Concept of General Average in Maritime Commerce

Topics
1. Introduction
2. Definition
3. Requisites
4. Expenses, by whom borne
5. Examples

1. Introduction
Long before the existence of maritime insurance, general average has been used as an ancient form of spreading
risk in the sea transport.[1] General average is said to date from the Rhodian Law of approximately 800 B.C.,
which stipulated that if a ship was in danger and cargo was jettisoned to save the ship, then the ship and the
remaining cargo were required to make a contribution to the owner of the lost cargo.[2] What remains of the
Rhodian law is found in Roman law, which in turn was adopted in the Rles of Olron and all the subsequent sea
codes until the present day.
General average is still a sui generis subject. It likewise relevant to contracts of carriage of goods by sea, and the
damages resulting therefrom are insurable. Under Philippine law, the provisions on general averages are
contained in the Code of Commerce.

2. Definition
General averages refer to 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.[3]
The Code classifies averages into simple or particular and general or gross. In contrast to general averages, simple
or particular averages refer to all expenses and damages caused to the vessel or cargo which have not inured to
the common benefit,[4] which are, therefore, borne only by the owner of the property giving rise to same.[5] They
are not for the common benefit, and are therefore not borne by the owners of the articles saved. The distinction is
better appreciated by looking into the requisites of general average.
3. Requisites
According to Tolentino, the following are the requisites for general average:[6]

First, there must be a common danger. This means, 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; that the danger
arises from the accidents of the sea, dispositions of the authority, or faults of men, provided that the circumstances
producing the peril should be ascertained and imminent or may rationally be said to be certain and imminent.
This last requirement excludes measures undertaken against a distant peril.

Second, that for the common safety part of the vessel or of the cargo or both is sacrificed deliberately. As a general
rule, sacrifice is made through the jettison of the cargo or part of the ship is thrown overboard during the voyage.
Exceptions are: (a) where the sinking of a vessel is necessary to extinguish a fire in a port, roadsteads, creek or bay;
and (b) where cargo is transferred to lighten the ship on account of a storm to facilitate entry into a port.[7]

Third, that from the expenses or damages caused follows the successful saving of the vessel and cargo.

Fourth, that the expenses or damages should have been incurred or inflicted after taking proper legal steps and
authority.[8] The procedure for recovery includes: (a) assembly and deliberation; (b) resolution of the captain; (c)
 entry of the resolution in the logbook; (d) detailed minutes; (e) delivery of the minutes to the maritime judicial
authority of the first port, within 24 hours from arrival; and (f) ratification of the captain under oath.
4. Expenses; by whom borne
Under the Code of Commerce, all the persons having an interest in the vessel and the cargo therein at the time of
the occurrence of the average shall contribute to satisfy this average.[9] The insurers[10] and the lenders on
bottomry and respondentia shall likewise contribute.[11] Several interests are involved and their share of expense
or damage shall be in proportion to the value of the owners property saved.

It must however be pointed out that a claimant (ship or cargo) is not entitled to obtain contribution from the other
parties even if there is common danger when he or his employees are at fault, or negligent in law.
5. Examples
A. Magsaysay Inc. v. Anastacio Agan, G.R. No. L-6393 (January 31, 1955)
Facts: The S S San Antonio vessel (plaintiff) with general cargo for different ship owners left Manila and was
bound for Basco, Batanes, vis Aparri, Cagayan. It reached Aparri, had a stopover, and as it would proceed to Basco
but still in port, it accidentally ran aground at the mouth of the Cagayan River. Plaintiff have it refloated by the
Luzon Stevedoring Co.. The vessel returned to Manila to refuel and then proceeded to Basco, where the cargoes
were delivered to their respective owners or consignees, who, with the exception of defendant, made a deposit or
signed a bond to answer for their contribution to the average. Thus, the plaintiff brought an action to make
defendant pay his contribution. Defendant denies liability. The lower court decided against the defendant, thus the
appeal.
Issue: Whether the expenses incurred in floating a vessel so stranded should be considered general average and
shared by the cargo owners.
Held: The expenses should not be considered as general average.

The said expenses do not fit into any of the specific cases of general average enumerated in article 811. No. 6 of this
article does mention expenses caused in order to float a vessel, but it specifically refers to a vessel intentionally
stranded for the purpose of saving it. In the present case, the stranding was not intentional.

The expenses also lack the requisites of general average. First, the expenses sought to be recovered from defendant
were not incurred to save vessel and cargo from a common danger. The vessel ran aground in fine weather inside
the port at the mouth of a river, a place described as very shallow. There was no imminent danger. It is, of
course, conceivable that, if left indefinitely at the mercy of the elements, they would run the risk of being
destroyed. But as stated at the above quotation, this last requirement excludes measures undertaken against a
distant peril. What does appear from the testimony of plaintiffs manager is that the vessel had to be salvaged in
order to enable it to proceed to its port of destination. But as was said in the case just cited it is the safety of the
property, and not of the voyage, which constitutes the true foundation of the general average. Second, the cargo
could, without need of expensive salvage operation, have been unloaded by the owners if they had been required to
do so. Third, the sacrifice was for the benefit of the vessel and not for the purpose of saving the cargo, the cargo
owners are not in law bound to contribute to the expenses. And fourth, the procedure was not followed.
1. Philippine Home Assurance Corp. v. CA and Eastern Shipping Lines, Inc.
Facts: Eastern Shipping Lines, Inc (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, shipment for
carriage to Manila and Cebu, freight pre-paid and in good order and condition. While the vessel was off Okinawa,
Japan, a small flame was detected on the acetylene cylinder located in the accommodation area near the engine
room on the main deck. The acetylene cylinder exploded sending flame throughout the accommodation area, thus
causing death and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel.
The ship was abandoned by the master and the crew.

The vessel was towed by Fukuda Salvage Co. to the port of Naha, Japan. The fire was eventually extinguished at
the said port and the cargoes which were saved were loaded to another vessel for delivery to their original ports of
destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges,
which were paid by Philippine Home Assurance Corp (PHAC)under protest for and in behalf of the consignees.
PHAC filed an action for recovery of sum paid. The trial court ruled in favor of ESLI which was affirm on appeal by
the CA.

Issue: Whether or not the expenses incurred in saving the cargo are considered general average.
Held: There was no general average.

The goods subject of the controversy were neither lost nor damaged in transit by the fire that razed the carrier.
Thus the issue is who among the carrier, consignee or insurer is liable for the additional charges or expenses
incurred by the owner of the ship in the salvage operations and in the transshipment of the goods via a different
carrier.

Moreover, fire is not considered a natural disaster or calamity since it almost always arises from some act of man
or by human means. It cannot be an act of God unless caused by lightning.

General averages include all damages and expenses which are deliberately caused in order to save the vessel, its
cargo, or both at the same time, from real and known risk. The formalities prescribed under the law were not
complied with. ESLI must return to PHAC the amount paid under protest in behalf of the consignees.