General Concept and Doctrines in Transportation Law

Doctrines & Principles

Concepts
Jurisprudence

Doctrine of Limited Liability in Maritime Law

Q: So what is this Doctrine?

A: The ship owners or agent’s liability is merely co-extensive with his interest in the vessel, such
that a total loss thereof results in its extinction. So the total destruction of the vessel extinguishes
marital liens, because there are no longer any rest(?) which it can attach. So in short, no vessel,
no liability.

Q: What does it mean?

A: Whenever there is an injury or death, or damage to cargoes, deterioration or loss, the liability
of the ship owner is limited to the value of the vessel. So therefore, if the vessel gets lost or
destroyed, the obligation or liability is extinguished. So that is why under the last phrase on your
screen it says “No vessel, no liability.” So that is the general rule when it comes to this doctrine
of Limited Liability in favor of the ship owner.

Q: Saan ba galling ‘tong doctrine na ‘to?

By the way, the governing law in transportation law in the PH, is primarily the Civil Code.
Suppletorily applicable for those not provided by the CC is the Code of Commerce. So that is
why, part of transportation law are the provisions of the Code of Commerce.

A: This Doctrine of Limited Liability came from three provisions under Code of Commerce.
Article 587 – “The ship agent shall also be civilly liable for the indemnities. But he may
exempt himself therefrom, by abandoning the vessel with all the equipment and the
freight it may have earned during the voyage.”

Article 590 – “Each co-owner may exempt himself from this liability by the
abandonment before a notary of the part of the vessel belonging to him.”

Article 837 – “Limited to the value of the vessel in all its appurtenances and freightage
surge during the voyage.”

Q: When is it applicable?
A: It is applicable only in these three instances:
a. Civil liability for indemnities in favor of third persons which arise from the conduct of
the captain in the care of the goods, which the vessel carry. Pursuant to Art. 587 of the
Code of Commerce.

b. Civil liability arising from collisions. So, when the vessels collide, and there could be
death, injury, lost, we apply the Doctrine of Limited Liability.
 c. Unpaid wages of the captain and the crew if the vessel and its cargo are totally
destroyed by reason of fracture (?) or shipwreck.

Take note that only in these situations when we apply the Doctrine of Limited Liability.

Q: Where the doctrine is not applicable? Or what are the exceptions?

A:

a. When the injury due (?) or the death of a passenger is due either to the fault of the ship
owner or to the concurring negligence of a ship owner and a captain.

Meaning, negligence of both the shipper and the captain. It means to say, that if the death
or injury to a passenger is by reason of the negligence of the captain alone, without
concurring negligence of the ship owner, the exception will not apply.

Note: if the carrier failed to overcome the presumption of negligence, the limited liability
rule does not apply.

b. When the vessel is insured.

If it is insured, basically the ship owner gets paid the proceeds of the insurance. So he
cannot interpose a defense that he’s no longer liable because of the losses of his vessel
because he is paid by the insurance.

c. In workmen’s compensation claims.

d. Claim of death benefits under POEA SEC (Standard Employment Contract) for OFW.

e. The claim is not maritime in nature.

Meaning, collusion of vessel used for transportation of goods in the rivers. Because when
you say maritime, that refers to ships, vessels, on seas not rivers. If the accident happened
in the rivers, it is not anymore considered Maritime in nature. Therefore, the Code of
Commerce will no longer apply.

Q: Who can invoke this Liability Rule?

A: The ship owner who can invoke the Limited Liability Rule. He is the person for whom the
rule has been considered and the charterer cannot invoke the Limited Liability as a defense,
especially against the ship owner.

Only the ship owner can invoke this Limited Liability Rule as enunciated in the case of De la
Torre vs. Court of Appeals.
Charter Party

Q: What is a Charter Party?

A: Basically, it’s a contract by which the entire ship or some principal part thereof is lent by the
owner to another person for a specified period or a particular voyage. So in other words, it’s
basically a lease of a vessel.

Q: What are the kinds/types of Charter Parties?

A:

a. Contract of Affreightment

1. Time Charter (fixed period of time)

2. Voyage Charter (for a single or particular voyage)

b. Bareboat/Demise Charter – the entire vessel is lent to the charterer. Transferring to him
the entire command, possession, control over its navigation including the master of the
vessel and the crew.

When there is Bareboat Charter, the Charterer is treated as owner pro-active (????) of the vessel.
Meaning, in the mean time. In the mean time that he is chartering the vesel, he is treated by law
as the owner. In such a case, the common carrier becomes now a _____ (Time Stamp: 16:04).

Q: Why is it important to determine, which type of charter party was entered into by the
parties?
A: The first thing that you need to do is to determine which type of Charter Party is that. Because
your answer could definitely depend on which type of Charter Party is being indicated in the
problem.

Q: So, if the contract or if the charter party is contract of affreightment, what is the
significance?
A: The carrier remains to be a common carrier. Therefore, the provisions in 1733 onwards, will
apply. Especially the requirement as to the _____ (TS: 17:02) ordinary diligence, the
presumption of negligence and fault. If the contract or the charter party is a contract of
affreightment. But if the charter party is a bareboat charter, the common carrier becomes a
private carrier. Therefore, the provisions on common carriers will not apply to a private carrier.

So, there’re really a need to determine from the problem, which kind of charter party is being
indicated in the problem.

Q: Going back now to the contract of affreightment, assuming now there is a loss,
destruction or deterioration of the goods. Who is liable?
A: As stated in San Miguel Corporation vs. Heirs of Inguito, if the charter is a contract of
affreightment, which leaves the general owner of possession of the ship as owners of the voyage,
the rights and responsibilities of ownership rest on the owner. The charterer is free from liability
to third persons.
So, if the charter is a contract of affreightment, the ship owner is liable as a common carrier, in
case of loss, destruction, injury, death of the passengers or the cargo. But if the contract is
bareboat or demise charter party, the liability is on the charterer. But not as a common carrier but
as a private carrier. But we do not apply the provisions of common carrier. We apply the general
provisions on torts and damages.

Maritime Protest

Q: What is Maritime Protest?

A: It is a written statement by the master of a vessel or any authorized officer attested by a
proper officer or notary to the effect that damages has been suffered by the ship.

So basically, it’s a declaration of damage suffered by the ship. Now, protest is required under the
following cases..

When we say “required” it is a pre-requisite before you can bring an action for damages. So
before your action for damages could prosper, you need a maritime protest in the following
cases:

1. When the vessel makes an arrival under distress.

2. When the vessel is shipwrecked.
3. Where the vessel last (?) going through a hurricane or the captain believes that the
cargo suffered damages or ___ (TS: 20:40)
4. Maritime collisions.

2, 3, and 4 are self-explanatory. #1 talks about arrival in under distress.

Q: What is the meaning of arrival under stress?

A: Is arrival of the vessel at a port of destination on account of three things:
a. lack of provisions
b. well-founded fear or seizure
c. by reason of accident of the sea disabling it to navigate

So, if the arrival is not in any of those indicated, you cannot consider that as arrival under
stress. Therefore, it is not arrival under stress, maritime protest is not necessary.

Doctrine of Inscrutable Fault

Q: What is this Doctrine?

A: Where fault is established, but it cannot be determine which of the two vessels where at fault,
both shall be deemed to have been at fault. Therefore, if both vessels were at fault, each shall
suffer its own damages. And both shall be solidary liable to others.
Q: What does 2nd paragraph mean?
A: The vessel, which was involved, let’s say in a collision, cannot run after the other. But they
are solidarily liable to others.

Illustration:
Two vessels collided – M/V Manila, an oil tanker, and M/V Cebu, a passenger vessel. As
a result, the passenger vessel sank and many of its passengers drowned and died. All its cargoes
were lost. The collision occurred at daytime when the sea was calm and the weather was good. It
was found out, that at the time of collision, the captain of M/V Manila was asleep, while the
captain of M/V Cebu was drugged.

So based on the facts of the case, there is fault. But it is not indicated there, whose fault was the
proximate cause of the collision. Pero definitely there is fault. So, applying now the Doctrine of
Inscrutable Fault, M/V Manila and M/V Cebu shall bear their own damages. Meaning M/V
Manila cannot run after M/V Cebu and vice versa. However, they are both solidarily liable to the
passengers who died or injured and to the owners of the cargoes that were lost.

Rules on Collision for Vessels

1. The collision may be due to the fault, negligence, lack of skill of the captain sailing or any
other member of the compliment of the vessel.

So, the owner of the vessel at fault shall be liable for losses and damages. If the owner of the
vessel is at fault, dapat siya yung liable.

2. Collision may be due to the fault of both vessels. Each vessel shall suffer its own loss but as
regards of the owner of the cargoes, both vessels shall be jointly and severally/solidarily liable.

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. (Doctrine of Inscrutable
Fault)

4. Vessels may collide within each other through a fortuitous event or force majeure.

So, in this case, each shall bear its own damage.

5. Two vessels may collide with each other without their fault but by reason of a third vessel. In
which case the third vessel will be liable for losses and damages.

6. If the vessel is properly anchored and moored, may collide with those nearby by reason of
____ (27:16) or other cause of force majeure.

So, in which case, the vessel ran into shall suffer its own damage or expense.
 Doctrine of Error in Extremis

There are three zones in collisions:

1. All time up to the moment when risk of collision begins.
2. Time between the moment when there is of collision begins up to the moment it
becomes practical certainty.
3. Time when collision is certain up to the time of impact.

In 1st and 2nd, it would appear that there is time in order to avoid the collision. But under the 3rd
zone, parang mahirap na siyang iwasan because the collision now is certain already up to the
time of impact.

Now, the Doctrine of Error in Extrimis would fall under the 3rd zone. Under the next paragraph:

“If a vessel having a right of way, suddenly changes its course during the 3rd zone in an effort to
avoid an imminent collision due to the fault of another vessel such at may be said to be done in
extrimis. And even if wrong, cannot create a responsibility on the part of said vessel with a right
of way.

Take note of the elements before we could properly apply this doctrine.
1. vessel having a right of way
2. the collision due to the fault of another vessel
3. the vessel, was the right of way did something to avoid the collision

The rule is, even if the action is wrong, that would not create responsibility on the part of
the vessel with a right of way.

Q: Who are the person involved in maritime owners (?)

A: There are four persons:
a. ship owners – owner of the ship

b. ship agents – is entrusted with the provisioning and representing of the vessel in the
port in which may be found. His liability to passengers and cargo owners for loss or
injury is the same as the ship owner. In fact, he is solidarily liable with the owner for such
loss or damage, subject to the right of reimbursement from the ship owner.

Remember that ship agent is acting only in a representative capacity. Whatever action
that he will undertake, bind the ship owner. The main liability is on the ship owner. But
the law imposes also solidarily liability to a ship agent, but he could claim reimbursement
from the ship owner.

c. ship captain or master of the vessel – triple roles of the captain/ master of the vessel:
(1) general agent of the ship owner (2) commander and technical director of the vessel (3)
government representative of the country under whose flag he navigates. Basically, this is
the pronouncement of the SC in the case of Inter-Orient Maritime Enterprises vs. NLRC.
 Where the SC had the occasion to discuss the triple roles of the captain or master of the
vessel.

d. officers and crew and super cargoes –

1. sailing mate and first mate – they are basically called the chief mate. Chief
mate is in charge of the cargo operations and security and safety of the ship and
the crew. That is his mate function.

2. second mate – he is the navigation officer of the ship. He is in charge with

navigation.

3. engineers – in charge of engine department.

4. members of the crew – other personnel in the vessel like cook, purser
(equivalent of a flight attendant in airline companies), and others who work in the
vessel.

e. super cargoes – is a person in charge in administrative duties assigned to him by the

ship agent or shippers, keeping an account and record of transaction as required in
accounting book of the captain.

So basically, bookkeeping function. He records the transaction required by the ship

captain.

General Average vs. Particular Average

Q: What is General Average all about?

A: This includes all damages and expenses which are deliberately cost in order to save the
vessel, its cargo, or both at the time of real and knowned risk.

So that’s how the SC defined general average in Philippine Home Assurance Corporation vs.
CA.

Q: What are the requisites for General Average?

A: Take note, this is important. Because in bar, you need to determine if it is general or
particular. In order to know that, we need to be familiar with the requisites:

1. There is a common danger, the ship and the cargo.

2. For the common safety, part of the vessel or cargo, or both, is sacrificed deliberately.
3. From the expenses or damages caused/cost (?) follows the successful saving of the
vessel and the cargo.
4. That the expenses or damages should have been incurred or inflicted after taking legal
steps and authority.
Examples:
1. Goods are jettisoned. When you jettison the goods to lighten the vessel, whether they
belong to the vessel, to the cargo or to the crew, and the damage suffered through said
act, by the goods which are kept on board.

If there is a risk of sinking, and you need to lighten the load of the vessel, you have to
jettison some of the goods.

2. Damage suffered by the goods through the opening made and the vessel in order to
drain her and prevent her from sinking.

So, it happens when, assuming the ship is already filled with water. In order to protect the
goods from being damaged, they would make an opening in the vessel in order to drain
the water to prevent it from sinking.

3. Expenses for curing or maintaining the members of the crew who may have been
wounded or crippled in defending or saving the vessel.

For example, there are pirates who wanted to take over the ship and some members of the
crew decided to defend the ship. And in the course thereof, the crews suffered injuries.
So, expenses for curing those members of the crew are considered general average.

4. Damage caused to the vessel which had to be opened or broken in order to save the
cargo.

The common denominator of these examples is there is some sacrifice that was
undertaken deliberately, in order to save the ship, cargo, or both.

Q: What is Particular Average?

A: These are expenses and damages caused to the vessel or cargo which have not inured to the
benefit and common profit of all person interested in the vessel and in cargo.

So the main point in general average, the expenses incurred would benefit everybody. Particular
average, it will not benefit all. Only particular person, like the owner of the cargo but not the
other personalities within the vessel.

Q: Why is it important to determine whether the average is general or particular?

A: Because if the average or the expenses or damage is general, the ship owner can ask for
contribution from those who benefited from the expenses and sacrifice.

Illustration:
In the case of Magsaysay, a vessel transporting cargoes belonging to the different
shippers, among them is Mr. A. While in the port, it ___ (TS: 41:20) aground at the
mount of Cagayan river and attempts to refloat it under its own power having failed. The
ship captain had it refloated at an agreed compensation. They hired a refloater in order to
 refloat the vessel. Once afloat, the vessel returned to Manila to refuel and proceeded to
the place of destination.

The basic issue: Are the expenses incurred in refloating the vessel general?

If the answer is yes, the ship captain or ship owner, will have to ask contribution from the
owners of the cargo. If not, they cannot recover or claim contribution.

Held: The SC said it is not a general average. Because facts do not disclose that the
expenses were incurred to save the vessel and cargoes from a common danger.
Remember the requisites, there should be a common danger. And the SC went on to say
that the vessel was refloated to enable it to proceed to its port of destination. So not
basically to save the ship, it was refloated not to save the vessel or the cargo but to enable
it to proceed to its port of destination. Hence, there was no general average because it is
the safety of the property and not the voyage which constitutes the true foundation of the
general average.

Principle of Loans on Bottomry and Respondentia

Q: What is Loan on Bottomry?

A: Is a loan secured by a ship owner or a ship agent guaranteed by the vessel itself and payable
only upon safe arrival of the vessel at destination.

The vessel should arrive at the vessel destination safely. Therefore, if it does not arrive safely,
the obligation is extinguished.

Take note of the 2nd paragraph. “It is a contract in the nature of a mortgage. By which the owner
of the ship, borrows money for the use, equipment, and repair of the vessel for a definite term
and pledges the ship as security for a repayment.”

Take not of the underlined, “If the ship be lost in the course of a specific voyage or during the
limited time by any of the ___ (TS: 45:06) enumerated in the contract, the lender shall also lose
his money.” That reiterates my statement a while ago, the requirement of safe arrival of the
vessel at the port of destination.

Q: How about Respondentia?

A: Similar to bottomry, it is a loan secured by the owner of the cargo payable upon safe arrival of
the cargo at destination.

Halos pareho lang but the security now is not the vessel but the cargo itself. And same principle,
that the condition for the payment of the loan is the safe arrival of the cargo at the place of
destination.

So, the lender must be paid his principal in interest, though the ship perishes, provided, that the
goods are safe. The ship owners cannot secure this loan. This loan is available only to cargo
owners. But when it comes to bottomry, it is available to ship owners because the subject matter
of the mortgage or security is the ship or vessel itself. But remember, under both instances,
bottomry and respondentia, the condition for payment is the safe arrival of the ship or the cargo
as the case may be.

Q: How is this loan (bottomry or respondentia) different from an ordinary loan?

A: Two distinctions:
a. Ordinary loan – Usury Law is applicable
b. Bottomry/ Respondentia – Usury Law is not applicable

a. Ordinary loan – the right to recovery from the debtor is not extinguished if the
thing put up as security is lost or destroyed.
b. Bottomry – the right to recover is extinguished if the thing put up as security is
lost or destroyed.

You will remember, when you took up your credit transaction that mortgage and pledge, these
are accessory contract. Meaning they cannot stand without a principal contract and normally a
principal contract is a contract of loan. So, the principal contract is the loan agreement, accessory
contract – mortgage, pledge, real or personal property.

We learned under that principle, if the accessory contract is lost or the thing mortgaged is lost,
the principal contract remains. Meaning it will not extinguish the obligation to pay the loan. But
it is different when it comes to Loan on Bottomry and Respondentia. The loss of the thing
mortgaged, like in this case the vessel or the cargo, they did not arrive safely at the place of
destination, it will result to the extinguishment of the obligation to pay.

Stevedoring Company
Q: What is Stevedoring Company?
A: Is charged with the loading and stowing of cargoes. Does not operate the business that is
classify as a common carrier.

Basically, its function is to load the good to the carrier. That’s the function of a stevedoring
company. But as stated here, it is not considered a common carrier. Hence, they are not required
to exercise extra-ordinary diligence. However, considering that they are in charge in the loading
and stowing of cargoes, they are prescribed to exercise at the very least, ordinary diligence of a
good father of a family.

Arrastre
Q: What is Arrastre?
A: Refers to a contract for unloading of goods from a vessel. In Stevedoring company, its
function is to load the goods into the vessel. Meanwhile, in arrastre, its function is to unload the
goods from the vessel.

In Mercantile Law, the term has a technical meaning as it applies to overseas trade. When a
person brings in cargo from abroad, he cannot unload and deliver the cargo by himself. This is
done by an arrastre operator which will then deliver the cargo of the importer-consignee.
If you are an arrastre operator, you have to enter into a management contract. And the parties in
that management contract are: the first party of the contract is the Republic of the Philippines,
represented either by the Bureau of Customs or the Philippine Port Authority. The second party
is the arrastre operator itself. It is a private party awarded a privilege of operating the arrastre
service.

Note however, that the implementation of such contract affects third parties. Mainly the importer
and the carrier. Therefore, an arrastre contract is what we call contract ______ (52:28). Meaning
it is a contract between two persons but it affects and benefits other persons or third persons. In
this case, it is the importer-consignee and the carrier although they are not signatory to such
arrastre contract.

Q: What is the liability of an arrastre operator?

A: To be considered them also a common carrier, so we have answer in the case of ICTSI vs.
Prudential Guarantee, the SC said “Arrastre operators service are clearly not maritime in
character as to both nature of its function and the place of their performance. The relationship
between an arrastre operator and consignee is akin to that between a warehouse man and a
depositor. Thus, an arrastre operator is not bound to exercise extra-ordinary diligence of a
common carrier.

In short, it is not considered as a common carrier. The relationship of an arrastre operator and the
consignee is that of a warehouseman and depository. Basically, the rules governing necessary
deposit will apply. And other the rules on necessary deposit, the diligence required is diligence
of a good father of a family not extra-ordinary diligence.

Salvage
Q: What is this salvage all about?
A: There is a law, it is Act No. 2616 otherwise known as “The Salvage Law”. When you say
“salvage”, there are persons who pick up and conveys a vessel to a safe place or its cargo which
are beyond the control of the crew or shall have been abandoned by them.

In other words, these are the persons would rescue a ship or the cargo which has been abandoned
or already beyond the control of the crew. Note however, that there could also be contract of
salvage that may be voluntarily entered into by the parties. But even without the contract, if there
is a vessel which has been abandoned or losses its control already then a group of persons could
rescue, that vessel, pick them up and bring it to a safe place. That is what we call salvage.

Q: What is the consequence if there is salvage?

A: They will be entitled under this law for compensation.

Requisites compensation before a salvor/salvors could be compensated for

bringing a ship or a vessel including its cargo to a safe place:

1. There must be a maritime(?) peril. Meaning, typhoon, fire, etc.

 2. The vessel is shipwrecked – beyond the control of the crew or shall have been
abandoned already.
3. The service of picking up and conveying the vessel of the cargo to a safe place
is voluntarily rendered by the salvors.
4. The service must have been successful in whole or in part or that the service
rendered contributed to the success.

Q: Saan ba kukunin yung reward?

A: Pursuant to the Salvage Law, paghahatian yan ng ship owner (50%), the ship captain (¼), and
the rest of the crew (¼). In proportion of course to their respective salaries, in the absence of
stipulation to the contrary. Because there could be a stipulation in their contract beforehand
regarding the division of the compensation for salvors. But in the absence of agreement, yan
yung division.