:
 Protest should be made within 24 hours before the 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)
 Injuries to persons and damage to cargo of owners not on board on collision
time need not be protested. (Art. 836)
DOCTRINE OF LAST CLEAR CHANCE OR CONTRIBUTORY NEGLIGENCE NOT
APPLICABLE.
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.
NOTE: The Doctrine of Limited Liability applies in case of collisions, but it shall
be limited only to the value of the vessel with all its appurtenances and
freightage earned during the voyage. When the latter is not sufficient to cover
all the liabilities, the indemnity due by reason of the death or injury of persons
shall have preference. (Arts. 837 and 838)
CHAPTER 18
ARRIVAL UNDER STRESS
* ARRIVAL UNDER STRESS – arrival of a vessel at a port of destination on
account of lack of provision, well-founded fear of seizure, privateers, pirates, or
accidents of sea disabling navigation. (Art. 819)
NOTE: Captain must make a protest
Steps to be taken in the determination of the propriety of arrival under stress
1. captain should determine during the voyage if there is a well-founded
fear of seizure, privateers of other valid grounds
2. captain shall then assemble the officers
3. captain shall summon the persons interested in the cargo who may be
present and who may attend but without right to vote
4. the officers shall determine and agree if there is well founded reason
after examining the circumstances; Captain shall have the deciding vote
5. agreement shall be drafter and the proper minutes shall be signed and
entered into the log book
6. objections and protests shall likewise be entered in the minutes
- Absence of one of the steps, can still be considered arrival under stress.
When not lawful:
1. lack of provisions due to negligence to carry according to usage and
customs;
2. risk of enemy not well known or manifest
3. defect of vessel due to improper repair; and
4. malice, negligence, want of foresight or lack of skill of captain. (Art. 820)
Who bears expenses:
 if arrival under stress is proper  shipowner or ship agent will only
be liable for the expenses of the arrival
 if arrival under stress is improper  shipowner and ship agent will
be liable for the same expenses and, in addition, they shall be
solidarily liable for damages caused to the cargoes by such arrival
under stress (Art. 821)
Page 36

NOTE:
- After cessation of the cause of the arrival under stress, captain should
continue voyage or else he shall be liable.
Unloading of cargoes to make repairs:
- in order to make repairs to the vessel or because there is danger that
cargo may suffer damage  necessary to unload; captain must
request authorization from competent judge or court for removal,
and carry it out w/ knowledge of the person interested in the cargo
- in a foreign port  Philippine Consul
- in case of the vessel  expenses shall be for the account of the ship
owner or agent
- in case of the cargo  chargeable against the owners of the
merchandise for whose benefit the act was performed
- if both  expenses to be divided proportionately between the value
of the vessel and cargo
(Art. 822)
Custody of cargo:
 entrusted to the captain (except in cases of force majeure)
(Art. 823)
 if entire cargo or part thereof should appear to be damaged, or there
should be imminent danger of its being damaged
 captain may request judge of competent court / consul, the sale
of all or part of the cargo
 person taking cognizance shall authorize it (after examination and
declaration)
 captain shall justify the legality of his conduct, answering to the
shipper for the price of the merchandise would have brought if they
had arrived in good condition
(Art. 824)
Liability of captain:
 captain responsible for the damages caused by his delay
 if cause of arrival under stress ceases  he should not continue the
voyage
 if cause of arrival should have been the fear of enemies 
deliberation and resolution (in a meeting of officers of the vessel and
persons interested in the cargo) shall precede the departure
(Art. 825)
* Shipwreck – the demolition or shattering of a vessel caused by her driving
ashore or on rocks and shoals in the midseas, or by the violence of winds or
waves in tempests
- loss of the vessel at sea as a consequence of its grounding, or running against
an object in sea or on the coast
 Loss or deteriorations of vessel or cargo caused by shipwreck or stranding 
individually account of the owners; part which may be saved belonging to them,
same proportion. (Art. 840)
 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 goods saved from the wreck to be specially bound for the payment of
the expenses of the respective salvage. (Art. 842)
 If several vessels sail under convoy, and any of them should be wrecked, the
cargo saved will be distributed among the rest in proportion to the amount
which each one is able to take. … If any captain should refuse, without sufficient
cause, to receive what may correspond to him, the captain of the wrecked
vessel to enter a marine protest against him. … If it is not possible to transfer to
the other vessels the entire cargo of the vessel wrecked, the goods of the
highest value and smallest volume to be saved first. Designation to be made by
the captain with concurrence of his officers. (Art. 843)
 The captain taking on-board the goods saved from the wreck to continue his
course to the port of destination and upon arrival he should deposit the goods
for disposal to their owners. … In case the captain changes his course, and if he
can unload them at the port of which they were consigned, he may make said
port if the shippers or supercargoes present and the officers and passengers of
the vessel consent thereto. But he is not required to do so even if he has the
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
consent during time of war or when the port is difficult and dangerous to make.
… The owners of the cargo to defray all the expenses of this arrival and the
payment of the freightage. (Art. 844)
 If cannot be, proceed to judicial sale complying with the formalities and on
publicity. (Art. 845)
CHAPTER 19
SALVAGE LAW (Act No. 2616)
* SALVAGE – 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.
Kinds of Salvage:
 Voluntary – compensation is dependent on the success.
 Under contract for a per diem or per horam wage – payable at all
events.
 Under contract for compensation – payable only in case of success.
Claim for valid salvage:
- Provides for a reward for voluntary salvage
- Other persons who assist in saving the vessel or its cargo from
shipwreck shall be entitled to a similar award
Persons not entitled to salvage compensation:
1. Crew of the vessel shipwrecked or which was in danger of shipwreck
2. He who shall have commenced the salvage in spite of opposition of
the captain or of his representatives
3. He who shall have failed to comply with the provisions of Section 3
(Section 3. The salvor who saves or picks up a vessel or merchandise
at sea, in the absence of the ship captain, ship owner or a
representative of either of them, they being unknown, shall convey
and deliver the vessel or merchandise ASAP to the collector of
customs if the port has a collector and otherwise to the provincial
treasurer or municipal mayor.)
Requisites of compensation or salvage reward:
1. Object must have been exposed to marine peril (fire, acts of pirate,
thieves)
2. Salvage services rendered voluntarily and is not required as an
existing duty or a form of contract (See Sec. 8)
* Pilots are not entitled to a reward
3. Salvage services are successful in whole or in part
4. Valid vessel which is shipwrecked beyond the control of the crew or
shall have been abandoned (not necessary)
* Courts will not interfere in the agreement of the parties except but where
there is no agreement or it is excessive the reward is fixed by the RTC judge.
* Derelict – a ship or cargo which is abandoned and deserted at sea by those
who were in charge of it, without any hope of recovering it or without any
intention of returning to it
- determined by ascertaining what was the intention and expectation of those
in charge of it when they quitted it
- boat or vessel found entirely deserted or abandoned on the sea without hope
or intention of recovery or return by the master or the crew, whether resulting
from wreck, accident, necessity, or voluntary abandonment
JETSAM, FLOTSAM, LIGAN:
 Jetsam – goods that were thrown off a ship which was in danger
 Flotsam – goods that floated off the ship while ship was in danger or
when it sank
 Ligan – goods left as sea on the wreck or tied to a buoy so that they
can be recovered later
Basis of entitlement to salvage reward (Circumstances to consider):
1. The labor expended by the salvors in rendering the salvage service
Page 37
 2. The promptitude, skill and energy displayed in rendering the service
and saving the property
3. The value of the property employed by the salvors in rendering the
service, and danger to which such property was exposed
4. The risk incurred by the salvors in rescuing the property from the
impending peril
5. The value of the property salved
6. The degree of danger which the property was rescued
Rights and obligations of salvors and owners:
 Salvor is entitled to compensation for services rendered. He has,
under the Salvage Law, a lien upon the property salvaged.
 On the other hand, the owner does not denounce his right to the
property. There is no presumption of an intention to abandon such
property rights.
Maritime Lien
 A salvor, in maritime law, has an interest in the property; called a lien, but it
never goes, in the absence of a contract expressly made, upon the idea of debt
due from the owner to the salvor but upon the principle that the service creates
a property in the thing saved.
Rule 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. 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).
3. 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
SALVAGE LAW
SECTION 1. WHEN IN CASE OF SHIPWRECK, THE VESSEL OR ITS CARGO SHALL
BE BEYOND THE CONTROL OF THE CREW, OR SHALL HAVE BEEN ABANDONED
BY THEM, AND PICKED UP AND CONVEYED TO A SAFE PLACE BY OTHER
PERSONS, THE LATTER SHALL BE ENTITLED TO A REWARD FOR THE SALVAGE.
THOSE WHO, NOT BEING INCLUDED IN THE ABOVE PARAGRAPH, ASSIST IN
SAVING A VESSEL OR ITS CARGO FROM SHIPWRECK, SHALL BE ENTITLED TO A
LIKE REWARD.
SEC. 2. IF THE CAPTAIN OF THE VESSEL, OR THE PERSON ACTING IN HIS STEAD,
IS PRESENT, NO ONE SHALL TAKE FROM THE SEA, OR FROM THE SHORES OR
COAST MERCHANDISE OR EFFECTS PROCEEDING FROM A SHIPWRECK OR
PROCEED TO THE SALVAGE OF THE VESSEL, WITHOUT THE CONSENT OF SUCH
CAPTAIN OR PERSON ACTING IN HIS STEAD.
SEC. 3. HE WHO SHALL SAVE OR PICK UP A VESSEL OR MERCHANDISE AT SEA, IN
THE ABSENCE OF THE CAPTAIN OF THE VESSEL, OWNER, OR A REPRESENTATIVE
OF EITHER OF THEM, THEY BEING UNKNOWN, SHALL CONVEY AND DELIVER
SUCH VESSEL OR MERCHANDISE, AS SOON AS POSSIBLE, TO THE COLLECTOR OF
CUSTOMS, IF THE PORT HAS A COLLECTOR, AND OTHERWISE TO THE
PROVINCIAL TREASURER OR MUNICIPAL MAYOR.
SEC. 4. AFTER THE SALVAGE IS ACCOMPLISHED, THE OWNER OR HIS
REPRESENTATIVE SHALL HAVE A RIGHT TO THE DELIVERY OF THE VESSEL OR
THINGS SAVED, PROVIDED THAT HE PAYS, OR GIVES A BOND TO SECURE, THE
EXPENSES AND THE PROPER REWARD.
THE AMOUNT AND SUFFICIENCY OF THE BOND, IN THE ABSENCE OF
AGREEMENT, SHALL BE DETERMINED BY THE COLLECTOR OF CUSTOMS OR BY
THE JUDGE OF THE COURT OF FIRST INSTANCE OF THE PROVINCE IN WHICH THE
THINGS SAVED MAY BE FOUND.
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
SEC. 5. THE COLLECTOR OF CUSTOMS, PROVINCIAL TREASURER, OR MUNICIPAL
MAYOR, TO WHOM A SALVAGE IS REPORTED, SHALL ORDER:
A. THAT THE THINGS SAVED BE SAFEGUARD AND INVENTORIED.
B. THE SALE AT PUBLIC OPTION OF THE THINGS SAVED WHICH MAY BE IN
DANGER OF IMMEDIATE LOSS OR OF THOSE WHOSE CONSERVATION IS
EVIDENTLY PREJUDICIAL TO THE INTERESTS OF THE OWNER, WHEN NO
OBJECTION IS MADE TO SUCH SALE.
C. THE ADVERTISEMENT WITHIN THE THIRTY DAYS SUBSEQUENT TO THE
SALVAGE, IN ONE OF THE LOCAL NEWSPAPERS OR IN THE NEAREST NEWS-
PAPER PUBLISHED, OF ALL THE DETAILS OF THE DISASTER, WITH A
STATEMENT OF THE MARK AND NUMBER OF THE EFFECTS REQUESTING
ALL INTERESTED PERSONS TO MAKE THEIR CLAIMS.
SEC. 6. IF, WHILE THE VESSEL OR THINGS SAVED ARE AT THE DISPOSITION OF
THE AUTHORITIES, THE OWNER OR HIS REPRESENTATIVE SHALL CLAIM THEM,
SUCH AUTHORITIES SHALL ORDER THEIR DELIVERY TO SUCH OWNER OR HIS
REPRESENTATIVE, PROVIDED THAT THERE IS NO CONTROVERSY OVER THEIR
VALUE, AND A BOND IS GIVEN BY THE OWNER OR HIS REPRESENTATIVE TO
SECURE THE PAYMENT OF THE EXPENSES AND THE PROPER REWARD.
OTHERWISE, THE DELIVERY SHALL NOR BE MADE UNTIL THE MATTER IS
DECIDED BY THE COURT OF FIRST INSTANCE OF THE PROVINCE.
SEC. 7. NO CLAIM BEING PRESENTED IN THE THREE MONTHS SUBSEQUENT TO
THE PUBLICATION OF THE ADVERTISEMENT PRESCRIBED IN SUB-SECTION (C) OF
SECTION FIVE, THE THINGS SAVE SHALL BE SOLD AT PUBLIC AUCTION, AND
THEIR PROCEEDS, AFTER DEDUCTING THE EXPENSES AND THE PROPER REWARD
SHALL BE DEPOSITED IN THE INSULAR TREASURY. IF THREE YEARS SHALL PASS
WITHOUT ANYONE CLAIMING IT, ONE-HALF OF THE DEPOSIT SHALL BE
ADJUDGED TO HIM WHO SAVED THE THINGS, AND THE OTHER HALF TO THE
INSULAR GOVERNMENT.
SEC. 8. THE FOLLOWING SHALL HAVE NO RIGHT TO A REWARD FOR SALVAGE
OR ASSISTANCE:
A. THE CREW OF THE VESSEL SHIPWRECKED OR WHICH WAS IS DANGER OF
SHIPWRECK;
B. HE WHO SHALL HAVE COMMENCED THE SALVAGE IN SPITE OF OPPOSITION
OF THE CAPTAIN OR HIS REPRESENTATIVE; AND
C. HE WHO SHALL HAVE FAILED TO COMPLY WITH THE PROVISIONS OF SECTION
THREE.
SEC. 9. IF, DURING THE DANGER, AN AGREEMENT IS ENTERED INTO
CONCERNING THE AMOUNT OF THE REWARD FOR SALVAGE OR ASSISTANCE,
ITS VALIDITY MAY BE IMPUGNED BECAUSE IT IS EXCESSIVE, AND IT MAY BE
REQUIRED TO BE REDUCED TO AN AMOUNT PROPORTIONATE TO THE
CIRCUMSTANCES.
SEC. 10. IN A CASE COMING UNDER THE LAST PRECEDING SECTION, AS WELL AS
IN THE ABSENCE OF AN AGREEMENT, THE REWARD FOR SALVAGE OR
ASSISTANCE SHALL BE FIXED BY THE COURT OF FIRST INSTANCE OF THE
PROVINCE WHERE THE THINGS SALVAGED ARE FOUND, TAKING INTO ACCOUNT
PRINCIPALLY THE EXPENDITURES MADE TO RECOVER OR SAVE THE VESSEL OR
THE CARGO OR BOTH, THE ZEAL DEMONSTRATED, THE TIME EMPLOYED, THE
SERVICES RENDERED, THE EXCESSIVE EXPRESS OCCASIONED THE NUMBER OF
PERSONS WHO AIDED, THE DANGER TO WHICH THEY AND THEIR VESSELS WERE
EXPOSED AS WELL AS THAT WHICH MENACED THE THINGS RECOVERED OR
SALVAGED, AND THE VALUE OF SUCH THINGS AFTER DEDUCTING THE
EXPENSES.
SEC. 11. FROM THE PROCEEDS OF THE SALE OF THE THINGS SAVED SHALL BE
DEDUCTED, FIRST, THE EXPENSES OF THEIR CUSTODY, CONSERVATION,
ADVERTISEMENT, AND AUCTION, AS WELL AS WHATEVER TAXES OR DUTIES
THEY SHOULD PAY FOR THEIR ENTRANCE; THEN THERE SHALL BE DEDUCTED
THE EXPENSES OF SALVAGE; AND FROM THE NET AMOUNT REMAINING SHALL
BE TAKEN THE REWARD FOR THE SALVAGE OR ASSISTANCE WHICH SHALL NOT
EXCEED FIFTY PER CENT OF SUCH AMOUNT REMAINING.
Page 38
SEC. 12. IF IN THE SALVAGE OR IN THE RENDERING OF ASSISTANCE DIFFERENT
PERSONS SHALL HAVE INTERVENED THE REWARD SHALL BE DIVIDED BETWEEN
THEM IN PROPORTION TO THE SERVICES WHICH EACH ONE MAY HAVE
RENDERED, AND, IN CASE OF DOUBT, IN EQUAL PARTS.
THOSE WHO, IN ORDER TO SAVE PERSONS, SHALL HAVE BEEN EXPOSED TO THE
SAME DANGERS SHALL ALSO HAVE A RIGHT TO PARTICIPATION IN THE
REWARD.
SEC. 13. IF A VESSEL OR ITS CARGO SHALL HAVE BEEN ASSISTED OR SAVED,
ENTIRELY OR PARTIALLY, BY ANOTHER VESSEL, THE REWARD FOR SALVAGE OR
FOR ASSISTANCE SHALL BE DIVIDED BETWEEN THE OWNER, THE CAPTAIN, AND
THE REMAINDER OF THE CREW OF THE LATTER VESSEL, SO AS TO GIVE THE
OWNER A HALF, THE CAPTAIN A FOURTH, AND ALL THE REMAINDER OF THE
CREW THE OTHER FOURTH OF THE REWARD, IN PROPORTION TO THEIR
RESPECTIVE SALARIES, IN THE ABSENCE OF AN AGREEMENT TO THE CONTRARY.
THE EXPRESS OF SALVAGE, AS WELL AS THE REWARD FOR SALVAGE OR
ASSISTANCE, SHALL BE A CHARGE ON THE THINGS SALVAGED ON THEIR VALUE.
CHAPTER 20
COGSA (CARRIAGE OF GOODS BY SEA ACT)
- Adopted by the Philippines on October 22, 1936 through
Commonwealth Act No. 65
- New Civil Code  primary law on goods that are being transported
from a foreign port to the Philippines
- COGSA  remains to be a suppletory law for such type of
transportation – international shipping
ART. 1753, NCC: THE LAW OF THE COUNTRY TO WHICH THE GOODS ARE TO BE
TRANSPORTED SHALL GOVERN THE LIABILITY OF THE COMMON CARRIER FOR
THEIR LOSS, DESTRUCTION OR DETERIORATION.
* Goods – includes goods, wares, merchandise, and articles of every kinds
whatsoever
- does not include live animals and cargo which by the contract of
carriage is stated as being carried on deck and is so carried
Parties:
 Carrier, and
 Shipper
- They are given their respective rights and obligations under COGSA.
- Carrier (covered by COGSA)  not limited to the shipowner; includes
charterer who enters into a contract of carriage with the shipper
- Charterer  charters a vessel and conducts his own business for his own
account
 after chartering the vessel, he uses the vessel to conduct a
business of transportation obtaining goods from 3 rd persons to transport the
latter’s goods
Duties of the carrier:
 Civil Code requires international carriers to exercise extraordinary
diligence in the performance of their contractual obligations
 Section 2 of COGSA  carrier’s obligation and liabilities in relation to
the loading, handling, stowage, carriage, custody, care and discharge
of such goods
 Section 3 of COGSA  responsibilities of the carrier under COGSA
Document of title required
- evidenced by the Bill of Lading
- BOL serves as prima facie evidence of the receipt by the carrier of the goods
Notice of claim and prescriptive period
* Notice of claim  must be made within 3 days from delivery if the damage is
not apparent; not mandatory
* Prescriptive period  1 year from delivery for the filing of the case is a
condition precedent or mandatory; does not apply to cases of misdelivery or
conversion
Defenses and immunities
- provided for by Section 4 of COGSA
ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños)
- Section 49(1) of COGSA – carrier shall not be liable for loss or damages arising
from unseaworthiness
- New Civil Code – carrier will not be liable only if it can present proof that the
unseaworthiness was caused exclusively by any of the circumstances specified
in Art. 1734 of the NCC
Waiver
- The shipowner and the ship agent may waive the benefit of any of the
defenses in its favor provided not only under COGSA but also under other laws
Limiting provision
- COGSA contains a provision that allows the shipper to recover only US$500 per
package unless there is a special declaration unless there the real value of the
goods is declared
- declaration made by the shipper stating an amount bigger than $500 per
package will make the carrier liable for such bigger amount but only if the
amount so declared is the real value of the goods
Right to discharge dangerous cargo
- COGSA allows the carrier to discharge the good of the carrier discovers that
the goods are dangerous, inflammable or are explosives
WARSAW CONVENTION of 1929
WHEN APPLICABLE:
- Applies to all international transportation of person, baggage or
goods performed by aircraft for hire.
- “International transportation” means any transportation in which
the place of departure and the place of destination are situated
either:
o within the territories of two High Contracting Parties
regardless of whether or not there be a break in the
transportation or transshipment, or
o 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.
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)
NOTE: Warsaw prevails over the Civil Code, Rules of Court and all laws in
the Philippines since an international law prevails over general law.
WHEN NOT APPLICABLE:
1. If there is willful misconduct on the part of the carrier’s employees.
The Convention does not regulate, much less exempt, carrier from
liability for damages for violating the rights of its passengers under
the contract of carriage (PAL v. CA, 257 SCRA 33). --- if the damage is
similarly caused by any agent of the carrier acting within the scope
of his employment
2. when it contradicts public policy;
3. if the requirements under the Convention are not complied with.
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; (Art. 17)
2. Destruction, loss or damage to any luggage or goods, if it took place
during the carriage; (Art. 18) and
3. Delay in the transportation of passengers, luggage or goods. (Art. 19)
NOTE: The Hague Protocol amended the Warsaw Convention 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 v. IAC, 192 SCRA 9)
Page 39
Remember: The said provisions merely declare the carrier liable for damages in
the enumerated cases if the conditions therein specified are present. Neither Updated from Ursal Summary
said provisions nor others in the aforementioned Convention regulate or
exclude liability for OTHER BREACHES of contract of carrier.

The Convention does not thus operate as an exclusive enumeration of the

instances of an airline’s liability, or as an absolute limit of the extent of that
liability.

LIMIT OF LIABILITY
1. passengers - limited to 250,000 francs;
 except: agreement to a higher limit
2. goods and checked-in baggage - 250 francs/kg
 except: consigner declared its value and paid a
supplementary sum, carrier liable to not more than the
declared sum unless it proves the sum is greater than its
actual value.
3. hand-carry baggage - limited to 5,000 francs/passenger

An agreement relieving the carrier from liability or fixing a lower limit is null and
void. (Art. 23)
Carrier not entitled to the foregoing limit if the damage is caused by willful
misconduct or default on its part. (Art. 25)

Case: China Airlines vs. Daniel Chiok

- The ticket-issuing airline acts as principal in a contract of carriage
and is thus liable for the acts and the omissions of any errant carrier
to which it may have endorsed any sector of the entire, continuous
trip.

Place of Destination- within the meaning of the Warsaw Convention, is

determined by the terms of the contract of carriage, or specifically the ticket
between the passenger and the carrier. It is the destination and not an agreed
stopping place that controls for the purpose of ascertaining jurisdiction under
the Convention. (Case: Santos III vs. Northwest Orient Airlines and CA)

ACTION FOR DAMAGES

1. Condition precedent
A written complaint must be made within:
- 3 days from receipt of baggage
- 7 days from receipt of goods
- in case of delay, 14 days from receipt of baggage/goods
F otherwise the action is barred except in case of fraud on the part of the
carrier. (Art. 26)
2. Jurisdiction – governed by domestic law
3. Venue – at the option of the plaintiff:
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;
d. court of the place of destination. (Art. 28)
4. Prescriptive period – 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation stopped. (Art. 29)
5. Rule in case of various successive carriers,
a. In case of transportation of passengers – the action is filed only against
the carrier in which the accident or delay occurred unless there is an
agreement whereby the first carrier assumed liability for the whole
journey.
b. In case of transportation of baggage or goods
i. the consignor can file an action against the first carrier and the
carrier in which the damage occurred
ii. the 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)

Nota Bene: COGSA/WARSAW applies to foreign vessels or airplane or

international travel
Code of Commerce applies to inter-island or domestic travel.

ELAINE MAE V. ALAGAO, XU Law 1 st Sem S.Y. 17-18 (Transportation Law – Castaños) Page 40