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NOTES ON TRANSPORTATION

KATHRYN PINEDA DELA SERNA

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
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)

1SECTION 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 capital, and all the executive and managing officers of such corporation or association must be
citizens of the Philippines.
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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.

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 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
By: Kathryn Pineda Dela Serna
Page 3
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.

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.

2Any 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 THE OWNER 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 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?

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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 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?

CPC CPCN
It is issued by the PSC to a public service which It is any authorization to operate a public
any political subdivision has granted a service issued by the PSC
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 of a public It is an authorization issued by the
service for which a franchise is required by Commission for the operation of a public
law. service for which no franchise, either municipal

3Any 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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or legislative is required by law.
It is issued whenever the Commission finds It is issued upon approval of any franchise or
that the operation of the proposed public privilege granted by any political subdivision
service will promote the public interests in a of the Philippines when in the judgment of the
proper and suitable manner, for which a Commission, such franchise or privilege will
municipal or legislative franchise is not properly conserve the public interest. (Section
necessary. (Section 16 [a]) 16 [b])

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?
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.

By: Kathryn Pineda Dela Serna


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WHAT ARE THE REQUISITES FOR THE GRANT OF CERTIFICATE?

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.

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:


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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
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])
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:

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Page 9
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 U TILITY IS CONSIDERED UNLAWFUL?

a. To provide or maintain any service that is unsafe, improper, or inadequate, or withhold or refuse any
service which can 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])

II. COMMON CARRIERS 4

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?

4 Unless otherwise indicated, reference is to the Civil Code.

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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).

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).
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
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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 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

Discussion:

a. Culpa contractual

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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.

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;
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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?

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.

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?

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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.

IS THE 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 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;
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?

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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;
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.

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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?)

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, 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?

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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 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? W HAT 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?

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?

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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 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 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
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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).

TO HOLD 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 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.

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).

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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).

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).

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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).

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

IN AN 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).

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).

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Page 22
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).

IN FIXING 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 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).
By: Kathryn Pineda Dela Serna
Page 23

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.

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;


By: Kathryn Pineda Dela Serna
Page 24
(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

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

By: Kathryn Pineda Dela Serna


Page 25
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;
(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, 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?

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Page 26

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

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.

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Page 27
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.

IS THE 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 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?

Common carrier is necessarily commercial falls under (2) because it is habitually engaged in transportation for
public.

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Page 28
(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?

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.

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Page 29
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 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.

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?

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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)?

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)?

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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)?

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 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.)

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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)?

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 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)
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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 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.

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.
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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?

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.

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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?

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 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.
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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, 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.

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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 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).
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4. Significance of Registration of Transactions Affecting Vessels

WHAT IS THE SIGNIFICANCE OF REGISTERING TRANSACTIONS AFFECTING VESSELS?

The significance of registration are:

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 A GENTS - 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

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

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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 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.
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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.

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.
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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 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.

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;

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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 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
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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 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 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,
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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).

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, 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]);
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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.

DOES THE 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 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?

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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.
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).

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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?

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, 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.

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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 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 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?

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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.

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.

WHEN IS 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.

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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).

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?

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?

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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, 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.

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
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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).

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).

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WHAT ARE THE GROUNDS FOR WHICH A SAILOR MAY BE DISCHARGED BY THE CAPTAIN?

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, 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.
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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?

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.

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
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Page 55
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 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 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?
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Page 56

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).

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

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1. AVERAGES

(a) Nature and Kinds - Articles 806 to 808

WHAT ARE CONSIDERED AS AVERAGES?

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:

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.
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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 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.
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.

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(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).

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
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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.

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.

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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 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:


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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.

(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:

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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 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?

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
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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 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

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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.

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.

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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 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

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?

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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 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.
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3. INSCRUTABLE:

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:

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)

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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, 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)

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).
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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 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 unable to protect and secure (Erlanger & Galinger vs. Swedish East Asiatic Co., Ltd., 34,
Phil. 178 [1916]).

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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).

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?

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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);
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 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).
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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?

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

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
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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 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.

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


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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 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.

IS A 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?
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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 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 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:
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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 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?

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).

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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?

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.
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.

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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.
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).

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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 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?

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.

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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.
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.

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.

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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.

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?

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.
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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.
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 L OAN - 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?

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.
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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.
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?

Loans may be made in goods and in merchandise, fixing their value in order to determine the principal of the
loan (Article 723).
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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

WHO SHALL 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.

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.
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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).

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?

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.

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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.
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

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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 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

WHAT IS 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 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 V OYAGE

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?

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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 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).

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?

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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.
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 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.

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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).

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:

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- primarily governed by the Civil Code
- then COGSA if applicable (e.g., foreign trade)
- Code of Commerce

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?

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.
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- 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.

- 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 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
By: Kathryn Pineda Dela Serna
Page 95
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;
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 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.
By: Kathryn Pineda Dela Serna
Page 96

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 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?

By: Kathryn Pineda Dela Serna


Page 97
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).

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 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.

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Page 98
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.

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-

By: Kathryn Pineda Dela Serna