San Beda College of Law: Contract OF Transportation/ Carriage

San Beda College of Law 54
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS
CONTRACT OF TRANSPORTATION/ Corporation vs. CA)

CARRIAGE  One is a common carrier even if he has no
 A contract whereby a person, natural or fixed and publicly known route, maintains no
juridical, obligates to transport persons, goods, terminals, and issues no tickets (Asia Lighterage
or both, from one place to another, by land, air Shipping, Inc. vs. CA).
or water, for a price or compensation.  Characteristics:
 Classifications: 1. Undertakes to carry for all people
1. Common or Private indifferently and thus is liable for refusal
2. Goods or Passengers without sufficient reason (Lastimoso vs.
3. For a fee (for hire) or Gratuitous Doliente, October 20, 1961);
4. Land, Water/maritime, or Air 2. Cannot lawfully decline to accept a
5. Domestic/inter-island/coastwise or particular class of goods for carriage to
International/foreign the prejudice of the traffic in these goods;
 It is a relationship which is imbued with the 3. No monopoly is favored (Batangas Trans.
public interest. vs. Orlanes, 52 PHIL 455);
4. Provides public convenience.
COMMON CARRIER
 Persons, corporations, firms or associations PRIVATE CARRIER
engaged in the business of carrying or  One which, without being engaged in the
transporting passengers or goods or both, by business of carrying as a public employment,
land, water, or air, for compensation, offering undertakes to deliver goods or passengers for
their services to the public (Art. 1732, Civil compensation. (Home Insurance Co. vs.
Code). American Steamship Agency, 23 SCRA 24)
 Art. 1732 of the New Civil Code avoids any
distinction between one whose principal  TESTS WHETHER CARRIER IS COMMON
business activity is the carrying of persons or OR PRIVATE:
goods or both and one who does such carrying  The SC in First Philippine Industrial
only as an ancillary activity (sideline). It also Corporation vs. CA (1995) reiterated the
avoids a distinction between a person or following tests:
enterprise offering transportation service on a 1. It must be engaged in the business of
regular or scheduled basis and one offering carrying goods for others as a public
such service on an occasional, episodic or employment and must hold itself out as
unscheduled basis. ready to engage in the transportation of
Neither does the law distinguish between a goods generally as a business and not as
carrier offering its services to the general public a casual occupation;
that is the general community or population and 2. It must undertake to carry goods of the
one who offers services or solicits business only kind to which its business in confined;
from a narrow segment of the general 3. It must undertake to carry by the method
population. by which his business is conducted and
A person or entity is a common carrier even over its established roads; and
if he did not secure a Certificate of Public 4. The transportation must be for hire.
Convenience (De Guzman vs. CA, 168 SCRA  In National Steel Corp. vs. CA (1997) the SC
612). held that the true test of a common carrier is the
 It makes no distinction as to the means of carriage of goods or passengers provided it has
transporting, as long as it is by land, water or air. space for all who opt to avail themselves of its
It does not provide that the transportation should transportation for a fee.
be by motor vehicle. (First Philippine Industrial
COMMERCIAL LAW COMMITTEE
 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws); Robespierre CU (Law
on Intellectual Property)
generally applies.
COMMON CARRIER PRIVATE 1. Civil Code - primary
CARRIER 2. Code of Commerce - suppletory
1. As to availability 3. Others - suppletory
Holds himself Contracts with a. Water/maritime: Carriage of Goods by
out for all people particular Sea Act (COGSA)
indiscriminately individuals or b. Air: Warsaw Convention
groups only
2. As to required diligence I. NEW CIVIL CODE
Extraordinary Ordinary (Arts. 1732-1766)
diligence is diligence is
required required REQUIREMENT OF EXTRAORDINARY
3. As to regulation DILIGENCE
Subject to State Not subject to  Rendition of service with the greatest skill and
regulation State regulation utmost foresight. (Davao Stevedore Co. v.
4. Stipulation limiting liability Fernandez)
Parties may not Parties may limit  Rationale:
agree on limiting the carrier’s 1. From the nature of the business and for
the carrier’s liability, provided reasons of public policy (Art. 1733)
liability except it is not contrary 2. Relationship of trust
when provided to law, morals or 3. Business is impressed with a special
by law good customs public duty
5. Exempting circumstance 4. Possession of the goods
Prove caso fortuito, 5. Preciousness of human life
extraordinary Art. 1174 NCC  A common carrier is not an absolute insurer of
diligence and all risks of travel.
Art. 1733, NCC
6.Presumption of negligence COVERAGE
1. Vigilance over goods (Arts. 1734-1754); and
There is a No presumption
2. Safety of passengers (Arts. 1755-1763).
presumption of of fault or
fault or negligence
PASSENGER
negligence
 A person who has entered into a contract of
7.Governing law
carriage, express or implied, with the carrier.
Law on common Law on
They are entitled to extraordinary diligence from
carriers obligations and
the common carrier.
contracts
 The following are not considered passengers,
and are entitled to ordinary diligence only:
GOVERNING LAWS
a. One who has not yet boarded any part of
A. Domestic/inter-island/coastwise
a vehicle regardless of whether or not he
 Applicable to Land, Water, and Air
has purchased a ticket;
transportation
b. One who remains on a carrier for an
1. Civil Code - primary
unreasonable length of time after he has
2. Code of Commerce (Arts. 349, 379, 573-
been afforded every safe opportunity to
734, 580, 806-845) - suppletory
alight;
c. One who has boarded by fraud, stealth,
B. International/foreign/overseas (Foreign
or deceit;
country to Philippines)
d. One who attempts to board a moving
 Applicable to Water/maritime and Air
vehicle, although he has a ticket, unless
transportation the attempt be with the knowledge and
 The law of the country of destination
consent of the carrier; CONTAINER
e. One who has boarded a wrong vehicle,  Even if the damage should be caused by the
has been properly informed of such fact, inherent defect/character of the goods, the
and on alighting, is injured by the carrier; common carrier must exercise due diligence to
f. Invited guests and accommodation forestall or lessen the loss. (Art. 1742)
passengers. (Lara vs. Valencia)  The carrier which, knowing the fact of improper
g. One who rides any part of the vehicle packing of the goods upon ordinary observation,
which is unsuitable or dangerous or still accepts the goods notwithstanding such
which he knows is not designed or condition, is not relieved of liability or loss or
intended for passengers. injury resulting therefrom. (Southern Lines, Inc.
v. CA, 4 SCRA 258)
DEFENSES OF A COMMON CARRIER IN THE
CARRIAGE OF GOODS 5. ORDER OR ACT OF PUBLIC AUTHORITY
1. CASO FORTUITO/FORCE MAJEURE  Said public authority must have the power to
 Requisites: issue the order (Art. 1743). Consequently, where
a. Must be the proximate and only cause of the officer acts without legal process, the
the loss common carrier will be held liable. (Ganzon v.
b. Exercise of due diligence to prevent or CA 161 SCRA 646)
minimize the loss before, during or after the  Diligence in the selection and supervision of
occurrence of the disaster (Art. 1739) employees under Article 2180 of the Civil Code
c. Carrier has not negligently incurred in cannot be interposed as a defense by the
delay in transporting the goods (Art. 1740) common carrier because the liability of the
 Fire is not considered a natural disaster or carriers arises from the breach of the contract of
calamity as it arises almost invariably from some carriage. The defense under said articles is
act of man. (Eastern Shipping Lines Inc. vs. applicable to negligence in quasi-delicts under
IAC) Art. 2176. (Del Prado v. Manila Electric Co., 52
 Mechanical defects are not force majeure if Phil 900)
the same was discoverable by regular and
adequate inspections. (Notes and Cases on the LIABILITY OF A COMMON CARRIER FOR
Law on Transportation and Public Utilities, DEATH OR INJURIES TO PASSENGERS DUE
Aquino, T. & Hernando, R.P. 2004 ed. p.120- TO ACTS OF ITS EMPLOYEES AND OTHER
122) PASSENGERS OR STRANGERS
2. ACTS OF PUBLIC ENEMY FOR ACTS OF

 Requisites: FOR ACTS OF OTHER
a. Must be the proximate and only cause of ITS PASSENGERS
the loss EMPLOYEES OR
b. Exercise of due diligence to prevent or STRANGERS
minimize the loss before, during or after the Required diligence and defense
act causing the loss, deterioration or Extraordinary Ordinary
destruction of the goods (Art. 1739) diligence diligence
Nature of liability
3. NEGLIGENCE OF THE SHIPPER OR Tort; however, Not absolute;
OWNER The employee limited by Art.
a. Sole and proximate cause: absolute must be on duty 1763
defense at the time of
b. Contributory: partial defense. (Art. 1741) the act.
(Maranan v.
4. CHARACTER OF THE GOODS OR Perez)
DEFECTS IN THE PACKING OR IN THE
 The carrier is liable when its personnel resulting to the injuries suffered by the other
allowed a passenger to drive the vehicle passengers. (MRR vs. Ballesteros, 16 SCRA
causing it to collide with another vehicle 641)
CARRIAGE OF GOODS CARRIAGE OF PASSENGERS
Parties
1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, Death or injury to the passengers
or deterioration of the goods
Duration of liability
From the time the goods are The duty of a common carrier to
unconditionally placed in the provide safety to its passengers so
possession of, and received by the obligates it not only during the
carrier for transportation until the course of the trip, but for so long as
same are delivered actually or the passengers are within its
constructively by the carrier to the premises and where they ought to
consignee or to the person who has be in pursuance to the contract of
the right to receive them. (Art. 1736) carriage. (LRTA v. Navidad, [2003])
 It remains in full force and effect  All persons who remain on the
even when they are temporarily premises within a reasonable time
unloaded or stored in transit unless after leaving the conveyance are to
the shipper or owner has made use be deemed passengers, and what is
of the right of stoppage in transitu. a reasonable time or a reasonable
(Art. 1737) delay within this rule is to be
 It continues to be operative even determined from all the
during the time the goods are stored circumstances, and includes a
in a warehouse of the carrier at the reasonable time to see after his
place of destination until the baggage and prepare for his
consignee has bee advised of the departure. (La Mallorca v. CA, 17
arrival of the goods and has had SCRA 739 ; Abiotiz Shipping
reasonable opportunity thereafter to Corporation v. CA, 179 SCRA 95)
remove them or otherwise dispose  It is the duty of common carriers of
of them. (Art. 1738) passengers to stop their
 Delivery of goods to the custom conveyances a reasonable length of
authorities is not delivery to the time in order to afford passengers
consignee. (Lu Do v. Binamira, 101 an opportunity to enter, and they are
Phil 120) liable for injuries suffered from the
sudden starting up or jerking of their
conveyances while doing so. The
duty which the carrier of passengers
owes to its patrons extends to
persons boarding the cars as well
as to those alighting therefrom
(Dangwa Trans Co., Inc. vs. CA 202
SCRA 574).
Presumption of negligence
Art.1735 Civil Code Art.1755 Civil Code

Reason: As to when and how goods Reason: The contract between the
were damaged in transit is a matter passenger and the carrier imposes
peculiarly within the knowledge of on the latter the duty to transport
the carrier and its employees. the passenger safely; hence the
(Mirasol v. Dollar, 53 PHIL 124) burden of explaining should fall on
Mere proof of delivery of goods to the carrier.
a carrier in good order and the
subsequent arrival of the same
goods at the place of destination in
bad order makes for a prima facie
case against the carrier. (Coastwise
Lighterage Corp. v. CA, 245 SCRA
796)
Defenses
1. Ordinary circumstance: 1. Exercise of extraordinary

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

Valid stipulations
1. Reduction of degree of diligence Stipulation limiting liability when a

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

carriage of the goods may be
reduced by only one degree, from
extraordinary to ordinary diligence or
diligence of a good father of a family.
(Art. 1744, Art. 1745, no. 4)
Void stipulations
3. That the carrier need not
observe any diligence in the Dispensing with or lessening the
custody of the goods; extraordinary responsibility of a
4. That the carrier shall exercise a common carrier for the safety of
degree of diligence less than that of passengers imposed by law by
a good father of a family over the stipulation, by posting of notices, by
movable transported; statements on tickets or otherwise.
5. That the carrier shall not be (Art. 1757)
responsible for the acts or
omissions of his or its employees;
6. That the carrier’s liability for acts
committed by thieves or robbers
who do not act with grave or
irresistible threat, violence or force
is dispensed with or diminished;
7. That the carrier is not
responsible for the loss, destruction
or deterioration of the goods on
account of the defective condition of
the car, vehicle, ship or other
equipment used in the contract of
carriage. (Art. 1745)

RULES ON PASSENGERS’ BAGGAGE that of the owner and driver of the other vehicle
IN THE IN THE arises from quasi-delict. (Fabre vs. CA)
CUSTODY OF CUSTODY OF
THE THE LIMITATIONS AS TO CARRIER’S LIABILITY
PASSENGERS COMMON INVALID AS VALID &
(HAND- CARRIER BEING ENFORCEABL
CARRIED) (CHECKED- CONTRARY TO E
IN) PUBLIC POLICY
Legal nature of the baggage 1. One 1. One limiting
Necessary Considered as exempting the the liability of
deposit “goods” carrier from any the carrier to
Required diligence by the and all liability for an agreed
common carrier loss or damage valuation,
Diligence of a Extraordinary occasioned by its unless the
depositary diligence own negligence. shipper
(ordinary 2. An unqualified declares a
diligence) limitation of higher value
Applicable rules liability to an and pays a
Arts. 1998 and Arts. 1733- agreed valuation. higher rate of
2000-2003 1753 freight
(H.E. Heacock
CONCURRING CAUSES OF ACTION ARISING Company vs.
FROM THE NEGLIGENT ACT OF THE Macondray &
COMMON CARRIER Company Inc.)
1. Culpa contractual (breach of contract)
 Only the carrier is primarily liable and not the  However, the carrier cannot limit its liability for
driver, because there is no privity between the injury to, or loss of, goods shipped where such
driver and the passenger. injury or loss was caused by its own negligence.
 Basis: Art.1759, NCC. (Shewaram vs. PAL, 17 SCRA 606)
 No defense of due diligence in the selection
and supervision of employees. SPECIAL RULES ON LIABILITES OF AIRLINE
CARRIERS
2. Culpa aquiliana (quasi-delict) 1. In case of flight diversion due to bad weather
 The carrier and driver are solidarily liable as or other circumstances beyond the pilot’s
joint tortfeasors. control, the relation between the carrier and the
 Basis: Art. 2180, NCC. passenger continues until the latter has been
landed at the port of destination and has left the
 Defense of due diligence in the selection and
carrier’s premises. The carrier should
supervision of employees is available. necessarily exercise extraordinary diligence in
Exception: maritime tort resulting in collision. safeguarding the comfort, convenience and
(See notes on Collision) safety of its stranded passengers until they have
reached their final destination. (Philippine
3. Culpa criminal (criminal negligence) Airlines vs. CA, 226 SCRA 423)
 The driver is primarily liable. The carrier is 2. Even where overbooking of passengers is
subsidiarily liable only if the driver is convicted allowed as a commercial practice, the airline
and declared insolvent. company would still be guilty of bad faith and
 Basis: Art. 100, RPC. still be liable for damages if it did not properly
inform passenger that it could breach the
 In case of injury to a passenger due to the contract of carriage even if they were confirmed
negligence of the driver of the bus on which he passengers. (Zalamea vs. CA, 228 SCRA 23)
is riding and of the driver of another vehicle, the 3. An open-dated ticket constitutes a complete
drivers as well as the owners of the two vehicles contract between the carrier and passenger.
are jointly and severally liable for damages. It Hence, the airline company is liable if it refused
makes no difference that the liability of the bus to confirm a passenger’s flight reservation.
driver and owner springs from contract while
(Singson vs. CA, 282 SCRA 149) Services Inc. vs. IAC)
4. An airline company which issued a confirmed
ticket to a passenger covering successive trips 4. The right of a party to recover for loss of
on different airlines can be held liable for shipment consigned to him under a bill of lading
damages occasioned by “bumping off” by one of drawn up only by and between the shipper and
the successive airlines. (Lufthansa German the carrier, springs from either a relation of
Airlines vs. CA, 238 SCRA 290) agency between him and the shipper, or his
5. An airline ticket providing that carriage by status as stranger in whose favor some
successive air carriers is to be regarded as a stipulation is made in said contract, and who
“single operation” is to make the issuing carrier becomes a party thereto when he demands
liable for the tortuous conduct of the other fulfillment of that stipulation. (Art. 1311 (2),
carrier. A printed provision in the ticket limiting (Mendoza vs. PAL Inc.)
liability only to its own conduct is not enough to
rebut that liability. (KLM Royal Dutch Airlines vs. 5. Acceptance of the bill of lading without
CA, 65 SCRA 237) dissent raises the presumption that all the terms
therein where brought to the knowledge of the
II. CODE OF COMMERCE shipper and agreed to by him and, in the
absence of fraud or mistake; he is estopped
A. OVERLAND TRANSPORTATION from thereafter denying that he assented to
(Arts. 349-379) such terms. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. &
Applicability Hernando, R.P. 2004 ed. p.261)
1. Domestic land and water/maritime
transportation. (Pandect of Commercial Law  Kinds:
and Jurisprudence, Justice Jose Vitug, 1997 1. On board - issued when the goods have
ed.) been actually placed aboard the ship with
2. Domestic Air Transportation. (Commercial very reasonable expectation that the
Law Review, Cesar Villanueva, 2004 ed.) shipment is as good as on its way.
2. Received - one in which it is stated that the
IMPORTANT CONCEPTS: goods have been received for shipment
1. Bill of lading with or without specifying the vessel by
2. Obligations of the carrier which the goods are to be shipped.
3. Right of abandonment 3. Negotiable - one in which it is stated that
4. Notice of damage the goods referred to therein will be
5. Combined carrier agreement delivered to the bearer or to the order of
any person named therein.
BILL OF LADING 4. Non-negotiable - One in which it is stated
 The written acknowledgment of receipt of that the goods referred to therein will be
goods and agreement to transport them to a delivered to a specified person.
specific place to a person named or to his order. 5. Clean – One which does not indicate any
 Rules: defect in the goods.
1. It is not indispensable for the creation of a 6. Foul – One which contains a notation
contract of carriage. (Compania Maritima vs. thereon indicating that the goods covered
Insurance Company of North America, 12 SCRA by it are in bad condition.
213)
7. Spent – One which covers goods that
2. Ambiguity is construed against the carrier, the already have been delivered by the carrier
contract being one of adhesion. without a surrender of a signed copy of the
bill.
3. The consignee, although the instrument is 8. Through – One issued by the carrier who is
oftentimes drawn up only by the consignor and obliged to use the facilities of other carriers
carrier, becomes bound by all the stipulations as well as his own facilities for the purpose
contained therein by making a claim for loss on of transporting the goods from the city of
the basis of said bill of lading. (Sea-Land the seller to the city of the buyer, which bill
of lading is honored by the second and
other interested carriers who do not issue takes the risk of delivering it in good condition
their own bills. as when it was loaded. (PAL vs. CA)
9. Custody – One wherein the goods are
already received by the carrier but the B. Duty to deliver the goods
vessel indicated therein has not yet arrived  Not only to transport the goods safely but to
in the port. the person indicated in the bill of lading. The
10. Port – One which is issued by the carrier to goods should be delivered to the consignee or
whom the goods have been delivered, and any other person to whom the bill of lading was
the vessel indicated in the bill of lading by validly transferred or negotiated.
which the goods are to be shipped is
already in the port where the goods are Time of delivery
held for shipment. Stipulated in No stipulation
 Functions: Contract/Bill of
1. Best evidence of the existence of the Lading
contract of carriage of cargo (Art. 353) 1. Carrier is 1. Within a
2. Document of title bound to fulfill reasonable
3. Receipt of cargo the contract and time.
4. Contract to transport and deliver goods as is liable for any 2. Carrier is
stipulated delay; no matter bound to
5. Symbol of the goods from what forward them in
cause it may the 1st shipment
OBLIGATIONS OF THE CARRIER have arisen. of the same or
A. Duty to accept the goods similar goods
GENERAL RULE: A common carrier cannot which he may
ordinarily refuse to carry a particular class of make to the
goods. point of delivery.
EXCEPTION: For some sufficient reason the (ART. 358 Code
discrimination against the traffic in such goods is of Commerce)
reasonable and necessary. (Fisher vs. Yangco
Steamship Co. 31 Phil 1). Effects of delay
 Instances when the carrier may validly refuse a. Merely suspends and generally does not
to accept the goods include the ff: terminate the contract of carriage
1.) Goods sought to be transported are b. Carrier remains duty bound to exercise
dangerous objects, or substances including extraordinary diligence
dynamite and other explosives c. Natural disaster shall not free the carrier
2.) Goods are unfit for transportation from responsibility (Art.1740)
3.) Acceptance would result in overloading d. If delay is without just cause, the contract
4.) Contrabands or illegal goods limiting the common carrier’s liability cannot be
5.) Goods are injurious to health availed of in case of loss or deterioration of the
6.) Goods will be exposed to untoward danger goods (Art.1747)
like flood, capture by enemies and the like
7.) Goods like livestock will be exposed to RIGHT OF CONSIGNEE TO ABANDON
disease GOODS
8.) Strike  Instances:
9.) Failure to tender goods on time. (Notes and 1. Partial non-delivery, where the goods are
Cases on the Law on Transportation and Public useless without the others (Art. 363);
Utilities, Aquino, T. & Hernando, R.P. 2004 ed. 2. Goods are rendered useless for sale or
p.68) consumption for the purposes for which they are
 In case of carriage by railway, the carrier is properly destined (Art. 365); and
exempted from liability if carriage is insisted 3. In case of delay through the fault of the
upon by the shipper, provided its objections are carrier (Art. 371).
stated in the bill of lading.
 However, when a common carrier accepts NOTICE OF DAMAGE (ART. 366)
cargo for shipment for valuable consideration, it  Requisites for applicability:
1. Domestic/inter-island/coastwise precedent precedent
transportation 2. 2. 3-day period
2. Land/water/air transportation 24-hour period for claiming
3. Carriage of goods for claiming latent damage
4. Goods shipped are damaged latent damage
 Rules: Prescriptive period
a. Patent damage: shipper must file a claim None provided; One year from
against the carrier immediately upon delivery Civil Code the date of
(it may be oral or written) applies. delivery
b. Latent damage: shipper should file a claim (delivered but
against the carrier within 24 hours from damaged
delivery. goods), or date
Note: These rules does not apply to misdelivery when the
of goods. (Roldan vs. Lim Ponzo) vessel left port
Purpose of notice: To inform the carrier that the or from the date
shipment has been damaged, and it is charged of delivery to
with liability therefore, and to give it an the arrastre
opportunity to make an investigation and fix (non-delivery or
responsibility while the matter is fresh. loss).
 The filing of notice of claim is a condition
precedent for recovery. COMBINED CARRIER AGREEMENT (ART.
 Shorter period may be stipulated by the 373)
parties because it merely affects the shipper’s GENERAL RULE: In case of a contract of
remedy and does not affect the liability of the transportation of several legs, each carrier is
carrier. (PHILAMGEN vs. Sweetlines, Inc.) responsible for its particular leg in the contract.
Prescriptive Period EXCEPTION: A combined carrier agreement
 Not provided by Article 366. Thus, in such where a carrier makes itself liable assuming the
absence, Civil Code rules on prescription apply. obligations and acquiring as well the rights and
 If despite the notice of claim, the carrier causes of action of those which preceded it.
refuses to pay, action must be filed in court.
1. No bill of lading was issued: within 2. MARITIME
6 years COMMERCE
2. Bill of lading was issued: within 10 (Arts. 573-869)
years.
ARTICLE 366 COGSA Sec.3 IMPORTANT CONCEPTS:
(6) 1. Merchant vessel
2. Maritime lien and Preference of Credit
Applicability
3. Doctrine of limited liability
1. Dome 1. International/
4. Causes of revocation of voyage
stic/inter- overseas/foreig
5. Participants in maritime commerce
island/coastwise n (from foreign
6. Charter party
transportation country to
7. Loans on bottomry and respondentia
2. Land, Phils.)
8. Accidents in maritime commerce
water, air Note: subject to
transportation the rule on
MARITIME/ADMIRALTY LAW
3. Carri Paramount
 It is the system of laws which particularly
age of goods Clause
2. relates to the affairs and business of the sea, to
Water/maritime ships, their crews and navigation, and to
transportation maritime conveyance of persons and property.
3. Carriage of (Notes and Cases on the Law on Transportation
goods and Public Utilities, Aquino & Hernando, citing
Notice of damage Francisco, p.254)
1. 1. Not a
 Maritime laws apply only to maritime trade
Condition condition
and sea voyages. (Pandect of Commercial Law  If the maritime lien arose prior to the recording
and Jurisprudence, Justice Jose Vitug, 1997 of a preferred mortgage, it shall have priority
ed.) over the said mortgage lien. (PNB vs. CA, 337
SCRA 381)
 Arrastre service is not maritime in character.
It refers to a contract for the unloading of goods
ORDER OF PREFERENCE IN CASE OF SALE
from a vessel. (ICTSI vs. Prudential Guarantee,
OF VESSEL
320 SCRA 244)
CHARACTERISTICS OF MARITIME R.A. 6106 P.D. 1521

TRANSACTION Effectivity date
1. Real - similar to transactions over real 1969 1978
property with respect to effectivity against third Applicability
persons which is done through registration. Overseas Both domestic
(Rubiso vs. Rivera, 37 Phil. 72). The evidence shipping only and overseas
of real nature is shown by: 1) the limitation of shipping
the liability of the agents to the actual value of Kind of sale
the vessel and the freight money; and 2) the Judicial Judicial and
right to retain the cargo and embargo and extrajudicial
detention of the vessel (Luzon Stevedoring Corp Order of Preference
v. CA, 156 SCRA 169); A preferred The preferred
2. Hypothecary - the liability of the owner of the mortgage shall mortgage lien
value of the vessel is limited to the vessel itself have priority shall have
(Doctrine of Limited Liability). over all claims priority over all
against the claims against
 The real and hypothecary nature of maritime vessel, except the vessel,
law simply means that the liability of the carrier the following except the
in connection with losses related to maritime preferences in following
contracts is confined to the vessel, which stands the order preferences in
as the guaranty for their settlement. (Aboitiz stated: the order
Shipping Corp. vs. General Accident Fire and 1. Judicial stated:
Life Assurance Corp. 217 SCRA 359). costs of the 1. Expenses
proceedings; and fees
MERCHANT VESSEL 2. Taxes due allowed and
 Vessel engaged in maritime commerce, the Philippine costs taxed by
whether foreign or otherwise. (Bar Review Government; the court and
Materials in Commercial Law, Jorge Miravite, 3. Salaries and taxes due to
2002 ed.) wages of the the
 Constitutes property which may be acquired Captain and Government;
and transferred by any of the means recognized Crew of the 2. Crew’s
by law. They shall continue to be considered as vessel during wages;
personal property. (Arts. 573, 585) its last voyage; 3. General
 They are susceptible to maritime liens such as 4. General average;
average or 4. Salvage,
for the repair, equipping and provisioning of the
salvage including
vessel in the preparation of a voyage, as well as
including contract
mortgage liabilities, in satisfaction of which a
contract salvage;
vessel may be validly arrested and sold. (Ship
salvage, 5. Maritime
Mortgage Decree of 1978)
bottomry loans, liens arising
and indemnity prior in time to
MARITIME LIEN
due shippers the recording of
 It constitutes a present right of property in the
for the value of the preferred
ship, a jus in re, to be afterward enforced in
goods mortgage;
admiralty by process in rem. (PNB vs. CA, 337
transported but 6. Damages
SCRA 381)
which were not arising out of
delivered to the tort; and is not abandoned;
consignee; 7. Preferred 6. Collision between two negligent vessels;
5. Costs of mortgage
repair and registered prior  Abandonment of the vessel is necessary to
equipment of in time. limit the liability of the shipowner. The only
the vessel, and instance were abandonment is dispensed with is
provisioning of when the vessel is entirely lost (Luzon
food, supplies Stevedoring vs. CA 156 SCRA 169).
and fuel during
its last voyage; RIGHT OF SHIPOWNER OR SHIP AGENT TO
and ABANDON VESSEL
6. Preferred  Instances:
mortgages 1. In case of civil liability from indemnities to
registered prior third persons (Art. 587);
in time. 2. In case of leakage of at least ¾ of the
contents of a cargo containing liquids (Art. 687);
 Effect of sale: All pre-existing claims in the and
3. In case of constructive loss of the vessel
vessel are terminated. They will then be
(Sec. 138, Insurance Code).
satisfied from the proceeds of the sale subject to
the order of preference.
RIGHT OF ABANDONMENT
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE) SHIPOWNER CONSIGNEE
 Cases where applicable: OR SHIP
AGENT
1. Art. 587 – civil liability for indemnities to
third persons What may be abandoned
2. Art. 590 – indemnities from negligent acts Vessel Goods shipped
of the captain (not the shipowner or ship Instances
agent) 1. In case of civil 1. Partial non-
3. Art. 837 – collision liability from delivery, where
4. Art. 643 – liability for wages of the indemnities to the goods are
captain and the crew and for advances third persons useless without
made by the ship agent if the vessel is (Art. 587); the others (Art.
lost by shipwreck or capture 2. Sec. 138, 363);
Insurance Code; 2. Goods are
GENERAL RULE: The liability of shipowner 3. In case of rendered
and ship agent is limited to the amount of leakage of at useless for sale
interest in said vessel such that where vessel is least ¾ of the or consumption
entirely lost, the obligation is extinguished. contents of a for the
(Luzon Stevedoring v. Escano, 156 SCRA 169) cargo containing purposes for
The interest extends to: 1) the vessel itself; 2) liquids (Art. 687) which they are
equipments; 3) freightage; and 4) insurance properly
proceeds. (Chua v. IAC, 166 SCRA 183) destined (Art.
EXCEPTIONS: 365); and
3. In case of
1. Claims under Workmen’s Compensation
delay through
(Abueg vs. San Diego 77 Phil 730);
the fault of the
2. Injury or damage due to shipowner or to the
carrier (Art.
concurring negligence of the shipowner and
371).
the captain;
Effects
3. The vessel is insured (Vasquez vs. CA 138
SCRA 553). 1. Transfer 1. Transfer of
4. Expenses for repair on vessel completed of ownership of ownership on
before loss; the vessel from the goods from
5. In case there is no total loss and the vessel the shipowner to the shipper to
the shippers or the carrier. 1. Capacity to trade;
insurer. 2. Carrier 2. Discharge duties of the captain, subject to
2. In case should pay the Art.609;
of (2), the shipper the 3. Contract in the name of the owners with
insurer must pay market value of respect to repairs, details of equipment,
the insured as if the goods at armament, provisions of food and fuel, and
there was actual the point of freight of the vessel, and all that relate to the
total loss of the destination. requirements of navigation;
vessel. 4. Order a new voyage, make a new charter or
insure the vessel after obtaining
CAUSES OF REVOCATION OF VOYAGE authorization from the shipowner or if
1. War or interdiction of commerce; granted in certificate of appointment.
2. Blockade;
3. Prohibition to receive cargo at destination; Civil Liabilities of the Shipowner And Ship
4. Embargo; Agent
5. Inability of the vessel to navigate. (Art. 640) 1. All contracts of the captain, whether
authorized or not, to repair, equip and
Terms: provision the vessel; (Art. 586)
1. Interdiction of commerce – A governmental 2. Loss and damage to the goods loaded on
prohibition of commercial intercourse the vessel without prejudice to their right to
intended to bring about an entire cessation free themselves from liability by abandoning
for the time being of all trade whatever. the vessel to the creditors. (Art. 587)
2. Blockade – A sort of circumvallation of a
place by which all foreign connection and Duty of Ship Agent to Discharge the Captain
correspondence is, as far as human power and Members of the Crew
can effect it, to be cut off.  If the seamen contract is not for a definite
3. Embargo – A proclamation or order of a period or voyage, he may discharge them at his
state, usually issued in time of war or discretion. (Art. 603)
threatened hostilities, prohibiting the  If for a definite period, he may not discharge
departure of ships or goods from some or all them until after the fulfillment of their contracts,
the ports of such state until further order. except on the following grounds:
a. Insubordination in serious matters;
PARTICIPANTS IN MARITIME COMMERCE b. Robbery;
A. Shipowners and ship agents c. Theft;
B. Captains and masters of the vessel d. Habitual drunkenness;
C. Officers and crew of the vessel e. Damage caused to the vessel or to its
D. Supercargoes cargo through malice or manifest or proven
E. Pilot negligence. (Art. 605)
A. SHIPOWNERS AND SHIP AGENTS B. CAPTAINS AND MASTERS

Shipowner (proprietario)  They are the chiefs or commanders of ships.
 Person who has possession, control and  The terms have the same meaning, but are
management of the vessel and the consequent particularly used in accordance with the size of
right to direct her navigation and receive freight the vessel governed and the scope of
earned and paid, while his possession transportation, i.e., large and overseas, and
continues. small and coastwise, respectively.
 Nature of position (3-fold character):
Ship agent (naviero) 1. General agent of the shipowner;
 Person entrusted with provisioning and 2. Technical director of the vessel;
representing the vessel in the port in which it 3. Representative of the government of the
may be found; also includes the shipowner. country under whose flag he navigates.
 Not a mere agent under civil law; he is  Qualifications:
solidarily liable with the ship owner. 1. Filipino citizen;
 Powers and functions: 2. Legal capacity to contract;
3. Must have passed the required physical stipulated ocean voyage (Inter-Orient Maritime
and mental examinations required for Enterprises Inc. vs. CA).
licensing him as such. (Art. 609)
 Inherent powers:  No liability for the following:
1. Appoint crew in the absence of ship 1. Damages caused to the vessel or to the
agent; cargo by force majeure;
2. Command the crew and direct the vessel 2. Obligations contracted for the repair,
to its port of destination; equipment, and provisioning of the vessel
3. Impose correctional punishment on those unless he has expressly bound himself
who, while on board vessel, fail to comply personally or has signed a bill of
with his orders or are wanting in exchange or promissory note in his
discipline; name. (Art. 620)
4. Make contracts for the charter of vessel
in the absence of ship agent. Solidary Liabilities of the Ship
5. Supply, equip, and provision the vessel; Agent/Shipowner for Acts Done by the
and Captain towards Passengers and Cargoes
6. Order repair of vessel to enable it to 1. Damages to vessel and to cargo due to
continue its voyage. (Art. 610) lack of skill and negligence;
 Sources of funds to comply with the inherent 2. Thefts and robberies of the crew;
powers of the captain (in successive order): 3. Losses and fines for violation of laws;
1. From the consignee of the vessel; 4. Damages due to mutinies;
2. From the consignee of the cargo; 5. Damages due to misuse of power;
3. By drawing on the ship agent; 6. For deviations;
4. By a loan on bottomry; 7. For arrivals under stress;
5. By sale of part of the cargo. (Art. 611) 8. Damages due to non-observance of
 Duties: marine regulations. (Art. 618)
1. Bring on board the proper certificate and
documents and a copy of the Code of C. OFFICERS AND CREW
Commerce; 1. Sailing Mate/First Mate
2. Keep a Log Book, Accounting Book and 2. Second Mate
Freight Book; 3. Engineers
3. Examine the ship before the voyage; 4. Crew
4. Stay on board during the loading and  No liability under the following circumstances:
unloading of the cargo; 1. If, before beginning voyage, captain attempts
5. Be on deck while leaving or entering the to change it, or a naval war with the power to
port; which the vessel was destined occurs;
6. Protest arrivals under stress and in case 2. If a disease breaks out and be officially
of shipwreck; declared an epidemic in the port of
7. Follow instructions of and render an destination;
accounting to the ship agent; 3. If the vessel should change owner or
8. Leave the vessel last in case of wreck; captain. (Art. 647)
9. Hold in custody properties left by
deceased passengers and crew Sailing Mate/First Mate
members;  Second chief of the vessel who takes the place
10. Comply with the requirements of of the captain in case of absence, sickness, or
customs, health, etc. at the port of arrival; death and shall assume all of his duties, powers
11. Observe rules to avoid collision; and responsibilities. (Art. 627)
12. Demand a pilot while entering or leaving  Duties:
a port. (Art. 612) 1. Provide himself with maps and charts
with astronomical tables necessary for
 A ship’s captain must be accorded a the discharge of his duties;
reasonable measure of discretionary authority to 2. Keep the Binnacle Book;
decide what the safety of the ship and of its 3. Change the course of the voyage on
crew and cargo specifically requires on a consultation with the captain and the
officers of the boat, following the decision Just Causes for the Discharge of Seaman
of the captain in case of disagreement; While Contract Subsists
4. Responsible for all the damages caused 1. Perpetration of a crime;
to the vessel and the cargo by reason of 2. Repeated insubordination, want of discipline;
his negligence. (Arts. 628 - 631) 3. Repeated incapacity and negligence;
4. Habitual drunkenness;
Second Mate 5. Physical incapacity;
 Takes command of the vessel in case of the 6. Desertion. (Art. 637)
inability or disqualification of the captain and the
sailing mate, assuming in such case their Rules in case of Death of a Seaman
powers and responsibilities.  The seaman’s heirs are entitled to payment as
 Third in command follows:
 Duties: 1. If death is natural:
1. Preserve the hull and rigging of the a. compensation up to time of death if
vessel; engaged on wage
2. Arrange well the cargo; b. if by voyage - half of amount if death
3. Discipline the crew; occurs on voyage out; and full, if on
4. Assign work to crew members; voyage in
5. Inventory the rigging and equipment of c. if by shares - none, if before departure;
the vessel, if laid up. (Art. 632) full, if after departure
2. if death is due to defense of vessel - full
Engineers payment;
 Officers of the vessel but have no authority 3. if captured in defense of vessel - full
except in matters referring to the motor payment;
apparatus. When two or more are hired, one of 4. if captured due to carelessness - wages up
them shall be the chief engineer. to the date of the capture. (Art. 645)
 Duties:
1. In charge of the motor apparatus, spare Complement of the Vessel
parts, and other instruments pertaining to  All persons on board, from the captain to the
the engines; cabin boy, necessary for the management,
2. Keep the engines and boilers in good maneuvers, and service, thus including the
condition; crew, the sailing mates, engineers, stokers and
3. Not to change or repair the engine other employees on board not having specific
without authority of the captain; designations.
4. Inform the captain of any damage to the  Does not include the passengers or the
motor apparatus; persons whom the vessel is transporting.
5. Keep an Engine Book;
6. Supervise all personnel maintaining the D. SUPERCARGOES
engine. (Art. 632)  Persons who discharges administrative duties
assigned to him by ship agent or shippers,
Crew keeping an account and record of transaction as
 The aggregate of seamen who man a ship, or required in the accounting book of the captain.
the ship’s company. (Art. 649)
 Hired by the ship agent, where he is present
and in his absence, the captain hires them, E. PILOT
preferring Filipinos, and in their absence, he  A person duly qualified, and licensed, to
may take in foreigners, but not exceeding 1/5 of conduct a vessel into or out of ports, or in
the crew. (Art. 634) certain waters.
 The term generally connotes a person taken
Classes of Seaman’s Contracts on board at a particular place for the purpose of
1. By the voyage; conducting a ship through a river, road or
2. By the month; and channel, or from a port.
3. By share of profits or freightage.  Master pro hac vice for the time being in the
command and navigation of the ship.
 While in exercising his functions a pilot is in  Classes:
sole command of the ship and supersedes the 1. Bareboat or demise – The charterer provides
master for the time being in the command and crew, food and fuel. The charterer is liable as if
navigation of the ship, the master does not he were the owner, except when the cause
surrender his vessel to the pilot and the pilot is arises from the unworthiness of the vessel. The
not the master. There are occasions when the shipowner leases to the charterer the whole
master may and should interfere and even vessel, transferring to the latter the entire
displace the pilot, as when the pilot is obviously command, possession and consequent control
incompetent or intoxicated (Far Eastern over the vessel’s navigation, including the
Shipping Company vs. CA). master and the crew, who thereby become the
 Compulsory Pilotage – States possessing charter’s servants. It transforms a common
harbors have enacted laws or promulgated rules carrier into a private carrier.
requiring vessels approaching their ports to take  The charterer becomes the owner of the
on board pilots licensed under the local laws. vessel pro hac vice, just for that one
(Notes and Cases on the Law on Transportation particular purpose only. Because the
and Public Utilities, Aquino, T. & Hernando, R.P. charterer is treated as owner pro hac vice,
2004 ed. p. 518) the charterer assumes the customary rights
and liabilities of the shipowner to third
Liablity of Pilot persons and is held liable for the expense of
GENERAL RULE: On compulsory pilotage the voyage and the wages of the seamen.
grounds, the Harbor Pilot is responsible for 2. Contract of Affreightment – A contract
damage to a vessel or to life or property due to whereby the owner of the vessel leases part or
his negligence. all of its space to haul goods for others.
EXCEPT:  The shipowner retains the possession,
1. Accident caused by force majeure or natural command and navigation of the ship, the
calamity provided the pilot exercised prudence charterer merely having use of the space in
and extra diligence to prevent or minimize the vessel in return for his payment of the
damages. charter hired.
2. Countermand or overrule by the master of  Kinds:
the vessel in which case the registered owner of a. Time charter – vessel is chartered for a
the vessel is liable. (Sec.11, Art.III PPA Admin fixed period of time or duration of voyage.
Order 03-85) b. Voyage or trip charter – the vessel is
leased for one or series of voyages
SPECIAL CONTRACTS OF MARITIME usually for purposes of transporting
COMMERCE goods for charterer.
1. Charter party
2. Bill of lading LEASE CHARTER
3. Contract of transportation of passengers PARTY
on sea voyages If for a definite Charterer may
4. Loan on bottomry period, lessee rescind charter
5. Loan on respondentia cannot give up party by paying
6. Marine insurance the lease by half of the
paying a portion freightage
CHARTER PARTY of the amount agreed upon.
 A contract by virtue of which the owner or agreed upon.
agent binds himself to transport merchandise or If the leased The new owner
persons for a fixed price. property is sold is not compelled
 A contract by which an entire ship, or some to one who to respect the
principal part thereof is let/leased by the owner knows of the charter party so
to another person for a specified time or use. existence of the long as he can
(Planters Products, Inc. vs. CA, 226 SCRA 476) lease, the new load the vessel
 Parties: owner must with his own
1. Ship owner or ship agent respect the cargo. (Art. 689)
2. Charterer lease.
Civil law Commercial law 4. Captain in the absence of the ship agent
concept concept or consignee and only if he acts in
accordance with the instructions of the
agent or owner and protects the latter’s
interests. (Art.609)
CHARTER BILL OF
PARTY LADING REQUISITES OF A VALID CHARTER PARTY
An entire or More like a 1. Consent of the contracting parties
complete private receipt 2. Existing vessel which should be placed at
contract. which the the disposition of the shipper
captain gives to 3. Freight
accredit goods 4. Compliance with Art. 652 of the Code of
received from Commerce
persons
Consensual Real contract
contract
BAREBOAT CONTRACT OF Clauses Which May Be Included In a Charter

OR DEMISE AFFREIGHTME Party
CHARTER NT (TIME OR
VOYAGE Jason clause Clause
CHARTER) paramount or
Charterer Owner remains paramount
becomes liable liable as carrier clause
to others and must A stipulation in a A clause in a
caused by its answer for any charter party charter party
negligence breach of duty that in case of a providing that
Charterer Charterer is not maritime the COGSA
regarded as regarded as accident for shall apply,
owner pro hac owner. which the even though the
vice for the shipowner is not transportation is
voyage responsible by domestic,
Owner of vessel The vessel law, contract or subject to the
relinquishes owner retains otherwise, the extent that any
possession, possession, cargo shippers, term of the bill
command and command and consignees or of lading is
navigation to navigation of the owners shall repugnant to the
charterer ship contribute with COGSA or
the shipowner in applicable law,
Common carrier Common carrier
general then to the
is converted to is not converted
average. extent thereof
private carrier. to a private
(Pandect of the provision of
carrier.
Commercial the bill of lading
Law and is void.
Jurisprudence, (Pandect of
PERSONS WHO MAY MAKE A CHARTER
Justice Jose Commercial
1. Owner or owners of the vessel, either in
Vitug, 1997 ed.) Law and
whole or in majority part, who have legal
Jurisprudence,
control and possession of the vessel
Justice Jose
2. Charterer may subcharter entire vessel to
Vitug, 1997 ed.)
3rd person only if not prohibited in original
charter. (Art.679) Rights and Obligations of Parties
3. Ship agent if authorized by the owner/s or
given such power in the certificate of
SHIPOWNER CHARTERER
appointment. (Art.598)
OR SHIP
AGENT tonnage vessel; receive
1. If the vessel 1. To pay the or flag; 2. Sale by cargo;
is chartered agreed charter 3. Failure the owner 4.
wholly, not to price; to place of the Embargo;
accept cargo 2. To pay the vessel vessel and
from others; freightage on at the before 5. Inability
2. To observe unboarded charterer’ loading by of the
represented cargo; s the vessel to
capacity; 3. To pay disposal; charterer; navigate.
3. To unload losses to others 4. Return
cargo for loading of the
clandestinely uncontracted vessel
placed cargo and illicit due to
4. To substitute cargo; pirates,
another vessel if 4. To wait if the enemies
load is less than vessel needs or bad
3/5 of capacity; repair; weather;
5. To leave the 5. To pay 5. Arrival
port if the expenses for at a port
charterer does deviation. (Arts. for
not bring the 679-687) repairs.
cargo within the
lay days and Terms:
extra lay days 1. Primage - bonus to be paid to the captain
allowed; after the successful voyage.
6. To place in a 2. Demurrage – the sum fixed in the charter
vessel in a party as a remuneration to the owner of the
condition to ship for the detention of his vessel beyond
navigate; the number of days allowed by the charter
7. to bring party for loading or unloading or for sailing.
cargo to nearest 3. Deadfreight – the amount paid by or
neutral port in recoverable from a charterer of a ship for the
case of war or portion of the ship’s capacity the latter
blockade. (Arts. contracted for but failed to occupy.
669-678) 4. Lay Days - days allowed to charter parties
for loading and unloading the cargo.
5. Extra Lay Days – days which follow after the
Rescission of a Charter Party lay days have elapsed.
At At Fortuitou
charterer shipown s causes USUAL FORMS OF CONSUMMATING
’s er’s (Art. 690) CONTRACTS
request request 1. C.I.F. – cost, insurance and freight;
(Art 688) (Art. 689) 2. F.O.B. - free on board;
3. F.A.S. - free alongside ship; and
1. By 1. If the 1. War or 4. C. & F. - cost and freight.
abandoni extra lay interdictio
ng the days n of TRANSSHIPMENT OF GOODS
charter terminate commerc  The act of taking cargo out of one ship and
and without e; loading it in another, or the transfer of goods
paying the cargo 2. from the vessel stipulated in the contract of
half of the being Blockade; affreightment to another vessel before the place
freightage placed 3. of destination named in the contract has been
; alongside Prohibitio reached, or the transfer for further transportation
2. Error in the n to from one ship or conveyance to another.
 It is not dependent on the ownership of the broker taking part therein
transporting ships or in the change of carriers, 3. Private instrument (Art. 720)
but rather on the fact of actual physical transfer Contents:
of cargo from one vessel to another. 1. Kind, name and registry of the
 If done without legal excuse, however vessel;
competent and safe the vessel into which the 2. Name, surname and domicile
transfer is made, is a violation of contract and of the captain;
infringement of right of shipper and subjects 3. Names, surnames and
carrier to liability if freight is lost event by cause domiciles of the borrower and
otherwise excepted. (Magellan Manufacturing the lender;
vs. CA, 201 SCRA 102) 4. Amount of the loan and the
premium stipulated;
LOAN ON BOTTOMRY AND RESPONDENTIA 5. Time for repayment;
 A real, unilateral, aleatory contract, by virtue of 6. Goods pledged to secure
which one person lends to another a certain repayment;
amount of money or goods on things exposed to 7. Voyage during which the risk
maritime risks, which amount, with its earnings, is run (Art.721)
is to be returned if the things are safely
transported, and which is lost if the latter are
lost. BOTTOMRY/ ORDINARY
RESPONDENT LOAN
IA (MUTUUM)
LOAN ON LOAN ON
Not subject to Subject to
BOTTOMRY RESPONDENT
Usury Law Usury Law
IA
Definition Liability of the Not subject to
Loan made by Loan taken on borrower is any
shipowner or security of the contingent on contingency
ship agent cargo laden on the safe arrival (absolute
guaranteed by a vessel, and of the vessel or liability)
vessel itself repayable upon cargo at
and repayable safe arrival of destination
upon arrival of cargo at The last lender The first lender
vessel at destination. is a preferred is a preferred
destination. (Art. 719) creditor creditor
(Art. 719)
Who may contract
Shipowner or Only the owner WHEN LOAN ON BOTTOMRY OR
ship agent. of the cargo. RESPONDENTIA REGARDED AS SIMPLE
Outside of the LOAN
residence of 1. Lender loaned an amount larger than the
the owners - value of the object due to fraudulent
the captain. means employed by the borrower.
(ART.726)
Common elements:
2. Full amount of the loan is not used for the
1. Exposure of security to
cargo or given on the goods if all of them
marine peril;
could not have been loaded, the balance
2. Obligation of the debtor
will be considered a simple loan.
conditioned only upon safe
(ART.727)
arrival of the security at the
3. If the effects on which the money is taken
point of destination.
is not subjected to any risk. (ART.729)
Forms:
1. Public instrument
Note: Under existing laws, the parties to a loan,
2. Policy signed by the
whether ordinary or maritime, may agree on any
contracting parties and the
rate of interest. (CB Circular 905)
only the excess is insurable, since a loan on
bottomry partakes of the nature likewise of an
MARINE LOAN ON insurance coverage to the extent of the loan
INSURANCE BOTTOMRY accommodation. The same rule would apply to
OR the hypothecation of the cargo by respondentia.
RESPONDE (Pandect of Commercial Law and
NTIA Jurisprudence, Justice Jose Vitug, 1997 ed.)
Indemnity is paid Indemnity is
after the loss has paid in ACCIDENTS IN MARITIME COMMERCE
occurred advance by 1. Averages
way of a loan 2. Arrival Under Stress
In case of loss of In case of 3. Collision
the vessel due to loss of the 4. Shipwreck
a risk insured vessel due to
against, the a marine AVERAGE
obligation of the peril, the  An extraordinary or accidental expense
insurer becomes obligation of incurred during the voyage in order to preserve
absolute the borrower the cargo, vessel or both, and all damages or
to pay is deterioration suffered by the vessel from
extinguished departure to the port of destination, and to the
Consensual Real contract cargo from the port of loading to the port of
contract consignment. (Art. 806)
 The person whose property has been saved
Hypothecary Nature of Bottomry/ must contribute to reimburse the damage
Respondentia caused or expense incurred if the situation
GENERAL RULE: The obligation of the constitutes general average.
borrower to pay the loan is extinguished if the  Classes:
goods given as security are absolutely lost by 1. Particular or Simple Average
reason of an accident of the sea, during the 2. Gross or General Average
voyage designated, and if it is proven that the  Where both vessel and cargo are saved, it is
goods were on board. general average; where only the vessel or only
EXCEPTIONS: the cargo is saved, it is particular average.
1. Loss due to inherent defect;  Expenses incurred to refloat a vessel, which
2. Loss due to the barratry on the part of the accidentally ran aground, in order to continue its
captain; voyage, do not constitute general average. Not
3. Loss due to the fault or malice of the only is there absence of a marine peril, common
borrower; safety factor, and deliberateness. It is the safety
4. The vessel was engaged in contraband; and of the property, and not the voyage, which
5. The cargo loaded on the vessel be different constitutes the true foundation of general
in from that agreed upon. average. (A. Magsaysay, Inc. vs. Agan, G.R.No.
L-6393, Jan. 31, 1955)
Concurrence of Marine Insurance and Loan
on Bottomry/Respondentia
1. The insurable interest of the owner of a PARTICULAR GROSS OR
ship hypothecated by bottomry is only the OR SIMPLE GENERAL
excess of the value over the amount Definition
secured by bottomry. (Sec. 101, Damages or Damages or
Insurance Code) expenses expenses
2. The value of what may be saved in case caused to the deliberately
of shipwreck shall be divided between the vessel or cargo caused in order
lender and the insurer in proportion to the that did not to save the
interest of each one. (Art. 735) inure to the vessel, its
common benefit, cargo or both
Note: If a vessel is hypothecated by bottomry and borne by from real and
respective known risk. 3. Entry of the
owners. (Art. (Art. 811) resolution in the
809) logbook
Requisites 4. Detailed
1. common minutes
danger; 5. Delivery of
2. deliberate the minutes to
sacrifice; the maritime
3. success; judicial
4. proper authority of the
formalities first port, within
and legal 24 hours from
steps. arrival,
Liability 6. Ratification
The owner of All the persons by captain
the goods which having an under oath.
gave rise to the interest in the (Arts. 813-814)
expense or vessel and the
suffered the cargo therein at GOODS NOT COVERED BY GENERAL
damage shall the time of the AVERAGE EVEN IF SACRIFICED
bear this occurrence of 1. Goods carried on deck. (ART.855)
average. (Art. the average 2. Goods not recorded in the books or
810) shall contribute records of the vessel. (ART.855 (2))
to satisfy this 3. Fuel for the vessel if there is more than
average. (Art. sufficient fuel for the voyage. (Rule IX,
812) York-Antwerp Rule)
 The insurers
(Art.859) and Jettison
lenders on  Act of throwing cargo overboard in order to
bottomry and lighten the vessel.
respondentia  Order of goods to be cast overboard:
shall likewise 1. Those which are on the deck, preferring
contribute. the heaviest one with the least utility and
(Art.732). value;
Number of interests involved 2. Those which are below the upper deck,
Only one Several beginning with the one with greatest
interest involved interests weight and smallest value. (Art. 815)
involved
Share in the damage or expense  Jettisoned goods are not res nullius nor
100% share In proportion to deemed “abandoned” within the meaning of civil
the value of the law so as to be the object of occupation by
owner’s salvage. (Pandect of Commercial Law and
property saved Jurisprudence, Justice Jose Vitug, 1997 ed.)
Right to recover  In order that the jettisoned goods may be
No There may be included in the gross or general average, the
reimbursement reimbursement existence of the cargo on board should be
Kinds (not exclusive) proven by means of the bill of lading. (Art. 816)
Art. 809 Art. 811
Procedure for recovery York-Antwerp (Y-A) Rules on Determining
1. Assembly Liability for Averages With Regard To Deck
and Cargo
deliberation 1. Deck cargo is allowed only in
2. Resolution of domestic/coastwise/inter-island shipping, and is
the captain
prohibited in international/overseas/foreign of the sea of vessel caused by
shipping. disabling due to reason of
2. If deck cargo is loaded with the consent of it to improper a lawful
the shipper on overseas trade, it must always navigate. repair; arrival.
contribute to general average, but should the (Art. 819) and (Art. 821)
same be jettisoned, it would not be entitled to 4. Malice,
reimbursement because there is violation of the negligenc
Y-A Rules. e, lack of
3. If deck cargo is loaded with the consent of foresight
the shipper on coastwise shipping, it must or skill of
always contribute to general average and if captain.
jettisoned would be entitled to reimbursement. (Art. 820)
 Reason: In domestic shipping, voyages are
usually short and the seas are generally not  It is the duty of the captain to continue the
rough. In overseas shipping, the vessel is voyage without delay after the cause of the
exposed for many days to perils of the sea. arrival under stress has ceased failing in such
duty renders him liable. However, in case the
DOMESTIC INTERNATION cause has been risk of enemies, there must first
AL be an assembly before departure. (Art. 825)
Deck cargo is Deck cargo is  Steps:
allowed not allowed 1. Captain should determine during the
With shipper’s consent voyage if there is well founded fear of
General Particular seizure, privateers and other valid
average average grounds;
Without shipper’s consent 2. Captain shall assemble the officers and
Captain is liable Captain is liable summon the persons interested in the
cargo who may attend the meeting but
ARRIVAL UNDER STRESS (ARRIBADA) without a right to vote;
 The arrival of a vessel at the nearest and most 3. The officers shall determine and agree if
convenient port instead of the port of there is well-founded reason after
destination, if during the voyage the vessel examining the circumstances. The
cannot continue the trip to the port of captain shall have the deciding vote;
destination. 4. The agreement shall be drafted and the
proper minutes shall be signed and
entered in the log book;
When When Who
5. Objections and protests shall likewise be
lawful unlawful bears
entered in the minutes.
expenses
:
COLLISION
 Impact of two vessels both of which are
The 1. Lack of The
moving.
inability to provisions shipowner
continue due to or ship
Allision
voyage is negligenc agent is
 Impact between a moving vessel and a
due to e to carry liable in
lack of according case of stationary one.
provision to usage unlawful
s, well- and arrival Nautical Rules to Determine Negligence
founded customs; under 1. When two vessels are about to enter a port,
fear of 2. Risk of stress. the farther one must allow the nearer to
seizure, enemy not But they enter first; if they collide, the fault is
privateers well shall not presumed to be imputable to the one who
, pirates, known or be liable arrived later, unless it can be proved that
or manifest for the there was no fault on its part.
accidents 3. Defect damages 2. When two vessels meet, the smaller should
give the right of way to the larger one. avoid imminent danger.
3. A vessel leaving port should leave the way 3. Third zone – time when collision is certain
clear for another which may be entering the and time of impact.
same port.  An error in this zone would no longer be legally
4. The vessel which leaves later is presumed to consequential.
have collided against one which has left  Error in Extremis - sudden movement made
earlier. by a faultless vessel during the third zone of
5. There is a presumption against the vessel collision with another vessel which is at fault
which sets sail in the night. during the 2nd zone. Even if such sudden
6. There is a presumption against the vessel movement is wrong, no responsibility will fall on
with spread sails which collides with another said faultless vessel. (Urrutia and Co. v. Baco
which is at anchor and cannot move, even River Plantation Co., 26 PHIL 632)
when the crew of the latter has received
word to lift anchor, when there was not Cases Covered By Collision and Allision
sufficient time to do so or there was fear of a 1. One vessel at fault
greater damage or other legitimate reason.  Vessel at fault is liable for damage caused to
7. There is a presumption against an innocent vessel as well as damages suffered by
improperly moored vessel. the owners of cargo of both vessels. (Art. 826)
8. There is a presumption against a vessel 2. Both vessels at fault
which has no buoys to indicate the location  Each vessel must bear its own loss, but the
of its anchors to prevent damage to vessels shippers of both vessels may go against the
which may approach it. shipowners who will be solidarily liable. (Art.
9. Vessels must have “proper look-outs” or 827)
persons trained as such and who have no 3. Vessel at fault not known
other duty aside therefrom. (Smith Bell v.  Each vessel must bear its own loss, but the
CA) shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art.
Nautical Rules as to Sailing Vessel and 828)
Steamship  Doctrine of Inscrutable Fault – In case of
1. Where a steamship and a sailing vessel are
collision where it cannot be determined
approaching each other from opposite
which between the two vessels was at fault,
directions, or on intersecting lines, the
both vessels bear their respective damage,
steamship from the moment the sailing
but both should be solidarily liable for
vessel is seen, shall watch with the highest
damage to the cargo of both vessels.
diligence her course and movements so as
4. Third vessel at fault
to be able to adopt such timely means of
 The third vessel will be liable for losses and
precaution as will necessarily prevent the
two boats from coming in contact. damages. (Art. 831)
2. The sailing vessel is required to keep her 5. Fortuitous event/force majeure
course unless the circumstances require  No liability. Each bears its own loss. (Art. 830)
otherwise.
 The doctrine of res ipsa loquitur applies in
Zones of Time in the Collision of Vessels case a moving vessel strikes a stationary object,
1. First zone – all time up to the moment when such as a bridge post, dock, or navigational aid.
risk of collision begins. (Far Eastern Shipping v. CA, Luzon Stevedoring
 No rule is as yet applicable for none is vs. CA)
necessary.
2. Second zone – time between moment when  Even if the cause of action against the
risk of collision begins and moment it becomes common carrier is based on quasi-delict, the
a practical certainty. defense of due diligence in the selection and
 It is in this period where conduct of the vessels supervision of employees is unavailing in case
is primordial. It is in this zone that vessels must of a maritime tort resulting in collision. It is not a
strictly observe nautical rules, unless a civil tort governed by the Civil Code but a
departure therefrom becomes necessary to maritime one governed by Arts. 826-839 of the
Code of Commerce. (Manila Steamship vs. Insa
Abdulhaman) ARRASTRE SERVICE
 A contract for the unloading of goods from a
 Doctrine of Last Clear Chance and Rule on vessel.
Contributory Negligence cannot be applied in  Applicability: Overseas trade only.
collision cases because of Art.827 of the Code (Commercial Law Review, C. Villanueva, 2004
of Commerce. (Notes and Cases on the Law on ed.)
Transportation and Public Utilities, Aquino, T. &  Significance: When a person brings in cargo
Hernando, R.P. 2004 ed.) from abroad, he cannot unload and deliver the
cargo by himself. The unloading must be done
MARITIME PROTEST by the arrastre operator, which will then deliver
 Condition precedent or prerequisite to recovery the cargo to the importer. (Commercial Law
of damages arising from collisions and other Review, C. Villanueva, 2004 ed.)
maritime accidents.  Nature of business: It is a public utility,
 It is a written statement made under oath by discharging functions which are heavily invested
the captain of a vessel after the occurrence of with public interest.
an accident or disaster in which the vessel or  Liability:
cargo is lost or damaged, with respect to the 1. Similar to a warehouseman (Lua Kian v.
circumstances attending such occurrence, for Manila Railroad)
the purpose of recovering losses and damages. 2. Similar to a common carrier (Northern
 Excuses for not filing protest: 1) where the Motors v. Prince Line)
interested person is not on board the vessel; 3. Solidary liability with the common carrier
and 2) on collision time, need not be protested.
(Art. 836) Note: In order that the arrastre operator may be
 Cases applicable: held liable, the consignee must prove that the
1. Collision (Art. 835); damage was due to the negligence and while
2. Arrival under stress (Art. 612(8)); the goods are in the custody of the arrastre
3. Shipwrecks (Arts. 612(15), 843); operator. (Hartford Fire Insurance v. E. Razon,
4. Where the vessel has gone through a Inc.)
hurricane or when the captain believes
that the cargo has suffered damages or STEVEDORING SERVICE
averages (Art. 624).  The carriage of goods from the warehouse or
 Who makes: Captain pier to the holds of the vessel. (Chief of Staff vs.
 When made: within 24 hours from the time the CIR)
collision took place.  As understood in the port business, the term
 Before whom made: competent authority at the consists of the handling of cargo from the hold
point of collision or at the first port of arrival, if in of the ship to the dock, in case of pier-side
the Philippines and to the Philippine consul, if unloading; or to a barge, in case of unloading at
the collision took place abroad. (Art. 835) sea. (Anglo-Fil Trading Corp. vs. Lazaro)
 The loading on the ship of outgoing cargo is
SHIPWRECK also part of stevedoring work. (Ibid.)
 It is the loss of the vessel at sea as a
consequence of its grounding, or running CONTAINERIZATION/ “SAID-TO-CONTAIN”/
against an object in sea or on the coast. It “SHIPPER’S LOAD AND COUNT” SYSTEM
occurs when the vessel sustains injuries due to  System whereby the shipper loads his cargoes
a marine peril rendering her incapable of in a specially designed container, seals the
navigation. container and delivers it to the carrier for
 If the wreck was due to malice, negligence or transportation. The carrier does not participate
lack of skill of the captain, the owner of the in the counting of the merchandise for loading
vessel may demand indemnity from said into the container, the actual loading, and the
captain. (Art. 841) sealing of the container. (US Lines v. Comm. Of
 The rules on collision or allision, as may be Customs, ICTSI v. Prudential Guarantee)
pertinent, can equally apply to shipwrecks.  The matter of quantity, description and
conditions of the cargo inside the container is
SPECIAL CONCEPTS the sole responsibility of the shipper, unless
there is stipulation to the contrary. (US Lines vs. b. The date when the goods should have
Comm. Of Customs, Reyma Brokerage v. Phil. been delivered (non-delivery). (Sec. 3[6])
Home Assurance)
 “Loss or Damage” as applied to the COGSA
Note: In order to attribute to the carrier any contemplates a situation where no delivery at all
damage to the shipment that may be found, was made by the shipper of the goods because
inspection of the goods should be done at pier- the same had perished, gone out of commerce,
side. (Bankers vs. CA) or disappeared in such a way that their
existence is unknown or they cannot be
III. CARRIAGE OF GOODS BY SEA recovered. Thus, it is inapplicable in case of
ACT/COGSA (C.A. No. 65) misdelivery or conversion. (Ang vs. American
Steamship Agencies Inc.) and damage arising
APPLICABILITY from delay or late delivery (Mitsui O.S.K. Lines
 The transportation must be: Ltd. vs. CA). In such instance the, Civil Code
1. Water/maritime transportation; rules on prescription shall apply.
2. for the carriage of goods; and
3. overseas/international/foreign (from  The one-year prescriptive period is
foreign port to Philippine port). suspended by:
 It can be applied in domestic sea 1. The express agreement of the parties
transportation if agreed upon by the parties. (Universal Shipping Lines, Inc. vs. IAC,
(Clause paramount or paramount clause) 188 SCRA 170)
2. The filing of an action in court until it is
IMPORTANT FEATURES: dismissed. (Stevens & Co. vs.
1. Amount of carrier’s liability Nordeutscher Lloyd, 6 SCRA 180)
2. Notice of damage
3. Prescriptive period  The one-year period shall run from delivery of
the last package and is not suspended by
AMOUNT OF CARRIER’S LIABILITY extrajudicial demand. (Dole Phils.,Inc. vs.
 Under the Sec. 4(5), the liability limit is set at Maritime Co.,148 SCRA 118)
$500 per package or customary freight unit
unless the nature and value of such goods is  The one-year period shall run from delivery to
declared by the shipper. This is deemed the arrastre operator and not to the consignee.
incorporated in the bill of lading even if not (Union Carbide Phils, Inc. vs. Manila Railroad
mentioned in it. (Eastern Shipping vs. IAC, 150 Co.,SCRA 359)
SCRA 463)
 Note that Art. 1749, NCC applies to  The insurer exercising its right of subrogation
domestic/inter-island/coastwise trade. is bound by the one-year prescriptive period.
However, it does not apply to the claim against
NOTICE OF DAMAGE (SEC. 3(6)) the insurer for the insurance proceeds. (Fil.
 Rules: Merchants Ins. Co. vs. Alejandro; Mayer Steel
a. Patent damage: shipper should file a claim Pipe Corp. vs. CA)
with the carrier immediately upon delivery
b. Latent damage: shipper should file a claim IV. WARSAW CONVENTION OF 1929 (WC)
with the carrier within three days from
delivery. PURPOSE: To protect the emerging air
transportation industry and to secure the
Note: The filing of a notice of claim is not a uniformity of recovery by the passengers.
condition precedent. APPLICABILITY
 The transportation must be:
PRESCRIPTIVE PERIOD 1. International transportation;
 Action for loss or damage to the cargo should 2. Air transportation; and
be brought within one year after: 3. Carriage of passengers, baggage or
a. Delivery of the goods (delivered but goods.
damaged goods); or  The WC shall also apply to fortuitous
transportation by aircraft performed by an air baggage shipped
transportation enterprise.
LIABILITY OF CARRIER FOR DAMAGES
 International transportation - any 1. Death or injury of a passenger if the accident
transportation in which the place of departure causing it took place on board the aircraft or in
and the place of destination are situated either: the course of its operations of embarking or
1. Within the territories of two High disembarking; (Art. 17)
Contracting Parties regardless of whether or 2. Destruction, loss or damage to any baggage
not there be a break in the transportation or or goods, if it took place during the
transshipment, or “transportation by air”; (Art. 18) and
2. Within the territory of a single High  Transportation by air – The period during
Contracting Party, if there is an agreed which the baggage or goods are in the charge of
stopping place within a territory subject to the carrier, whether in an airport or on board an
the sovereignty, mandate or authority of aircraft, or, in case of a landing outside an
another power, even though that power is airport, in any place whatsoever.
not a party to the Convention. (“round trip”, It includes any transportation by land or
Am. Jur.) water outside an airport if such takes place in
the performance of a contract for transportation
 Transportation to be performed by several by air, for the purpose of loading, delivery, or
successive air carriers shall be deemed to be transshipment.
one undivided transportation, if it has been 3. Delay in the transportation of passengers,
regarded by the parties as a single operation, baggage or goods. (Art. 19)
whether it has been agreed upon under the form
of a single contract or of a series of contracts, Note: The Hague Protocol amended the WC by
and it shall not lose its international character removing the provision that if the airline took all
merely because one contract or a series of necessary steps to avoid the damage, it could
contracts is to be performed entirely within a exculpate itself completely (Art. 20(1)). (Alitalia
territory subject to the sovereignty, suzerainty, vs. IAC, 192 SCRA 9)
mandate, or authority of the same High
Contracting Party. (Art. 1 Sec.3) LIMIT OF LIABILITY (Art. 22, as amended by
Guatemala Protocol, 1971; Alitalia vs. IAC)
WHEN INAPPLICABLE 1. Passengers
1. When public policy is contradicted; GENERAL RULE: $100,000 per passenger
2. If the requirements under the Convention EXCEPTION: Agreement to a higher limit
are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents 2. Checked-in baggage
a. Passenger ticket GENERAL RULE: $20 per kilogram
b. Baggage check EXCEPTION: In case of special declaration of
c. Air way bill value and payment of a supplementary sum by
2. Liability of the carrier for damages consignor, carrier is liable to not more than the
a. Death or injury to passengers declared sum unless it proves the sum is
b. Loss or damage to baggage or goods greater than actual value.
c. Delay 3. Hand-carried baggage
3. Successive carrier agreement  $1000/passenger
4. Jurisdiction
4. Goods to be shipped
5. Combined transportation agreement
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
PASSEN BAGGAG AIR
GER E CHECK WAYBILL value and payment of a supplementary sum by
TICKET consignor, carrier is liable to not more than the
declared sum unless it proves the sum is
Passenge Checked- Goods to
greater than actual value.
r in be
 An agreement relieving the carrier from  In United Airlines vs. Uy the two-year
liability or fixing a lower limit is null and void. prescriptive period was not applied where the
(Art. 23) airline employed delaying tactics.
 Carrier is not entitled to the foregoing limit if
the damage is caused by willful misconduct or RULE IN CASE OF VARIOUS SUCCESSIVE
default on its part. (Art. 25) CARRIERS
1. Carriage of passengers
 Thus, the WC does not operate as an GENERAL RULE: Action is filed only against
exclusive enumeration of the instances of an the carrier in which the accident or delay
absolute limit of the extent of liability. It does not occurred.
preclude the application of the Civil Code and EXCEPTION: Agreement or contract whereby
other pertinent local laws. It does not regulate the first carrier assumed liability for the whole
or exclude liability for other breaches of contract journey.
by the carrier, or misconduct of its employees, 2. Carriage of baggage or goods
or for some particular or exceptional type of a. Passenger or consignor can file an action
damage. (Alitalia vs. CA) against the first carrier and the carrier in
which the damage occurred
 In PanAm v. IAC, the WC was applied as b. Passenger or consignee can file an
regards the limitation on the carrier’s liability, action against the last carrier and the
there being a simple loss of baggage without carrier in which the damage occurred.
any improper conduct on the part of the officials  These carriers are jointly and severally
or employees of the airline or other special liable. (Art. 30)
injury sustained by the passenger.
 A contract of international carriage by air,
 In KLM Royal v. Tuller, the WC has invariably although performed by different carriers under a
been held inapplicable, or as not restrictive of series of airline tickets constitutes a single
the carrier’s liability, where there was operation. Members of the International Air
satisfactory evidence of malice or bad faith Transportation Association (IATA) are under a
attributable to its officers and employees. general pool partnership agreement wherein
(Alitalia vs. IAC) they act as agent of each other in the issuance
of tickets to contracted passengers to boost
ticket sales worldwide and at the same time
provide passengers easy access to airlines
ACTION FOR DAMAGES which are otherwise inaccessible in some parts
1. Notice of claim of the world. (American Airlines vs. CA)
 A written complaint must me made within:
a. 3 days from receipt of baggage  Under a general pool partnership agreement,
b. 7 days from receipt of goods the ticket-issuing airline is the principal in a
c. In case of delay, 14 days from receipt of contract of carriage while the endorsee-airline is
baggage/goods the agent. The obligation of the former
 The complaint is a condition precedent. remained and did not cease even when the
Without the complaint, the action is barred breach occurred not on its own flight but on that
except in case of fraud on the part of the carrier. of another airline which had undertaken to carry
(Art. 26) the passengers to one of their destinations.
(China Airlines vs. Chiok)
2. Prescriptive period
 Action must be filed within 2 years from: JURISDICTION
a. date of arrival at the destination  At the option of the plaintiff, the action for
b. date of expected arrival damages may be filed in the:
c. date on which the transportation stopped. a. Court of domicile of the carrier;
(Art. 29) b. Court of its principal place of business;
c. Court where it has a place of business
through which the contract has been
made; or
d. Court of the place of destination. (Art. recovering it, or without any intention of
28(1)) returning to it.
NOTE: It is the passenger’s “ultimate
destination” not “an agreed stopping place” that  The intention of those in charge must be
determines the country where suit is to be filed. ascertained. If those in charge left with the
 The forum of action provided in Art. 28(1) is a intention of returning, or of procuring assistance,
matter of jurisdiction rather than of venue. the property is not derelict, but if they quitted the
(Santos III vs. Northwest; 2A C.J.S.) property with the intention of finally leaving it, it
is derelict and a change of their intention and an
V. SALVAGE LAW (Act No. 2616) attempt to return will not change its nature
(Erlanger & Galinger vs. Swedish East Asiatic
SALVAGE Co. Ltd.).
 Two concepts:
1. Services one person renders to the owner of  If it is clear that the intention to return is
a ship or goods, by his own labor, preserving the slight, the salvage which was done thereafter is
goods or the ship which the owner or those considered valid. (Notes and Cases on the Law
entrusted with the care of them have either on Transportation and Public Utilities, Aquino, T.
abandoned in distress at sea, or are unable to & Hernando, R.P. 2004 ed. p. 616)
protect or secure.
2. Compensation allowed to persons by whose CONTRACT OF TOWAGE
voluntary assistance a ship at sea or her cargo  A contract whereby one vessel, usually
or both have been saved in whole or in part from motorized, pulls another, whether loaded or not
impending sea peril, or such property recovered with merchandise, from one place to another, for
from actual peril or loss, as in cases of a compensation. It is a contract for services
shipwreck, derelict or recapture. rather than a contract of carriage.
 Requisites:
1. Valid object of salvage;
2. Object must have been exposed to SALVAGE TOWAGE
marine peril (not perils of the ship); Governed by Governed by
3. Services rendered voluntarily (neither an special law Civil Code on
existing duty nor out of a pre-existing (Act No. 2616) contract of
contract); lease
4. Services are successful, total or partial. Requires Success is not
 Subjects of Salvage: success, required
1. Ship itself; otherwise no
2. Jetsam – goods which are cast into the sea, payment
and there sink and remain under water; Must be done Only the
3. Floatsam or Flotsam – goods which float with the consent of the
upon the sea when cast overboard; consent of the tugboat owner
4. Ligan or Lagan – goods cast into the sea tied captain/crewm is needed
to a buoy, so that they may be found again by en
the owners (p.173, Judge Diaz). Vessel must be Vessel need
 Persons who have no right to a reward for involved in an not be involved
salvage: accident in an accident
1. Crew of the vessel saved; Fees Fees belong to
2. Person who commenced Salvage in spite of distributed the tugboat
opposition of the Captain or his representative; among owner
3. In accordance with Sec. 3 of the Salvage crewmen
Law, a person who fails to deliver a salvaged
vessel or cargo to the Collector of Customs. RULES ON SALVAGE REWARD
1. The reward is fixed by the RTC judge in the
 Derelict – a ship or her cargo which is absence of agreement or where the latter is
abandoned and deserted at sea by those who excessive. (Sec. 9)
are in charge of it, without any hope of 2. The reward should constitute a sufficient
compensation for the outlay and effort of the 6. Ice plants; and
salvors and should be liberal enough to offer 7. Public markets.
an inducement to others to render services
in similar emergencies in the future. PUBLIC SERVICE
3. If sold (no claim being made within 3 months  A person who owns, operates, manages or
from publication), the proceeds, after controls in the Philippines for hire or
deducting expenses and the salvage claim, compensation, with general or limited clientele,
shall go to the owner; if the latter does not whether permanent, occasional or accidental,
claim it within 3 years, 50% of the said and done for general business purposes, any
proceeds shall go to the salvors, who shall common carrier or public utility, ice plants,
divide it equitably, and the other half to the power and water supplies, communication and
government. (Secs. 11-12) similar public services. (Sec. 13b, CA 146)
4. If a vessel is the salvor, the reward shall be  A casual or incidental service devoid of public
distributed as follows: character and interest is not brought within the
a. 50% to the shipowner; category. The question depends on such factors
b. 25% to the captain; and as the extent of services, whether such person
or company has held himself or itself out as
ready to serve the public or a portion of the
c. 25% to the officers and crew in proportion public generally. (Luzon Stevedoring vs. PSC)
to their salaries. (Sec. 13)
NOTE: The Public Service Commission created
 Taking passengers from a sinking ship, under the Public Service Law has already been
without rendering any service in rescuing the abolished under P.D. No. 1 and other issuances.
vessel, is not a salvage service, being a duty of It has been replaced by the following
humanity and not for reward. government agencies: LTO; LTFRB; ATO; BOE;
NTC; NEA; ERB; NWRC; CAB; and MIA.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)
CERTIFICATE CERTIFICATE
PURPOSES: OF PUBLIC OF PUBLIC
1. To secure adequate, sustained service CONVENIENC CONVENIENC
for the public at the least possible cost; E (CPC) E AND
2. To protect the public against NECESSITY
unreasonable charges and poor, (CPCN)
inefficient service; An An
3. To protect and secure investments in authorization authorization
public services; issued by the issued by the
4. To prevent ruinous competition. appropriate appropriate
government government
AUTHORITY TO OPERATE PUBLIC agency for the agency for the
SERVICES operation of operation of
GENERAL RULE: No public service shall public services public service
operate without having been issued a certificate for which no for which a
of public convenience or a certificate of public franchise, prior franchise
convenience and necessity. either is required by
EXCEPTIONS: municipal or law; e.g.
1. Warehouses; legislative, is telephone and
2. Animal drawn vehicles and bancas required by other services.
moved by oar or sail; law, e.g.,
3. Airships, except for the fixing of common
maximum rates for fare and freight; carriers.
4. Radio companies, except for rates fixing;
5. Public services owned or operated by the  A CPC or a CPCN constitutes neither a
government, except as to rates fixing; franchise nor a contract, confers no property
right, and is a mere license or a privilege. The accuracy of all investigation;
holder of said certificate does not acquire a meters and all 4. Valuation of
property right in the route covered thereby. Nor measuring properties of
does it confer upon the holder any proprietary appliances; public utilities;
right or interest or franchise in the public 5. Issuance 5. Examination
highways. Revocation of this certificate deprives of orders and test of
him of no vested right. New and additional requiring measuring
burdens, alteration of the certificate, or even establishment appliances;
revocation or annulment thereof is reserved to or 6. Grant of
the State. (Luque vs. Villegas, 30 SCRA 408) maintenance special permits
of extension of to make extra
 It is a “property” and has a considerable value facilities; or special trips
and can be the subject of sale or attachment. 6. Revocation in territories
(Cogeo-Cubao Operators and Drivers Assn. vs. , or specified in the
CA, 207 SCRA 343, Raymundo vs. Luneta modification of certificate;
Motor Co.) CPC or 7. Uniform
CPCN; accounting
REQUREMENTS FOR GRANTING CPC OR 7. Suspension system and
CPCN of CPC or furnishing of
1. Applicant must be a citizen of the Philippines CPCN, except annual reports;
or a corporation or entity 60% of the capital when it is 8. Compelling
of which is owned by such citizens; necessary to compliance
2. Applicant must prove public necessity; avoid serious with the laws
3. Applicant must prove that the operation of and and
the public service proposed and the irreparable regulations.
authorization to do business will promote the damage or
public interest on a proper and suitable inconvenience
manner; to the public or
4. Applicant must have sufficient financial private
capability to undertake the proposed interest, in
services and meeting the responsibilities which case, a
incident to its operation. suspension
not more than
30 days may
POWERS POWERS be ordered,
REQUIRING EXERCISABL prior to the
PRIOR E WITHOUT hearing.
NOTICE AND PRIOR (Soriano v.
HEARING NOTICE AND Medina, 164
HEARING SCRA 36)
1. Issuance 1. Investigatio UNLAWFUL ACTS OF PUBLIC UTILITY

of CPC or n any matter COMPANIES
CPCN; concerning 1. Engagement in public service business
2. Fixing of public service; without first securing the proper certificate;
rates, tolls, 2. Requiring 2. Providing or maintaining unsafe, improper or
and charges; operators to inadequate service as determined by the
3. Setting up furnish safe, proper authority;
of standards adequate, and 3. Committing any act of unreasonable and
and proper service; unjust preferential treatment to any particular
classifications; 3. Requiring person, corporation or entity as determined
4. Establishm public services by the proper authority;
ent of rules to to pay 4. Refusing or neglecting to carry public mail
secure expenses of upon request. (Secs. 18 and 19)
applied ahead of the other, will be granted the
ACTS REQUIRING PRIOR APPROVAL certificate.
1. Establish and maintain individual or joint
rates; RATE-FIXING POWER
2. Establish and operate new units;  The rate to be fixed must be just, founded
3. Issue free tickets; upon conditions which are fair and reasonable
4. Issue any stock or stock certificates to both the owner and the public.
representing an increase of capital;  A rate is just and reasonable if it conforms to
5. Capitalize any franchise in excess of the the following requirements:
amount actually paid to the Government; 1. One which yields to the carrier a fair
6. Sell, alienate, mortgage or lease property, return upon the value of the property
certificates or franchise. employed in performing the service; and
2. One which is fair to the public for the
 Under Sec. 20(g) of C.A. No. 146, the sale, service rendered.
etc. may be negotiated and completed before
the approval by the proper authority. Its approval REGISTERED OWNER RULE
is not a condition precedent to the validity of the  The registered owner of a certificate of public
contract. The approval is necessary only to convenience is liable to the public for the injuries
protect public interest. or damages suffered by third persons caused by
the operation of said vehicle, even though the
PRIOR OPERATOR/OLD OPERATOR RULE same had been transferred to a third person.
 The rule allowing an existing franchised  The registered owner is not allowed to
operator to invoke a preferential right within the escape responsibility by proving that a third
authorized territory as long as he renders person is the actual and real owner Reason: It
satisfactory and economical service. would be easy for him, by collusion with others
 The policy is not to issue a certificate to a or otherwise, to transfer the responsibility to an
second operator to cover the same field and in indefinite person, or to one who possesses no
competition with a first operator who is property with which to respond financially for the
rendering sufficient, adequate and satisfactory damage or injury done. (Erezo, et al. vs. Jepte
service. The prior operator must first be given 102 Phil 103).
an opportunity to improve its service, if
inadequate or deficient. KABIT SYSTEM
 Purpose: To prevent ruinous and wasteful  A system whereby a person who has been
competition in order that the interests of the granted a certificate of public convenience
public would be conserved and preserved. allows other persons who own motor vehicles to
operate under such license, for a fee or
 It subordinates the prior applicant rule which percentage of such earnings. It is void and
gives the first applicant priority only if things and inexistent under Art. 1409, Civil Code.
circumstances are equal.  Effects:
1. The transfer, sale, lease or assignment of
 Where the operator either fails or neglects to the privilege granted is valid between the
make the improvement or effect the increase in contracting parties but not upon the public or
services, especially when given the opportunity, third persons. (Gelisan vs. Alday, 154 SCRA
new operators should be given the chance to 388)
give the services needed by the public. 2. The registered owner is primarily liable for all
the consequences flowing from the
PRIOR APPLICANT RULE operations of the carrier.
 Presupposes a situation when two interested  The public has the right to assume that
persons apply for a certificate to operate a the registered owner is the actual or lawful
public utility in the same community over which owner thereof. It would be very difficult and
no person has as yet granted any certificate. If it often impossible, as a practical matter, for
turns out, after the hearing, that the the public to enforce their rights of action that
circumstances between the two applicants are they may have for injuries inflicted by the
more or less equal, then the applicant who vehicle if they should be required to prove
who the actual owner is. (Benedicto vs. IAC,
187 SCRA 547)
3. The thrust of the law in enjoining the kabit
system is to identify the person upon whom
responsibility may be fixed with the end in
view of protecting the riding public (Lim vs.
CA 373 SCRA 394).
4. The registered owner cannot recover from
the actual owner and the latter cannot obtain
transfer of the vehicle to himself, both being
in pari delicto. (Teja Marketing vs. IAC)
5. For the better protection of the public, both
the registered owner and the actual owner
are jointly and severally liable with the driver.
(Zamboanga Transportation Co. vs. CA)

San Beda College of Law: Contract OF Transportation/ Carriage

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San Beda College of Law 54

MEMORY AID IN COMMERCIAL LAW

CONTRACT OF TRANSPORTATION/ Corporation vs. CA)

2. ACTS OF PUBLIC ENEMY FOR ACTS OF

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

Art.1735 Civil Code Art.1755 Civil Code

1. Ordinary circumstance: 1. Exercise of extraordinary

COMMERCIAL LAW COMMITTEE

1. Reduction of degree of diligence Stipulation limiting liability when a

 The diligence required in the

COMMERCIAL LAW COMMITTEE

CHARACTERISTICS OF MARITIME R.A. 6106 P.D. 1521

A. SHIPOWNERS AND SHIP AGENTS B. CAPTAINS AND MASTERS

BAREBOAT CONTRACT OF Clauses Which May Be Included In a Charter

1. Issuance 1. Investigatio UNLAWFUL ACTS OF PUBLIC UTILITY

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