Contract of Transportation A contract of circumstances or conditions § Prohibits common

transportation is one whereby a certain person or carriers from subjecting any person or thing to any
association of persons obligate themselves to transport undue or unreasonable prejudice or discrimination
persons, things, or news from one to another for a whatsoever
fixed price. [Crisostomo v CA, G.R. No. 138334
(2003)] When is Discrimination Allowed? The law does not
prohibit the charging of a different rate for the
Carriers are persons or corporations who undertake to carrying of passengers or property when the actual
transport or convey goods, property, or persons, from cost of handling and transporting the same is
one place to another, gratuitously or for hire, and are difference. § They are allowed to charge for a different
classified as: a. Private or special carriers, who price for handling and shipping merchandise when the
transport or undertake to transport in a particular shipper exercises greater care in preparing the
instance for hire or reward [AGBAYANI, Commercial shipment,
Laws of the Philippines (1987)]; and b. Common or
public carriers [Art. 1732, NCC] May Common Carriers Refuse to Transport
Passengers or Goods? result in overloading; goods
Common carriers are: are injurious to health, goods may be exposed to
a. Persons, corporations, firms or associations, untoward danger like flood, capture by enemies and
b. Engaged in the business of carrying or transporting, the like; livestock will be exposed to diseases; General
c. Passengers or goods or both, nature of the business done by the carrier; All the
d. By land, water, or air, attendant circumstances which might affect the
e. For compensation, question of the reasonable necessity for the refusal by
f. Offering their services to the public. [Art. 1732, the carrier to undertake the transportation
NCC]
Diligence Required of Common Carriers
Test for a Common Carrier Whether the
undertaking is a part of the activity engaged in by the Standard of Diligence Common carriers, from the
carrier, which it has heldout to the general public as its nature of their business and for reasons of public
business or occupation. - Determined by the character policy, are bound to observe extraordinary diligence,
of the business actually carried on by the carrier - If according to all the circumstances of each case: 1. In
the undertaking is a single transaction, not a part of the the vigilance over the goods, [Arts. 1734, 1735, and
general business or occupation engaged in, as 1745, Nos. 5, 6, and 7, NCC] and 2. For the safety of
advertised and held out to the general public, the the passengers transported by them [Art. 1733, NCC].
individual or the entity rendering such service is a
private, not a common, carrier. [Perena v. Nicolas, Extraordinary diligence Requires carrying
G.R. No. 157917 (2012)] passengers safely:

Test for a Common Carrier If the undertaking be a  As far as human care and foresight can provide, 
single transaction, not a part of the general business or
Using the utmost diligence of very cautious persons, 
occupation engaged in, as advertised and held out to With a due regard for all the circumstances [Art. 1755,
the general public, then the individual or company NCC]. Note: A common carrier is not an insurer of
furnishing such service is a private carrier. the safety of its passengers and is not bound absolutely
and at all events to carry them safely and without
One engaged in the business of transporting injury [Yobido v. CA, G.R. No. 113003 (1997)].
petroleum products from refineries via pipeline is a
common carrier. It is engaged in the business of Presumption of Negligence The following gives rise
transporting or carrying goods, i.e., petroleum to a presumption of negligence against the carrier: For
products, for hire as a public employment. It carriage of goods i. Proof of delivery of goods in good
undertakes to carry for all persons indifferently, that order to a carrier, and ii. Proof their arrival at the place
is, to all persons who choose to employ its services, of destination in bad order Note: While delay in the
and transports the goods by land and for delivery of goods is a breach of contract of carriage, it
compensation. The fact that it has a limited clientele does not raise the presumption of negligence because
does not exclude it from the definition of a common the goods are not lost, deteriorated, or destroyed. [Art.
carrier. [First Phil. Industrial v. CA, G.R. No. 125948 1735, NCC].
(1998)] For carriage of passengers i. Death of passenger/s, or
ii. Injury to passenger/s Note: Mere failure to reach
Discrimination Allowed in Common Carriage? Art. one’s destination, without injury or death, does not
1732 prohibits unreasonable discrimination § A raise the presumption of negligence because it does
common carrier must carry for all persons, either not involve safety of the passengers.
passengers or property, for exactly the same charge for Effects of Presumption  Makes out a prima facie
a like or contemporaneous service in the transportation case against the carrier  Makes it incumbent upon the
of like kind of traffic under substantially similar carrier to prove that the loss/death/injury was due to
some other circumstance inconsistent with its liability, occurrence of the flood, storm, or natural disaster [Art.
or that it observedextraordinary diligence [Art. 1756, 1739, NCC]; and 3. The common carrier must not
NCC; Ynchausti Steamship v. Dexter and Unson, G.R. have negligently incurred delay [Art. 1740, NCC].
No. L-15652 (1920)].
Act of public enemy Requisites a. The act of the
Registered owner rule The person who is the public enemy was committed either in an international
registered owner of a vehicle is liable for any damage or civil war [Art. 1734 (2), NCC]; b. The act of the
caused by the negligent operation of the vehicle public enemy must have been the proximate and only
although the same was already sold [Filcar Transport cause; and c. The common carrier must exercise due
v. Espinas, G.R. No. 174156 (2012)]. diligence to prevent or minimize the loss before,
during and after the act of the public enemy causing
Classification of transport network vehicle services the loss, destruction or deterioration of the goods [Art.
and transport network companies. Transport 1739, NCC].
Network Vehicle Service or TNVS refers to a TNC-
accredited private vehicle owner, which is a common Act or Omission of Shipper Requisites: Act or
carrier, using the internet-based technology omission, whether willful or negligent, of the shipper
application or digital platform technology transporting or owner of the goods must also be the proximate
passengers from one point to another, for cause of the loss, destruction or deterioration of the
compensation. The TNVS cannot operate as a goods transported.
common carrier outside of or independent from the
use of the internet-based technology of the TNC or Character of the goods Requisites a. The loss,
TNCs to which they are accredited. [DOTr D.O. No. destruction, or deterioration of the goods is due to the
2018-012] character of the goods or defects in the packing or in
the containers [Art. 1734 (4), NCC]; and b. The
Liabilities of Common Carriers common carrier must exercise due diligence to
The obligation of the common carrier consists in the forestall or lessen the loss [Art. 1742, NCC]
transportation of passengers or goods or both [Art.
1732, NCC]. Art. 1742 of the NCC Common carrier must still
Principles governing the liability of common exercise due diligence to forestall or lessen the loss.
carriers: a. The liability of a carrier is contractual and Requisites for Defense of Defect in Packing Or In
arises upon breach of its obligation. There is breach if Container 1. Loss, destruction or deterioration is due
it fails to exert extraordinary diligence according to all to the character of the goods or defects in packing or
circumstances of each case; b. A carrier is obliged to in the container;
carry its passenger with the utmost diligence of a very
cautious person, having due regard for all the Requisites for Order or Act of Competent Public
circumstances; c. A carrier is presumed to be at fault Authority 1. Loss, destruction or deterioration was
or to have acted negligently in case of death of, or due to the order or act of competent public authority;
injury to, passengers, it being its duty to prove that it 2. Art. 1743: Public authority had power to issue the
exercised extraordinary diligence; and d. The carrier is order.
not an insurer against all risks of travel [Isaac v. A.L.
Ammen, G.R. No. L-9671 (1957)]. A common carrier may not be absolved from
liability in case of force majeure or fortuitous event
Presumption of Negligence General rule: Common alone. The common carrier must still prove: (i) That it
carriers are responsible for the loss, destruction, or was not negligent in causing the death or injury
deterioration of the goods. resulting from an accident; [Yobido v. CA, G.R. No.
113003 (1997)] (ii) That the loss or destruction of the
Exception: Common carriers are not liable when such merchandise was due to accident and force majeure
loss, destruction, or deterioration is due to any of the and not fraud, fault, or negligence on the part of the
following causes only: 1. Flood, storm, earthquake, captain or owner of the ship [Tan Chiong Sian v.
lightning, or other natural disaster or calamity; 2. Act Inchausti, G.R. No. L-6092 (1912)].
of the public enemy in war, whether international or
civil; 3. Act of omission of the shipper or owner of the Contributory Negligence The liability of the
goods; 4. The character of the goods or defects in the common carrier shall be equitably reduced when the
packing or in the containers; 5. Order or act of loss, destruction, or deterioration of the goods when:
competent public authority [Art. 1734, NCC]. a. The negligence of the common carrier was the
proximate cause thereof; and b. The shipper or owner
Exempting Causes Natural disaster or calamity merely contributed to such loss, destruction, or
deterioration [Art. 1741, NCC].
Requisites 1. The natural disaster must have been the
proximate and only cause of the loss; 2. The common When Does The Carrier's Responsibility Begin?
carrier must exercise due diligence to prevent or Art. 1736: Extraordinary responsibility of the common
minimize the loss before, during and after the
carrier begins from the time the goods are delivered to
the carrier Does Shipper Have a Cause of Action Carrier's lien
- goods transported shall be especially bound to
Test To Determine Delivery Whenever the control answer for the cost of transportation and for the
and possession of the goods passes to the carrier and expenses and fees incurred for them during
nothing remains to be done by the shipper. Then it can conveyance until the moment of their delivery
be said with certainty that the relation of shipper and (prescribes days after delivery - Art. 375, Code of
carrier has been established. Commerce)
When Does Responsibility Terminate? At the time
the goods are delivered, actually or constructively, by Stipulations Limiting Liability Art. 1744: A
the carrier to the consignee or to the person who has a stipulation between the common carrier and the
right to receive them. shipper or owner limiting the liability of the former to
How is Constructive Delivery Made? Notice by the a degree less than extraordinary diligence shall be
carrier that the cargo had already arrived, thereby valid. Requisites: 1. It shall be in writing, signed by
placing the same at the disposal of the shipper or the shipper and owner; 2. Supported by a valuable
consignee. consideration other than the service rendered by the
Effect? § It automatically releases the carrier of the common carrier; 3. Reasonable, just and not contrary
extraordinary responsibility for the cargo § Reason for to public policy
duration of extraordinary responsibility? § Simply
because the carrier is in possession. Thus, the Effect of Lack of Competition Art. 1751: The fact
obligation of the carrier to carry the good that the common carrier has no competition along the
line or route, or a part thereof, to which the contract
Rules on Temporary Unloading or Storage in refers shall be taken into consideration on the question
Transit and Storage in Warehouse Art. 1737: The of whether or not a stipulation limiting the common
common carrier's duty to observe extraordinary carrier's liability is reasonable, just and in consonance
diligence in the vigilance over the goods remains in with public policy.
full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or Does Presumption of Negligence Attach When
owner has made use of the right of stoppage in Liability is Stipulated? Art. 1752: Even when there
transitu. is an agreement limiting the liability of the common
carrier in the vigilance over the goods, the common
Art. 1738: The extraordinary liability of the common carrier is disputably presumed to have been negligent
carrier continues to be operative even during the time in case of their loss, destruction or deterioration. How
the goods are stored in a warehouse of the carrier at do you dispute? By evidence that the carrier
the place of destination until the consignee has been exercised the requisite extraordinary diligence.
advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or Void Stipulations Art. 1745: Any of the following or
otherwise dispose of them. similar stipulations shall be considered unreasonable,
unjust and contrary to public policy: 1. That the goods
Effect of Stoppage in Transitu Exercising § The are transported at the risk of the owner or shipper; 2.
extraordinary responsibility of the common carrier That the common carrier will not be liable for any
ceases. § The carrier thereafter hold the goods in the loss, destruction or deterioration of the goods; 3. That
capacity of the ordinary bailee or depository or the common carrier need not observe any diligence in
warehouseman and is only liable as such because there the custody of the goods; 4. That the common carrier
is no longer any contract of carriage to speak of. § The shall exercise a degree of diligence less than that of a
diligence required will only be that of a good father of good father of a family or a man of ordinary prudence
a family. in the vigilance over the movables transported.

When Does the Responsibility Terminate When
Goods are Stored in Warehouse? Art. 1738 A.
Notice of arrival of the goods to the consignee, his
agents or authorized representative; B. Reasonable
opportunity on the part of the consignee to remove the
goods or otherwise dispose of them.
Demurrage - a charge which is permitted and
recognized not only because it may afford
compensation to the carrier for an additional service
but because of the usefulness and importance of its
main object, which is to obtain prompt release of the
goods and thus prevent interference with the general
traffic of the carrier
Rule on Conflict of Law 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.
Baggage of Passengers What are the classes of
baggage of passenger 1. Baggage in the custody of
the passengers or their employees; 2. Baggage not in
such custody but in that of the carrier.
What Laws Will Apply for Baggage of Passenger?
Art. 1733 (extraordinary diligence) and Art. 1753 (law
of the country of destination) shall apply to
passenger's baggage which is not in his personal
custody or in that of his employees.

Is the carrier liable for non-declared but accepted
cargo? Yes. Similarly baggage and goods of
passengers although not declared and charges not paid,
if accepted for transportation will make the common
carrier liable.
Duty of Common Carrier in Baggage in Possession
of Passenger It shall be responsible as a depository.
Conditions: 1. Notice was given to them or to their
employees of the baggage brought by their passengers
2. On the part of the passenger, they take the
precautions which the common carriers or their
substitutes advised relative to the care and vigilance of
their baggage.
Can There Be a Stipulation Limiting the Liability
of a Common Carrier for Baggage? Art. 2003: No.
Common carriers cannot free themselves from
responsibility of a depository by posting notices to the
effect that they are not liable for baggage brought by
the passengers. It shall also be a void stipulation, even
if between the common carrier and passenger, if the
responsibility set forth in Art. 1998 to 2001 is
suppressed or diminished.
Transportation of Passengers How is diligence
exercised by common carriers? Art. 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.
Presumption of Negligence Art. 1756: 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 as prescribed in articles 1733
and 1755. Is The Presumption Rebuttable?
Conditions: If it can be proven that: 1. A fortuitous
event or force majeure was the proximate cause; and
2. The carrier had observed the required extra ordinary
diligence
When Does the Obligation Start and End? It should
exist not only during the course of the trip but for so
long as the passengers are within its premises and
where they ought to be in pursuance to the contract of
carriage (Light Rail Transit Authority vs. Navidad,
G.R. No. 145804, February 6, 2003) All persons who
remain on the premises a reasonable time after
leaving the conveyance are to be deemed passengers,
and what is a reasonable time or a reasonable delay
within this rule is to be determined from all the
circumstances, and includes a reasonable time to see
after his baggage and prepare for his departure
(Aboitiz Shipping Corp. vs. CA, G.R. No. 84458, 179
SCRA 95)
What evidence is required of a passenger to prove
fault and negligence? § Simple proof of injury § The
passenger is relieved of the duty to establish the fault
or negligence of the carrier or of its employees. All
that is necessary to prove is the existence of the
contract and the fact of its non-performance by the
carrier.

Who are Considered Passengers A passenger is one May the Responsibility Be Subject of a Stipulation?
who has entered into a contract of carriage, express or Art. 1757: The responsibility of a common carrier for
implied with the carrier. the safety of passengers as required in Articles 1733
and 1755 cannot be dispensed with or lessened by
Who are Considered Passengers Dangwa stipulation, by the posting or notices, by statements on
Transportation Corp., Inc. vs. CA, G.R. No. 95582, tickets, or otherwise.
October 7, 1991 § By stepping and standing on the
platform of the bus, he is already considered a Can the Liability Be Subject of Stipulation? Art.
passenger and is entitled all the rights and protection 1758: When a passenger is carried gratuitously, a
pertaining to such a contractual relation. § SC also stipulation limiting the common carrier's liability for
stated that attempting to board a bus or train or negligence is valid, but not for wilful acts or gross
streetcar moving slowly is not negligence per se on the negligence.
part of the passenger but the duty of the common
carrier is to stop their conveyances at a reasonable Paragraph 2 of Art. 1758: The reduction of fare does
length of time in order to afford passengers an not justify any limitation of the common carrier's
opportunity to board and enter. liability .

Who Are Not Considered Passengers 1. One who
enters a vehicle without any intention of paying or
refuses on demand to pay his fare 2. One who remains
on a common carrier for an unreasonable length of
time after he has been afforded every safe opportunity
to alight 3. One who is able to obtain transportation by
fraud or decit 4. One who rides stealthily, without
knowledge on part of carrier 5. One who attempts to
board a moving vehicle 6. One who upon entering the
wrong vehicle is properly informed of such fact.
Acts of Employees § Art. 1759: Common carriers are
liable for the death of or injuries to passengers through
the negligence or wilful 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. § 2nd paragraph:
This liability of the common carrier does not cease
upon proof that they exercised all the diligence of a
good father of a family in the selection and
supervision of their employees. § Maranan vs. Perez,
L-22272, June 26, 1987
May it be subject of stipulation? § Art. 1760: The
common carrier's responsibility prescribed in the
preceding article cannot be eliminated or limited by
stipulation, by the posting of notices, by statements on
the tickets or otherwise. § Reason for the rule: The
servant is clothed with the delegated authority, and
charged with the duty by the carrier to execute his
undertaking to carry the passenger safely.
Does the Passenger Have a Duty? Art. 1761: The
passenger must observe the diligence of a good father
of a family to avoid injury to himself. Applicable to
invited guest or accommodation passenger (Lara vs.
Valencia)
Acts of Co-Passengers or Strangers § Art. 1763: A
common carrier is responsible for injuries suffered by
a passenger on account of the wilful 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 acts or omission. § It must
be noted that Art. 1763 speaks of responsibility of a
common carrier for injuries to a passenger not for
his death when it deals with the wilful acts or
negligence of other passengers or strangers.
Actions That May Be Filed In the event of loss,
destruction or deterioration of goods or injury or death
of a passenger, what are the sources of obligations to
which a common carrier may be held liable? 1. Culpa
Contractual or contractual negligence due to breach of
contract of carriage 2. Culpa Acquiliana - tort or
quasi-delict 3. Culpa Criminal or criminal negligence
which results in criminal liability A single act may
give rise to 2 or more causes of action.
Selection and Supervision of Employees May a
common carrier escape liability by interposing the
defense that it exercised all the diligence of a good
father of a family to prevent damage such as diligence
in the selection and supervision of employees as
provided under Art. 2181 of the Civil Code? §
Generally NO. Liability of common carriers arises
from breach of contract of carriage while the defense
recognized under Art. 2180 is applicable to negligence
in quasi-delicts (culpa aquiliana.
Subsidiary Liability of Carrier In order for a
common carrier to be liable subsidiarily, there must be
adequate evidence establishing the following: 1. he is
indeed the employer of the convict; 2. that he is
engaged in some kind of industry; 3. the crime was
committed by the employee in the discharge of his
duties; and 4. execution against the employee is
unsatisfied.
PUBLIC SERVICE ACT (C.A. 146)
A public utility is a business or service engaged in
regularly supplying the public with some commodity
or service of public consequence such as electricity,
gas, water, transportation, telephone, or telegraph
service [National Power Corporation v. Court of
Appeals, G.R. No. 112702 (1997)].
Elements of a public utility: 1. There must be public
interest or consequence; 2. Private property devoted to
public use; 3. Offers to the public indiscriminately ; 4.
For hire/ compensation.
Necessity for certificate of public convenience No
public service as herein defined shall operate in the
Philippines without having first secured from the
Commission a certificate, which shall be known as
Certificate of Public Convenience (CPC) or as
Certificate of Public Convenience and Necessity
(CPCN) [Section 15, Public Service Act]
REQS: 1. The applicant must be a citizen of the
Philippines, or a corporation or copartnership,
association or joint stock company constituted and
organized under the laws of the Philippines, 60 per
centum at least of the stock or paid-up capital of which
belong entirely to citizens of the Philippines; 2. The
applicant must prove that the operation of the public
service proposed and the authorization to do business
will promote the public interest in a proper and
suitable manner; 3. The applicant must be financially
capable of undertaking the proposed service and
meeting the responsibilities incident to its operations
[Vda. De Lat v. Public Service Commission, G.R. No.
L-34978 (1988)].
Prior operator rule
Meaning
The first licensee should have more or less of a vested
and preferential right over a person who seeks to
acquire another and a later license over the same route,
so long as the first licensee:  Keeps and performs the
terms and conditions of its license; and  Complies
with the reasonable rules and regulations of the
Commission and meets the reasonable demands of the
public. Rationale: Without such preferential right, the
first licensee would not have protection on his
investment, and would be subject to ruinous
competition and thus defeat the very purpose and
intent for which the Public Service Commission was
created [Batangas Transportation Co., G.R. No. L-
28865 (1928)].
Exceptions 1. Where public interest and convenience
would be better served by the new operator; 2. Where
the old operator failed to make an offer to meet the
increase in traffic; 3. Where the CPC granted to the
new operator is a maiden franchise; 4. When the
application of the rule would be conducive to
monopoly [Mandbusco Inc. v. Francisco, G.R. No. L-
23688 (1970)].
iii. Ruinous competition There is ruinous competition
if: a. The operator would be deprived of their profits
on the capital invested in its business; b. The business
would not have sufficient gains to pay a fair rate of
interest on its capital investments. In order that the
opposition based on ruinous competition may
prosper, it must be shown that the opponent would be
deprived of their profits on the capital invested in its
business.  The mere possibility of reduction in the
earnings of a business is not sufficient to prove
ruinous competition.  It must be shown that the
business would not have sufficient gains to pay a fair
rate of interest on its capital investments [Vda. De Lat
v. Public Service Commission, G.R. No. L-34978
(1988)].

Boundary system Under the boundary system, the

driver: (1) Rents the vehicle, typically a jeepney,from
the owner or operator by paying a fee called the
“boundary” fee; (2) Pays for fuel and maintenance of
the vehicle. Whatever the driver earns from passenger
fares in excess of the boundary fee is his income
[Paguio Transport Corp. v. National Labor Relations
Commission, G.R. No. 11950 (1998)].

Definition The kabit system is an arrangement

“whereby a person, who has been granted a CPC
allows another person, who owns motor vehicles. to
operate under such franchise for a fee” [Teja

Rationale against the kabit system 1. it is an abuse

of the certificate of public convenience, a special
privilege conferred by the government; 2. it is one of
the root causes of the prevalence of graft and
corruption in the government transportation offices; 3.
it is contrary to public policy, and is therefore void
and inexistent [Teja Marketing v. Intermediate
Appellate Court, G.R. No. L-65510 (1987)]. Effect of
the kabit system  Although not outrightly penalized
as a criminal offense, the kabit system is invariably
recognized as being contrary to public policy and,
therefore, void and in existent [Art. 1409, NCC].

Approval of sale, encumbrance or lease of property

Before the sale, encumbrance, or lease of public

utility property or assets, the Public Service Act
requires the approval of the PSC.  There should be
a public hearing, with notice to all interested parties
before the approval is granted;  The PSC must first
determine if there are good and reasonable grounds
justifying the transfer or lease of the property covered
by the franchise, or if the sale or lease is detrimental to
public interest. Rationale: A franchise is personal in
nature. Any transfer or lease thereof should be notified
to the PSC so that the latter may take proper
safeguards to protect the interest of the public. If the
property covered by the franchise is transferred or
leased to another without obtaining the requisite
approval: (1) The transfer is not binding against the
Public Service Commission; and (2) The grantee
continues to be responsible under the franchise in
relation to the Commission and to the public [Montoya
v. Ignacio, G.R. No. L-5868 (1953)].