Chapter 8

APPLICABLE LAWS AND RULES

Mortgage and other encumbrances over vessels are governed by the provisions of PD 1521
or also known as the SHIP MORTGAGE DECREE OF 1978 as well as Sec. 12 of EO No.
125, as amended , is being implemented with respect to ANNOTATION/CANCELLATION of
mortgages and transfer of rights and other encumbrances of vessels Memorandum
circular #100 issued by MARINA.
WITH RESPECT TO PREFERRED MORTGAGE, provisions of PD 1521 prevail over CIVIL
CODE AND CODE OF COMMERCE provisions. REASON: General legislation must give way
to special legislation on the same subject.
(Source: PD 1521 or also known as the SHIP MORTGAGE DECREE OF 1978) was enacted to
accelerate the growth and development of the shipping industry and to extend benefits
accorded to overseas shipping under PD 214 to domestic shipping.
Who may constitute a ship mortgage? ( Sec. 2)
a. Any citizen of the Philippines;and
b. Any association or corporation organized under the laws of the Philippines, at least 60%
of the capital of which is owned by citizens of the Philippines
( PURPOSE) may for the purpose of financing the CONSTRUCTION,
ACQUISITION , PURCHASE of vessels or INITIAL OPERATION of vessels, freely
constitute a mortgage or any other lien or encumbrance on his or its vessel and
its equipment with ANY BANK, OR OTHER FINANCIAL INSTITUTIONS, domestic or
foreign.
NO Mortgage of Vessel of Domestic ownership, as the whole or any part thereof,
shall be valid, in respect to such vessel against any person other than the
mortgagor, his heir or assign , and a person having actual notice thereof, UNTIL
SUCH MORTGAGE IS RECORDED IN THE OFFICE OF THE PHILIPPINE COAST
GUARD OF THE PORT OF DOCUMENTATION OF SUCH VESSEL.
The Coast Guard District or Station Commander shall record mortgages delivered
to him in THE ORDER OF RECEPTION, in books to be kept for that purpose and
indexed to show:
a.
b.
c.
d.
e.
f.
g.

Name of the vessel;

Names of parties to the mortgage;
Time and date of reception of the instrument;
The interest in the vessel so mortgaged;
The amount and date of maturity of the mortgage;
Name, citizenship, nationality and residence of the owner;and
Any material change of condition in respect to any of the preceding items.
A copy of the instrument shall be furnished the CENTRAL BANK.

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Preferred mortgages- A valid mortgage which at the time it is made includes THE
WHOLE OF ANY VESSEL OF DOMESTIC OWNERSHIP shall have, in respect to
such vessel and as of date of recordation, the PREFFERED STATUS given by SEC.
17 , IF:
a. The mortgage is RECORDED;
b. AFFIDAVIT IS FILED with the record of such mortgage to the effect that mortgage is
made in good faith and without any desire to HINDER, DELAY, or DEFRAUD any
existing or future creditor of the mortgagor or any lien or of the mortgaged vessel;
c. The mortgage does NOT STIPULATE that the MORTGAGEE WAIVES the
PREFERRED STATUS;

A vessel holding s Provisional Certificate of Philippine Registry is considered a vessel

of domestic ownership such that it can be subject of preferred mortgage.
There shall be endorsed upon the documents of a vessel covered by a preferred
mortgage Endorsement shall be made by the ff:
a. Coast guard district or station commander of the port of documentation of the mortgaged
vessel;and
b. Coast guard district or station commander of any port in which the vessel is found .
A mortgage includes property other than a vessel shall not be held a preferred
mortgage unless the mortgage provides for SEPARATE DISCHARGE OF SUCH
PROPERTY by payment of specified portion of the mortgage indebtedness.
A mortgage includes MORE THAN 1 VESSEL and provides for separate discharge
of each vessel by payment of a portion of mortgage indebtedness, the amount of
such payment shall be endorsed upon the documents of the vessel.
In case such mortgage DOES NOT PROVIDE for SEPARATE DISCHARGE and the
vessel is to be sold upon the order of the Philippines in a suit in rem in admirality,
the court shall determine the portion of the mortgage indebtedness INCREASED
BY 20 per centum : 1.) Which in the opinion of the court, the approx. value of all
vessels covered by mortgage, and 2. Upon payment of which the vessel shall be
discharged from mortgage.
PREFERRED CLAIMS: Sec. 17 provides that preferred mortgage lien should have
PRIORITY OVER ALL CLAIMS against the vessel , EXCEPT the ff claims:
a. Expenses and Fees allowed and Costs taxed by the court and taxes due to
government;
b. Crews wages;
c. General average;
d. Salvage , including contract salvage;
e. Maritime liens arising PRIOR in time to the recording of the preferred
mortgage;
f. Damages arising out of tort;and
g. Preferred mortgage registered prior in time.
Certified copies of mortgage:

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Coast guard district or station commander upon recording of a preferred mortgage shall
deliver 2 certified copies thereof to : 1. MORTGAGOR who shall pla ce, and use due
diligence to retain , one copy on board the vessel mortgaged notice of which shall be
POSTED in a CONSPICUOUS place and cause such copy and documents to be
exhibited by the MASTER to any person having business with the vessel. If MASTER
WILLFULLY FAILED TO EXHIBIT: His masters license may be suspended or
cancelled by the Phil. Coast Guard.
Prior or subsequent maritime liensMortgagor shall: 1. Upon request of the mortgagee, disclose in writing to him prior to
execution of any preferred mortgage the existence of any maritime lien, prior mortgage
or other obligation or liability upon the vessel to be mortgaged , that is KNOWN to the
MORTGAGOR; 2.) Without consent of the mortgagee, shall NOT incur , AFTER the
execution of such mortgage MADE ANY CONTRACTUAL OBLIGATION CREATING A
LIEN upon the vessel, other than : LIEN FOR WAGES OF STEVEDORES when
employed directly by the owner, operator, master, ships husband or agent of the vessel ,
for wages of the crew, GENERAL AVERAGES or for SALVAGE , TONNAGE DUES and
all other charges NOT EXCEEDING P20,000.
Penalties: A mortgagor with intent to defraud, violates the above: FINE NOT MORE
THAN P 5,000 or imprisonment of NOT MORE THAN 2 years
RECORD of Notice of Claim of Lien ; discharge of lien
NB: MARINA now administers the annotation and or cancellation of the ANY
mortgage over the vessels.
Arrest of Vessels: Upon filling of the petition for judicial foreclosure of a preferred ship
mortgage or immediately thereafter, the applicant may apply ex-parte for an order for the
arrest of the mortgaged vessel and the judge shall immediately issue the same ,
provided that it is made to appear by affidavit of the applicant , or some other person
who personally knows the fact thats that a default in the mortgage has occurred
and that the applicant files a bond executed to the adverse party in an amount to be
fixed by judge , not exceeding the applicants claim.
Extrajudicial Foreclosure The provisions of Chattel Mortgage Law on the remedy
of extra-judicial foreclosure of mortgages in so far as not inconsistent SHALL
STILL APPLY.
Foreign Ship Mortgages. Preferred mortgage shall include any mortgage,
hyphotecation or similar charge attested as security upon any documented foreign
vessel if such has been duly and validly executed in accordance with the laws of the
foreign nation under the laws of which the vessel is documented and has been duly
registered. Preferred mortgage lien in case of foreign vessel shall be subordinate to
maritime liens for repairs, supplies, towage, use of drydock or maritime railway or other
necessaries, performed or supplied in the Philippines.

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MARITIME LIEN: In general terms, it is a privileged claim on a vessel for some service rendered to i

NB: Despite transfer of ownership , lien is not extinguished. Lien is

INSEPARABLE from the vessel and until discharged, it follows the vessel. Its
enforcement is in the nature of a quasi in rem proceeding.
Prescription: enforcement of a maritime lien imposed by special law prescribes in 10
years. Laches may also lie if there was unreasonable delay on the part of claimant in
asserting its rights.
Maritime Liens for Necessaries. Maritime liens that are superior to the preferred
mortgage includes maritime lien for necessaries. Section 21 provides for the ff
requirements for a maritime lien for necessaries which is enforceable by suit in rem:
a. Necessaries must have been furnished to and for the benefit of the vessel;
b. The necessaries must have been necessary for continuation of the voyage;
c. The credit must have been extended to the vessel;
d. There must be necessity for the extension of the credit ; and
e. The necessaries must be ordered by persons authorized to contract on behalf of the
vessel;
The following persons shall be presumed to have authority from the owner to
procure repairs , supplies, towage, use of dry dock or marine railway and other
necessities for the vessel:
a. The managing owner;
b. Ships husband;
c. Master or;
d. Any person to whom the management of the vessel at the port of supply is entrusted.
Examples of maritime lien for necessaries are:
a. Expenses for the payment of bunker oil/ fuel;
b. Unused stores and oil;
c. Bonded stores;
d. Provisions;
e. Repairs and docking of vessel
f. The cost of modification;
g. Expense on the vessel that is indispensable to the maintenance and navigation of
the vessel.

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 Necessity of credit will be presumed where it appears that the repairs and
supplies were necessary for the ship and that they were ordered by the master.
NO PRESUMPTION , IF THE MASTER DID NOT ORDER THE FUELS AND NO
PROOF OF NECESSITY FOR THE SUPPLIES.
MARITIME TORT: Torts contemplated under Sec 17 are maritime torts. it is defined as
CIVIL WRONG COMMITTED ON navigable waters. As general principle, any conduct
which is tortious under general law and which is connected with the ship or its uses
creates a maritime lien. It includes collision claims and personal injury claims.
Salvage lien: either ex contractu or that imposed by Act No. 2616. Salvage is given
preference because of the benefit conferred in PRESERVING THE VALUE OF THE
VESSEL and the CARGO.
When proceeds NOT sufficient: the residue shall be divided among them pro rata. All
credits not paid, whether fully or partially shall subsist as ordinary credits enforceable by
personal action against debtor.
Test to determine the presence of maritime lien
a. In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in
a foreign port, whether such lien exist or whether the court has or will exercise
jurisdiction, depends upon the law of the country where the supplies were
furnished, which must be pleaded and proved;
b. Lauritzen-Romero-Rhodits trilogy of case: 1.) place of wrongful act;2.) law of the
flag 3.) allegiance or domicile of the injured 4.) allegiance of the defendant
shipowner; 5.) place of contract;6.) inaccessibility of foreign forum;and 7.) law of the
forum.
c. Factors provided in Restatement of Conflicts of Law: In the absence of effective
choice of law by the parties, the forum contacts should be considered include: a. the
place of forum contacts to be considered include the : a. place of the contracting
parties; b. place of negotiation; c.place of performance; d.) location of the subject
matter of the contract; and e. domicile and residence , nationality , place of
incorporation of business of the parties.

EXECUTORY CONTRACT DOCTRINE A lien does not attach for breach of an executory contract e

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NB: MARINA now administers the annotation and or cancellation of the

ANY mortgage over the vessels.
Mortgage with non-maritime property: In case a mortgage which
includes property other than vessel , the mortgage shall NOT BE HELD A
PREFERRED mortgage UNLESS the mortgage provides for the separate
discharge of such property by payment of specified portion of mortgage
indebtedness.
If a preferred mortgage so provides for separate discharge, the
amount of the portion of such payment shall be endorsed upon the
documents of the vessel;
The rules do not apply to mortgage over the vessel and her freight
because the freight in this situation is considered part of the vessel
for such purpose.
It is more advisable to take separate mortgages on the maritime and
non-maritime property BECAUSE there is no discernable advantage
in the composite mortgage, since there must be a separate
recordation of the ship and non-maritime property and foreclosure
actions on default.
Foreclosure: is only an alternative remedy. The mortgagee may avail of the
laternative remedy of specific performance in suit in personam in admiralty.
Chapter 9
Persons who take part in Maritime Commerce
Liability of Shipowners and ship agents: Shipowner is the person
PRIMARILY LIABLE for damages sustained in the operation of the vessel;
Naviero under the Code of Commerce includes: SHIP OWNER, AGENT
and even CHARTERER who is considered as owner pro hac vice.
SHIP AGENT: under the code of commerce, a person entrusted with the
provisioning of the vessel , or represents her in the port in which she
happens to be. LIABILITY: Joint and several with the owner.
EXTENT OF LIABILITY: The joint and several liability applies to BOTH for
breach of contract and extra contractual obligations such as tort. The
liability is however subject to the LIMITED LIABILTY RULE.
Shipowner and ship agent shall be CIVILLY LIABLE for the ACTS of
the CAPTAIN and for the OBLIGATIONS contracted by the latter to
REPAIR, EQUIP, and PROVISION the vessel, PROVIDED that the
creditor PROVES that the amount was invested for the benefit of the
same.
Ship agent shall also be CIVILLY LIABLE for the indemnities in favour
of 3rd persons which may arise from the CONDUCT OF THE CAPTAIN in
the care of goods which he loaded on the vessel; BUT he may
EXEMPT therefrom by ABANDONING the VESSEL with all her
equipments and the freight may have earned during the voyage.

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 When captain acts in excess of authority : GR: Owner and agent shall
not be held liable . Exception: Owner and agent shall be liable if the
proceeds of an obligation redounded to the benefit of the vessel.
Liability for extra-contractual obligations: Owner and agent are liable
for tortious acts of captain/agents. If the cause of action is based on quasi
delict, there is a vicarious liability on the part of the employer( Direct and
Primary liable with employee)
Part owners: If 2 or more persons should part owners of a merchant
vessel, a partnership shall be presumed established by the co-owners.
a. The partnership shall be governed by the resolutions of majority of
members;
b. A vessel shall not be detained or levied upon in execution in its entirety for
private debts of a part owner, but the proceedings shall be limited to the
interest which the debtor may have in the vessel without interfering with
the navigation.
c. Co-owners shall be civilly liable in the proportion of their interests in the
common fund, for the results of the acts of the captain;
d. Each co-owner may exempt himself by abandonment before a notary of
the part of the vessel belonging to him;
e. Shall likewise be liable in the same proportion for the expenses for the
maintenance , equipment and provisioning of vessel, necessary for
navigation.
Ship agent must have the capacity to trade and must be recorded in
the mechants registry of the province.
a. Ship agent ( POWER) can enter into contracts to provision the ship. He can
purchase necessary supplies for particular voyage.
b. Represent the vessel in any action in court or tribunal;
c. May discharge the duties of captain of the vessel ( governed by the Labor
Code for domestic while POEA rules for seamen hired overseas)
d. Duty to account the results of each voyage without prejudice to always
having the books and correspondence relating to the vessel and to its
voyage as their disposal.
e. Indemnify the captain for all expenses he may have incurred for the
benefit of the vessel
LIMITATIONS
a. May not order a new voyage or make contracts for new charter or insure
the vessel without the authorization of its owner or resolution of majority
of co-owners, UNLESS POWERS WERE GRANTED TO HIM in the
CERTIFICATE of HIS appointment;
b. If he insures the vessel without authorization therefore, he shall be
subsidiarily liable for the solvency of the insurer;
Captain- applied to those who govern vessels that navigate the high seas or
large dimensions and importance;
Masters- those who command smaller ships engaged exclusively in the
coastwise trade.
HOWEVER, for purpose of Maritime Commerce, the words have same
meaning.

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MARINA RULES: Master: person having command of the ship whether

domestic or international trade. While a boat captain: a person authorized
by MARINA to act as officer or command a boat or ship or has license to act
as such.
Qualifications: Masters, Captains or Patrons of vessel:
a. Must be Filipinos;
b. Must have the capacity to contract;
c. Proven skills, capacity and qualifications necessary to command and
direct the vessel;and
d. Must not be disqualified for the discharge of duties of the position.
Powers and Functions
a. Captain of the vessel is a confidential , fiduciary and managerial
employee;
b. It has 3 distinct roles:
1. General agent of the shipowner; ( has the authority to sign bill of
lading, agree whether to take cargo, deal with freight earned, agree
upon the rates)
2. Commander and technical director of the vessel; ( most important
role: has to do with operation and preservation of vessel during voyage
and protection of passengers, crews and cargoes.
3. Representative of the country under whose flag he navigates;
Powers inherent to captain, master or patron of a vessel:
1. To appoint or make contracts with the crew in the absence of the ship
agent ; but shipagent may not employ any member against the captains
express refusal;
2. To command the crew and direct the vessel to the port of its
destination , in accordance with transactions he may have received from
the ship agent;
3. To impose in accordance with contracts and laws and regulations of the
merchant marine and when on board the vessel , correctional punishment
upon those who fail to comply with his orders
4. Hold preliminary hearing on crimes committed on board the vessel on the
seas, which crimes should be turned over to the authorities having
jurisdiction over the same at first port touched;
5. To make contracts for the charter of the vessel in absence of ship
agent or its consignee
6. Protect the interest of the owner with utmost care
7. To adopt all proper measures to keep the vessel well supplied and
equipped, purchasing all that may be necessary for the purpose , provided
no time to request instruction from ship agent;
8. To order, in similar urgent cases while on voyage, the repairs on
the hull and engines of the vessel which are necessary to finish
the voyage.
Discretion of Captain or Master: A ship captain must be accorded
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.
Liability of Captains and Masters:

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The captain shall be civilly liable to the SHIP agent and the latter to
3rd persons who may have made contracts with the former:
1. For all damages suffered by the vessel and its cargo by reason of want of
skill or negligence on his part. If a misdemeanour or crime be committed,
shall be liable under ROC;
2. For all the thefts committed by crew, reserving his right of action against
the guilty party;
3. For losses ,fines, confiscations imposed an account of violation of
customs, police , health and navigation laws;
4. For losses and damages caused by mutinies on board the vessel or by
reasons of faults committed by the crew in service and defense of the
same , if he does not prove that he made timely use of all his authority to
prevent or avoid them;
5. For caused by misuse of powers and non-fullfilment of obligations
6. For those arising by reason of his going out of his course or taking course
which he should NOT have taken without sufficient cause
7. For those arising by reason of his voluntarily entering a port other than
that of his destination , outside of the cases;
8. For those arising by reason of non-observance of the provisions contained
in the regulations on situation of lights and maneuvers for the purpose of
preventing collisions;
Pilotage: A Pilot, in maritime law, is a person duly qualified and licensed
, to conduct a vessel into or out of ports, or certain waters. IN BROAD
SENSE, Pilot includes both: 1. Those whose duty is to guide vessels into
or out of the ports, or in particular waters; and 2. Those entrusted with
the navigation of the vessel on high seas.
Compulsory Pilotage: States possessing harbors have enacted laws or
promulgated rules requiring vessels approaching their ports to take on board
pilots licensed under local laws. It is implemented in Port of Manila.
The HARBOUR PILOTS shall be responsible for damage caused to a
vessel, or to life and property at ports due to his negligence or fault; he
can only be ABSOLVED if the accident is due to force majeure or natural
calamities, provided he has exercised prudence and EXTRAORDINARY
diligence to prevent damage.
The MASTER shall retain OVERALL command of the vessel even on
pilotage grounds whereby he can countermand or overrule the order or
command of harbour pilot on board. Liability of the ship owner with right of
recourse against the master.
Duties of Pilot:
a. Pilot shall be responsible for direction of vessel from the time he assumes
his work as a pilot until he leaves it anchored or berthed safely.
Shipowner and Pilot: In general, PILOT shall be personally liable for
damages caused by his own negligence or default to the owners of the vessel
or to 3rd parties for damages sustained in a collision. Such negligence of the
pilot in the performance of duty shall constitutes maritime tort.

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 Colliding vessel is prima facie responsible, hence, the burden of

proof is upon the party claiming benefit of the exemption from
liability.
Pilot association is NOT jointly and severally liable with the member
pilot. No employer-employee relationship.
Officers and Crew of vessels: the complement of a vessel shall be
understood as : ALL persons on board, from the captain to the cabin boy ,
necessary for the management , maneuvers and service and therefore,
the complement shall include the : Crew, sailing mates, engineers,
strokers, and other employees on board not having specific
designations; BUT shall not include passengers or persons whom the
vessel is transporting.
SAILING MATE: The chief or sailing mate is the 2 nd in command . next
only to the captain of the vessel.
Memorandum Circular # 137:
Master- is a person having command of a ship
Deck officer- means an officer qualified in accordance with provisions of
International Convention on Standards of Training Cerification and Watchkeeping
for seafarers (STCW) of 1978 as amended.
Chief Engineer- a senior licensed marine engineer responsible for mechanical
propulsion and operation and maintenance of mechanical and electrical
installations of the ship
Engineer Officer officer qualified in accordance with the provisions of STCW
Radio Officerperson holding appropriate certificate and recognized by
Administartion under provisions of Radio Regulations
Ratings man is a member of the ships crew other than the master or officer
Memorandum Circular # 148:
Officer: a member of the crew other than the master, who has been designated
as such national law or regulation or in the absence of such designation , by
collective agreement or custom.
Chief mate officer next in rank to the master and upon whom the command of a
ship will fall in the event of incapacity of the Master.
Major Patron- a marine deck officer duly registered and certificated to act as
officer duly registered and certificated to act as officer or master of vessel not
more than 500 GT navigating in major coastwise trade routes within territorial
limits of the Philippines.
Minor Patron- a marine deck officer duly registered and certificated to act as
officer duly registered and certificated to act as officer or master of vessel not
more than 250 GT navigating in minor coastwise trade routes within territorial
limits of the Philippines.
REGULATIONS OF MERCHANT MARINE PROFESSION: governed by
special laws and pertinent rules issued by MARINA and Board of

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Marine Deck Officers and Board of Marine Engineer Officers. Phil.

Merchant Marine Officers Act of 1998.
Merchant Marine Profession: shall refer to the profession requiring
the application of fundamental and known principles of navigation ,
seamanship, and engineering to the peculiar condition and
requirements of on board management , operation and maintenance of
main propulsion and auxiliary engines, stability and trim of the vessel
and cargo handling. It shall also cover but will not be limited to the
following:
a. Proper handling and stowage of cargoes on board which includes
the safe carriage of passengers from port of origin to port of
destination
b. Safe watchkeeping of the vessels navigation in accordance with the
rules of the road at the sea;
c. Maritime education and training cadets and other marine
professionals;
d. Employment with government.
Merchant Marine vessel: shall apply only to the commercial ships,
propelled by machinery , public or private, strictly engaged in maritime
commerce, both seagoing and or near coastal trade, vessels engaged
in the training of cadets for merchant marine profession and non
combatant vessel in the Phil. Government.
Minimum safe manning: There must be sufficient number of officers
and crew that are serving the vessel;
International or domestic trade, seagoing ships are required to
be completely manned by Filipinos seafarers and NO foreign
officers shall be allowed onboard unless approved by MARINA.
Security of tenure: No employee can be dismissed without JUST
cause and without affording due process.
a. APPLICABLE LAWS
Labor Code: domestic trade or coastwise shipping.
POEA Regulations and Migrant Workers and Overseas
Filipinos Act of 1995: Foreign vessel
Termination of Employment:
a. When seafarer completes his period of contractual service aboard the
vessel , sign off from the vessel and arrives at point of hire;
b. When the seafarer signs-off and is disembarked for medical reasons;
c. Due to shipwreck, ships sale, lay-up of vessel, discontinuance of voyage
or change of vessel principal;
d. Voluntary resignation in writing and signs off prior to expiration of
contract
e. Discharged for just cause
Chapter 10 Charter Party ( skipped for purpose of the quiz)
Chapter 11 Loans on Bottomry and Respondentia
Bottomry: In maritime commerce, it is a contract whereby the owner of a
ship borrows for the use , equipment or repair of the vessel , for a definite

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term , and pledges the ship ( or the keel or bottom of the ship pars pro toto)
as security with the stipulation that if the ship is lost during the
voyage or during the limited time on account of the perils
enumerated , the lender shall lose his money.
Where goods or some part thereof , are hypothecated as security for
a loan, the repayment of which is dependent upon maritime risks, what
ensues is a loan respondentia. The usual form of a loan on
respondentia is that of a bond. It is the borrowers personal
responsibility which is deemed to be the principal security for the
performance of the contract, hence the term respondentia.
The peculiarity of loans on bottomry and respondentia arose from
the hazards of the trade whereby the lender had to bear with and assume
, the numerous marine perils that lay in the path of many ships voyage ; and
thus upon termination of a safe journey, he is entitled to received thereby a
greater return on his principal than would ordinarily to be received by a
lender in a simple load. However, the lender in loan on respondentia does not
lose capital should the ship perish due to marine peril so long as the goods
subject of the loan survive or saved. But if the cargo on board should
disappear due to perils of the sea, the lender on respondentia shall suffer loss
of his capital.
Distinguished from simple loan.
1. In bottomry or respondentia, there must be a MARINE RISK and the
existence of which must be duly established; Simple loan, NO
NEED.
2. In bottomry or respondentia must be executed in accordance with
FORM AND MANNER required by CODE of COMMERCE; Simple loan,
general provisions on contract shall apply
3. In bottomry or respondentia must be RECORDED in the registry of
vessel in order to bind 3rd parties; Simple loan NO SUCH
REGISTRATION;
4. In bottomry or respondentia, preference is extended to the LAST
LENDER if there be several lenders on theory that were it not for
the last lenders , then the prior lenders would not have benefited
from preservation of the security; Simple loan, 1 st lender, as
general rule.
Authority to constitute loan on bottomry: The SHIPOWNER may
secure a loan on bottomry upon his ship in case where he is only a part
owner , any bottomry that he may contract shall be limited only to the
extent of his interest in the vessel. The ship captain, who is part
owner , may like manner obtain a loan on bottomry only to the extent
of interest.
Authority to constitute loan on bottomry:
The cargo owner
shall have the right to enter into respondentia involving his
cargo.
Captain may NOT contract a loan on respondentia ( he is an agent of
the ship owner and not the cargo owner)
Forms of the Loans:
a. By means of a public instrument;

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b. By means of a policy signed by contracting parties and the broker

taking part therein;
c. By means of private instrument
d. Must be entered in the certificate of registry of the vessel and shall
be recorded in the registry of vessel.
e. The contract must contain a statement of the kind, name and
registry of the vessel : the name , surname , and domicile of the
captain
Chapter 12
Averages
Averages in general , provides that the ff shall be considered
averages:
a. All extraordinary or accidental expenses which may be incurred during the
voyage in order to preserve the vessel, the cargo or both;
b. Any damage or deteriorations which the vessel may suffer from the time it
puts to sea from the port of departure until it casts anchor in the port of
destination and those suffered by the merchandise from the time they are
loaded in the port of shipment until they are unloaded in the port of their
consignment.
A petty and ordinary expenses incident to navigation such as those
of pilotage of coasts and ports, lighterage and towage, anchorage ,
inspections , health, quarantine , lazaretto and other so-called port
expenses, shall be considered ORDINARY expenses to be defrayed by
the shipowner , unless there is an express agreement to the
contrary.
Classifications of averages: Simple ; and General or gross average.
SIMPLE AVERAGE: or particular averages shall include all the expenses and
damages caused to the vessel or to her cargo which have not inured to the
common benefit and profit of all the persons interested in the vessel
and her cargo. If the damage caused is not a general average, the same
can be considered particular. Borne by: the owner of the goods that
suffered the damage bears the loss. Consistent with res perit domino.
GENERAL AVERAGE: shall include all the damages and expenses which
are deliberately caused in order to save the vessel , its cargo or both at the
same time from real and known risk.
Requisites:
a. There must be a common danger;
b. For common safety part of the vessel or the cargo or both is sacrificed
deliberately;
c. That from the expenses or damages caused follows the successful saving
of the vessel and cargo
d. Expenses and damages should have been incurred after taking proper
legal steps and authority.
COMMON DANGER: both the ship and cargo, after has been loaded
are subject to the same danger , whether during the voyage or in the
port of loading or unloading; the danger arises from accidents of the
sea, dispositions of authority or faults of men

Transportation Law: Aquino

 Deliberate Sacrifice: There must be a voluntary sacrifice on the part

of the benefit of the whole in order to justify general average
contribution. It cannot involve a damage which is resulted beyond the
control of the captain and crew or without any intention on their part.
Sacrifice is made through jettison of the cargo or part of the
ship is thrown overboard during the voyage. However, there
can also be a general average even if the sacrifice was not
made during the voyage in at least 2 cases:
a. Where the sinking of a vessel is necessary to extinguish fire in a
port, roadstead , creek or bay; and
b. Where cargo is transferred to lighten the ship on account of a storm
to facilitate entry into a port.
It should be noted that the loss can no longer be considered a general
average if the thing was Inevitably lost.
Successful Sacrifice : No general contribution can be demanded if
the vessel and other cargo that are sought to be saved were in fact not
saved. The owners of the goods saved shall not be liable for the
indemnification of those jettisoned , lost, or damaged.
For example: goods belonging to Mr. A were sacrificed to save the
ship from sinking due to typhoon. There will be no general average
contribution if the ship still sank because of the same typhoon. Hence,
the sacrifice was not successful in saving the ship. However, if the ship
was saved from typhoon, there will be liability for general average
contribution even if the vessel will be subsequently lost for some other
reason during the voyage.
Who bears general average: Those who benefited from the
sacrifice. These include the ship owner and owners of the cargoes
that were saved. Contribution may also be imposed on insurers of the
vessel or cargoes that were saved as well as lenders on bottomry or
respondentia.
Lenders on bottomry or respondentia shall suffer, in proportion
to their respective interest, the general average which may
take place in the goods on which the loan is made.
Who is entitled to indemnity:
a. The owner of the cargoes which were sacrificed is entitled to
receive general average contribution;
However, the ff goods even if sacrificed are not covered:
a. Goods carried on deck unless the rule, special laws or
customs of the place allow the same;
b. The goods that are not recorded in books or records of the
vessel;
c. The fuel for the vessel if there is more than sufficient fuel for
the voyage.

Transportation Law: Aquino

 York-Antwerp Rules: May be agreed to be applied to solve controversies

where no provision in Code of Commerce is in point because the said
rules embody the custom of maritime states.
York-Antwerp Rules of 1974
In the adjustment of general average the ff rules shall apply to the exclusion of
any law and practice inconsistent therewith:
Rule A: York-Antwerp Rules: The general average act when and only when,
any extra ordinary sacrifice or expenditure is intentionally and reasonably made
or incurred for the common safety for the purpose of preserving from peril the
property involved in a common maritime adventure.
Rule B: GA sacrifices and expenses shall be borne by different contributing
interests .
Rule C:
Only such losses, damages or expenses which are the direct
consequence of the GA act shall be allowed as GA.
Loss or damage sustained by the ship or cargo through delay , whether on voyage
or subsequently, such as demurrage, and any indirect loss whatsoever, such as
loss of market, shall not be admitted as GA
Rule D: Rights to contribution in GA shall not be affected though the event which
gave rise to the sacrifice or expenditure may have been due to the fault of one of
the parties to the adventure
Rule E: The onus of proof is upon the party claiming in GA to show that the loss
or expense claimed is properly allowable as GA.
Rule F: Any extra expense incurred in place of another expense which would
have been allowable as GA shall be deemed to be a GA and so allowed without
regard to the saving, if any, to the other interest, but only up to the amount of GA
expense avoided.
Rule G: GA shall be adjusted as regards both loss and contribution upon the
baseis of values as the time and place when and where the adventure ends.
Rule I: No jettison of cargo shall be made good as GA, unless such cargo carried
in accordance with the recognized custom of trade.

Transportation Law: Aquino