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COMMERCIAL LAW

REVIEWER/TRANSPORTATION LAW
TRANSPORTATION LAWS
CONTRACT OF TRANSPORTATION/ CARRIAGE
A contract whereby a person, natural or juridical,
obligates to transport persons, goods, or both, from
one place to another, by land, air or water, for a
price or compensation.
Classifications:
1 Common or Private
2 Goods or Passengers
3 For a fee (for hire) or Gratuitous
4 Land, Water/maritime, or Air
5 Domestic/inter-island/coastwise or
International/foreign
It is a relationship which is imbued with the
public interest.
COMMON CARRIER
Persons, corporations, firms or associations
engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air,
for compensation, offering their services to the
public (Art. 1732, Civil Code).
Art. 1732 of the New Civil Code avoids any
distinction between one whose principal business
activity is the carrying of persons or goods or both
and one who does such carrying only as an
ancillary activity (sideline).
It also avoids a

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REVIEWER/TRANSPORTATION LAW
distinction between a person or enterprise offering
transportation service on a regular or scheduled
basis and one offering such service on an
occasional, episodic or unscheduled basis.
Neither does the law distinguish between a
carrier offering its services to the general public
that is the general community or population and
one who offers services or solicits business only
from a narrow segment of the general population.
A person or entity is a common carrier even if he
did not secure a Certificate of Public Convenience
(De Guzman vs. CA, 168 SCRA 612).
It makes no distinction as to the means of
transporting, as long as it is by land, water or air. It
does not provide that the transportation should be
by motor vehicle.
(First Philippine Industrial
Corporation vs. CA)
One is a common carrier even if he has no fixed
and publicly known route, maintains no terminals,
and issues no tickets (Asia Lighterage Shipping, Inc.
vs. CA).
Characteristics:
1. Undertakes to carry for all people indifferently
and thus is liable for refusal without sufficient
reason (Lastimoso vs. Doliente, October 20,

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1961);
2. Cannot lawfully decline to accept a particular
class of goods for carriage to the prejudice of
the traffic in these goods;
3.
No monopoly is favored (Batangas Trans. vs.
Orlanes, 52 PHIL 455);
4. Provides public convenience.
PRIVATE CARRIER
One which, without being engaged in the
business of carrying as a public employment,
undertakes to deliver goods or passengers for
compensation. (Home Insurance Co. vs. American
Steamship Agency, 23 SCRA 24)
TESTS WHETHER CARRIER IS COMMON OR
PRIVATE:
The SC in First Philippine Industrial Corporation
vs. CA (1995) reiterated the following tests:
1 It must be engaged in the business of carrying
goods for others as a public employment and
must hold itself out as ready to engage in the
transportation of goods generally as a business
and not as a casual occupation;
2 It must undertake to carry goods of the kind to
which its business in confined;
3 It must undertake to carry by the method by
which his business is conducted and over its
established roads; and
4 The transportation must be for hire.

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REVIEWER/TRANSPORTATION LAW
In National Steel Corp. vs. CA (1997) the SC held
that the true test of a common carrier is the
carriage of goods or passengers provided it has
space for all who opt to avail themselves of its
transportation for a fee.
COMMON
PRIVATE CARRIER
CARRIER
1. As to availability
Holds himself out Contracts with particular
for
all
people individuals or groups
indiscriminately
only
2. As to required diligence
Extraordinary
Ordinary diligence is
diligence
is required
required
3. As to regulation
Subject to State Not subject to State
regulation
regulation
4. Stipulation limiting liability
Parties may not Parties may limit the
agree on limiting carriers
liability,
the
carriers provided
it
is
not
liability
except contrary to law, morals
when provided by or good customs
law
5. Exempting circumstance
Prove
caso fortuito, Art. 1174

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REVIEWER/TRANSPORTATION LAW
extraordinary
NCC
diligence and Art.
1733, NCC
6.Presumption of negligence
There
is
a No presumption of fault
presumption
of or negligence
fault or negligence
7.Governing law
Law on common
Law on obligations and
carriers
contracts
GOVERNING LAWS
A. Domestic/inter-island/coastwise
Applicable to Land, Water, and Air transportation
1. Civil Code - primary
2. Code of Commerce (Arts. 349, 379, 573-734,
580, 806-845) - suppletory
B. International/foreign/overseas
(Foreign
country to Philippines)

Applicable
to
Water/maritime
and
Air
transportation
The law of the country of destination generally
applies.
1. Civil Code - primary
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of Goods by Sea
Act (COGSA)
b. Air: Warsaw Convention

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REVIEWER/TRANSPORTATION LAW
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT
OF
EXTRAORDINARY
DILIGENCE
Rendition of service with the greatest skill and
utmost foresight. (Davao Stevedore Co. v.
Fernandez)
Rationale:
1 From the nature of the business and for reasons
of public policy (Art. 1733)
2 Relationship of trust
3 Business is impressed with a special public duty
4 Possession of the goods
5 Preciousness of human life
A common carrier is not an absolute insurer of all
risks of travel.
COVERAGE
1. Vigilance over goods (Arts. 1734-1754); and
2. Safety of passengers (Arts. 1755-1763).
PASSENGER
A person who has entered into a contract of
carriage, express or implied, with the carrier. They
are entitled to extraordinary diligence from the
common carrier.
The following are not considered passengers,

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and are entitled to ordinary diligence only:
a One who has not yet boarded any part of a
vehicle regardless of whether or not he has
purchased a ticket;
b One who remains on a carrier for an
unreasonable length of time after he has been
afforded every safe opportunity to alight;
c One who has boarded by fraud, stealth, or
deceit;
d One who attempts to board a moving vehicle,
although he has a ticket, unless the attempt be
with the knowledge and consent of the carrier;
e One who has boarded a wrong vehicle, has
been properly informed of such fact, and on
alighting, is injured by the carrier;
f Invited guests and accommodation passengers.
(Lara vs. Valencia)
g One who rides any part of the vehicle which is
unsuitable or dangerous or which he knows is
not designed or intended for passengers.

DEFENSES OF A COMMON CARRIER IN THE


CARRIAGE OF GOODS
CASO FORTUITO/FORCE MAJEURE
Requisites:
a Must be the proximate and only cause of the loss
b Exercise of due diligence to prevent or minimize
the loss before, during or after the occurrence of
the disaster (Art. 1739)

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c Carrier has not negligently incurred in delay in
transporting the goods (Art. 1740)
Fire is not considered a natural disaster or
calamity as it arises almost invariably from some
act of man. (Eastern Shipping Lines Inc. vs. IAC)
Mechanical defects are not force majeure if the
same was discoverable by regular and adequate
inspections. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed. p.120-122)
2. ACTS OF PUBLIC ENEMY
Requisites:
a Must be the proximate and only cause of the loss
b Exercise of due diligence to prevent or minimize
the loss before, during or after the act causing
the loss, deterioration or destruction of the goods
(Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute defense
b. Contributory: partial defense. (Art. 1741)
4. CHARACTER OF THE GOODS OR DEFECTS IN THE
PACKING OR IN THE CONTAINER
Even if the damage should be caused by the
inherent defect/character of the goods, the
common carrier must exercise due diligence to
forestall or lessen the loss. (Art. 1742)
The carrier which, knowing the fact of improper

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REVIEWER/TRANSPORTATION LAW
packing of the goods upon ordinary observation,
still accepts the goods notwithstanding such
condition, is not relieved of liability or loss or injury
resulting therefrom. (Southern Lines, Inc. v. CA, 4
SCRA 258)
5. ORDER OR ACT OF PUBLIC AUTHORITY
Said public authority must have the power to
issue the order (Art. 1743). Consequently, where
the officer acts without legal process, the common
carrier will be held liable. (Ganzon v. CA 161 SCRA
646)
Diligence in the selection and supervision of
employees under Article 2180 of the Civil Code
cannot be interposed as a defense by the common
carrier because the liability of the carriers arises
from the breach of the contract of carriage. The
defense under said articles is applicable to
negligence in quasi-delicts under Art. 2176. (Del
Prado v. Manila Electric Co., 52 Phil 900)
LIABILITY OF A COMMON CARRIER FOR
DEATH OR INJURIES TO PASSENGERS DUE TO
ACTS OF ITS EMPLOYEES AND OTHER
PASSENGERS OR STRANGERS
FOR ACTS OF OTHER
FOR ACTS OF ITS
PASSENGERS OR
EMPLOYEES
STRANGERS
Required diligence and defense

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Extraordinary
diligence

Ordinary diligence

Nature of liability
Tort; however,
Not absolute; limited by
The employee must Art. 1763
be on duty at the
time of the act.
(Maranan v. Perez)
The carrier is liable when its personnel allowed a
passenger to drive the vehicle causing it to collide
with another vehicle resulting to the injuries
suffered by the other 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

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Cause of liability
Delay in delivery, loss,
Death or injury to the
destruction, or
passengers
deterioration of the
goods
Duration of liability
From the time the goods
are
unconditionally
placed in the possession
of, and received by the
carrier for transportation
until
the
same
are
delivered
actually
or
constructively
by
the
carrier to the consignee
or to the person who has
the right to receive them.
(Art. 1736)
It remains in full force
and effect even when
they
are
temporarily
unloaded or stored in
transit unless the shipper
or owner has made use
of the right of stoppage
in transitu. (Art. 1737)
It continues to be
operative even during
the time the goods are

The duty of a common


carrier
to
provide
safety
to
its
passengers
so
obligates it not only
during the course of
the trip, but for so
long
as
the
passengers are within
its
premises
and
where they ought to
be in pursuance to the
contract of carriage.
(LRTA
v.
Navidad,
[2003])
All persons who
remain
on
the
premises
within
a
reasonable time after
leaving
the
conveyance are to be
deemed passengers,
and
what
is
a

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stored in a warehouse of
the carrier at the place of
destination
until
the
consignee
has
bee
advised of the arrival of
the goods and has had
reasonable
opportunity
thereafter
to
remove
them
or
otherwise
dispose of them. (Art.
1738)
Delivery of goods to
the custom authorities is
not
delivery
to
the
consignee. (Lu Do v.
Binamira, 101 Phil 120)

reasonable time or a
reasonable
delay
within this rule is to be
determined from all
the
circumstances,
and
includes
a
reasonable time to see
after his baggage and
prepare
for
his
departure.
(La
Mallorca v. CA, 17
SCRA 739 ; Abiotiz
Shipping Corporation
v. CA, 179 SCRA 95)
It is the duty of
common carriers of
passengers to stop
their conveyances a
reasonable length of
time in order to afford
passengers
an
opportunity to enter,
and they 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

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patrons extends to
persons boarding the
cars as well as to
those
alighting
therefrom
(Dangwa
Trans Co., Inc. vs. CA
202 SCRA 574).
Presumption of negligence
Art.1735 Civil Code
Reason: As to when and
how
goods
were
damaged in transit is a
matter peculiarly within
the knowledge of the
carrier
and
its
employees. (Mirasol v.
Dollar, 53 PHIL 124)
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)

Art.1755 Civil Code


Reason: The contract
between
the
passenger and the
carrier imposes on the
latter the duty to
transport
the
passenger
safely;
hence the burden of
explaining should fall
on the carrier.

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

1 Exercise
of
extraordinary
diligence
(Art.
1756)
2 Caso fortuito

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REVIEWER/TRANSPORTATION LAW
1734)
Valid stipulations
1. Reduction of degree of
diligence
to
ordinary
diligence, provided it be:
a In writing, signed by
the shipper or 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)

Stipulation
limiting
liability
when
a
passenger is carried
gratuitously, but not
for willful acts or gross
negligence. (Art. 1758)

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3. Limited liability for
delay:
An
agreement
limiting
the
common
carriers 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
1That the goods are
transported at the risk of
the owner or shipper;
2That carrier will not be
liable
for
any
loss,

Dispensing with or
lessening
the
extraordinary
responsibility
of
a
common carrier for

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REVIEWER/TRANSPORTATION LAW
destruction
or
deterioration
of
the
goods;
3That the carrier need not
observe any diligence in
the
custody
of
the
goods;
4That the carrier shall
exercise a degree of
diligence less than that
of a good father of a
family over the movable
transported;
5That the carrier shall not
be responsible for the
acts or omissions of his
or its employees;
6That the carriers 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;
7That the carrier is not
responsible for the loss,
destruction
or
deterioration
of
the
goods on account of the

the
safety
of
passengers
imposed
by law by stipulation,
by posting of notices,
by
statements
on
tickets or otherwise.
(Art. 1757)

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defective condition of
the car, vehicle, ship or
other equipment used in
the contract of carriage.
(Art. 1745)
RULES ON PASSENGERS BAGGAGE
IN THE CUSTODY OF
THE PASSENGERS
(HAND-CARRIED)

IN THE CUSTODY OF
THE COMMON
CARRIER
(CHECKED-IN)
Legal nature of the baggage
Necessary deposit
Considered as goods
Required diligence by the common carrier
Diligence of a depositary Extraordinary
(ordinary diligence)
diligence
Applicable rules
Arts. 1998 and 2000-2003 Arts. 1733-1753
CONCURRING CAUSES OF ACTION ARISING
FROM THE NEGLIGENT ACT OF THE COMMON
CARRIER
1. Culpa contractual (breach of contract)
Only the carrier is primarily liable and not the
driver, because there is no privity between the
driver and the passenger.
Basis: Art.1759, NCC.
No defense of due diligence in the selection and
supervision of employees.

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2. Culpa aquiliana (quasi-delict)
The carrier and driver are solidarily liable as joint
tortfeasors.
Basis: Art. 2180, NCC.
Defense of due diligence in the selection and
supervision of employees is available. Exception:
maritime tort resulting in collision. (See notes on
Collision)
3. Culpa criminal (criminal negligence)
The driver is primarily liable. The carrier is
subsidiarily liable only if the driver is convicted and
declared insolvent.
Basis: Art. 100, RPC.
In case of injury to a passenger due to the
negligence of the driver of the bus on which he is
riding and of the driver of another vehicle, the
drivers as well as the owners of the two vehicles
are jointly and severally liable for damages. It
makes no difference that the liability of the bus
driver and owner springs from contract while that
of the owner and driver of the other vehicle arises
from quasi-delict. (Fabre vs. CA)
LIMITATIONS AS TO CARRIERS LIABILITY
INVALID AS BEING
VALID &
CONTRARY TO
ENFORCEABLE
PUBLIC POLICY

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1. One exempting the
carrier from any and all
liability for loss or
damage occasioned by
its own negligence.
2.
An
unqualified
limitation of liability to
an agreed valuation.

1.
One
limiting
the
liability of the carrier to
an
agreed
valuation,
unless
the
shipper
declares a higher value
and pays a higher rate of
freight
(H.E. Heacock Company
vs.
Macondray
&
Company Inc.)

However, the carrier cannot limit its liability for


injury to, or loss of, goods shipped where such
injury or loss was caused by its own negligence.
(Shewaram vs. PAL, 17 SCRA 606)
SPECIAL RULES ON LIABILITES OF AIRLINE
CARRIERS
1. In case of flight diversion due to bad weather or
other circumstances beyond the pilots control, the
relation between the carrier and the passenger
continues until the latter has been landed at the
port of destination and has left the carriers
premises. The carrier should necessarily exercise
extraordinary diligence in safeguarding the
comfort, convenience and safety of its stranded
passengers until they have reached their final
destination. (Philippine Airlines vs. CA, 226 SCRA
423)

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REVIEWER/TRANSPORTATION LAW
2. Even where overbooking of passengers is
allowed as a commercial practice, the airline
company would still be guilty of bad faith and still
be liable for damages if it did not properly inform
passenger that it could breach the contract of
carriage even if they were confirmed passengers.
(Zalamea vs. CA, 228 SCRA 23)
3. An open-dated ticket constitutes a complete
contract between the carrier and passenger.
Hence, the airline company is liable if it refused to
confirm a passengers flight reservation. (Singson
vs. CA, 282 SCRA 149)
4. An airline company which issued a confirmed
ticket to a passenger covering successive trips on
different airlines can be held liable for damages
occasioned by bumping off by one of the
successive airlines. (Lufthansa German Airlines vs.
CA, 238 SCRA 290)
5. An airline ticket providing that carriage by
successive air carriers is to be regarded as a single
operation is to make the issuing carrier liable for
the tortuous conduct of the other carrier. A printed
provision in the ticket limiting liability only to its
own conduct is not enough to rebut that liability.
(KLM Royal Dutch Airlines vs. CA, 65 SCRA 237)
II. CODE OF COMMERCE

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REVIEWER/TRANSPORTATION LAW
A OVERLAND TRANSPORTATION
(Arts. 349-379)
Applicability
1.
Domestic
land
and
water/maritime
transportation. (Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997 ed.)
2. Domestic Air Transportation. (Commercial Law
Review, Cesar Villanueva, 2004 ed.)
IMPORTANT CONCEPTS:
1 Bill of lading
2 Obligations of the carrier
3 Right of abandonment
4 Notice of damage
5 Combined carrier agreement
BILL OF LADING
The written acknowledgment of receipt of goods
and agreement to transport them to a specific
place to a person named or to his order.
Rules:
1. It is not indispensable for the creation of a
contract of carriage. (Compania Maritima vs.
Insurance Company of North America, 12 SCRA
213)
2. Ambiguity is construed against the carrier, the
contract being one of adhesion.

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3. The consignee, although the instrument is
oftentimes drawn up only by the consignor and
carrier, becomes bound by all the stipulations
contained therein by making a claim for loss on the
basis of said bill of lading. (Sea-Land Services Inc.
vs. IAC)
4. The right of a party to recover for loss of
shipment consigned to him under a bill of lading
drawn up only by and between the shipper and the
carrier, springs from either a relation of agency
between him and the shipper, or his status as
stranger in whose favor some stipulation is made in
said contract, and who becomes a party thereto
when he demands fulfillment of that stipulation.
(Art. 1311 (2), (Mendoza vs. PAL Inc.)
5. Acceptance of the bill of lading without dissent
raises the presumption that all the terms therein
where brought to the knowledge of the shipper and
agreed to by him and, in the absence of fraud or
mistake; he is estopped from thereafter denying
that he assented to such terms. (Notes and Cases
on the Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.261)
Kinds:
1 On board - issued when the goods have been
actually placed aboard the ship with very

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reasonable expectation that the shipment is as
good as on its way.
2 Received - one in which it is stated that the
goods have been received for shipment with or
without specifying the vessel by which the goods
are to be shipped.
3 Negotiable - one in which it is stated that the
goods referred to therein will be delivered to the
bearer or to the order of any person named
therein.
4 Non-negotiable - One in which it is stated that
the goods referred to therein will be delivered to
a specified person.
5 Clean One which does not indicate any defect
in the goods.
6 Foul One which contains a notation thereon
indicating that the goods covered by it are in bad
condition.
7 Spent One which covers goods that already
have been delivered by the carrier without a
surrender of a signed copy of the bill.
8 Through One issued by the carrier who is
obliged to use the facilities of other carriers as

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well as his own facilities for the purpose of
transporting the goods from the city of the seller
to the city of the buyer, which bill of lading is
honored by the second and other interested
carriers who do not issue their own bills.
9 Custody One wherein the goods are already
received by the carrier but the vessel indicated
therein has not yet arrived in the port.
10Port One which is issued by the carrier to
whom the goods have been delivered, and the
vessel indicated in the bill of lading by which the
goods are to be shipped is already in the port
where the goods are held for shipment.
Functions:
1 Best evidence of the existence of the contract of
carriage of cargo (Art. 353)
2 Document of title
3 Receipt of cargo
4 Contract to transport and deliver goods as
stipulated
5 Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier cannot
ordinarily refuse to carry a particular class of goods.
EXCEPTION: For some sufficient reason the

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discrimination against the traffic in such goods is
reasonable and necessary. (Fisher vs. Yangco
Steamship Co. 31 Phil 1).
Instances when the carrier may validly refuse to
accept the goods include the ff:
1.) Goods sought to be transported are dangerous
objects, or substances including dynamite and
other explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger like
flood, capture by enemies and the like
7.) Goods like livestock will be exposed to disease
8.) Strike
9.) Failure to tender goods on time. (Notes and
Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.68)
In case of carriage by railway, the carrier is
exempted from liability if carriage is insisted upon
by the shipper, provided its objections are stated in
the bill of lading.
However, when a common carrier accepts cargo
for shipment for valuable consideration, it takes the
risk of delivering it in good condition as when it was
loaded. (PAL vs. CA)

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B. Duty to deliver the goods
Not only to transport the goods safely but to the
person indicated in the bill of lading. The goods
should be delivered to the consignee or any other
person to whom the bill of lading was validly
transferred or negotiated.
Time of delivery
Stipulated in
Contract/Bill of
Lading
1. Carrier is bound to
fulfill the contract
and is liable for any
delay;
no
matter
from what cause it
may have arisen.

No stipulation
1. Within a reasonable
time.
2. Carrier is bound to
forward them in the 1st
shipment of the same or
similar goods which he
may make to the point of
delivery. (ART. 358 Code
of Commerce)

Effects of delay
a Merely suspends and generally does not
terminate the contract of carriage
b Carrier remains duty bound to exercise
extraordinary diligence
c Natural disaster shall not free the carrier
from responsibility (Art.1740)
d If delay is without just cause, the contract

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
limiting the common carriers liability cannot
be availed of in case of loss or deterioration
of the goods (Art.1747)
RIGHT OF CONSIGNEE TO ABANDON GOODS
Instances:
1 Partial non-delivery, where the goods
are useless without the others (Art.
363);
2 Goods are rendered useless for sale or
consumption for the purposes for which
they are properly destined (Art. 365);
and
3 In case of delay through the fault of the
carrier (Art. 371).
NOTICE OF DAMAGE (ART. 366)
Requisites for applicability:
1 Domestic/inter-island/coastwise transportation
2 Land/water/air transportation
3 Carriage of goods
4 Goods shipped are damaged
Rules:
a. Patent damage: shipper must file a claim against
the carrier immediately upon delivery (it may be
oral or written)
b. Latent damage: shipper should file a claim
against the carrier within 24 hours from delivery.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
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.
The filing of notice of claim is a condition
precedent for recovery.
Shorter period may be stipulated by the parties
because it merely affects the shippers remedy and
does not affect the liability of the carrier.
(PHILAMGEN vs. Sweetlines, Inc.)
Prescriptive Period
Not provided by Article 366. Thus, in such
absence, Civil Code rules on prescription apply.
If despite the notice of claim, the carrier refuses
to pay, action must be filed in court.
1 No bill of lading was issued: within 6 years
2 Bill of lading was issued: within 10 years.
ARTICLE 366
COGSA Sec.3 (6)
Applicability
1
Domestic/int 1 International/
eroverseas/foreign
(from
island/coastwi foreign country to Phils.)
se
Note: subject to the rule
transportation on Paramount Clause
2
Land, water, 2. Water/maritime
air
transportation
transportation 3. Carriage of goods

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
3

Carriage of
goods
Notice of damage
1
1 Not a
Conditi
condition
on
precedent
precede
2 3-day period
nt
for claiming
2 24latent
hour
damage
period
for
claimin
g latent
damag
e
Prescriptive period
None
provided; One year from the date of
Civil Code applies. delivery (delivered but
damaged goods), or date
when the vessel left port
or from the date of
delivery to the arrastre
(non-delivery or loss).
COMBINED CARRIER AGREEMENT (ART. 373)
GENERAL RULE: In case of a contract of
transportation of several legs, each carrier is
responsible for its particular leg in the contract.
EXCEPTION: A combined carrier agreement where

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
a carrier makes itself liable assuming the
obligations and acquiring as well the rights and
causes of action of those which preceded it.
MARITIME COMMERCE
(Arts. 573-869)
IMPORTANT CONCEPTS:
1 Merchant vessel
2 Maritime lien and Preference of Credit
3 Doctrine of limited liability
4 Causes of revocation of voyage
5 Participants in maritime commerce
6 Charter party
7 Loans on bottomry and respondentia
8 Accidents in maritime commerce
MARITIME/ADMIRALTY LAW
It is the system of laws which particularly relates
to the affairs and business of the sea, to ships, their
crews and navigation, and to maritime conveyance
of persons and property. (Notes and Cases on the
Law on Transportation and Public Utilities, Aquino &
Hernando, citing Francisco, p.254)
Maritime laws apply only to maritime trade and
sea voyages. (Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997 ed.)
Arrastre service is not maritime in character. It

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
refers to a contract for the unloading of goods from
a vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA
244)
CHARACTERISTICS
OF
MARITIME
TRANSACTION
1. Real - similar to transactions over real property
with respect to effectivity against third persons
which is done through registration. (Rubiso vs.
Rivera, 37 Phil. 72). The evidence of real nature is
shown by: 1) the limitation of the liability of the
agents to the actual value of the vessel and the
freight money; and 2) the right to retain the cargo
and embargo and detention of the vessel (Luzon
Stevedoring Corp v. CA, 156 SCRA 169);
2. Hypothecary - the liability of the owner of the
value of the vessel is limited to the vessel itself
(Doctrine of Limited Liability).
The real and hypothecary nature of maritime law
simply means that the liability of the carrier in
connection with losses related to maritime
contracts is confined to the vessel, which stands as
the guaranty for their settlement. (Aboitiz Shipping
Corp. vs. General Accident Fire and Life Assurance
Corp. 217 SCRA 359).
MERCHANT VESSEL
Vessel engaged in maritime commerce, whether
foreign or otherwise. (Bar Review Materials in

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REVIEWER/TRANSPORTATION LAW
Commercial Law, Jorge Miravite, 2002 ed.)
Constitutes property which may be acquired and
transferred by any of the means recognized by law.
They shall continue to be considered as personal
property. (Arts. 573, 585)
They are susceptible to maritime liens such as
for the repair, equipping and provisioning of the
vessel in the preparation of a voyage, as well as
mortgage liabilities, in satisfaction of which a
vessel may be validly arrested and sold. (Ship
Mortgage Decree of 1978)
MARITIME LIEN
It constitutes a present right of property in the
ship, a jus in re, to be afterward enforced in
admiralty by process in rem. (PNB vs. CA, 337 SCRA
381)
If the maritime lien arose prior to the recording
of a preferred mortgage, it shall have priority over
the said mortgage lien. (PNB vs. CA, 337 SCRA 381)
ORDER OF PREFERENCE IN CASE OF SALE OF
VESSEL
R.A. 6106
P.D. 1521
Effectivity date
1969
1978
Applicability
Overseas shipping Both domestic and

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REVIEWER/TRANSPORTATION LAW
only

overseas shipping
Kind of sale
Judicial
Judicial and
extrajudicial
Order of Preference
A
preferred The
preferred
mortgage
shall mortgage lien shall
have priority over have priority over all
all claims against claims against the
the vessel, except vessel, except the
the
following following preferences
preferences in the in the order stated:
order stated:
1. Expenses and fees
1. Judicial costs of allowed
and
costs
the proceedings;
taxed by the court
2. Taxes due the and taxes due to the
Philippine
Government;
Government;
2. Crews wages;
3. Salaries and 3. General average;
wages
of
the 4. Salvage, including
Captain and Crew contract salvage;
of
the
vessel 5.
Maritime
liens
during
its
last arising prior in time to
voyage;
the recording of the
4.
General preferred mortgage;
average
or 6. Damages arising
salvage including out of tort; and
contract salvage, 7. Preferred mortgage
bottomry
loans, registered
prior
in
and indemnity due time.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
shippers for the
value of goods
transported
but
which were not
delivered to the
consignee;
5. Costs of repair
and equipment of
the vessel, and
provisioning
of
food, supplies and
fuel during its last
voyage; and
6.
Preferred
mortgages
registered prior in
time.
Effect of sale: All pre-existing claims in the vessel
are terminated. They will then be satisfied from the
proceeds of the sale subject to the order of
preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
Cases where applicable:
1 Art. 587 civil liability for indemnities to third
persons

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REVIEWER/TRANSPORTATION LAW
2 Art. 590 indemnities from negligent acts of the
captain (not the shipowner or ship agent)
3 Art. 837 collision
4 Art. 643 liability for wages of the captain and
the crew and for advances made by the ship
agent if the vessel is lost by shipwreck or
capture
GENERAL RULE: The liability of shipowner and
ship agent is limited to the amount of interest in
said vessel such that where vessel is entirely lost,
the obligation is extinguished. (Luzon Stevedoring
v. Escano, 156 SCRA 169) The interest extends to:
1) the vessel itself; 2) equipments; 3) freightage;
and 4) insurance proceeds. (Chua v. IAC, 166 SCRA
183)
EXCEPTIONS:
1 Claims under Workmens Compensation (Abueg
vs. San Diego 77 Phil 730);
2 Injury or damage due to shipowner or to the
concurring negligence of the shipowner and the
captain;
3 The vessel is insured (Vasquez vs. CA 138 SCRA
553).
4 Expenses for repair on vessel completed before
loss;
5 In case there is no total loss and the vessel is not
abandoned;
6 Collision between two negligent vessels;

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REVIEWER/TRANSPORTATION LAW
Abandonment of the vessel is necessary to limit
the liability of the shipowner. The only instance
were abandonment is dispensed with is when the
vessel is entirely lost (Luzon Stevedoring vs. CA
156 SCRA 169).
RIGHT OF SHIPOWNER OR SHIP AGENT TO
ABANDON VESSEL
Instances:
1 In case of civil liability from indemnities to third
persons (Art. 587);
2 In case of leakage of at least of the contents
of a cargo containing liquids (Art. 687); and
3 In case of constructive loss of the vessel (Sec.
138, Insurance Code).
RIGHT OF ABANDONMENT
SHIPOWNER OR
CONSIGNEE
SHIP AGENT
What may be abandoned
Vessel
Goods shipped
Instances
1. In case of civil 1. Partial non-delivery, where the
liability
from goods are useless without the
indemnities
to others (Art. 363);
third persons (Art. 2. Goods are rendered useless for
587);
sale or consumption for the
2.
Sec.
138, purposes for which they are
Insurance Code;
properly destined (Art. 365); and

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
3. In case of 3. In case of delay through the
leakage of at least fault of the carrier (Art. 371).
of the contents
of
a
cargo
containing liquids
(Art. 687)
1

Transfer of
ownership
of
the
vessel
from
the
shipowner
to
the shippers or
insurer.
2 In case of (2),
the
insurer
must pay the
insured as if
there
was
actual
total
loss
of
the
vessel.

Effects
1 Transfer of ownership on the
goods from the shipper to the
carrier.
2 Carrier should pay the shipper
the market value of the goods
at the point of destination.

CAUSES OF REVOCATION OF VOYAGE


1 War or interdiction of commerce;
2 Blockade;
3 Prohibition to receive cargo at destination;
4 Embargo;
5 Inability of the vessel to navigate. (Art. 640)

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REVIEWER/TRANSPORTATION LAW
Terms:
1 Interdiction of commerce A governmental
prohibition of commercial intercourse intended to
bring about an entire cessation for the time being
of all trade whatever.
2 Blockade A sort of circumvallation of a place by
which all foreign connection and correspondence
is, as far as human power can effect it, to be cut
off.
3 Embargo A proclamation or order of a state,
usually issued in time of war or threatened
hostilities, prohibiting the departure of ships or
goods from some or all the ports of such state
until further order.
PARTICIPANTS IN MARITIME COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who has possession, control and
management of the vessel and the consequent
right to direct her navigation and receive freight
earned and paid, while his possession continues.

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REVIEWER/TRANSPORTATION LAW
Ship agent (naviero)
Person entrusted with provisioning and
representing the vessel in the port in which it may
be found; also includes the shipowner.
Not a mere agent under civil law; he is solidarily
liable with the ship owner.
Powers and functions:
1 Capacity to trade;
2 Discharge duties of the captain, subject to
Art.609;
3 Contract in the name of the owners with respect
to repairs, details of equipment, armament,
provisions of food and fuel, and freight of the
vessel, and all that relate to the requirements of
navigation;
4 Order a new voyage, make a new charter or
insure the vessel after obtaining authorization
from the shipowner or if granted in certificate of
appointment.
Civil Liabilities of the Shipowner And Ship
Agent
1 All contracts of the captain, whether authorized
or not, to repair, equip and provision the vessel;
(Art. 586)
2 Loss and damage to the goods loaded on the
vessel without prejudice to their right to free
themselves from liability by abandoning the
vessel to the creditors. (Art. 587)

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REVIEWER/TRANSPORTATION LAW
Duty of Ship Agent to Discharge the Captain
and Members of the Crew
If the seamen contract is not for a definite period
or voyage, he may discharge them at his discretion.
(Art. 603)
If for a definite period, he may not discharge
them until after the fulfillment of their contracts,
except on the following grounds:
a Insubordination in serious matters;
b Robbery;
c Theft;
d Habitual drunkenness;
e Damage caused to the vessel or to its cargo
through malice or manifest or proven negligence.
(Art. 605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders of ships.
The terms have the same meaning, but are
particularly used in accordance with the size of the
vessel governed and the scope of transportation,
i.e., large and overseas, and small and coastwise,
respectively.
Nature of position (3-fold character):
1 General agent of the shipowner;
2 Technical director of the vessel;
3 Representative of the government of the
country under whose flag he navigates.
Qualifications:
1 Filipino citizen;

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
2 Legal capacity to contract;
3 Must have passed the required physical and
mental examinations required for licensing him
as such. (Art. 609)
Inherent powers:
1 Appoint crew in the absence of ship agent;
2 Command the crew and direct the vessel to its
port of destination;
3 Impose correctional punishment on those who,
while on board vessel, fail to comply with his
orders or are wanting in discipline;
4 Make contracts for the charter of vessel in the
absence of ship agent.
5 Supply, equip, and provision the vessel; and
6 Order repair of vessel to enable it to continue its
voyage. (Art. 610)
Sources of funds to comply with the inherent
powers of the captain (in successive order):
1 From the consignee of the vessel;
2 From the consignee of the cargo;
3 By drawing on the ship agent;
4 By a loan on bottomry;
5 By sale of part of the cargo. (Art. 611)
Duties:
1 Bring on board the proper certificate and
documents and a copy of the Code of
Commerce;
2 Keep a Log Book, Accounting Book and Freight
Book;
3 Examine the ship before the voyage;

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
4 Stay on board during the loading and unloading
of the cargo;
5 Be on deck while leaving or entering the port;
6 Protest arrivals under stress and in case of
shipwreck;
7 Follow instructions of and render an accounting
to the ship agent;
8 Leave the vessel last in case of wreck;
9 Hold in custody properties left by deceased
passengers and crew members;
10 Comply with the requirements of customs,
health, etc. at the port of arrival;
11 Observe rules to avoid collision;
12 Demand a pilot while entering or leaving a
port. (Art. 612)
A ships captain must be accorded a reasonable
measure of discretionary authority to decide what
the safety of the ship and of its crew and cargo
specifically requires on a stipulated ocean voyage
(Inter-Orient Maritime Enterprises Inc. vs. CA).
No liability for the following:
1 Damages caused to the vessel or to the cargo
by force majeure;
2 Obligations
contracted
for
the
repair,
equipment, and provisioning of the vessel
unless he has expressly bound himself
personally or has signed a bill of exchange or
promissory note in his name. (Art. 620)

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Solidary
Liabilities
of
the
Ship
Agent/Shipowner for Acts Done by the
Captain towards Passengers and Cargoes
1 Damages to vessel and to cargo due to lack of
skill and negligence;
2 Thefts and robberies of the crew;
3 Losses and fines for violation of laws;
4 Damages due to mutinies;
5 Damages due to misuse of power;
6 For deviations;
7 For arrivals under stress;
8 Damages due to non-observance of marine
regulations. (Art. 618)
C. OFFICERS AND CREW
1 Sailing Mate/First Mate
2 Second Mate
3 Engineers
4 Crew
No liability under the following circumstances:
1 If, before beginning voyage, captain attempts to
change it, or a naval war with the power to which
the vessel was destined occurs;
2 If a disease breaks out and be officially declared
an epidemic in the port of destination;
3 If the vessel should change owner or captain.
(Art. 647)
Sailing Mate/First Mate

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Second chief of the vessel who takes the place of
the captain in case of absence, sickness, or death
and shall assume all of his duties, powers and
responsibilities. (Art. 627)
Duties:
1 Provide himself with maps and charts with
astronomical tables necessary for the discharge
of his duties;
2 Keep the Binnacle Book;
3 Change the course of the voyage on
consultation with the captain and the officers of
the boat, following the decision of the captain in
case of disagreement;
4 Responsible for all the damages caused to the
vessel and the cargo by reason of his
negligence. (Arts. 628 - 631)
Second Mate
Takes command of the vessel in case of the
inability or disqualification of the captain and the
sailing mate, assuming in such case their powers
and responsibilities.
Third in command
Duties:
1 Preserve the hull and rigging of the vessel;
2 Arrange well the cargo;
3 Discipline the crew;
4 Assign work to crew members;
5 Inventory the rigging and equipment of the
vessel, if laid up. (Art. 632)

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Engineers
Officers of the vessel but have no authority
except in matters referring to the motor apparatus.
When two or more are hired, one of them shall be
the chief engineer.
Duties:
1 In charge of the motor apparatus, spare parts,
and other instruments pertaining to the
engines;
2 Keep the engines and boilers in good condition;
3 Not to change or repair the engine without
authority of the captain;
4 Inform the captain of any damage to the motor
apparatus;
5 Keep an Engine Book;
6 Supervise all personnel maintaining the engine.
(Art. 632)
Crew
The aggregate of seamen who man a ship, or the
ships company.
Hired by the ship agent, where he is present and
in his absence, the captain hires them, preferring
Filipinos, and in their absence, he may take in
foreigners, but not exceeding 1/5 of the crew. (Art.
634)
Classes of Seamans Contracts
1 By the voyage;

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
2 By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman
While Contract Subsists
1 Perpetration of a crime;
2 Repeated insubordination, want of discipline;
3 Repeated incapacity and negligence;
4 Habitual drunkenness;
5 Physical incapacity;
6 Desertion. (Art. 637)
Rules in case of Death of a Seaman
The seamans heirs are entitled to payment as
follows:
1 If death is natural:
a compensation up to time of death if engaged on
wage
b if by voyage - half of amount if death occurs on
voyage out; and full, if on voyage in
c if by shares - none, if before departure; full, if
after departure
2 if death is due to defense of vessel - full payment;
3 if captured in defense of vessel - full payment;
4 if captured due to carelessness - wages up to the
date of the capture. (Art. 645)
Complement of the Vessel
All persons on board, from the captain to the
cabin boy, necessary for the management,

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
maneuvers, and service, thus including the crew,
the sailing mates, engineers, stokers and other
employees
on
board
not
having
specific
designations.
Does not include the passengers or the persons
whom the vessel is transporting.
D. SUPERCARGOES
Persons who discharges administrative duties
assigned to him by ship agent or shippers, keeping
an account and record of transaction as required in
the accounting book of the captain. (Art. 649)
E. PILOT
A person duly qualified, and licensed, to conduct
a vessel into or out of ports, or in certain waters.
The term generally connotes a person taken on
board at a particular place for the purpose of
conducting a ship through a river, road or channel,
or from a port.
Master pro hac vice for the time being in the
command and navigation of the ship.
While in exercising his functions a pilot is in sole
command of the ship and supersedes the master
for the time being in the command and navigation
of the ship, the master does not surrender his
vessel to the pilot and the pilot is not the master.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
There are occasions when the master may and
should interfere and even displace the pilot, as
when the pilot is obviously incompetent or
intoxicated (Far Eastern Shipping Company vs. CA).
Compulsory Pilotage States possessing harbors
have enacted laws or promulgated rules requiring
vessels approaching their ports to take on board
pilots licensed under the local laws. (Notes and
Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.
518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage grounds,
the Harbor Pilot is responsible for damage to a
vessel or to life or property due to his negligence.
EXCEPT:
1. Accident caused by force majeure or natural
calamity provided the pilot exercised prudence and
extra diligence to prevent or minimize damages.
2. Countermand or overrule by the master of the
vessel in which case the registered owner of the
vessel is liable. (Sec.11, Art.III PPA Admin Order 0385)
SPECIAL
CONTRACTS
COMMERCE
1 Charter party
2 Bill of lading

OF

MARITIME

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
3 Contract of transportation of passengers on sea
voyages
4 Loan on bottomry
5 Loan on respondentia
6 Marine insurance
CHARTER PARTY
A contract by virtue of which the owner or agent
binds himself to transport merchandise or persons
for a fixed price.
A contract by which an entire ship, or some
principal part thereof is let/leased by the owner to
another person for a specified time or use.
(Planters Products, Inc. vs. CA, 226 SCRA 476)
Parties:
1 Ship owner or ship agent
2 Charterer
Classes:
1. Bareboat or demise The charterer provides
crew, food and fuel. The charterer is liable as if he
were the owner, except when the cause arises from
the unworthiness of the vessel. The shipowner
leases to the charterer the whole vessel,
transferring to the latter the entire command,
possession and consequent control over the
vessels navigation, including the master and the
crew, who thereby become the charters servants.
It transforms a common carrier into a private

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
carrier.
The charterer becomes the owner of the vessel
pro hac vice, just for that one particular purpose
only. Because the charterer is treated as owner
pro hac vice, the charterer assumes the
customary rights and liabilities of the shipowner
to third persons and is held liable for the expense
of the voyage and the wages of the seamen.
2. Contract of Affreightment A contract whereby
the owner of the vessel leases part or all of its
space to haul goods for others.
The shipowner retains the possession,
command and navigation of the ship, the
charterer merely having use of the space in the
vessel in return for his payment of the charter
hired.
Kinds:
a Time charter vessel is chartered for a fixed
period of time or duration of voyage.
b Voyage or trip charter the vessel is leased for
one or series of voyages usually for purposes of
transporting goods for charterer.
LEASE

CHART
ER
PARTY
If for a Charter

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
definite
period,
lessee
cannot
give up
the
lease by
paying a
portion
of
the
amount
agreed
upon.
If
the
leased
property
is
sold
to
one
who
knows
of
the
existenc
e of the
lease,
the new
owner
must
respect
the
lease.

er may
rescind
charter
party by
paying
half
of
the
freighta
ge
agreed
upon.
The new
owner is
not
compell
ed
to
respect
the
charter
party so
long as
he can
load the
vessel
with his
own
cargo.
(Art.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
689)
Civil law Commer
concept cial law
concept

CHART
ER
PARTY
An
entire or
complet
e
contract
.

BILL OF
LADING

More
like
a
private
receipt
which
the
captain
gives to
accredit
goods
received
from
persons
Consens Real
ual
contract
contract
BAREB CONTR
OAT OR ACT OF
DEMISE AFFREI

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
CHART
ER

GHTME
NT
(TIME
OR
VOYAG
E
CHART
ER)
Owner
remains
liable as
carrier
and
must
answer
for any
breach
of duty
Charter
er is not
regarde
d
as
owner.

Charter
er
become
s liable
to
others
caused
by
its
negligen
ce
Charter
er
regarde
d
as
owner
pro hac
vice for
the
voyage
Owner
The
of
vessel
vessel
owner

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
relinquis
hes
possessi
on,
comman
d
and
navigati
on
to
chartere
r
Commo
n carrier
is
convert
ed
to
private
carrier.

retains
possessi
on,
comman
d
and
navigati
on
of
the ship
Commo
n carrier
is
not
convert
ed to a
private
carrier.

PERSONS WHO MAY MAKE A CHARTER


1 Owner or owners of the vessel, either in whole
or in majority part, who have legal control and
possession of the vessel
2 Charterer may subcharter entire vessel to 3 rd
person only if not prohibited in original charter.
(Art.679)
3 Ship agent if authorized by the owner/s or given
such power in the certificate of appointment.
(Art.598)
4 Captain in the absence of the ship agent or

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
consignee and only if he acts in accordance
with the instructions of the agent or owner and
protects the latters interests. (Art.609)
REQUISITES OF A VALID CHARTER PARTY
1 Consent of the contracting parties
2 Existing vessel which should be placed at the
disposition of the shipper
3 Freight
4 Compliance with Art. 652 of the Code of
Commerce

Clauses Which May Be Included In a Charter


Party
Jason
Clause
clause paramo
unt or
paramo
unt
clause

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
A
stipulati
on in a
charter
party
that in
case of
a
maritim
e
accident
for
which
the
shipown
er is not
responsi
ble
by
law,
contract
or
otherwis
e,
the
cargo
shippers
,
consign
ees
or
owners
shall

A clause
in
a
charter
party
providin
g
that
the
COGSA
shall
apply,
even
though
the
transpor
tation is
domesti
c,
subject
to
the
extent
that any
term of
the bill
of lading
is
repugna
nt to the
COGSA
or
applicab

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
contribu
te with
the
shipown
er
in
general
average
.
(Pandec
t
of
Commer
cial Law
and
Jurispru
dence,
Justice
Jose
Vitug,
1997
ed.)

le law,
then to
the
extent
thereof
the
provisio
n of the
bill
of
lading is
void.
(Pandec
t
of
Commer
cial Law
and
Jurispru
dence,
Justice
Jose
Vitug,
1997
ed.)

Rights and Obligations of Parties


SHIPO
WNER
OR
SHIP

CHART
ERER

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
AGENT
1 If 1To pay
the the
ve agreed
sse charter
l is price;
ch 2To pay
art freighta
ere ge
on
d
unboard
wh ed
oll cargo;
y, 3To pay
not losses
to to
ac others
ce for
pt loading
car uncontr
go acted
fro cargo
m and
oth illicit
ers cargo;
; 4To wait
2 To if
the
ob vessel
ser needs
ve repair;
rep5To pay

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
res
ent
ed
ca
pa
cit
y;
3 To
unl
oa
d
car
go
cla
nd
est
ine
ly
pla
ce
d
4 To
su
bst
itu
te
an
oth
er
ve

expens
es
for
deviatio
n. (Arts.
679687)

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
sse
l if
loa
d
is
les
s
tha
n
3/5
of
ca
pa
cit
y;
5 To
lea
ve
the
por
t if
the
ch
art
ere
r
do
es
not
bri

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
ng
the
car
go
wit
hin
the
lay
da
ys
an
d
ext
ra
lay
da
ys
all
ow
ed;
6 To
pla
ce
in
a
ve
sse
l in
a
co

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
ndi
tio
n
to
na
vig
ate
;
7 to
bri
ng
car
go
to
ne
are
st
ne
utr
al
por
t in
ca
se
of
wa
r
or
blo
ck

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
ad
e.
(Ar
ts.
66
967
8)
Rescission of a Charter Party
At
At
Fort
char ship uito
tere own us
rs ers caus
requ requ es
est
est (Art.
(Art (Art. 690)
688) 689)
1. By
aban
doni
ng
the
chart
er
and
payi
ng

1. If
the
extra
lay
days
termi
nate
with
out
the

1.
War
or
inter
dicti
on of
com
merc
e;
2.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
half
of
the
freig
htag
e;
2.
Error
in
tonn
age
or
flag;
3.
Failur
e to
place
the
vess
el at
the
chart
erer
s
dispo
sal;
4.
Retur
n of
the

carg
o
bein
g
place
d
alon
gside
the
vess
el;
2.
Sale
by
the
owne
r of
the
vess
el
befor
e
loadi
ng
by
the
chart
erer;

Block
ade;
3.
Prohi
bitio
n to
recei
ve
carg
o;
4.
Emb
argo;
and
5.
Inabi
lity
of
the
vess
el to
navi
gate.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
vess
el
due
to
pirat
es,
ene
mies
or
bad
weat
her;
5.
Arriv
al at
a
port
for
repai
rs.
Terms:
1 Primage - bonus to be paid to the captain after
the successful voyage.
2 Demurrage the sum fixed in the charter party as
a remuneration to the owner of the ship for the
detention of his vessel beyond the number of
days allowed by the charter party for loading or
unloading or for sailing.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
3 Deadfreight the amount paid by or recoverable
from a charterer of a ship for the portion of the
ships capacity the latter contracted for but failed
to occupy.
4 Lay Days - days allowed to charter parties for
loading and unloading the cargo.
5 Extra Lay Days days which follow after the lay
days have elapsed.
USUAL
FORMS
OF
CONSUMMATING
CONTRACTS
1 C.I.F. cost, insurance and freight;
2 F.O.B. - free on board;
3 F.A.S. - free alongside ship; and
4 C. & F. - cost and freight.
TRANSSHIPMENT OF GOODS
The act of taking cargo out of one ship and
loading it in another, or the transfer of goods from
the vessel stipulated in the contract of
affreightment to another vessel before the place of
destination named in the contract has been
reached, or the transfer for further transportation
from one ship or conveyance to another.
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 another.
If done without legal excuse, however competent
and safe the vessel into which the transfer is made,

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
is a violation of contract and infringement of right
of shipper and subjects carrier to liability if freight
is lost event by cause otherwise excepted.
(Magellan Manufacturing vs. CA, 201 SCRA 102)
LOAN ON BOTTOMRY AND RESPONDENTIA
A real, unilateral, aleatory contract, by virtue of
which one person lends to another a certain
amount of money or goods on things exposed to
maritime risks, which amount, with its earnings, is
to be returned if the things are safely transported,
and which is lost if the latter are lost.
LOAN
LOAN
ON
ON
BOTTO RESPO
MRY
NDENT
IA
Definition
Loan
Loan
made
taken
by
on
shipown security
er
or of
the
ship
cargo
agent
laden
guarant on
a
eed by vessel,
vessel
and

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
itself
repayab
and
le upon
repayab safe
le upon arrival
arrival
of cargo
of
at
vessel
destinat
at
ion.
destinat (Art.
ion.
719)
(Art.
719)
Who may
contract
Shipow Only
ner or the
ship
owner
agent.
of
the
Outside cargo.
of
the
residen
ce
of
the
owners
the
captain.
Common
elements:
1 Exposure
of
security
to

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
marine peril;
2 Obligation
of
the
debtor
conditioned
only upon safe
arrival of the
security at the
point
of
destination.
Forms:
1 Public
instrument
2 Policy
signed
by
the
contracting
parties and the
broker
taking
part therein
3 Private
instrument
(Art. 720)
Contents:
1 Kind, name and
registry of the
vessel;
2 Name, surname
and domicile of
the captain;
3 Names,
surnames and

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
domiciles
of
the
borrower
and the lender;
4 Amount of the
loan and the
premium
stipulated;
5 Time
for
repayment;
6 Goods pledged
to
secure
repayment;
7 Voyage during
which the risk
is run (Art.721)

BOTTO
MRY/
RESPO
NDENT
IA
Not
subject
to
Usury
Law
Liability
of
the

ORDIN
ARY
LOAN
(MUTU
UM)
Subject
to
Usury
Law
Not
subject

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
borrowe
r
is
conting
ent on
the safe
arrival
of
the
vessel
or cargo
at
destinat
ion
The last
lender
is
a
preferre
d
creditor

to any
conting
ency
(absolut
e
liability)

The first
lender
is
a
preferre
d
creditor

WHEN
LOAN
ON
BOTTOMRY
OR
RESPONDENTIA REGARDED AS SIMPLE LOAN
1 Lender loaned an amount larger than the value
of the object due to fraudulent means employed
by the borrower. (ART.726)
2 Full amount of the loan is not used for the cargo
or given on the goods if all of them could not
have been loaded, the balance will be
considered a simple loan. (ART.727)

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REVIEWER/TRANSPORTATION LAW
3 If the effects on which the money is taken is not
subjected to any risk. (ART.729)
Note: Under existing laws, the parties to a loan,
whether ordinary or maritime, may agree on any
rate of interest. (CB Circular 905)
MARINE
INSURA
NCE

Indemnit
y is paid
after the
loss has
occurred
In case of
loss
of
the
vessel
due to a
risk
insured

LOAN
ON
BOTT
OMRY
OR
RESP
ONDE
NTIA
Indem
nity is
paid in
advan
ce by
way of
a loan
In case
of loss
of the
vessel
due to
a
marine

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
against,
the
obligatio
n of the
insurer
becomes
absolute

peril,
the
obligat
ion of
the
borrow
er
to
pay is
exting
uished
Consensu Real
al
contra
contract ct
Hypothecary
Nature
of
Bottomry/
Respondentia
GENERAL RULE: The obligation of the borrower to
pay the loan is extinguished if the goods given as
security are absolutely lost by reason of an
accident of the sea, during the voyage designated,
and if it is proven that the goods were on board.
EXCEPTIONS:
1 Loss due to inherent defect;
2 Loss due to the barratry on the part of the
captain;
3 Loss due to the fault or malice of the borrower;
4 The vessel was engaged in contraband; and
5 The cargo loaded on the vessel be different in
from that agreed upon.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Concurrence of Marine Insurance and Loan on
Bottomry/Respondentia
1 The insurable interest of the owner of a ship
hypothecated by bottomry is only the excess of
the value over the amount secured by bottomry.
(Sec. 101, Insurance Code)
2 The value of what may be saved in case of
shipwreck shall be divided between the lender
and the insurer in proportion to the interest of
each one. (Art. 735)
Note: If a vessel is hypothecated by bottomry only
the excess is insurable, since a loan on bottomry
partakes of the nature likewise of an insurance
coverage to the extent of the loan accommodation.
The same rule would apply to the hypothecation of
the cargo by respondentia. (Pandect of Commercial
Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)
ACCIDENTS IN MARITIME COMMERCE
1 Averages
2 Arrival Under Stress
3 Collision
4 Shipwreck
AVERAGE
An extraordinary or accidental expense incurred
during the voyage in order to preserve the cargo,
vessel or both, and all damages or deterioration
suffered by the vessel from departure to the port of

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
destination, and to the cargo from the port of
loading to the port of consignment. (Art. 806)
The person whose property has been saved must
contribute to reimburse the damage caused or
expense incurred if the situation constitutes
general average.
Classes:
1 Particular or Simple Average
2 Gross or General Average
Where both vessel and cargo are saved, it is
general average; where only the vessel or only the
cargo is saved, it is particular average.
Expenses incurred to refloat a vessel, which
accidentally ran aground, in order to continue its
voyage, do not constitute general average. Not
only is there absence of a marine peril, common
safety factor, and deliberateness. It is the safety of
the property, and not the voyage, which constitutes
the true foundation of general average. (A.
Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31,
1955)
PARTIC GROSS
ULAR
OR
OR
GENER
SIMPLE
AL
Definition
Damage Damag
s
or es
or

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
expense expens
s caused es
to
the delibera
vessel
tely
or cargo caused
that did in order
not
to save
inure to the
the
vessel,
common its
benefit, cargo or
and
both
borne
from
by
real and
respecti known
ve
risk.
owners. (Art.
(Art.
811)
809)
Requisites
1 comm
on
dange
r;
2 delibe
rate
sacrifi
ce;
3 succe
ss;

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
4 prope
r
formal
ities
and
legal
steps.
Liability
The
All the
owner of persons
the
having
goods
an
which
interest
gave
in
the
rise
to vessel
the
and the
expense cargo
or
therein
suffered at
the
the
time of
damage the
shall
occurre
bear this nce of
average. the
(Art.
average
810)
shall
contribu
te
to
satisfy
this

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
average
.
(Art.
812)
The
insurers
(Art.859
)
and
lenders
on
bottomr
y
and
respond
entia
shall
likewise
contribu
te.
(Art.732
).
Number of
interests
involved
Only
Several
one
interest
interest s
involved involve
d

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Share in the
damage or
expense
100%
In
share
proporti
on
to
the
value of
the
owners
propert
y saved
Right to
recover
No
There
reimbur may be
sement reimbur
sement
Kinds (not
exclusive)
Art. 809 Art. 811
Procedure for
recovery
1 Asse
mbly
and
delibe
ration
2 Resol
ution

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
of the
captai
n
3 Entry
of the
resolu
tion in
the
logbo
ok
4 Detail
ed
minut
es
5 Delive
ry of
the
minut
es to
the
mariti
me
judici
al
autho
rity of
the
first
port,
within

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
24
hours
from
arrival
,
6 Ratific
ation
by
captai
n
under
oath.
(Arts.
813814)
GOODS NOT COVERED BY GENERAL AVERAGE
EVEN IF SACRIFICED
1 Goods carried on deck. (ART.855)
2 Goods not recorded in the books or records of
the vessel. (ART.855 (2))
3 Fuel for the vessel if there is more than
sufficient fuel for the voyage. (Rule IX, YorkAntwerp Rule)
Jettison
Act of throwing cargo overboard in order to
lighten the vessel.
Order of goods to be cast overboard:
1 Those which are on the deck, preferring the

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
heaviest one with the least utility and value;
2 Those which are below the upper deck,
beginning with the one with greatest weight
and smallest value. (Art. 815)
Jettisoned goods are not res nullius nor deemed
abandoned within the meaning of civil law so as
to be the object of occupation by salvage. (Pandect
of Commercial Law and Jurisprudence, Justice Jose
Vitug, 1997 ed.)
In order that the jettisoned goods may be
included in the gross or general average, the
existence of the cargo on board should be proven
by means of the bill of lading. (Art. 816)
York-Antwerp (Y-A) Rules on Determining
Liability for Averages With Regard To Deck
Cargo
1 Deck
cargo
is
allowed
only
in
domestic/coastwise/inter-island shipping, and is
prohibited
in
international/overseas/foreign
shipping.
2 If deck cargo is loaded with the consent of the
shipper on overseas trade, it must always
contribute to general average, but should the
same be jettisoned, it would not be entitled to
reimbursement because there is violation of
the Y-A Rules.
3 If deck cargo is loaded with the consent of the
shipper on coastwise shipping, it must always

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
contribute to general average and if jettisoned
would be entitled to reimbursement.
Reason: In domestic shipping, voyages are
usually short and the seas are generally not rough.
In overseas shipping, the vessel is exposed for
many days to perils of the sea.
DOMES
TIC

INTER
NATIO
NAL
Deck
Deck
cargo is cargo is
allowed not
allowed
With shippers
consent
General Particul
average
ar
average
Without shippers
consent
Captain Captain
is liable is liable
ARRIVAL UNDER STRESS (ARRIBADA)
The arrival of a vessel at the nearest and most
convenient port instead of the port of destination, if
during the voyage the vessel cannot continue the
trip to the port of destination.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Wh Wh Who
en
en bear
lawf unla s
ul
wful exp
ens
es:
The 1 Lac
inabi
k of
lity
pro
to
visi
conti
ons
nue
due
voya
to
ge is neg
due
lige
to
nce
lack
to
of
car
provi
ry
sions
acc
,
ordi
wellng
foun
to
ded
usa
fear
ge
of
and
seizu
cus
re,
to
priva
ms;

The
ship
own
er or
ship
agen
t is
liabl
e in
case
of
unla
wful
arriv
al
unde
r
stres
s.
But
they
shall
not

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
teers 2 Ris
,
k of
pirat
ene
es,
my
or
not
accid wel
ents
l
of
kno
the
wn
sea
or
disa
ma
bling
nife
it to st
navi 3 Def
gate.
ect
(Art.
of
819)
ves
sel
due
to
imp
rop
er
rep
air;
and
4 Mal
ice,
neg
lige

be
liabl
e for
the
dam
ages
caus
ed
by
reas
on of
a
lawf
ul
arriv
al.
(Art.
821)

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
nce
,
lac
k of
for
esi
ght
or
skil
l of
cap
tain
.
(Art
.
820
)
It is the duty of the captain to continue the
voyage without delay after the cause of the arrival
under stress has ceased failing in such duty renders
him liable. However, in case the cause has been
risk of enemies, there must first be an assembly
before departure. (Art. 825)
Steps:
1 Captain should determine during the voyage if
there is well founded fear of seizure, privateers
and other valid grounds;
2 Captain shall assemble the officers and
summon the persons interested in the cargo

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
who may attend the meeting but without a right
to vote;
3 The officers shall determine and 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 likewise be
entered in the minutes.
COLLISION
Impact of two vessels both of which are moving.
Allision
Impact between
stationary one.

moving

vessel

and

Nautical Rules to Determine Negligence


1 When two vessels are about to enter a port, the
farther one must allow the nearer to enter first; if
they collide, the fault is presumed to be
imputable to the one who arrived later, unless it
can be proved that there was no fault on its part.
2 When two vessels meet, the smaller should give
the right of way to the larger one.
3 A vessel leaving port should leave the way clear
for another which may be entering the same port.
4 The vessel which leaves later is presumed to

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
have collided against one which has left earlier.
5 There is a presumption against the vessel which
sets sail in the night.
6 There is a presumption against the vessel with
spread sails which collides with another which is
at anchor and cannot move, even when the crew
of the latter has received word to lift anchor,
when there was not sufficient time to do so or
there was fear of a greater damage or other
legitimate reason.
7 There is a presumption against an improperly
moored vessel.
8 There is a presumption against a vessel which has
no buoys to indicate the location of its anchors to
prevent damage to vessels which may approach
it.
9 Vessels must have proper look-outs or persons
trained as such and who have no other duty aside
therefrom. (Smith Bell v. CA)
Nautical Rules as to Sailing Vessel and
Steamship
1. Where a steamship and a sailing vessel are
approaching each other from opposite directions,
or on intersecting lines, the steamship from the
moment the sailing vessel is seen, shall watch
with the highest diligence her course and
movements so as to be able to adopt such timely
means of precaution as will necessarily prevent
the two boats from coming in contact.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
2. The sailing vessel is required to keep her course
unless the circumstances require otherwise.
Zones of Time in the Collision of Vessels
1 First zone all time up to the moment when risk
of collision begins.
No rule is as yet applicable for none is necessary.
2 Second zone time between moment when risk
of collision begins and moment it becomes a
practical certainty.
It is in this period where conduct of the vessels is
primordial. It is in this zone that vessels must
strictly observe nautical rules, unless a departure
therefrom becomes necessary to avoid imminent
danger.
3 Third zone time when collision is certain and
time of impact.
An error in this zone would no longer be legally
consequential.
Error in Extremis - sudden movement made by a
faultless vessel during the third zone of collision
with another vessel which is at fault during the 2nd
zone. Even if such sudden movement is wrong, no
responsibility will fall on said faultless vessel.
(Urrutia and Co. v. Baco River Plantation Co., 26
PHIL 632)
Cases Covered By Collision and Allision
1 One vessel at fault
Vessel at fault is liable for damage caused to

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
innocent vessel as well as damages suffered by the
owners of cargo of both vessels. (Art. 826)
2 Both vessels at fault
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art. 827)
3 Vessel at fault not known
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art. 828)
Doctrine of Inscrutable Fault In case of
collision where it cannot be determined which
between the two vessels was at fault, both
vessels bear their respective damage, but both
should be solidarily liable for damage to the cargo
of both vessels.
4 Third vessel at fault
The third vessel will be liable for losses and
damages. (Art. 831)
5 Fortuitous event/force majeure
No liability. Each bears its own loss. (Art. 830)
The doctrine of res ipsa loquitur applies in case a
moving vessel strikes a stationary object, such as a
bridge post, dock, or navigational aid. (Far Eastern
Shipping v. CA, Luzon Stevedoring vs. CA)
Even if the cause of action against the common
carrier is based on quasi-delict, the defense of due
diligence in the selection and supervision of

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
employees is unavailing in case of a maritime tort
resulting in collision. It is not a civil tort governed
by the Civil Code but a maritime one governed by
Arts. 826-839 of the Code of Commerce. (Manila
Steamship vs. Insa Abdulhaman)
Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied in
collision cases because of Art.827 of the Code of
Commerce. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite to recovery
of damages arising from collisions and other
maritime accidents.
It is a written statement made under oath by the
captain of a vessel after the occurrence of an
accident or disaster in which the vessel or cargo is
lost or damaged, with respect to the circumstances
attending such occurrence, for the purpose of
recovering losses and damages.
Excuses for not filing protest: 1) where the
interested person is not on board the vessel; and 2)
on collision time, need not be protested. (Art. 836)
Cases applicable:
1 Collision (Art. 835);
2 Arrival under stress (Art. 612(8));
3 Shipwrecks (Arts. 612(15), 843);

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
4 Where the vessel has gone through a hurricane
or when the captain believes that the cargo has
suffered damages or averages (Art. 624).
Who makes: Captain
When made: within 24 hours from the time the
collision took place.
Before whom made: competent authority at the
point of collision or at the first port of arrival, if in
the Philippines and to the Philippine consul, if the
collision took place abroad. (Art. 835)
SHIPWRECK
It is the loss of the vessel at sea as a
consequence of its grounding, or running against
an object in sea or on the coast. It occurs when the
vessel sustains injuries due to a marine peril
rendering her incapable of navigation.
If the wreck was due to malice, negligence or
lack of skill of the captain, the owner of the vessel
may demand indemnity from said captain. (Art.
841)
The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from a
vessel.
Applicability: Overseas trade only. (Commercial
Law Review, C. Villanueva, 2004 ed.)

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Significance: When a person brings in cargo
from abroad, he cannot unload and deliver the
cargo by himself. The unloading must be done by
the arrastre operator, which will then deliver the
cargo to the importer. (Commercial Law Review, C.
Villanueva, 2004 ed.)
Nature of business: It is a public utility,
discharging functions which are heavily invested
with public interest.
Liability:
1. Similar to a warehouseman (Lua Kian v. Manila
Railroad)
2. Similar to a common carrier (Northern Motors v.
Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may be
held liable, the consignee must prove that the
damage was due to the negligence and while the
goods are in the custody of the arrastre operator.
(Hartford Fire Insurance v. E. Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse or
pier to the holds of the vessel. (Chief of Staff vs.
CIR)
As understood in the port business, the term
consists of the handling of cargo from the hold of
the ship to the dock, in case of pier-side unloading;
or to a barge, in case of unloading at sea. (Anglo-Fil

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Trading Corp. vs. Lazaro)
The loading on the ship of outgoing cargo is also
part of stevedoring work. (Ibid.)
CONTAINERIZATION/
SAID-TO-CONTAIN/
SHIPPERS LOAD AND COUNT SYSTEM
System whereby the shipper loads his cargoes in
a specially designed container, seals the container
and delivers it to the carrier for transportation. The
carrier does not participate in the counting of the
merchandise for loading into the container, the
actual loading, and the sealing of the container. (US
Lines v. Comm. Of Customs, ICTSI v. Prudential
Guarantee)
The matter of quantity, description and
conditions of the cargo inside the container is the
sole responsibility of the shipper, unless there is
stipulation to the contrary. (US Lines vs. Comm. Of
Customs, Reyma Brokerage v. Phil. Home
Assurance)
Note: In order to attribute to the carrier any
damage to the shipment that may be found,
inspection of the goods should be done at pier-side.
(Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA
(C.A. No. 65)
APPLICABILITY

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REVIEWER/TRANSPORTATION LAW
The transportation must be:
1 Water/maritime transportation;
2 for the carriage of goods; and
3 overseas/international/foreign (from foreign port
to Philippine port).
It can be applied in domestic sea transportation
if agreed upon by the parties. (Clause paramount or
paramount clause)
IMPORTANT FEATURES:
1 Amount of carriers liability
2 Notice of damage
3 Prescriptive period
AMOUNT OF CARRIERS LIABILITY
Under the Sec. 4(5), the liability limit is set at
$500 per package or customary freight unit unless
the nature and value of such goods is declared by
the shipper. This is deemed incorporated in the bill
of lading even if not mentioned in it. (Eastern
Shipping vs. IAC, 150 SCRA 463)
Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a Patent damage: shipper should file a claim with
the carrier immediately upon delivery
b Latent damage: shipper should file a claim with
the carrier within three days from delivery.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Note: The filing of a notice of claim is not a
condition precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo should be
brought within one year after:
a Delivery of the goods (delivered but damaged
goods); or
b The date when the goods should have been
delivered (non-delivery). (Sec. 3[6])
Loss or Damage as applied to the COGSA
contemplates a situation where no delivery at all
was made by the shipper of the goods because the
same had perished, gone out of commerce, or
disappeared in such a way that their existence is
unknown or they cannot be recovered. Thus, it is
inapplicable in case of misdelivery or conversion.
(Ang vs. American Steamship Agencies Inc.) and
damage arising from delay or late delivery (Mitsui
O.S.K. Lines Ltd. vs. CA). In such instance the, Civil
Code rules on prescription shall apply.
The one-year prescriptive period is suspended
by:
1 The express agreement of the parties (Universal
Shipping Lines, Inc. vs. IAC, 188 SCRA 170)
2 The filing of an action in court until it is
dismissed. (Stevens & Co. vs. Nordeutscher

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Lloyd, 6 SCRA 180)
The one-year period shall run from delivery of
the last package and is not suspended by
extrajudicial demand. (Dole Phils.,Inc. vs. Maritime
Co.,148 SCRA 118)
The one-year period shall run from delivery to
the arrastre operator and not to the consignee.
(Union Carbide Phils, Inc. vs. Manila Railroad
Co.,SCRA 359)
The insurer exercising its right of subrogation is
bound by the one-year prescriptive period.
However, it does not apply to the claim against the
insurer for the insurance proceeds. (Fil. Merchants
Ins. Co. vs. Alejandro; Mayer Steel Pipe Corp. vs.
CA)
IV. WARSAW CONVENTION OF 1929 (WC)
PURPOSE:
To
protect
the
emerging
air
transportation industry and to secure the uniformity
of recovery by the passengers.
APPLICABILITY
The transportation must be:
1 International transportation;
2 Air transportation; and
3 Carriage of passengers, baggage or goods.
The WC shall also apply to fortuitous

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
transportation by aircraft performed by an air
transportation enterprise.
International transportation - any transportation
in which the place of departure and the place of
destination are situated either:
1. Within the territories of two High Contracting
Parties regardless of whether or not there be a
break in the transportation or transshipment, or
2. Within the territory of a single High Contracting
Party, if there is an agreed stopping place within a
territory subject to the sovereignty, mandate or
authority of another power, even though that
power is not a party to the Convention. (round
trip, Am. Jur.)
Transportation to be performed by several
successive air carriers shall be deemed to be one
undivided transportation, if it has been regarded by
the parties as a single operation, whether it has
been agreed upon under the form of a single
contract or of a series of contracts, and it shall not
lose its international character merely because one
contract or a series of contracts is to be performed
entirely within a territory subject to the
sovereignty, suzerainty, mandate, or authority of
the same High Contracting Party. (Art. 1 Sec.3)
WHEN INAPPLICABLE
1 When public policy is contradicted;

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REVIEWER/TRANSPORTATION LAW
2 If the requirements under the Convention are
not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a Passenger ticket
b Baggage check
c Air way bill
2. Liability of the carrier for damages
a Death or injury to passengers
b Loss or damage to baggage or goods
c Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PAS
SEN
GER
TICK
ET
Pass
enge
r

BAG
GAG
E
CHE
CK
Chec
kedin
bagg
age

AIR
WAY
BILL
Good
s to
be
shipp
ed

LIABILITY OF CARRIER FOR DAMAGES


1. Death or injury of a passenger if the accident
causing it took place on board the aircraft or in the

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
course of its operations of embarking or
disembarking; (Art. 17)
2. Destruction, loss or damage to any baggage or
goods, if it took place during the transportation by
air; (Art. 18) and
Transportation by air The period during which
the baggage or goods are in the charge of the
carrier, whether in an airport or on board an
aircraft, or, in case of a landing outside an airport,
in any place whatsoever.
It includes any transportation by land or 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.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19)
Note: The Hague Protocol amended the WC by
removing the provision that if the airline took all
necessary steps to avoid the damage, it could
exculpate itself completely (Art. 20(1)). (Alitalia vs.
IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended by
Guatemala Protocol, 1971; Alitalia vs. IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW

2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum by
consignor, carrier is liable to not more than the
declared sum unless it proves the sum is greater
than actual value.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum by
consignor, carrier is liable to not more than the
declared sum unless it proves the sum is greater
than actual value.
An agreement relieving the carrier from liability
or fixing a lower limit is null and void. (Art. 23)
Carrier is not entitled to the foregoing limit if the
damage is caused by willful misconduct or default
on its part. (Art. 25)
Thus, the WC does not operate as an exclusive
enumeration of the instances of an absolute limit of
the extent of liability. It does not preclude the
application of the Civil Code and other pertinent
local laws. It does not regulate or exclude liability

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
for other breaches of contract by the carrier, or
misconduct of its employees, or for some particular
or exceptional type of damage. (Alitalia vs. CA)
In PanAm v. IAC, the WC was applied as regards
the limitation on the carriers liability, there being a
simple loss of baggage without any improper
conduct on the part of the officials or employees of
the airline or other special injury sustained by the
passenger.
In KLM Royal v. Tuller, the WC has invariably
been held inapplicable, or as not restrictive of the
carriers liability, where there was satisfactory
evidence of malice or bad faith attributable to its
officers and employees. (Alitalia vs. IAC)

ACTION FOR DAMAGES


1. Notice of claim
A written complaint must me made within:
a 3 days from receipt of baggage
b 7 days from receipt of goods
c In case of delay, 14 days from receipt of
baggage/goods
The complaint is a condition precedent. Without
the complaint, the action is barred except in case of
fraud on the part of the carrier. (Art. 26)

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
2. Prescriptive period
Action must be filed within 2 years from:
a date of arrival at the destination
b date of expected arrival
c date on which the transportation stopped. (Art.
29)
In United Airlines vs. Uy the two-year
prescriptive period was not applied where the
airline employed delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1 Carriage of passengers
GENERAL RULE: Action is filed only against the
carrier in which the accident or delay occurred.
EXCEPTION: Agreement or contract whereby the
first carrier assumed liability for the whole journey.
2 Carriage of baggage or goods
a Passenger or consignor can file an action
against the first carrier and the carrier in which
the damage occurred
b Passenger or consignee can file an action
against the last carrier and the carrier in which
the damage occurred.
These carriers are jointly and severally liable.
(Art. 30)
A contract of international carriage by air,
although performed by different carriers under a

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
series of airline tickets constitutes a single
operation. Members of the International Air
Transportation Association (IATA) are under a
general pool partnership agreement wherein they
act as agent of each other in the issuance of tickets
to contracted passengers to boost ticket sales
worldwide and at the same time provide
passengers easy access to airlines which are
otherwise inaccessible in some parts of the world.
(American Airlines vs. CA)
Under a general pool partnership agreement, the
ticket-issuing airline is the principal in a contract of
carriage while the endorsee-airline is the agent.
The obligation of the former remained and did not
cease even when the breach occurred not on its
own flight but on that of another airline which had
undertaken to carry the passengers to one of their
destinations. (China Airlines vs. Chiok)
JURISDICTION
At the option of the plaintiff, the action for
damages may be filed in the:
a Court of domicile of the carrier;
b Court of its principal place of business;
c Court where it has a place of business through
which the contract has been made; or
d Court of the place of destination. (Art. 28(1))

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
NOTE: It is the passengers ultimate destination
not an agreed stopping place that determines the
country where suit is to be filed.
The forum of action provided in Art. 28(1) is a
matter of jurisdiction rather than of venue. (Santos
III vs. Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
Two concepts:
1. Services one person renders to the owner of a
ship or goods, by his own labor, preserving the
goods or the ship which the owner or those
entrusted with the care of them have either
abandoned in distress at sea, or are unable to
protect or secure.
2. Compensation allowed to persons by whose
voluntary assistance a ship at sea or her cargo or
both have been saved in whole or in part from
impending sea peril, or such property recovered
from actual peril or loss, as in cases of shipwreck,
derelict or recapture.
Requisites:
1 Valid object of salvage;
2 Object must have been exposed to marine peril
(not perils of the ship);
3 Services rendered voluntarily (neither an
existing duty nor out of a pre-existing contract);
4 Services are successful, total or partial.

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea, and
there sink and remain under water;
3. Floatsam or Flotsam goods which float upon
the sea when cast overboard;
4. Ligan or Lagan goods cast into the sea tied to a
buoy, so that they may be found again by the
owners (p.173, Judge Diaz).
Persons who have no right to a reward for
salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite of
opposition of the Captain or his representative;
3. In accordance with Sec. 3 of the Salvage Law, a
person who fails to deliver a salvaged vessel or
cargo to the Collector of Customs.
Derelict a ship or her cargo which is
abandoned and deserted at sea by those who are in
charge of it, without any hope of recovering it, or
without any intention of returning to it.
The intention of those in charge must be
ascertained. If those in charge left with the
intention of returning, or of procuring assistance,
the property is not derelict, but if they quitted the
property with the intention of finally leaving it, it is
derelict and a change of their intention and an
attempt to return will not change its nature

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
(Erlanger & Galinger vs. Swedish East Asiatic Co.
Ltd.).
If it is clear that the intention to return is slight,
the salvage which was done thereafter is
considered valid. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed. p. 616)
CONTRACT OF TOWAGE
A contract whereby one vessel, usually
motorized, pulls another, whether loaded or not
with merchandise, from one place to another, for a
compensation. It is a contract for services rather
than a contract of carriage.
SALVA
GE
Govern
ed
by
special
law (Act
No.
2616)

TOWA
GE
Govern
ed
by
Civil
Code
on
contrac
t
of
lease
Require Success
s
is
not
success require

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
,
otherwi
se no
paymen
t
Must be
done
with the
consent
of the
captain/
crewme
n
Vessel
must be
involve
d in an
acciden
t

Only
the
consent
of the
tugboat
owner
is
needed
Vessel
need
not be
involve
d in an
acciden
t
Fees
Fees
distribu belong
ted
to the
among tugboat
crewme owner
n
RULES ON SALVAGE REWARD
1 The reward is fixed by the RTC judge in the
absence of agreement or where the latter is

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
excessive. (Sec. 9)
2 The reward should constitute a sufficient
compensation for the outlay and effort of the
salvors and should be liberal enough to offer an
inducement to others to render services in similar
emergencies in the future.
3 If sold (no claim being made within 3 months
from publication), the proceeds, after deducting
expenses and the salvage claim, shall go to the
owner; if the latter does not claim it within 3
years, 50% of the said proceeds shall go to the
salvors, who shall divide it equitably, and the
other half to the government. (Secs. 11-12)
4 If a vessel is the salvor, the reward shall be
distributed as follows:
a 50% to the shipowner;
b 25% to the captain; and
c 25% to the officers and crew in proportion to
their salaries. (Sec. 13)
Taking passengers from a sinking ship, without
rendering any service in rescuing the vessel, is not
a salvage service, being a duty of humanity and not
for reward.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
PURPOSES:
1 To secure adequate, sustained service for the
public at the least possible cost;
2 To protect the public against unreasonable
charges and poor, inefficient service;
3 To protect and secure investments in public
services;
4 To prevent ruinous competition.
AUTHORITY TO OPERATE PUBLIC SERVICES
GENERAL RULE: No public service shall operate
without having been issued a certificate of public
convenience or a certificate of public convenience
and necessity.
EXCEPTIONS:
1 Warehouses;
2 Animal drawn vehicles and bancas moved by
oar or sail;
3 Airships, except for the fixing of maximum rates
for fare and freight;
4 Radio companies, except for rates fixing;
5 Public services owned or operated by the
government, except as to rates fixing;
6 Ice plants; and
7 Public markets.
PUBLIC SERVICE
A person who owns, operates, manages or
controls in the Philippines for hire or compensation,
with general or limited clientele, whether

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
permanent, occasional or accidental, and done for
general business purposes, any common carrier or
public utility, ice plants, power and water supplies,
communication and similar public services. (Sec.
13b, CA 146)
A casual or incidental service devoid of public
character and interest is not brought within the
category. The question depends on such factors as
the extent of services, whether such person or
company has held himself or itself out as ready to
serve the public or a portion of the public generally.
(Luzon Stevedoring vs. PSC)
NOTE: The Public Service Commission created
under the Public Service Law has already been
abolished under P.D. No. 1 and other issuances. It
has been replaced by the following government
agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB;
NWRC; CAB; and MIA.
CERTIF
ICATE
OF
PUBLIC
CONVE
NIENC
E
(CPC)

CERTIF
ICATE
OF
PUBLIC
CONVE
NIENC
E AND
NECES
SITY

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
(CPCN)
An
authori
zation
issued
by the
appropr
iate
govern
ment
agency
for the
operati
on
of
public
service
s
for
which
no
franchis
e,
either
municip
al
or
legislati
ve,
is
require
d
by

An
authori
zation
issued
by the
appropr
iate
govern
ment
agency
for the
operati
on
of
public
service
for
which a
prior
franchis
e
is
require
d
by
law;
e.g.
telepho
ne and
other

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
law,
service
e.g.,
s.
commo
n
carriers
.
A CPC or a CPCN constitutes neither a franchise
nor a contract, confers no property right, and is a
mere license or a privilege. The holder of said
certificate does not acquire a property right in the
route covered thereby. Nor does it confer upon the
holder any proprietary right or interest or franchise
in the public highways. Revocation of this
certificate deprives him of no vested right. New and
additional burdens, alteration of the certificate, or
even revocation or annulment thereof is reserved
to the State. (Luque vs. Villegas, 30 SCRA 408)
It is a property and has a considerable value
and can be the subject of sale or attachment.
(Cogeo-Cubao Operators and Drivers Assn. vs. CA,
207 SCRA 343, Raymundo vs. Luneta Motor Co.)
REQUREMENTS FOR GRANTING CPC OR CPCN
1 Applicant must be a citizen of the Philippines or a
corporation or entity 60% of the capital of which
is owned by such citizens;
2 Applicant must prove public necessity;
3 Applicant must prove that the operation of the

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
public service proposed and the authorization to
do business will promote the public interest on a
proper and suitable manner;
4 Applicant must have sufficient financial capability
to undertake the proposed services and meeting
the responsibilities incident to its operation.
POWE POWER
RS
S
REQUI EXERCI
RING SABLE
PRIOR WITHO
NOTIC
UT
E AND PRIOR
HEARI NOTIC
NG
E AND
HEARI
NG
1 Issua 1 Invest
nce
igatio
of
n any
CPC
matte
or
r
CPCN
conce
;
rning
2 Fixing
public
of
servic
rates,
e;

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
tolls, 2 Requir
and
ing
charg
opera
es;
tors
3 Settin
to
g up furnis
of
h
stand
safe,
ards
adequ
and
ate,
classi
and
ficati
prope
ons;
r
4 Estab
servic
lishm
e;
ent of 3 Requir
rules
ing
to
public
secur
servic
e
es to
accur
pay
acy
expen
of all ses of
meter invest
s and igatio
all
n;
meas 4 Valuat
uring
ion of
appli
prope
ances
rties

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
;
of
5 Issua
public
nce
utilitie
of
s;
order 5 Exami
s
nation
requir
and
ing
test of
estab
meas
lishm
uring
ent or applia
maint
nces;
enan 6 Grant
ce of of
exten
specia
sion
l
of
permi
faciliti ts to
es;
make
6 Revoc extra
ation,
or
or
specia
modi
l trips
ficati
in
on of territo
CPC
ries
or
specifi
CPCN
ed in
;
the
7.
certifi

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
Suspen
cate;
sion of 7 Unifor
CPC or m
CPCN,
accou
except
nting
when it syste
is
m and
necess
furnis
ary to hing
avoid
of
serious
annua
and
l
irrepar
report
able
s;
damag 8 Comp
e
or elling
inconve compl
nience
iance
to the with
public
the
or
laws
private
and
interest
regula
,
in tions.
which
case, a
suspen
sion
not
more

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
than 30
days
may be
ordered
, prior
to the
hearing
.
(Sorian
o
v.
Medina
,
164
SCRA
36)
UNLAWFUL
ACTS
OF
PUBLIC
UTILITY
COMPANIES
1 Engagement in public service business without
first securing the proper certificate;
2 Providing or maintaining unsafe, improper or
inadequate service as determined by the proper
authority;
3 Committing any act of unreasonable and unjust
preferential treatment to any particular person,
corporation or entity as determined by the proper
authority;
4 Refusing or neglecting to carry public mail upon
request. (Secs. 18 and 19)
ACTS REQUIRING PRIOR APPROVAL

COMMERCIAL LAW
REVIEWER/TRANSPORTATION LAW
1 Establish and maintain individual or joint rates;
2 Establish and operate new units;
3 Issue free tickets;
4 Issue any stock or stock certificates representing
an increase of capital;
5 Capitalize any franchise in excess of the amount
actually paid to the Government;
6 Sell, alienate, mortgage or lease property,
certificates or franchise.
Under Sec. 20(g) of C.A. No. 146, the sale, etc.
may be negotiated and completed before the
approval by the proper authority. Its approval is not
a condition precedent to the validity of the
contract. The approval is necessary only to protect
public interest.
PRIOR OPERATOR/OLD OPERATOR RULE
The rule allowing an existing franchised operator
to invoke a preferential right within the authorized
territory as long as he renders satisfactory and
economical service.
The policy is not to issue a certificate to a second
operator to cover the same field and in competition
with a first operator who is rendering sufficient,
adequate and satisfactory service.
The prior
operator must first be given an opportunity to
improve its service, if inadequate or deficient.
Purpose: To prevent ruinous and wasteful
competition in order that the interests of the public

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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
The rate to be fixed must be just, founded upon
conditions which are fair and reasonable to both
the owner and the public.
A rate is just and reasonable if it conforms to the
following requirements:
1 One which yields to the carrier a fair return
upon the value of the property employed in

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performing the service; and
2 One which is fair to the public for the service
rendered.
REGISTERED OWNER RULE
The registered owner of a certificate of public
convenience is liable to the public for the injuries or
damages suffered by third persons caused by the
operation of said vehicle, even though the same
had been transferred to a third person.
The registered owner is not allowed to escape
responsibility by proving that a third person is the
actual and real owner Reason: It would be easy for
him, by collusion with others or otherwise, to
transfer the responsibility to an indefinite person,
or to one who possesses no property with which to
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 inexistent under Art. 1409,
Civil Code.
Effects:
1 The transfer, sale, lease or assignment of the
privilege granted is valid between the contracting

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parties but not upon the public or third persons.
(Gelisan vs. Alday, 154 SCRA 388)

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2 The registered owner is primarily liable for all the
consequences flowing from the operations of the
carrier.
The public has the right to assume that the
registered owner is the actual or lawful owner
thereof. It would be very difficult and often
impossible, as a practical matter, for the public to
enforce their rights of action that they may have
for injuries inflicted by the vehicle if they should
be required to prove who the actual owner is.
(Benedicto vs. IAC, 187 SCRA 547)
3 The thrust of the law in enjoining the kabit system
is to identify the person upon whom responsibility
may be fixed with the end in view of protecting
the riding public (Lim vs. CA 373 SCRA 394).
4 The registered owner cannot recover from the
actual owner and the latter cannot obtain transfer
of the vehicle to himself, both being in pari
delicto. (Teja Marketing vs. IAC)
5 For the better protection of the public, both the
registered owner and the actual owner are jointly
and severally liable with the driver. (Zamboanga
Transportation Co. vs. CA)

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