Transpo Law Reviewer

San Beda College of Law
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MEMORY AID IN COMMERCIAL LAW
TRANSPORTATION LAWS
CONTRACT OF TRANSPORTATION/ 4. Provides public convenience.

CARRIAGE
 A contract whereby a person, natural or PRIVATE CARRIER
juridical, obligates to transport persons,  One which, without being engaged in the
goods, or both, from one place to another, by business of carrying as a public employment,
land, air or water, for a price or undertakes to deliver goods or passengers for
compensation. compensation. (Home Insurance Co. vs.
 Classifications: American Steamship Agency, 23 SCRA 24)
1. Common or Private
2. Goods or Passengers  TESTS WHETHER CARRIER IS COMMON
3. For a fee (for hire) or Gratuitous OR PRIVATE:
4. Land, Water/maritime, or Air  The SC in First Philippine Industrial
5. Domestic/inter-island/coastwise or Corporation vs. CA (1995) reiterated the
International/foreign following tests:
 It is a relationship which is imbued with the 1. It must be engaged in the business
public interest. of carrying goods for others as a
public employment and must hold
COMMON CARRIER itself out as ready to engage in the
 Persons, corporations, firms or associations transportation of goods generally as
engaged in the business of carrying or a business and not as a casual
transporting passengers or goods or both, by occupation;
land, water, or air, for compensation, offering 2. It must undertake to carry goods of
their services to the public (Art. 1732, Civil the kind to which its business in
Code). confined;
 Art. 1732 of the New Civil Code avoids any 3. It must undertake to carry by the
distinction between one whose principal method by which his business is
business activity is the carrying of persons or conducted and over its established
goods or both and one who does such roads; and
carrying only as an ancillary activity 4. The transportation must be for hire.
(sideline). It also avoids a distinction  In National Steel Corp. vs. CA (1997) the SC
between a person or enterprise offering held that the true test of a common carrier is
transportation service on a regular or the carriage of goods or passengers provided
scheduled basis and one offering such service it has space for all who opt to avail
on an occasional, episodic or unscheduled themselves of its transportation for a fee.
basis.
Neither does the law distinguish between
a carrier offering its services to the general COMMON CARRIER PRIVATE
public that is the general community or CARRIER
population and one who offers services or 1. As to availability
solicits business only from a narrow segment Holds himself out for Contracts with
of the general population. all people particular individuals
A person or entity is a common carrier indiscriminately or groups only
even if he did not secure a Certificate of 2. As to required diligence
Public Convenience (De Guzman vs. CA, 168 Extraordinary Ordinary diligence is
SCRA 612). diligence is required required
 It makes no distinction as to the means of 3. As to regulation
transporting, as long as it is by land, water or
Subject to State Not subject to State
air. It does not provide that the regulation regulation
transportation should be by motor vehicle.
4. Stipulation limiting liability
(First Philippine Industrial Corporation vs. CA)
 One is a common carrier even if he has no Parties may not agree Parties may limit the
on limiting the carrier’s liability,
fixed and publicly known route, maintains no
carrier’s liability provided it is not
terminals, and issues no tickets (Asia
except when provided contrary to law,
Lighterage Shipping, Inc. vs. CA).
by law morals or good
 Characteristics:
customs
1. Undertakes to carry for all people
5. Exempting circumstance
indifferently and thus is liable for
refusal without sufficient reason Prove extraordinary caso fortuito, Art.
(Lastimoso vs. Doliente, October 20, diligence and Art. 1174 NCC
1961); 1733, NCC
2. Cannot lawfully decline to accept a 6.Presumption of negligence
particular class of goods for carriage There is a No presumption of
to the prejudice of the traffic in these presumption of fault fault or negligence
goods; or negligence
3. No monopoly is favored (Batangas 7.Governing law
Trans. vs. Orlanes, 52 PHIL 455);
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)
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Law on common Law on obligations ticket, unless the attempt be with

carriers and contracts the knowledge and consent of the
carrier;
e. One who has boarded a wrong
GOVERNING LAWS
vehicle, has been properly informed
A. Domestic/inter-island/coastwise
of such fact, and on alighting, is
 Applicable to Land, Water, and Air
injured by the carrier;
transportation
f. Invited guests and accommodation
1. Civil Code - primary
passengers. (Lara vs. Valencia)
2. Code of Commerce (Arts. 349, 379,
g. One who rides any part of the
573-734, 580, 806-845) - suppletory
vehicle which is unsuitable or
dangerous or which he knows is not
B. International/foreign/overseas
designed or intended for passengers.
(Foreign country to Philippines)
 Applicable to Water/maritime and Air
DEFENSES OF A COMMON CARRIER IN
transportation THE CARRIAGE OF GOODS
 The law of the country of destination 1. CASO FORTUITO/FORCE MAJEURE
generally applies.  Requisites:
1. Civil Code - primary a. Must be the proximate and only
2. Code of Commerce - suppletory cause of the loss
3. Others - suppletory b. Exercise of due diligence to prevent
a. Water/maritime: Carriage of Goods or minimize the loss before, during or
by Sea Act (COGSA) after the occurrence of the disaster (Art.
b. Air: Warsaw Convention 1739)
c. Carrier has not negligently incurred
I. NEW CIVIL CODE in delay in transporting the goods (Art.
(Arts. 1732-1766) 1740)
 Fire is not considered a natural disaster or
REQUIREMENT OF EXTRAORDINARY
calamity as it arises almost invariably from
DILIGENCE
some act of man. (Eastern Shipping Lines Inc.
 Rendition of service with the greatest skill
vs. IAC)
and utmost foresight. (Davao Stevedore Co. v.  Mechanical defects are not force majeure if
Fernandez)
the same was discoverable by regular and
 Rationale:
adequate inspections. (Notes and Cases on
1. From the nature of the business and the Law on Transportation and Public Utilities,
for reasons of public policy (Art. Aquino, T. & Hernando, R.P. 2004 ed. p.120-
1733) 122)
2. Relationship of trust
3. Business is impressed with a special 2. ACTS OF PUBLIC ENEMY
public duty  Requisites:
4. Possession of the goods
a. Must be the proximate and only
5. Preciousness of human life
cause of the loss
 A common carrier is not an absolute insurer
b. Exercise of due diligence to prevent
of all risks of travel. or minimize the loss before, during or
after the act causing the loss,
COVERAGE deterioration or destruction of the goods
1. Vigilance over goods (Arts. 1734-1754); (Art. 1739)
and
2. Safety of passengers (Arts. 1755-1763). 3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute
PASSENGER defense
 A person who has entered into a contract of b. Contributory: partial defense. (Art.
carriage, express or implied, with the carrier. 1741)
They are entitled to extraordinary diligence
from the common carrier. 4. CHARACTER OF THE GOODS OR DEFECTS
 The following are not considered IN THE PACKING OR IN THE CONTAINER
passengers, and are entitled to ordinary  Even if the damage should be caused by the
diligence only: inherent defect/character of the goods, the
a. One who has not yet boarded any common carrier must exercise due diligence
part of a vehicle regardless of to forestall or lessen the loss. (Art. 1742)
whether or not he has purchased a  The carrier which, knowing the fact of
ticket; improper packing of the goods upon ordinary
b. One who remains on a carrier for an observation, still accepts the goods
unreasonable length of time after he notwithstanding such condition, is not
has been afforded every safe relieved of liability or loss or injury resulting
opportunity to alight; therefrom. (Southern Lines, Inc. v. CA, 4 SCRA
c. One who has boarded by fraud, 258)
stealth, or deceit;
d. One who attempts to board a 5. ORDER OR ACT OF PUBLIC AUTHORITY
moving vehicle, although he has a

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 Said public authority must have the power FOR ACTS OF

to issue the order (Art. 1743). Consequently, FOR ACTS OF ITS OTHER
where the officer acts without legal process, EMPLOYEES PASSENGERS OR
the common carrier will be held liable. STRANGERS
(Ganzon v. CA 161 SCRA 646) Required diligence and defense
 Diligence in the selection and supervision Extraordinary Ordinary diligence
of employees under Article 2180 of the Civil diligence
Code cannot be interposed as a defense by Nature of liability
the common carrier because the liability of
Tort; however, Not absolute; limited
the carriers arises from the breach of the
The employee must by Art. 1763
contract of carriage. The defense under said
be on duty at the
articles is applicable to negligence in quasi-
time of the act.
delicts under Art. 2176. (Del Prado v. Manila
(Maranan v. Perez)
Electric Co., 52 Phil 900)
 The carrier is liable when its personnel
LIABILITY OF A COMMON CARRIER FOR
allowed a passenger to drive the vehicle
DEATH OR INJURIES TO PASSENGERS DUE
TO ACTS OF ITS EMPLOYEES AND OTHER causing it to collide with another vehicle
resulting to the injuries suffered by the other
PASSENGERS OR STRANGERS
passengers. (MRR vs. Ballesteros, 16 SCRA
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, or Death or injury to the passengers
deterioration of the goods
Duration of liability
From the time the goods are unconditionally The duty of a common carrier to provide safety
placed in the possession of, and received by the to its passengers so obligates it not only during
carrier for transportation until the same are the course of the trip, but for so long as the
delivered actually or constructively by the passengers are within its premises and where
carrier to the consignee or to the person who they ought to be in pursuance to the contract
has the right to receive them. (Art. 1736) of carriage. (LRTA v. Navidad, [2003])
 It remains in full force and effect even when  All persons who remain on the premises within
they are temporarily unloaded or stored in a reasonable time after leaving the conveyance
transit unless the shipper or owner has made are to be deemed passengers, and what is a
use of the right of stoppage in transitu. (Art. reasonable time or a reasonable delay within
1737) this rule is to be determined from all the
 It continues to be operative even during the circumstances, and includes a reasonable time
time the goods are stored in a warehouse of the to see after his baggage and prepare for his
carrier at the place of destination until the departure. (La Mallorca v. CA, 17 SCRA 739 ;
consignee has bee advised of the arrival of the Abiotiz Shipping Corporation v. CA, 179 SCRA
goods and has had reasonable opportunity 95)
thereafter to remove them or otherwise dispose  It is the duty of common carriers of
of them. (Art. 1738) passengers to stop their conveyances a
 Delivery of goods to the custom authorities is reasonable length of time in order to afford
not delivery to the consignee. (Lu Do v. passengers an opportunity to enter, and they
Binamira, 101 Phil 120) are liable for injuries suffered from the sudden
starting up or jerking of their conveyances
while doing so. The duty which the carrier of
passengers owes to its patrons extends to
persons boarding the cars as well as to those
alighting therefrom (Dangwa Trans Co., Inc. vs.
CA 202 SCRA 574).

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Presumption of negligence
Art.1735 Civil Code Art.1755 Civil Code

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

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

diligence, provided it be: carried gratuitously, but not for willful acts or
a) In writing, signed by the shipper or gross negligence. (Art. 1758)
owner;
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
1. That the goods are transported at the risk Dispensing with or lessening the extraordinary
of the owner or shipper; responsibility of a common carrier for the
2. That carrier will not be liable for any loss, safety of passengers imposed by law by
destruction or deterioration of the goods; stipulation, by posting of notices, by

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3. That the carrier need not observe any statements on tickets or otherwise. (Art. 1757)
diligence in the custody of the goods;
4. That the carrier shall exercise a degree of
diligence less than that of a good father of a
family over the movable transported;
5. That the carrier shall not be responsible for
the acts or omissions of his or its employees;
6. That the carrier’s liability for acts
committed by thieves or robbers who do not
act with grave or irresistible threat, violence or
force is dispensed with or diminished;
7. That the carrier is not responsible for the
loss, destruction or deterioration of the goods
on account of the defective condition of the
car, vehicle, ship or other equipment used in
the contract of carriage. (Art. 1745)

RULES ON PASSENGERS’ BAGGAGE Macondray &
IN THE CUSTODY OF IN THE CUSTODY Company Inc.)
THE PASSENGERS OF THE COMMON
(HAND-CARRIED) CARRIER  However, the carrier cannot limit its liability
(CHECKED-IN) for injury to, or loss of, goods shipped where
Legal nature of the baggage such injury or loss was caused by its own
Necessary deposit Considered as negligence.
“goods” (Shewaram vs. PAL, 17 SCRA 606)
Required diligence by the common
carrier SPECIAL RULES ON LIABILITES OF
Diligence of a Extraordinary AIRLINE CARRIERS
depositary (ordinary diligence 1. In case of flight diversion due to bad
diligence) weather or other circumstances beyond the
Applicable rules pilot’s control, the relation between the
Arts. 1998 and 2000- Arts. 1733-1753 carrier and the passenger continues until the
2003 latter has been landed at the port of
destination and has left the carrier’s
CONCURRING CAUSES OF ACTION premises. The carrier should necessarily
ARISING FROM THE NEGLIGENT ACT OF exercise extraordinary diligence in
THE COMMON CARRIER safeguarding the comfort, convenience and
1. Culpa contractual (breach of contract) safety of its stranded passengers until they
 Only the carrier is primarily liable and not have reached their final destination.
the driver, because there is no privity (Philippine Airlines vs. CA, 226 SCRA 423)
between the driver and the passenger. 2. Even where overbooking of passengers is
 Basis: Art.1759, NCC. allowed as a commercial practice, the airline
 No defense of due diligence in the selection company would still be guilty of bad faith and
and supervision of employees. still be liable for damages if it did not properly
inform passenger that it could breach the
2. Culpa aquiliana (quasi-delict) contract of carriage even if they were
 The carrier and driver are solidarily liable as confirmed passengers. (Zalamea vs. CA, 228
joint tortfeasors. SCRA 23)
 Basis: Art. 2180, NCC. 3. An open-dated ticket constitutes a
 Defense of due diligence in the selection complete contract between the carrier and
passenger. Hence, the airline company is
and supervision of employees is available.
liable if it refused to confirm a passenger’s
Exception: maritime tort resulting in collision.
flight reservation. (Singson vs. CA, 282 SCRA
(See notes on Collision)
149)
4. An airline company which issued a
3. Culpa criminal (criminal negligence)
confirmed ticket to a passenger covering
 The driver is primarily liable. The carrier is
successive trips on different airlines can be
subsidiarily liable only if the driver is
held liable for damages occasioned by
convicted and declared insolvent.
“bumping off” by one of the successive
 Basis: Art. 100, RPC.
airlines. (Lufthansa German Airlines vs. CA,
238 SCRA 290)
 In case of injury to a passenger due to the 5. An airline ticket providing that carriage by
negligence of the driver of the bus on which successive air carriers is to be regarded as a
he is riding and of the driver of another “single operation” is to make the issuing
vehicle, the drivers as well as the owners of carrier liable for the tortuous conduct of the
the two vehicles are jointly and severally other carrier. A printed provision in the ticket
liable for damages. It makes no difference limiting liability only to its own conduct is not
that the liability of the bus driver and owner enough to rebut that liability. (KLM Royal
springs from contract while that of the owner Dutch Airlines vs. CA, 65 SCRA 237)
and driver of the other vehicle arises from
quasi-delict. (Fabre vs. CA) II. CODE OF COMMERCE
LIMITATIONS AS TO CARRIER’S LIABILITY
INVALID AS BEING VALID & A. OVERLAND TRANSPORTATION
CONTRARY TO ENFORCEABLE (Arts. 349-379)
PUBLIC POLICY
1. One exempting the 1. One limiting the Applicability
carrier from any and liability of the carrier 1. Domestic land and water/maritime
all liability for loss or to an agreed transportation. (Pandect of Commercial Law
damage occasioned by valuation, unless the and Jurisprudence, Justice Jose Vitug, 1997
its own negligence. shipper declares a ed.)
2. An unqualified higher value and 2. Domestic Air Transportation. (Commercial
limitation of liability to pays a higher rate of Law Review, Cesar Villanueva, 2004 ed.)
an agreed valuation. freight
(H.E. Heacock IMPORTANT CONCEPTS:
Company vs. 1. Bill of lading
2. Obligations of the carrier
3. Right of abandonment 6. Foul – One which contains a notation
4. Notice of damage thereon indicating that the goods
5. Combined carrier agreement covered by it are in bad condition.
BILL OF LADING 7. Spent – One which covers goods that

 The written acknowledgment of receipt of already have been delivered by the
goods and agreement to transport them to a carrier without a surrender of a signed
specific place to a person named or to his copy of the bill.
order. 8. Through – One issued by the carrier
 Rules: who is obliged to use the facilities of
1. It is not indispensable for the creation of a other carriers as well as his own
contract of carriage. (Compania Maritima vs. facilities for the purpose of
Insurance Company of North America, 12 transporting the goods from the city of
SCRA 213) the seller to the city of the buyer,
which bill of lading is honored by the
2. Ambiguity is construed against the carrier, second and other interested carriers
the contract being one of adhesion. who do not issue their own bills.
9. Custody – One wherein the goods are
3. The consignee, although the instrument is already received by the carrier but the
oftentimes drawn up only by the consignor vessel indicated therein has not yet
and carrier, becomes bound by all the arrived in the port.
stipulations contained therein by making a 10. Port – One which is issued by the
claim for loss on the basis of said bill of carrier to whom the goods have been
lading. (Sea-Land Services Inc. vs. IAC) delivered, and the vessel indicated in
the bill of lading by which the goods
4. The right of a party to recover for loss of are to be shipped is already in the port
shipment consigned to him under a bill of where the goods are held for shipment.
lading drawn up only by and between the  Functions:
shipper and the carrier, springs from either a 1. Best evidence of the existence of the
relation of agency between him and the contract of carriage of cargo (Art. 353)
shipper, or his status as stranger in whose 2. Document of title
favor some stipulation is made in said 3. Receipt of cargo
contract, and who becomes a party thereto 4. Contract to transport and deliver goods
when he demands fulfillment of that as stipulated
stipulation. (Art. 1311 (2), (Mendoza vs. PAL 5. Symbol of the goods
Inc.)
OBLIGATIONS OF THE CARRIER
5. Acceptance of the bill of lading without A. Duty to accept the goods
dissent raises the presumption that all the GENERAL RULE: A common carrier cannot
terms therein where brought to the ordinarily refuse to carry a particular class of
knowledge of the shipper and agreed to by goods.
him and, in the absence of fraud or mistake; EXCEPTION: For some sufficient reason the
he is estopped from thereafter denying that discrimination against the traffic in such
he assented to such terms. (Notes and Cases goods is reasonable and necessary. (Fisher vs.
on the Law on Transportation and Public Yangco Steamship Co. 31 Phil 1).
Utilities, Aquino, T. & Hernando, R.P. 2004 ed.  Instances when the carrier may validly
p.261) refuse to accept the goods include the ff:
1.) Goods sought to be transported are
 Kinds: dangerous objects, or substances including
1. On board - issued when the goods dynamite and other explosives
have been actually placed aboard the 2.) Goods are unfit for transportation
ship with very reasonable expectation 3.) Acceptance would result in overloading
that the shipment is as good as on its 4.) Contrabands or illegal goods
way. 5.) Goods are injurious to health
2. Received - one in which it is stated that 6.) Goods will be exposed to untoward danger
the goods have been received for like flood, capture by enemies and the like
shipment with or without specifying 7.) Goods like livestock will be exposed to
the vessel by which the goods are to disease
be shipped. 8.) Strike
3. Negotiable - one in which it is stated 9.) Failure to tender goods on time. (Notes
that the goods referred to therein will and Cases on the Law on Transportation and
be delivered to the bearer or to the Public Utilities, Aquino, T. & Hernando, R.P.
order of any person named therein. 2004 ed. p.68)
4. Non-negotiable - One in which it is  In case of carriage by railway, the carrier is
stated that the goods referred to exempted from liability if carriage is insisted
therein will be delivered to a specified upon by the shipper, provided its objections
person. are stated in the bill of lading.
5. Clean – One which does not indicate  However, when a common carrier accepts
any defect in the goods. cargo for shipment for valuable consideration,
it takes the risk of delivering it in good  The filing of notice of claim is a condition
condition as when it was loaded. (PAL vs. CA) precedent for recovery.
 Shorter period may be stipulated by the
B. Duty to deliver the goods parties because it merely affects the
 Not only to transport the goods safely but to shipper’s remedy and does not affect the
the person indicated in the bill of lading. The liability of the carrier. (PHILAMGEN vs.
goods should be delivered to the consignee or Sweetlines, Inc.)
any other person to whom the bill of lading Prescriptive Period
was validly transferred or negotiated.  Not provided by Article 366. Thus, in such
absence, Civil Code rules on prescription
Time of delivery apply.
Stipulated in No stipulation  If despite the notice of claim, the carrier
Contract/Bill of refuses to pay, action must be filed in court.
Lading 1. No bill of lading was issued:
1. Carrier is bound to 1. Within a within 6 years
fulfill the contract reasonable time. 2. Bill of lading was issued:
and is liable for any 2. Carrier is bound to within 10 years.
delay; no matter forward them in the ARTICLE 366 COGSA Sec.3 (6)
from what cause it 1st shipment of the Applicability
may have arisen. same or similar 1. Domestic/inter- 1. International/
goods which he may island/coastwise overseas/foreign
make to the point of transportation (from foreign
delivery. (ART. 358 2. Land, water, air country to Phils.)
Code of Commerce) transportation Note: subject to the
3. Carriage of goods rule on Paramount
Effects of delay Clause
a. Merely suspends and generally does not 2. Water/maritime
terminate the contract of carriage transportation
b. Carrier remains duty bound to exercise 3. Carriage of goods
extraordinary diligence Notice of damage
c. Natural disaster shall not free the carrier 1. Condition 1. Not a condition
from responsibility (Art.1740) precedent precedent
d. If delay is without just cause, the 2. 24-hour period for 2. 3-day period for
contract limiting the common carrier’s liability claiming latent claiming latent
cannot be availed of in case of loss or damage damage
deterioration of the goods (Art.1747) Prescriptive period
None provided; Civil One year from the
RIGHT OF CONSIGNEE TO ABANDON Code applies. date of delivery
GOODS (delivered but
 Instances: damaged goods), or
1. Partial non-delivery, where the goods are date when the
useless without the others (Art. 363); vessel left port or
2. Goods are rendered useless for sale or from the date of
consumption for the purposes for which they delivery to the
are properly destined (Art. 365); and arrastre (non-
3. In case of delay through the fault of the delivery or loss).
carrier (Art. 371).
NOTICE OF DAMAGE (ART. 366) COMBINED CARRIER AGREEMENT (ART.

 Requisites for applicability: 373)
1. Domestic/inter-island/coastwise GENERAL RULE: In case of a contract of
transportation transportation of several legs, each carrier is
2. Land/water/air transportation responsible for its particular leg in the
3. Carriage of goods contract.
4. Goods shipped are damaged EXCEPTION: A combined carrier agreement
 Rules: where a carrier makes itself liable assuming
a. Patent damage: shipper must file a claim the obligations and acquiring as well the
against the carrier immediately upon rights and causes of action of those which
delivery (it may be oral or written) preceded it.
b. Latent damage: shipper should file a claim
against the carrier within 24 hours from
delivery.
Note: These rules does not apply to
misdelivery of goods. (Roldan vs. Lim Ponzo)
Purpose of notice: To inform the carrier that
the shipment has been damaged, and it is
charged with liability therefore, and to give it
an opportunity to make an investigation and
fix responsibility while the matter is fresh.
2. M vessel, which stands as the guaranty for their
A settlement. (Aboitiz Shipping Corp. vs.
R General Accident Fire and Life Assurance
I Corp. 217 SCRA 359).
T
I MERCHANT VESSEL
M  Vessel engaged in maritime commerce,
E whether foreign or otherwise. (Bar Review
C Materials in Commercial Law, Jorge Miravite,
O 2002 ed.)
M  Constitutes property which may be acquired
M and transferred by any of the means
E recognized by law. They shall continue to be
R considered as personal property. (Arts. 573,
C 585)
E  They are susceptible to maritime liens such
(Arts. 573-869) as for the repair, equipping and provisioning
of the vessel in the preparation of a voyage,
IMPORTANT CONCEPTS: as well as mortgage liabilities, in satisfaction
1. Merchant vessel of which a vessel may be validly arrested and
2. Maritime lien and Preference of sold. (Ship Mortgage Decree of 1978)
Credit
3. Doctrine of limited liability MARITIME LIEN
4. Causes of revocation of voyage  It constitutes a present right of property in
5. Participants in maritime commerce the ship, a jus in re, to be afterward enforced
6. Charter party in admiralty by process in rem. (PNB vs. CA,
7. Loans on bottomry and respondentia 337 SCRA 381)
8. Accidents in maritime commerce  If the maritime lien arose prior to the
recording of a preferred mortgage, it shall
MARITIME/ADMIRALTY LAW have priority over the said mortgage lien.
 It is the system of laws which particularly (PNB vs. CA, 337 SCRA 381)
relates to the affairs and business of the sea,
to ships, their crews and navigation, and to
maritime conveyance of persons and ORDER OF PREFERENCE IN CASE OF SALE
property. (Notes and Cases on the Law on OF VESSEL
Transportation and Public Utilities, Aquino &
Hernando, citing Francisco, p.254) R.A. 6106 P.D. 1521
Effectivity date
 Maritime laws apply only to maritime trade 1969 1978
and sea voyages. (Pandect of Commercial Applicability
Law and Jurisprudence, Justice Jose Vitug, Overseas shipping Both domestic and
1997 ed.) only overseas shipping
Kind of sale
 Arrastre service is not maritime in Judicial Judicial and
character. It refers to a contract for the extrajudicial
unloading of goods from a vessel. (ICTSI vs. Order of Preference
Prudential Guarantee, 320 SCRA 244) A preferred The preferred
mortgage shall have mortgage lien shall
CHARACTERISTICS OF MARITIME priority over all have priority over all
TRANSACTION claims against the claims against the
1. Real - similar to transactions over real vessel, except the vessel, except the
property with respect to effectivity against following following
third persons which is done through preferences in the preferences in the
registration. (Rubiso vs. Rivera, 37 Phil. 72). order stated: order stated:
The evidence of real nature is shown by: 1) 1. Judicial costs of 1. Expenses and
the limitation of the liability of the agents to the proceedings; fees allowed and
the actual value of the vessel and the freight 2. Taxes due the costs taxed by the
money; and 2) the right to retain the cargo Philippine court and taxes due
and embargo and detention of the vessel Government; to the Government;
(Luzon Stevedoring Corp v. CA, 156 SCRA 3. Salaries and 2. Crew’s wages;
169); wages of the 3. General average;
2. Hypothecary - the liability of the owner of Captain and Crew of 4. Salvage, including
the value of the vessel is limited to the vessel the vessel during its contract salvage;
itself (Doctrine of Limited Liability). last voyage; 5. Maritime liens
4. General average arising prior in time
 The real and hypothecary nature of or salvage including to the recording of
maritime law simply means that the liability contract salvage, the preferred
of the carrier in connection with losses related bottomry loans, and mortgage;
to maritime contracts is confined to the indemnity due 6. Damages arising
shippers for the out of tort; and 1. In case of civil liability from indemnities to
value of goods 7. Preferred third persons (Art. 587);
transported but mortgage registered 2. In case of leakage of at least ¾ of the
which were not prior in time. contents of a cargo containing liquids (Art.
delivered to the 687); and
consignee; 3. In case of constructive loss of the vessel
5. Costs of repair (Sec. 138, Insurance Code).
and equipment of
the vessel, and RIGHT OF ABANDONMENT
provisioning of food,
supplies and fuel SHIPOWNER OR CONSIGNEE
during its last SHIP AGENT
voyage; and What may be abandoned
6. Preferred Vessel Goods shipped
mortgages Instances
registered prior in 1. In case of civil 1. Partial non-
time. liability from delivery, where the
indemnities to third goods are useless
 Effect of sale: All pre-existing claims in the persons (Art. 587); without the others
vessel are terminated. They will then be 2. Sec. 138, (Art. 363);
satisfied from the proceeds of the sale subject Insurance Code; 2. Goods are
to the order of preference. 3. In case of leakage rendered useless for
of at least ¾ of the sale or consumption
DOCTRINE OF LIMITED LIABILITY contents of a cargo for the purposes for
(HYPOTHECARY RULE) containing liquids which they are
 Cases where applicable: (Art. 687) properly destined
1. Art. 587 – civil liability for (Art. 365); and
indemnities to third persons 3. In case of delay
2. Art. 590 – indemnities from negligent through the fault of
acts of the captain (not the the carrier (Art.
shipowner or ship agent) 371).
3. Art. 837 – collision Effects
4. Art. 643 – liability for wages of the 1. Transfer of 1. Transfer of
captain and the crew and for ownership of the ownership on the
advances made by the ship agent if vessel from the goods from the
the vessel is lost by shipwreck or shipowner to the shipper to the
capture shippers or insurer. carrier.
2. In case of (2), the 2. Carrier should
GENERAL RULE: The liability of shipowner insurer must pay the pay the shipper the
and ship agent is limited to the amount of insured as if there market value of the
interest in said vessel such that where vessel was actual total loss goods at the point of
is entirely lost, the obligation is extinguished. of the vessel. destination.
(Luzon Stevedoring v. Escano, 156 SCRA 169)
The interest extends to: 1) the vessel itself; 2) CAUSES OF REVOCATION OF VOYAGE
equipments; 3) freightage; and 4) insurance 1. War or interdiction of commerce;
proceeds. (Chua v. IAC, 166 SCRA 183) 2. Blockade;
EXCEPTIONS: 3. Prohibition to receive cargo at
1. Claims under Workmen’s Compensation destination;
(Abueg vs. San Diego 77 Phil 730); 4. Embargo;
2. Injury or damage due to shipowner or to 5. Inability of the vessel to navigate. (Art.
the concurring negligence of the 640)
shipowner and the captain;
3. The vessel is insured (Vasquez vs. CA 138 Terms:
SCRA 553). 1. Interdiction of commerce – A
4. Expenses for repair on vessel completed governmental prohibition of commercial
before loss; intercourse intended to bring about an
5. In case there is no total loss and the entire cessation for the time being of all
vessel is not abandoned; trade whatever.
6. Collision between two negligent vessels; 2. Blockade – A sort of circumvallation of a
place by which all foreign connection and
 Abandonment of the vessel is necessary to correspondence is, as far as human
limit the liability of the shipowner. The only power can effect it, to be cut off.
instance were abandonment is dispensed with 3. Embargo – A proclamation or order of a
is when the vessel is entirely lost (Luzon state, usually issued in time of war or
Stevedoring vs. CA 156 SCRA 169). threatened hostilities, prohibiting the
departure of ships or goods from some or
RIGHT OF SHIPOWNER OR SHIP AGENT all the ports of such state until further
TO ABANDON VESSEL order.
 Instances:
PARTICIPANTS IN MARITIME COMMERCE  Nature of position (3-fold character):
A. Shipowners and ship agents 1. General agent of the shipowner;
B. Captains and masters of the vessel 2. Technical director of the vessel;
C. Officers and crew of the vessel 3. Representative of the government of
D. Supercargoes the country under whose flag he
E. Pilot navigates.
 Qualifications:
A. SHIPOWNERS AND SHIP AGENTS 1. Filipino citizen;
Shipowner (proprietario) 2. Legal capacity to contract;
 Person who has possession, control and 3. Must have passed the required
management of the vessel and the physical and mental examinations
consequent right to direct her navigation and required for licensing him as such.
receive freight earned and paid, while his (Art. 609)
possession continues.  Inherent powers:
1. Appoint crew in the absence of ship
Ship agent (naviero) agent;
 Person entrusted with provisioning and 2. Command the crew and direct the
representing the vessel in the port in which it vessel to its port of destination;
may be found; also includes the shipowner. 3. Impose correctional punishment on
 Not a mere agent under civil law; he is those who, while on board vessel,
solidarily liable with the ship owner. fail to comply with his orders or are
 Powers and functions: wanting in discipline;
1. Capacity to trade; 4. Make contracts for the charter of
2. Discharge duties of the captain, subject vessel in the absence of ship agent.
to Art.609; 5. Supply, equip, and provision the
3. Contract in the name of the owners with vessel; and
respect to repairs, details of equipment, 6. Order repair of vessel to enable it to
armament, provisions of food and fuel, continue its voyage. (Art. 610)
and freight of the vessel, and all that  Sources of funds to comply with the inherent
relate to the requirements of navigation; powers of the captain (in successive order):
4. Order a new voyage, make a new charter 1. From the consignee of the vessel;
or insure the vessel after obtaining 2. From the consignee of the cargo;
authorization from the shipowner or if 3. By drawing on the ship agent;
granted in certificate of appointment. 4. By a loan on bottomry;
5. By sale of part of the cargo. (Art.
Civil Liabilities of the Shipowner And 611)
Ship Agent  Duties:
1. All contracts of the captain, whether 1. Bring on board the proper certificate
authorized or not, to repair, equip and and documents and a copy of the
provision the vessel; (Art. 586) Code of Commerce;
2. Loss and damage to the goods loaded on 2. Keep a Log Book, Accounting Book
the vessel without prejudice to their right and Freight Book;
to free themselves from liability by 3. Examine the ship before the voyage;
abandoning the vessel to the creditors. 4. Stay on board during the loading and
(Art. 587) unloading of the cargo;
5. Be on deck while leaving or entering
Duty of Ship Agent to Discharge the the port;
Captain and Members of the Crew 6. Protest arrivals under stress and in
 If the seamen contract is not for a definite case of shipwreck;
period or voyage, he may discharge them at 7. Follow instructions of and render an
his discretion. (Art. 603) accounting to the ship agent;
 If for a definite period, he may not discharge 8. Leave the vessel last in case of
them until after the fulfillment of their wreck;
contracts, except on the following grounds: 9. Hold in custody properties left by
a. Insubordination in serious matters; deceased passengers and crew
b. Robbery; members;
c. Theft; 10. Comply with the requirements of
d. Habitual drunkenness; customs, health, etc. at the port of
e. Damage caused to the vessel or to arrival;
its cargo through malice or manifest or 11. Observe rules to avoid collision;
proven negligence. (Art. 605) 12. Demand a pilot while entering or
leaving a port. (Art. 612)
B. CAPTAINS AND MASTERS
 They are the chiefs or commanders of ships.  A ship’s captain must be accorded a
 The terms have the same meaning, but are reasonable measure of discretionary authority
particularly used in accordance with the size to decide what the safety of the ship and of
of the vessel governed and the scope of its crew and cargo specifically requires on a
transportation, i.e., large and overseas, and stipulated ocean voyage (Inter-Orient
small and coastwise, respectively. Maritime Enterprises Inc. vs. CA).
the sailing mate, assuming in such case their
 No liability for the following: powers and responsibilities.
1. Damages caused to the vessel or to  Third in command
the cargo by force majeure;  Duties:
2. Obligations contracted for the repair, 1. Preserve the hull and rigging of the
equipment, and provisioning of the vessel;
vessel unless he has expressly 2. Arrange well the cargo;
bound himself personally or has 3. Discipline the crew;
signed a bill of exchange or 4. Assign work to crew members;
promissory note in his name. (Art. 5. Inventory the rigging and equipment
620) of the vessel, if laid up. (Art. 632)
Solidary Liabilities of the Ship Engineers

Agent/Shipowner for Acts Done by the  Officers of the vessel but have no authority
Captain towards Passengers and except in matters referring to the motor
Cargoes apparatus. When two or more are hired, one
1. Damages to vessel and to cargo due of them shall be the chief engineer.
to lack of skill and negligence;  Duties:
2. Thefts and robberies of the crew; 1. In charge of the motor apparatus,
3. Losses and fines for violation of laws; spare parts, and other instruments
4. Damages due to mutinies; pertaining to the engines;
5. Damages due to misuse of power; 2. Keep the engines and boilers in good
6. For deviations; condition;
7. For arrivals under stress; 3. Not to change or repair the engine
8. Damages due to non-observance of without authority of the captain;
marine regulations. (Art. 618) 4. Inform the captain of any damage to
the motor apparatus;
C. OFFICERS AND CREW 5. Keep an Engine Book;
1. Sailing Mate/First Mate 6. Supervise all personnel maintaining
2. Second Mate the engine. (Art. 632)
3. Engineers
4. Crew Crew
 No liability under the following  The aggregate of seamen who man a ship,
circumstances: or the ship’s company.
1. If, before beginning voyage, captain  Hired by the ship agent, where he is present
attempts to change it, or a naval war and in his absence, the captain hires them,
with the power to which the vessel was preferring Filipinos, and in their absence, he
destined occurs; may take in foreigners, but not exceeding 1/5
2. If a disease breaks out and be officially of the crew. (Art. 634)
declared an epidemic in the port of
destination; Classes of Seaman’s Contracts
3. If the vessel should change owner or 1. By the voyage;
captain. (Art. 647) 2. By the month; and
3. By share of profits or freightage.
Sailing Mate/First Mate
 Second chief of the vessel who takes the Just Causes for the Discharge of Seaman
place of the captain in case of absence, While Contract Subsists
sickness, or death and shall assume all of his 1. Perpetration of a crime;
duties, powers and responsibilities. (Art. 627) 2. Repeated insubordination, want of
 Duties: discipline;
1. Provide himself with maps and 3. Repeated incapacity and negligence;
charts with astronomical tables 4. Habitual drunkenness;
necessary for the discharge of his 5. Physical incapacity;
duties; 6. Desertion. (Art. 637)
2. Keep the Binnacle Book;
3. Change the course of the voyage on Rules in case of Death of a Seaman
consultation with the captain and the  The seaman’s heirs are entitled to payment
officers of the boat, following the as follows:
decision of the captain in case of 1. If death is natural:
disagreement; a. compensation up to time of death if
4. Responsible for all the damages engaged on wage
caused to the vessel and the cargo b. if by voyage - half of amount if death
by reason of his negligence. (Arts. occurs on voyage out; and full, if on
628 - 631) voyage in
c. if by shares - none, if before
Second Mate departure; full, if after departure
 Takes command of the vessel in case of the 2. if death is due to defense of vessel - full
inability or disqualification of the captain and payment;
3. if captured in defense of vessel - full 3. Contract of transportation of
payment; passengers on sea voyages
4. if captured due to carelessness - wages 4. Loan on bottomry
up to the date of the capture. (Art. 645) 5. Loan on respondentia
6. Marine insurance
Complement of the Vessel
 All persons on board, from the captain to the CHARTER PARTY
cabin boy, necessary for the management,  A contract by virtue of which the owner or
maneuvers, and service, thus including the agent binds himself to transport merchandise
crew, the sailing mates, engineers, stokers or persons for a fixed price.
and other employees on board not having  A contract by which an entire ship, or some
specific designations. principal part thereof is let/leased by the
 Does not include the passengers or the owner to another person for a specified time
persons whom the vessel is transporting. or use. (Planters Products, Inc. vs. CA, 226
SCRA 476)
D. SUPERCARGOES  Parties:
 Persons who discharges administrative 1. Ship owner or ship agent
duties assigned to him by ship agent or 2. Charterer
shippers, keeping an account and record of  Classes:
transaction as required in the accounting 1. Bareboat or demise – The charterer
book of the captain. (Art. 649) provides crew, food and fuel. The charterer is
liable as if he were the owner, except when
E. PILOT the cause arises from the unworthiness of the
 A person duly qualified, and licensed, to vessel. The shipowner leases to the charterer
conduct a vessel into or out of ports, or in the whole vessel, transferring to the latter the
certain waters. entire command, possession and consequent
 The term generally connotes a person taken control over the vessel’s navigation, including
on board at a particular place for the purpose the master and the crew, who thereby
of conducting a ship through a river, road or become the charter’s servants. It transforms
channel, or from a port. a common carrier into a private carrier.
 Master pro hac vice for the time being in the  The charterer becomes the owner of
command and navigation of the ship. the vessel pro hac vice, just for that one
 While in exercising his functions a pilot is in particular purpose only. Because the
sole command of the ship and supersedes the charterer is treated as owner pro hac
master for the time being in the command vice, the charterer assumes the
and navigation of the ship, the master does customary rights and liabilities of the
not surrender his vessel to the pilot and the shipowner to third persons and is held
pilot is not the master. There are occasions liable for the expense of the voyage and
when the master may and should interfere the wages of the seamen.
and even displace the pilot, as when the pilot 2. Contract of Affreightment – A contract
is obviously incompetent or intoxicated (Far whereby the owner of the vessel leases part
Eastern Shipping Company vs. CA). or all of its space to haul goods for others.
 Compulsory Pilotage – States possessing  The shipowner retains the possession,
harbors have enacted laws or promulgated command and navigation of the ship, the
rules requiring vessels approaching their charterer merely having use of the space
ports to take on board pilots licensed under in the vessel in return for his payment of
the local laws. (Notes and Cases on the Law the charter hired.
on Transportation and Public Utilities, Aquino,  Kinds:
T. & Hernando, R.P. 2004 ed. p. 518) a. Time charter – vessel is chartered for
a fixed period of time or duration of
Liablity of Pilot voyage.
GENERAL RULE: On compulsory pilotage b. Voyage or trip charter – the vessel is
grounds, the Harbor Pilot is responsible for leased for one or series of voyages
damage to a vessel or to life or property due usually for purposes of transporting
to his negligence. goods for charterer.
EXCEPT:
1. Accident caused by force majeure or LEASE CHARTER PARTY
natural calamity provided the pilot exercised If for a definite Charterer may
prudence and extra diligence to prevent or period, lessee cannot rescind charter party
minimize damages. give up the lease by by paying half of the
2. Countermand or overrule by the master of paying a portion of freightage agreed
the vessel in which case the registered owner the amount agreed upon.
of the vessel is liable. (Sec.11, Art.III PPA upon.
Admin Order 03-85) If the leased property The new owner is not
is sold to one who compelled to respect
SPECIAL CONTRACTS OF MARITIME knows of the the charter party so
COMMERCE existence of the long as he can load
1. Charter party lease, the new owner the vessel with his
2. Bill of lading must respect the own cargo. (Art. 689)
lease.
Civil law concept Commercial law Clauses Which May Be Included In a
concept Charter Party
Jason clause Clause paramount

or paramount
CHARTER PARTY BILL OF LADING clause
An entire or complete More like a private A stipulation in a A clause in a charter
contract. receipt which the charter party that in party providing that
captain gives to case of a maritime the COGSA shall
accredit goods accident for which apply, even though
received from the shipowner is not the transportation is
persons responsible by law, domestic, subject to
Consensual contract Real contract contract or the extent that any
otherwise, the cargo term of the bill of
BAREBOAT OR CONTRACT OF shippers, consignees lading is repugnant to
DEMISE CHARTER AFFREIGHTMENT or owners shall the COGSA or
(TIME OR VOYAGE contribute with the applicable law, then
CHARTER) shipowner in general to the extent thereof
average. (Pandect of the provision of the
Charterer becomes Owner remains liable
Commercial Law and bill of lading is void.
liable to others as carrier and must
Jurisprudence, Justice (Pandect of
caused by its answer for any
Jose Vitug, 1997 ed.) Commercial Law and
negligence breach of duty
Jurisprudence, Justice
Charterer regarded Charterer is not
Jose Vitug, 1997 ed.)
as owner pro hac regarded as owner.
vice for the voyage
Owner of vessel The vessel owner
relinquishes retains possession,
possession, command and
command and navigation of the ship Rights and Obligations of Parties
navigation to
charterer
SHIPOWNER OR CHARTERER
Common carrier is Common carrier is SHIP AGENT
converted to private not converted to a
1. If the vessel is 1. To pay the
carrier. private carrier.
chartered wholly, not agreed charter price;
to accept cargo from 2. To pay
others; freightage on
2. To observe unboarded cargo;
PERSONS WHO MAY MAKE A CHARTER represented capacity; 3. To pay losses to
1. Owner or owners of the vessel, 3. To unload cargo others for loading
either in whole or in majority part, clandestinely placed uncontracted cargo
who have legal control and 4. To substitute and illicit cargo;
possession of the vessel another vessel if load 4. To wait if the
2. Charterer may subcharter entire is less than 3/5 of vessel needs repair;
vessel to 3rd person only if not capacity; 5. To pay expenses
prohibited in original charter. 5. To leave the port for deviation. (Arts.
(Art.679) if the charterer does 679-687)
3. Ship agent if authorized by the not bring the cargo
owner/s or given such power in the within the lay days
certificate of appointment. (Art.598) and extra lay days
4. Captain in the absence of the ship allowed;
agent or consignee and only if he 6. To place in a
acts in accordance with the vessel in a condition
instructions of the agent or owner to navigate;
and protects the latter’s interests. 7. to bring cargo to
(Art.609) nearest neutral port
in case of war or
REQUISITES OF A VALID CHARTER PARTY blockade. (Arts. 669-
1. Consent of the contracting parties 678)
2. Existing vessel which should be
placed at the disposition of the
shipper Rescission of a Charter Party
3. Freight
At At Fortuitous
4. Compliance with Art. 652 of the
charterer’s shipowner’ causes
Code of Commerce
request s request (Art. 690)
(Art 688) (Art. 689)
1. By 1. If the extra 1. War or

abandoning lay days interdiction cause otherwise excepted. (Magellan
the charter terminate of commerce; Manufacturing vs. CA, 201 SCRA 102)
and paying without the 2. Blockade;
half of the cargo being 3. Prohibition LOAN ON BOTTOMRY AND
freightage; placed to receive RESPONDENTIA
2. Error in alongside the cargo;  A real, unilateral, aleatory contract, by
tonnage or vessel; 4. Embargo; virtue of which one person lends to another a
flag; 2. Sale by and certain amount of money or goods on things
3. Failure to the owner of 5. Inability of exposed to maritime risks, which amount,
place the the vessel the vessel to with its earnings, is to be returned if the
vessel at the before navigate. things are safely transported, and which is
charterer’s loading by lost if the latter are lost.
disposal; the
4. Return of charterer;
the vessel
due to
pirates,
enemies or
bad weather; LOAN ON LOAN ON
5. Arrival at a BOTTOMRY RESPONDENTIA
port for Definition
repairs. Loan made by Loan taken on
shipowner or ship security of the cargo
Terms: agent guaranteed laden on a vessel,
1. Primage - bonus to be paid to the captain by vessel itself and and repayable upon
after the successful voyage. repayable upon safe arrival of cargo
2. Demurrage – the sum fixed in the charter arrival of vessel at at destination. (Art.
party as a remuneration to the owner of destination. (Art. 719)
the ship for the detention of his vessel 719)
beyond the number of days allowed by
the charter party for loading or unloading Who may contract
or for sailing. Shipowner or ship Only the owner of
3. Deadfreight – the amount paid by or agent. Outside of the cargo.
recoverable from a charterer of a ship for the residence of the
the portion of the ship’s capacity the owners - the
latter contracted for but failed to occupy. captain.
4. Lay Days - days allowed to charter Common elements:
parties for loading and unloading the 1. Exposure of security to marine peril;
cargo. 2. Obligation of the debtor conditioned
5. Extra Lay Days – days which follow after only upon safe arrival of the security at
the lay days have elapsed. the point of destination.
Forms:
USUAL FORMS OF CONSUMMATING 1. Public instrument
CONTRACTS 2. Policy signed by the contracting parties
1. C.I.F. – cost, insurance and freight; and the broker taking part therein
2. F.O.B. - free on board; 3. Private instrument (Art. 720)
3. F.A.S. - free alongside ship; and Contents:
4. C. & F. - cost and freight. 1. Kind, name and registry of the vessel;
2. Name, surname and domicile of the
TRANSSHIPMENT OF GOODS captain;
 The act of taking cargo out of one ship and 3. Names, surnames and domiciles of the
loading it in another, or the transfer of goods borrower and the lender;
from the vessel stipulated in the contract of 4. Amount of the loan and the premium
affreightment to another vessel before the stipulated;
place of destination named in the contract 5. Time for repayment;
has been reached, or the transfer for further 6. Goods pledged to secure repayment;
transportation from one ship or conveyance 7. Voyage during which the risk is run
to another. (Art.721)
 It is not dependent on the ownership of the
transporting ships or in the change of
carriers, but rather on the fact of actual
physical transfer of cargo from one vessel to BOTTOMRY/ ORDINARY LOAN
another. RESPONDENTIA (MUTUUM)
 If done without legal excuse, however
Not subject to Usury Subject to Usury
competent and safe the vessel into which the
Law Law
transfer is made, is a violation of contract and
infringement of right of shipper and subjects
carrier to liability if freight is lost event by
Liability of the Not subject to any of a ship hypothecated by bottomry
borrower is contingency is only the excess of the value over
contingent on the (absolute liability) the amount secured by bottomry.
safe arrival of the (Sec. 101, Insurance Code)
vessel or cargo at 2. The value of what may be saved in
destination case of shipwreck shall be divided
between the lender and the insurer
The last lender is a The first lender is a in proportion to the interest of each
preferred creditor preferred creditor one. (Art. 735)
WHEN LOAN ON BOTTOMRY OR Note: If a vessel is hypothecated by bottomry

RESPONDENTIA REGARDED AS SIMPLE only the excess is insurable, since a loan on
LOAN bottomry partakes of the nature likewise of an
1. Lender loaned an amount larger than insurance coverage to the extent of the loan
the value of the object due to accommodation. The same rule would apply
fraudulent means employed by the to the hypothecation of the cargo by
borrower. (ART.726) respondentia. (Pandect of Commercial Law
2. Full amount of the loan is not used and Jurisprudence, Justice Jose Vitug, 1997
for the cargo or given on the goods if ed.)
all of them could not have been
loaded, the balance will be ACCIDENTS IN MARITIME COMMERCE
considered a simple loan. (ART.727) 1. Averages
3. If the effects on which the money is 2. Arrival Under Stress
taken is not subjected to any risk. 3. Collision
(ART.729) 4. Shipwreck
Note: Under existing laws, the parties to a

loan, whether ordinary or maritime, may
agree on any rate of interest. (CB Circular
905)
AVERAGE
 An extraordinary or accidental expense
MARINE INSURANCE LOAN ON
BOTTOMRY OR incurred during the voyage in order to
RESPONDENTIA preserve the cargo, vessel or both, and all
damages or deterioration suffered by the
Indemnity is paid after Indemnity is paid
vessel from departure to the port of
the loss has occurred in advance by
destination, and to the cargo from the port of
way of a loan
loading to the port of consignment. (Art. 806)
In case of loss of the In case of loss of  The person whose property has been saved
vessel due to a risk the vessel due to
must contribute to reimburse the damage
insured against, the a marine peril,
caused or expense incurred if the situation
obligation of the insurer the obligation of
constitutes general average.
becomes absolute the borrower to
 Classes:
pay is
1. Particular or Simple Average
extinguished
2. Gross or General Average
Consensual contract Real contract
 Where both vessel and cargo are saved, it
is general average; where only the vessel or
Hypothecary Nature of Bottomry/
only the cargo is saved, it is particular
Respondentia
average.
GENERAL RULE: The obligation of the
 Expenses incurred to refloat a vessel,
borrower to pay the loan is extinguished if the
which accidentally ran aground, in order to
goods given as security are absolutely lost by
continue its voyage, do not constitute general
reason of an accident of the sea, during the
average. Not only is there absence of a
voyage designated, and if it is proven that the
marine peril, common safety factor, and
goods were on board.
deliberateness. It is the safety of the
EXCEPTIONS:
property, and not the voyage, which
1. Loss due to inherent defect; constitutes the true foundation of general
2. Loss due to the barratry on the part of average. (A. Magsaysay, Inc. vs. Agan,
the captain; G.R.No. L-6393, Jan. 31, 1955)
3. Loss due to the fault or malice of the
borrower;
4. The vessel was engaged in contraband;
PARTICULAR OR GROSS OR GENERAL
and
SIMPLE
5. The cargo loaded on the vessel be
different in from that agreed upon. Definition
Damages or expenses Damages or expenses
Concurrence of Marine Insurance and caused to the vessel deliberately caused in
Loan on Bottomry/Respondentia or cargo that did not order to save the
1. The insurable interest of the owner inure to the common vessel, its cargo or both
benefit, and borne by from real and known Jettison
respective owners. risk. (Art. 811)  Act of throwing cargo overboard in order to
(Art. 809) lighten the vessel.
Requisites  Order of goods to be cast overboard:
1. common danger; 1. Those which are on the deck,
2. deliberate sacrifice; preferring the heaviest one with the
3. success; least utility and value;
4. proper formalities 2. Those which are below the upper
and legal steps. deck, beginning with the one with
Liability greatest weight and smallest value.
The owner of the All the persons having (Art. 815)
goods which gave an interest in the vessel
rise to the expense or and the cargo therein at  Jettisoned goods are not res nullius nor
suffered the damage the time of the deemed “abandoned” within the meaning of
shall bear this occurrence of the civil law so as to be the object of occupation
average. (Art. 810) average shall contribute by salvage. (Pandect of Commercial Law and
to satisfy this average. Jurisprudence, Justice Jose Vitug, 1997 ed.)
(Art. 812)  In order that the jettisoned goods may be
 The insurers (Art.859) included in the gross or general average, the
and lenders on existence of the cargo on board should be
bottomry and proven by means of the bill of lading. (Art.
respondentia shall 816)
likewise contribute.
(Art.732). York-Antwerp (Y-A) Rules on Determining
Number of interests involved Liability for Averages With Regard To
Only one interest Several interests Deck Cargo
involved involved 1. Deck cargo is allowed only in
domestic/coastwise/inter-island shipping, and
is prohibited in international/overseas/foreign
shipping.
2.
3. If deck cargo is loaded with the consent
Share in the damage or expense of the shipper on overseas trade, it must
100% share In proportion to the always contribute to general average, but
value of the owner’s should the same be jettisoned, it would not
property saved be entitled to reimbursement because there
Right to recover is violation of the Y-A Rules.
No reimbursement There may be 4. If deck cargo is loaded with the consent
reimbursement of the shipper on coastwise shipping, it must
always contribute to general average and if
Kinds (not exclusive)
jettisoned would be entitled to
Art. 809 Art. 811
reimbursement.
Procedure for recovery
 Reason: In domestic shipping, voyages are
1. Assembly and
usually short and the seas are generally not
deliberation
rough. In overseas shipping, the vessel is
2. Resolution of the
exposed for many days to perils of the sea.
captain
3. Entry of the
resolution in the DOMESTIC INTERNATIONAL
logbook Deck cargo is allowed Deck cargo is not
4. Detailed minutes allowed
5. Delivery of the With shipper’s consent
minutes to the maritime General average Particular average
judicial authority of the Without shipper’s consent
first port, within 24 Captain is liable Captain is liable
hours from arrival,
6. Ratification by ARRIVAL UNDER STRESS (ARRIBADA)
captain under oath.  The arrival of a vessel at the nearest and
(Arts. 813-814) most convenient port instead of the port of
destination, if during the voyage the vessel
GOODS NOT COVERED BY GENERAL cannot continue the trip to the port of
AVERAGE EVEN IF SACRIFICED destination.
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or When lawful When unlawful Who bears
records of the vessel. (ART.855 (2)) expenses:
3. Fuel for the vessel if there is more
than sufficient fuel for the voyage. The inability to 1. Lack of The ship-
(Rule IX, York-Antwerp Rule) continue provisions due to owner or ship
voyage is due negligence to carry agent is liable
to lack of according to usage in case of another which is at anchor and cannot
provisions, and customs; unlawful move, even when the crew of the latter
well-founded 2. Risk of enemy arrival under has received word to lift anchor, when
fear of seizure, not well known or stress. But there was not sufficient time to do so or
privateers, manifest they shall not there was fear of a greater damage or
pirates, or 3. Defect of be liable for other legitimate reason.
accidents of vessel due to the damages 7. There is a presumption against an
the sea improper repair; caused by improperly moored vessel.
disabling it to and reason of a 8. There is a presumption against a vessel
navigate. (Art. 4. Malice, lawful arrival. which has no buoys to indicate the
819) negligence, lack of (Art. 821) location of its anchors to prevent damage
foresight or skill of to vessels which may approach it.
captain. (Art. 820) 9. Vessels must have “proper look-outs” or
persons trained as such and who have no
other duty aside therefrom. (Smith Bell v.
 It is the duty of the captain to continue the
CA)
voyage without delay after the cause of the
arrival under stress has ceased failing in such
Nautical Rules as to Sailing Vessel and
duty renders him liable. However, in case the
Steamship
cause has been risk of enemies, there must
1. Where a steamship and a sailing vessel
first be an assembly before departure. (Art.
are approaching each other from
825)
opposite directions, or on intersecting
 Steps:
lines, the steamship from the moment
1. Captain should determine during the the sailing vessel is seen, shall watch
voyage if there is well founded fear with the highest diligence her course and
of seizure, privateers and other valid movements so as to be able to adopt
grounds; such timely means of precaution as will
2. Captain shall assemble the officers necessarily prevent the two boats from
and summon the persons interested coming in contact.
in the cargo who may attend the 2. The sailing vessel is required to keep her
meeting but without a right to vote; course unless the circumstances require
3. The officers shall determine and otherwise.
agree if there is well-founded reason
after examining the circumstances.
The captain shall have the deciding
vote;
4. The agreement shall be drafted and
the proper minutes shall be signed
and entered in the log book;
5. Objections and protests shall Zones of Time in the Collision of Vessels
likewise be entered in the minutes. 1. First zone – all time up to the moment
when risk of collision begins.
COLLISION  No rule is as yet applicable for none is
 Impact of two vessels both of which are
necessary.
moving. 2. Second zone – time between moment
when risk of collision begins and moment it
Allision becomes a practical certainty.
 Impact between a moving vessel and a  It is in this period where conduct of the
stationary one. vessels is primordial. It is in this zone that
vessels must strictly observe nautical rules,
Nautical Rules to Determine Negligence unless a departure therefrom becomes
1. When two vessels are about to enter a necessary to avoid imminent danger.
port, the farther one must allow the 3. Third zone – time when collision is certain
nearer to enter first; if they collide, the and time of impact.
fault is presumed to be imputable to the  An error in this zone would no longer be
one who arrived later, unless it can be
legally consequential.
proved that there was no fault on its part.
 Error in Extremis - sudden movement made
2. When two vessels meet, the smaller
by a faultless vessel during the third zone of
should give the right of way to the larger
collision with another vessel which is at fault
one.
during the 2nd zone. Even if such sudden
3. A vessel leaving port should leave the
movement is wrong, no responsibility will fall
way clear for another which may be
on said faultless vessel. (Urrutia and Co. v.
entering the same port.
Baco River Plantation Co., 26 PHIL 632)
4. The vessel which leaves later is
presumed to have collided against one
Cases Covered By Collision and Allision
which has left earlier.
1. One vessel at fault
5. There is a presumption against the vessel
 Vessel at fault is liable for damage caused to
which sets sail in the night.
6. There is a presumption against the vessel innocent vessel as well as damages suffered
with spread sails which collides with by the owners of cargo of both vessels. (Art.
826) believes that the cargo has suffered
2. Both vessels at fault damages or averages (Art. 624).
 Each vessel must bear its own loss, but the  Who makes: Captain
shippers of both vessels may go against the  When made: within 24 hours from the time
shipowners who will be solidarily liable. (Art. the collision took place.
827)  Before whom made: competent authority at
3. Vessel at fault not known the point of collision or at the first port of
 Each vessel must bear its own loss, but the arrival, if in the Philippines and to the
shippers of both vessels may go against the Philippine consul, if the collision took place
shipowners who will be solidarily liable. (Art. abroad. (Art. 835)
828)
 Doctrine of Inscrutable Fault – In case SHIPWRECK
of collision where it cannot be  It is the loss of the vessel at sea as a
determined which between the two consequence of its grounding, or running
vessels was at fault, both vessels bear against an object in sea or on the coast. It
their respective damage, but both should occurs when the vessel sustains injuries due
be solidarily liable for damage to the to a marine peril rendering her incapable of
cargo of both vessels. navigation.
4. Third vessel at fault  If the wreck was due to malice, negligence
 The third vessel will be liable for losses and or lack of skill of the captain, the owner of the
damages. (Art. 831) vessel may demand indemnity from said
5. Fortuitous event/force majeure captain. (Art. 841)
 No liability. Each bears its own loss. (Art.  The rules on collision or allision, as may be
830) pertinent, can equally apply to shipwrecks.
 The doctrine of res ipsa loquitur applies in SPECIAL CONCEPTS

case a moving vessel strikes a stationary ARRASTRE SERVICE
object, such as a bridge post, dock, or  A contract for the unloading of goods from a
navigational aid. (Far Eastern Shipping v. CA, vessel.
Luzon Stevedoring vs. CA)  Applicability: Overseas trade only.
(Commercial Law Review, C. Villanueva, 2004
 Even if the cause of action against the ed.)
common carrier is based on quasi-delict, the  Significance: When a person brings in
defense of due diligence in the selection and cargo from abroad, he cannot unload and
supervision of employees is unavailing in case deliver the cargo by himself. The unloading
of a maritime tort resulting in collision. It is must be done by the arrastre operator, which
not a civil tort governed by the Civil Code but will then deliver the cargo to the importer.
a maritime one governed by Arts. 826-839 of (Commercial Law Review, C. Villanueva, 2004
the Code of Commerce. (Manila Steamship vs. ed.)
Insa Abdulhaman)  Nature of business: It is a public utility,
discharging functions which are heavily
 Doctrine of Last Clear Chance and Rule on invested with public interest.
Contributory Negligence cannot be applied in  Liability:
collision cases because of Art.827 of the Code 1. Similar to a warehouseman (Lua Kian v.
of Commerce. (Notes and Cases on the Law Manila Railroad)
on Transportation and Public Utilities, Aquino, 2. Similar to a common carrier (Northern
T. & Hernando, R.P. 2004 ed.) Motors v. Prince Line)
3. Solidary liability with the common carrier
MARITIME PROTEST
 Condition precedent or prerequisite to Note: In order that the arrastre operator may
recovery of damages arising from collisions be held liable, the consignee must prove that
and other maritime accidents. the damage was due to the negligence and
 It is a written statement made under oath by while the goods are in the custody of the
the captain of a vessel after the occurrence of arrastre operator. (Hartford Fire Insurance v.
an accident or disaster in which the vessel or E. Razon, Inc.)
cargo is lost or damaged, with respect to the
circumstances attending such occurrence, for STEVEDORING SERVICE
the purpose of recovering losses and  The carriage of goods from the warehouse
damages. or pier to the holds of the vessel. (Chief of
 Excuses for not filing protest: 1) where the Staff vs. CIR)
interested person is not on board the vessel;  As understood in the port business, the term
and 2) on collision time, need not be consists of the handling of cargo from the
protested. (Art. 836) hold of the ship to the dock, in case of pier-
 Cases applicable: side unloading; or to a barge, in case of
1. Collision (Art. 835); unloading at sea. (Anglo-Fil Trading Corp. vs.
2. Arrival under stress (Art. 612(8)); Lazaro)
3. Shipwrecks (Arts. 612(15), 843);  The loading on the ship of outgoing cargo
4. Where the vessel has gone through a is also part of stevedoring work. (Ibid.)
hurricane or when the captain
CONTAINERIZATION/ “SAID-TO- damaged goods); or
CONTAIN”/ “SHIPPER’S LOAD AND b. The date when the goods should
COUNT” SYSTEM have been delivered (non-delivery).
 System whereby the shipper loads his (Sec. 3[6])
cargoes in a specially designed container,
seals the container and delivers it to the  “Loss or Damage” as applied to the COGSA
carrier for transportation. The carrier does not contemplates a situation where no delivery at
participate in the counting of the all was made by the shipper of the goods
merchandise for loading into the container, because the same had perished, gone out of
the actual loading, and the sealing of the commerce, or disappeared in such a way that
container. (US Lines v. Comm. Of Customs, their existence is unknown or they cannot be
ICTSI v. Prudential Guarantee) recovered. Thus, it is inapplicable in case of
 The matter of quantity, description and misdelivery or conversion. (Ang vs. American
conditions of the cargo inside the container is Steamship Agencies Inc.) and damage arising
the sole responsibility of the shipper, unless from delay or late delivery (Mitsui O.S.K. Lines
there is stipulation to the contrary. (US Lines Ltd. vs. CA). In such instance the, Civil Code
vs. Comm. Of Customs, Reyma Brokerage v. rules on prescription shall apply.
Phil. Home Assurance)
 The one-year prescriptive period is
Note: In order to attribute to the carrier any suspended by:
damage to the shipment that may be found, 1. The express agreement of the
inspection of the goods should be done at parties (Universal Shipping Lines,
pier-side. (Bankers vs. CA) Inc. vs. IAC, 188 SCRA 170)
2. The filing of an action in court until it
III. CARRIAGE OF GOODS BY SEA is dismissed. (Stevens & Co. vs.
ACT/COGSA (C.A. No. 65) Nordeutscher Lloyd, 6 SCRA 180)
APPLICABILITY  The one-year period shall run from delivery

 The transportation must be: of the last package and is not suspended by
1. Water/maritime transportation; extrajudicial demand. (Dole Phils.,Inc. vs.
2. for the carriage of goods; and Maritime Co.,148 SCRA 118)
3. overseas/international/foreign (from
foreign port to Philippine port).  The one-year period shall run from delivery
 It can be applied in domestic sea to the arrastre operator and not to the
transportation if agreed upon by the parties. consignee. (Union Carbide Phils, Inc. vs.
(Clause paramount or paramount clause) Manila Railroad Co.,SCRA 359)
IMPORTANT FEATURES:  The insurer exercising its right of

1. Amount of carrier’s liability subrogation is bound by the one-year
2. Notice of damage prescriptive period. However, it does not
3. Prescriptive period apply to the claim against the insurer for the
insurance proceeds. (Fil. Merchants Ins. Co.
AMOUNT OF CARRIER’S LIABILITY vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)
 Under the Sec. 4(5), the liability limit is set
at $500 per package or customary freight unit IV. WARSAW CONVENTION OF 1929 (WC)
unless the nature and value of such goods is
declared by the shipper. This is deemed PURPOSE: To protect the emerging air
incorporated in the bill of lading even if not transportation industry and to secure the
mentioned in it. (Eastern Shipping vs. IAC, uniformity of recovery by the passengers.
150 SCRA 463) APPLICABILITY
 Note that Art. 1749, NCC applies to  The transportation must be:
domestic/inter-island/coastwise trade. 1. International transportation;
2. Air transportation; and
NOTICE OF DAMAGE (SEC. 3(6)) 3. Carriage of passengers, baggage or
 Rules: goods.
a. Patent damage: shipper should file a  The WC shall also apply to fortuitous
claim with the carrier immediately upon transportation by aircraft performed by an air
delivery transportation enterprise.
b. Latent damage: shipper should file a
claim with the carrier within three days  International transportation - any
from delivery. transportation in which the place of departure
and the place of destination are situated
Note: The filing of a notice of claim is not a either:
condition precedent. 1. Within the territories of two High
Contracting Parties regardless of whether
PRESCRIPTIVE PERIOD or not there be a break in the
 Action for loss or damage to the cargo transportation or transshipment, or
should be brought within one year after: 2. Within the territory of a single High
a. Delivery of the goods (delivered but Contracting Party, if there is an agreed
stopping place within a territory subject
to the sovereignty, mandate or authority LIMIT OF LIABILITY (Art. 22, as amended
of another power, even though that by Guatemala Protocol, 1971; Alitalia vs.
power is not a party to the Convention. IAC)
(“round trip”, Am. Jur.) 1. Passengers
GENERAL RULE: $100,000 per passenger
 Transportation to be performed by several EXCEPTION: Agreement to a higher limit
successive air carriers shall be deemed to be
one undivided transportation, if it has been
regarded by the parties as a single operation,
whether it has been agreed upon under the 2. Checked-in baggage
form of a single contract or of a series of GENERAL RULE: $20 per kilogram
contracts, and it shall not lose its EXCEPTION: In case of special declaration of
international character merely because one value and payment of a supplementary sum
contract or a series of contracts is to be by consignor, carrier is liable to not more than
performed entirely within a territory subject the declared sum unless it proves the sum is
to the sovereignty, suzerainty, mandate, or greater than actual value.
authority of the same High Contracting Party. 3. Hand-carried baggage
(Art. 1 Sec.3)  $1000/passenger
4. Goods to be shipped
WHEN INAPPLICABLE GENERAL RULE: $20 per kilogram
1. When public policy is contradicted; EXCEPTION: In case of special declaration of
2. If the requirements under the value and payment of a supplementary sum
Convention are not complied with. by consignor, carrier is liable to not more than
the declared sum unless it proves the sum is
IMPORTANT CONCEPTS: greater than actual value.
1. Transportation documents
a. Passenger ticket  An agreement relieving the carrier from
b. Baggage check
liability or fixing a lower limit is null and void.
c. Air way bill
(Art. 23)
2. Liability of the carrier for damages
 Carrier is not entitled to the foregoing limit
a. Death or injury to passengers
if the damage is caused by willful misconduct
b. Loss or damage to baggage or goods
or default on its part. (Art. 25)
c. Delay
3. Successive carrier agreement
 Thus, the WC does not operate as an
4. Jurisdiction
exclusive enumeration of the instances of an
5. Combined transportation agreement
absolute limit of the extent of liability. It does
not preclude the application of the Civil Code
PASSENGER BAGGAGE AIR
and other pertinent local laws. It does not
TICKET CHECK WAYBILL
regulate or exclude liability for other breaches
Passenger Checked-in Goods to be of contract by the carrier, or misconduct of its
baggage shipped employees, or for some particular or
exceptional type of damage. (Alitalia vs. CA)
LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the  In PanAm v. IAC, the WC was applied as
accident causing it took place on board the regards the limitation on the carrier’s liability,
aircraft or in the course of its operations of there being a simple loss of baggage without
embarking or disembarking; (Art. 17) any improper conduct on the part of the
2. Destruction, loss or damage to any officials or employees of the airline or other
baggage or goods, if it took place during the special injury sustained by the passenger.
“transportation by air”; (Art. 18) and
 Transportation by air – The period during  In KLM Royal v. Tuller, the WC has
which the baggage or goods are in the charge invariably been held inapplicable, or as not
of the carrier, whether in an airport or on restrictive of the carrier’s liability, where
board an aircraft, or, in case of a landing there was satisfactory evidence of malice or
outside an airport, in any place whatsoever. bad faith attributable to its officers and
It includes any transportation by land or employees. (Alitalia vs. IAC)
water outside an airport if such takes place in
the performance of a contract for
transportation by air, for the purpose of
loading, delivery, or transshipment. ACTION FOR DAMAGES
3. Delay in the transportation of passengers, 1. Notice of claim
baggage or goods. (Art. 19)  A written complaint must me made within:
a. 3 days from receipt of baggage
Note: The Hague Protocol amended the WC
b. 7 days from receipt of goods
by removing the provision that if the airline
c. In case of delay, 14 days from
took all necessary steps to avoid the damage,
receipt of baggage/goods
it could exculpate itself completely (Art.
 The complaint is a condition precedent.
20(1)). (Alitalia vs. IAC, 192 SCRA 9)
Without the complaint, the action is barred
except in case of fraud on the part of the d. Court of the place of destination. (Art.
carrier. (Art. 26) 28(1))
NOTE: It is the passenger’s “ultimate
2. Prescriptive period destination” not “an agreed stopping place”
 Action must be filed within 2 years from: that determines the country where suit is to
a. date of arrival at the destination be filed.
b. date of expected arrival  The forum of action provided in Art. 28(1)
c. date on which the transportation is a matter of jurisdiction rather than of
stopped. (Art. 29) venue. (Santos III vs. Northwest; 2A C.J.S.)
 In United Airlines vs. Uy the two-year V. SALVAGE LAW (Act No. 2616)
prescriptive period was not applied where the
airline employed delaying tactics. SALVAGE
 Two concepts:
RULE IN CASE OF VARIOUS SUCCESSIVE 1. Services one person renders to the owner
CARRIERS of a ship or goods, by his own labor,
1. Carriage of passengers preserving the goods or the ship which the
GENERAL RULE: Action is filed only against owner or those entrusted with the care of
the carrier in which the accident or delay them have either abandoned in distress at
occurred. sea, or are unable to protect or secure.
EXCEPTION: Agreement or contract whereby 2. Compensation allowed to persons by
the first carrier assumed liability for the whole whose voluntary assistance a ship at sea or
journey. her cargo or both have been saved in whole
2. Carriage of baggage or goods or in part from impending sea peril, or such
a. Passenger or consignor can file an property recovered from actual peril or loss,
action against the first carrier and as in cases of shipwreck, derelict or
the carrier in which the damage recapture.
occurred  Requisites:
b. Passenger or consignee can file an 1. Valid object of salvage;
action against the last carrier and 2. Object must have been exposed to
the carrier in which the damage marine peril (not perils of the ship);
occurred. 3. Services rendered voluntarily
 These carriers are jointly and severally (neither an existing duty nor out of a
liable. (Art. 30) pre-existing contract);
4. Services are successful, total or
 A contract of international carriage by air, partial.
although performed by different carriers  Subjects of Salvage:
under a series of airline tickets constitutes a 1. Ship itself;
single operation. Members of the 2. Jetsam – goods which are cast into the sea,
International Air Transportation Association and there sink and remain under water;
(IATA) are under a general pool partnership 3. Floatsam or Flotsam – goods which float
agreement wherein they act as agent of each upon the sea when cast overboard;
other in the issuance of tickets to contracted 4. Ligan or Lagan – goods cast into the sea
passengers to boost ticket sales worldwide tied to a buoy, so that they may be found
and at the same time provide passengers again by the owners (p.173, Judge Diaz).
easy access to airlines which are otherwise  Persons who have no right to a reward
inaccessible in some parts of the world. for salvage:
(American Airlines vs. CA) 1. Crew of the vessel saved;
2. Person who commenced Salvage in spite
 Under a general pool partnership of opposition of the Captain or his
agreement, the ticket-issuing airline is the representative;
principal in a contract of carriage while the 3. In accordance with Sec. 3 of the Salvage
endorsee-airline is the agent. The obligation Law, a person who fails to deliver a salvaged
of the former remained and did not cease vessel or cargo to the Collector of Customs.
even when the breach occurred not on its
own flight but on that of another airline which  Derelict – a ship or her cargo which is
had undertaken to carry the passengers to abandoned and deserted at sea by those who
one of their destinations. (China Airlines vs. are in charge of it, without any hope of
Chiok) recovering it, or without any intention of
returning to it.
JURISDICTION
 At the option of the plaintiff, the action for  The intention of those in charge must be
damages may be filed in the: ascertained. If those in charge left with the
a. Court of domicile of the carrier; intention of returning, or of procuring
b. Court of its principal place of assistance, the property is not derelict, but if
business; they quitted the property with the intention of
c. Court where it has a place of business finally leaving it, it is derelict and a change of
through which the contract has been their intention and an attempt to return will
made; or
not change its nature (Erlanger & Galinger vs. (C.A. No. 146)
Swedish East Asiatic Co. Ltd.).
PURPOSES:
 If it is clear that the intention to return is 1. To secure adequate, sustained
slight, the salvage which was done thereafter service for the public at the least
is considered valid. (Notes and Cases on the possible cost;
Law on Transportation and Public Utilities, 2. To protect the public against
Aquino, T. & Hernando, R.P. 2004 ed. p. 616) unreasonable charges and poor,
inefficient service;
CONTRACT OF TOWAGE 3. To protect and secure investments in
 A contract whereby one vessel, usually public services;
motorized, pulls another, whether loaded or 4. To prevent ruinous competition.
not with merchandise, from one place to
another, for a compensation. It is a contract AUTHORITY TO OPERATE PUBLIC
for services rather than a contract of carriage. SERVICES
GENERAL RULE: No public service shall
operate without having been issued a
SALVAGE TOWAGE certificate of public convenience or a
certificate of public convenience and
Governed by special Governed by Civil necessity.
law (Act No. 2616) Code on contract of EXCEPTIONS:
lease
1. Warehouses;
Requires success, Success is not 2. Animal drawn vehicles and bancas
otherwise no required moved by oar or sail;
payment 3. Airships, except for the fixing of
Must be done with Only the consent of maximum rates for fare and freight;
the consent of the the tugboat owner 4. Radio companies, except for rates
captain/crewmen is needed fixing;
5. Public services owned or operated by
Vessel must be Vessel need not be
the government, except as to rates
involved in an involved in an
fixing;
accident accident
6. Ice plants; and
Fees distributed Fees belong to the 7. Public markets.
among crewmen tugboat owner
PUBLIC SERVICE
RULES ON SALVAGE REWARD  A person who owns, operates, manages or
1. The reward is fixed by the RTC judge in controls in the Philippines for hire or
the absence of agreement or where the compensation, with general or limited
latter is excessive. (Sec. 9) clientele, whether permanent, occasional or
2. The reward should constitute a sufficient accidental, and done for general business
compensation for the outlay and effort of purposes, any common carrier or public
the salvors and should be liberal enough utility, ice plants, power and water supplies,
to offer an inducement to others to communication and similar public services.
render services in similar emergencies in (Sec. 13b, CA 146)
the future.  A casual or incidental service devoid of
3. If sold (no claim being made within 3 public character and interest is not brought
months from publication), the proceeds, within the category. The question depends on
after deducting expenses and the such factors as the extent of services,
salvage claim, shall go to the owner; if whether such person or company has held
the latter does not claim it within 3 years, himself or itself out as ready to serve the
50% of the said proceeds shall go to the public or a portion of the public generally.
salvors, who shall divide it equitably, and (Luzon Stevedoring vs. PSC)
the other half to the government. (Secs.
11-12) NOTE: The Public Service Commission
4. If a vessel is the salvor, the reward shall created under the Public Service Law has
be distributed as follows: already been abolished under P.D. No. 1 and
a. 50% to the shipowner; other issuances. It has been replaced by the
b. 25% to the captain; and following government agencies: LTO; LTFRB;
ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
MIA.
c. 25% to the officers and crew in
proportion to their salaries. (Sec. 13)
CERTIFICATE OF CERTIFICATE OF
 Taking passengers from a sinking ship, PUBLIC PUBLIC
without rendering any service in rescuing the CONVENIENCE CONVENIENCE
vessel, is not a salvage service, being a duty (CPC) AND NECESSITY
of humanity and not for reward. (CPCN)
VI. PUBLIC SERVICE ACT

An authorization An authorization meters and all expenses of
issued by the issued by the measuring investigation;
appropriate appropriate appliances; 4. Valuation of
government agency government agency 5. Issuance of properties of public
for the operation of for the operation of orders requiring utilities;
public services for public service for establishment or 5. Examination
which no franchise, which a prior maintenance of and test of
either municipal or franchise is required extension of measuring
legislative, is by law; e.g. facilities; appliances;
required by law, telephone and other 6. Revocation, or 6. Grant of special
e.g., common services. modification of CPC permits to make
carriers. or CPCN; extra or special trips
7. Suspension of in territories
CPC or CPCN, specified in the
except when it is certificate;
 A CPC or a CPCN constitutes neither a
necessary to avoid 7. Uniform
franchise nor a contract, confers no property
serious and accounting system
right, and is a mere license or a privilege. The
irreparable damage and furnishing of
holder of said certificate does not acquire a
or inconvenience annual reports;
property right in the route covered thereby.
to the public or 8. Compelling
Nor does it confer upon the holder any
private interest, in compliance with the
proprietary right or interest or franchise in the
which case, a laws and
public highways. Revocation of this certificate
suspension not regulations.
deprives him of no vested right. New and
more than 30 days
additional burdens, alteration of the
may be ordered,
certificate, or even revocation or annulment
prior to the
thereof is reserved to the State. (Luque vs.
hearing. (Soriano v.
Villegas, 30 SCRA 408)
Medina, 164 SCRA
36)
 It is a “property” and has a considerable
value and can be the subject of sale or
attachment. (Cogeo-Cubao Operators and UNLAWFUL ACTS OF PUBLIC UTILITY
Drivers Assn. vs. CA, 207 SCRA 343, COMPANIES
Raymundo vs. Luneta Motor Co.) 1. Engagement in public service business
without first securing the proper
REQUREMENTS FOR GRANTING CPC OR certificate;
CPCN 2. Providing or maintaining unsafe,
1. Applicant must be a citizen of the improper or inadequate service as
Philippines or a corporation or entity 60% determined by the proper authority;
of the capital of which is owned by such 3. Committing any act of unreasonable and
citizens; unjust preferential treatment to any
2. Applicant must prove public necessity; particular person, corporation or entity as
3. Applicant must prove that the operation determined by the proper authority;
of the public service proposed and the 4. Refusing or neglecting to carry public
authorization to do business will promote mail upon request. (Secs. 18 and 19)
the public interest on a proper and
suitable manner; ACTS REQUIRING PRIOR APPROVAL
4. Applicant must have sufficient financial 1. Establish and maintain individual or joint
capability to undertake the proposed rates;
services and meeting the responsibilities 2. Establish and operate new units;
incident to its operation. 3. Issue free tickets;
4. Issue any stock or stock certificates
representing an increase of capital;
5. Capitalize any franchise in excess of the
POWERS POWERS
amount actually paid to the Government;
REQUIRING EXERCISABLE
6. Sell, alienate, mortgage or lease
PRIOR NOTICE WITHOUT PRIOR
property, certificates or franchise.
AND HEARING NOTICE AND
HEARING
 Under Sec. 20(g) of C.A. No. 146, the sale,
etc. may be negotiated and completed before
1. Issuance of 1. Investigation the approval by the proper authority. Its
CPC or CPCN; any matter approval is not a condition precedent to the
2. Fixing of rates, concerning public validity of the contract. The approval is
tolls, and charges; service; necessary only to protect public interest.
3. Setting up of 2. Requiring
standards and operators to furnish PRIOR OPERATOR/OLD OPERATOR RULE
classifications; safe, adequate, and  The rule allowing an existing franchised
4. Establishment proper service; operator to invoke a preferential right within
of rules to secure 3. Requiring public the authorized territory as long as he renders
accuracy of all services to pay satisfactory and economical service.
 The policy is not to issue a certificate to a inexistent under Art. 1409, Civil Code.
second operator to cover the same field and  Effects:
in competition with a first operator who is 1. The transfer, sale, lease or assignment of
rendering sufficient, adequate and the privilege granted is valid between the
satisfactory service. The prior operator must contracting parties but not upon the
first be given an opportunity to improve its public or third persons. (Gelisan vs.
service, if inadequate or deficient. Alday, 154 SCRA 388)
 Purpose: To prevent ruinous and wasteful
competition in order that the interests of the
public would be conserved and preserved.
 It subordinates the prior applicant rule

which gives the first applicant priority only if
things and circumstances are equal.
 Where the operator either fails or neglects

to make the improvement or effect the
increase in services, especially when given
the opportunity, new operators should be
given the chance to give the services needed
by the public.
PRIOR APPLICANT RULE

 Presupposes a situation when two interested
persons apply for a certificate to operate a
public utility in the same community over
which no person has as yet granted any
certificate. If it turns out, after the hearing,
that the circumstances between the two
applicants are more or less equal, then the
applicant who applied ahead of the other, will
be granted the certificate.
RATE-FIXING POWER 2. The registered owner is primarily liable

 The rate to be fixed must be just, founded for all the consequences flowing from the
upon conditions which are fair and reasonable operations of the carrier.
to both the owner and the public.  The public has the right to assume
 A rate is just and reasonable if it conforms to that the registered owner is the actual or
the following requirements: lawful owner thereof. It would be very
1. One which yields to the carrier a fair difficult and often impossible, as a
return upon the value of the property practical matter, for the public to enforce
employed in performing the service; their rights of action that they may have
and for injuries inflicted by the vehicle if they
2. One which is fair to the public for the should be required to prove who the
service rendered. actual owner is. (Benedicto vs. IAC, 187
SCRA 547)
REGISTERED OWNER RULE 3. The thrust of the law in enjoining the
 The registered owner of a certificate of kabit system is to identify the person
public convenience is liable to the public for upon whom responsibility may be fixed
the injuries or damages suffered by third with the end in view of protecting the
persons caused by the operation of said riding public (Lim vs. CA 373 SCRA 394).
vehicle, even though the same had been 4. The registered owner cannot recover
transferred to a third person. from the actual owner and the latter
 The registered owner is not allowed to cannot obtain transfer of the vehicle to
himself, both being in pari delicto. (Teja
escape responsibility by proving that a third
Marketing vs. IAC)
person is the actual and real owner Reason: It
5. For the better protection of the public,
would be easy for him, by collusion with
both the registered owner and the actual
others or otherwise, to transfer the
owner are jointly and severally liable with
responsibility to an indefinite person, or to
the driver. (Zamboanga Transportation
one who possesses no property with which to
Co. vs. CA)
respond financially for the damage or injury
done. (Erezo, et al. vs. Jepte 102 Phil 103).
KABIT SYSTEM
 A system whereby a person who has been
granted a certificate of public convenience
allows other persons who own motor vehicles
to operate under such license, for a fee or
percentage of such earnings. It is void and

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CONTRACT OF TRANSPORTATION/ 4. Provides public convenience.

COMMERCIAL LAW COMMITTEE

Law on common Law on obligations ticket, unless the attempt be with

COMMERCIAL LAW COMMITTEE

 Said public authority must have the power FOR ACTS OF

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

COMMERCIAL LAW COMMITTEE

Art.1735 Civil Code Art.1755 Civil Code

1. Ordinary circumstance: Exercise of 1. Exercise of extraordinary diligence

1. Reduction of degree of diligence to ordinary Stipulation limiting liability when a passenger is

 The diligence required in the carriage of the

COMMERCIAL LAW COMMITTEE

COMMERCIAL LAW COMMITTEE

BILL OF LADING 7. Spent – One which covers goods that

NOTICE OF DAMAGE (ART. 366) COMBINED CARRIER AGREEMENT (ART.

Solidary Liabilities of the Ship Engineers

Jason clause Clause paramount

1. By 1. If the extra 1. War or

WHEN LOAN ON BOTTOMRY OR Note: If a vessel is hypothecated by bottomry

Note: Under existing laws, the parties to a

 The doctrine of res ipsa loquitur applies in SPECIAL CONCEPTS

APPLICABILITY  The one-year period shall run from delivery

IMPORTANT FEATURES:  The insurer exercising its right of

VI. PUBLIC SERVICE ACT

 It subordinates the prior applicant rule

 Where the operator either fails or neglects

PRIOR APPLICANT RULE

RATE-FIXING POWER 2. The registered owner is primarily liable

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