Notes On Transportation

NOTES ON TRANSPORTATION
I. GENERAL CONSIDERATIONS
A. PUBLIC UTILITIES
WHAT IS PUBLIC UTILITY?
Public utility is a business or service engaged in supplying the

public with some commodity or service of public consequence, or
essential to the general public such as electricity, gas, water,
transportation, telephone or telegraph service. The term implies public
use and service. (Albano vs. Reyes, 175 SCRA 264, Kilusang Mayo Uno
Labor Center vs. Garcia, Jr., 239 SCRA 386, National Power Corporation
vs. Court of Appeals and Cepalco, G.R. No. 112702, September 26,
1997)
As its name indicates, the term public utility implies a public

use and service to the public, and indeed, the principal determinative
characteristic of a public utility is that of service to, or readiness to
serve, an indefinite public (or portion of the public as such) which has a
legal right to demand and receive its services or commodities. There
must be a dedication or holding out, either express or implied, of
produce or services to the public as a class.
WHAT ARE THE CONSTITUTIONAL LIMITATIONS ON PUBLIC UTILITIES?
a. Public utilities - No franchise, certificate, or any other form

of authorization for the operation of public utility shall be
granted except to:
a) Citizens of the Philippines; or
b) Corporations or associations organized under the

Philippine laws where at least 60% of the capital is
owned by Filipino citizens (Article XII, Section 11) 1
1
SECTION 11. No franchise, certificate, or any other form of authorization for
the operation of a public utility shall be granted except to citizens of the Philippines
or to corporations or associations organized under the laws of the Philippines at least
sixty per centum of whose capital is owned by such citizens, nor shall such franchise,
certificate, or authorization be exclusive in character or for a longer period than fifty
years. Neither shall any such franchise or right be granted except under the condition
that it shall be subject to amendment, alteration, or repeal by the Congress when the
common good so requires. The State shall encourage equity participation in public
utilities by the general public. The participation of foreign investors in the governing
body of any public utility enterprise shall be limited to their proportionate share in its
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The participation of foreign investors in the governing body of

any public utility enterprise shall be limited to their proportionate share
in the capital, and all the executive and managing officers of such
corporations or associations must be citizens of the Philippines.
b. Mass Media Mass media and commercial

telecommunications shall be:
a) 100% Filipino capital; and
b) 100% Filipino management
c. Government Take-Over of Public Utilities In times of

national emergency, when the public interest so requires,
the State may, during the emergency and under
reasonable terms, temporarily take over or direct the
operation of any privately owned public utility or business
affected with public interests. (Article XII, Section 17)
d. Operation of Vital Industries The State may, in the

interest of national welfare or defense, establish and
operate vital industries and upon payment of just
compensation, transfer to public ownership utilities and
other private enterprises to be operated by the
government. (Article XII, Section 18)
e. Prohibition Against Monopolies The State shall regulate or

prohibit monopolies when the public interest so requires;
no combination in restraint of trade or unfair competition
shall be allowed. (Article XII, Section 19)
WHAT IS THE BASIS FOR THE STATE REGULATION OF PUBLIC

UTILITIES?
The basis for the State to regulate public utilities, including those
engaged in transportation, is police power for the protection of the
public as well as of the utilities themselves
WHAT IS THE EXTENT OF THE POWER TO REGULATE PUBLIC UTILITIES?
1. A rightful exercise of police power in the regulation and

supervision of public utilities does not deprive them of their
property without due process of law, or deny
compensation, nor does it impair the obligation of any
contract.
capital, and all the executive and managing officers of such corporation or
association must be citizens of the Philippines.
By: Kathryn Pineda Dela Serna

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2. The right to regulate a public utility under the police power

does not extent beyond:
1) The right to regulate rates and charges;

2) The right to prevent discrimination upon the
part of the public utility against those who
employ it; and
3) The right to make orders governing the
conduct of the public utility to the end that its
efficiency may be built-up and maintained, and
the public and its employees be accorded
desirable safeguards and conveniences.
MAY A 100% FOREIGN CORPORATION OWN A PUBLIC UTILITY?

(People vs. William M. Quasha, L-6055, June 12, 1953; and Tatad vs.
Garcia, G.R. No. 114222, April 16, 1995)
The Supreme Court, when confronted with the issue of whether

respondent EDSA LRT Corporation, LTD., a foreign corporation can own
EDSA LRT III, a public utility, ruled: Section II of Article XII of the
Constitution, in no uncertain terms, requires a franchise for the
operation of a public utility. However, it does require a franchise before
one can own the facilities needed to operate a public utility so long as
it does not operate them to serve the public.
In law, there is a clear distinction between the operation of a

public utility and the ownership of the facilities and equipment used to
serve the public. The right to operate a public utility may exist
independently and separately from the ownership of the facilities
thereof. One can own said facilities without operating them as a public
utility, or conversely, one may operate a public utility without owning
the facilities used to serve the public. Indeed, a mere owner or lessor
of the facilities used by a public utility is not a public utility. Even the
mere formation of a public utility corporation does not ipso facto
characterize the corporation as one operating a public utility. The
moment of determining the requisite Filipino nationality is when the
entity applies for a franchise, certificate or any other form of
authorization for that purpose.
WHAT IS PUBLIC SERVICE?
It includes every person who may own, operate, manage, or

control in the Philippines for hire or compensation, with general or
limited clientele, whether permanent, occasional or accidental, and
done for general business purposes, any common carrier, with or

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without fixed route and whatever may be its classifications, engaged in

the transportation of passenger or freight or both, canal, irrigation
system gas, electric light, heat and power, water supply power,
petroleum, sewerage system, wire or wireless communication systems,
wire or wireless broadcasting stations and stations and other similar
public service. (Section 13 [b], CA 146)
It includes railroad, street railway, traction railway, subway motor

vehicle, steamboat, or steamship line, ferries, and water craft,
shipyard, ice plant, electric light, heat and power or any other public
utility.
In Kilusang Mayo Uno Labor Center vs. Garcia, Jr. 239 SCRA 386,
the Supreme Court ruled: A foreign corporation may own facilities by
which a public utility may operate, but actual operations would be
granted to a qualified Filipino corporation to which the franchise shall
be granted. The right to operate a public utility may exist
independently and separately from the ownership of the facilities
thereof.
WHAT IS THE EXTENT OF USE OR SERVICE INVOLVED?
The word public does not mean the whole public nor does it
mean all the people in a certain area or political subdivision. Rather, it
means individuals in general without restriction or selection to the
extent that the capacity of the utility may admit of such service or use.
Accordingly, the use and enjoyment of the utility service may be local
and limited in the territory served, and the fact that the service is
limited to a particular district or a part of a town does not prevent the
organization or business from being a public utility.
The number of people actually served does not determine

whether a person or company is a public utility. Such a person or
company which holds himself or itself out to serve all who wish to avail
themselves of the service may be a public utility even though only one
or two people actually receive service. Furthermore, the mere fact that
service is rendered only under contract does not prevent a company
from being a public utility.
The principal distinguishing characteristic is its readiness to

serve the public indiscriminately regardless of the number of people
actually served, which offeree has the right to demand such service,
such use of the public utility by right and not by permission. The
offeror offers service which is a public and continuing one and the
refusal of the utility to render the service to the offeree is a violation of
the nature and character of a public utility.

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WHAT IS THE PURPOSE OF THE PUBLIC SERVICE LAW?

The ordinary purpose of the Public Service Law is to subject
public service to state control and regulation. Specifically, the primary
purpose of its enactment is twofold, namely:
1. To secure adequate, sustained service for the public at the least

possible cost and protect the public against unreasonable
charges and poor, inefficient service.
2. To protect and conserve investments which have already been
made for public service, and prevent ruinous competition.
WHAT IS THE DIFFERENCE BETWEEN A PUBLIC UTILITY AND A PUBLIC

SERVICE?
To all practical intent and purposes, there is no difference and the

terms are used interchangeably.
WHICH IS BROADER, PUBLIC SERVICE OR PUBLIC UTILITY?
Public utility is a broader concept than public service. Public

utility embraces public service. If one is a public utility, one is not
necessarily a public service; but if one is a public service, one is
necessarily a public utility.
If one is a public utility, then it is subject to the limitations and

restrictions provided for in the constitution (Article 12, Sections 11, 17,
18 and 19) If a public service is necessarily a public utility, then it is
also subject to the same constitutional restrictions.
MAY A PUBLIC UTILITY NOT BE A PUBLIC SERVICE?
Yes, as it may not be part of the enumeration in the Public

Service ct and therefore not subject to restriction of the Public Service
Commission 2 or other successor board or agency but still subject to
the constitutional requirements.
WHEN IS A PUBLIC UTILITY A PUBLIC UTILITY?
Go back to the definition of a public utility when it is regularly

supplying the public with some commodity or service of public
consequence.
2
Any reference to the defunct Public Service commission shall be understood to be
the appropriate board, authority or agency of the government that took over its
functions.

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A IS THEOWNER OF A TRACTOR, WHICH HE USES IN CULTIVATING HIS

LAND. ON DAYS THAT HE IS NOT USING THE TRACTOR, HE LEASES THE SAME
TO OTHER PERSONS FOR PURPOSES OF TILLING THE LATTERS LAND. IS A
ENGAGED IN PUBLIC SERVICE?
No. Under Section 13 [b] of CA 146, a person engaged in
agriculture, not otherwise a public service, who owns a motor vehicle
and uses it personally and/or enters into a special contract whereby
said motor is offered for hire or compensation to third parties engaged
in agriculture, not itself or themselves a public service, for operation by
the latter for a limited time and for a specific purpose directly
connected with the cultivation of his or their farm, the transportation
processing, and marketing of agricultural products of such third party
or third parties shall not be considered as operating a public service for
the purposes of the Act.
IS A PUBLIC MARKET INCLUDED AMONG THE PUBLIC SERVICE

DEFINED BY LAW?
While a public Market is a public service or utility, it is not one

that falls under the jurisdiction of the corresponding board, not being
ejusdem generis with those public services enumerated in Section 13
[b] of the Public Service Act over which the Board has jurisdiction.
Hence the approval of the Board of the fees fixed by the City of Manila
for the use of its markets is not covered by Section 20 of the Public
Service Act. (Chamber of Filipino Retailers, Inc. vs. Villegas, 44 SCRA
406.
B. TRANSPORTATION
WHAT IS TRANSPORTATION?
It is the carriage of goods or persons from one point to another.
WHAT IS A CONTRACT OF TRANSPORTATION?
A contract of transportation is one whereby a certain person or

association of persons oblige themselves to transport person, things,
or news from one place to another for a fixed price.
WHAT IS THE NATURE OF TRANSPORTATION?
It is for public use, which means that the use is not confined to
privileged individuals; it is open to an indefinite public. It is this definite
or unrestricted quality that gives it its public character. The true
criterion by which to judge the character of the use is whether the

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public may enjoy it by right or only by permission. There must be, in

general, a right which the law compels the owner to give to the general
public.
WHAT ARE EXEMPTED FROM THE PROVISIONS OF THE PUBLIC SERVICE

ACT?
The following are exempted from the provisions of the Section

14.
1. Warehouses;
2. Vehicles drawn by animals and bancas moved by oar or sail; and
tugboats and lighters;
3. Airships within the Philippines except as regards the fixing of
their maximum rates on freights and passengers (Airships
engaged in air transportation are under the jurisdiction of the
Civil Aeronautics Board);
4. Radio companies except with respect to the fixing of rates (Radio
companies are under the jurisdiction of the national
telecommunications Commission);
5. Public service owned and operated by any instrumentality of the
National Government or by any government-owned or controlled
corporation, except with respect to the fixing of rates (Section
14)
6. Public markets (Chamber of Filipino Retailers, Inc. vs. Villegas,
supra)
7. Ice-plants and cold storage (PD No. 43)
WHAT IS REQUIRED TO THOSE ENGAGED IN PUBLIC SERVICE?
With the exception of those enumerated in Section 14, no public

service shall operated in the Philippines without possessing a valid and
subsisting certificate from the Public Service Commissions,3, known as
certificate of public convenience, or certificate of convenience and
public necessity, as the case may be, to the effect that the operation
of said service and the authorization to do business will promote the
public interests in a proper and suitable manner (Section 15, par. 1)
The Commission may prescribe as a condition for the issuance of

the certificate provided in the preceding paragraph that the service
can be acquired by the Republic of the Philippines or by any
instrumentality thereof upon payment of the cost price of its useful
equipment, less reasonable depreciation; and likewise, that the
3
Any reference to the defunct Public Service commission shall be understood to be
the appropriate board, authority or agency of the government that took over its
functions.

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certificate shall be valid only for a definite period of time, and that the
violation of any of these conditions shall produce the immediate
cancellation of the certificate without the necessity of any express
action on the part of the Commission (Section 15, par. 2)
The foregoing is likewise applicable to any extension or

amendment of certificates actually in force and to those which may
hereafter be issued, to permits to modify itineraries and time schedule
of public services, and to authorizations to renew and increase
equipment and properties. (Section 15, par. 4)
WHAT ENTITIES ENGAGED IN PUBLIC SERVICE ARE NOT REQUIRED TO

OBTAIN A CERTIFICATE OF PUBLIC CONVENIENCE OR CERTIFICATE OF PUBLIC
CONVENIENCE AND NECESSITY?
The following are exempted from obtaining a certificate of public

convenience or certificate of public convenience and necessity:
1. Public service owned or operated by government entities or

government-owned or controlled corporations shall be
regulated by the commission in the same way as privately-
owned public services but certificates of public convenience
or certificates of public convenience and necessity shall not
be required of such entities or corporations. (Section 13)
2. Grantees of legislative franchise when expressly exempted
from obtaining a certificate from the Commission (Section 18)
3. Those expressly exempted from the jurisdiction of the
Commission by the provisions of Section 13 of the Act
(Section 18)
EXAMPLES: A city may establish and maintain a telephone

system, or an electric service, without the national government such as
Philippine Railway (PD 731) and Metro Manila Transit (PD 860) are
likewise exempted from the requirement of obtaining a certificate of
public convenience.
WHAT IS THE NATURE OF A CERTIFICATE OF PUBLIC CONVENIENCE?
It is neither a franchise nor a contract. It confers no property

rights, and is a mere license or privilege which may be forfeited when
the grantee fails to comply with his commitments behind which lies the
paramount interest of the public.
WHAT IS THE DIFFERENCE BETWEEN A CERTIFICATE OF PUBLIC

CONVENIENCE AND CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY?

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CPC CPCN
It is issued by the PSC to a public It is any authorization to operate a
service which any political public service issued by the PSC
subdivision has granted a
franchise under Act 667 after it
has approved the same under Par.
[b] of Section 16 of the Public
Service Law.
It is an authorization for operation It is an authorization issued by the
of a public service for which a Commission for the operation of a
franchise is required by law. public service for which no
franchise, either municipal or
legislative is required by law.
It is issued whenever the It is issued upon approval of any
Commission finds that the franchise or privilege granted by
operation of the proposed public any political subdivision of the
service will promote the public Philippines when in the judgment
interests in a proper and suitable of the Commission, such franchise
manner, for which a municipal or or privilege will properly conserve
legislative franchise is not the public interest. (Section 16 [b])
necessary. (Section 16 [a])
IF A PUBLIC SERVICE HAS A FRANCHISE FROM CONGRESS, WHY IS

THERE A NEED TO GET A CPCN TO OPERATE?
Even with a franchise, there is still a need to get a CPCN or a

permit to operate. A franchise is a legislative grant, a law therefore it
does not mean that one, upon grant of such franchise, can operate at
once. The regulatory boards/agencies determine the schedule, the kind
of transportation, the rates .and all these are governed by the CPCN.
FRANCHISE:
A franchise is a legislative act, in the form of a law. It goes

through the lawmaking process. (Such grant should not exceed 50
years)
CAN ONE GO TO THE SENATE TO ASK FOR A FRANCHISE?
No. A franchise is a private bill which must originate from

Congress.
CASES:
1. Albano v. ReyesDoes ICTSI or anyone for that matter need a

franchise to operate MICT? Is MICT a public utility?

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2. Raymundo vs. Luneta:
a. A CPC is a property subject to execution, if it can be

sold voluntarily, it can be sold involuntarily (public
auction after attachment)
b. If it is a privilege, how can it be considered a

property?
It is a privilege as between the grantor and the
grantee; but it is property as between the grantee and a
private person.
3. In PAL vs. CAB, G.R. No. 119528, March 26, 1997, it was held that
there is no more distinction between certificate of public
convenience and certificate of public convenience and necessity.
Said the Supreme Court: Many and varied are the definition of
certificates of public convenience which courts and legal writers
have drafted. Some statutes use the terms convenience and
necessity while others use only the words public convenience.
The terms convenience and necessity, if used together in a
statute, are usually held not to be separable, but are construed
together. The word necessity is so connected, not as an
additional requirement but to modify and qualify what might
otherwise be taken as the strict significance of the word
necessity. Public convenience and necessity exists when the
proposed facility will meet a reasonable want of the public and
supply a need which the existing facilities do not adequately
afford. It does not mean or require an actual physical necessity
or an indispensable thing.
The terms convenience and necessity are to be construed

together; although they are not synonymous, and effect must be
given both. The convenience of the public must not be
circumscribed by according to the word necessity its strict
meaning or an essential requisite.
The use of the word necessity, in conjunction with public

convenience in a certificate of authorization to a public service
entity to operate, does not in any way modify the nature of such
certification, or the requirements for the issuance of the same. It
is the law which determines the requisites of such certification,
and not the title indicating the certificate.
WHAT ARE THE REQUISITES FOR THE GRANT OF CERTIFICATE?

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a. The applicant must be a citizen of the Philippines, or

corporation and association constituted and organized
under the laws of the Philippines, 60 % of which must be
owned by Filipino citizens;
b. The applicant must prove that the operation of the public
service proposed and the authorization to do business will
promote the public interest and suitable manner;
c. The applicant must be financially capable of undertaking
the proposed service and meeting the responsibilities
incident to its operation.
WHEN MAY THE COMMISSION ISSUE CERTIFICATES OF PUBLIC

CONVENIENCE?
The Commission shall have the power, upon proper notice and
hearing to issue operation of public services within the Phili[ppines
whenever the Commission finds that the operation of the public service
proposed and the authorization to do business will promote the public
interest in a proper and suitable manner. (Section 16 [a])
WHEN MAY THE COMMISSION ISSUE CERTIFICATES OF PUBLIC

CONVENIENCE AND NECESSITY?
The Commission shall have the power, upon notice and hearing
to approve, subject to constitutional limitations, any franchise or
privilege granted under the provisions of Act No. 667, as amended by
Act No. 1022, by any political subdivision of the Philippines when, in
the judgment of the commission, such franchise or privilege will
properly conserve the public interest, and to issue certificates of public
convenience and necessity when such is required or provided by law or
franchise (Section 16 [b])
WHAT IS THE PRIOR OPERATOR RULE?
It means that before permitting a new operator to invade the

territory of another already established with a CPC, the prior operator
must first be given the opportunity to extend its service in order to
meet public needs in the matter of transportation.
HOW DOES THE PRIOR OPERATOR RULE WORK?
The prior operator rule works to protect the prior operator if it

maintains an adequate service and is able to meet demands of the
public. His investment is protected by not allowing a subsequent
operator to be granted a license for the same route.

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WHAT IS THE RATIONALE OF THE PRIOR OPERATOR RULE?
The preservation of public convenience and prevent ruinous

competition.
WHAT IS RUINOUS COMPETITION?
There is ruinous competition when there is actual ruin of the

business of the operator; that the existing operator will not gain
enough profit if another person is allowed to enter the business; that
which will result in the deprivation of sufficient gain in respect of
reasonable return of investment to prior operator, therefore, the
oppositor, alleging this, must show that he will be deprived of a
reasonable return of his investment.
WHAT IS THE PRIOR APPLICANT RULE?
Where there are applicants for a PU over the same territory, all
conditions being equal, priority in filing of the application for a CPC
becomes an important factor in granting or refusal of a cert. But if
other conditions are not equal, such priority is not ordinarily sufficient
importance to control the granting of a CPC and the PSC is authorized
to determine which of the applicants can best meet the requirements
of public convenience.
CASE:
Carmelo vs. Monserrat:
The prior operator rule does not apply in this case.

How did Monserrat know that Carmelo was actually applying for
a CPC?
Carmelo was required to publish in newspaper of general

circulation to give other parties an opportunity to oppose. The
opposition may, as a legal basis, invoke the prior operator rule.
WHEN IS THE PRIOR OPERATOR RULE OR PROTECTION OF INVESTMENT

NOT APPLICABLE?
a. Where public interest would be served by the new

operator (Guico v. Estate of Buan, L-9769, Aug. 30,
1957)
b. Where the old operator has failed to make an offer
to meet the increase in traffic (Manila Yellow Taxi
Cab v. Castelo, L- 13910, May 30, 1960

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c. Where the CPC granted to the new operator is a

maiden certificate, which does not overlap with the
entire route of the old operator but only a short
portion thereof as a convergence point (Mandbusco
v. Francisco, 32 SCRA 405)
d. If the application of the rule will be conducive to
monopoly of the service, and contrary to the
principle that promotes healthy competition (Villa
Rey Transit v. Pangasinan Trans. 5 SCRA 234)
e. Where line passes through private subdivision
whose owners granted permit to another (Estrella v
PSC L-12641, Sept. 30, 1960)
WHAT IS THE KABIT SYSTEM?
It is an arrangement entered into by an owner of a unit or units

who has no certificate of public convenience with an operator having a
certificate of public convenience to operate along a route but who has
not fielded all the units allowed him to be operated under the said
certificate.
Under the said arrangement, the owner of the unit transfers the
registration of the said unit to the operator having the certificate of
public convenience. With that transfer, the operator having the
certificate of public convenience will now become the registered owner
of the said unit. Actually, it is the true owner of the unit who operates
the said unit under the certificate of public convenience of the operator
or grantee of such franchise. The real owner of the unit only pays the
operator or grantee a certain amount monthly as agreed upon between
them for the use of the privilege to operate under said certificate or
franchise.
IN CASE THE UNIT BEING OPERATED UNDER THE KABIT SYSTEM

MEETS ACCIDENT, CAUSING DAMAGE OR INJURY TO ANY PASSENGER OR TO A
THIRD PARTY, WHO IS LIABLE FOR SUCH DAMAGE OR INJURY?
The operator and the real owner of the unit involved are jointly
and severally liable for such damage or injury to the third party, the
passenger and/or the latters next of kin.
UPON WHAT GROUNDS MAY THE COMMISSION SUSPEND OR REVOKE

ANY CERTIFICATE?
a. The facts and circumstances on the strength of which said cert

was issued have been misrepresented or materially changed?
(sec. 16 [m])

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b. The holder thereof has violated or willfully and contumaciously

refused to comply with any order, rule or regulation of the Comm
or nay provision of the PSA (sec. 16 [n])
c. The common carrier repeatedly fails to comply with his or its
duty to observe extraordinary diligence as prescribed by law (Art.
1765, CC)
WHERE SHOULD ENTITIES ENGAGED IN TRANSPORTATION OBTAIN THE

NECESSARY CERTIFICATES OF PUBLIC CONVENIENCE?
The appropriate certificates of public convenience may be

obtained by entities engaged in transportation as follows:
a. Those engaged in public transportation services by motorized

vehicles, from the Land Transportation Franchising and
Regulatory Board (LTFRB) [Section 5 {b}, EO No. 125]
b. Those engaged in the operation of domestic and overseas water
carriers, from the Maritime Industry Authority (MARINA) [Section
12, EO No. 125]
c. Those engaged in air commerce and/or air transportation, foreign
or domestic, from the Civil Aeronautics Board (CAB) [Section 11,
R.A. No. 776, as amended]
d. Those engaged in providing land transportation by the use of
tricycles, from the local Sangguniang Bayan or Sangguniang
Panlungsod [Section 446 {3, vi} and Section 458 {3, vi}, Local
Government Code]
WHAT GOVERNMENT AGENCIES GOVERN OTHER ENTITIES ENGAGED IN

PUBLIC SERVICE OTHER THAN TRANSPORTATION?
a. Radio, television, telephone and other telecommunications

entities- National Telecommunications Commission (NTC) [R.A.
No. 7525]
b. Electric companies and cooperatives National Electrification
Administration [R.A. No. 6038 as amended by P.D. No. 269 and
P.D. No. 1645]
c. Local water utilities Local Water Utilities Administration [P.S. No.
198, 768 and 1479]
d. Express and/or messenger services Philippine Postal
Corporation [P.D. No. 240, as amended]
WHAT SERVICE AND ACTS ON THE PART OF THE PUBLIC UTILITY IS

CONSIDERED UNLAWFUL?
a. To provide or maintain any service that is unsafe, improper,

or inadequate, or withhold or refuse any service which can

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reasonably be demanded and furnished, as founded and

determined by the Commission4 in a final order which shall
be conclusive and shall effect in accordance with the PSA,
upon appeal or otherwise (sec. 19 [a]) (Asked 1993 Bar)
b. To make or give or give, directly or indirectly, by itself or
through its agents, discounts or rebates on authorized
rates, or grant credit for the payment of freight charges, or
any undue or unreasonable preference or advantage to any
person or corporation or locality or any particular
description of traffic to any prejudice or disadvantage in
any respect whatsoever; to adopt, maintain, or enforce any
regulation, practice or measurement which shall be found
or determined by the Commission to be unjust, reasonable,
unduly preferential or unjustly discriminatory (sec. 19 [b])
c. To refuse or neglect, when requested by the Director of
Posts or his authorized representative, to carry public mail
on the regular trips of any public land transportation
service maintained or operated by any such public service,
upon such terms and conditions and for a consideration in
such amount as may be agreed upon by the Director of
Posts and the public service carrier (sec. 19 [c])
4
II. COMMON CARRIERS
Governing laws (Common Carriers):
a. Articles 1732 to 1763 of the Civil Code

b. Sections 349 to 379, 573 to 736, and 806 to 869 of the Code of
Commerce.
In case of conflict between the two sets of laws, the provisions of

the Civil Code shall generally prevail, being the latter law.
There are also special laws that govern particular cases such as
the Public Service Act, Carriage of Goods by Sea Act, Land
Transportation and Traffic Code.
WHAT ARE COMMON CARRIERS?
Common carriers are 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 (Article 1732).
4
Unless otherwise indicated, reference is to the Civil Code.

Page 16
WHY IS IT IMPORTANT TO KNOW WHETHER A CARRIER IS A COMMON

CARRIER OR NOT?
There is a concern about whether a carrier is a common carrier

or not because the obligations arising from common carriage contract
are different from that which arise from otherwise.
IS A PUJ A COMMON CARRIER?
No, because a common carrier is a person, corporation, firm or

association, etc. and not the means of transporting.
WHAT ARE THE REQUISITES TO BE A COMMON CARRIER OF GOODS?
TEST FOR DETERMINING WHETHER A PARTY IS A COMMON CARRIER OF
GOODS:
a. He must be engaged in the business of carrying goods for

others as a public employment, and must hold himself out
as ready to engage in the transportation of goods for
persons generally as a business and not as a casual
occupation;
b. He must undertake to carry goods of the kind to which his

business is confined;
c. He must undertake to carry by the method by which his

business is conducted and over his established routes; and
d. The transportation must be for fire.
WHAT ARE THE CHARACTERISTICS OF A COMMON CARRIER?
The concept of common carriers contemplated under Article

1732 of the Civil Code and the fact that the said concept corresponds
to the concept of public service under the Public Service Act results
in the application of the following rules or principles:
1. Article 1732 makes no distinction between one whose principle

business activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity (in local
idiom, as a sideline) (De Guzman vs. CA).
2. Article 1732 also carefully avoids making any 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 (Ibid).

Page 17
3. Article 1732 does not distinguish between a carrier offering its

service to the general public, i.e., the general community or
population, and one who offers services or solicits business only
from a narrow segment of the general population (ibid).
4. A person or entity is a common carrier and has the obligations of
a common carrier under the Civil Code even if he did not secure
a Certificate of Public Convenience (ibid).
5. The Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air (First Philippine
Industrial Corp. vs. CA).
6. The Civil Code does not provide that the transportation should be
by motor vehicle (ibid).
7. A person or entity may be a common carrier even if he has no
fixed and publicly known route, maintains no terminals, and
issued no tickets (Asia Lighterage and Shipping, Inc. vs. CA).
8. A person or entity need not be engaged in the business of public
transportation for the provisions of the Civil Code on common
carriers to apply to them (Fabre, Jr. vs. CA).
HOW IS A COMMON CARRIER DISTINGUISHED FROM A PRIVATE

CARRIER?
The distinction between a common or public carrier and a

private or special carrier lies in the character of the business, such
that if the undertaking is a single transaction, not a part of a general
business or occupation, although involving the carriage of the goods
for a fee, the person or corporation offering such service is a private
carrier (Planters Product vs. CA). Thus, if a person agrees to carry a
person to the airport using his privately-owned car that is meant for
personal use, he will be considered a private carrier.
HOW IS A COMMON CARRIER DISTINGUISHED FROM TOWAGE,

ARRASTRE AND STEVEDORING?
In towage, one vessel is hired to bring another vessel to another

place. In this case, the operator of a tugboat cannot be considered a
common carrier.
Likewise, an arrastre operator is not a common carrier
WHAT IS THE NATURE AND BASIS OF LIABILITY OF COMMON

CARRIERS? WHAT IS THE DEGREE OF DILIGENCE REQUIRED OF COMMON
CARRIERS?
Common carriers, from the nature of their business and for

reasons of public policy, are bound to observe extraordinary diligence

Page 18
in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case
(Article 1733).
Such extraordinary diligence in the vigilance over the goods is

further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7,
while the extraordinary diligence for the safety of the passengers is
further set forth in articles 1755 and 1756 (Article 1733).
In the case of passengers, the law further provides that

they are bound to carry the passengers safely as far as human care
and foresight can provide, using utmost diligence of very cautious
person with due regard for all circumstances (Article 1755). As a
matter of fact, in case of death or injuries to passengers, they are
presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as prescribed by
law (Article 1756).
WHY IS THE DEFENSE OF PROOF OF DILIGENCE IN THE SELECTION AND

SUPERVISION OF EMPLOYEES NOT AVAILABLE IN CASE OF BREACH OF
CONTRACT?
The liability of the common carrier in case of breach of contract

is direct and immediate. In quasi-delict, the employers liability is
merely subsidiary.
WHEN DOES THE VINCULUM JURIS (LEGAL TIE) ARISE?
In the case of contracts, the legal tie arises upon their perfection;
while in the case of quasi-delict, the legal tie arises upon the
occurrence of the injury. Thus, the negligent act which constitutes the
breach of contract of carriage does not create a new vinculum juris nor
gives rise to a separate cause of action.
CAUSE OF ACTION ARISING FROM THE SAME NEGLIGENT ACT:
Problem:
X, Inc. Public Utility Co.

Y Bus driver, reckless driving
Z Passenger injured
Z, the injured passenger, can avail of any of the three causes of action:
a. culpa contractual negligence based on contract

b. culpa aquiliana negligence based on tort
c. culpa criminal negligence based on a crime

Page 19
Discussion:
a. Culpa contractual
In the contract of carriage of passengers, it is the

obligation of the carrier to convey the passenger safely to the
point of destination. In case a passenger is not brought safely
thereto, there will be a breach of contract.
Title of the case: passenger Z vs. X, Inc. because the

contract is between them. The driver is not to be included as a
party to the action because he is not a party to the contract. As
to him, there is no privity of contract.
b. Culpa aquiliana
Damage caused another due to negligence. Title of the
case: passenger Z vs. X, Inc. and Driver Y. he defendants will
be solidarily liable as joint tort-feasors.
c. Culpa criminal
The drivers act may amount to a crime: physical injuries

through reckless imprudence. Title of the case: People of the
Philippines vs. Driver Y If the latter is insolvent, an action can be
pursued by Z against X, Inc. to enforce the latters subsidiary
liability.
Note that:
a. The weakest cause of action is culpa aquiliana where the

employer may raise the defense of due diligence in the selection
and supervision of the driver.
b. Culpa criminal is a stronger cause of action because as to the

companys subsidiary liability, the latters defense is limited;
however the quantum of evidence needed to convict the
employee would have to be guilt beyond reasonable doubt.
c. In transportation law, culpa contractual is the cause of action. In

a contract of carriage of passengers, it is the obligation of the
common carrier to bring the passengers safely to the point of
destination. If the death or injury occurs, the presumption of
negligence automatically arises and the common carrier can be
held liable if he fails to prove extraordinary diligence for the
duration of the carriage.

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Subsection 2 VIGILANCE OVER THE GOODS
WHAT IS THE RESPONSIBILITY OF COMMON CARRIERS WITH REGARD

TO GOODS CARRIED BY THEM?
Common carriers, from the nature of their business and for

reasons of public policy, are bound to observe extraordinary diligence
in the vigilance over the goods, according to all the circumstances of
each case (Article 1733).
WHAT IS THE PRESUMPTION WHEN THE GOODS TRANSPORTED ARE

LOST, DESTROYED OR DETERIORATED? HOW IS THE PRESUMPTION
REBUTTED?
If the goods are lot, destroyed or deteriorated, common carriers

are presumed to have been at fault or to have acted negligently,
unless they can prove extraordinary diligence as required by Article
1733.
WHAT IS THE PRACTICAL EFFECT OF SUCH PRESUMPTION?
Since it is the law who makes such presumption of negligence,

the plaintiff does not have the burden of proving the negligence of the
carrier.
WHEN IS THIS PRESUMPTION NOT APPLICABLE?
Common carriers are responsible for the loss, destruction, or

deterioration of the goods, unless the same is due to any of the
following causes only:
a. Flood, storm, earthquake, lightning, or other natural disaster or

calamity;
b. ct of the public enemy in war, whether international or civil;
c. Act or omission of the shipper or owner of the goods;
d. The character of the goods or defects in the packing or in the
containers;
e. Order of act of competent authority (Article 1734).
WHO HAS THE BURDEN OF PROVING THAT THE CAUSE OF THE LOSS,
DESTRUCTION OR DETERIORATION IS ONE OF THE EXCEPTIONS PROVIDED BY
LAW?

Page 21
The carrier has the burden of proving that the cause of the
damage is one of the instances mentioned in Article 1734. However,
the shipper has the onus probandi to show the carriers fault so that
the latter could be made liable.
HOW MAY THE LEGAL PRESUMPTION OF NEGLIGENCE WHEN THE

GOODS ARE LOST, DESTROYED, OR DETERIORATED IN THE POSSESSION OF
THE COMMON CARRIER BE OVERCOME?
They have to prove that they observed extra-ordinary diligence

as required in Article 1733.
WHAT ARE THE REQUISITES FOR DEFENSE OF NATURAL DISASTER?
A common carrier is still liable for a loss caused by a natural

disaster, except when it is proven that:
a. The natural disaster is the proximate and only cause of the loss,
destruction or deterioration;
b. The common carrier exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the
natural disaster; and
c. The common carrier has not incurred in delay in transporting the
goods.
WHAT IS THE EFFECT OF DELAY ON THE PART OF THE CARRIER IN SUCH A

CASE?
If at the time of the loss, the carrier had already negligently

incurred in delay in transporting the good, natural disaster shall not
exempt it from liability (Article 1740).
WHAT IS THE EFFECT OF CONTRIBUTORY NEGLIGENCE OF THE SHIPPER

IN SUCH A CASE?
If there was contributory negligence of the shipper, the carrier

would still be liable provided that the proximate cause of the loss is the
latters negligence. However, the damages to be paid to the shipper
shall be equitably reduced (Article 1741).
IS FIRE A NATURAL DISASTER? EXCEPTION.
Fire is not a natural disaster or calamity as it arises almost

invariably from some act of man or by human means. It does not fall
within the category of an act of God unless cause by lightings or other
natural disaster or calamity.

Page 22
WHAT ARE THE REQUISITES IN ORDER THAT THE COMMON CARRIER

MAY BE EXEMPTED FROM LIABILITY FOR ACTS OF PUBLIC ENEMY?
a. The act of the public enemy must have been the proximate and
only cause; and
b. The common carrier must have exercised due diligence to
prevent or minimize the loss before, during and after the act of
the public enemy causing the loss, destruction or deterioration of
the goods.
WHAT IS THE EFFECT OF CONTRIBUTORY NEGLIGENCE OF THE SHIPPER

OR OWNER?
If the shipper or owner merely contributed to the loss,

destruction or deterioration of the goods, the proximate cause thereof
being the negligence of the common carrier, the latter shall be liable in
damages, which however, shall be equitably reduced.
WHAT MUST THE COMMON CARRIER DO TO FORESTALL OR LESSEN THE

LOSS CAUSED BY THE CHARACTER OF THE GOODS OR FAULTY PACKING?
Even if the loss, destruction, or deterioration of the goods should

be caused by the character of the goods, or the faulty nature of the
packing or of the containers, the common carrier must exercise
diligence to forestall or lessen the loss.
Thus, if the fact of improper packing is known to the carrier or its

servants, or apparent upon ordinary observation, but it accepts the
goods notwithstanding such condition, it is not relieved of liability for
loss or injury resulting therefrom.
ISTHE COMMON CARRIER LIABLE IF THE GOODS ARE SEIZED OR

DESTROYED THROUGH THE ORDER OF PUBLIC AUTHORITY?
If through the order of public authority the goods are seized or

destroyed, the common carrier is not responsible, provided said public
authority had the power to issue the order.
WHEN SHALL OBSERVANCE OF EXTRAORDINARY LIABILITY COMMNECE

AND WHEN SHALL IT STOP?
The extraordinary responsibility of the common carrier lasts 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

Page 23
person who has a right to receive them, without prejudice to the

provisions of article 1738 (Article 1736).
WHAT IS THE LIABILITY OF THE COMMON CARRIER IN CASE OF LOSS,

DESTRUCTION OR DETERIORATION OF THE GOODS CAUSED BY THE
CHARACTER THEREOF OR OF THE FAULTY NATURE OF THE PACKING OR
CONTAINERS?
Even if the loss, destruction, or deterioration of the goods should

be caused by the character of the goods, or the faulty nature of the
packing or of the containers, the common carrier must exercise due
diligence to forestall or lessen the loss (Article 1742).
IS THE STIPULATION BETWEEN THE COMMON CARRIER AND THE

SHIPPER OR OWNER LIMITING THE LIABILITY OF THE FORMER TO LESS THAN
EXTRAORDINARY DILIGENCE VALID?
A stipulation between the common carrier and the shipper or

owner limiting the liability of the former for the loss, destruction, or
deterioration of the goods to a degree less than extraordinary diligence
shall be valid, 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 common carrier; and
c. Reasonable, just and not contrary to public policy (Article 1744).
WHAT STIPULATIONS IN A CONTRACT OF CARRIAGE ARE CONSIDERED

UNREASONABLE, UNJUST AND CONTRARY TO PUBLIC POLICY?
Any of the following or similar stipulations shall be considered

unreasonable, unjust and contrary to public policy:
a. That the goods are transported at the risk of the owner or

shipper;
b. That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
c. That the common carrier need not observe any diligence in the
custody of the goods;
d. That the common carrier shall exercise a degree of diligence less
than that of a good father of a family, or of a man of ordinary
prudence in the vigilance over the movables transported;
e. That the common carrier shall not be responsible for the acts or
omissions of his or its employees;

Page 24
f. That the common carriers liability for acts committed by thieves,

or of robbers who do not act with grave or irresistible threat,
violence or force, is dispensed with or diminished;
g. That the common carrier is not responsible for the loss,
destruction or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment
used in the contract of carriage (Article 1745).
WHEN MAY AN AGREEMENT LIMITING THE LIABILITY OF THE CARRIER

BE ANNULLED BY THE SHIPPER?
An agreement limiting the common carriers liability may be

annulled by the shipper or owner if the common carrier refused to
carry the goods unless the former agreed to such stipulation.
WHAT IS THE EFFECT IF THE COMMON CARRIER, WITHOUT JUST

CAUSE, DELAYS TRANSPORTING THE GOODS OR CHANGES THE STIPULATED
OR USUAL ROUTE?
If the common carrier, without just cause, delays the

transportation of goods or changes the stipulated or usual route, the
contract limiting the liability of the common carrier cannot be availed
of in case of loss, destruction or deterioration of the goods.
WHAT IS THE EFFECT OF DELAY ON ACCOUNT OF STRIKES OR RIOTS

ON THE LIABILITY OF THE COMMON CARRIER?
An agreement limiting the common carriers liability for delay on

account of strikes or riots is valid (Article 1748). Besides, and this is the
reason behind the law, not only natural disasters or acts of God but
even acts of men or force majeure which are unforeseeable or
unavoidable, such as wars, strikes, and riots, are classified as
fortuitous events. Under the doctrine of fortuitous event (Article 1174),
such agreement would be perfectly valid.
WHAT ARE THE KINDS OF STIPULATIONS OFTEN MADE IN THE BILL OF

LADING CONCERNING THE LIABILITY OF THE COMMON CARRIER? ARE THESE
STIPULATIONS VALID?
Three kinds of stipulations have often been made in a bill of

lading:
a. One exempting the carrier from liability for loss or damage

occasioned by its own negligence;
b. One proving for an unqualified limitation on such liability to an
agreed valuation;

Page 25
c. 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.
The firsts and the second kinds of stipulations are invalid as

being contrary to public policy, but the third is valid and enforceable.
WHAT IS THE EFFECT OF A CONTRACT LIMITING THE CARRIERS

LIABLITY IF THE COMMON CARRIER DELAYS OR CHANGES THE STIPULATED OR
USUAL ROUTE?
If the common carrier, without just cause, delays the

transportation of the goods or changes the stipulated or usual route,
the contract limiting the common carrier's liability cannot be availed of
in case of the loss, destruction, or deterioration of the goods (Article
1747).
IS A STIPULATION LIMITING THE COMMON CARRIERS LIABILITY TO THE

VALUE OF THE GOODS DECLARED BY THE SHIPPER IN THE BILL OF LADING
VALID?
If the stipulation limits the carriers liability to an agreed

valuation such as the value of the goods appearing in the bill of lading,
unless the shipper declares a greater value, it is valid (Article 1749).
If the stipulation limits the carriers liability to an agreed
valuation without any qualification whatsoever such as the value of the
goods stated in the bill of lading, as a rule, it is contrary to public
policy, and therefore, void. However, if it can be shown to be
reasonable and just under the circumstances, and had been fairly
agreed upon, then it is perfectly valid (Article 1750).
WHICH FACTOR SHALL BE TAKEN INTO CONSIDERATION ON THE

QUESTION OF WHETHER OR NOT A STIPULATION LIMITING THE COMMON
CARRIERS LIABILITY IS REASONABLE, JUST AND IN CONSONANCE WITH
PUBLIC POLICY?
The fact that the common carrier has no competitor along the
line or route, or a part thereof, to which the contract refers shall be
taken into consideration on the question of whether or not a stipulation
limiting the common carriers liability is reasonable, just and in
consonance with public policy.
WHAT IS THE PRESUMPTION OF THE LAW IN CASE OF LOSS,

DESTRUCTION OR DETERIORATION OF THE GOODS WHILE IN THE CARE OF A
COMMON CARRIER (EVEN WHEN THERE IS AN AGREEMENT LIMITING THE
CARRIERS LIABILITY?)

Page 26
Even when there is an agreement limiting the liability of the

common carrier in the vigilance over the goods, the common carrier is
disputably presumed to have been negligent in case of their loss,
destruction or deterioration.
WHAT LAW SHALL GOVERN THE LIABILITY OF THE COMMON CARRIER

WHERE THE GOODS ARE TO BE TRANSPORTED FROM ONE COUNTRY TO
ANOTHER?
The law of the country to which the goods are to be transported

shall govern the liability of the common carrier for their loss,
destruction or deterioration.
WHAT PROVISIONS OF LAW SHALL APPLY TO A PASSENGERS

BAGGAGE?
The provisions of Articles 1733 to 1753 shall apply to the

passengers baggage which is not in his personal custody or in that of
his employees. As to the other baggage, the rules in Articles 1998 and
2000 to 2003 concerning the responsibility of hotel-keepers shall be
applicable.
Hence, with respect to the passengers baggage, which is in his

personal custody or in that of his employees, the following rules shall
apply:
a. The common carrier shall be responsible as depositaries for the

effects brought by the passengers, provided that notice was
given to them, or to their employees, of the effects brought in by
passengers and that on the part of the latter, they take the
precautions which said common carriers advised relative to the
care and vigilance of their effects;
b. For the effects brought in by the passengers as mentioned
above, the common carrier shall be responsible for the loss or
injury thereto that may be caused by the servants or employees
of the common carrier as well as by strangers; but not that which
may proceed from any force majeure. The fact that the
passengers are constrained to rely on the vigilance of the
common carrier shall be considered in determining the degree of
care required of him;
c. The act of a thief or robber, who has entered the vehicle is not
deemed force majeure, unless it is done with the use of arms or
through irresistible force;
d. The common carrier is not liable for compensation if the loss is
due to the acts of the passenger, his family, servants or visitors,

Page 27
or if the loss arises from the character of the things brought in

the vehicle;
e. The common carrier cannot free himself from responsibility by
posting notices to the effect that he is not liable for the articles
brought by the passengers. Any stipulation between the common
carrier and the passenger whereby the responsibility of the
former set forth in Articles 1998 to 2001 is suppressed or
diminished, shall be void.
With respect however, to the effects checked-in or entrusted by

the passenger to the carrier, the provisions on the liability of the
common carrier shall apply.
SUPPOSE THE CARRIER WAS NOT PAID FOR THE TRANSPORT OR

CARRYING OF THE BAGGAGE, ARE THE RULES ABOVE CITED STILL
APPLICABLE?
Yes, because payment of the fare for the baggage or non

issuance of a bill of lading is not important. The contract of carriage
was already perfected at the moment there was meeting of the minds
between the parties.
WHEN DOES THE EXTRAORDINARY RESPONSIBILITY OF THE COMMON

CARRIER BEGIN AND WHEN DOES IT END?
The extraordinary responsibility of the common carrier lasts 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, without prejudice to the
provisions of Article 1738
Notice of arrival of the goods amounts to constructive delivery.

TO WHOM MUST THE CARRIER DELIVER THE GOODS TRANSPORTED?
The carrier must deliver the goods to the consignee, or to the

person who has the right to receive them.
IS
DELIVERY BY THE COMMON CARRIER TO THE CUSTOMS AUTHORITIES
CONSIDERED AS DELIVERY TO THE CONSIGNEE SO AS TO END THE CARRIERS
EXTRAORDINARY RESPONSIBILITY OVER THE GOODS?
Delivery of the cargo to the customs authorities is not delivery to

the consignee or to the persons who has the right to receive them as
contemplated in Article 1736, because in such a case the goods are
still in the hands of the Government and the owner cannot exercise

Page 28
dominion over them. (But the parties may agree to limit the carriers
liability in this case)
DOES THE RESPONSIBILITY OF THE COMMON CARRIER REMAIN WHEN

THE GOODS ARE TEMPORARILY UNLOADED OR STORED IN TRANSIT? WHAT
THE EXCEPTION?
The common carriers duty to observe extraordinary diligence in

the vigilance over the goods 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.
WHAT IS STOPPAGE IN TRANSITU?
The act by which the unpaid vendor of the goods stops their
progress and resumes possession of them, while they are in the course
of transit from him to the purchaser, and not yet actually delivered to
the latter.
The right of stoppage in transitu may be exercised when the

buyer of the goods being transported is or becomes insolvent. The
unpaid seller who has parted with the possession of the goods has the
right of stopping them in transitu, that is to say, he may resume
possession of the goods at any time while they are in transit, and he
will then become entitled to the same rights in regard to the goods as
he would have had if he had never parted with the possession.
WHO HAS THE LIABILITY WHILE THE GOODS ARE IN THE WAREHOUSE
OF THE COMMON CARRIER AT THE PLACE OF DESTINATION?
The extraordinary liability of the common carrier continues to be

operative even during the time the goods are stored in a warehouse of
the carrier at the place of destination until the consignee has been
advised of the arrival of the goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose of them.
MAY THERE BE A CONTRACT OF CARRIAGE OF PASSENGER EVEN

WITHOUT A TICKET?
Yes, the statute of frauds covers six contracts, none of which is a

contract of transportation, which means that a contract of carriage
maybe oral.
WHAT IS THE PRESUMPTION CREATED BY LAW IF THERE WAS AN

AGREEMENT LIMITING THE LIABILITY OF THE COMMON CARRIER AND THE
GOODS TRANSPORTED BY THEM ARE LOST, DESTROYED OR DAMAGED?

Page 29
Even when there is an agreement limiting the liability of the

common carrier in the vigilance over the goods, the common carrier is
disputably presumed to have been negligent in case of their loss,
destruction or deterioration (Article 1752).
SUBSECTION 3
SAFETY OF PASSENGERS
WHAT IS THE DEGREE OF DILIGENCE REQUIRED OF COMMON CARRIERS

IN TRANSPORTING PASSENGERS?
A common carrier is bound to carry the passengers safely as far

as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances
(Article 1755).
WHAT IS THE PRESUMPTION CREATED BY LAW IN CASE OF DEATH OF

OR INJURIES TO PASSENGERS?
In case of death of or injuries to passengers, common carriers

are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as
prescribed in articles 1733 and 1755 (Article 1756).
Thus, in case of death of a passenger, the presumption is that

the carrier was at fault in the absence of satisfactory explanation by
the carrier as to how the accident occurred (Abeto vs. Philippine
Airlines, Inc., 115 SCRA 589).
A common carrier is vested with public interest. Once a

passenger in the course of travel is injured or does not reach his
destination safely, the carrier and driver are presumed to be at fault
(Bacarro vs. Castano, 118 SCRA 187).
This statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence as prescribed by law
(Baliwag Transit, Inc. vs. Court of Appeals, 256 SCRA 747), or that the
death or injury of the passenger was due to fortuitous event (Philippine
Rabbit Bus Lines, Inc. vs. Intermediate Appellate Court, 189 SCRA
158).
In an action for damages, the issue is not whether or not the

party seeking damages has adduced sufficient evidence to show the
negligence of the common carrier but whether or not the carrier has
presented the required quantum of proof to overcome the presumption

Page 30
that it has been at fault or that it acted negligently in the performance

of its duty.
IS A COMMON CARRIER LIABLE FOR DAMAGES DUE TO FORTUITOUS

EVENT?
A common carriers liability does not extend to damages caused

by fortuitous event (Ampang vs. Guinoo Trans., Co., 92 Phil. 1085).
Accordingly, a common carrier is not responsible for events which,
could not be foreseen, or which, though foreseen, are inevitable
(Laguna Tayabas Co. vs. Tiongson, 16 SCRA 940). After all, the carrier
is not an insurer against all risks of travel (Isaac vs. A.L. Ammen
Transportation Co., Inc. L-9671, August 23, 1957). If a common carrier
would be an insurer of the passengers safety, it ought to be liable in
case of death of, or injuries to, passengers, although not negligent. But
a common carriers liability rests upon negligence, its failure to
exercise the utmost diligence that the law requires (Necesito vs. Paras,
104 Phil. 75).
WHEN IS THERE A CASE OF CASO FORTUITO WHICH WOULD EXEMPT

THE CARRIER FROM RESPONSIBILITY?
To constitute a caso fortuito that would exempt a person from

responsibility, it is necessary that:
1. The event must be independent of the human will;

2. The occurrence must render it impossible for the debtor to fulfill
the obligation in a normal manner;
3. The obligor must be free of participation in, or aggravation of,
the injury to the creditor; and
4. The event must have been impossible to foresee, of if it could be
foreseen, must have been impossible to avoid (Vasquez vs. Court
a Appeals, 138 SCRA 553; Fortune Express, Inc. vs. Court of
Appeals, G.R. No. 119756, March 18, 1999).
In order that a common carrier may be absolved from liability in

case of force majeure, it is not enough that the accident was caused by
force majeure. The common carrier must still prove that it exercised
extra-ordinary diligence in the transport of passengers and was not
negligent in causing the injuries resulting from such accident.
Therefore, defense of force majeure is not enough. It must be coupled
with the assertion that extra-ordinary diligence was observed by the
common carrier.
Presumption of negligence of common carrier is NOT rebutted by

force majeure. Only the exercise of extra-ordinary diligence by the

Page 31
common carrier during the occurrence of the caso fortuito to lessen or

mitigate its effects can the common carrier be absolved from liability.
IS ACCIDENT CAUSED BY DEFECTIVE BREAKS OF A VEHICLE OR ANY

OTHER MECHANICAL DEFECT A CASO FORTUITO?
A mishap caused by defective breaks could not be considered as
fortuitous in character. Some extraordinary circumstance independent
of the will of the obligor, or his employees is an essential element of
caso fortuito (Tugade vs. Court of Appeals, 85 SCRA 226).
While a carrier is not an insurer of the safety of its passengers,

the carrier must nevertheless be held answerable for the flaws in its
equipment if such flaws were discoverable. The manufacturer of the
defective equipment is in law the carriers agent, and the good repute
of the carrier will not relieve it from liability. The rationale of the
carriers liability is the fact that the passenger has no privity with the
manufacturer of the defective equipment. Hence, the passenger has no
remedy against the manufacturer while the carrier usually has
(Necesito vs. Paras, 104 Phil. 75).
TOHOLD THE COMMON CARRIER LIABLE FOR DEATH, OR INJURY TO A

PASSENGER, MUST THE COURT MAKE AN EXPRESS FINDING OF FAULT OR
NEGLIGENCE ON THE PART OF THE COMMON CARRIER?
In an action based on contract of carriage, the court need not

make an express finding of fault or negligence in the part of the carrier
in order to hold it responsible to pay damages sought for by the
passenger. By the contract of carriage, the carrier assumes the express
obligation to transport the passenger to his destination safely and to
observe extraordinary with a due regard for all of the circumstances,
and any injury that might be suffered by the passenger is right away
attributable to the fault of the carrier (Article 1756). This is an
exception to the general rule that negligence must be proved, and it is
therefore incumbent upon the carrier to prove that it has exercised
extraordinary diligence as prescribed by law (Batabgas Transportation
Co. vs. Caguimbal, 22 SCRA 171; Landingin vs. Pangasinan Co., 33
SCRA 284).
WHAT IS THE DURATION OF EXTRA-ORDINARY LIABILITY OF COMMON

CARRIER OF PASSENGERS?
There is no specific provision to this effect. But jurisprudence

provides that this extra-ordinary liability starts from the time the
passenger unconditionally places himself for transport up to the time
the passenger alights from the vehicle. However, when the passenger
has reasonable cause to be near the vehicle, or remains in the

Page 32
premises within a reasonable time after alighting, extra-ordinary

diligence of the carrier will still have to be exercised.
CAN THE RESPONSIBILITY OF A COMMON CARRIER FOR THE SAFETY OF

PASSENGERS BE DISPENSED WITH OR LESSENED BY STIPULATION?
The responsibility of a common carrier for the safety of

passengers as required in articles 1733 and 1755 cannot be dispensed
with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise (Article 1757). However, when a
passenger is carried gratuitously, a stipulation limiting the carriers
liability is valid, but not for willful acts or gross negligence (Article
1758). The reduction of fare does not justify any limitation of the
common carrier's liability (ibid).
The foregoing provision means that the fact that a passenger is

carried gratuitously does not necessarily relieve the carrier from
responsibility to such passenger. The common carrier is only allowed to
stipulate with the passenger carried gratuitously that the former is not
responsible for simple negligence. It also means that in the absence of
stipulation, the carrier is still liable for negligence. But even with a
stipulation, the carrier cannot be exempted from liability for willful acts
or gross negligence to a non-paying passenger. And a mere discount or
reduction in fare does not justify any limitation on the carriers liability
(Article 1758).
ARE CHILDREN WHO DO NOT PAY THE FARE CONSIDERED AS

PASSENGERS FOR WHOM THE COMMON CARRIER SHOULD BE RESPONSIBLE?
A child going on a train with its mother, or in charge of another

person who has a ticket or pays fare for herself or himself is a
passenger, although no fare is paid for such child. But this rule does
not apply where the child is unaccompanied by one having it in charge
and to newsboys or children who are permitted to ride on a car
gratuitously by an employee who has no authority to do so.
WHAT IS THE RESPONSIBILITY OF COMMON CARRIERS FOR THE DEATH

OF OR INJURIES TO PASSENGERS THROUGH THE NEGLIGENCE OR WILLFUL
ACTS OF THE FORMERS EMPLOYEES?
Common carriers are liable for the death of or injuries to

passengers through the negligence or wilful acts of the former's
employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common
carriers.

Page 33
This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in the
selection and supervision of their employees (Article 1759).
However, the carrier cannot be made liable for the unauthorized

act of its employee in confirming a reservation made by a passenger
with an expired ticket, especially if such employee did not know the
requirements to have such ticket extended (Cervantes vs. Court of
Appeals, 304 SCRA 27).
WHAT IS MEANT BY THE PRINCIPLE OF RESPONDEAT SUPERIOR?
The principle of respondeat superior refers to that rule by virtue

of which, if the damage or injury is caused by the negligence or willful
act of an employee, the employer is liable only when the act of the
employee is within the scope of his authority (Maranan vs. Perez, 20
SCRA 412). As far as our laws on common carriers is concerned, this
view, which is the minority view in Anglo-American law, is not followed
in this jurisdiction (ibid). As the Supreme Court has stated it so
emphatically: We do not and have never followed the respondeat
superior rule (Ramos vs. Pepsi Cola Bottling Co., 19 SCRA 289).
WHAT ARE THE REASONS FOR ARTICLE 1759 IN MAKING THE

COMMON CARRIER LIABLE FOR INJURIES OR DEATH BY THE NEGLIGENCE OR
WILLFUL ACTS OF ITS EMPLOYEES?
There are at least three cogent reasons for making the common
carrier liable for injuries or death caused by the negligence or willful
acts of its employees:
1. The special undertaking of the carrier requires that it furnish its

passengers that full measure of protection afforded by the
exercise of high degree of care prescribed by law, inter alia, from
violence and insults at the hands of strangers and other
passengers, but above all, from the acts of the carriers own
servants charged with the passengers safety.
2. Said liability of the carrier for the servants violation of duty to
passengers, is a result of the formers confiding in the servants
hands the performance of his contract to safely transport the
passenger, delegating therewith the duty of protecting the
passenger with the utmost care prescribed by law; and
3. As between the carrier and the passenger, the former must bear
the risk of wrongful acts of negligence of the carriers employees
against passengers, since it, and not the passengers, has power
to select and remove them (Maranan vs. Perez, 20 SCRA 413).

Page 34
MAY THE CARRIER BE HELD LIABLE IF THE DEATH OF OR INJURY TO A

PASSENGER IS CAUSED BY THE NEGLIGENCE OR WILLFUL ACTS OF ANOTHER
PASSENGER OR OF A STRANGER?
A common carrier is responsible for injuries suffered by a

passenger on account of the wilful acts or negligence of other
passengers or of strangers, if the common carrier's employees through
the exercise of the diligence of a good father of a family could have
prevented or stopped the act or omission (Article 1763).
WHERE IS THE DEFENSE OF THE EXERCISE OF DILIGENCE OF A GOOD

FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF THEIR
EMPLOYEES APPROPRIATE?
This defense is appropriate only in quasi-delict or culpa aquiliana

(Article 2180). It is not available, however in culpa contractual and
therefore, a common carrier cannot raise such defense in action
bought by its passengers (Article 1759)
MAY THE COMMON CARRIERS RESPONSIBILITY FOR THE NEGLIGENCE

AND WILLFUL ACTS OF ITS EMPLOYEES BE ELIMINATED OR DIMINISHED BY
STIPULATION OR OTHERWISE?
The common carrier's responsibility prescribed in the preceding

article cannot be eliminated or limited by stipulation, by the posting of
notices, by statements on the tickets or otherwise (Article 1760).
WHAT DEGREE OF DILIGENCE MUST THE PASSENGER OBSERVE TO

AVOID INJURY TO HIMSELF?
The passenger must observe the diligence of a good father of a

family to avoid injury to himself (Article 1761).
Thus, where the proximate cause of the injury to the passenger

was his own negligence, the carrier cannot be held liable (Lara vs.
Valencia, L-9907, June 30, 1958).
WHAT IS THE EFFECT OF CONTRIBUTORY NEGLIGENCE OF THE

PASSENGER?
The contributory negligence of the passenger does not bar

recovery of damages for his death or injuries, if the proximate cause
thereof is the negligence of the common carrier, but the amount of
damages shall be equitably reduced (Article 1762).

Page 35
Even when the common carrier failed to exercise extraordinary

diligence as required by law, a contributory negligence of the
passenger while not exempting the carrier form liability, nevertheless
justified the deletion of amount adjudicated as moral damages. By the
same token, the award of exemplary damages must be set aside.
Exemplary damages may be allowed only in cases where the
defendant acted in wanton, fraudulent, reckless, oppressive or
malevolent manner (Philippine Railways vs. Court of Appeals, 139
SCRA 87).
SUMMARY: WHAT IS THE DEGREE OF DILIGENCE REQUIRED OF A

COMMON CARRIER?
1. In transporting goods, the common carrier must exercise

EXTRAORDINARY DILIGENCE (Articles 1733 and 1735).
2. In transporting passengers, the common carrier must exercise
UTMOST DILIGENCE of very cautious persons, with due regard for all
the circumstances (Article 1755)
3. In preventing or stopping injuries to a passenger on account of
the willful or negligence of other passengers or of strangers, the
common carriers employees must exercise the DILIGENCE OF A
GOOD FATHER OF A FAMILY (Article 1763).
SUBSECTION 4
Common Provisions
INAN ACTION BASED ON CULPA CONTRACTUAL, MUST THE DRIVER OF

THE CARRIER BE INCLUDED AS PARTY DEFENDANT?
For breach of contractual obligation to carry the passengers

safely to their place of destination, the common carrier is primarily
liable for damages, and the case may be brought against the carrier
alone, without the necessity of including the driver (Cachero vs. Manila
Yellow Taxicab Co., Inc., L-8721, May 23, 1957).
IS THE CARRIERS CONTRACTUAL LIABILITY THE SAME AS ITS DRIVERS

CIVIL LIABILITY ARISING FROM CRIMINAL NEGLIGENCE?
A civil action based on the contractual liability of a common

carrier is distinct from the criminal action instituted against the carrier
or its employee cased on the latters criminal negligence. The first is
governed by the provisions of the Civil Code, and not by those of the
Revised Penal Code, and it being entirely separate and distinct from
the criminal action, the same may be instituted and prosecuted
independently of, and regardless of the result of the latter (Benaldes
vs. Bohol Transportation, Inc., 7 SCRA 277).

Page 36
IS THE DRIVER OF THE CARRIER JOINTLY AND SEVERALLY LIABLE WITH

THE CARRIER IN CASE OF BREACH OF CONTRACT OF CARRIAGE?
The driver is not jointly and severally liable with the carrier in
case of breach of contract of carriage. The rationale behind this is that
the contract of carriage is between the carrier and the passenger, and
in the event of contractual liability, the carrier is exclusively
responsible therefore to the passenger, even if such breach is due to
the negligence of the driver. Further, if the driver is jointly and
severally liable with the carrier, that would make the carriers liability
personal instead of merely vicarious and consequently, entitled to
recover only the share which corresponds to the driver (Philippine
Rabbit Bus Lines vs. Intermediate Appellate Court, 189 SCRA 158).
WHAT ARE THE DAMAGES THAT MAY BE AWARDED AGAINST A

COMMON CARRIER?
Damages in cases comprised in this Section shall be awarded in

accordance with Title XVIII of this Book, concerning Damages. Article
2206 shall also apply to the death of a passenger caused by the breach
of contract by a common carrier (Article 1764).
Under Article 2197, damages may be:
1. Actual or compensatory;
2. Moral;
3. Nominal;
4. Temperate or moderate;
5. Liquidated; or
6. Exemplary or corrective.
WHAT DAMAGES MAY BE RECOVERED IN CASE OF DEATH OF A

PASSENGER?
When death occurs, the following items of damages may be

recovered:
1. An indemnity for the death of the victim;

2. An indemnity for loss of earning capacity of the deceased;
3. Moral damages;
4. Attorneys fee and expenses of litigation;
5. Interest in proper cases (Brinas vs. People, 125 SCRA 687).

Page 37
INFIXING A GREATER AMOUNT OF DAMAGES FOR DEATH OF A

PASSENGER THAN THAT PROVIDED BY LAWM WHAT MAY THE COURTS
CONSIDER?
Article 2206 applies in case of death caused by breach of

contract by the common carrier (Article 1764). It fixes the minimum
indemnity for death at P____ which the courts may increase according
to circumstances. It is in fixing a greater amount of indemnity that
courts may consider the financial capacity of the common carrier,
along with such other factors as:
1. Life expectancy of the deceased or of the beneficiary, whichever

is shorter;
2. Pecuniary loss to the plaintiff or beneficiary;
3. Loss of support;
4. Loss of service;
5. Loss of society;
6. Mental suffering of beneficiaries; and
7. Medical and funeral expenses (Pangasinan Transportation Co.,
Inc. vs. Legaspi, 12 SCRA 592).
In awarding compensatory damages, the age of the plaintiff, his

expected life span, and his earning capacity within that life span must
be taken into consideration. Thus, the fact that the plaintiff was only in
his twenties, when through the negligence of the defendant, he lost
the use of his limbs, being condemned for the remainder of his life to
be a paralytic, in effect leading a maimed, well-nigh useless existence,
were taken into account in fixing compensatory damages (Marchan vs.
Mendoza, 24 SCRA 889).
HOW MAY LIFE EXPECTANCY OF A PERSON BE DETERMINED FOR

PUPROSES OF FIXING THE AMOUNT OF DAMAGES THAT MAY BE RECOVERED?
In determining the number of years on the basis of which the

damages shall be computed and the rate which the losses sustained by
said heirs should be fixed, the following formula was adopted in the
American Expectancy Table of Mortality or the actual Combined
Experience Table of Mortality:
2/3 x (80 age of the decedent) = life expectancy.

Thus, the life expectancy of the passenger who died when he
was over 29 years of age (or around 30 for purposes of computation)
was placed at 33 1/3 years, following the foregoing formula (Villa Rey
Transit, Inc. vs. Court of Appeals, 31 SCRA 514). And where the
passenger was 37 years old when he died, he had a life expectancy of

Page 38
28 2/3 more years (Fortune Express, Inc. vs. Court of Appeals, G.R. No.
119756, March 18, 1999).
In the computation of the damages to be awarded, it should be

life expectancy of the passenger who died and not the life expectancy
of the beneficiary which should be considered (Philippine Airlines vs.
Court of Appeals, 185 SCRA 110).
ACTUAL OR COMPENSATORY DAMAGES
Actual damages are adequate compensation for pecuniary loss

suffered and proved. It includes attorneys fees.
ARTICLE 2199. Except as provided by law or by stipulation, one is

entitled to an adequate compensation only for such pecuniary loss suffered by him as
he has duly proved. Such compensation is referred to as actual or compensatory
damages.
ARTICLE 2200. Indemnification for damages shall comprehend not only

the value of the loss suffered, but also that of the profits which the obligee failed to
obtain. (1106)
ARTICLE 2201. In contracts and quasi-contracts, the damages for which

the obligor who acted in good faith is liable shall be those that are the natural and
probable consequences of the breach of the obligation, and which the parties have
foreseen or could have reasonably foreseen at the time the obligation was
constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the non-
performance of the obligation. (1107a)
ARTICLE 2202. In crimes and quasi-delicts, the defendant shall be liable

for all damages which are the natural and probable consequences of the act or
omission complained of. It is not necessary that such damages have been foreseen or
could have reasonably been foreseen by the defendant. cdasia
ARTICLE 2203. The party suffering loss or injury must exercise the
diligence of a good father of a family to minimize the damages resulting from the act
or omission in question.
ARTICLE 2204. In crimes, the damages to be adjudicated may be

respectively increased or lessened according to the aggravating or mitigating
circumstances.
ARTICLE 2205. Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of temporary or permanent

personal injury;
(2) For injury to the plaintiff's business standing or commercial credit.

Page 39
ARTICLE 2206. The amount of damages for death caused by a crime or

quasi-delict shall be at least three thousand pesos, even though there may have
been mitigating circumstances. In addition:
(1) The defendant shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity
shall in every case be assessed and awarded by the court, unless the deceased on
account of permanent physical disability not caused by the defendant, had no
earning capacity at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of
article 291, the recipient who is not an heir called to the decedent's inheritance by
the law of testate or intestate succession, may demand support from the person
causing the death, for a period not exceeding five years, the exact duration to be
fixed by the court;
(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased. cdtai
ARTICLE 2207. If the plaintiff's property has been insured, and he has
received indemnity from the insurance company for the injury or loss arising out of
the wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who has
violated the contract. If the amount paid by the insurance company does not fully
cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.
ARTICLE 2208. In the absence of stipulation, attorney's fees and

expenses of litigation, other than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest; casia
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy
the plaintiff's plainly valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled
workers;
(8) In actions for indemnity under workmen's compensation and employer's
liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's
fees and expenses of litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
ARTICLE 2209. If the obligation consists in the payment of a sum of

money, and the debtor incurs in delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of the interest agreed upon, and in
the absence of stipulation, the legal interest, which is six per cent per annum. (1108)
casia

Page 40
ARTICLE 2210. Interest may, in the discretion of the court, be allowed

upon damages awarded for breach of contract.
ARTICLE 2211. In crimes and quasi-delicts, interest as a part of the

damages may, in a proper case, be adjudicated in the discretion of the court.
ARTICLE 2212. Interest due shall earn legal interest from the time it is
judicially demanded, although the obligation may be silent upon this point. (1109a)
ARTICLE 2213. Interest cannot be recovered upon unliquidated claims or

damages, except when the demand can be established with reasonable certainty.
ARTICLE 2214. In quasi-delicts, the contributory negligence of the

plaintiff shall reduce the damages that he may recover.
ARTICLE 2215. In contracts, quasi-contracts, and quasi-delicts, the court

may equitably mitigate the damages under circumstances other than the case
referred to in the preceding article, as in the following instances: cdtai
(1) That the plaintiff himself has contravened the terms of the contract;
(2) That the plaintiff has derived some benefit as a result of the contract;
(3) In cases where exemplary damages are to be awarded, that the defendant
acted upon the advice of counsel;
(4) That the loss would have resulted in any event;
(5) That since the filing of the action, the defendant has done his best to lessen
the plaintiff's loss or injury.
OTHER KINDS OF DAMAGES

ARTICLE 2216. No proof of pecuniary loss is necessary in order that
moral, nominal, temperate, liquidated or exemplary damages, may be adjudicated.
The assessment of such damages, except liquidated ones, is left to the discretion of
the court, according to the circumstances of each case. cda
MORAL DAMAGES
ARTICLE 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they are the proximate result of
the defendant's wrongful act or omission.
ARTICLE 2218. In the adjudication of moral damages, the sentimental

value of property, real or personal, may be considered.
ARTICLE 2219. Moral damages may be recovered in the following and

analogous cases:
(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;

Page 41
(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.
casia
The parents of the female seduced, abducted, raped, or abused, referred to in

No. 3 of this article, may also recover moral damages.
The spouse, descendants, ascendants, and brothers and sisters may bring the
action mentioned in No. 9 of this article, in the order named.
ARTICLE 2220. Willful injury to property may be a legal ground for

awarding moral damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
AS
A GENERAL RULE, MAY MORAL DAMAGES BE RECOVERED IN
BREACH OF CONTRACT OF TRANSPORTATION?
Moral damages are not recoverable in damage actions

predicated on a breach of contract of transportation in view of the
provisions of Articles 2219 and 2220. The said provisions limited the
award of moral damages to those enumerated therein and analogous
cases. A breach of contract cannot be considered included in the
descriptive term analogous cases used in Article 2219, not only
because Article 2220 specifically provided for damages that are caused
by contractual breach, but because the definition of quasi delict in
Article 2176 expressly excludes the cases where there is a pre-
existing contractual relation between the parties (Verzosa vs. Baytan,
107 Phil. 1010; Martinez vs. Gonzales, 6 SCRA 331).
WHAT ARE THE EXCEPTIONS TO THE FOREGOING RULE WHEN MORAL

DAMAGES MAY BE RECOVERED IN BREACH OF CONTRACT OF
TRANSPORTATION?
Moral damages may be recovered in an action for breach of

contract of transportation in the following cases:
1. When the mishap results in the death of a passenger (M. Ruiz

Highway Transit, Inc. vs. Court of Appeals, 11 SCRA 98);
2. Where it is proved that the carrier was guilty of fraud or bad
faith, even if death does not result (Rex Taxicab Co., Inc. vs.
Bautista, L-15392, September 30, 1960; Singson vs. Court of
Appeals, 282 SCRA 149).
Bad faith means a breach of a known duty through some motive

or ill-will. Self enrichment or fraternal interest, and not personal ill-will,

Page 42
may have been the motive, but it is malice nevertheless which may be
the ground for awarding moral damages for breach of contract of
carriage (Lopez vs. Pan American World Airways, 16 SCRA 431). The
bad faith referred to may be bad faith in the securing and in the
execution of the contract and in the enforcement of its terms or any
other kind of deceit which may have been used by the carrier (Tamayo
vs. Aquino, L-12634 and 12720, may 29, 1959).
MAY MORAL DAMAGES BE GRANTED IN CASE OF BREACH OF

CONTRACT OF TRANSPORTATION WHICH MERELY CAUSES PHYSICAL INJURIES
TO PASSENGERS?
In case of breach of contract of carriage resulting only to physical

injuries of passengers, moral damages are not recoverable (Laguna
Tayabas Bus Co. vs. Cornista, 11 SCRA 182), unless the carrier acted
fraudulently or with malice or in bad faith (Roque vs. Buan, 21 SCRA
651; Bulante vs. Chu Liante, 23 SCRA 604).
NOMINAL DAMAGES
Nominal damages are awarded not to compensate but to

vindicate a right of the plaintiff that has been violated by the
defendant. Temperate damages, on the other hand, refers to pecuniary
loss suffered but cannot be proven with certainty.
ARTICLE 2221. Nominal damages are adjudicated in order that a right of

the plaintiff, which has been violated or invaded by the defendant, may be vindicated
or recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him. cd
ARTICLE 2222. The court may award nominal damages in every

obligation arising from any source enumerated in article 1157, or in every case where
any property right has been invaded.
ARTICLE 2223. The adjudication of nominal damages shall preclude

further contest upon the right involved and all accessory questions, as between the
parties to the suit, or their respective heirs and assigns. cdtai
TEMPERATE OR MODERATE DAMAGES
ARTICLE 2224. Temperate or moderate damages, which are more than

nominal but less than compensatory damages, may be recovered when the court
finds that some pecuniary loss has been suffered but its amount can not, from the
nature of the case, be proved with certainty.
ARTICLE 2225. Temperate damages must be reasonable under the

circumstances.
LIQUIDATED DAMAGES

Page 43
ARTICLE 2226. Liquidated damages are those agreed upon by the

parties to a contract, to be paid in case of breach thereof. aisa dc
ARTICLE 2227. Liquidated damages, whether intended as an indemnity

or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.
ARTICLE 2228. When the breach of the contract committed by the

defendant is not the one contemplated by the parties in agreeing upon the liquidated
damages, the law shall determine the measure of damages, and not the stipulation.
EXEMPLARY OR CORRECTIVE DAMAGES
ARTICLE 2229. Exemplary or corrective damages are imposed, by way

of example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages.
ARTICLE 2230. In criminal offenses, exemplary damages as a part of the

civil liability may be imposed when the crime was committed with one or more
aggravating circumstances. Such damages are separate and distinct from fines and
shall be paid to the offended party.
ARTICLE 2231. In quasi-delicts, exemplary damages may be granted if

the defendant acted with gross negligence.
ARTICLE 2232. In contracts and quasi-contracts, the court may award

exemplary damages if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner.
ARTICLE 2233. Exemplary damages cannot be recovered as a matter of

right; the court will decide whether or not they should be adjudicated. cdt
ARTICLE 2234. While the amount of the exemplary damages need not
be proved, the plaintiff must show that he is entitled to moral, temperate or
compensatory damages before the court may consider the question of whether or not
exemplary damages should be awarded. In case liquidated damages have been
agreed upon, although no proof of loss is necessary in order that such liquidated
damages may be recovered, nevertheless, before the court may consider the
question of granting exemplary in addition to the liquidated damages, the plaintiff
must show that he would be entitled to moral, temperate or compensatory damages
were it not for the stipulation for liquidated damages. cdtai
ARTICLE 2235. A stipulation whereby exemplary damages are

renounced in advance shall be null and void.
ISTHE DOCTRINE OF LAST CLEAR CHANCE APPLICABLE TO

PASSENGERS OF A COMMON CARRIER?
The principle about the last clear chance would call for
application in a suit between the owners and drivers of two colliding
vehicles. It does not apply where a passenger demands responsibility
form the carrier to enforce its contractual obligation. It would be
inequitable to exempt the negligent driver of the common carrier in the

Page 44
ground that the other driver was likewise guilty of negligence (Anuran
vs. Buno, 17 SCRA 224).
WHAT MAY BE DONE TO THE CERTIFICATE OF PUBLIC CONVENIENCE

GRANTED TO A COMMON CARRIER THAT REPEATEDLY FAILS TO COMPLY WITH
ITS DUTY TO OBSERVE EXTRAORDINARY DILIGENCE?
The Public Service Commission may, on its own motion or on

petition of any interested party, after due hearing, cancel the
certificate of public convenience granted to any common carrier that
repeatedly fails to comply with his or its duty to observe extraordinary
diligence as prescribed in this Section (Article 1765).
WHAT LAWS SHOULD APPLY FOR MATTERS NOT REGULATED BY THE

CIVIL CODE?
In all matters not regulated by this Code, the rights and

obligations of common carriers shall be governed by the Code of
Commerce and by special laws (Article 1766).
III. CODE OF COMMERCE PROVISIONS ON OVERLAND TRANSPORTATION

(Unless otherwise indicated, reference is to Code of Commerce)
WHAT IS THE SCOPE OF OVERLAND TRANSPORTATION?
It applies to transport on land and small bodies of water,

waterways, both natural and artificial including transport on rivers
which are not very large.
In transport on sea, the law on Admiralty governs.
WHAT IS THE NATURE OF THE CONTRACT OF TRANSPORTATION BY

LAND AND WATERWAYS? (WHEN A CONTRACT IS DEEMED COMMERCIAL)
A contract of transportation by land or waterways of any kind

shall be considered commercial:
1. When it has for its object merchandise or any article of

commerce;
2. When, whatever its object may be, the carrier is a merchant or is
habitually engaged in transportation for the public.
IS COMMON CARRIER COMMERCIAL?

Page 45
Common carrier is necessarily commercial falls under (2)

because it is habitually engaged in transportation for public.
(1) refers to both common carriers and private carriers (for so

long as it involves commercial objects)
WHAT GOVERNS COMMON CARRIERS?
1. Common carriers are primarily governed by the Civil Code.

2. Suppletory- Code of Commerce and special laws.
WHAT DOES THE CODE OF COMMERCE GOVERN?
Overland transportation
Martime/Admiralty
WHAT GOVERN COMMERCIAL CONTRACTS?
1. Commercial contract involving common carrier- refer to the

Civil Code first and then the Code of Commerce thereafter.
2. Private carrier involving commercial contract refer to the
Code of Commerce first and the Civil Code thereafter (but not
to Civil Code provisions on common carriers) ex. Provisions on
tort, contracts, etc.
EFFECT OF CIVIL CODE, ART. 1766, 2270, CIVIL CODE
The Civil Code does not expressly repeal the provisions of the
Code of Commerce on overland transportation. Instead, it makes such
provisions suppletory to the provisions of the Civil Code on common
carriers.
DEFINE BILL OF LADING.
It is a written acknowledgment of the receipt of goods and an

agreement to transport and to deliver them at a specified place to a
person named or his order. Also called shipping receipts, forwarders
receipts, receipt for transportation, air ways bill of lading.
A bill of lading is an instrument in writing, signed by a carrier or

his agent, describing the freight so as to identify, stating the name of
the consignor, the terms of the contract of carriage, and agreeing or
directing that the freight be delivered to the order or assigns of a
specified person at a specified place.
WHAT IS THE NATURE OF A BILL OF LADING?

Page 46
1. It is a contract in itself and the parties are bound by its terms, by

which the 3 parties namely the shipper, the carrier and the
consignee undertake specific responsibilities and assume
stipulated obligations. As a contract, it also fixes the route,
destination, and freight rate or charges, and stipulates the rights
and obligations assumed by the parties.
2. It is a receipt- it recites the date and place of shipment, and
describes the goods as to marks, quality, quantity and value.
3. It is a symbol of the goods covered by it. It is a legal evidence of
the contract between the shipper and the carrier. As evidence, its
contents shall decide all disputes, which may arise with regard to
their execution and fulfillment. However, in the absence of a bill
of lading, their respective claims may be determined by legal
proofs which each of the contracting parties may present, in
conformity with law. (Art. 354)
WHAT ARE THE CLASSES OF BILLS OF LADING?
1. NEGOTIABLE BILL OF LADING- 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 in such document.
2. NON-NEGOTIABLE BILL OF LADING- One in which it is stated that the
goods referred to therein will be delivered to a specified person.
3. CLEAN AND FOUL BILL OF LADING- One which contains a notation
thereon indicating that the goods covered by it are in bad
condition.
4. SPENT BILL OF LADING- One which covers goods that have already
been delivered by the carrier without a surrender of a signed
copy of the lading.
5. THROUGH BILL OF LADING- One issued by a carrier who is obliged to
use the facilities of other carriers as 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
ladings.
6. ON BOARD BILL OF LADING- One in which it is stated that the goods
have been received on board the vessel which is to carry the
goods.
7. RECEIVED-FOR-SHIPMENT BILL OF LADING- 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.
8. CUSTODY BILL OF LADING- One which is issued by the carrier to
whom the goods have been delivered for shipment but the
steamer indicated in the bill of lading which is to carry the goods

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has not yet reached the port where the goods are held for
shipment.
9. PORT BILL OF LADING- One which is issued by the carrier to whom
the goods have been delivered, and the steamer 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.
WHAT IS THE EFFECT OF THE ISSUANCE BY A CARRIER OF AN

UNSIGNED BILL OF LADING WHEN ACCEPTED BY THE SHIPPER OR
CONSIGNEE?
A bill of lading delivered and accepted constitutes the contract of

carriage even though not signed, because the acceptance of a paper
containing the terms of a proposed contract generally constitutes an
acceptance of a contract and of all of its terms and conditions which
the acceptor has actual or constructive notice. In a nutshell, the
acceptance of a bill of lading by the shipper and the consignee with full
knowledge of its contents gives rise to the presumption that the same
was a perfected and binding contract (Keng Hua Paper Products Co.,
Inc. vs. Court of Appeals, 286 SCRA 257).
WHAT MUST BE STATED IN THE BILL OF LADING?
The shipper as well as the carrier of merchandise or effects may

mutually demand of each other the issuance of a bill of lading in which
there shall be stated:
1. The name, surname and domicile of the shipper;

2. The name, surname and domicile of the carrier;
3. The name, surname and domicile of the person to whom or to
whose order the effects are sent, or whether such effects are to
be delivered to the bearer of the said bill;
4. The description of the effects, with a statement of their kind,
weight, and the exterior marks or signs of the packages
containing the same;
5. The cost of transportation;
6. The date on which the shipment is made;
7. The place of delivery to the carrier;
8. The place and time of delivery to the consignee;
9. The indemnity to be paid by the carrier in case of delay, should
there be an agreement on this point (Art. 350).
HOW IS AN AMBIGUITY IN A BILL OF LADING CONSTRUED?
Ambiguity in a bill of lading is construed against the carrier, the

contract being one of adhesion.

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WHO ARE THE PARTIES TO A BILL OF LADING?
1. shipper
2. consignee
3. carrier
WHAT IS THE EVIDENCE OF THE CONTRACT BETWEEN THE SHIPPER

AND THE CARRIER?
Since a bill of lading constitutes the legal evidence of the

contract of transportation between the parties, all disputes between
the parties regarding the execution and performance of the contract of
transportation shall be decided by the contents of the bill of lading
issued by the carrier.
Exception: falsity and material error in the drafting of the bill.
Bill not essential to contract-the fact that a bill is not issued does
not preclude the existence of a contract of transportation, provided
there is a meeting of the minds, since a contract of transportation is
essentially a consensual contract.
If no bill is issued, the disputes between the parties shall be

determined by the legal proofs which the parties may present in
support of their respective claims, according to the general provisions
established by the Code of Commerce and the Civil Code. (Art. 354)
However, the parties may mutually demand that a bill of lading

be issued (Art. 350), but the same is not obligatory for the purpose of
giving effect to the contract of carriage.
WHEN CAN A CARRIER REFUSE TO TRANSPORT? (ART. 356)
1. If the packages appear to be unfit for transportation;

2. Nevertheless, in the case of railroads, this authority is not
absolute. If the transportation of such packages is insisted upon,
railroads cannot refuse to carry them, but they shall be exempt
from all their responsibility if their objections are made to appear
in the bill of lading.
HOW SHOULD THE CARRIER EXAMINE THE PACKAGE IN CASE OF WELL

FOUNDED SUSPICIONS OF THE FALSITY IN THE DECLARATION OF THE
CONTENTS OF THE PACKAGE (ART. 357)?

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1. If the carrier has a well founded suspicion of falsity in the

declaration as to the contents of a package, he may examine it.
However, he must make the examination either in the presence
of the shipper or consignee and witnesses or before a notary
public where the shipper or consignee does not appear after
having been cited to do so.
2. Should the declaration of the shipper appear to be true, the
expenses occasioned by the examination and by the careful
repacking of the said packages shall be paid by the carrier, and
in a contrary case, the shipper.
IS A BILL OF LADING INDISPENSABLE TO A CONTRACT OF CARRIAGE?
Although Article 350 provides that the Shipper as well as the

carrier of merchandise or goods may mutually demand that a bill of
lading be made, still, said bill of lading is not indispensable. For as
long as there is a meeting of the minds of the parties, a contract of
carriage exists even in the absence of a bill of lading.
If no bill is issued, the disputes between the parties shall be

determined by the legal proofs which the parties may present in
support of their respective claims, according to the general provisions
established by the Code of Commerce and the Civil Code.
Parol evidence rule prohibits one from raising the terms and
conditions not contained in the bill of lading. Exceptions: Falsity and
fraud.
If no bill of lading, apply Article 51:
1. If value exceeds P300, testimony of witness is NOT sufficient; it

needs of proof through other writing (ex, receipts, checks).
2. IF VALUE IS EXACTLY P300 or less, one can introduce testimonial
evidence.
WHEN DOES RESPONSIBILITY OF THE CARRIER COMMENCE (ART.

355)?
From the moment he receives the merchandise personally or

through his duly authorized agent, at the place indicated for receiving
them. (Also provided in Art. 1736, Civil Code)
WHAT IS THE ROUTE TO BE TAKEN BY THE CARRIER IN TRANSPORTING

THE GOODS (ART. 359)?

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1. The route agreed by the parties should there be an agreed route,

in which case the carrier must not change the route, UNLESS by
force majeure. Otherwise, the carrier shall be liable for (1) losses
due not only to the change of route but also to (2) other causes,
(3) together with the indemnity agreed upon. Furthermore, under
Article 1747 of the Civil Code, (4) the carrier cannot avail of the
contract limiting his liability. When by the said cause of force
majeure, the carrier is obliged to take another route, producing
an increase in the transportation charges, the amount of such
increase, after presenting formal proof thereof, shall be
reimbursable to him.
2. When there is no agreed route, the carrier must select one which
may be the shortest, least expensive and practically passable.
WHAT IS THE RIGHT OF THE CARRIER WHEN THE GOODS

TRANSPORTED RUN THE RISK OF BEING LOST (ARTS. 361, 362)?
If the goods transported run the risk of being lost on account of

their nature or by reason of an inevitable accident, there being no time
for the owners to dispose of the same, the carrier may proceed to their
sale, placing them for this purpose at the disposal of the judicial
authority or of the officials provided for in special provisions.
WHAT IS THE OBLIGATION OF THE COMMON CARRIER WITH RESPECT

TO THE GOODS TO BE DELIVERED (ART. 363)?
Outside of the cases mentioned in the second paragraph of

Article 361, the carrier shall be obliged to deliver the goods shipped in
the same condition in which, according to the bill of lading, they were
found at the time they were received, without any damage or
impairment, and failing to do so, to pay the value which those not
delivered may have at the point and at the time at which their delivery
should have been made.
If those not delivered form part of the goods transported, the

consignee may refuse to receive the latter, when he proves that he
cannot make use of them independently of the others.
WHEN MAY THE CONSIGNEE REFUSE TO RECEIVE THE GOODS?
1. If those not delivered form part of the goods transported, the

consignee may refuse to receive the latter, when he proves that
he cannot make use of them independently of the others (Art.
363, par. 2).
2. If, in consequence of the damage, the goods are rendered
useless for sale and consumption for the purposes for which they

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are properly destined, the consignee shall not be bound to

receive them, and he may have them in the hands of the carrier,
demanding of the latter their value at the current price on that
day (Art. 365, par. 1).
3. If among the damaged goods there should be some pieces in
good condition and without any defect, the foregoing provision
shall be applicable with respect to those damaged and the
consignee shall receive those which are sound, this segregation
to be made by distinct and separate pieces and without dividing
a single object, unless the consignee proves the impossibility of
conveniently making use of them in this form (Art. 365. par. 2.
4. The same rule shall be applied to merchandise in bales or
packages, separating those parcels which appear sound (Art.
365, par. 3).
TO WHOM MUST DELIVERY BE MADE (ART. 368)?
The carrier must deliver without delay or difficulty the

merchandise received by him to the consignee, by the mere fact of
being so designated in the bill of lading to receive it; and should the
carrier not do so, he shall be liable for the damages which may arise
therefrom.
This provision however, is deemed amended by Article 1736 of

the Civil Code which provides that the delivery by the carrier may be
made either to the consignee, or to the person who has a right to
receive them, aside therefrom, the delivery by the carrier is subject to
the right of the unpaid seller to stoppage in transitu. (Art. 1532, Civil
Code.)
WHAT MUST BE DONE IF THE CONSIGNEE CANNOT BE FOUND, DOES

NOT PAY THE TRANSPORTATION CHARGES, OR REFUSES TO RECEIVE THE
GOODS (ART. 369, ART. 1752, CIVIL CODE)?
1. If the consignee can not be found at the residence indicated in

the bill of lading;
2. If he refuses to pay the transportation charges and expenses;
3. To receive the goods, the deposit of the said goods shall be
ordered by the municipal judge, where there is no judge of first
instance, to be placed at the disposal of the shipper or sender,
without prejudice to third persons having a better right, this
deposit having all the effects of a delivery.
WHEN SHOULD THE CARRIER DELIVER THE GOODS (ARTS. 370,

358)?

Page 52
1. In case a period for the delivery has been agreed upon, the
carrier must deliver within the period agreed upon.
2. Should there be no period, the carrier shall be under the
obligation to forward them with the first shipment of the same or
similar merchandise he may make to the point where he must
deliver them; and should he not do so, the damages occasioned
by the delay suffered by him. And where the carrier negligently
incurs in delay, a natural disaster shall not free such carrier from
responsibility, and the carrier shall be liable for damages.
WHAT IS THE RESPONSIBILITY OF THE CARRIER IN CASE OF

AGREEMENT FOR THE USE OF THE COMBINED SERVICES OF OTHER CARRIERS
(ART. 373)?
Should a carrier deliver merchandise to a consignee by virtue of

agreements combined with other carriers, he shall assume the
obligations of those who preceded him in the conveyance, reserving
his right to proceed against them if he should not be the party directly
responsible for the fault which gives rise to the claim of the shipper of
the consignee.
The carrier making the delivery shall also assume all the actions
and rights of those who may have preceded him in the transportation.
The shipper and the consignee shall have an immediate right of

action against the carrier who executed the transportation contract, or
against the other carriers who received the goods transported without
reservation.
The reservation made by the latter shall not exempt them,

however, from liabilities they may have incurred by reason of their own
acts.
WITHIN WHAT TIME SHOULD A CLAIM BE BROUGHT AGAINST THE

CARRIER ON ACCOUNT OF DAMAGE TO THE GOODS TO BE TRANSPORTED?
Within the twenty-four hours following the receipt of the

merchandise, the claim against the carrier for damage or average be
found therein upon opening the packages, may be made, provided that
the indications of the damage or average which gives rise to the claim
cannot be ascertained from the outside part of such packages, in which
case the claim shall be admitted only at the time of receipt.
After the periods mentioned have elapsed, or the transportation

charges have been paid, no claim shall be admitted against the carrier

Page 53
with regard to the condition in which the goods transported were

delivered (Art. 366).
SUMMARY:
1. If the damage is apparent from the exterior of the package, the

claim must be made upon receipt of the package. For such
purpose, a verbal claim made immediately is sufficient
compliance with the law.
2. If the damage cannot be known from the exterior part of the
packages, the claim must be made within 24 hours following the
receipt of the merchandise.
3. When the consignee receives the merchandise, paying the
freight charges without protest, all claims against the carrier are
extinguished.
4. The foregoing rule has no application wherein the goods are not
delivered by the carrier to the consignee.
5. The periods of prescription under the Civil Code does not repeal
Art. 366 of the Code of Commerce, because the limitations of
actions in the Civil Code are without prejudice to those specified
in the Code of Commerce. (Art. 1148, Civil Code)
6. The 24 hour rule is inapplicable to misdelivery or conversion
where the ordinary prescriptive periods will apply, or when the
right to the period is waived.
WHAT IS CONVERSION?
It is an unauthorized assumption and exercise of the right of

ownership over goods or personal chattels belonging to another,
resulting in the alteration of their condition or the exclusion of the
owners rights.
HOW SHALL THE VALUE OF THE GOODS TRANSPORTED BE

DETERMINED?
The value of the goods which the carrier must pay in case of
their loss or conversion shall be determined in accordance with the
declaration in the bill of lading, no proofs being allowed on the part of
the shipper that there were among the goods declared therein, articles
of greater value, and money.
WHAT SECURITY DOES THE SHIPPER HAVE TO ASSURE PAYMENT OF

HIS CLAIMS FROM THE CARRIER?
Horses, vehicles, vessels, equipment, and all other principal and

accessory means of transportation, shall be specially obligated in favor

Page 54
of the shipper, although with relation to railroad, said obligations shall

be subordinated to the provisions of the law of concession with respect
to the property, and those of this Code with regard to the manner and
form of effecting the attachments and retentions against said
companies.
WHEN MAY THE CONSIGNEE REFUSE TO RECEIVE THE GOODS?
1. Should a part of the goods transported be delivered, the

consignee may refuse to receive it, when he proves that he
cannot make use of it without the others. (par. 2, Art, 363).
2. If due to the effect of the damages, the goods are rendered
useless for sale or consumption for particular purposes for which
they are to be used, the consignee shall not be bound to receive
them, and he may leave them in the hands of the carrier,
demanding payment of their value at the current market price on
said day (par. 1, Art. 365);
3. If among the damaged goods there should be some in good
condition and without defect whatsoever, the foregoing provision
shall be applicable with regard to the damaged ones, and the
consignee shall receive those which are sound, this segregation
being made by distinct and separate pieces, without dividing for
such purpose one whole article, unless the consignee proves the
impossibility of conveniently utilizing them in this form. The
same rule shall be applied to goods in bales and packages, with
distinction of those which appear sound. (par. 2 & 3, Art. 365)
SUMMARY:
Cases where consignee may abandon the goods:
1. In case of partial delivery, where the consignee can prove that he

can not make use of the goods capable of delivery
independently of those delivered,
2. Under art. 365 where the goods are rendered useless for sale or
consumption for purpose for which they were properly destined,
3. Under Art. 371, where there is delay through the fault of the
carrier.
WHEN MAY THE CONSIGNEE ABANDON THE GOODS?
In cases of delay on account of the fault of the carrier, the

consignee may leave the goods transported in the hands of the carrier,
informing him thereof in writing before the arrival of the same at the
point of destination.

Page 55
When this abandonment takes place, the carrier shall satisfy the
total value of the goods, and if they had been lost or mislaid.
Should the abandonment not take place, the indemnity for

damages on account of the delay may not exceed the current price
that the goods transported would have on the day and at the place
where the delivery should have been made, and this provision shall be
observed in all other cases where this indemnity is due.
If the carrier delays delivery, the consignee cannot refuse the

deliver, his remedy is to seek damages, but if the delay is
unreasonable, abandonment or conversion is proper. (Art. 371)
WITHIN WHAT TIME SHOULD THE CONSIGNEE PAY THE EXPENSES OF

TRANSPORTATION? WHAT IS THE REMEDY OF THE CARRIER IN CASE OF NON-
PAYMENT?
The consignee to whom the shipment may have been made

cannot defer the payment of the expenses and transportation charges
on the goods received after twenty-four hours have lapsed following
the time of the delivery; and in case of delay in making this payment,
the carrier may demand the judicial sale of the goods he transported
for an amount sufficient to cover the transportation charges and the
expenses incurred.
WHAT SECURITY DOES THE CARRIER HAVE FOR THE PAYMENT OF THE
TRANSPORTATION EXPENSES?
The goods transported shall be specially obligated to answer for

the transportation charges and for the expenses and fees caused by
the same during their transportation and until the time of their
delivery.
The credits for transportation shall be preferred claims or liens,

upon the goods carried, for the price of the contract and incidental
expenses until their delivery and for thirty days thereafter. One
prescribed, the carrier shall have no further right of action than that
corresponding to him as an ordinary creditor.
The preference of the carrier to the payment of what is due for

the transportation and expenses of the goods delivered to the
consignee shall not be affected by the insolvency of the latter,
provided that the lien is exercised within eight (now thirty) days from
delivery.
WHAT ARE THE RIGHTS OF SHIPPER?

Page 56
1. Damages subject to the 24-hour rule

2. Abandonment (3 cases)
3. Right to change consignment
WHAT ARE THE OBLIGATIONS OF SHIPPER/CONSIGNEE?
1. To pay transport charges

2. To return bill of lading or otherwise issue a receipt.
IV. ADMIRALTY AND MARITIME COMMERCE
A. CONCEPT OF ADMIRALTY; JURISDICTION OVER ADMIRALTY CASES

- BATAS PAMBANSA BLG. 129, SEC. 19 (3), SEC. 33 (1)
DEFINE MARITIME LAW.
Maritime law is the system of laws which particularly relates to

the affairs and business of the sea, to ships, their crews and
navigation, and to marine conveyance of persons and property.
This system of laws includes:
1. Book III of the Code of Commerce entitled Maritime Commerce,

2. Act No. 2616 otherwise known as the Salvage Law,
3. Commonwealth Act No. 65 otherwise known as the Carriage of
Goods by Sea Act,
4. Presidential Decree No. 1521 known as the Ship Mortgage
Decree of 1978, and
5. Other special laws relating to Maritime Commerce.
However, the primary law on the maritime commerce is still the

New Civil Code provisions on common carriers. The Code of Commerce
and special laws apply only suppletorily.
WHAT IS THE CONCEPT OF ADMIRALTY AS DITINGUISHED FROM

OVERLAND TRANSPORTATION?
As distinguished from overland transportation, admiralty

depends on the size of vessel and the size of the body of water over
which such vessel traverses.
WHICH COURT HAS JURISDICTION OVER ADMIRALTY CASES?

Page 57
B.P. 129 provides that the RTC shall have exclusive jurisdiction in
all actions in admiralty and maritime jurisdiction where the demand of
the claim exceeds P300, 000.00. The MTC shall have exclusive original
jurisdiction over actions where the value of the personal property or
amount of the demand does not exceed P300, 000.
The law therefore, does not really care if the case is an admiralty
or maritime claim. It is the amount that is relevant, and not the nature
of claim, for purposes of vesting jurisdiction. B.P. 129, in providing for
admiralty and maritime jurisdiction is superfluous.
B. VESSELS
1. Meaning
WHAT IS A VESSEL OR SHIP?
The words ship and vessel designate every craft, large or

small so long as it be not an accessory of another, such as the small
boat of a vessel, of greater or less tonnage. This definition comprises
both craft intended for ocean or for coastwise navigation, as well as
the floating docks, mud lighters, dredges, dumpscrows or any other
floating apparatus used in the service of an industry or in that of
maritime commerce (Yu Con vs. Ipil, 41 Phil. 770).
Under the mercantile Code, vessels refer solely and exclusively

to merchant ships and to those which are engaged in the
transportation of passengers and freight from one port to another or
from one place to another (Lopez vs. Duruelo, 52 Phil. 232).
A banca then must also be considered as a vessel within the

meaning of the word as understood in the Code of Commerce (Yu Con
vs. Ipil, supra).
WHAT KINDS OF VESSELS ARE GOVERNED BY THE CODE OF

COMMERCE?
Vessels which are licensed to engage in maritime commerce or

commerce by sea, whether in foreign or coastwise trade are regulated
by Book III (Maritime Commerce).
These refer exclusively to merchant ships engaged in the

transportation of passengers and freight from one port to another.
It is not intended though to include all ships, craft or floating

structures of every kind without limitation, and should not include

Page 58
minor craft engaged in river or bay traffic (Lopez vsa. Duruelo, 52 Phil.
229). Vessels of minor nature, such as river boats and those carrying
passengers from ship to shore are governed as to their liability to
passengers by the Civil Code.
2. Nature and Acquisition of - Articles 573, 574, 585, Article

712, Civil Code
HOW MAY OWNERSHIP OF MERCHANT VESSELS BE ACQUIRED?
1. Merchant vessels constitute property which may be acquired and

transferred by any of the means recognized by law. The acquisition
of a vessel must appear in a written instrument, which shall not
produce any effect with respect to third persons if not inscribed in
the registry of vessels.
2. The ownership of a vessel shall likewise be acquired by possession
in good faith, continued for three years, with a just title duly
recorded.
3. In the absence of any of these requisites, continuous possession for
ten years shall be necessary in order to acquire ownership.
4. A captain may not acquire by prescription the vessel of which he is
in command (Article 573). There can be no adverse possession in
the case of a captain who hold fiduciary relationship with the ship
owner; except where the captain repudiates the fiduciary
relationship and takes on an adverse possession which is known to
the public (adverse, open, continuous, notorious possession).
Thus, in accordance with the foregoing provision, ownership of a

vessel may be acquired in the following manner:
1. By any of the means recognized by law, such as sale, dacion en

pago, or any other contract by which ownership of a property is
acquired. It must however, be in writing and to bind third
persons, must be recorded in the Registry of Vessels.
2. By possession of the vessel in good faith for three years, with
good title duly recorded.
3. In the absence of the foregoing requisites, by continuous
possession for ten years.
WHAT MATERIALS MAY BUILDERS OF VESSELS EMPLOY, AND WHAT

SYSTEM SHOULD THEY FOLLOW IN THEIR CONSTRUCTION AND RIGGING?
Builders of vessels may employ the materials and follow, with

respect to their construction and rigging, the systems most suitable to
their interests. Ship owners and seamen shall be subject to what the
laws and regulations of the public administration on navigation,

Page 59
customs, health, safety of vessels, and other similar matters (Article

574).
HOW IS A VESSEL CONSIDERED?
Vessels are personal property under Article 416 of the Civil Code.
The same rule can be found in Article 585 of the Code of Commerce
which provides:
For all purposes of law not modified or restricted by the

provisions of this Code, vessels shall continue to be considered as
personal property (Article 585).
However, although a vessel is a personal property, the ownership

thereof is evidenced by a certificate of ownership and the transfer
thereof to be binding on third persons, must be registered in its
registry of property.
3. Registration; Certificates Issued; Distinctions - Tariff and

Custom Code, Sections 802, et seq.; PD 761, as amended by PD
1064, 1521
WHERE SHALL REGISTRATION OF A VESSEL BE EFFECTED?
The registration of a vessel shall be effected at its home port,

being a port when a coast guard district or station is in the said port,
and at the nearest Coast Guard or Station when the home port does
not have such (Section 803).
WHAT KIND OF VESSELS NEED TO BE REGISTERED?
1. Every vessel used in the Philippine waters, not being a transient

of foreign registry shall be registered with the Philippine Coast
Guard. To this end, it shall be the duty of the master, owner or
agent of every vessel to make application to the proper
Philippine Coast Guard District/Station for registration thereof
within fifteen days after the vessel becomes subject to such
registration.
2. A vessel of three tons gross or less shall not be registered, unless
the owner shall so desire, nor shall documents or licenses of any
kind be required for such vessel, but the proper fee shall be
charged for admeasurement, when admeasurement is
necessary, except when the same is engaged in towing or
carrying of articles and passengers for hire.
3. All undocumented vessels shall be numbered in such form
prescribed by the Commandant, Philippine Coast Guard.

Page 60
WHAT RECORD OF DOCUMENTS AFFECTING TITLE MUST BE

REGISTERED?
In the record of transfers and encumbrances of vessels, to be

kept at each principal port of entry, shall be recorded at length all
transfers, bills of sale, mortgages, liens or other documents which
evidence ownership or directly or indirectly affect the title of registered
vessels, and therein shall be recorded all receipts, certificates or
acknowledgment cancelling or satisfying, in whole or in part, any such
obligations. No other record of any such document or paper shall be
required than such as is affected hereunder (Section 805).
WHAT ARE THE OPTIONS OF SMALL BOAT OWNERS?
1. If the vessel is of domestic ownership, and of more than fifteen

tons gross or less, the taking of a certificate of Philippine registry
shall be optional (Section 806, Tariff and Customs Code, as
amended by P.D. 761 and 1064).
2. If the vessel is five tons gross or less, and the owner does not
take a certificate of Philippine registry, the taking of a certificate
of ownership shall be optional to the owner (Section 808, Tariff
and Customs Code, Section 1178 RAC and Section 1504, Phil.
Merchant Marine Rules and Regs.)
3. A vessel of three tons or less shall not be registered unless the
owner so desires (Section 1503 (b) Phil. Merchant Marine Rules
and Regs.)
WHAT ARE THE DISTINCTIONS OF THE FOREGOING?
The first case refers to a certificate of Philippine register, the

privilege of which are outlined in Section 810; while the second is a
certificate of ownership as distinguished in Section 808. The third is
simple registration.
WHAT DOES DOMESTIC OWNERSHIP MEAN?
Domestic Ownership refers to the ownership of vessels entitled

to Philippine register limited to citizens of the Philippines or to
corporations owned by such citizens. But it does not exclude aliens
from being licensed as ship brokers.
WHAT RIGHTS DO A CERTIFICATE OF PHILIPPINE REGISTRY CONFER

UPON A VESSEL?
A certificate of Philippine registry confers upon the vessel the

right to engage, consistently with law, in the Philippine coastwise trade

Page 61
and entitles it to the protection of the authorities and the flag of the
Philippines in all ports and on the high seas, and at the same time
secures to it the same privileges and subjects it to the same disabilities
as, under the laws of the Philippines, pertain to foreign-built vessels
transferred abroad to citizens of the Philippines (Section 810).
WHAT ARE THE REQUIREMENTS FOR APPROVAL OF APPLICATIONS FOR

CERTIFICATE OF PHILIPPINE REGISTRY?
No application for a certificate of Philippine registry shall be

approved until the commandant, Philippine Coast Guard, is satisfied
from an inspection of the vessel that it is engaged or destined to be
engaged in legitimate trade and that it is of domestic ownership as
such ownership is defined in Section 1504 hereof.
The Coast Guard or Station Commander may at any time inspect

a vessel or examine its owner, master, crew or passenger in order to
ascertain whether the vessel is engaged in legitimate trade and is
entitled to have or retain the certificate of the Philippine registry.
The Coast Guard District/Station Commander may at any time

make an administrative investigation as to the ownership or title of any
vessel engaged in the coastwise trade and whether such title or
ownership is in accordance with the requirements of law; and any
vessel sold, transferred or mortgaged to any person not a citizen of the
Philippines without previous approval of the President of the
Philippines, or leased or chartered to any citizen or national of a
country with which the Philippines has no diplomatic relations, or put
under foreign registry or flag without such approval, or operated in
violation of any of the provisions of this Code, shall be seized by the
Government of the Republic of the Philippines; and any person,
corporation, company or association violating any of the provisions of
this section shall be guilty of a misdemeanor and be punished by a fine
of not more than five thousand pesos or imprisonment for not more
than five years, or both: Provided, That in the event the person guilty
of such violation is a corporation, company or association, the manager
or, in his default, the president thereof shall be criminally responsible
for such violation (Section 811).
4. Significance of Registration of Transactions Affecting

Vessels
WHAT IS THE SIGNIFICANCE OF REGISTERING TRANSACTIONS

AFFECTING VESSELS?
The significance of registration are:

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1. It determines ownership of the vessel; and

2. It binds third persons.
C. PERSONS PARTICIPATING IN MARITIME COMMERCE
WHO ARE THE PERSONS PARTICIPATING IN MARITIME COMMERCE?
1. Ship owner
2. Ship agent
3. Captain or master
4. Other officers of the vessel, e.g., first mate, second master,
etc
5. Seamen
6. Other persons of the complement, e.g., stokers, supercargoes,
etc.
1. SHIP OWNERS AND SHIP AGENTS - ARTICLES 586 TO 608;

618
WHAT IS A SHIP OWNER?
A ship owner is a natural or juridical person who owns the vessel.

He is the person who is primarily liable for damages sustained in the
operation of vessel.
WHAT IS A SHIP AGENT?
By ship agent is understood the person entrusted with

provisioning or representing the vessel in the port in which it may be
found (Section 586, par. 2). The Code of Commerce likewise makes the
ship agent jointly and severally liable with the owner.
WHAT IS THE RATIONALE FOR SHIP AGENTS?
So that the ship owner will have a representative in all the places
where his vessel makes port. This is for convenience and economic
reasons (expensive to put office in every port of call).
WHAT ARE THE FUNCTIONS OF SHIP AGENTS?
1. Issuance of tickets
2. Issuance of bill of lading
a. Responsibilities and Liabilities

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WHAT IS THE LIABILITY OF THE SHIP OWNER AND SHIP AGENT FOR
THE ACTS OF, AND OBLIGATIONS CONTRACTED BY THE CAPTAIN?
Ship owners and ship agents are primarily liable for the
following:
1. The shipowner and the 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 the
creditor proves that the amount claimed was invested for the
benefit of the same (Article 586, par. 1).
2. The ship agent shall also be civilly liable for the indemnities in
favor of third persons which may arise from the conduct of the
captain in the care of the goods which he loaded on the vessel;
but he may exempt himself therefrom by abandoning the vessel
with all her equipments and the freight it may have earned
during the voyage (Article 587).
3. For damages to third persons for tort or quasi-delict committed
by the captain (Basis: Article 2180) Exception: Collision with
another vessel (See discussion under Collision)
4. Under Article 826 for damages in case of collision due to the
fault, negligence or want of skill of the captain, or any other
member of the complement.
5. For the obligations contracted by the captain, if the latter does
not exceed the powers and privileges pertaining to him by
reason of his position or conferred upon him by the former
(Article 588).
6. If the amounts claimed were invested for the benefit of the
vessel, the responsibility therefor shall devolve upon its owner or
agent (Section 588).
OTHERS:
ARTICLE 589. If two or more persons should be part owners of a merchant
vessel, a partnership shall be presumed as established by the co-owners.
This partnership shall be governed by the resolutions of the majority of the

members.
If the part owners should not be more than two, the disagreement of views, if any,
shall be decided by the vote of the member having the largest interest. If the
interests are equal, it should be decided by lot.
The person having the smallest share in the ownership shall have one vote; and
proportionately the other part owners as many votes as they have parts equal to the
smallest one. aisadc
A vessel may not be detained, attached or levied upon in execution in its entirety,
for the private debts of a part owner, but the proceedings shall be limited to the

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interest which the debtor may have in the vessel, without interfering with the
navigation.
ARTICLE 590. The co-owners of a vessel shall be civilly liable in the proportion
of their interests in the common fund, for the results of the acts of the captain,
referred to in Article 587.
Each co-owner may exempt himself from this liability by the abandonment, before
a notary, of the part of the vessel belonging to him.
ARTICLE 591. All the part owners shall be liable, in proportion to their
respective ownership, for the expenses for repairing the vessel, and for other
expenses which are incurred by virtue of a resolution of the majority.
They shall likewise be liable in the same proportion for the expenses for the
maintenance, equipment, and provisioning of the vessel, necessary for navigation.
ARTICLE 592. The resolution of the majority with regard to the repair,
equipment, and provisioning of the vessel in the port of departure shall bind the
minority, unless the minority members renounce their interests, which must be
acquired by the other co-owners, after a judicial appraisement of the value of the
portion or portions assigned.
The resolutions of the majority relating to the dissolution of the partnership and
sale of the vessel shall also be binding on the minority.
The sale of the vessel must be made at public auction, subject to the provisions of
the law of civil procedure, unless the co-owners unanimously agree otherwise, saying
always the right of repurchase and redemption provided for in Article 575.
ARTICLE 593. The owners of a vessel shall have preference in her charter over
other persons, under the same conditions and price. If two or more of them should
claim this right, the one having the greater interest shall be preferred; and should
they have equal interests, the matter shall be decided by lot.
ARTICLE 594. The co-owners shall elect the manager who is to represent them
in the capacity of ship agent.
The appointment of director or ship agent shall be revocable at the will of the
members.
ARTICLE 595. The ship agent, whether he is at the same time the owner of the
vessel, or a manager for an owner or for an association of co-owners, must have the
capacity to trade and must be recorded in the merchant's registry of the province.
The ship agent shall represent the ownership of the vessel, and may, in his own
name and in such capacity, take judicial and extrajudicial steps in matters relating to
commerce.
ARTICLE 596. The ship agent may discharge the duties of captain of the
vessel, subject in every case to the provision of Article 609.
If two or more co-owners apply for the position of captain, the disagreement shall
be decided by a vote of the members; and if the vote should result in a tie, it shall be
decided in favor of the co-owner having the larger interest in the vessel.

Page 65
If the interests of the applicants should be equal, and there should be a tie, the
matter shall be decided by lot.
ARTICLE 597. The ship agent shall designate and come to terms with the
captain, and shall contract in the name of the owners, who shall be bound in all that
refer to repairs, details of equipment, armament, provisions of food and fuel, and
freight of the vessel, and, in general, in all that relate to the requirements of
navigation.
ARTICLE 598. The ship agent may not order a new voyage, or make contracts
for a new charter, or insure the vessel, without the authorization of its owner or
resolution of the majority of the co-owners, unless these powers were granted him in
the certificate of his appointment. cdasia
If he insures the vessel without authorization therefore, he shall be subsidiarily

liable for the solvency of the insurer.
ARTICLE 599. The ship agent managing for an association shall render to his
associates an account of the results of each voyage of the vessel, without prejudice
to always having the books and correspondence relating to the vessel and to its
voyages at their disposal.
ARTICLE 600. After the account of the managing agent has been approved by
a relative majority, the co-owners shall pay the expenses in proportion to their
interest, without prejudice to the civil or criminal actions which the minority may
deem fit to institute afterwards.
In order to enforce the payment, the managing agent shall be entitled to an

executory action ("accion ejecutiva"), which shall be instituted by virtue of a
resolution of the majority, and without further proceedings than the acknowledgment
of the signatures of the persons who voted for the resolution.
ARTICLE 601. Should there be any profits, the co-owners may demand of the
managing agent the amount corresponding to their interests by means of an
executory action ("accion ejecutiva"), without any other requisite than the
acknowledgment of the signatures on the instrument approving the account.
ARTICLE 602. The ship agent shall indemnify the captain for all the expenses
he may have incurred with funds of his own or of others, for the benefit of the vessel.
ARTICLE 603. Before the vessel sets out to sea the ship agent may at his
discretion discharge the captain and members of the crew whose contracts are not
for a definite period or voyage, paying them the salaries earned according to their
contracts, and without any indemnity whatsoever, unless there is an express and
specific agreement in respect thereto.
ARTICLE 604. If the captain or any other member of the crew should be
discharged during the voyage, they shall receive their salary until they return to the
port where the contract was made, unless there should be just cause for the
discharge, all in accordance with Article 636 and following of this Code.
ARTICLE 605. If the contracts of the captain and members of the crew with
the ship agent should be for a definite period or voyage, they may not be discharged
until after the fulfillment of their contracts, except by reason of insubordination in

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serious matters, robbery, theft, habitual drunkenness, or damage caused to the

vessel or to its cargo through malice or manifest or proven negligence.
ARTICLE 606. If the captain should be a co-owner of the vessel, he may not be
discharged unless the ship agent returns to him the amount of his interest therein,
which, in the absence of agreement between the parties, shall be appraised by
experts appointed in the manner established in the law of civil procedure.
ARTICLE 607. If the captain who is a co-owner should have obtained the
command of the vessel by virtue of a special agreement contained in the articles of
association, he may not be deprived of his office except for the causes mentioned in
Article 605.
ARTICLE 608. In case of the voluntary sale of the vessel, all contracts between
the ship agent and the captain shall terminate, reserving to the latter his right to the
indemnity which may pertain to him, according to the agreements made with the
ship agent.
They vessel sold shall remain subject to the security of the payment of said
indemnity if, after the action against the vendor has been instituted, the latter is
found to be insolvent.
ARTICLE 618. The captain shall be civilly liable to the ship agent, and the
latter to the third persons who may have made contracts with the former;
1. For all the damages suffered by the vessel and its cargo by reason of want of
skill or negligence on his part. If a misdemeanor or crime has been committed, he
shall be liable in accordance with the Penal Code. cda
2. For all the thefts committed by the crew, reserving his right of action against
the guilty parties.
3. For the losses, fines, and confiscations imposed an account of violation of

customs, police, health, and navigation laws and regulations.
4. For the losses and damages caused by mutinies on board the vessel or by
reason of faults committed by the crew in the 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 those caused by the misuse of the powers and the non-fulfillment of the
obligations pertaining to him in accordance with Articles 610 and 612.
6. For those arising by reason of his going out of his course or taking a course
which he should not have taken without sufficient cause, in the opinion of the officers
of the vessel, at a meeting with the shippers or supercargoes who may be on board.
No exceptions whatsoever shall exempt him from this obligation.
7. For those arising by reason of his voluntarily entering a port other than that of
his destination, outside of the cases or without the formalities referred to in Article
612.
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.

Page 67
WHAT IS THE LIABILITY OF SHIP CAPTAINS TO THE SHIP AGENT?
The captain shall be civilly liable to the ship agent, and the latter
to the third persons who may have made contracts with the former;
1. For all the damages suffered by the vessel and its cargo by
reason of want of skill or negligence on his part. If a misdemeanor or
crime has been committed, he shall be liable in accordance with the
Penal Code. cda
2. For all the thefts committed by the crew, reserving his right of
action against the guilty parties.
3. For the losses, fines, and confiscations imposed an account of

violation of customs, police, health, and navigation laws and
regulations.
4. For the losses and damages caused by mutinies on board the

vessel or by reason of faults committed by the crew in the 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 those caused by the misuse of the powers and the non-
fulfillment of the obligations pertaining to him in accordance with
Articles 610 and 612.
6. For those arising by reason of his going out of his course or

taking a course which he should not have taken without sufficient
cause, in the opinion of the officers of the vessel, at a meeting with the
shippers or supercargoes who may be on board.
No exceptions whatsoever shall exempt him from this obligation.
7. For those arising by reason of his voluntarily entering a port

other than that of his destination, outside of the cases or without the
formalities referred to in Article 612.
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 (Article 618).
NOTES:
Ship owners have direct responsibility to third persons. Article

618 recognizes the direct responsibility of the ship owner and

Page 68
ship agent; so that the injured parties may immediately look for
reimbursement to the owner of the ship, it being universally
recognized that the ship master or captain is primarily the
representative of the owner.
This direct liability is moderated and limited by the owners right
to abandon the vessel and earned freight.
Liability of owner when vessel is leased: If leased by the owner to
another person who appoints the captain, majority of authority
holds that the owner continues to be responsible to third persons
for the acts of the captain because he is the only one who
appears as having control of the vessel in the certificate of
registration.
Based on the Civil Code, the master and the supercargo are
liable as depositaries. It is a necessary condition in the
transportation of the property that it be placed in their
possession for the obligation to preserve and guard said property
Having failed to exercise the diligence required after the money
has been placed in their possession, they are liable for its loss
and for damages, if any. The Code of Commerce likewise makes
the ship owner civilly liable for loss suffered by those who
contracted with the captain in consequence of the misdemeanors
and crimes committed by the latter or by members of its crew
(Yu Con vs. Ipil, 41 Phil. 770).
b. The Doctrine of Limited Liability - Article 587
This doctrine of limited liability, however, cannot be invoked if

the ship owner is at fault. Like when the ship owner knowingly hired an
unlicensed captain (Manila Steamship vs. Abdulhaman, 100 Phil. 31).
WHAT IS THE REAL AND HYPOTHECARY NATURE OF MARITIME LAW?
The Supreme Court explained in one case that the spirit of the
Code of Commerce is accurately set forth in a treatise of Madriaga on
maritime law (Philippine Shipping Company, et al. vs. Francisco Garcia
Vergara, No. 1600, June 1, 1906, 6 Phil. 281).
That which distinguishes the maritime from civil law

and even from the mercantile law in general is the real and
hypothecary nature of the former, and the many securities
of a real nature that maritime customs from time
immemorial, the laws, the codes, and the later
jurisprudence, have provided for the protection of the
various and conflicting interest which are ventured and
risked in maritime expeditions, such as the interests of the

Page 69
vessel and of the agent, those who make loans upon the
cargo, and those of a constructor as to repairs made to the
vessel.
The real and hypothecary nature of maritime law operates to

limit such liability to the value of the vessel or the insurance thereof, if
any. This is called the doctrine of limited liability. It is called real and
hypothecary because the interest is limited to the res (vessel) which
when lost, the liability of the owner is extinguished except for unpaid
freight and salvaged goods and equipment.
In Aboitiz Shipping Corporation vs. General Accident Fire and Life

Assurance Corporation, Ltd., No. 100446, January 21, 1993, 217 SCRA
359, the Supreme Court likewise explained that 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 is hypothecated for such obligations or
which stands as the guaranty for their settlement.
Abandonment may be made so as to be exempted from liability

like:
1. Civil liability to third persons arising from the conduct of

the captain in the vigilance over the goods which the
vessel carried (Article 587);
2. The proportionate contribution of co-owners of the vessel
to a common fund for the results of the acts of the captain
referred to in Article 587 (Article 590)
3. Civil liability incurred by the ship owner in case of collision
(Article 837)
4. This doctrine also applies for claims due to death or injuries
to passengers although Article 587 speaks only of goods.
Thus, the sinking of the ship gives the owner/agent the right to
abandon the vessel. In abandoning the vessel, there is no required
procedure to be followed. There is no prescriptive period with in which
the ship owner can make the abandonment; he may do so for so long
as he is not estopped form invoking the same or do an act inconsistent
with abandonment (i.e., salvage).
This real and hypothecary nature is evidenced 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 the embargo and
detention of the vessel even in cases where ordinary civil

Page 70
law would not allow more than a personal action against

the debtor.
WHAT IS THE POLICY BEHIND THIS DOCTRINE?
The policy behind this doctrine is to promote the encouragement

of ship building and investment in maritime commerce.
There are two reasons why it is impossible to do away with these

privileges, to wit:
1. The risk to which the thing is exposed, and

2. The real nature of maritime law, exclusively real, according to
which the liability of the parties is limited to a thing to which is at
mercy of the waves.
If the agent is only liable with the vessel and freight money and
both may be lost through the accidents of navigation it is only just that
the maritime creditors have some means of obviating this precious
nature of his rights by detaining the ship, his only security, before it is
lost (Philippine Shipping Company, et al. vs. Francisco Garcia Vergara,
supra).
WHAT IS THE REQUIREMENT BEFORE THE DOCTRINE OF LIMITED

LIABILITY CAN BE INVOKED?
Abandonment of the vessel, its appurtenances and the

freightage is an indispensable requirement before the ship owner or
ship agent can enjoy the benefits of the limited liability principle. If the
carrier does not want to abandon the vessel, then he is still liable even
beyond the value of the vessel,
WHAT ARE THE STATUTORY PROVISIONS THAT PROVIDED FOR THE

LIMITED LIABILITY RULE?
1. The ship agent shall also be civilly liable for the indemnities in
favor of third persons which may arise from the conduct of the
captain in the care of the goods which he loaded on the vessel;
but he may exempt himself therefrom by abandoning the vessel
with all her equipments and the freight it may have earned
during the voyage (Article 587).
2. The civil liability incurred by the shipowners in the case

prescribed in this section, shall be understood as limited to the
value of the vessel with all its appurtenances and freightage
earned during the voyage (Article 837).

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3. If the vessel and her cargo should be totally lost, by reason of

capture or wreck, all rights shall be extinguished, both as regards
the crew to demand any wages whatsoever, and as regards the
ship agent to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should

be saved, the crew engaged on wages, including the captain,
shall retain their rights on the salvage, so far as they go, on the
remainder of the vessel as well as on the amount of the
freightage of the cargo saved; but sailors who are engaged on
shares shall not have any right whatsoever on the salvage of the
hull, but only on the portion of the freightage saved. If they
should have worked to recover the remainder of the shipwrecked
vessel they shall be given from the amount of the salvage an
award in proportion of the efforts made and to the risks,
encountered in order to accomplish the salvage (Article 643).
4. The co-owners of a vessel shall be civilly liable in the proportion

of their interests in the common fund, for the results of the acts
of the captain, referred to in Article 587.
Each co-owner may exempt himself from this liability by

the abandonment, before a notary, of the part of the vessel
belonging to him (Article 590).
DISCUSSION:
Article 837 apples the principle of limited liability in cases of

collision while Articles 587 and 590 embody the universal principle of
limited liability in all cases (Monarch Insurance Co., Inc. vs. Court of
Appeals, G.R. Nos. 92735, 94867, 95578, June 8, 2000, 333 SCRA 71,
94).
However, it was explained in Aboitiz Shipping Corporation vs.

General Accident Fire and Life Assurance Corporation, Ltd., supra, that
taken together with related articles, Articles 837, 587 and 590 cover
only:
1. Liability to third persons (Article 587);

2. Acts of the captain (Article 590); and
3. Collisions (Article 837).
In connection with Article 587, the carrier cannot invoke Articles

1733 and 1735 of the Civil Code. While the primary law governing the
instant case is the Civil Code, in all matters not regulated by said Code,

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the Code of Commerce and other special laws shall govern. Since the
Civil Code contains no provision regulating liability of ship owners in
the event of total loss or destruction of the vessel, it is the provisions
of the Code of Commerce, particularly Article 857, that governs (Chua
Yek Hong vs. Intermediate Appellate Court, G.R. No. L-74811,
December 14, 1988).
WHAT ARE THE EXCEPTIONS TO THE LIMITED LIABILITY OF THE SHIP

OWNER AND SHIP AGENT?
1. In case the voyage is not maritime, but only in river, bay, or gulf;
2. In case of the expenses for equipping, repairing or provisioning
the vessel contemplated before its loss;
3. In case the vessel is not a common carrier;
4. In case the vessel totally sunk or became a total loss due to the
fault of the ship owner or ship agent;
5. If workmens compensation claims (claim of an employee against
the employer) (Abueg vs. San Diego, 77 Phil. 730 [1946]);
6. Where the injury or death to a passenger is due either to the
fault of the ship owner, or to the concurring negligence of the
ship owner and the captain (Manila Steamship vs. Abdulhamen,
100 Phil. 32 [1956]).
7. Where the vessel is insured.
DOESTHE DOCTRINE OF LIMITED LIABILITY APPLY IF THE CAPTAIN OR

THE CREW WAS NEGLIGENT?
The limited liability rule applies if the captain or the crew caused
the damage or injury.
For instance, the ship owners or ship agents liability is limited to

the value of the vessel if the damage was caused by the
unseaworthiness of the vessel caused by the negligence of the captain
or crew during the voyage (Aboitiz Shipping Corporation vs. General
Accident Fire and Life Assurance Corporation, Ltd., supra).
However, if the failure to maintain the seaworthiness of the

vessel can be ascribed to the ship owner alone or the ship owner
concurrently with the captain, then the limited liability principle can not
be invoked (Monarch Insurance Co., Inc. vs. Court of Appeals, supra).
The carrier is liable for the damage to the full extent and not up
to the value of the vessel if it was established that the carrier was
guilty of negligence in allowing the captain and the crew to play
mahjong during the voyage, in failing to maintain the ship as

Page 73
seaworthy and in allowing the ship to carry more passengers than it

was allowed to carry (No. 110390, November 7, 1997, 281 SCRA 534).
c. Specific Rights and Prerogatives - Articles 575, 593, 594,

596, 601
1. ARTICLE 575. Co-owners of vessels shall have the right of repurchase and
redemption in sales made to strangers, but they may exercise the same only
within the nine days following the inscription of the sale in the registry, and by
depositing the price at the same time.
2. ARTICLE 593. The owners of a vessel shall have preference in her charter over
other persons, under the same conditions and price. If two or more of them
should claim this right, the one having the greater interest shall be preferred;
and should they have equal interests, the matter shall be decided by lot.
3. ARTICLE 594. The co-owners shall elect the manager who is to represent them
in the capacity of ship agent. The appointment of director or ship agent shall
be revocable at the will of the members.
4. 4ARTICLE 596. The ship agent may discharge the duties of captain of
the vessel, subject in every case to the provision of Article 609. If two or more
co-owners apply for the position of captain, the disagreement shall be decided
by a vote of the members; and if the vote should result in a tie, it shall be
decided in favor of the co-owner having the larger interest in the vessel. If the
interests of the applicants should be equal, and there should be a tie, the
matter shall be decided by lot.
5. ARTICLE 601. Should there be any profits, the co-owners may demand of the
managing agent the amount corresponding to their interests by means of an
executory action ("accion ejecutiva"), without any other requisite than the
acknowledgment of the signatures on the instrument approving the account.
2. CAPTAINS AND MASTER
DISTINGUISH A CAPTAIN FROM A MASTER OF A VESSEL.
Technically, the name of captain or master is given, according to

the kind of vessel, to the person in charge of it. The first is applied to
those who govern vessels that navigate the high seas or ships of large
dimensions and importance, although they may be engaged in
coastwise trade.
Masters are those who command smaller ships engaged in the
coastwise trade. But for purposes of maritime commerce, the words
captain and master have the same meaning; both being the chiefs
or commanders of vessels (Yu Con vs. Ipil, 41 Phil. 770). Matron on the
other hand command bancas.
(a) Qualifications and Licensing - Rep. Act 5173,

Sec. 3
Article 609
WHO HAS THE AUTHORITY TO ISSUE LICENSE TO OFFICERS, PILOTS,

PATRONS AND SEAMEN?

Page 74
The Philippine Coast Guard has the authority to issue licenses

and certificates to officers, pilots, major and minor patrons and
seamen, as well as suspend and revoke such licenses and certificates.
WHAT ARE THE QUALIFICATIONS OF MASTERS, MATES OR PATRONS OF

A VESSEL?
An applicant for certificate or license as master, mate or patron

shall be:
1. Citizen of the Philippines

2. Must be physically fir and must be examined physically
3. Must undergo examination into moral and technical qualifications
4. Must have the other prescribed requirements (Sections 829,
1188, 1189 , 1190 and 1191, R.A. No 1937, repealing Article
609 of the Code of Commerce)
(b) Power and Duties - Articles 610, 611, 612, 622,

624, 625
WHAT ARE THE INHERENT POWERS OF THE CAPTAIN OR MASTER OF A

VESSEL ?
The following powers shall be inherent in the position of captain,

master or patron of a vessel:
1. To appoint or make contracts with the crew in the absence of the

ship agent, and to propose said crew, should said agent be
present; but the ship agent may not employ any member against
the captain's express refusal.
2. To command the crew and direct the vessel to the port of its
destination, in accordance with the instructions he may have
received from the ship agent.
3. To impose, in accordance with the contracts and with the laws
and regulations of the merchant marine, and when on board the
vessel, correctional punishment upon those who fail to comply
with his orders or are wanting in discipline, holding a preliminary
hearing on the crimes committed on board the vessel on the
seas, which crimes shall be turned over to the authorities having
jurisdiction over the same at the first port touched.
4. To make contracts for the charter of the vessel in the absence of
the ship agent or of its consignee, acting in accordance with the
instructions received and protecting the interests of the owner
with utmost care.

Page 75
5. To adopt all proper measures to keep the vessel well supplied

and equipped, purchasing all that may be necessary for the
purpose, provided there is no time to request instruction from
the ship agent.
6. To order, in similar urgent cases while on a voyage, the repairs
on the hull and engines of the vessel and in its rigging and
equipment, which are absolutely necessary to enable it to
continue and finish its voyage; but if he should arrive at a point
where there is a consignee of the vessel, he shall act in
concurrence with the latter (Article 610).
WHAT ARE THE GENERAL FUNCTIONS OF THE CAPTAIN OF A VESSEL?
In general, a captain of a vessel has the following functions :
1. He is a general agent of the ship owner ;

2. He is a technical director of the vessel ;
3. He is a representative of the Government in the country whose
flag he navigates
TO COMPLY WITH HIS OBLIGATIONS, HOW MAY THE CAPTAIN RAISE

FUNDS ?
In order to comply with the obligations mentioned in the

preceding article, the captain, when he has no funds and does not
expect to receive any from the ship agent, shall obtain the same in the
successive order stated below:
1. By requesting said funds from the consignee of the vessel or

correspondents of the ship agent.
2. By applying to the consignees of the cargo or to those interested
therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by means of a loan on
bottomry.
5. By selling a sufficient amount of the cargo to cover the sum
absolutely indispensable for the repair of the vessel and to
enable it to continue its voyage (Article 611).
In these two last cases he must apply to the judicial authority of

the port, if in the Philippines, and to the consul of the Republic of the
Philippines if in a foreign country, and where there is none, to the local
authority, proceeding in accordance with the provisions of Article 583,
and with the provisions of the law of civil procedure (Article 611).
WHAT DUTIES ARE INHERENT IN THE OFFICE OF THE CAPTAIN?

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The following obligations shall be inherent in the office of captain:
1. To have on board before starting on a voyage a detailed

inventory of the hull, engines, rigging, spare-masts, tackle, and
other equipment of the vessel; the royal or the navigation
certificate; the roll of the persons who make up the crew of the
vessel, and the contracts entered into with them; the lists of
passengers; the bill of health; the certificate of the registry
proving the ownership of the vessel and all the obligations which
encumber the same up to that date; the charter parties or
authenticated copies thereof; the invoices or manifests of the
cargo, and the memorandum of the visit or inspection by
experts, should it have been made at the port of departure.
2. To have a copy of this code on board.
3. To have three folioed and stamped books, placing at the

beginning of each one a memorandum of the number of folios it
contains, signed by the maritime authority, and in his absence by
the competent authority.
4. Before receiving cargo, to make with the officers of the crew and
two experts, if required by the shippers and passengers, an
examination of the vessel, in order to ascertain whether it is
water-tight, with the rigging and engines in good condition, and
with the equipment required for good navigation, preserving
under his responsibility a certificate of the memorandum of his
inspection, signed by all those who may have taken part therein.
5. The experts shall be appointed, one by the captain of the vessel

and another by those who request its examination, and in case of
disagreement a third shall be appointed by the marine authority
of the port or by the authority, exercising his functions.
6. To remain constantly on board the vessel with the crew while the
cargo is being taken on board and to carefully watch the stowage
thereof; not to consent to the loading of any merchandise or
matter of a dangerous character, such as inflammable or
explosive substances, without the precautions which are
recommended for their packing, handling and isolation; not to
permit the carriage on deck of any cargo which by reason of its
arrangement, volume, or weight makes the work of the sailors
difficult, and which might endanger the safety of the vessel; and
if, on account of the nature of the merchandise, the special
character of the shipment, and principally the favorable season
in which it is undertaken, merchandise may be carried on deck,

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he must hear the opinion of the officers of the vessel and have
the consent of the shippers and of the ship agent.
7. To demand a pilot at the expense of the vessel whenever

required by the navigation, and principally when he has to enter
a port, canal, or river, or has to take a roadstead or anchoring
place with which neither he nor the officers and crew are
acquainted.
8. To be on deck on reaching land and to take command on entering

and leaving ports, canals, roadsteads, and rivers, unless there is
a pilot on board discharging his duties. He shall not spend the
night away from the vessel except for serious causes or by
reason of official business.
9. To present himself, when making a port in distress, to the

maritime authority if in the Philippines and to the consul of the
Republic of the Philippines if in a foreign country, before twenty-
four hours have elapsed, and to make a statement of the name
registry, and port of departure of the vessel, of its cargo, and the
cause of arrival which declaration shall be visaed by the
authority or the consul, if after examining the same it is found to
be acceptable, giving the captain the proper certificate proving
his arrival in distress and the reasons therefor. In the absence of
the maritime authority or of the consul, the declaration must be
made before the local authority.
10. To take the necessary steps before the competent authority

in order to record in the certificate of the vessel in the registry of
vessels the obligations which he may contract in accordance with
Article 583.
11. To place under good care and custody all the papers and
belongings of any members of the crew who might die on the
vessel, drawing up a detailed inventory, in the presence of
passengers, or, in their absence, of members of the crew as
witnesses.
12. To conduct himself according to the rules and precepts

contained in the instructions of the ship agent, being liable for all
that which he may do in violation thereof.
13. To inform the ship agent from the port at which the vessel
arrives, of the reason of his arrival, taking advantage of the
semaphore, telegraph, mail, etc., as the case may be; to notify
him of the cargo he may have received, stating the names and

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domiciles of the shippers, freightage earned, and amounts

borrowed on bottomry loan; to advise him of his departure, and
of any operation and date which may be of interest to him.
14. To observe the rules with respect to situation, lights and

maneuvers in order to avoid collisions.
15. To remain on board, in case the vessel is in danger, until all

hope to save it is lost, and before abandoning it, to hear the
officers of the crew, abiding by the decision of the majority; and
if the boats are to be taken to, he shall take with him, before
anything else, the books and papers, and then the articles of
most value, being obliged to prove, in case of the loss of the
books and papers, that he did all he could to save them.
16. In case of wreck, to make the proper protest in due form at

the first port of arrival, before the competent authority or the
Philippine consul, within twenty-four hours, specifying therein all
the incidents of the wreck, in accordance with subdivision 8 of
this article.
17. To comply with the obligations imposed by the laws and

regulations on navigation, customs, health, and others (Article
612).
WHAT BOOKS MUST BE CARRIED BY THE CAPTAIN ON BOARD THE

VESSEL?
1. In the first book, which shall be called "log book," he shall enter
day by day the condition of the atmosphere, the prevailing
winds, the courses taken, the rigging carried, the power of the
engines used in navigation, the distances covered, the
maneuvers executed, and other incidents of navigation; he shall
also enter the damage suffered by the vessel in her hull, engines,
rigging, and tackle, no matter what its cause may be, as well as
the impairment and damage suffered by cargo, and the effect
and importance of the jettison, should there be any; and in cases
of serious decisions which require the advice or a meeting of the
officers of the vessel, or even of the crew and passengers, he
shall record the decisions adopted. For the information indicated
he shall make use of the binnacle book and of the steam of
engine book kept by the engineer.
2. In the second book called the "accounting book," he shall record

all the amounts collected and paid for the account of the vessel,
entering specifically article by article, the source of the collection

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and the amounts spent for provisions, repairs, acquisitions of

equipment or goods, fuel, food, outfits, wages, and other
expenses of whatever nature they may be. He shall furthermore
enter therein a list of all the members of the crew, stating their
domiciles, their wages and salaries, and the amounts they may
have received on account, directly or by delivery to their
families.
3. In the third book, called "freight book," he shall record the

loading and discharge of all the goods, stating their marks and
packages, names of the shippers and of the consignees, ports of
loading and unloading, and the freightage they give. In this same
book he shall record the names and places of sailing of the
passengers, the number of packages in their baggage, and the
price of passage (Article 612, No. 3).
(c) Prohibited Acts and Transactions - Articles 613,

614, 615, 617, 621, 583
WHAT ARE THE PROHIBITED ACTS AND TRANSACTIONS OF CAPTAIN?
1. ARTICLE 613. A captain who navigates for freight in common or on shares

may not make any separate transaction for his own account; and should he do
so, the profit which may accrue shall belong to the other persons interested,
and the losses shall be borne by him exclusively.
2. ARTICLE 614. A captain who, having made an agreement to make a voyage,

fails to perform his undertaking, without prevented by fortuitous accident or
force majeure, shall indemnify for all the losses which he may cause without
prejudice to the criminal penalties which may be proper.
3. ARTICLE 615. Without the consent of the agent, the captain cannot have
himself substituted by another person; and should he do so, besides being
liable for all the acts of the substitute and bound to the indemnities
mentioned in the foregoing articles, the captain as well as the substitute may
be discharged by the ship agent.
4. ARTICLE 617. The captain may not contract loans on respondentia secured by
the cargo; and should he do so, the contracts shall be void.
Neither may he borrow money on bottomry for his own transactions,

except on the portion of the vessel he owns, provided no money has been
previously borrowed on the whole vessel, and there does not exist any other
kind of lien or obligation chargeable against the vessel. If he may do so, he
must state what interest he has in the vessel.
In case of violation of this article, the principal, interest, and costs shall
be for the personal account of the captain, and the ship agent may
furthermore discharge him.

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5. ARTICLE 621. A captain who borrows money on the hull, engine, rigging or
tackle of the vessel, or pledges or sells merchandise or provisions outside of
the cases and without the formalities prescribed in this Code, shall be liable
for the principal, interests, and costs, and shall indemnify for the damages he
may cause.
He who commits fraud in his accounts shall pay the amount defrauded
and shall be subject to the provisions of the Penal Code.
6. ARTICLE 583. If while on a voyage the captain should find it necessary to

contract one or more of the obligations mentioned in subdivisions 8 and 9 of
Article 580, he shall apply to the judge or court if he is in Philippine territory,
and otherwise to the consul of the Republic of the Philippines, should there be
one, and, in his absence, to the judge or court or proper local authority,
presenting the certificate of the registration sheet treated of in Article 612 and
the instruments proving the obligation contracted.
The judge or court, the consul, or the local authority, as the case may
be, in view of the result of the proceedings instituted, shall make a temporary
memorandum of their result in the certificate, in order that it may be recorded
in the registry when the vessel returns to the port of its registry, or so that it
can be admitted as a legal and preferred obligation in case of sale before its
return, by reason of the sale of the vessel on account of a declaration of
unseaworthiness.
The omission of this formality shall make the captain personally liable for
the credits prejudiced on his account.
WHENIS THE CAPTAIN CIVILLY LIABLE TO THE SHIP AGENT AND THE
LATTER TO THIRD PERSONS?
The captain shall be civilly liable to the ship agent, and the latter
to the third persons who may have made contracts with the former:;
1. For all the damages suffered by the vessel and its cargo by
reason of want of skill or negligence on his part. If a
misdemeanor or crime has been committed, he shall be liable in
accordance with the Penal Code.
2. For all the thefts committed by the crew, reserving his right of
action against the guilty parties.
3. For the losses, fines, and confiscations imposed an account of

violation of customs, police, health, and navigation laws and
regulations.
4. For the losses and damages caused by mutinies on board the

vessel or by reason of faults committed by the crew in the
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.

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5. For those caused by the misuse of the powers and the non-
fulfillment of the obligations pertaining to him in accordance with
Articles 610 and 612.
6. For those arising by reason of his going out of his course or

taking a course which he should not have taken without sufficient
cause, in the opinion of the officers of the vessel, at a meeting
with the shippers or supercargoes who may be on board.
No exceptions whatsoever shall exempt him from this

obligation.
7. For those arising by reason of his voluntarily entering a port

other than that of his destination, outside of the cases or without
the formalities referred to in Article 612.
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 (Article 618).
WHEN IS THE CAPTAIN PERSONALLY LIABLE FOR LOANS ON THE HULL,

ENGINE, RIGGING OR TACKLE OF THE VESSEL?
A captain who borrows money on the hull, engine, rigging or

tackle of the vessel, or pledges or sells merchandise or provisions
outside of the cases and without the formalities prescribed in this
Code, shall be liable for the principal, interests, and costs, and shall
indemnify for the damages he may cause.
He who commits fraud in his accounts shall pay the amount

defrauded and shall be subject to the provisions of the Penal Code
(Article 621).
WHAT IS THE DUTY OF THE CAPTAIN IF HE SHOULD RECEIVE NEWS OF

THE APPEARANCE OF CORSAIRS OR MEN OF WAR AGAINST HIS FLAG WHILE
ONE VOYAGE?
If while on a voyage the captain should learn of the appearance

of privateers or men of war against his flag, he shall be obliged to
make the nearest neutral port, inform his agent or shippers, and await
an occasion to sail under convoy, or until the danger is over or he has
received express orders from the ship agent or the shippers (Article
622).
WHAT IS MEANT BY CORSAIRS AND MEN OF WAR?

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A corsair is a pirate ship or a privateer; while men of war or men

o war are battleships or warships used by the navy of a government.
WHAT MUST THE CAPTAIN DO SHOULD THE VESSEL OR HER CARGO BE

FORCIBLY TAKEN BY A CORSAIR?
If he should be attacked by a privateer, and, after having tried to

avoid the encounter and having resisted the delivery of the effects of
the vessel or its cargo, they should be forcibly taken away from him, or
he should be obliged to deliver them, he shall make an entry thereof in
his freight book and shall prove the fact before the competent
authority at the first port he touches.
After the force majeure has been proved, he shall be exempted from
liability (Article 623).
WHAT ARE THE DUTIES OF A CAPTAIN OF A VESSEL WHICH HAS GONE

THROUGH A HURRICANE OR WHOSE CARGO HAS SUFFERED DAMAGE OR
AVERAGE?
A captain whose vessel has gone through a hurricane or who

believes that the cargo has suffered damages or averages, shall make
a protest thereon before the competent authority at the first port he
touches, within twenty-four hours following his arrival and shall ratify it
within the same period when he arrives at his destination, immediately
proceeding with the proof of the facts, and he may not open the
hatches until after this has been done.
The captain shall proceed in the same manner, if, the vessel
having been wrecked; he is saved alone or with part of his crew, in
which case he shall appear before the nearest authority, and make a
sworn statement of facts.
The authority or the consul shall verify the said facts receiving
sworn statements of the members of the crew and passengers who
may have been saved; and taking such other steps as may assist in
arriving at the facts he shall make a statement of the result of the
proceedings in the log book and in that of the sailing mate, and shall
deliver to the captain the original record of the proceedings, stamped
and folioed, with a memorandum of the folios, which he must
rubricate, in order that it may be presented to the judge or court of the
port of destination.
The statement of the captain shall be accepted if it is in

accordance with those of the crew and passengers; if they disagree,

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the latter shall be accepted, always saying proof to the contrary

(Article 624).
WHAT IS MARITIME PROTEST?
Maritime protest is a written statement under oath, made by the

master of a vessel, after the occurrence of an accident or disaster in
which the vessel or cargo is lost or destroyed, with respect to the
circumstances attending such occurrence. It is usually intended to
show that the loss or damage resulted from a peril of the sea, or for
some other cause for which neither the master nor the owner was
responsible, and concludes with the protestation against any liability of
the owner for such loss or damage.
WHAT ARE THE INSTANCES WHERE PROTEST IS REQUIRED?
1. When the vessel makes an arrival under stress (Article 612);

2. Where the vessel is shipwrecked (Articles 612, 624 and 843);
3. Where the vessel has gone through a hurricane or the captain
believes that the cargo has suffered damages or averages
(Article 624); and
4. Maritime collisions (Article 835)
WHEN AND WHERE SHOULD MARITIME PROTEST BE FILED?
A captain whose vessel has gone through a hurricane or who

believes that the cargo has suffered damages or averages, shall make
a protest thereon before the competent authority at the first port he
touches, within twenty-four hours following his arrival and shall ratify it
within the same period when he arrives at his destination, immediately
proceeding with the proof of the facts, and he may not open the
hatches until after this has been done.
The captain shall proceed in the same manner, if, the vessel
having been wrecked; he is saved alone or with part of his crew, in
which case he shall appear before the nearest authority, and make a
sworn statement of facts.
The authority or the consul shall verify the said facts receiving
sworn statements of the members of the crew and passengers who
may have been saved; and taking such other steps as may assist in
arriving at the facts he shall make a statement of the result of the
proceedings in the log book and in that of the sailing mate, and shall
deliver to the captain the original record of the proceedings, stamped
and folioed, with a memorandum of the folios, which he must
rubricate, in order that it may be presented to the judge or court of the
port of destination.

Page 84
The statement of the captain shall be accepted if it is in

accordance with those of the crew and passengers; if they disagree,
the latter shall be accepted, always saying proof to the contrary
(Article 624).
WHAT IS THE DUTY OF THE CAPTAIN UPON ARRIVAL AT THE PORT OF

DESTINATION REGARDING THE DELIVERY OF THE CARGO?
The captain, under his personal responsibility as soon as he

arrives at the port of destination, should get the necessary permission
from the health and customs officers, and perform the other formalities
required by the regulations of the administration, delivering the cargo
without any defalcation, to the consignee, and in a proper case, the
vessel, rigging, and freightage to the ship agent.
If by reason of the absence of the consignee or on account of the
nonappearance of a legal holder of the bills of lading, the captain
should not know to whom he is to legally make the delivery of the
cargo, he shall place it at the disposal of the proper judge or court or
authority, in order that he may determine what is proper with regard to
its deposit, preservation and custody (Article 625).
3. OTHER OFFICERS AND CREW
WHO SHALL TAKE PLACE OF THE CAPTAIN IN CASE OF ABSENCE,

SICKNESS OR DEATH OF THE LATTER?
The sailing mate, as the second chief of the vessel, and unless
the agent orders otherwise, shall take the place of the captain in cases
of absence, sickness, or death, and shall then assume all his powers,
duties, and responsibilities (Article 627).
(a) Contracts and Formalities - Article 634
WHO MAY ENLIST THE CREW?
The captain may make up the crew of his vessel with such
number of men as he may consider proper, and in the absence of
Filipino sailors, he may take on foreigners residing in the country, the
number thereof not to exceed one-fifth of the crew. If in foreign ports
the captain should not find a sufficient number of Filipino sailors, he
may complete the crew with foreigners, with the consent of the consul
or marine authorities (Article 634).

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In case however, of Philippine vessels operating in the coastwise

trade or on the high seas, no officer or member of the crew may be
hired who is not a citizen of the Philippines (Section 829, Tariff and
Customs Code).
(b) Duties and Liabilities - Article 635
MAY A SAILOR CONTRACTED TO SERVE A VESSEL RESCIND HIS

CONTRACT?
A sailor who has been contracted to serve on a vessel may not

rescind his contract or fail to comply therewith except by reason of a
legitimate impediment which may have happened to him.
Neither may he transfer from the service of one vessel to another

without obtaining the written permission of the captain of the vessel on
which he may be.
If, without obtaining said permission, the sailor who has signed for
one vessel should sign for another one, the second contract shall be
void, and the captain may choose between forcing him to fulfill the
service to which he first bound himself, or at his expense to look for a
person to substitute him.
Furthermore, he shall lose the wages earned on his first contract, to

the benefit of the vessel for which he had signed.
A captain who, knowing that a seaman is in the service of another

vessel, should have made a new agreement with him without having
required of him the permission referred to in the preceding paragraphs,
shall be subsidiarily responsible to the captain of the vessel to which
the seaman first belonged, for that part of the indemnity, referred to in
the third paragraph of this article, which the seaman may not be able
to pay (Article 635).
(c) Rights - Articles 636 to 647
WHAT IS THE DURATION OF THE SAILORS CONTRACT?
If there is no fixed period for which a seaman has been

contracted he may not be discharged until the end of the return
voyage to the port where he enlisted (Article 636).
WHAT ARE THE GROUNDS FOR WHICH A SAILOR MAY BE DISCHARGED

BY THE CAPTAIN?

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Neither may the captain discharge a seaman during the time of

his contract except for just cause, the following being considered as
such:
1. The perpetration of a crime which disturbs order on the vessel.

2. Repeated insubordination, want of discipline, or non-fulfillment of
the service.
3. Repeated incapacity and negligence in the fulfillment of the
service he should render.
4. Habitual drunkenness.
5. Any occurrence which incapacitates the seaman to perform the
work entrusted to him, with the exception of that provided in
Article 644.
6. Desertion.
The captain may, however, before getting out on a voyage and

without giving any reason, refuse to permit a seaman whom he may
have engaged to go on board, and leave him on land, in which case he
will be obliged to pay him his wages as if he had rendered services.
This indemnity shall be paid from the funds of the vessel if the
captain should have acted for reasons of prudence and in the interest
of the safety and good services of the farmer. Should this not be the
case, it shall be paid by the captain personally (Article 637).
After the voyage has begun, during the same, and until the
conclusion thereof, the captain may not abandon any member of his
crew on land or on sea, unless, by reason of some crime, his
imprisonment and delivery to the competent authority in the first port
touched should be proper, a matter obligatory for the captain.
WHAT IS THE EFFECT ON THE CREW OF THE REVOCATION OF THE

VOYAGE OR CHANGE OF DESTINATION?
If, after the crew has been engaged, the voyage is revoked by
the will of the ship agent or of the charterers before or after the vessel
has put to sea, or if the vessel is for the same reason given a
destination different from that fixed in the agreement with the crew,
the latter shall be indemnified on account of the rescission of the
contract, according to the cases follows:
1. If the revocation of the voyage should be decided upon before

the departure of the vessel from the port, each sailor engaged
shall be given one month's salary, besides what may be due him,

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in accordance with his contract, for the services rendered to the

vessel up to the date of the revocation.
2. If the agreement should have been for a fixed amount for the
whole voyage, that which may be due for said month and days
shall be determined in proportion to the approximate number of
days the voyage should have lasted, in the judgment of experts,
in the manner established in the law of Civil Procedure; and if the
proposed voyage should be of such short duration that it is
calculated at approximately one month, the indemnity shall be
fixed for fifteen days, discounting in all cases the sums
advanced.
3. If the revocation should take place after the vessel has put to
sea, the seamen engaged for a fixed amount for the voyage shall
receive in full the salary which may have been offered them as if
the voyage had terminated; and those engaged by the month
shall receive the amount corresponding to the time they might
have been on board and to the time they may require to arrive at
the port of destination, the captain being obliged, furthermore, to
pay the seamen in both cases, the passage to the said port or to
the port of sailing of the vessel, as may be convenient for them.
4. If the ship agent or the charterers of the vessel should give it a
destination different from that fixed in the agreement, and the
members of the crew should not agree thereto, they shall be
given by way of indemnity half the amount fixed in case No. 1,
besides what may be owed them for the part of the monthly
wages corresponding to the days which have elapsed from the
date of their agreements.
If they accept the change, and the voyage, on account of the

greater distance or of other reasons, should give rise to an increase of
wages, the latter shall be adjusted privately or through amicable
arbitrators in case of disagreement. Even though the voyage should be
shortened to a nearer point, this shall not give rise to a reduction in the
wages agreed upon.
If the revocation or change of the voyage should come from the

shippers or charterers, the agent shall have a right to demand of them
the indemnity which may be justly due (Article 638).
HOWEVER: If the revocation of the voyage should arise from a just

cause independent of the will of the ship agent and charterers, and the
vessel should not have left the port, the members of the crew shall
have no other right than to collect the wages earned up to the day on
which the revocation took place (Article 639).
WHAT ARE JUST CAUSES FOR THE REVOCATION OF THE VOYAGE?

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The following shall be just causes for the revocation of the

voyage.
1. A declaration of war or interdiction of commerce with the power

to whose territory the vessel was bound.
2. The blockade of the port of its destination, or the breaking out of
an epidemic after the agreement.
3. The prohibition to receive in said port the goods which make up
the cargo of the vessel.
4. The detention or embargo of the same by order of the
government, or for any other reason independent of the will of
the ship agent.
5. The inability of the vessel to navigate (Article 640).
WHAT ARE: (A) INTERDICTION OF COMMERCE; (B) BLOCKADE; AND

(C) EMBARGO?
(a) Interdiction of commerce between two countries is a

government prohibition of commercial intercourse, intended
to bring about an entire cessation for the time being of all
trade whatever.
(b) Blockade is a circumvallation round a place by which all
foreign connection and correspondence is, as far as human
power can effect it, to be cut off. It is the actual investment
of a port or place by a hostile force fully competent, under
ordinary circumstances, to cut off all communication
therewith, so arranged or disposed as to be able to apply its
force to every point of practicable access or approach to the
port or place so invested.
(c) Embargo is a proclamation or order of 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.
IN CASE THE VOYAGE IS REVOKED FOR A JUST CAUSE, DO SAILORS

HAVE A RIGHT TO BE PAID, IF SO, HOW MUCH?
If, after a voyage has been begun, any of the first three causes
mentioned in the foregoing article should occur, the sailors shall be
paid at the port which the captain may deem advisable to make for the
benefit of the vessel and cargo, according to the time they may have
served thereon; but if the vessel is to continue its voyage, the captain
and the crew may mutually demand the enforcement of the contract.

Page 89
In case of the occurrence of the fourth cause, the crew shall

continue to be paid half wages, if the agreement is by month; but if the
detention should exceed three months, the contract shall be rescinded
and the crew shall be paid what they should have earned according to
the contract if the voyage had been concluded. And if the agreement
should be for a fixed sum for the voyage, the contract must be
complied within the terms agreed upon.
In the fifth case, the crew shall have no other right than to collect
the wages earned; but if the disability of the vessel should have been
caused by the negligence or lack of skill of the captain, engineer, or
sailing mate, they shall indemnify the crew for the damages suffered,
always without prejudice to the criminal liability which may be proper
(Article 641).
WHEN ARE SAILORS NOT ENTITLED TO BE PAID WHENEVER THE

VOYAGE IS REVOKED?
If the crew have been engaged on shares, they shall not be

entitled, by reason of the revocation, delay, or greater extension of the
voyage, to anything but the proportionate part of the indemnity which
way be paid into the common funds of the vessel by the persons liable
for said occurrences (Article 642).
In the foregoing case, a form of partnership is formed between

the ship owner and the sailors for which both of them should share in
the profits and losses, and therefore, in case the voyage is revoked or
delayed, the sailors are not entitled to anything other than a
proportionate part of the indemnity which may be paid to the common
fund of the vessel.
WHAT IS THE EFFECT OF TOTAL OR PARTIAL LOSS OF THE VESSEL ON

THE RIGHT OF THE CREW TO WAGES, AND SHIP AGENT FOR ADVANCES
MADE?
If the vessel and her cargo should be totally lost, by reason of

capture or wreck, all rights shall be extinguished, both as regards the
crew to demand any wages whatsoever, and as regards the ship agent
to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should be

saved, the crew engaged on wages, including the captain, shall retain
their rights on the salvage, so far as they go, on the remainder of the
vessel as well as on the amount of the freightage of the cargo saved;
but sailors who are engaged on shares shall not have any right
whatsoever on the salvage of the hull, but only on the portion of the

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freightage saved. [If they should have worked to recover the remainder
of the shipwrecked vessel they shall be given from the amount of the
salvage an award in proportion of the efforts made and to the risks,
encountered in order to accomplish the salvage.] (Article 643) (Note:
last sentence which is bracketed has been repealed by the Salvage
Law, Section 8, Act No. 2616).
The aforesaid provision, however, has no effect on the right of

the crew under the Employees Compensation provision of the Labor
Code of the Philippines (P.D. 412, as amended). Thus, the widows of
the captain, machinist and patron of the a vessel who perished as a
result of the sinking of the vessel where they were working, are
entitled to compensation under the said law (Enciso vs. Dy-Liaco, 57
Phil. 446; Abueg, et al. vs. San Diego, 44 O.G. 80).
IS A SAILOR WHO FALLS SICK DURING THE VOYAGE ENTITLED TO

WAGES AND COSTS OF MEDICAL ATTENTION?
A sailor who falls sick shall not lose his right to wages during the
voyage, unless the sickness is the result of his own fault. At any rate,
the costs of the attendance and cure shall be defrayed from the
common funds, in the form of a loan.
If the sickness should come from an injury received in the service

or defense of the vessel, the seaman shall be attended and cured at
the expense of the common funds deducting, before anything else,
from the proceeds of the freightage the cost of the attendance and
cure (Article 644).
The sailor shall be entitled to the benefits provided for by the

Labor Code of the Philippines (Abueg, et al. vs. San Diego, supra).
WHAT IS THE EFFECT OF THE DEATH OF THE SAILOR DURING THE

VOYAGE ON HIS RIGHT T WAGES NOT YET RECEIVED?
If a sailor should die during the voyage, his heirs will be given the
wages earned and not received according to his contract and the cause
of his death, namely
1. If he died a natural death and was engaged on wages, that which

may have been earned up to the date of his death shall be paid.
2. If the contract was for a fixed sum for the whole voyage, half the
amount earned shall be paid if the seamen died on the voyage out,
and the whole amount if he died on the return voyage.
3. And if the contract was on shares and death occurred after the
voyage was begun, the heirs shall be paid the entire portion due

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the seaman; but if the latter died before the departure of the vessel
from the port, the heirs shall not be entitled to claim anything.
4. If death occurred in the defense of the vessel, the seaman shall be
considered as living, and his heirs shall be paid, at the end of the
voyage, the full amount of wages or the integral part of the profits
which may be due him as to others of his class.
In the same manner, the sailor captured while defending the vessel
shall be considered present so as to enjoy the same benefits as the
rest; but should he have been captured on account of carelessness or
other accident not related to the service, he shall only receive the
wages due up to the day of his capture (Article 645).
UPON WHAT ASSETS DO THE CREW HAVE A LIEN FOR UNPAID WAGES?
The vessel with her engines, rigging, equipment, and freightage

shall be liable for the wages earned by the crew engaged per month or
for the trip, the liquidation and payment to take place between one
voyage and the other.
After a new voyage has been undertaken, credits of such kind

pertaining to the preceding voyage shall lose their right of preference
(Article 646).
WHICH IS MORE SUPERIOR LIEN, THAT IN FAVOR OF THE CREW FOR
UNPAID WAGES OR THAT CREATED IN FAVOR OF A MORTGAGEE?
The lien created in favor of the crew for their wages take
preferences over a lien created by giving the ship as security for
money borrowed. The crew therefore, has a prior lien upon a ship over
the lien created by a chattel mortgage (McMicking vs. El Blanco
Espanol-Filipino, 13 Phil. 429), and the purchaser of the vessel would
be obliged to respect the lien created by unpaid wages of the crew
(Philippine Shipping Co. vs. Garcia, 6 Phil. 281).
WHEN ARE OFFICERS AND CREW FREE FROM ALL OBLIGATIONS THEY
CONTRACTED?
The officers and the crew of the vessel shall be free from all
obligations if they deem it proper, in the following cases:
1. If, before beginning the voyage, the captain attempts to change

it, or a naval war with the power to which the vessel was
destined occurs.
2. If a disease should break out and be officially declared an
epidemic in the port of destination.
3. If the vessel should change owner or captain (Article 647).

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4. SUPERCARGOES, ARTICLES 649-651
WHO IS A SUPERCARGO?
Supercargo is a person especially employed by the owner of a

cargo to take charge of and sell to the best advantage merchandise
which has been shipped, and to purchase returning cargoes and to
receive freight, as he may be authorized.
WHAT ARE THE DUTIES OF A SUPERCARGO? WHAT IS THE EFFECT OF

DESIGNATION OF A SUPERCARGO ON THE POWERS AND RESPONSIBILITIES OF
THE CAPTAIN?
Supercargoes shall discharge on board the vessel the

administrative duties which the ship agent or the shippers may have
assigned to them; they shall keep an account and record of their
transactions in a book which shall have the same conditions and
requisites as required for the accounting book of the captain, and they
shall respect the latter in his capacity as chief of the vessel. cdta
The powers and responsibilities of the captain shall cease, when

there is a supercargo, with regard to that part of the administration
legitimately conferred upon the latter, but shall continue in force for all
acts which are inseparable from his authority and office (Article 649).
WHAT TRANSACTIONS ARE NOT ALLOWED TO BE ENTERED INTO BY

SUPERCARGOES?
Supercargoes may not, without special authorization or

agreement, make any transaction for their own account during the
voyage, with the exception of the ventures which, in accordance with
the custom of the port of destination, they are permitted to do.
Neither shall they be permitted to invest in the return trip more

than the profits from the ventures, unless there is an express
authorization from the principals (Article 651).
D. ACCIDENTS AND DAMAGES IN MARITIME COMMERCE
1. AVERAGES
(a) Nature and Kinds - Articles 806 to 808
WHAT ARE CONSIDERED AS AVERAGES?

Page 93
The following shall be considered averages:
1. All extraordinary or accidental expenses which may be incurred

during the voyage in order to preserve the vessel, the cargo, or
both.
2. Any damages 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
(Article 806).
The petty and ordinary expenses incident to navigation, such as

those of pilotage of coasts and ports, those of lighterage and towage,
anchorage, inspection, health, quarantine, lazaretto, and other so-
called port expenses, costs of barges and unloading until the
merchandise is placed on the wharf, and any other usual expenses of
navigation, shall be considered ordinary expenses to be defrayed by
the shipowner, unless there is an express agreement to the contrary
(Article 807).
WHAT ARE THE KINDS OF AVERAGES?

Averages shall be:
1. Simple or particular.
2. General or gross (Article 808).
(1) SIMPLE OR PARTICULAR
(A) DEFINITIONS - ARTICLE 809
WHAT ARE SIMPLE OR PARTICULAR AVERAGES?
Simple of particular averages shall include all the expenses and

damages caused to vessel or to her cargo which have not inured to the
common benefit and profit of all persons interested in the vessel and
her cargo (Article 808). If a damage is not general average, the same
can be considered a particular average.
As a general rule, simple 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, and especially the following:

Page 94
1. The losses suffered by the cargo from the time of its embarkation
until it is unloaded, either on account of inherent defect of the
goods or by reason of an accident of the sea or force majeure,
and the expenses incurred to avoid and repair the same.
2. The losses and expenses suffered by the vessel in its hull,
rigging, arms, and equipment, for the same causes and reasons,
from the time it puts to sea from the port of departure until it
anchors and lands in the port of destination.
3. The losses suffered by the merchandise loaded on deck, except
in coastwise navigation, if the marine ordinances allow it.
4. The wages and victuals of the crew when the vessel is detained
or embargoed by legitimate order or force majeure, if the charter
has been contracted for a fixed sum for the voyage.
5. The necessary expenses on arrival at a port, in order to make
repairs or secure provisions.
6. The lowest value of the goods sold by the captain in arrivals
under stress for the payment of provisions and in order to save
the crew, or to meet any other need of the vessel, against which
the proper amount shall be charged.
7. The victuals and wages of the crew while the vessel is in
quarantine.
8. The loss inflicted upon the vessel or cargo by reason of an
impact or collision with another, if it is accidental and
unavoidable.
If the accident should occur through the fault or negligence of
the captain, the latter shall be liable for all the losses caused.
9. Any loss suffered by the cargo through the fault, negligence, or

barratry of the captain or of the crew, without prejudice to the
right of the owner to recover the corresponding indemnity from
the captain, the vessel, and the freightage (Article 809).
(B) EFFECTS - ARTICLE 810
WHO BEARS SIMPLE AND PARTICULAR AVERAGES?
Since simple or particular averages do mot inure to the common

benefit, the owner of the goods that suffered the damage bears the
loss. Article 810 of the Code of Commerce provides that the owner of
the goods which gave rise to the expense or suffered the damage shall
bear the simple or particular averages. This rule on simple or
particular average is consistent with the maxim res perit domino.
However, under Article 732 of the Code of Commerce, if the

vessel or goods are hypothecated by a loan on bottomry or

Page 95
respondentia, the lender shall also bear the loss in proportion to his
interest.
(2) GROSS GENERAL
(A) DEFINITIONS - ARTICLES 811, 817, 818
WHAT ARE GENERAL OR GROSS AVERAGES?
As a general rule, general or gross averages 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 a real and known
risk, and particularly the following:
1. The goods or cash invested in the redemption of the vessel or of

the cargo captured by enemies, privateers, or pirates, and the
provisions, wages, and expenses of the vessel detained during
the time the settlement or redemption is being made.
2. The goods jettisoned to lighten the vessel, whether they belong
to the cargo, to the vessel, or to the crew, and the damage
suffered through said act by the goods which are kept on board.
3. The cables and masts which are cut or rendered useless, the
anchors and the chains which are abandoned, in order to save
the cargo, the vessel, or both.
4. The expenses of removing or transferring a portion of the cargo
in order to lighten the vessel and place it in condition to enter a
port or roadstead, and the damage resulting therefrom to the
goods removed or transferred.
5. The damage suffered by the goods of the cargo by the opening
made in the vessel in order to drain it and prevent its sinking.
6. The expenses caused in order to float a vessel intentionally
stranded for the purpose of saying it.
7. The damage caused to the vessel which had to be opened,
scuttled or broken in order to save the cargo.
8. The expenses for the treatment and subsistence of the members
of the crew who may have been wounded or crippled in
defending or saying the vessel.
9. The wages of any member of the crew held as hostage by
enemies, privateers, or pirates, and the necessary expenses
which he may incur in his imprisonment, until he is returned to
the vessel or to his domicile, should he prefer it.
10. The wages and victuals of the crew of a vessel chartered
by the month, during the time that it is embargoed or detained
by force majeure or by order of the government, or in order to
repair the damage caused for the common benefit.

Page 96
11. The depreciation resulting in the value of the goods sold at

arrival under stress in order to repair the vessel by reason of
gross average.
12. The expenses of the liquidation of the average.
(B) ESSENTIAL REQUISITES - ARTICLES 813, 814,

860
WHAT ARE THE REQUISITES OF GENERAL AVERAGE?
In A. Magsaysay, Inc. vs. Agan, No. L-6393, January 31, 1955, the
Supreme Court adopted the requisites of general averages stated by
Senator Tolentino in his commentaries on the Code of Commerce:
1. There must be a common danger;

2. That for the common safety part of the vessel or of the cargo
or both is sacrificed deliberately;
3. That from the expenses or damage caused follows the
successful saving of the vessel and cargo; and
4. That the expenses or damages should have been incurred or
inflicted after taking proper legal steps and authority.
FIRST REQUISITE: COMMON DANGER
The requirement that there must be common means:
1. That both the ship and the cargo, after it has been loaded, are
subject to the same danger, whether during the voyage, or in
the port of loading or unloading;
2. That the danger arises from the accidents from the sea,
dispositions of the authority, or faults of men;
3. That the circumstances producing the peril should be ascertained
and imminent or may rationally be said to be certain and
imminent (A. Magsaysay, Inc. vs. Agan, supra).
SECOND REQUISITE: DELIBERATE SACRIFICE
There must be voluntary sacrifice of a part for the benefit of the

whole in order to justify general average. For example, it may involve a
voluntary jettison or casting away of some portion of the associated
interests for the purpose of avoiding a common peril from the whole to
a particular portion of those interests (Compagnie de Commerce vs.
Hamburg Amerika, supra). It cannot involve a damage which resulted
beyond the contract of the captain and crew without any intention on
their part. As a matter of fact, the Code of Commerce prescribes a
procedure in deciding whether a sacrifice should be made (See Article
813).

Page 97
Normally, the sacrifice is made though the jettison of the cargo

or part of the ship is thrown overboard during the voyage. However,
there can also be general averages even if the sacrifice was not made
during the voyage in at least two cases:
1. Where the sinking of a vessel is necessary to extinguish a fire in

a port, roadstead, creek or bay; and
2. Where cargo is transferred to lighten the ship on account of a
storm to facilitate entry into the port. These cases are covered by
Articles 816, 817 and 818.
ARTICLE 816. In order that the goods jettisoned may be included in the gross
average and the owners thereof be entitled to indemnity, it shall be necessary insofar
as the cargo is concerned that their existence on board be proven by means of the
bill of lading; and with regard to those belonging to the vessel, by means of the
inventory prepared before the departure in accordance with the first paragraph of
Article 812.
ARTICLE 817. If in lightening a vessel on account of a storm, in order to

facilitate its entry into a port or roadstead, part of the cargo should be transferred to
lighters or barges and be lost, the owner of said part shall be entitled to indemnity,
as if the loss had originated from a gross average, the amount thereof being
distributed between the vessel and cargo from which it came.
If, on the contrary, the merchandise transferred should be saved and the
vessel should be lost, no liability may be demanded of the salvage.
ARTICLE 818. If, as a necessary measure to extinguish a fire in a port,

roadstead, creek, or bay, it should be decided to sink any vessel, this loss shall be
considered gross average, to which the vessels saved shall contribute.
It should be noted that the loss can no longer be considered a

general average if the thing was inevitably lost. Consistently, Rule IV of
the York-Antwerp Rules provides that loss or damage sustained by
cutting away wreck or parts of the ship which have been previously
carried away or are effectively lost by accident shall not be made good
as general average.
THIRD REQUISITE: SACRIFICE MUST BE SUCCESSFUL
NO general contribution can be demanded if the vessel and other

cargo that are sought to be saved were in fact not saved. Consistently,
Article 860 of the Code of Commerce provides:
ARTICLE 860. If, notwithstanding the jettison of merchandise, breakage of

masts, ropes, and equipment, the vessel shall be lost running the same risk, no
contribution whatsoever by jettison of gross average shall be proper.
The owners of the goods saved shall not be liable for the indemnification of
those jettisoned, lost, or damaged.

Page 98
For example, goods belonging to Mr. A were sacrificed to save

the ship from sinking because of a 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 the typhoon, there will be
liability for general average contribution even if the vessel will be
subsequently lost for some other reason during the voyage. Thus,
Article 861 of the Code of Commerce provides:
ARTICLE 861. If, after the vessel has been saved from the risk which gave rise
to the jettison, it should be lost through another accident taking place during the
voyage, the goods saved and existing from the first risk shall continue liable to
contribution by reason of the gross average according to their value in the condition
in which they may be found, deducting the expenses incurred in saving them.
FOURTH REQUISITE: COMPLIANCE WITH LEGAL STEPS
The expenses or damages should have been incurred or inflicted

after taking proper legal steps and authority under Articles 813 to 815
of the Code of Commerce which provide:
ARTICLE 813. In order to incur the expenses and cause the damages
corresponding to gross average, there must be a resolution of the captain, adopted
after deliberation with the sailing mate and other officers of the vessel, and after
hearing the persons interested in the cargo who may be present.
If the latter shall object, and the captain and officers or a majority of them, or
the captain, if opposed to the majority, should consider certain measures necessary,
they may be executed under his responsibility, without prejudice to the right of the
shippers to proceed against the captain before the competent judge or court, if they
can prove that he acted with malice, lack of skill, or negligence.
If the persons interested in the cargo, being on board the vessel, have not
been heard, they shall not contribute to the gross average, their share being
chargeable against the captain, unless the urgency of the case should be such that
the time necessary for previous deliberations was wanting.
ARTICLE 814. The resolution adopted to cause the damages which constitute
general average must necessarily be entered in the log book, stating the motives and
reasons for the dissent, should there be any, and the irresistible and urgent causes
which impelled the captain if he acted of his own accord.
In the first case the minutes shall be signed by all the persons present who
could do so before taking action, if possible; and if not, at the first opportunity. In the
second case, it shall be signed by the captain and by the officers of the vessel.
In the minutes, and after the resolution, shall be stated in detail all the goods
jettisoned, and mention shall be made of the injuries caused to those kept on board.
The captain shall be obliged to deliver one copy of these minutes to the maritime
judicial authority of the first port he may make, within twenty-four hours after his
arrival, and to ratify it immediately under oath.

Page 99
ARTICLE 815. The captain shall direct the jettison, and shall order the goods
cast overboard in the following order:
1. Those which are on deck, beginning with those which embarrass the
maneuver or damage of the vessel, preferring, if possible, the heaviest ones
with the least utility and value.
2. Those which are below the upper deck, always beginning with those of the
greatest weight and smallest value, to the amount and number absolutely
indispensable.
(C) EFFECTS - ARTICLE 812
WHO BEARS THE GROSS OR GENERAL AVERAGE?
Gross or general average shall be borne by those who benefited

from the sacrifice. These include the ship owner and the owners of the
cargoes that were saved. Contribution may also be imposed on the
insurers of the vessel or cargoes that were saved as well as lenders on
bottomry or respondetia (Articles 732 and 859).
ARTICLE 812. In order to satisfy the amount of the gross or general averages,
all the persons having an interest in the vessel and cargo therein at the time of the
occurrence of the average shall contribute.
(D) JETTISON - ARTICLES 815, 816
HOW SHALL JETTISON BE MADE?
ARTICLE 815. The captain shall direct the jettison, and shall order the goods
cast overboard in the following order:
1. Those which are on deck, beginning with those which embarrass the
maneuver or damage of the vessel, preferring, if possible, the heaviest ones
with the least utility and value.
2. Those which are below the upper deck, always beginning with those of the
greatest weight and smallest value, to the amount and number absolutely
indispensable.
ARTICLE 816. In order that the goods jettisoned may be included in the gross
average and the owners thereof be entitled to indemnity, it shall be necessary insofar
as the cargo is concerned that their existence on board be proven by means of the
bill of lading; and with regard to those belonging to the vessel, by means of the
inventory prepared before the departure in accordance with the first paragraph of
Article 812.
(E) JASON CLAUSES (SEE YORK-ANTWERP RULES,

RULE D)
Rights to contribution in general average 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, but

Page 100
this shall not prejudice any remedies which may be open against that
party for such fault.
Although the Code of Commerce provisions on averages are still

in force, the parties may, by stipulation in the charter party or any
written agreement, agree that the York-Antwerp Rules shall be applied.
In addition, the York-Antwerp Rules may also be used to solve
controversies where no provision in the Code of Commerce is in point
because the said rules embody the custom of maritime states. Jason
clause is a standard provision in maritime commerce. It provides for
uniform rules on adjustment of averages in maritime accidents to
address the varied systems of determining the same.
(B) PROOF AND LIQUIDATION OF AVERAGES

(1) MODES - ARTICLES 846, 847, 848
ARTICLE 846. Those interested in the proof and liquidation of averages may
mutually agree and bind themselves at any time with regard to the liability,
liquidation, and payment thereof. cdt
In the absence of agreements, the following rules shall be observed:
1. The proof of the average shall take place in the port where the repairs are
made, should any be necessary, or in the port of unloading.
2. The liquidation shall be made in the port of unloading, if it is a Philippine port.
3. If the average occurred outside of the jurisdictional waters of the Philippines,

or the cargo has been sold in a foreign port by reason of an arrival under stress, the
liquidation shall be made in the port of arrival.
4. If the average has occurred near the port of destination, so that said port can
be made, the proceedings mentioned in Rules 1 and 2 shall be held there.
ARTICLE 847. In the case where the liquidation of the averages is made
privately by virtue of agreement, as well as when a judicial authority intervened at
the request of any of the parties interested who do not agree thereto, all of them
shall be cited, and heard, should they not have renounced this right.
Should they not be present or should the have no legal representative, the
liquidation shall be made by the Consul in a foreign port, and where there is none, by
the competent judge or court, according to the laws of the country and for the
account of the proper party.
When the representative is a person well known in the place where the liquidation
is made, his intervention shall be admitted and shall produce legal effects, even
though he be authorized only by a letter of the ship agent, the shipper, or the insurer.
ARTICLE 848. Claims for averages shall not be admitted if they do not exceed
5 per cent of the interest which the claimant may have in the vessel or in the cargo if
it be gross average and 1 per cent of the goods damaged if particular average,
deducting in both cases the expenses of appraisal, unless there is an agreement to
the country.

Page 101
(2) APPRAISAL OF GENERAL AVERAGE - ARTICLES

855; 857
ARTICLE 855. The merchandise loaded on the upper deck of the vessel shall
contribute to the gross average should they be saved; but there shall be no right to
indemnity if they should be lost by reason of having been jettisoned for common
safety, except when the marine ordinances allow their shipment in this manner in
coastwise navigation.
The same shall take place with that which is on board and is not included in
the bills of lading or inventories, according to the cases.
In any case the shipowner and the captain shall be liable to the shippers for
the damages from the jettison, if the storage on the upper deck was made without
the consent of the latter.
ARTICLE 857. After the appraisement of the goods saved and of those lost
which constitute the gross average, has been concluded by the experts, the repairs, if
any, made on the vessel, and in this case, the accounts of the same approved by the
persons interested or by the judge or court, the entire record shall be turn over to the
liquidator appointed, in order that he may proceed with the distribution of the
average.
(3) LIQUIDATION OF GENERAL AVERAGE -

ARTICLES 858, 865 TO 869
ARTICLE 858. In order to effect the liquidation, the liquidator shall examine
the protest of the captain, comparing it, if necessary, with the log book, and all the
contracts which may have been made among the persons interested in the average,
the appraisements, expert examinations, and accounts of repairs made. If, as a result
of this examination, he should find any defect in the procedure which might injure the
rights of the person interested or affect the liability of the captain, he shall call
attention thereof in order that it may be corrected, if possible, and otherwise he shall
include it in the exordial of the liquidation.
Immediately thereafter he shall proceed with the distribution of the amount of

the average, for which purpose he shall fix:
1. The contributing capital, which he shall determine by the value of the cargo,
in accordance with the rules established in Article 854.
2. That of the vessel in her actual condition, according to the statement of

experts.
3. The 50 per cent of the amount of the freightage, deducting the remaining 50
per cent for wages and maintenance of the crew.
After the amount of the gross average has been determined in accordance with
the provisions of this Code, it shall be distributed pro rata among the goods which are
to cover the same. cdasia
ARTICLE 865. The distribution of the gross average shall not be final until it
has been agreed to, or in the absence thereof, until it has been approved by the

Page 102
judge or court, after an examination of the liquidation and a hearing of the persons
interested who may be present or of their representatives.
ARTICLE 866. After the liquidation has been approved, it shall be the duty of
the captain to collect the amount of the contributions, and he shall be liable to the
owners of the goods averaged for the damages they may suffer through his delay or
negligence.
ARTICLE 867. If the person contributing should not pay the amount of the
contribution at the end of the third day after having been required to do so, the
goods saved shall be proceeded against, in the request of the captain, until payment
has been made from their proceeds.
ARTICLE 868. If the person interested in receiving the goods saved should not
give security sufficient to answer for the amount corresponding to the gross average,
the captain may defer the delivery thereof until payment has been made. aisadc
(4) LIQUIDATION OF PARTICULAR AVERAGE -

ARTICLE 869
ARTICLE 869. The experts whom the court or the person interested may
appoint, as the case may be, shall proceed with the examination and appraisement of
the averages in the manner prescribed in Articles 853 and 854, Rules 2 to 7, insofar
as they are applicable.
2. ARRIVALS UNDER STRESS
WHAT IS ARRIVAL UNDER STRESS?
A definition of arrival under stress can be derived from Article

819 of the Code of Commerce. Under the said provision, arrival under
stress is the arrival of a vessel at the nearest and most convenient
port which was decided upon after determining that there is well-
founded fear of seizure, privateers, or pirates or by reason of any
accident of the sea disabling it to navigate, or by lack of provisions.
Lack of provision should not be due from the failure to take

necessary provisions according to usage and customs.
WHY IS IT IMPORTANT TO DETERMINE WHETHER ARRIVAL IS UNDER

STRESS OR NOT?
Because as a general rule, the captain and the ship owner are
made liable for deviation from route during the voyage. Arrival under
stress is an exception.
(A) CAUSES - ARTICLES 819 AND 820
WHAT ARE THE CAUSES FOR ARRIVAL UNDER STRESS?

Page 103
ARTICLE 819. If during the voyage the captain should believe that the vessel
can not continue the trip to the port of destination on account of the lack of
provisions, well-founded fear of seizure, privateers, or pirates, or by reason of any
accident of the sea disabling it to navigate, he shall assemble the officers and shall
summon the persons interested in the cargo who may be present, and who may
attend the meeting without the right to vote; and if, after examining the
circumstances of the case, the reason should be considered well-founded, the arrival
at the nearest and most convenient port shall be agreed upon, drafting and entering
the proper minutes, which shall be signed by all, in the log book.
The captain shall have the deciding vote, and the persons interested in the
cargo, may make the objections and protests they may deem proper, which shall be
entered in the minutes in order that they may make use thereof in the manner they
may consider advisable.
ARTICLE 820. An arrival shall not be considered lawful in the following cases:
1. If the lack of provisions should arise from the failure to take the necessary
provisions for the voyage according to usage and customs, or if they should have
been rendered useless or lost through bad stowage or negligence in their care.
2. If the risk of enemies, privateers, or pirates should not have been well known,
manifest, and based on positive and provable facts.
3. If the defect of the vessel should have arisen from the fact that it was not
repaired, rigged, equipped, and prepared in a manner suitable for the voyage, or
from some erroneous order of the captain.
4. When malice, negligence, want of foresight, or lack of skill on the part of the
captain exists in the act causing the damage.
(B) FORMALITIES - ARTICLES 819, 822
WHAT FORMALITIES MUST BE OBSERVED IN ARRIVAL UNDER STRESS?
ARTICLE 819. If during the voyage the captain should believe that the vessel
can not continue the trip to the port of destination on account of the lack of
provisions, well-founded fear of seizure, privateers, or pirates, or by reason of any
accident of the sea disabling it to navigate, he shall assemble the officers and shall
summon the persons interested in the cargo who may be present, and who may
attend the meeting without the right to vote; and if, after examining the
circumstances of the case, the reason should be considered well-founded, the arrival
at the nearest and most convenient port shall be agreed upon, drafting and entering
the proper minutes, which shall be signed by all, in the log book.
The captain shall have the deciding vote, and the persons interested in the
cargo, may make the objections and protests they may deem proper, which shall be
entered in the minutes in order that they may make use thereof in the manner they
may consider advisable.
ARTICLE 822. If in order to make repairs to the vessel or because there is

danger that the cargo may suffer damage, it should be necessary to unload, the

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captain must request authorization from the competent judge or court for the
removal, and carry it out with the knowledge of the person interested in the cargo, or
his representative, should there be any.
In a foreign port, it shall be the duty, of the Philippine Consul, where there is one,
to give the authorization.
In the first case, the expenses shall be for the account of the ship agent or owner,
and in the second, they shall be chargeable against the owners of the merchandise
for whose benefit the act was performed.
If the unloading should take place for both reasons, the expenses shall be divided
proportionately between the value of the vessel and that of the cargo.
(C) EXPENSE - ARTICLES 821, 822
ARTICLE 821. The expenses of an arrival under stress shall always be for the
account of the shipowner or agent, but they shall not be liable for the damages which
may be caused the shippers by reason of the arrival provided the latter is legitimate.
Otherwise, the ship agent and the captain shall be jointly liable.
ARTICLE 822. If in order to make repairs to the vessel or because there is

danger that the cargo may suffer damage, it should be necessary to unload, the
captain must request authorization from the competent judge or court for the
removal, and carry it out with the knowledge of the person interested in the cargo, or
his representative, should there be any.
In a foreign port, it shall be the duty, of the Philippine Consul, where there is
one, to give the authorization.
In the first case, the expenses shall be for the account of the ship agent or
owner, and in the second, they shall be chargeable against the owners of the
merchandise for whose benefit the act was performed.
If the unloading should take place for both reasons, the expenses shall be
divided proportionately between the value of the vessel and that of the cargo.
(D) RESPONSIBILITY OF CAPTAIN - ARTICLES 823 825
WHAT ARE RESPONSIBILITES OF THE CAPTAIN IN CASE OF ARRIVAL

UNDER STRESS?
ARTICLE 823. The custody and preservation of the cargo which has been
unloaded shall be intrusted to the captain, who shall be responsible for the same,
except in cases of force majeure.
ARTICLE 824. If the entire cargo or part thereof should appear to be damaged,
or there should be imminent danger of its being damaged, the captain may request
of the competent judge or court, or of the consul in a proper case, the sale of all or of
part of the former, and the person taking cognizance of the matter shall authorize it,
after an examination and declaration of experts, advertisements, and other
formalities required by the case, and an entry in the book, in accordance with the
provisions of Article 624.

Page 105
The captain shall, in a proper case, justify the legality of his conduct, under
the penalty of answering to the shipper for the price the merchandise would have
brought if they had arrived in good condition at the port of destination.
ARTICLE 825. The captain shall be responsible for the damages caused by his
delay, if after the cause of the arrival under stress has ceased, he should not
continue the voyage.
If the cause of arrival should have been the fear of enemies, privateers, or
pirates, a deliberation and resolution in a meeting of the officers of the vessel and
persons interested in the cargo who may be present, in accordance with the
provisions contained in Article 819, shall precede the departure.
3. COLLISIONS
DEFINE COLLISION.
Collision is defined as an impact or sudden contact of a moving

body with an obstruction in its line of motion, whether both bodies are
in motion or one stationary and the other, no matter which, in motion.
As applied to maritime commerce, collision is therefore an

impact or sudden contact of a vessel with another whether both are in
motion or stationary.
Strictly speaking, collision refers to the contact of two moving

vessels. If one vessel is moving while the other is stationary, the same
is more appropriately called allision. Nevertheless, for purposes of
applying the provisions of the Code of Commerce, collision includes
collision per se and allision.
WHAT ARE THE 3 ZONES IN COLLISION?
In collision of vessels, there exists 3 DIVISION OF TIME or ZONES:
(A) FIRST DIVISION covers all the time up to the moment when the risk
of collision may be said to have begun. Within this time zone, no
rule is applicable because none is necessary. Each vessel is free to
direct its course as it deems best without reference to the
movement of the other vessel.
(B) SECOND DIVISION covers the time between the moment when the
risk of collision begins and the moment when it has become a
practical certainty. The burden is on the vessel required to keep
away and avoid the danger
(C) THIRD DIVISION covers the time between the moment of actual
contact. This is the period where error in extremis may occur, and
the rule is that the vessel which has forced the privileged vessel

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into danger is responsible even if sthe privileged vessel committed

an error within that zone (A. Urrutia & Co. vs. Baco River Plantation,
Co., No. 7675, March 25, 1913).
WHAT IS ERROR IN EXTREMIS?
Where a navigator, suddenly realizing that a collision is imminent

by no fault of his own, in confusion and excitement of the moment
does something which contributes to the collision or omits to do
something by which the collision might be avoided, such act or
omission is ordinarily considered in extremis and the ordinary rules of
strict accountability do not apply.
Thus, when it was during the time when the said vessel was
passing through the third zone that it changed its course to port in
order to avoid, if possible, the collision, the act may be said to have
been done in extremis, and even if wrong, the sailing vessel is not
responsible for the result.
(A) CLASSES AND EFFECTS
WHAT ARE THE CLASSES OF COLLISION?
a. Fortuitous
b. Culpable
c. Inscrutable
A) FORTUITOUS - ARTICLES 830, 832
WHO BEARS THE DAMAGE IN CASE THE COLLISION IS THROUGH A

FORTUITOUS EVENT?
If a vessel should collide with another, through fortuitous event

or force majeure, each vessel and its cargo shall bear its own damages
(Article 830).
WHAT KIND OF AVERAGE IS A DAMAGE CAUSED BY A COLLISION DUE

TO A STORM OR FORCE MAJEURE?
If by reason of a storm or other cause of force majeure, a vessel

which is properly anchored and moored should collide with those
nearby, causing them damages, the injury occasioned shall be
considered as particular average of the vessel run into (Article 832).
B) CULPABLE - ARTICLES 826, 827 AND 831

Page 107
IF
A VESSEL SHOULD BE FORCED BY A THIRD VESSEL TO COLLIDE WITH
ANOTHER, WHAT IS THE RESPONSIBILITY OF THE THIRD VESSEL?
If a vessel should be forced by a third vessel to collide with

another, the owner of the third vessel shall indemnify the losses and
damages caused, the captain thereof being civilly liable to said owner
(Article 831).
WHO BEARS THE DAMAGE IN CASE A VESSEL SHOULD COLLIDE WITH

ANOTHER, THROUGH THE FAULT, NEGLIGENCE, OR WANT OF SKILL OF THE
CAPTAIN, SAILING MATE, OR ANY OTHER MEMBER OF THE COMPLEMENT?
If a vessel should collide with another, through or the fault,

negligence, or lack of skill of the captain, sailing mate, or any other
member of the complement, the owner of the vessel at fault shall
indemnify the losses and damages suffered, after an expert appraisal
(Article 826).
WHO SHALL BEAR THE DAMAGE IN CASE THE COLLISION IS IMPUTABLE TO

BOTH VESSELS?
If the collision is imputable to both vessels, each one shall suffer

its own damages, and both shall be solidarily responsible for the losses
and damages occasioned to their cargoes (Article 827).
NAUTICAL RULES IN DETERMINING WHETHER COLLISION IS
FORTUITOUS OR DUE TO THE NEGLIGENCE OF THE CAPTAIN:
When two vessels collide while entering the port, the latter
vessel is presumed to be at fault.
Smaller vessels should give right of way to large vessels.
Vessels leaving the port should leave the way clear for another
which may be entering the same port.
There is a presumption against the vessel which sets sail in the
night.
In case of collision between sailing vessel and a steamship, the
latter is presumed to be at fault.
Steam vessels towing have a right of way over steam vessels not
towing
C) INSCRUTABLE FAULT - ARTICLE 828
WHAT IS THE DOCTRINE OF INSCRUTABLE FAULT?
The doctrine of inscrutable fault means that the court can see
that a fault has been committed, but is unable, from the conflict of

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testimony, or otherwise to locate it. Hence, when it is impossible to

determine to what direct and specific acts the collision is attributable,
it is a case of damage arising from a cause that is inscrutable.
WHO SHALL BEAR THE DAMAGE IN CASE IT CANNOT BE DETERMINED

WHICH IF THE TWO VESSELS CAUSED THE COLLISION?
The provisions of the preceding article are applicable to the use

in which it cannot be determined which of the two vessels has caused
the collision (Article 828). This is an extension of Article 827, which
applies when (a) both vessels are shown to be blameworthy; or (b)
there is no proof as to which vessel was at fault. There is solidary
liability of the vessels, despite the fact that one vessel is more
negligent than the other.
IS THE DOCTRINE OF LAST CLEAR CHANCE APPLICABLE IN THIS CASE?
The doctrine of last clear chance is not applicable in this case

where both vessels are blameworthy.
SUMMARY:
1. FORTUITOUS:
Vessels collide with each other through fortuitous event or

force majeure each vessel and each cargo bears its own
damage.
A vessel which is properly anchored and moored may
collide with those nearby by reason of storm or force
majeure vessel run into suffers its own damage.
2. CULPABLE:
Collision due to fault, negligence or lack of skill of the

captain, sailing mate, or any other member of the
complement owner of the vessel at fault is liable for the
losses and damages.
Collision due to the fault of both vessels each vessel
suffers its own loss; and both owners shall be jointly and
severally liable for loss or damage to cargoes.
Two vessels collide with each other without their fault but
by reason of the fault if a third vessel owner of the third
vessel is liable.
3. INSCRUTABLE:

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Where it cannot be determined which of the two vessels is

at fault each of the vessel suffers its own loss and both
shall be solidarily liable for losses and damages to their
cargoes.
(b) PRESUMPTION OF LOSS BY COLLISION - ARTICLE 833
WHEN IS LOSS BY COLLISION PRESUMED?
A vessel which, upon being run into, sinks immediately, as well

as that which, having been obliged to make a port to repair the
damages caused by the collision, is lost during the voyage or is obliged
to be stranded in order to be saved, shall be presumed as lost by
reason of collision (Article 833).
(C) LIABILITIES
(1) SHIP OWNER OR AGENT - ARTICLES 837, 838
WHAT IS THE LIMIT OF THE LIABILITY OF THE SHIP OWNER IN CASES

OF COLLISION?
The civil liability incurred by the shipowners in the case

prescribed in this section, shall be understood as limited to the value of
the vessel with all its appurtenances and freightage earned during the
voyage (Article 837).
WHAT CLAIM SHALL BE PREFERRED WHEN THE VALUE OF THE VESSEL
AND HER APPURTENANCES SHOULD NOT BE SUFFICIENT TO COVER ALL
LIABILITIES?
When the value of the vessel and her appurtenances should not
be sufficient to cover all the liabilities, the indemnity due by reason of
the death or injury of persons shall have preference (Article 838).
(2) CAPTAIN, PILOT, OTHERS - ARTICLES 829, 834
WHAT IS THE REMEDY OF THE OWNER AGAINST THE PERSONS CAUSING

THE INJURY?
In the cases above mentioned the civil action of the owner

against the person causing the injury as well as the criminal liabilities,
which may be proper, are reserved (Article 829).
NOTES:

Page 110
Liability for negligence in the absence of contract is

governed by Article 2176 of the Civil Code the provision
on quasi-delict. However, the liabilities of ship owners and
ship agents as well as the captain or crew in collision cases
is still governed by the provisions of the Code of Commerce
on Collision (National Development Company vs. The Court
of Appeals, et al., Nos. L-49407 and L-49469, August 19,
1988, 164 SCRA 593, 603).
Although the liability with respect to collision is not
governed by quasi-delict, liability in collision cases are still
negligence based. In other words, courts are still called
upon to determine the negligence of the persons involved
in order to impose liability. The person who caused the
injury is both criminally and civilly liable under Article 829
of the Code of Commerce.
In the determination of negligence, the same test of a
reasonable man in the position of an expert that applies in
quasi-delict should also be applied although with due
consideration to the expertise of the persons involved
including the carrier itself, the captain, officers and crew of
the vessel. Thus, it is still required to determine if a
reasonable man with the same expertise would have done
what the party in question did under the circumstances. It
is still relevant to determine if the collision is sufficiently
foreseeable such that a reasonable man with the same
expertise could have avoided the impact.
In some respect, however, the rules that apply to quasi-
delict cannot be applied in collision case like:
1. The doctrine of the last clear chance
2. The rule on contributory negligence of the other
vessel (Article 827)
3. Proof that the plaintiff was negligent will bar
recovery from the defendant in collision cases even
if the plaintiffs negligence can be classified as
merely contributory (Gorgonio De Sarasola vs. Yu
Biao Sontua, G.R. No. 22630, January 31, 1925).
WILL THE PRESENCE OF A PILOT AT THE TIME OF THE COLLISION

EXEMPT THE CAPTAIN FROM LIABILITY?
If the vessels colliding with each other should have pilots on

board discharging their duties at the time of the collision, their
presence shall not exempt the captains from the liabilities they incur,
but the latter shall have the right to be indemnified by the pilots,

Page 111
without prejudice to the criminal liability which the latter may incur
(Article 834).
(3) CONDITIONS; PROTESTS - ARTICLES 835, 836,

839
WHAT FORMAL REQUIREMENT MUST BE FULFILLED TO BE ABLE TO

RECOVER DAMAGES CAUSED BY COLLISION? WHAT IS THE EFFECT OF
FAILURE TO COMPLY THEREWITH?
The action for the recovery of losses and damages arising from
collisions cannot be admitted if a protest or declaration is not
presented within twenty-four hours before the competent authority of
the point where the collision took place, or that of the first port of
arrival of the vessel, if in Philippine territory, and to the consul of the
Republic of the Philippines if it occurred in a foreign country (Article
835).
With respect to damages caused to persons or to the cargo, the

absence of protest may not prejudice the persons interested who were
not on board or were not in a condition to make known their wishes
(Article 836).
NOTES:
REASON FOR REQUIRING PROTEST: to prevent fictitious collisions

or improper indemnities.
VESSELS TO WHICH RULES ON COLLISION APPLY: Collisions of sea-
going vessels; merchant vessels or merchant ships; those
run by masters having a special training, with elaborate
apparatus of crew and equipment.
OFFICERS TO WHOM PROTEST MUST BE MADE: Competent
authority where the collision took place; or competent
authority at first port of arrival, if in Philippine territory, and
to consul, if in a foreign port.
WHAT ARE THE INSTANCES WHERE PROTEST IS REQUIRED?
1. Vessel making arrival under stress (Article 612)

2. Vessel is shipwrecked (Articles 612, 624 and 843)
3. Vessel which has gone through a hurricane or when the captain
believes that the cargo has suffered damages or averages
(Article 624)
4. Maritime collisions (Article 835)

Page 112
WHAT ARE THE INSTANCES WHEN PROTEST AFTER A COLLSION IS NOT

NECESSARY?
1. In case the basis of the action is quasi-delict (Lopez vs. Duruelo,

52 Phil. 229).
2. In case of collision of a motor boat engaged in conveying
passengers between the ship and the shore, and a larger vessel,
since the provision on collision is intended to cover collisions of
sea-going vessels (Lopez vs. Duruelo, supra).
3. In case the person interested in the damage was not on board or
was not in a condition to make known his wishes (Article 836).
WHAT MUST THE PHILIPPINE CONSUL DO IN CASE A PHILIPPINE

VESSEL SHOULD HAVE A COLLISION IN FOREIGN WATERS OR OPEN SEAS?
If the collision should take place between Philippine vessels in

foreign waters, or if having taken place in the open seas, and the
vessels should make a foreign port, the Consul of the Republic of the
Philippines in said port shall hold a summary investigation of the
accident, forwarding the proceedings to the Secretary of the
Department of Foreign Affairs for continuation and conclusion (Article
839).
4. SHIPWRECKS, ARTICLES 840 TO 843
DEFINE SHIPWRECK.
Shipwreck has been defined as the demolition or shattering of a

vessel caused by her driving ashore or on rocks and shoals in the
midseas, or by the violence of winds and waves in tempests.
WHO SHALL BEAR THE DAMAGE SUFFERED BY THE VESSEL AND HER
CARGO DUE TO SHIPWRECK OR STRANDING?
The losses and deteriorations suffered by a vessel and her cargo

by reason of shipwreck or stranding shall be individually for the
account of the owners, the part which may be saved belonging to them
in the same proportion (Article 840).
WHAT IS THE LIABILITY OF THE SHIP CAPTAIN IN CASE THE WRECK OR

STRANDING OF THE VESSEL IS CAUSED BY MALICE, NEGLIGENCE OR LACK OF
SKILL OF THE CAPTIAN?
The general rule is that the damage due to shipwreck or

stranding shall be borne by the respective owners (Article 840), except
in case of malice, negligence or lack of skill of the captain, or because

Page 113
the vessel put to sea was insufficiently repaired and equipped, in which
case the captain shall be liable for the damage caused to the vessel or
the cargo. Thus, Article 841 provides that:
If the wreck or stranding should be caused by the malice, negligence, or lack

of skill of the captain, or because the vessel put to sea was insufficiently repaired and
equipped, the ship agent or the shippers may demand indemnity of the captain for
the damages caused to the vessel or to the cargo by the accident, in accordance with
the provisions contained in Articles 610, 612, 614, and 621 (Article 841).
WHO SHALL BEAR THE EXPENSES OF THE SALVAGE?
The goods saved from the wreck shall be specially bound for the
payment of the expenses of the respective salvage, and the amount
thereof must be paid by the owners of the former before they are
delivered to them, and with preference over any other obligation if the
merchandise should be sold (Article 842).
IN
CASE THE SHIPWRECK OCCURS WHILE THE VESSEL IS IN A CONVOY,
HOW SHOULD STHE SAVED CARGO BE DISTRIBUTED?
If several vessels sail under convoy, and any of them should be

wrecked, the cargo saved shall be distributed among the rest in
proportion to the amount which each one is able to take.
If any captain should refuse, without sufficient cause, to receive

what may correspond to him, the captain of the wrecked vessel shall
enter a protest against him, before two sea officials, of the losses and
damages resulting therefrom, ratifying the protest within twenty-four
hours after arrival at the first port, and including it in the proceedings
he must institute in accordance with the provisions contained in Article
612.
If it is not possible to transfer to the other vessels the entire
cargo of the vessel wrecked, the goods of the highest value and
smallest volume shall be saved first, the designation thereof to be
made by the captain with the concurrence of the officers of his vessel
(Article 843).
(A) SALVAGE LAW (ACT NO. 2616)
WHAT IS SALVAGE AND ITS CONCEPT?
In general, salvage may be defined as a service which 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

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unable to protect and secure (Erlanger & Galinger vs. Swedish East
Asiatic Co., Ltd., 34, Phil. 178 [1916]).
Salvage is founded on the equity of remunerating private and

individual services performed in saving, in whole or in part, a ship or its
cargo from impending peril, or recovering them after actual loss. It is a
compensation for actual services rendered to the property charged
with it, and is allowed for meritorious conduct of the salvor, and in
consideration of a benefit conferred upon the person whose property
he has saved. A claim of salvage rests on the principle that, unless the
property is in fact saved by those who claim the compensation, it
cannot be allowed, however benevolent their intention and however
heroic their conduct (ibid).
WHAT IS A DERELICT?
It is a condition of a ship or her cargo which is abandoned and

deserted at sea by those who are in charged of it, without any hope of
recovering it, or without any intention of returning it. If those in charge
of the property left it with the intention of finally leaving it, it is derelict
and the change of their intention and an attempt to return to it will not
change its nature.
WHAT ARE THE RIGHTS OF A FINDER OF A DERILICT?
The finder who takes possession, with the intention of saving the
ship, gains a right of possession over the same, which he can maintain
against the true owners. The owner thus abandons temporarily his
right of possession, which is transferred to the finder who becomes
bound to preserve the property with good faith and bring it to a safe
place for the owners use; in return, he acquires a right to be paid for
his services a reasonable and proper compensation out of the property
itself. He is not bound to part with the possession thereof until he is
paid or the property is taken into the possession of the law preparatory
to the amount of salvage being legally asserted.
WHAT ARE THE KINDS OF SALVAGE?
1. Voluntary, wherein the compensation is dependent upon success.

This is the most ancient class of pure salvage.
2. Rendered upon a contract for a per diem or per horam wage,
payable at all events. This is the most common upon the Great
Lakes.
3. Under a contract for a compensation payable only in case of
success (C.S. Robinson, et al. vs. The Ship Alta, et al., No.
3488, August 10, 1907).

Page 115
WHEN CAN THERE BE A VALID SALVAGE?
1. When in case of shipwreck, the vessel or its cargo shall be

beyond the control of the crew, or shall have been abandoned by
them, and picked up and conveyed to a safe place by other
persons, the latter shall be entitled to a reward for the salvage.
Those who, not being included in the above paragraph, assist in
saving a vessel or its cargo from shipwreck, shall be entitled to a
like reward (Section 1).
2. If the captain of the vessel, or the person acting in his stead, is
present, no one shall take from the sea, or from the shores or
coast merchandise or effects proceeding from a shipwreck or
proceed to the salvage of the vessel, without the consent of such
captain or person acting in his stead (Section 2).
NOTES ON TOWAGE:
A vessel, though not abandoned, may be the subject of a

salvage, if at the time the services were rendered, there was a
probable, threatening danger to the vessel and its cargo. If the
vessel towed is aided in escaping a present or prospective
danger, the services is one of salvage and the towage is merely
incidental.
Distinction between a salvage and towage is of importance to
the crew of the salvaging ship because if the contract is one of
towage, the crew does not have any interest or right to the
remuneration pursuant to the contract; but if the service
rendered is one of salvage, the crew can look to the salvaged
vessel for its share.
The towing vessel cannot invoke cannot invoke equity in quasi-
contract of towage. There is an express provision of law (Article
2124 NCC) that is applicable to the relationship of quasi-contract
of towage, where the crew is not entitled to compensation
separate from that of the vessel.
WHAT ARE THE ELEMENTS OF SALVAGE?
1. There must be a marine peril;

2. The service is voluntarily rendered and is not required as an
existing duty or from a special contract; and
3. There must be success in whole or in part or that the service
rendered contributed to such success (Barrios vs. Go Thong &
Company, No. L-17192, March 30, 1963, 7 SCRA 535);

Page 116
4. The vessel is shipwrecked beyond the control of the crew or shall

have been abandoned (Section 1, Savage Law).
WHAT IS THE OBLIGATION OF A PERSON WHO HAS SAVED OR PICKED

UP A VESSEL OR MERCHANDISE AT SEA IN THE ABSENCE OF THE CAPTAIN OF
THE VESSEL, OWNER OR REPRESENTATIVE?
He who shall save or pick up a vessel or merchandise at sea, in

the absence of the captain of the vessel, owner, or a representative of
either of them, they being unknown, shall convey and deliver such
vessel or merchandise, as soon as possible, to the Collector of
Customs, if the port has a collector, and otherwise to the provincial
treasurer or municipal mayor (Section 3).
WHAT IS THE RIGHT AND OBLIGATION OF THE OWNER AFTER THE

SALVAGE?
After the salvage is accomplished, the owner or his

representative shall have a right to the delivery of the vessel or things
saved, provided that he pays, or gives a bond to secure, the expenses
and the proper reward.
The amount and sufficiency of the bond, in the absence of

agreement, shall be determined by the Collector of Customs or by the
Judge of the Court of First Instance of the province in which the things
saved may be found (Section 4).
If, while the vessel or things saved are at the disposition of the
authorities, the owner or his representative shall claim them, such
authorities shall order their delivery to such owner or his
representative, provided that there is no controversy over their value,
and a bond is given by the owner or his representative to secure the
payment of the expenses and the proper reward. Otherwise, the
delivery shall nor be made until the matter is decided by the Court of
First Instance of the province (Section 6).
NOTES:
The salvor has an interest in the property, a lien, though this is

not considered a debt due by the owner to the salvor for the
services rendered upon the principle that the service creates a
property in the thing being saved. The salvor becomes, for all
intents and purposes, a joint owner, and if the property is lost, he
must bear his share like the other joint owners.
Where the ship or its cargo is saved together, payment of
compensation should be charged against the ship and cargo in

Page 117
the proportion of their respective value, as in the case of general

average.
WHAT ARE THE DUTIES OF THE COLLECTOR OF CUSTOMS, PROVINCIAL

TREASURER OR MUNICIPAL MAYOR AFTER THE SALVAGE?
The Collector of Customs, provincial treasurer, or municipal

mayor, to whom a salvage is reported, shall order:
1. That the things saved be safeguard and inventoried.

2. The sale at public auction of the things saved which may be in
danger of immediate loss or of those whose conservation is
evidently prejudicial to the interests of the owner, when no
objection is made to such sale.
3. The advertisement within the thirty days subsequent to the
salvage, in one of the local newspapers or in the nearest
newspaper published, of all the details of the disaster, with a
statement of the mark and number of the effects requesting all
interested persons to make their claims.
WHAT IS THE PROCEDURE TO BE FOLLOWED IF THERE IS NO CLAIM

OVER THE SLAVAGED GOODS?
No claim being presented in the three months subsequent to the

publication of the advertisement prescribed in sub-section (c) of
Section five, the things save shall be sold at public auction, and their
proceeds, after deducting the expenses and the proper reward shall be
deposited in the insular treasury. If three years shall pass without
anyone claiming it, one-half of the deposit shall be adjudged to him
who saved the things, and the other half to the insular government
(Section 7).
WHO ARE THE PERSONS WHO HAVE NO RIGHT TO A REWARD FOR A

SALVAGE?
The following shall have no right to a reward for salvage or

assistance:
1. The crew of the vessel shipwrecked or which was is danger of

shipwreck;
2. He who shall have commenced the salvage in spite of opposition
of the captain or his representative; and
3. He who shall have failed to comply with the provisions of Section
three (Section 8).
WHAT ARE THE RULES AS TO REWARD?

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1. If, during the danger, an agreement is entered into concerning

the amount of the reward for salvage or assistance, its validity
may be impugned because it is excessive, and it may be required
to be reduced to an amount proportionate to the circumstances
(Section 9).
2. In a case coming under the last preceding section, as well as in
the absence of an agreement, the reward for salvage or
assistance shall be fixed by the Court of First Instance of the
province where the things salvaged are found, taking into
account principally the expenditures made to recover or save the
vessel or the cargo or both, the zeal demonstrated, the time
employed, the services rendered, the excessive express
occasioned the number of persons who aided, the danger to
which they and their vessels were exposed as well as that which
menaced the things recovered or salvaged, and the value of such
things after deducting the expenses (Section 10).
3. From the proceeds of the sale of the things saved shall be
deducted, first, the expenses of their custody, conservation,
advertisement, and auction, as well as whatever taxes or duties
they should pay for their entrance; then there shall be deducted
the expenses of salvage; and from the net amount remaining
shall be taken the reward for the salvage or assistance which
shall not exceed fifty per cent of such amount remaining (Section
11).
4. If in the salvage or in the rendering of assistance different
persons shall have intervened the reward shall be divided
between them in proportion to the services which each one may
have rendered, and, in case of doubt, in equal parts. Those who,
in order to save persons, shall have been exposed to the same
dangers shall also have a right to participation in the reward
(Section 12).
5. If a vessel or its cargo shall have been assisted or saved, entirely
or partially, by another vessel, the reward for salvage or for
assistance shall be divided between the owner, the captain, and
the remainder of the crew of the latter vessel, so as to give the
owner a half, the captain a fourth, and all the remainder of the
crew the other fourth of the reward, in proportion to their
respective salaries, in the absence of an agreement to the
contrary. The express of salvage, as well as the reward for
salvage or assistance, shall be a charge on the things salvaged
on their value (Section 13).
E. SPECIAL CONTRACTS OF MARITIME COMMERCE
1. CHARTER PARTIES

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A. DEFINITION
WHAT IS CHARTER PARTY AND ITS CONCEPT?
A charter party is defined as a contract whereby an entire ship, or

some principal part of the ship, is let by the owner thereof to a
merchant or other person for a specified time or use for the
conveyance of goods, in consideration of the payment of freight
(Caltex (Phil.), Inc. vs. Sulpicio Lines, Inc., G.R. No. 131166, September
30, 1999, 315 SCRA 709).
The term charter party is taken from carta partita which literally
means divided document. Carta partita refers to the ancient practice
of writing out the terms and conditions of a contract in duplicate on
one piece of parchment and then dividing it down the middle thus
providing each party with a copy.
The charter contract is often referred to as a form of mercantile

lease for it involves a charterer, who is most often a merchant
himself, who desires to lease a ship or vessel owned by another for the
transport of his goods for commercial purposes. The charter may also
involve the transportation of persons from one port to another. The
parties thereto are therefore the charterer, or charter party, and the
ship owner.
B.KINDS
WHAT ARE THE KINDS OF CHARTER PARTIES?
1. THE BAREBOAT OR DEMISE CHARTER
A bareboat, also known as demise, is one where the shipowner

delivers the vessel to the charterer with his crew who will get off the
vessel upon delivery thereof to the charterer. Thereafter, it is the
charterer who will provide his own crew for the operation of the vessel
during the period of the charter. Thus the charterer becomes the owner
pro hac vice of the vessel since he mans the vessel with his own set
of master and crew, effectively becoming the owner for the voyage or
service stipulated, subject however to any liability for damages arising
from negligence.
WHAT ARE THE EFFECTS OF A BAREBOAT CHARTER?
The effect is that not only the entire capacity of the ship is
leased, but the ship itself, and the possession is passed on to the

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charterer. The entire control and management of the vessel is given up

to the charterer.
The shipowner loses his lien on the cargo, but the lien is not
destroyed, as it continues in favor of the charterer when the goods are
taken on freight since the vessel is leased in its entirety to the
charterer.
The bareboat charterer assumes, to a large extent, the

customary rights and liabilities of the ship owner in relation to third
persons who may have dealt with him or with the vessel. In this latter
instance, the master of the vessel is the agent of the charterer or
owner pro hac vice, and not the general owner of the vessel who is
liable for the expenses of the voyage including the wage of seamen.
WHAT IS OWNER PRO HAC VICE OF THE VESSEL? IN WHAT KIND OF

CHARTER PARTY DOES THIS OBTAIN?
It is a demise charterer to whom the owner of the vessel has

completely and exclusively relinquished possession, command, and
navigation of the vessel.
In this kind of charter, the charterer mans and equips the vessel
and assumes all responsibility for its navigation, management and
operation. He thus acts as the owner of the vessel in all important
aspects during the duration of the charter.
2. CONTRACT OF AFFEIGHTMENT which is divided into:
1. TIME CHARTER
2. VOYAGE CHARTER
In time charter, the vessel is leased to the charterer for a fixed

period of time stipulated therein, while a voyage charter involves only
a single or particular voyage. In both the time and voyage charters, the
charterer hires the vessel only, either for a determinate period of time
or for a single or consecutive voyage, with the ship owner providing
fosr the provisions of the ship, wages of the master and crew, and the
expenses for the maintenance of the vessel.
Generally, the character of the common carrier is not

affected by the charter party if the same is a contract of affreightment.
It is only when the charter includes both the vessel and the crew, as in
a bareboat or demise that a common carrier becomes private, at least
insofar as th particular voyage covering the charter party is concerned.

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IN
CASE THE CHARTER PARTY IS CONSIDERED AS A PRIVATE
CARRIAGE, MAY THE PARTIES STIPULATE ON THE LIABILIOTY FOR THE
DAMAGE TO THE CARGO SHIPPED?
In case a charter party is considered as a private carriage,

the parties may freely contract respecting liability for damage to goods
and other matters. The basic principle is that the responsibility for
cargo loss falls on the one who agreed to perform the duty involved.
When so agreed therefore, the charterer could be responsible for the
care of the cargo during the voyage (Maritime Agencies and Services,
Inc. vs. Court of Appeals, 187 SCRA 346).
C.FORMS AND EFFECTS - ARTICLES 652 657
WHAT IS THE IMPORTANCE OF A CONTRACT OF CHARTER PARTY?
The contract of a charter party is important because the rights

and obligation of the parties are determined principally by the
provisions of the charter party.
The application of the Civil Code provisions on common carrier

depends on the kind of charter party
WHAT ARE THE FORMAL REQUISITES OF A CHARTER PARTY?
A charter party must be drawn in duplicate and signed by the

contracting parties, and when either does not know how or is not able
to do so, by two witnesses at his request.
The charter party shall contain, besides the conditions freely

stipulated, the following circumstances:
1. The kind, name, and tonnage of the vessel.

2. Its flag and port of registry.
3. The name, surname, and domicile of the captain.
4. The name, surname, and domicile of the ship agent, if the latter
should make the charter party.
5. The name, surname, and domicile of the charterer; and if he
states that he is acting by commission, that of the person for
whose account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or the weight or measurement
which they respectively bind themselves to load and to transport,
or whether the charter party is total.
8. The freightage to be paid, stating whether it is to be a fixed
amount for the voyage or so much per month, or for the space to

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be occupied, or for the weight or measure of the goods of which

the cargo consists, or in any other manner whatsoever agreed
upon.
9. The amount of primage to be paid to the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and the
demurrage to be paid for each of them (Article 652).
WHAT IS PRIMAGE?
It is the customary compensation given to the captain of the

vessel for the use of his ropes. Traditionally, it was the captain who
provided the ropes for the use of the vessel which he commanded.
WHAT IS DEMURRAGE?
It is an amount stipulated in the charter party to be paid by the

charterer or shipper to the shipowner for any delay in the sailing of his
ship.
ISA CONTRACT OF TOWAGE A CHARTER PARTY, A CONTRACT FOR THE

CARRIAGE OF GOODS, OR A CONTRACT FOR LEASE OF SERVICES?
It is a contract for the hire of services, because what is towed is

not shipped or placed on board the towing vessel. However, if the
barge towed and its tugboat belongs to the same owner and the barge
is used continuously in the business of transporting anothers goods,
then the contract is either one for the carriage of goods or a charter
party depending on the agreement of the parties.
WHAT IS THE EFFECT OF RECEIPT OF A CARGO WITHOUT THE CHARTER

PARTY BEING SIGNED?
If the cargo should be received without the charter party having

been signed, the contract shall be understood as executed in
accordance with what appears in the bill of lading, the sole evidence of
title with regard to the cargo for determining the rights and obligations
of the ship agent, of the captain, and of the charterer (Article 653).
WHAT IS THE PROBATIVE VAUE OF A CHARTER PARTY WHETHER DULY

CERTIFIED BY A BROKER OR NOT?
The charter parties executed with the intervention of a broker,

who certifies to the authenticity of the signatures of the contracting
parties because they were signed in his presence, shall be full
evidence in court; and if they should be conflicting, that which accords

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with one which the broker must keep in his registry, if kept in
accordance with law, shall govern.
The contracts shall also be admitted as evidence, even though a

broker has not taken part therein, if the contracting parties
acknowledge the signatures to be the same as their own.
If no broker has intervened in the charter party and the

signatures are not acknowledged, doubts shall be decided by what is
provided for in the bill of lading and in the absence thereof, by the
proofs submitted by the parties (Article 654).
WHAT IS THE EFFECT OF CHARTER PARTIES EXECUTED BY THE CAPTAIN

IN THE ABSENCE OF THE SHIP AGENT AND IN VIOLATION OF THE
INSTRUCTIONS OF THE LATTER?
Charter parties executed by the captain in the absence of the

ship agent shall be valid and effective, even though in executing them
he should have acted in violation of the orders and instructions of the
ship agent or shipowner; but the latter shall have a right of action
against the captain for indemnification of damages (Article 655).
WHAT IS THE DATE OF LOADING AND UNLOADING WHEN THE CHARTER

PARTY FAILS TO STATE THE SAME?
If in the charter party the time in which the loading and

unloading are to take place is not stated, the usages of the port where
these acts take place shall be observed. After the stipulated or the
customary period has passed, and there is no express proviso in the
charter party fixing the indemnity for the delay, the captain shall be
entitled to demand demurrage for the lay days and extra lay days
which may have elapsed in loading and unloading (Article 656).
WHAT IS THE OBLIGATION OF THE CAPTAIN SHOULD THE VESSEL

BECOME UNSEAWORTHY DURING THE VOYAGE? WHAT IS THE CONSEQUENCE
OF FAILURE TO FULFILL SUCH OBLIGATION ON THE PART OF THE CAPTAIN?
If during the voyage the vessel should be rendered unseaworthy,

the captain shall be obliged to charter at his expense another one in
good condition to receive the cargo and carry it to its destination, for
which purpose he shall be obliged to look for a vessel not only at the
port of arrival but also in the neighborhood within distance of 150
kilometers.
If the captain, through indolence or malice, should not furnish a

vessel to its destination, the shippers, after requiring the captain to

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charter a vessel within an inextendible period, may charter one and

petition the judicial authority to summarily approve the charter party
which they may have made.
The same authority shall judicially ("por la via de appremio")
compel the captain, to carry out, for his account and under his
responsibility, the charter made by the shippers.
If the captain, notwithstanding his diligence, should not find a

vessel for the charter, he shall deposit the cargo at the disposal of the
shippers, to whom he shall communicate the facts on the first
opportunity which presents itself, the freight being adjusted in such
cases by the distance covered by the vessel, with no right to any
indemnification whatsoever (Article 657).
d) RIGHTS AND OBLIGATIONS OF SHIPOWNERS - ARTICLES 669

678
WHAT ARE THE OBLIGATIONS OF THE SHIP OWNER OR THE CAPTAIN IN

CHARTER PARTIES?
The shipowner or the captain shall observe in charter parties the

capacity of the vessel or that expressly designated in its registry, a
difference greater than 2 per cent between that stated and her true
capacity not being permissible.
If the shipowner or the captain should contract to carry a greater

amount of cargo than the vessel can carry in view of her tonnage, they
shall indemnify the shippers whose contracts they do not fulfill for the
losses they may have caused when by reason of their default,
according to the following cases, viz:
1. If the vessel has been chartered by one shipper only, and there
should appear to be an error or fraud in her capacity, and the
charterer should not wish to rescind the contract, when he has a
right to do so, the freightage shall be reduced in proportion to the
cargo which the vessel can not receive, the person from whom the
vessel is chartered being furthermore obliged to indemnify the
charterer for the losses he may have caused him.
2. If, on the contrary there should be several charter parties, and by
reason of want of space all the cargo contracted for cannot be
loaded, and none of the charterers desires to rescind the contract,
preference shall be given to the person who has already loaded and
arranged the freight in the vessel, and the rest shall take the places
corresponding to them in the order of the dates of their contracts.
3. Should there be no priority, the charterers may load, if they wish, in
proportion to the amounts of weight or space for which each may

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have contracted, and the person from whom the vessel was
chartered shall be obliged to indemnify them for losses and
damages.
WHEN MY ANOTHER VESSEL BE SUBSTITUTED FOR THE ONE CHARTERED?
If the person from whom the vessel is chartered, after receiving a

part of the freight, should not find sufficient to make up at least three-
fifths of the amount which the vessel may hold, at the price he may
have fixed, he may substitute for the transportation another vessel
inspected and declared suitable for the same voyage, the expenses of
transfer and the increase in the price of the charter, should there be
any, being for his account. Should he not be able to make this change,
he shall undertake the voyage at the time agreed upon; and should no
time have been fixed, within fifteen days from the time the loading
began, unless otherwise stipulated.
If the owner of the part of the freight already loaded should

procure some more at the same price and under similar or
proportionate conditions to those accepted for the freight received, the
person from whom the vessel is chartered or the captain can not refuse
to accept the rest of the cargo; and should he do so, the shipper shall
have a right to demand that the vessel put to sea with the cargo which
it may have on board (Article 670).
WHEN IS SUBSTITUTION OF VESSELS NOT ALLOWED IN CHARTER

PARTIES?
After three-fifths of the vessel has been loaded, the person from
whom she is chartered may not, without the consent of the charterers
or shippers, substitute the vessel designated in the charter party by
another one, under the penalty of making himself thereby liable for all
the losses and damages occurring during the voyage to the cargo of
those who did not consent to the change (Article 671).
WHEN THE WHOLE VESSEL HAS BEEN CHARTERED, MAY THE CAPTAIN
ACCEPT CARGO FROM OTHER PERSONS?
If the vessel has been chartered in whole, the captain may not,
without the consent of the charterer, accept cargo from any other
person; and should he do so, said charterer may oblige him to unload it
and to indemnify him for the losses suffered thereby (Article 672).
WHAT IS THE LIABILITY OF THE PERSON FROM WHOM THE VESSEL IS

CHARTERED FOR VOLUNTARY DELAY CAUSED BY THE CAPTAIN?

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The person from whom the vessel is chartered shall be liable for
all the losses caused to the charterer by reason of the voluntary delay
of the captain in putting to sea, according to the rules prescribed,
provided he has been requested, notarially or judicially, to put to sea at
the proper time (Article 673).
WHAT IS THE CONSEQUENCE SHOULD THE CHARTERER CARRY MORE

CARGO THAN THAT CONTRACTED FOR?
If the charterer should carry to the vessel more cargo than that
contracted for, the excess may be admitted in accordance with the
price stipulated in the contract, if it can be well stowed without injuring
the other shippers; but if in order to load it, the vessel would be thrown
out of trim, the captain must refuse it or unload it at the expense of its
owner.
In the same manner, the captain may, before leaving the port,
unload merchandise clandestinely placed on board, or transport them,
if he can do so with the vessel in trim, demanding by way of freightage
the highest price which may have been stipulated for said voyage
(Article 674).
WHAT SHOULD BE DONE IN CASE THE VESSEL HAS BEEN CHARTERED

TO RECEIVE CARGO IN ANOTHER PORT?
If the vessel has been chartered to receive the cargo in another

port, the captain shall appear before the consignee designated in the
charter party; and, should the latter not deliver the cargo to him, he
shall inform the charterer and wait his instructions, the lay days agreed
upon or those allowed by custom in the port beginning to run in the
meantime, unless there is an express, agreement to the contrary.
Should the captain not receive an answer within the time

necessary therefor, he shall make efforts to find freight; and should he
not find any after the lay days and extra lay days have elapsed, he
shall make a protest and return to the port where the charter was
made.
The charterer shall pay the freightage in full, discounting that

which may have been earned on the merchandise which may have
been carried on the voyage out or on the return trip, if carried for the
account of third persons.
The same shall be done if a vessel, having been chartered for the
round trip, should not be given any cargo on its return (Article 675).
WHEN WILL THE CAPTAIN LOSE THE FREIGHT?

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The captain shall lose the freightage and shall indemnify the
charterers if the latter should prove, even against the certificate of
inspection, if one has been made at the port of departure, that the
vessel was not in a condition to navigate at the time of receiving the
cargo (Article 676).
WHAT IS THE EFFECT OF A DECLARATION OF WAR OR BLOCKADE ON

THE CHARTER PARTY?
The charter party shall subsist if a declaration of war or a

blockade should take place during the voyage, the captain not having
any instructions from the charterer.
In such case the captain must proceed to the nearest safe and
neutral port, requesting and awaiting orders from the shipper, and the
expenses and salaries paid during the detention shall be paid as
general average.
If, by orders of the shipper, the cargo should be discharged at

the port of arrival, the freightage for the voyage out shall be paid in full
(Article 677).
WHAT SHOULD BE DONE SHOULD THE CPATAIN FAIL TO RECEIVE

INSTRUCTION FROM THE SHIPPER DESPITE THE LAPSE OF TIME?
If the time necessary, in the opinion of the judge or court, to

receive the orders of the shipper should have elapse, without the
captain having received any instructions, the cargo shall be deposited,
and it shall be liable for the payment of the freightage and expenses
on its account during the delay, which shall be paid from the proceeds
of the part first sold (Article 678).
SUMMARY:
RIGHTS OF THE SHIPOWNER:
1. Where the cargo received is not sufficient to make up at least three-

fifths of the amount which the vessel may hold, he may substitute
another vessel inspected and declared suitable for the voyage. The
expenses of transfer and the increase in the price of the charter, if
any, shall be paid by him. But the shipowner does not have this
right of substitution where three-fifths of the vessel has been filled.
2. To collect freightage in accordance with the price stipulated for
cargo in excess if that agreed upon if such excess can be properly
stowed.

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3. To refuse and unload at the expense of the owner excess cargo that
cannot be properly stowed.
4. To unload merchandise clandestinely placed on board, o to
transport them if he can do so, demanding the highest freightage.
5. To find freight to take the place of freight not received if the vessel
has been chartered to receive cargo in another port, after he
receives no cargo from the consignee and after he receives no
answer from the charterer.
6. To receive freightage in full, discounting that which may have been
earned on the merchandise carried as substitute.
7. To have the charter party subsist notwithstanding the declaration of
war or a blockade during the voyage, and to receive in such cases,
the freightage in full where the shipper orders that the cargo should
be discharged at the port of arrival.
OBLIGATIONS OF SHIPOWNERS:
1. To observe in the charter parties, the capacity of the vessel, and to

indemnify the shippers whose contracts are not fulfilled for the
losses they may have suffered by the failure of the shipowner to
observe the capacity of the vessel. In such cases, there may be one
or more charterers.
2. To undertake the voyage at the time agreed upon with fifteen days
from the time the loading began if no time is stipulated, even if the
shipowner should not find cargo sufficient to make up at least three-
fifths of the amount which the vessel may hold, where he fails his
right to change vessel.
3. Where the shipowner should not find cargo sufficient to make up at
least three-fifths of the amount which the vessel may hold to accept
other cargo procured by the owner of the freight already loaded
under the same price and conditions.
4. Not to change the vessel after three-fifths of the vessel has been
loaded, without the consent of the charterers or shippers.
Otherwise, the shipowner shall be liable for the losses and damages
occurring during the voyage to the cargo of those who did not give
their consent.
5. If the vessel has been chartered in whole, not to accept cargo from
any other person without the consent of the charterer. Otherwise,
the captain shall answer for the losses suffered and be required to
unload.
6. To answer for losses arising from delay in putting to sea. But the
charterer must request the same, judicially or notarially.
7. To have the vessel in a condition to navigate at the time of
receiving the cargo. Otherwise, the captain shall lose the freightage
and shall indemnify the charterers.

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8. In case of declaration of war or blockade during the voyage, where

the captain has not received any instructions form the chartrer for
the captain to proceed to the nearest safe and neutral port,
requesting and awaiting orders from the shipper.
E). OBLIGATIONS OF CHARTERERS - ARTICLES 679 687
MAY THE CHARTERER, AS A MATTER OF RIGHT, SUB CHARTER THE

WHOLE OR PART OF THE VESSEL?
The charterer of an entire vessel may sub-charter the whole or

part thereof on such terms as he may consider most convenient, the
captain not being allowed to refuse to receive on board the freight
delivered by the second charterers, provided that the conditions of the
first charter are not change, and that the price agreed upon is paid in
full to the person from whom the vessel is chartered, even though the
full cargo is not embarked, with the limitation established in the next
article (Article 679).
WHAT IS THE LIABILITY IF THE CHARTERER WHO DOES NOT COMPLETE

THE FULL CARGO HE BOUND HIMSELF TO SHIP?
A charterer who does not complete the full cargo he bound

himself to ship shall pay the freightage of the amount he fails to ship, if
the captain does not take other freight to complete the load of the
vessel, in which case the first charterer shall pay the difference, should
there be any (Article 680).
WHAT
IS THE LIABILITY OF THE CHARTERER FOR LAODING GOODS
DIFFERENT FROM THOSE MENTIONED AT THE TIME OF THE EXECUTION OF
THE SHARTER PARTY?
If the charterer should load goods different from those stated at

the time of executing the charter party, without the knowledge of the
person from whom the vessel was chartered or of the captain, and
should thereby give rise to losses, by reason of confiscation, embargo,
detention, or other causes, to the person from whom the vessel was
chartered or to the shippers, the person giving rise thereto shall be
liable with the value of his shipment and furthermore with his property,
for the full indemnity to all those injured through his fault (Article 681).
WHAT IS THE LIABILITY OF THE PARTIES FOR CARRYING GOODS FOR

ILLICIT COMMERCE?
If the merchandise should have been shipped for the purpose of

illicit commerce, and were taken on board with the knowledge of the

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person from whom the vessel was chartered or of the captain, the
latter, jointly with the owner of the same, shall be liable for all the
losses which may be caused the other shippers; and even though it
may have been stipulated, they can not demand any indemnity
whatsoever from the charterer for the damaged caused to the vessel
(Article 682).
IN CASE THE VESSEL IS BEING REPAIRED, MY THE SHIPPER BE

REQUIRED TO WAIT UNTIL THE VESSEL IS REPAIRED? WHO SHOULD BEAR THE
EXPENSES OF UNLOADING THE CARGO?
In case of making a port to repair the hull, machinery, or

equipment of the vessel, the shippers must await until the vessel is
repaired, being permitted to unload it at their own expense should they
deem it proper.
If, for the benefit of the cargo subject to deterioration, the

shippers or the court, or the consul, or the competent authority in a
foreign country, should order the merchandise to be unloaded, the
expenses of unloading and reloading shall be for the account of the
former (Article 683).
WHAT IS THE RESPONSIBILITY OF THE CHARTERER FOR FREIGHT

SHOULD HE UNLOAD THE VESSEL BEFORE ARRIVING AT THE PORT OF
DESTINATION?
If the charterer, without the occurrence of any of the cases of

force majeure mentioned in the foregoing article, should wish to unload
his merchandise before arriving at the port of destination, he shall pay
the full freightage, the expenses of the arrival made at his request, and
the losses and damages caused the other shippers, should there be
any (Article 684).
WHAT MUST BE PAID BY THE SHIPPER SHOULD HE UNLOAD THE GOODS

BEFORE STARTING THE VOYAGE?
In charters for transportation of general freight, any of the

shippers may unload the merchandise before the beginning of the
voyage, paying one-half of the freightage, the expense of stowing and
restowing the cargo, and any other damage which for his reason he
may cause the other shippers (Article 685).
WHEN IS THE CAPTAIN ENTITLED TO THE PAYMENT OF THE FREIGHT

AND OTHER EXPENSES FOR THE CONSIGNEE?

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After the vessel has been unloaded and the cargo placed at the
disposal of the consignee, the latter must immediately pay the captain
the freightage due and the other expenses for which said cargo may be
liable.
The primage must be paid in the same proportion and at the

same time as the freightage, all the changes and modifications to
which the latter should be subject also governing the former (Article
686).
WHEN MAY NOT THE CHARACTERS AND SHIPPERS ABANDON THE

GOODS FOR THE PAYMENT OF FREIGHT AND OTHER EXPENSES? WHEN CAN
THEY MAKE SUCH ABANDONMENT?
The charterers and shippers may not abandon merchandise

damaged on account of inherent defect or fortuitous event, for the
payment of the freightage and other expenses.
The abandonment shall be proper, however, if the cargo should

consist of liquids and they have leaked out, nothing remaining in the
containers but one-fourth part of their contents (Article 687).
SUMMARY:
OBLIGATIONS OF THE CHARTERER:
1. To pay freightage in full even if the charterer does not complete the
full cargo he bound himself to ship.
2. To answer with the value of his shipment and other property for the
losses suffered by the shipowner, captain, or other shippers arising
from confiscation, embargo, detention, or other causes, where the
charterer loads goods different from those stated at the time of the
execution of the charter party.
3. To be jointly liable with the captain for losses which may be caused
to the other shippers where the charterer ships goods for the
purpose of illicit commerce with the knowledge of the shipowner or
captain.
4. In the case of making a port to repair the hull, machinery or
equipment of the vessel, to wait until the vessel is repaired or to
pay for the expenses of loading should the charterer choose to
unload.
5. Where the charterer unloads goods before arriving at the port of
destination without the occurrence of the cases of force majeure
mentioned in Article 683, to pay (1) the expenses of arrival, (2) the
freightage in full, and (3) for the damages and losses caused to
other shippers, if any.

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6. Where the charterer unloads before the beginning of voyage, (1) to

pay one-half of the freightage, (2) to pay for the expenses of
stowing and restowing the cargo, and (3) to pay any other damage
which for this reason he may cause to other shippers.
7. To pay freightage, other expenses and the primage after the vessel
has been unloaded abd the cargo placed at the disposal of the
consignee.
8. Not to abandon merchandise damaged on account of inherent
defect or fortuitous event, for the payment of the freightage and
other expenses.
F) RESCISSION - ARTICLE 688 TO 692
WHEN MAY THE CHARTER PARTY BE RESCINDED UPON REQUEST OF

THE CHARTERER?
A charter party may be rescinded at the request of the charterer:
1. If before loading the vessel he should not agree with that

stated in the certificate of tonnage, or if there should be an error in the
statement of the flag under which she sails.
2. If the vessel should not be placed at the disposal of the

charterer within the period and in the manner agreed upon.
3. If after the vessel has put to sea, she should return to the
port of departure, on account of risk from pirates, enemies, or bad
weather, and the shippers should agree to unload her.
In the second and third cases the person from whom the vessel
was chartered shall indemnify the charterer for the voyage out.
4. If the charter should have been made by the months, the

charterers shall pay the full freightage for one month, if the voyage is
for a port in the same waters, and for two months, if for a port in
different waters.
From one port to another of the Philippines and adjacent islands,

the freightage for one month only shall be paid.
5. If the vessel should make a port during the voyage in order

to make urgent repairs, and the charterers should prefer to dispose of
the merchandise.
When the delay does not exceed thirty days, the shippers shall
pay the full freightage for the voyage out.

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Should the delay exceed thirty days, they shall only pay the
freightage in proportion to the distance covered by the vessel (Article
688).
WHEN MAY A CHARTER PARTY BE RESCINDED UPON REQUEST OF THE

PERSON FOR WHOM THE VESSEL IS CHARTERED?
At the request of the person from whom the vessel is chartered

the charter party may be rescinded:
1. If the charterer, at the termination of the extra lay days,

does not place the cargo alongside the vessel.
In such case the charterer must pay half the freight stipulated,
besides the demurrage due for the lay days and extra lay days.
2. If the person from whom the vessel was chartered should

sell it before the charterer has begun to load it, and the purchaser
should load it for his own account.
In such case the vendor shall indemnify the charterer for the
losses he may suffer.
If the new owner of the vessel should not load it for his own
account, the charter party shall be respected, and the vendor shall
indemnify the purchaser if the former did not inform him of the charter
pending at the time of making the sale (Article 689).
UPON WHAT GROUNDS MAY A CHARTER PARTY BE RESCINDED?
The charter party shall be rescinded and all actions arising

therefrom shall be extinguished, if, before the vessel puts to sea from
the port of departure, any of the following cases should occur:
1. A declaration of war or interdiction of commerce with the

power to whose ports the vessel was to make its voyage.
2. A condition of blockade of the port of destination of said

vessel, or the breaking out of an epidemic after the contract was
executed.
3. The prohibition to receive at the said port the merchandise

constituting the cargo of the vessel.

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4. An indefinite detention, by reason of an embargo of the

vessel by order of the government, or for any other reason
independent of the will of the ship agent.
5. The inability of the vessel to navigate, without fault of the

captain or ship agent.
The unloading shall be made for the account of the charterer

(Article 690).
WHO SHALL BE LIABLE FOR DAMAGES SHOULD THE VESSEL FAIL TO

PUT TO SEA BY REASON OF CLOSING OF THE PORT OF DEPARTURE OR OTHER
TEMPORARY CAUSE?
If the vessel cannot put to sea on account of the closing of the

port of departure or any other temporary cause, the charter shall
remain in force, with neither one of the contracting parties having a
right to claim damages.
The subsistence and wages of the crew shall be considered as
general average.
During the interruption, the charterer may at the proper time and
for his own account, unload and load the merchandise, paying
demurrage if he delays the reloading after the cause for the detention
has ceased (Article 691).
WHEN IS A CHARTER PARTY PARTIALLY RESCINDED? WHAT ARE THE

CONSEQUENCES THEREOF?
A charter party shall be partially rescinded, unless there is an

agreement to the contrary, and the captain shall only be entitled to the
freightage for the voyage out, if, by reason of a declaration of war,
closing of ports, or interdiction of commercial relations during the
voyage, the vessel should make the port designated for such a case in
the instructions of the charterer (Article 692).
THE FOLLOWING CLAUSES IN CHARTER PARTIES, NOT BEING CONTRARY

TO LAW, MORALS, GOOD CUSTOMS, PUBLIC ORDER AND PUBLIC POLICY, ARE
VALID STIPULATIONS:
a. Jason clause a stipulation in a charter party that in case

of a maritime accident for which the shipowner is not
responsible by law, contract or otherwise, the cargo
shippers, consignees or owners shall contribute with the
shipowner in general average.

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b. Clause payment a clause in a charter party providing

that the Carriage of Goods by Sea Act (COGSA) shall apply,
subject to the extent that any term of the bill of lading is
repugnant to the COGSA or applicable law, then to the
extent thereof (only) the provision of the bill of lading is
void.
(B)LOANS ON BOTTOMRY AND RESPONDENTIA
1. LOAN ON BOTTOMRY, DEFINED
WHAT IS BOTTOMRY AND ITS CONCEPT?
Bottomry, in maritime law, is a contract whereby the owner of

the ship borrows for the use, equipment or repair of the vessel, for a
definite 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.
2. LOAN ON RESPONDENTIA, DEFINED

WHAT IS RESPONDENTIA?
A loan on respondentia is one made on the goods laden on board

the ship, and which are to be sold or exchanged in the course of the
voyage, the borrowers personal responsibility being deemed the
principal security for the performance of the contract. The lender must
be paid his principal and interest, although the ship perishes, provided
that the goods are saved. The goods, or some part thereof, are
hypothecated as security for a loan, the repayment of which is
dependent upon maritime risks. The usual form of a loan on
respondentia is that of a bond. In this kind of maritime loan, it is the
borrowers personally responsibility which is deemed to be the
principal security for the performance of the contract, hence the term
respondentia.
WHAT IS THE RATIONALE BEHIND THIS KIND OF LOANS?
The rationale is to encourage people to invest/participate in

maritime commerce (similar to the reason behind the doctrine of
limited liability); such that if the security for the loan (goods or vessel)
is lost, the obligation to pay the loan is extinguished.
HOW ARE LOANS ON BOTTOMRY AND RESPONDENTIA DISTINGUISHED

FROM SIMPLE LOAN?

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The loan on bottomry or respondentia may be distinguished from

simple loan in the following manner:
1. In bottomry or respondentia, the rate of interest is not subject to

the Usury Law on account of the extraordinary risks involved
whereas in simple loan, the rate of interest must not exceed the
ceiling fixed by the Usury Law.
2. In bottomry or respondentia, there must necessarily be a marine
risk the existence of which must be duly established whereas in
simple loan, there need not be such risks involved.
3. The loan on bottomry or respondentia must be executed in
accordance with form and manner required in the Code of
Commerce whereas in simple loan, the formal requisites
regarding contracts in general would apply.
4. The loan on bottomry or respondentia must recorded in the
registry of vessels in order to bind third persons whereas no
registration is required in the case of a simple loan.
5. In the loan on bottomry or respondentia, preference is extended
to the last lender, then prior lenders would not have benefited
from the preservation of the security, whereas in a simple loan,
the first lender, as a general rule, enjoys preference over
subsequent ones.
6. An ordinary loan or may not have collateral, while a loan on
bottomry or respondentia must have collateral.
7. The collateral of an ordinary loan may be any property, real or
personal, while the collateral of a loan on bottomry or
respondentia must have a vessel or cargo subject to maritime
risks.
8. An ordinary loan is absolutely repayable, while payment of a loan
on bottomry or repondentia depends upon the safe arrival qat
the port of the collateral of the loan.
9. An ordinary loan need not to be writing but interest shall not be
due unless expressly stipulated in writing, while a loan on
bottomry or respondentia must be recorded in writing.
10. The loss of the collateral if any, in an ordinary loan does
not extinguish the same, while the loss of the collateral in loan
on bottomry or respondentia extinguishes the same.
SPECIAL FEATURES OF LOANS ON BOTTOMRY AND RESPONDENTIA:
c. These contracts must at least be in writing; otherwise, they

can not be the basis of judicial action. In order to affect
third persons and entitle it to preferential credit treatment,
the contract should be inscribed in the certificate of
registry and seconded in the registry of vessels.

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d. The captain may not borrow on bottomry or respondentia

except on his own interest or portion thereof, otherwise,
the contract is void.
e. The usury laws are inapplicable to these contracts.
f. Should the goods upon which the money is taken not be
subjected to risk, the contract shall be considered a simple
loan.
g. More recent loans are preferred than prior loans.
3. CHARACTER OF LOAN - ARTICLE 719
WHAT IS THE CHARACTER OF A LOAN IN BOTTOMRY OR

RESPONDENTIA?
A loan in which under any condition whatever, the repayment of

the sum loaned and of the premium stipulated depends upon the safe
arrival in port of the goods on which it is made, or of the price they
may receive in case of accident, shall be considered a loan on
bottomry or respondentia (Article 719).
The character of this kind of loan is that it is real, unilateral and

aleatory contract, thus:
1. Delivery of the amount loaned is necessary for the
perfection of the contract;
2. Although there are reciprocal benefits, the contract
produces obligations only for one party, the borrower who
must return the amount borrowed plus premium; and
3. The lender really runs known risks.
WHAT IS THE REAL NATURE OF A LOAN ON BOTTOMRY OR LOAN ON

RESPONDENTIA?
A loan on bottomry or a loan on respondentia is not merely a

simple loan of money called mutuum, but it is also in the nature of
insurance. That is why the right on the part of the creditor to recover
the loan is premised on the safe arrival of the vessel or the cargo at
the port of destination. If the vessel or cargo fails to reach the port of
destination safely, the creditor loses his right to recover the loan. The
reason is that the creditor is acting not only as a lender, but at the
same time, also an insurer of the vessel or cargo given as collateral for
the loan.
4. FORMS AND REQUISITES - ARTICLES 720 722
WHAT ARE THE FORMAL REQUIREMENTS OF LOANS ON BOTTOMRY OR

RESPONDENTIA?

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Loans on bottomry or respondentia may be executed:
1. By means of a public instrument.

2. By means of a policy signed by the contracting parties and the
broker taking part therein.
3. By means of a private instrument.
Under whichever of these forms the contract is executed, it shall

be entered in the certificate of the registry of the vessel and shall be
recorded in the registry of vessels, without which requisites the credits
of this kind shall not have, with regard to other credits, the preference
which, according to their nature, they should have, although the
obligation shall be valid between the contracting parties.
The contracts made during a voyage shall be governed by the

provisions of Articles 583 and 611, and shall be effective with regard to
third persons from the date of their execution, if they should be
recorded in the registry of vessels of the port of registry of the vessel
before the lapse of eight days following its arrival. If said eight days
should elapse without the record having been made in the
corresponding registry, the contracts made during the voyage of a
vessel shall produce no effect with regard to third persons, except from
the day and date of their inscription.
In order that the policy of the contracts executed in accordance

with No. 2 may have binding force, they must conform to the registry
of the broker who took part therein. With respect to those executed in
accordance with No. 3 the acknowledgment of the signature shall be
required.
Contracts which are not reduced to writing shall not give rise to
judicial action (Article 720).
WHAT MUST BE STATED IN A CONTRACT ON BOTTOMRY OR

RESPONDENTIA?
In a contract on bottomry or respondentia the following must be

stated:
1. The kind, name, and registry of the vessel.

2. The name, surname, and domicile of the captain.
3. The names, surnames, and domiciles of the person giving and
the person receiving the loan.
4. The amount of the loan and the premium stipulated.
5. The time for repayment.

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6. The goods pledged to secure repayment.

7. The voyage during which the risk is run (Article 721).
HOW MAY CONTRACTS ON BOTTOMRY OR RESPONDENTIA WHICH ARE

MADE TO ORDER, BE TRANSFERABLE?
The contract may be made to order, in which case they shall be

transferable by indorsement, and the indorsee shall acquire all the
rights and shall incur all the risks corresponding to the indorser (Article
724).
5. ON WHAT CONSTITUTED - ARTICLES 724 725
WHAT MAY CONSTITUTE AS SECUTIRY FOR A LOAN ON BOTTOMRY OR

RESPONDENTIA?
The loans may be constituted jointly or separately:
1. On the hull of the vessel.

2. On the rigging.
3. On the equipment, provisions, and fuel.
4. On the engine, if the vessel is a steamer.
5. On the merchandise loaded.
If the loan in constituted on the hull of the vessel, the rigging,

equipment and other goods, provisions, fuel, steam engines, and the
freightage earned during the voyage on which the loan is made shall
also be considered as included in the liability for the loan.
If the loan is made on the cargo, all that which constitutes the
same shall be subject to the repayment; and if on a particular object of
the vessel or of the cargo, only the object concretely and specifically
mentioned shall be liable (Article 724).
MAY LOANS ON BOTTOMRY BE MADE ON THE SALARIES OF THE CREW

OR ON PROFITS?
No loans on bottomry may be made on the salaries of the crew

or on the profits expected (Article 725).
The reason for this rule is that the salaries of the crew are not part
of the capital of the ship owner, nor are future profits or commercial
effects that could be given as collateral.
6. AMOUNT -ARTICLES 723, 726 725
HOW SHALL THE VALUE OF THE PRINCIPAL LOAN BE DETERMINED?

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Loans may be made in goods and in merchandise, fixing their

value in order to determine the principal of the loan (Article 723).
WHAT
MAY CONSTITUTE AS SECURITY FOR A LAON ON BOTTOMRY OR
RESPONDENTIA?
The loans may be constituted jointly or separately:
1. On the hull of the vessel.

2. On the rigging.
3. On the equipment, provisions, and fuel.
4. On the engine, if the vessel is a steamer.
5. On the merchandise loaded.
If the loan in constituted on the hull of the vessel, the rigging,

equipment and other goods, provisions, fuel, steam engines, and the
freightage earned during the voyage on which the loan is made shall
also be considered as included in the liability for the loan. cdta
If the loan is made on the cargo, all that which constitutes the
same shall be subject to the repayment; and if on a particular object of
the vessel or of the cargo, only the object concretely and specifically
mentioned shall be liable (Article 724).
No loans on bottomry may be made on the salaries of the crew

or on the profits expected.
7. BY WHOM - ARTICLES 728, 617, 611, 583
WHOSHALL BE BOUND BY THE LOAN OBTAINED BY THE CAPTAIN AT

THE PLACE OF RESIDENCE OF THE OWNERS OF THE VESSEL?
The loan which the captain takes at the point of residence of the
owners of the vessel shall only affect that part thereof which belongs
to the captain, if the other owners or their agents should not have
given their express authorization therefor or should not have taken
part in the transaction.
If one or more of the owners should be requested to furnish the

amount necessary to repair or provision the vessel, and they should
not do so within twenty-four hours, the interest which the parties in
default may have in the vessel shall be liable for the loan in the proper
proportion.

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Outside of the residence of the owners the captain may contract

loans in accordance with the provisions of Articles 583 and 611 (Article
728).
WHAT CONTRACTS ON BOTTOMRY OR RESPONDENTIA ARE

PROHIBITED?
The captain may not contract loans on respondentia secured by

the cargo; and should he do so, the contracts shall be void.
Neither may he borrow money on bottomry for his own

transactions, except on the portion of the vessel he owns, provided no
money has been previously borrowed on the whole vessel, and there
does not exist any other kind of lien or obligation chargeable against
the vessel. If he may do so, he must state what interest he has in the
vessel.
In case of violation of this article, the principal, interest, and

costs shall be for the personal account of the captain, and the ship
agent may furthermore discharge him (Article 617).
IF THE CAPTAIN HAS NO FUNDS TO COMPLY WITH HIS OBLIGATION,

HOW SHALL HE OBTAIN FUNDS?
In order to comply with the obligations mentioned in the
preceding article, the captain, when he has no funds and does not
expect to receive any from the ship agent, shall obtain the same in the
successive order stated below:
1. By requesting said funds from the consignee of the vessel or

correspondents of the ship agent.
2. By applying to the consignees of the cargo or to those interested
therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by means of a loan on
bottomry.
5. By selling a sufficient amount of the cargo to cover the sum
absolutely indispensable for the repair of the vessel and to
enable it to continue its voyage.
In these two last cases he must apply to the judicial authority of

the port, if in the Philippines, and to the consul of the Republic of the
Philippines if in a foreign country, and where there is none, to the local
authority, proceeding in accordance with the provisions of Article 583,
and with the provisions of the law of civil procedure (Article 611).

Page 142
WHAT FORMALITIES SHOULD THE CAPTAIN FOLLOW IF THE CAPTAIN

SHOULD CONTRACT ONE OR MORE OF THE OBLIGATIONS MENTIONED IN
SUBDIVISIONS 8 AND 9 OF ARTICLE 580?
If while on a voyage the captain should find it necessary to

contract one or more of the obligations mentioned in subdivisions 8
and 9 of Article 580, he shall apply to the judge or court if he is in
Philippine territory, and otherwise to the consul of the Republic of the
Philippines, should there be one, and, in his absence, to the judge or
court or proper local authority, presenting the certificate of the
registration sheet treated of in Article 612 and the instruments proving
the obligation contracted.
The judge or court, the consul, or the local authority, as the case
may be, in view of the result of the proceedings instituted, shall make
a temporary memorandum of their result in the certificate, in order
that it may be recorded in the registry when the vessel returns to the
port of its registry, or so that it can be admitted as a legal and
preferred obligation in case of sale before its return, by reason of the
sale of the vessel on account of a declaration of unseaworthiness.
The omission of this formality shall make the captain personally

liable for the credits prejudiced on his account (Article 583).
8. EFFECTS OF CONTRACT - ARTICLES 719, 729, 726, 727 AND 730
WHEN IS A LOAN CONSIDERED BOTTOMRY OR RESPONDENTIA?
A loan in which under any condition whatever, the repayment of

the sum loaned and of the premium stipulated depends upon the safe
arrival in port of the goods on which it is made, or of the price they
may receive in case of accident, shall be considered a loan on
bottomry or respondentia (Article 719).
WHAT ARE THE INSTANCES WHERE THE CONSTRACT IS CONSIDERED A

SIMPLE LOAN AND NOT A LOAN ON BOTTOMRY OR RESPONDENTIA?
Should the goods on which money is taken not be subjected to

risk, the contract shall be considered a simple loan, with the obligation
on the part of the borrower to return the principal and interest at the
legal rate, if that agreed upon should not be lower (Article 729).
WHAT IS THE CONSEQUENCE IF THE LENDER SHOULD PROVE THAT THE

AMOUNT OF THE LOAN IS LARGER THAN THE VALUE OF THE COLLATERAL?

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If the lender should prove that he loaned an amount larger than

the value of the object liable for the bottomry loan, on account of
fraudulent measures employed by the borrower, the loan shall be valid
only for the amount at which said object is appraised by experts.
The surplus principal shall be returned with legal interests for the
entire time required for repayment (Article 726).
WHAT
IS THE CONSEQUENCE IF THE FULL AMOUNT OF THE LOAN
CONTRACTED IS MORE THAN WHAT IS NECESSARY TO LOAD THE VESSEL?
If the full amount of the loan contracted in order to load the

vessel should not be used for the cargo, the balance shall be returned
before clearing.
The same procedure shall be observed with regard to the goods

taken as loan, if they were not loaded (Article 727).
WHAT IS THE ORDER OF PREFERENCE OF LOANS ON BOTTOMRY?
Loans made during the voyage shall have preference over those
made before the clearing of the vessel, and they shall be graduated in
the inverse order of their dates.
The loans for the last voyage shall have preference over prior
ones.
Should several loans have been made at the same port of arrival
under stress and for the same purpose, all of them shall be paid pro
rata (Article 730).
F. BILL OF LADING
1. CONTENTS - ARTICLES 706, 707, 713, 714
WHAT MUST A BILL OF LADING CONTAIN:
The captain of the vessel and the shipper shall have the
obligation of drawing up the bill of lading in which shall be stated:
1. The name, registry, and tonnage of the vessel.

2. The name of the captain and his domicile.
3. The port of loading and that of unloading.
4. The name of the shipper.

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5. The name of the consignee, if the bill of lading is issued in the

name of a specified person.
6. The quantity, quality, number of packages and marks of the
merchandise.
7. The freightage and the primage stipulated (Article 706).
TO WHOSE ORDER MAY A BILL OF LADING BE ISSUED?
The bill of lading may be issued:
1. To bearer,
2. to order,
3. or in the name of a specified person (Article 706).
WHAT IS THE OBLIGATION OF THE PERSON TO WHOSE ORDER THE BILL

OF LADING WAS ISSUED? WHAT IS THE RIGHT OF THE SHIPPER?
The person in whose name the bill of lading was issued must sign
the same within twenty-four hours after the cargo has been received
on board, the shipper being entitled to demand the unloading at the
expense of the captain should the latter not sign it, and, in every case,
the losses and damages suffered thereby (Article 706).
HOW MANY COPIES MUST THE BILL OF LADING BE MADE?
Four true copies of the original bill of lading shall be made, and
all of them shall be signed by the captain and the shipper. Of these,
the shipper shall keep one and send another to the consignee; the
captain shall take two, one for himself and another for the ship agent.
There may also be drawn up as many copies of the bill of lading

as may be considered necessary by the person interested; but when
they are issued to order or to bearer, they shall be stated in all the
copies, be they the first four or the subsequent ones, the destination of
each one, stating whether it is for the agent, for the captain, for the
shipper, or for the consignee. If the copy sent to the latter should have
a duplicate, this circumstance and the fact that it is not valid except in
default of the first one must be stated therein (Article 707).
WHAT IS THE OBLIGATION OF THE CAPTAIN IF BEFORE THE DELIVERY

OF THE CARGO A NEW BILL OF LADING IS DEMANDED BECAUSE OF LOSS OF
STHE PREVIOUS ONE? WHAT IS THE CONDITION OF THE ISSUANCE OF THE
NEW BILL OF LADING?
If before the delivery of the cargo a new bill of lading should be

demanded of the captain, on the allegation that the failure to present

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the previous ones is due to their loss or to any other just cause, he
shall be obliged to issue it, provided that security for the value of the
cargo is given to his satisfaction, but without changing the
consignment, and stating therein the circumstances prescribed in the
last paragraph of Article 707, under penalty, should he not so state, of
being held liable for said cargo if improperly delivered through his fault
(Article 713).
WHAT IS THE RIGHT OF THE SHIPPER IF BEFORE THE VESSEL IS PUT

TO SEA, THE CAPTAIN SHOULD DIE OR SHOULD CEASE TO HOLD HIS
POSITION?
If before the vessel puts to sea the captain should die or should
cease to hold his position through any cause, the shippers shall have
the right to demand of the new captain the ratification of the first bills
of lading, and the latter must do so, provided that all the copies
previously issued be presented or returned to him, and it should
appear from all examination of the cargo that they are correct (Article
714).
WHO BEARS THE EXPENSES ARISING FROM THE EXAMINATION OF THE

CARGO IN SUCH A CASE?
The expenses arising from the examination of the cargo shall be

defrayed by the ship agent, without prejudice to the right of action of
the latter against the first captain if he ceased to be such through his
own fault. Should said examination not be made, it shall be understood
that the new captain accepts the cargo as it appears from the bills of
lading issued (Article 714).
2. PROBATIVE VALUE - ARTICLES 709, 710
WHATIS THE PROBATIVE VALUE OF A BILL OF LADING DRAWN UP IN

ACCORDANCE WITH THE PROVISIONS OF THE CODE OF COMMERCE?
A bill of lading drawn up in accordance with the provisions of this

title shall be proof as between all those interested in the cargo and
between the latter and the insurers, proof to the contrary being
reserved for the latter (Article 709).
IN CASE THE BILLS OF LADINGS DO NOT AGREE, WHICH BILL OF

LADING SHALL BE UPHELD?
If the bills of lading do not agree, and no change or erasure can

be observed in any of them, those possessed by the shipper or
consignee signed by the captain shall be proof against the captain or

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ship agent in favor of the consignee or shipper; and those possessed

by the captain or ship agent signed by the shipper shall be proof
against the shipper or consignee in favor of the captain or ship agent
(Article 710).
G. PASSENGERS ON SEA VOYAGE
1. NATURE OF CONTRACT - ARTICLE 695
WHAT IS THE NATURE OF A CONTRACT OF RIGHT TO PASSAGE?
A contract of right to passage is personal in nature. Thus, the

Code of Commerce provides: The right to passage, if issued to a
specified person, may not be transferred without the consent of the
captain or of the consignee (Article 695).
2. OBLIGATIONS OF PASSENGER - ARTICLES 693, 699, 704,

694,700
HOW SHALL THE PASSAGE PRICE BE DETERMINED IF THE SAME HAS

NOT BEEN AGREED UPON?
If the passage price has not been agreed upon, the judge or
court shall summarily fix it, after a declaration of experts (Article 693).
WHAT IS THE RIGHT OF THE CAPTAIN IF THE CONSTRACT IS RESCNDED

BEFORE OR AFTER THE COMMENCEMENT OF THE VOYAGE?
If the contract is rescinded, before or after the commencement of

the voyage, the captain shall have a right to claim payment of what he
may have furnished the passengers (Article 699).
WHAT IS THE RIGHT OF THE CAPTAIN IN ORDER TO COLLECT THE
PASSAGE-MONEY AND EXPENSES OF SUSTENANCE?
The captain, in order to collect the passage-money and expenses

of sustenance, may retain the goods belonging to the passenger, and
in case of the sale of the same he shall be given preference over other
creditors acting the same way as in the collection of freightage (Article
704).
WHAT MUST THE CAPTAIN DO IF THE PASSENGER SHOULD NOT ARRIVE ON

BAORD AT THE FIXED TIME OR SHOULD LEAVE THE VESSEL WITHOUT
PERMISSION?
Should the passenger not arrive on board at the time fixed, or

should leave the vessel without permission from the captain when the

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latter is ready to leave the port, the captain may continue the voyage
and demand the full passage price (Article 694).
WHO SHALL HAVE THE POWER TO PRESERVE ORDER AND DISCIPLINE

ON BOARD THE VESSEL?
In all matters pertaining to the preservation of order and

discipline on board the vessel passengers shall be subject to the orders
of the captain, without any distinction whatsoever (Article 700).
3. RIGHTS OF PASSENGERS -ARTICLES 697, 698
WHAT ARE THE RIGHTS OF PASSENGERS IF THE VOYAGE IS NOT

COMPLETED?
1. If before the voyage is begun it is suspended through the

exclusive fault of the captain or ship agent, the passengers shall
have the right to a refund of their fares and to recover losses and
damages; but if the suspension is due to fortuitous events, or to
force majeure, or to any other cause independent of the captain
or ship agent, the passengers shall only be entitled to the return
of the fare (Article 697).
2. In case a voyage already begun should be interrupted, the
passengers shall be obliged to pay the fare in proportion to the
distance covered, without right to recover for losses and
damages if the interruption is due to fortuitous event or to force
majeure, but with a right to indemnity if the interruption should
have been caused by the captain exclusively. If the interruption
should be caused by the disability of the vessel, and a passenger
should agree to await the repairs, he may not be required to pay
any increased price of passage, but his living expenses during
the stay shall be for his own account (Article 698).
3. In case of delay in the departure of the vessel, the passengers
have the right to remain on board and to be furnished with food
for the account of the vessel unless the delay is due to fortuitous
events or to force majeure. If the delay should exceed ten days,
passengers requesting the same shall be entitled to the return of
the fare; and if it is due exclusively to the fault of the captain or
ship agent, they may also demand indemnity for losses and
damages (Article 698).
4. A vessel exclusively devoted to the transportation of passengers
must take them directly to the port or ports of destination, no
matter what the number of passengers may be, making all the
stops indicated in its itinerary (Article 698).

Page 148
4. RESPONSIBILITIES OF CAPTAIN - ARTS. 701, 702, 705,

612, 703; ARTICLE 1754, CIVIL CODE
WHAT ARE THE OBLIGATIONS OF THE CAPTAIN WITH REGARD TO THE

CONVENIENCE AND SUBSISTENCE OF PASSENGERS DURING VOYAGE?
1. The convenience or the interest of the passengers shall not

obligate or empower the captain to stand in shore or enter places
which may take the vessel out of her course, or to remain in the
ports he must or in under necessity of touching for a period
longer than that required by the needs of navigation (Article
701).
2. In the absence of an agreement to the contrary, it shall be
understood that the subsistence of the passengers during the
voyage is included in the price of the passage; but should it be
for the account of the latter, the captain shall be under
obligation, in case of necessity, to furnish the supply of food
necessary for their sustenance at a reasonable price (Article
702).
3. In case of the death of a passenger during the voyage, the
captain shall be authorized, with regard to the body, to take the
steps required by the circumstances, and shall carefully take care
of the papers and goods which may be on board belonging to the
passenger, observing the provisions of case No. 10 of Article 612
with regard to members of the crew (Article 705).
WHAT ARE THE INHERENT OBLIGATIONS IN THE OFFICE OF THE CAPTAIN?
The following obligations shall be inherent in the office of captain:
1. To have on board before starting on a voyage a detailed

inventory of the hull, engines, rigging, spare-masts, tackle, and
other equipment of the vessel; the royal or the navigation
certificate; the roll of the persons who make up the crew of the
vessel, and the contracts entered into with them; the lists of
passengers; the bill of health; the certificate of the registry
proving the ownership of the vessel and all the obligations which
encumber the same up to that date; the charter parties or
authenticated copies thereof; the invoices or manifests of the
cargo, and the memorandum of the visit or inspection by
experts, should it have been made at the port of departure.
2. To have a copy of this code on board.
3. To have three folioed and stamped books, placing at the
beginning of each one a memorandum of the number of folios it
contains, signed by the maritime authority, and in his absence by
the competent authority.

Page 149
4. Before receiving cargo, to make with the officers of the crew and
two experts, if required by the shippers and passengers, an
examination of the vessel, in order to ascertain whether it is
water-tight, with the rigging and engines in good condition, and
with the equipment required for good navigation, preserving
under his responsibility a certificate of the memorandum of his
inspection, signed by all those who may have taken part therein.
The experts shall be appointed, one by the captain of the vessel
and another by those who request its examination, and in case of
disagreement a third shall be appointed by the marine authority
of the port or by the authority, exercising his functions.
5. To remain constantly on board the vessel with the crew while the
cargo is being taken on board and to carefully watch the stowage
thereof; not to consent to the loading of any merchandise or
matter of a dangerous character, such as inflammable or
explosive substances, without the precautions which are
recommended for their packing, handling and isolation; not to
permit the carriage on deck of any cargo which by reason of its
arrangement, volume, or weight makes the work of the sailors
difficult, and which might endanger the safety of the vessel; and
if, on account of the nature of the merchandise, the special
character of the shipment, and principally the favorable season
in which it is undertaken, merchandise may be carried on deck,
he must hear the opinion of the officers of the vessel and have
the consent of the shippers and of the ship agent.
6. To demand a pilot at the expense of the vessel whenever
required by the navigation, and principally when he has to enter
a port, canal, or river, or has to take a roadstead or anchoring
place with which neither he nor the officers and crew are
acquainted.
7. To be on deck on reaching land and to take command on entering
and leaving ports, canals, roadsteads, and rivers, unless there is
a pilot on board discharging his duties. He shall not spend the
night away from the vessel except for serious causes or by
reason of official business.
8. To present himself, when making a port in distress, to the
maritime authority if in the Philippines and to the consul of the
Republic of the Philippines if in a foreign country, before twenty-
four hours have elapsed, and to make a statement of the name
registry, and port of departure of the vessel, of its cargo, and the
cause of arrival which declaration shall be visaed by the
authority or the consul, if after examining the same it is found to
be acceptable, giving the captain the proper certificate proving
his arrival in distress and the reasons therefor. In the absence of

Page 150
the maritime authority or of the consul, the declaration must be

made before the local authority.
9. To take the necessary steps before the competent authority in
order to record in the certificate of the vessel in the registry of
vessels the obligations which he may contract in accordance with
Article 583.
10. To place under good care and custody all the papers and
belongings of any members of the crew who might die on the
vessel, drawing up a detailed inventory, in the presence of
passengers, or, in their absence, of members of the crew as
witnesses.
11. To conduct himself according to the rules and precepts
contained in the instructions of the ship agent, being liable for all
that which he may do in violation thereof.
12. To inform the ship agent from the port at which the vessel
arrives, of the reason of his arrival, taking advantage of the
semaphore, telegraph, mail, etc., as the case may be; to notify
him of the cargo he may have received, stating the names and
domiciles of the shippers, freightage earned, and amounts
borrowed on bottomry loan; to advise him of his departure, and
of any operation and date which may be of interest to him.
13. To observe the rules with respect to situation, lights and
maneuvers in order to avoid collisions.
14. To remain on board, in case the vessel is in danger, until all
hope to save it is lost, and before abandoning it, to hear the
officers of the crew, abiding by the decision of the majority; and
if the boats are to be taken to, he shall take with him, before
anything else, the books and papers, and then the articles of
most value, being obliged to prove, in case of the loss of the
books and papers, that he did all he could to save them.
15. In case of wreck, to make the proper protest in due form at
the first port of arrival, before the competent authority or the
Philippine consul, within twenty-four hours, specifying therein all
the incidents of the wreck, in accordance with subdivision 8 of
this article.
16. To comply with the obligations imposed by the laws and
regulations on navigation, customs, health, and others (Article
612).
HOW IS A PASSENGER CONSIDERED INSOFAR AS THE GOODS HE

CARRIES ON BOARD ARE CONCERNED?
A passenger shall be considered a shipper insofar as the goods
he carries on board are concerned, and the captain shall not be
responsible for what the former may keep under his immediate and
special custody, unless the damage arises from an act of the captain or
of the crew (Article 703).

Page 151
WHAT RULES SHALL APPLY TO THE PASSENGERS BAGGAGE?
1. The provisions of Articles 1733 to 1753 shall apply to the

passengers baggage which is not under his custody or in
that of his employees. As to other baggage, the rules in
Articles 1998 and 2000 to 2003 concerning the
responsibility of hotel-keepers shall be applicable (Article
1754 Civil Code).
H. CARRIAGE OF GOODS BY SEA ACT (COMMONWEALTH ACT NO. 65;

PUBLIC ACT NO. 521, 74TH US CONGRESS)
WHAT IS THE PRINCIPAL PURPOSE OF THE CARRIAGE OF GOODS BY

SEA ACT?
The principal purpose of the COGSA is to bring about uniformity

to ocean bills of lading and to give effect to the Brussels Treaty
(Preamble, Commonwealth Act. No. 65).
WHAT CONTRACTS ARE COVERED BY THE COGSA?
COGSA is applicable to all contracts for the carriage of goods by

sea to and from Philippine ports in foreign trade (Section 1). COGSA
does not apply to purely domestic transport.
NOTES:
To know whether which law is applicable to a contract for the

carriage of goods by sea:
a. Distinguish whether the carrier is a common carrier or

private carrier;
b. Where the vessel is going:
1. From the Philippines to a foreign country: apply

laws of such foreign country (Article 1753, Civil
Code);
2. From a foreign country to the Philippines:
If common carrier:
- primarily governed by the Civil Code

- then COGSA if applicable (e.g., foreign trade)
- Code of Commerce

Page 152
If private carrier:
- COGSA more specific

- Code of Commerce
- Civil Code (provisions not dealing with
common carriers, e.g., torts, contracts)
IN WHAT SITUATIONS DOES COGSA PRIMARILY APPLY?
Where the parties expressly stipulate that COGSA shall govern

their respective rights and obligations.
CAN COGSA APPLY TO DOMESTIC TRADE?
Generally, no, unless the parties agree otherwise.
WHAT APPLICATION DOES COGSA HAVE IN CARRIAGE OF

PASSENGERS?
None, COGSA applies only to carriage of goods.
WHAT IS THE PRESCRIPTIVE PERIOD UNDER SECTION 3 (6)?
The carrier and the agent shall be discharged from liability, in

respect of loss or damage unless suit is brought within year from:
1. In case of damaged goods: From the time the delivery of the goods
was made.
2. In case of non-delivery (i.e., lost goods): From the date the goods
should have been delivered.
WHAT RULES GOVERN CASES OF MISDELIVERY OR CONVERSION?
The one-year prescriptive period in Section 3 (6) applies only

where there is loss or damage. Loss contemplates only where no
delivery at all was made by the carrier 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. Hence, in
case of misdelivery (delivery to wrong persons) or conversion of the
goods, the rules on prescription found in the Civil Code shall apply, that
is, 10 years for contracts; 4 years for tortious obligations.
IS THE PRESCRIPTIVE PERIOD UNDER THE COGSA INTERRUPTED
FROM THE TIME OF THE MAKING OF EXTRA-JUDICIAL DEMAND OR FILING OF
JUDICIAL ACTION AS PROVIDED BY ARTICLE 115 OF THE CIVIL CODE?

Page 153
No. The one-year period provided under the COGSA is a special

prescriptive period, uniform worldwide.
WHAT IS THE RATIONALE BEHIND THE 3-DAY NOTICE AND RELATIVELY

SHORT PERIOD OF PRESCRIPTION?
1. To provide the carrier an opportunity to look for the lost goods;

2. To discover who is at fault;
3. In case of transshipment, to determine, when and where the
damage occurred.
NOTES:
- The shipper, consignee or legal holder of a bill of lading may invoke

the prescriptive period although the proviso in Section 3 (6) gives
the impression that it is the shipper alone who can invoke the same.
- The prescriptive period does not apply to the action by an insurer as
subrogee of the consignee.
- Stipulation in a bill limiting the carriers liability contrary to Section
3 (8) is void, example: provision in the bill excepting the owner from
liability for loss or damage of cargo unless a written notice thereof
was given to the carrier within 30 days.
- Such provision is contrary to the provision of the COGSA since
Section 3 provides that even if a notice of loss or damage is not
given as required, that fact shall not prejudice the right of the
shipper to bring a suit within 1 year after delivery of the goods.
- Notice requirements:
COGSA: Section 3 (6) If loss or damage is apparent: protest

as soon as the goods are received.
If not apparent protest within 3 days after delivery.
Code of commerce: Article 366-

If apparent protest at the time of the delivery
If not apparent protest within 24 hours after
receipt
WARSAW: Article 26:

In case of damage of baggage protest within 3 days
from receipt
In case of damage of goods protest within 7 days
from receipt
In case of delay protest within 14 days from receipt.

Page 154
- Failure to comply with the 3-day notice requirement under the

COGSA does not affect the right of the ship owner to bring action
provided he brings the same within 1 year.
- This must be distinguished from the notice requirement in the
WARSAW Convention and Code of Commerce, where notice
requirement is a condition precedent for the right of action against
the ship owner to accrue.
- Amount recoverable in case of loss: $500.00 per package, even if
not stipulated.
- The plaintiff cannot dispute said limitation on the ground that it was
not freely and fairly agreed upon or that it is against public policy
because the law itself provides for said limitation; thus the same is
deemed read into their contract.
- Package here means individual packaging of the goods (does not
cover one container van.
- Parties may agree to an amount of liability less than &500.00 under
Section 4 (5). By providing that $500.00 is the maximum liability,
the law does not disallow an agreement for liability at a lesser
amount. Moreover, Article 1749 of the Civil Code expressly allows
the limitation of the carriers liability.
WHEN SHALL A SHIPPED BILL OF LADING BE ISSUED?
After the goods are loaded the bill of lading to be issued by the
carrier, master, or agent of the carrier to the shipper shall, if the
shipper so demands, be a "shipped" bill of lading Provided, That if the
shipper shall have previously taken up any document of title to such
goods, he shall surrender the same as against the issue of the
"shipped" bill of lading, but at the option of the carrier such document
of title may be noted at the port of shipment by the carrier, master, or
agent with name or name the names of the ship or ships upon which
the goods have been shipped and the date or dates of shipment, and
when so noted the same shall for the purpose of this section be
deemed to constitute a "shipped" bill of lading (No. 7, Section 3).
MAY THE CARRIER BE RELIEVED FROM LIABILITY FOR LOSS OR

DAMAGE CAUSED BY NEGLIGENCE, FAULT OR FAILURE IN THE FULFILLMENT OF
ITS DUTIES AND OBLIGATIONS?
Any clause, covenant, or agreement in a contract of carriage

relieving the carrier or the ship from liability for loss or damage to or in
connection with the goods, arising from negligence, fault, or failure in
the duties and obligations provided in this section, or lessening such
liability otherwise than as provided in this Act, shall be null and void
and of no effect. A benefit of insurance in favor of the carrier, or similar

Page 155
clause, shall be deemed to be a clause relieving the carrier from

liability (No. 8, Section 3).
RIGHTS AND IMMUNITIES:
FOR WHAT LOSSES AND DAMAGES ARE THE CARRIER AND THE SHIP
NOT LIABLE?
1. Neither the carrier nor the ship shall be liable for loss or damage
arising or resulting from unseaworthiness unless caused by want
of due diligence on the part of the carrier to make the ship
seaworthy, and to secure that the ship is properly manned,
equipped, and supplied, and to make to the holds, refrigerating
and cool chambers, and all other parts of the ship in which goods
are carried fit and safe for their reception, carriage, and
preservation in accordance with the provisions of paragraph (1)
of section 3. Whenever loss or damage has resulted from
unseaworthiness, the burden of proving the exercise of due
diligence shall be on the carrier or other persons claiming
exemption under the section.
2. Neither the carrier nor the ship shall be responsible for loss or
damage arising or resulting from
1. Act, neglect, or default of the master, mariner, pilot, or the

servants of the carrier in the navigation or in the
management of the ship;
2. Fire, unless caused by the actual fault or privity of the
carrier;
3. Perils, dangers, and accidents of the sea or other navigable
waters;
4. Act of God;
5. Act of war,
6. Act of public enemies;
7. Arrest or restraint of princes, rulers, or people, or seizure
under legal process;
8. Quarantine restrictions;
9. Act or omission of the shipper or owner of the goods, his
agent or representative;
10.Strikes or lockouts or stoppage or restraint of labor from
whatever cause, whether partial or general; Provided, That
nothing herein contained shall be construed to relieve a
carrier from responsibility for the carrier's own acts;
11.Riots and civil commotions;
12.Saving or attempting to save life or property at sea;

Page 156
13.Wastage in bulk or weight or any other loss or damage

arising from inherent defect, quality, or vice of the goods;
14.Insufficiency of packing;
15.Insufficiency of inadequacy of marks;
16.Latent defects not discoverable by due diligence; and
17.Any other cause arising without the actual fault and privity
of the carrier and without the fault or neglect of the agents
or servants of the carrier, but the burden of proof shall be
on the person claiming the benefit of this exception to
show that neither the actual fault or privity of the carrier
nor the fault or neglect of the agents or servants of the
carrier contributed to the loss or damage.
3. Any deviation in saving or attempting to save life or property at

sea, or any reasonable deviation shall not be deemed to be an
infringement or breach of this Act or of the contract of carriage,
and the carrier shall not be liable for any loss or damage
resulting therefrom: Provided, however, That if the deviation is
for the purpose of loading cargo or unloading cargo or
passengers it shall, prima facie, be regarded as unreasonable
(Section 4).
WHAT ARE THE LOSSES OR DAMAGES FOR WHICH THE SHIPPER SHALL
NOT BE LIABLE?
The shipper shall not be responsible for loss or damage sustained

by the carrier or the ship arising from any cause without the act, fault,
or neglect of the shipper, his agents, or servants (Section 4, No. 3).
WHAT IS THE LIMIT OF THE LIABILITY OF THE CARRIER OR THE SHIP

FOR THE LOSS OR DAMAGE TO THE GOODS TRANSPORTED?
Neither the carrier nor the ship shall in any event be or become
liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $600 per package
lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in
other currency, unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the bill of
lading. This declaration, if embodied in the bill of lading, shall be prima
facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the

carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That such

Page 157
maximum shall not be less than the figure above named. In no event
shall the carrier be liable for more than the amount of damage actually
sustained.
Neither the carrier nor the ship shall be responsible in any event
for loss or damage to or in connection with the transportation of the
goods if the nature or value thereof has been knowingly and
fraudulently misstated by the shipper in the bill of lading (Section 4,
No. 5).
WHAT MAY BE DONE TO GOODS OF INFLAMMABLE, EXPLOSIVE, OR

DANGEROUS NATURE IN CASE THE CARRIER, MASTER OR AGENT OF THE
CARRIER HAS NOT KNOWLINGLY CONSENTED TO THE CARRIAGE THEREOF?
Goods of an inflammable, explosive, or dangerous nature to the

shipment whereof the carrier, master or agent of the carrier, has not
consented with knowledge of their nature and character, may at any
time before discharge be landed at any place or destroyed or rendered
innocuous by the carrier without compensation, and the shipper of
such goods shall be liable for all damages and expenses directly or
indirectly arising out of or resulting from such shipment. If any such
goods shipped with such knowledge and consent shall become a
danger to the ship or cargo, they may in like manner be landed at any
place, or destroyed or rendered innocuous by the carrier without
liability on the part of the carrier except to general average, if any
(Section 4, No. 6).
SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE OF

RESPONSIBILITIES AND LIABILITIES:
MAY THE CARRIER SURRENDER ANY OF HIS RIGHTS AND IMMUNITIES

OR INCREASE HIS RESPONSIBILITIES?
A carrier shall be at liberty to surrender in whole or in part all or

any of his rights and immunities or to increase any of his
responsibilities and liabilities under this Act, provided such surrender or
increase shall be embodied in the bill of lading issued to the shipper.
The provisions of this Act shall not be applicable to charter

parties; but if bills of lading are issued in the case of a ship under
charter party, they shall comply with the terms of this Act. Nothing in
this Act shall be held to prevent the insertion in a bill of lading of any
lawful provision regarding general average (Section 5).
Note that what the law allows the carrier to do is to increase any
of his responsibilities but not to unilaterally diminish the same. He is

Page 158
also allowed to surrender any of his rights and immunities but not to
unilaterally increase his rights and immunities.
SPECIAL CONDITIONS:
WHILE THE CARRIER CANNOT UNILATERALLY DIMINISH HIS

RESPONSIBILITIES NOR INCREASE HIS RIGHTS AND IMMUNITIES, MAY THE
CARRIER AND THE SHIPPER AGREE ON THE TERMS OF RESPONSIBILITY AND
LIABILITY OF THE CARRIER AS WELL AS THE RIGHTS AND IMMUNITIES OF THE
CARRIER WITH RESPECT TO THE GOODS SHIPPED OR HIS OBLIGATION AS TO
SEAWORTHINESS?
Notwithstanding the provisions of the preceding sections, a

carrier, master or agent of the carrier, and a shipper shall, in regard to
any particular goods be at liberty to enter into any agreement in any
terms as to the responsibility and liability of the carrier for such goods,
and as to the rights and immunities of the carrier in respect of such
goods, or his obligation as to seaworthiness (so far as the stipulation
regarding seaworthiness is not contrary to public policy), or the care or
diligence of his servants or agents in regard to the loading, handling
stowage, carriage, custody, care, and discharge of the goods carried by
sea: Provided, That in this case no bill of lading has been or shall be
issued and that the terms agreed shall be embodied in a receipt which
shall be a non-negotiable document and shall be marked as such.
Any agreement so entered into shall have full legal effect:

Provided, That this section shall not apply to ordinary commercial
shipments made in the ordinary course of trade but only to other
shipments where the character or condition of the property to be
carried or the circumstances, terms, and conditions under which the
carriage is to be performed are such as reasonably to justify a special
agreement (Section 6).
MAY THE CARRIER AND THE SHIPPER STIPULATE ON THE

RESPONSIBILITY OF THE CARRIER PRIOR TO THE LOADING OF THE CARGO
AND SUBSEQUENT TO THE DISCHARGE THEREOF FROM THE SHIP?
Nothing contained in this Act shall prevent a carrier or a shipper

from entering into any agreement, stipulation, condition, reservation,
or exemption as to the responsibility and liability of the carrier or the
ship for the loss or damage to or in connection with the custody and
care and handling of goods prior to the loading on and subsequent to
the discharge from the ship on which the goods are carried by sea
(Section 7).

Page 159
DOES THE COGSA AFFECT THE RIGHTS AND OBLIGATIONS OF THE

CARRIER UNDER SPECIFIC LAW?
The provisions of this Act shall not affect the rights and
obligations of the carrier under the provisions of the Shipping Act,
1916, or under the provisions of section 4281 to 4289, inclusive, of the
Revised Statutes of the United States, or of any amendments thereto;
or under the provisions of any other enactment for the time being in
force relating to the limitation of the liability of the owners of seagoing
vessels (Section 8).
MAY THE COMMON CARRIER DISCRIMINATE BETWEEN COMPETITING

SHIPPERS?
Nothing contained in this Act shall be construed as permitting a

common carrier by water to discriminate between competing shippers
similarly place in time and circumstances, either (a) with respect to the
right to demand and receive bills of lading subject to the provisions of
this Act; or (b) when issuing such bills of lading, either in the surrender
of any of the carrier's rights and immunities or in the increase of any of
the carrier's responsibilities and liabilities pursuant to section 6, title I,
of this Act or (c) in any other way prohibited by the Shipping Act, 1916,
s amended (Section 9).
WHEN IS THE WEIGHT STATED IN THE BILL OF LADING NOT A PRIMA

FACIE EVIDENCE OF ITS ACCURACY AGAINST THE CARRIER NOR DEEMED TO
BE GUARANTEED BY THE SHIPPER?
Where under the customs of any trade the weight of any bulk
cargo inserted in the bill of lading is a weight ascertained or accepted
by a third party other than the carrier or the shipper, and the fact that
the weight is so ascertained or accepted is stated in the bill of lading,
then, notwithstanding any thing in this Act, the bill of lading shall not
be deemed to be prima facie evidence against the carrier of the receipt
of goods of the weight so inserted in the bill of lading, and the
accuracy thereof at the time of shipment shall not be deemed to have
been guaranteed by the shipper (Section 11).
TO WHAT CONTRACTS SHALL THE COGSA NOT APPLY?
This Act shall apply to all contracts for carriage of goods by sea
to or from ports of the United States in foreign trade. As used in this
Act the term "United States" includes its districts, territories, and
possessions: Provided, however, That the Philippine legislature may by
law exclude its application to transportation to or from ports of the
Philippine Islands. The term "foreign trade" means the transportation of

Page 160
goods between the ports of the United States and ports of foreign
countries. Nothing in this Act shall be held to apply to contracts for
carriage of goods by sea between any port of the United States or its
possessions, and any other port of the United States or its possession:
Provided, however, That any bill of lading or similar document of title
which is evidence of a contract for the carriage of goods by sea
between such ports, containing an express statement that it shall be
subject to the provisions of this Act, shall be subjected hereto as fully
as if subject hereto as fully as if subject hereto by the express
provisions of this Act: Provided, further, That every bill of lading or
similar document of title which is evidence of a contract for the
carriage of goods by sea from ports of the United States, in foreign
trade, shall contain a statement that it shall have effect subject to the
provisions of this Act (section 13).
WHEN MAY THE PROVISIONS OF COGSA BE SUSPENDED?
Upon the certification of the Secretary of Commerce that the

foreign commerce of the United States in its competition with that of
foreign nations is prejudiced the provisions, or any of them, of Title I of
this Act, or by the laws of any foreign country or countries relating to
the carriage of goods by sea, the President of the United States, may,
from time to time, by proclamation, suspend any or all provisions of
Title I of this Act for such periods of time or indefinitely as may be
designated in the proclamation. The President may at any time rescind
such suspension of Title I hereof, and any provisions thereof which may
have been suspended shall thereby be reinstated and again apply to
contracts thereafter made for the carriage of goods by sea. Any
proclamation of suspension or rescission of any such suspension shall
take effect on a date named therein, which date shall be not less than
ten days from the issue of the proclamation.
Any contract for the carriage of goods by sea, subject to the provisions
of this Act, effective during any period when title I hereof, or any part
thereof, is suspended, shall be subject to all provisions of law now or
hereafter applicable to that part of Title I which may have thus been
suspended (Section 14).
OTHERS TERMS:
1. WHAT IS BARRATRY?
These are destructive acts committed by the crew against

the vessel.

Page 161
2. HOW DO YOU DISTINGUISH BARRATRY FROM MUTINY?
Mutiny is the act committed by the crew against the

captain for the purpose of taking over the command of the
vessel, while barratry is committed not for the purpose of taking
over the command of the vessel.
3. WHAT IS A LOOKOUT?
It is a member of the crew who is assigned to serve as a

lookout, that is, to watch the direction where the vessel is
heading for and to observe the oncoming vessels for the
guidance of the ship navigator.
4. WHAT IS TRANSSHIPMENT?
In maritime law, transshipment is defined as the act of
taking cargo out of one ship and loading it in another, or the
transfer of goods from one 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.
There is transshipment even if the two vessels belong to

the same owner.
-o00o-

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NOTES ON TRANSPORTATION

WHAT IS PUBLIC UTILITY?

Public utility is a business or service engaged in supplying the

As its name indicates, the term public utility implies a public

WHAT ARE THE CONSTITUTIONAL LIMITATIONS ON PUBLIC UTILITIES?

a. Public utilities - No franchise, certificate, or any other form

a) Citizens of the Philippines; or

b) Corporations or associations organized under the

The participation of foreign investors in the governing body of

b. Mass Media Mass media and commercial

c. Government Take-Over of Public Utilities In times of

d. Operation of Vital Industries The State may, in the

e. Prohibition Against Monopolies The State shall regulate or

WHAT IS THE BASIS FOR THE STATE REGULATION OF PUBLIC

WHAT IS THE EXTENT OF THE POWER TO REGULATE PUBLIC UTILITIES?

1. A rightful exercise of police power in the regulation and

By: Kathryn Pineda Dela Serna

2. The right to regulate a public utility under the police power

1) The right to regulate rates and charges;

MAY A 100% FOREIGN CORPORATION OWN A PUBLIC UTILITY?

The Supreme Court, when confronted with the issue of whether

In law, there is a clear distinction between the operation of a

WHAT IS PUBLIC SERVICE?

It includes every person who may own, operate, manage, or

By: Kathryn Pineda Dela Serna

without fixed route and whatever may be its classifications, engaged in

It includes railroad, street railway, traction railway, subway motor

WHAT IS THE EXTENT OF USE OR SERVICE INVOLVED?

The number of people actually served does not determine

The principal distinguishing characteristic is its readiness to

By: Kathryn Pineda Dela Serna

WHAT IS THE PURPOSE OF THE PUBLIC SERVICE LAW?

1. To secure adequate, sustained service for the public at the least

WHAT IS THE DIFFERENCE BETWEEN A PUBLIC UTILITY AND A PUBLIC

To all practical intent and purposes, there is no difference and the

WHICH IS BROADER, PUBLIC SERVICE OR PUBLIC UTILITY?

Public utility is a broader concept than public service. Public

If one is a public utility, then it is subject to the limitations and

MAY A PUBLIC UTILITY NOT BE A PUBLIC SERVICE?

Yes, as it may not be part of the enumeration in the Public

WHEN IS A PUBLIC UTILITY A PUBLIC UTILITY?

Go back to the definition of a public utility when it is regularly

By: Kathryn Pineda Dela Serna

A IS THEOWNER OF A TRACTOR, WHICH HE USES IN CULTIVATING HIS

IS A PUBLIC MARKET INCLUDED AMONG THE PUBLIC SERVICE

While a public Market is a public service or utility, it is not one

It is the carriage of goods or persons from one point to another.

WHAT IS A CONTRACT OF TRANSPORTATION?

A contract of transportation is one whereby a certain person or

WHAT IS THE NATURE OF TRANSPORTATION?

By: Kathryn Pineda Dela Serna

public may enjoy it by right or only by permission. There must be, in

WHAT ARE EXEMPTED FROM THE PROVISIONS OF THE PUBLIC SERVICE

The following are exempted from the provisions of the Section

WHAT IS REQUIRED TO THOSE ENGAGED IN PUBLIC SERVICE?

With the exception of those enumerated in Section 14, no public

The Commission may prescribe as a condition for the issuance of

By: Kathryn Pineda Dela Serna

The foregoing is likewise applicable to any extension or

WHAT ENTITIES ENGAGED IN PUBLIC SERVICE ARE NOT REQUIRED TO

The following are exempted from obtaining a certificate of public

1. Public service owned or operated by government entities or