L.A. Batch Unitas Personae - No.

543/FabianCPA 

TEST FOR A COMMON CARRIER

TRANSPORTATION LAW REVIEWER
1) Engaged in the business of carrying goods for others
Based on Atty. Valencia’s lectures,
as a public employment, must hold himself out as
(from San Beda Notes, Sevilla Notes, Sigma Notes, the book
ready to engage in the transportation of goods or
of Agbayani, and Japet Notes)
persons generally as a business and not as a casual
occupation
I. DEFINITIONS 2) Undertake to carry goods of the kind to which his
business is confined
3) Undertake to carry by the methods by which his
TRANSPORTATION
business is conducted and over his established roads
- One whereby a certain person or association of person
4) The transportation must be for hire
obligate themselves to transport persons, things, or news
from one place to another for a fixed price
TRUE TEST
- Whether the given undertaking is a part of the business
SHIPPER/CONSIGNOR
engaged in by the carrier which he has held out to the
- One who gives rise to the contract of transportation by
general public as his occupation rather than the quantity
agreeing to deliver the things or news to be transported,
or extent of the business actually transacted or the number
or to present his own person or those of others in the case
or character of the conveyances
of transportation of passengers

CHARACTERISTICS OF COMMON CARRIERS

CONSIGNEE
1) Undertakes to carry for all people indifferently
- Party to whom the carrier is to deliver the things
2) Cannot lawfully decline to accept a particular class of
transported
goods for carriage to the prejudice of the traffic of
those goods
FREIGHT
 Can decline: if there‟s sufficient reason for
1) Price of carriage
discrimination
2) Goods carried
3) No monopoly is favored
4) Public convenience
COMMON CARRIERS
- One that holds itself out as ready to engage in the
General Rule
transportation of goods for hire as a public employment
Law prohibit unreasonable discrimination – it must be the
and not as a casual occupation
same price or charge for a like or contemporaneous
service in the transportation of like kind of traffic under
PRIVATE CARRIERS
substantially similar conditions
- Those who transport or undertake to transport in a
particular instance for hire or reward
Exception
1) When the actual cost of handling and transporting is
COMMON CARRIER PRIVATE CARRIER different
Holds himself out to all Agrees in some special case 2) When the shipper exercises greater care in
persons who choose to with some private individual preparing the same for shipment (cheaper rate)
employ him as ready to carry to carry for hire
for hire Cases:
Bound to carry for all who Not bound to carry for any 1) Merchandise of like quantity may not be considered alike
offer such goods as it is reason unless it enters a (Ex: if one is without wrapper and the other is neatly
accustomed to carry and special agreement to do so packed)
tender payment 2) Shipments may be alike although composed of different
Subject to regulation Not subject to regulation classes of merchandise
Extraordinary diligence Ordinary diligence
Cannot limit liability by Can limit liability by
stipulation stipulation JUSTIFIABLE REFUSAL
1) Suitability of the vessels for the transportation of the
Cases: products
1) Person offering transportation on occasional periodic 2) Reasonable possibility of danger or disaster,
basis, unscheduled and even if it is not his principal resulting from their transportation in the form and
occupation, is a common carrier because he charged for a condition in which they are offered for carriage
fee. Article 1732 gives no distinction 3) General nature of the business done by carrier
2) Notwithstanding that carrier has no certificate of public 4) All attendant circumstances
convenience, it is still a common carrier who is liable

NOTES NOTES Page 1 PARA BRIGHT

 L.A. Batch Unitas Personae - No. 543/FabianCPA 
Cases:
1) Mere fact that explosives are transported, does not in itself
justify the refusal of a vessel, if ti can be proven that the
explosives are offered in a condition rendering it without
real danger to carrier
COMMON CARRIERS SUBJECT TO LEGISLATIVE
REGULATION
- Just and reasonable regulation
1) Must not have the effect of depriving an owner of his
property without due process of law
2) Nor confiscation without just compensation
3) Nor limiting or prescribing irrevocably vested right or
privileges lawfully under a charter of franchise
GOVERNING LAWS
By Land – Civil Code (Art. 1732-1766)
By Sea – if place of destination is Philippines
a) Civil Code
b) Code of commerce
c) Special Law (COGSA and Salvage Act)
- if place of destination is a Foreign country
a) the law of the said country will govern
b) COGSA
By Air – if Domestic travel
a) Civil Code
- If International travel
a) Warsaw Convention
 NB: the Civil Code contains no provision regulating
liability of ship-owner or agents in the event o total loss or
destruction of vessels, therefore, the Code of Commerce
governs (Art. 587)
Cases:
1) Laws of the Philippines will apply to collision in carriage of
goods by sea to Philippines, even if collision occurred in
foreign waters, If the destination of the carriage is the
Philippines
2) COGSA applicable up to final port of destination
3) Registered owner primarily and solidarily liable with
driver, under the “Kabit System”, even if the vehicle had
already been sold, leased, or transferred to another
person who was actually operation the vehicle
 Remedy of registered owner: Right to be indemnified
by actual owner through a 3rd party complaint or a
cross-claim
4) But registered owner‟s common-law wife who is not
registered co-owner is not liable
5) Both owner of record and the actual operation should be
adjudged jointly and severally liable with the driver
NOTES NOTES Page 2 PARA BRIGHT
ARTICLE 1732. 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.
VIGILANCE OVER GOODS
ARTICLE 1733. 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.
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.
SCOPE OF RESPONSIBILITY
General Rule
Lasts from the time the cargoes are loaded in the vessels
until they are discharged and delivered to the consignees
Exception
If common carrier acts as a private carrier, as when it
charters its vessel totally for use of a single party or a
special person only, it is exempt from exercising
extraordinary diligence
KABIT SYSTEM
- Whereby a person who has been granted a certificate of
public convenience allow other persons who own motor
vehicles to operate them under such license, for a fee or
percentage earnings.
- Void and inexistent but not a criminal offense.
ARTICLE 1734. 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:
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in
the containers;
(5) Order or act of competent public authority.
(6) Defense of exercise of extraordinary diligence*
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
ARTICLE 1735. In all cases other than those mentioned in Nos.
1, 2, 3, 4, and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required
in article 1733.
RESULT: to carrier
1) Breach of contract
2) Culpa contractual (not culpa aquiliana)
PRESUMPTION OF NEGLIGENCE
- The burden of plaintiff is to prove that the goods he
transported have been lose, destroyed, or deteriorated.
Burden is shifted to carrier to prove exercise of
extraordinary diligence.
- The mere proof of delivery of goods in good order to a
carrier and of their arrival at the place of destination in
bad order is a prima facie case against the carrier.
Cases:
1) It is meet and proper that carrier should be afforded the
right of having a wide discretion in the selection and
supervision of persons who will handle the goods
2) Air carrier can terminate services of pilot for serious
misconduct and drunkenness, because of its duty of
extraordinary diligence
3) The placing of conditions in a bill of lading does not
relieve the vessels of obligation to take appropriate care
of the cargo
4) Carrier should not accept goods unless it can be given the
type of storage its character requires
5) If the fact of improper packaging is known to the carrier or
his servants, or apparent upon ordinary observation, but it
accepts the goods notwithstanding, it is not relieved of
liability for loss or injury resulting therefrom
REQUISITES FOR DEFENSE OF NATURAL DISASTER
1) Must have been the proximate and only cause of the loss
2) The Common Carrier must exercise due diligence to
prevent of minimize the loss before, during and after the
occurrence of the flood, storm, or other natural disaster
3) Common Carrier must not incur delay
EFFECT OF DELAY
- A natural disaster shall not free carrier from responsibility
- But mere delay to transport the goods, or a refusal to
transport them, does not necessarily render the Common
Carrier liable for damages if the goods get lost by an act
of God. It is necessary that the Common Carrier was guilty
of a willful or negligent act and the shipper acted without
negligence
- If act of shipper‟s negligence intervened between delay or
refusal and loss of goods due to act of God, the act of god
is the proximate cause and carriers cause merely a remote
cause. Shipper not entitled to set up claim of contributory
negligence.
NOTES NOTES Page 3 PARA BRIGHT
Cases:
1) NOT CASO FORTUITO: accidents due to defects of carrier
a) Unexpected breakage
b) Defects in the automobile
c) Negligence of driver
d) Unseaworthiness
e) Lack o spare parts
f) Deficiency of incompetence of manpower
g) Defective breaks
h) Tire blow out –negligence of driver and carrier
i) Fire – because it arises invariably from some act of
man or by human means.
 Act of God- if caused by lightning/natural cause
DAMAGE DUE TO DEFECT OF GOODS
- As long as damage to the goods was due purely to the
inherent nature or defect of the goods or of the containers
thereof, the carrier cannot be held responsible
DILIGENCE IN SELECTION OF EMPLOYEES
- Cannot be used as a defense by Common Carriers, the
liability arising from breach of contract of carriage
- Can be used if negligence in quasi-delicts such as the
responsibility of owners and managers of establishments
LIABILIITY OF EMPLOYEE TO SHIPPER
- The shipper must sue the steamship and cannot maintain
an action on the contract made between the steamship and
the contracting party who undertakes to remove the
freight
ARTICLE 1736. 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 1737. The common carrier‟s 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.
ARTICLE 1738. 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.
DEMMURAGE
- A charge for the carriers compensation for additional
services due to the delay of shipper to unload the goods
and for the lost earnings of the carrier for the unnecessary
delay in the use of the vessels
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
STOPPAGE IN TRANSITU
- 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
- Exercised: when buyer becomes INSOLVENT
- Result: The extraordinary responsibility of Common
Carrier CEASES, the carrier holds the goods as an
ORDINARY BAILEE or WAREHOUSEMAN and is liable only
as such, no longer Extraordinary Diligence but merely
“Such care in regard to them as a reasonably careful
owner of similar goods would exercise”
ARTICLE 1739. In order that the common carrier may be
exempted from responsibility, the natural disaster must have
been the proximate and only cause of the loss. However, the
common carrier must exercise due diligence to prevent or
minimize loss before, during and after the occurrence of flood,
storm or other natural disaster in order that the common carrier
may be exempted from liability for the loss, destruction, or
deterioration of the goods. The same duty is incumbent upon
the common carrier in case of an act of the public enemy
referred to in article 1734, No. 2.
ARTICLE 1740. If the common carrier negligently incurs in
delay in transporting the goods, a natural disaster shall not free
such carrier from responsibility.
ARTICLE 1741. 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.
ARTICLE 1742. 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 1743. If through the order of public authority the
goods are seized or destroyed, the common carrier is not
responsible, provided said public authority had power to issue
the order.
IF ORDER OF PUBLIC AUTHORITY
- Common Carrier is not responsible provided public
authority had POWER to issue the order.
ARTICLE 1744. 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:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the
service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
NOTES NOTES Page 4 PARA BRIGHT
VALID STIPULATION
 Limitation of liability of Common Carrier to an agreed
value
 If only a PRIVATE CARRIER
1) An agreement limiting the Common Carriers liability for
delay on account of strikes and riots
2) A stipulation that Common Carriers liability is limited to
the value of the goods appearing on the Bill of Lading
unless shipper declares a greater value
 The INSURER who pays the insured on his claim for
damage is merely SUBROGATED to the rights of the
insured, insurer can‟t collect from carrier more than
what the insured can collect form carrier.
CAN’T USE STIPULATION
1) If Common Carrier delays the transportation of goods
without just cause
2) If Common Carrier changes the stipulated or usual route
without just cause
AGREEMENT MAY BE ANNULLED
- By the shipper or owner if the Common Carrier refused to
carry the goods
ARTICLE 1745. Any of the following or similar stipulations
shall be considered unreasonable, unjust and contrary to
public policy:
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence
in the custody of the goods;
(4) 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;
(5) That the common carrier shall not be responsible for the
acts or omission of his or its employees;
(6) That the common carrier‟s 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;
(7) 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 1746. An agreement limiting the common carrier‟s
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.
 L.A. Batch Unitas Personae - No. 543/FabianCPA 

ARTICLE 1747. If the common carrier, without just cause, LIABLE NOT LIABLE
delays the transportation of the goods or changes the stipulated
or usual route, the contract limiting the common carrier‟s If caused by the carriers If due to acts of the
liability cannot be availed of in case of the loss, destruction, or servants or employees passengers, his family,
deterioration of the goods. servants or visitors
If act of thief or robbers If caused by robbers with
without grave and irresistible grave and irresistible force or
ARTICLE 1748. An agreement limiting the common carrier‟s
force or use of arms use of arms
liability for delay on account of strikes or riots is valid.
If arises from character of the
baggage
ARTICLE 1749. A stipulation that the common carrier‟s liability
is limited to the value of the goods appearing in the bill of  NB: Common Carrier cannot limit liability by posting
lading, unless the shipper or owner declares a greater value, is notices, stipulation, statements in tickets, or otherwise
binding.

ARTICLE 1750. A contract fixing the sum that may be

recovered by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just SAFETY OF PASSENGERS
under the circumstances, and has been fairly and freely agreed
upon.

ARTICLE 1751. 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
carrier‟s liability is reasonable, just and in consonance with
public policy.
ARTICLE 1752. 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 1753. 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.
ARTICLE 1755. 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 1756. 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.
EXTRAORDINARY DILIGENCE IN THE SAFETY OF
1) Passengers
2) Members of the crew
3) Complement operating the carrier

ARTICLE 1754. The provisions of articles 1733 to 1753 shall
apply to the passenger‟s baggage which is not in his personal
custody or in that of his employee. As to other baggage, the
rules in articles 1998 and 2000 to 2003 concerning the
responsibility of hotel-keepers shall be applicable.
CLASSES OF BAGGAGE
1) Baggage in custody of passengers or their employees
 NECESSARY DEPOSIT = ORDINARY DILIGENCE
Liable if:
a) Notice was given to them or their employees
b) Passengers take the precaution which said
Common Carrier or their substitutes advised
2) Baggage in the custody of the carrier
 EXTRAORDINARY DILIGENCE – even if not declared
and even if charges are not paid
STILL LIABLE
- Notwithstanding that he exercise all the diligence of a
good father of a family in the selection and supervision of
his employees.
ARTICLE 1757. 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 1758. When a passenger is carried gratuitously, a
stipulation limiting the common carrier‟s liability for
negligence is valid, but not for willful acts or gross negligence.
The reduction of fare does not justify any limitation of the
common carrier‟s liability.
Cases:
1) Carrier not ordinarily liable for injuries of passengers due
to fires or explosions caused by articles brought into
conveyance by other passengers

NOTES NOTES Page 5 PARA BRIGHT

 L.A. Batch Unitas Personae - No. 543/FabianCPA 
ARTICLE 1759. Common carriers are liable for the death of or
injuries to passengers through the negligence or willful 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.
 Reason: violates contractual obligation
COMMON CARRIER EXEMPT
1. If personal violence or personal grudge
2. If not done in line of duty or never in a position to
represent the employer
 NB: The liability of the Common Carrier extends only to
those acts that the carrier could foresee or avoid through
the exercise of the degree of diligence required of it
WHEN RELATIONSHIP TERMINATES
- The relationship of carrier and passenger does not cease
at the moment the passenger alights form the carrier‟s
vehicle, but continues until the passenger has had
reasonable time to leave the carriers premises.
ARTICLE 1760. 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 1761. The passenger must observe the diligence of a
good father of a family to avoid injury to himself.
ARTICLE 1762. 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 1763. A common carrier is responsible for injuries
suffered by a passenger on account of the willful 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.
 Meaning: A Common Carrier is RESPONSIBLE FOR
INJURIES suffered by a passenger on account of the
WILLFUL 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. If
the injury of the passenger could not have been avoided
by the exercise of ordinary diligence of the part of the
employees of the Common Carrier, the Common Carrier
is not liable.
NOTES NOTES Page 6 PARA BRIGHT
WARSAW CONVENTION
“Convention for the Unification of Certain Rules Relating to
International Carriage by Air”
I. HISTORY
- Binding to the Philippines because the Warsaw
Convention is a treaty commitment voluntarily entered
and assumed by the Philippines government and as such,
has the force and effect of law in this country
- Warsaw Convention was signed in Warsaw, Poland and
took effect on February 13, 1933. The Convention was
concurred to by the SENATE through RESOLUTION No. 19
on May 16, 1950. The Philippine instrument of ACCESSION
was signed by President Quirino on October 13, 1950 and
was DEPOSITED with the Polish government on November
9, 1950. The Convention became binding to the
Philippines on February 9, 1951. On September 23, 1955,
President Magsaysay issued PROCLAMATION No. 201,
declaring our formal adherence thereto.
II. APPLICABILITY
- To all INTERNATIONAL TRANSPORTATION of persons,
luggage or goods performed by aircraft for reward and
applies equally to gratuitous carriage by aircraft.
III. “INTERNATIONAL”
- Whether the transportation is “international” is
determined by the CONTRACT of the parties. In the case
of passengers, it is the TICKET.
IV. TWO CATEGORIES OF INTERNATIONAL
TRANSPORTATION
1. That where the place of departure and the place of
destination are situated within the territories of two High
Contracting Parties regardless of whether or not there be
a break in the transportation or a transshipment; and
2. That where the place of departure and the place of
destination are within the territory of a single High
Contracting Party if there is an agreed stopping place
within a territory subject to the sovereignty, mandate or
authority of another power, even though the power is not a
party to the Convention.
ARTICLE 28. An action for damages must be brought, at the
option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the Court having jurisdiction
where the carrier is ordinarily resident, or has his principal
place of business, or has an establishment by which the
contract has been made or before the Court having jurisdiction
at the place of destination.
 L.A. Batch Unitas Personae - No. 543/FabianCPA 

WHERE ACTION FOR DAMAGES MUST BE BROUGHT

a) Domicile of the carrier
b) Principal place of business of the carrier
c) Place of business through which the contract has
been made
d) Place of destination

ARTICLE 29. The right to damages shall be extinguished if an

action is not brought within two years, reckoned from the date
of arrival at the destination, or from the date on which the
aircraft ought to have arrived, or from the date on which the
carriage stopped.

ARTICLE 25. The carrier shall not be entitled to avail

himself of the provisions of this Convention which exclude
or limit his liability, if the damage is caused by his willful
misconduct or by such default on his part as, in accordance
with the law of the Court seized of the case, is considered to be
equivalent to willful misconduct.

Similarly the carrier shall not be entitled to avail himself of the

said provisions, if the damage is caused as aforesaid by any
agent of the carrier acting within the scope of his employment.

NOT ENTITLED TO AVAIL OF PROVISIONS

1) If damage caused by his willful misconduct
2) If damage caused by any agent of the carrier acting
within the scope of his employment
3) If does not fall under the Warsaw Convention

LIMITATION ON LIABILITY
- $ 500 per container, unless a higher value of the goods is
declared.

REBUS SIC STANTIBUS

- A vital change in the condition of the contracting parties
that they could not have foreseen at the time the treaty was
concluded
- The doctrine does not operate automatically to render the
treaty inoperative. There is a necessity for a FOMAL ACT
OF REJECITON, usually made by the HEAD OF THE
STATE, with a statement of the reasons why compliance
with the treaty is no longer required.

HIGH CONTRACTING PARTY

- It is a state whose ratification of or adherence to the
convention has become effective and whose denunciation
thereof has not become effective.
- Signatory of the Warsaw Convention, adhering and
abiding to its provisions.

NOTES NOTES Page 7 PARA BRIGHT

 L.A. Batch Unitas Personae - No. 543/FabianCPA 
DAMAGES RECOVERABLE FROM COMMON CARRIERS
Damages, as defined in the case of People vs. Ballesteros, is the
“pecuniary compensation, recompense, or satisfaction for an
injury sustained, or as otherwise expressed, the pecuniary
consequences which the law imposes for the breach of some
duty or violation of some rights.”
The Old Code provided only for limited general principles for
awarding damages, thus the New Civil Code supplemented
other provisions as to the award of damages. In the New Civil
Code, the extent of recovery is expressly provided for in
Article 2201 of the Civil Code,
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.
Thus, applying the said provision, a carrier in good faith shall
only be liable for damages natural and probable from the
breach of obligation. If then a carrier is in bad faith, he shall be
liable to all damages arising from the breach of obligation.
Thus, in such cases, the right of recourse of the employer to the
employee who committed the negligent, willful or fraudulent
act is available in both cases, whether the carrier is in good
faith or in bad faith.
ART 1764. 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.
ART 2197. Damages may be:
(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated; or
(6) Exemplary or corrective.
NOTES NOTES Page 8 PARA BRIGHT
Actual or Compensatory Damages
ART 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.
ART 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)
ART 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)
ART 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.
ART 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.
ART 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.
ART 2206. The amount of damages for death caused by a
crime or quasi-delict shall be at least three thousand pesos
(from P3,000 to P50,000 + additional as court decides), 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.
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
ACTUAL DAMAGES
IN BREACH OF CONTRACT OF CARRIAGE
If the Common Carrier is in:
1. GOOD Faith – it shall be responsible for:
a. The NATURAL and PROBABLE consequences of the
breach of the obligations; AND
b. Damages which the parties FORESAW or COULD
HAVE FORESEEN
2. BAD Faith – it shall be responsible for:
a. ALL damages which may be REASONABLY
ATTRIBUTED to the non-performance of the
obligation (relation of cause and effect is enough)
[Article 2201]
 Damages do not only consist of actual damages but also of
compensatory damages, loss of earning capacity
2 TYPES OF COMPENSATORY DAMAGES:
a. “Dano Emergente”/Damnum Emergente
- actual loss suffered composed of destruction or loss
of the thing, fines and penalties that have to be paid,
medical and hospitalization expenses in case of
injury, rent, agricultural product, hotel rental (if you
are bumped off and you have to stay in a hotel), food,
- what a person already possesses
- In Dano Emergente, an object for instance that a
person already possesses shall be the actual damage
that it may be recover from the party who breached
the contract. In case of a motor vehicle accident, the
actual damage to the car, and if there be any medical
expense incurred by the injured party will form part
of the actual damages he may recompense from the
injurer.
b. “Lucro Cesante” / Lucrum Cessans
- unrealized profits; profits that could have been
earned had there been no interruption of the
business and evidenced by the receipts of the
enterprise; profits because of a proposed future
resale of the property being purchased; interest on
rentals that were not paid; loss of earning capacity
- the failure to receive as benefit what would have
been pertained to him.
- In the case of Lucro Cesante however, it may arise if
the injured party in this case, failed to work for days
due to his injury thus, the actual damage is the benefit
he could have appropriated if this breach did not
arise.
Medical expenses also form part of the actual damages. A
claimant, not the injured party, but has spent his resources for
the medical expenses of his relative, or son may recover actual
damages from the party who breached the obligation. Even in
case of death, the claimant, not the injured party, may assert for
actual damages for the funeral expenses he incurred from the
NOTES NOTES Page 9 PARA BRIGHT
party who breached. However, any expenses relating to 40
days, or death anniversaries shall not be recoverable as
damages. Moreover, in case of death, as provided for in
Article 2206, the fixed indemnity with the exclusion of all other
recoverable damages shall be Php 50,000.
FACTORS FOR DAMAGES ARISING FROM DEATH
1) The number of years on the basis of which the damages
shall be computed (based on American Expectancy Table
of Mortality)
2) The rate at which the losses sustained should be fixed
The damages does not consist of the full amount of his earnings,
but only of the support the dependents and intestate heirs
received or would have received from him had he not died.
The award for damages for death is computed on the basis fo
the LIFE EXPECTANCY of the DECEASED, not of his
beneficiary. Only NET EARNINGS not gross earnings should be
considered.
Net earnings = total earnings – (expenses necessary
+ living and other incidental expenses)
Therefore, Actual Damages also cover Loss of Earning
Capacity on the basis of the following formula:
Net Earning Capacity= Life Expectancy x (Gross
Annual Income less Necessary Living Expenses)
As ruled by the Supreme Court, the Net Earning Capacity
should be derived from the gross income of the victim minus
the necessary and incidental living expenses of the victim if he
were alive. Moreover, the Living expenses should be derived
from the individual‟s net earning, 50% of the gross income in
the absence of proof of the amount of living expenses to be
deducted from the gross income. ( People vs. Arnel Mataro G.R.
No. 130378 and Metro Manila Transit vs. CA G.R. Nos. 116617)
 The income that the injured person could earn should he
finish his course may be recovered as damages.
 In an action based on breach of contract of carriage, CC is
not liable for moral damages, where the injured
passenger DOES NOT DIE, Moral damages are not
recoverable UNLESS it is proved that the carrier was
guilty of malice or bad faith on the part of the carrier.
FEATURES OF ACTUAL DAMAGES
1) They pertain to such injuries or losses that are actually
sustained and susceptible of measurement
2) Damages cannot be presumed – to be recoverable, they
must be pleaded and proven in court; in no instance may a
judge award more than those so pleaded and proven
3) Speculative damages cannot be awarded
4) The award thereof must be based on the evidence
presented, not on the personal knowledge of the court;
and certainly not on flimsy, remote, speculative and non-
substantial proof
 L.A. Batch Unitas Personae - No. 543/FabianCPA 

ITEMS INCLUDED IN ACTUAL DAMAGES DAMAGES RECOVERABLE FROM DEATH DUE TO

1) The sum being carried by the deceased passenger which COMMISSION OF CRIME
was lost, loss of merchandise carried, and loss of baggage
containing personal belongings 4) Indemnity for death (P50,000)
2) Funeral expense 5) Indemnity for loss of earning capacity of deceased
3) Attorney‟s fees and expenses of litigation 6) Moral damages
7) Exemplary damages
- The court has discretion to adopt a measure of 8) Attorney‟s fees and expenses of litigation
depreciation in determining the CC‟s liability for loss of 9) Interest in proper cases
goods. The court may adopt a general fair measure of the
total depreciation of articles at the time of the loss.
ATTORNEYS FEES
Q: If the value of the car is P 1M, can the court order the carrier
to pay P 1M based only on speculation or on the mere assertion Attorney fees may generally be granted as Actual Damages
of the plaintiff that the car is worth P 1M? however, this may only be permitted if it falls under the
circumstances provided for in Article 2208 of the Civil Code;
A: No. These are actual damages and susceptible of
measurement. Even if the car is indeed worth P 1M, for the ART. 2208: In the absence of stipulation, attorney‟s fees and
court to award P 1M in damages, it must be pleaded. The expenses of litigation, other than judicial costs, cannot be
plaintiff must ask for it in court and pray for P 1M in actual recovered, except:
damages AND prove it. How does he prove it? By means of the
receipt – it is a brand new car. I just bought it and on the same c. When exemplary damages are awarded;
day, I shipped it from Davao to Manila, as the case maybe. The d. When the defendant‟s act or omission has compelled the
court cannot say – “I actually bought a new car the other day. It plaintiff to litigate with third persons or to incur expenses
is exactly the same model but of a different color. So, I know to protect his interest;
that it is worth P 1M. So, I will just award P 1M.” That is not e. In criminal cases of malicious prosecution against the
allowed because it has to be proven. plaintiff;
f. In case of a clearly unfounded civil action or proceeding
FONTANILLA vs. CA against the plaintiff;
FACTS: A movie reel was sent through PAL to be used in a g. Where the defendant acted in gross and evident bad faith
town fiesta. It was supposed to be shown in a town fiesta and in refusing to satisfy the plaintiff‟s plainly valid, just and
charge people who will watch the movie. The plane was demandable claim;
delayed. So, the movie arrived after the fiesta. They were not h. In actions for legal support;
i. In actions for the recovery of wages of household helpers,
able to show the movie. They were not able to earn profit from
laborers and skilled workers,
showing the movie.
ISSUE: Can PAL be held liable for loss of profits caused by j. In actions for indemnity under workmen‟s compensation
and employer‟s liability laws;
the fact that the movie was not shown during the town fiesta
k. In a separate civil action to recover civil liability arising
HELD: If PAL was in good faith and was not told of the from a crime,
l. When at least double judicial costs are awarded;
purpose of the movie, then, PAL cannot be held liable for loss
m. In any other case where the court deems it just and
of profits since the damage was not perceived. If a carrier is in
equitable that attorney‟s fees and expenses of litigation
good faith, the carrier can only be held liable for damages
should be recovered.
which the parties foresaw or could have perceived. However,
In all cases, the attorney‟s fees and expenses of litigation must
if PAL was told of the purpose, then, it can now be held liable
be reasonable.
for loss profits because the damage is within the purview or
could be reasonably perceived. However, if PAL was in bad
faith (any kind of bad faith), it does not matter whether it knew
of the purpose of the movie reel. It could be held liable in INTEREST RATES
anyway.
The Supreme Court laid down the rules on the application of
interests and interest rates in the case of Eastern Shipping Lines
IN CRIMES AND QUASI-DELICTS:
vs. Court of Appeals, as to the application of the proper
1. The common carrier shall be liable for ALL damages
interest rates: 1) When the obligation, regardless of its source,
which are the natural and probable consequences of the
law, contracts, quasi-contracts, delicts or quasi-delicts is
act or omission complained of
breached, the contravenor can be held liable for damages, 2)
2. It is not necessary that such damages have been foreseen
If the award of interest in the concept of actual and
or could have reasonably been foreseen by the common
compensatory damages, the rate of interest as well as the
carrier (Article 2202)
accrual thereof, is imposed as follows;

• Similar to bad faith under breach of contract

Page
NOTES NOTES 10 PARA BRIGHT
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
a.) when the obligation is breached, and it is consists in the
payment of sum of money, a loan or forbearance of money,
the interest due should be stipulated in writing furthermore,
the interest due shall itself earn legal interest from the time it is
judicially demanded. In the absence of stipulation, the rate of
12% interest per annum to be computed from default shall be
then subject to the provisions of Article 1169 of the Civil Code.
b.) When an obligation does not constitute a loan or
forbearance of money is breached, an interest on the amount
of damages awarded may be imposed upon the discretion of
the court at the rate of 6% per annum. The interest shall begin
to run only from the date when the claim is judicially or
extrajudicially made, but when certainty cannot be
established, it shall begin to run from the date the judgment of
the court was made.
c.) When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or 2 above, shall be
12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then equivalent to a
forbearance of credit.
Moral Damages
ART 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: (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.
ART 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.
ART 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of
the defendant's wrongful act for omission.
ART 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.
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NOTES NOTES
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.
ART 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.
MORAL DAMAGES
Moral Damages is not imposed upon the defendant to enrich
the injured party but to compensate for the damage he had
done. In order to protect as well the interest of the defendant,
the law provided situations as to only when can moral damages
be recovered under Therefore, as a general rule, no moral
damages may be awarded where the breach of contract is not
malicious however if the contractual negligence is malicious
and is considered gross negligence, the court may rule that
moral damages may be awarded.
FACTORS FOR AWARD OF MORAL DAMAGES
In several cases ruled by the Supreme Court, there are several
factors that should be considered as to the award of moral
damages namely;
1) the extent of humiliation,
2) extent of pain and suffering,
3) official, professional, political, social and financial
standing of the offended party and the
4) age of the claimant
5) business and financial position of the offender
In addition, the law formerly provides that corporations cannot
be awarded of moral damages as it is a juridical person and has
no feelings to be besmirched or humiliated however, in a later
Supreme Court ruling it then ruled that if the corporation then
has a good reputation, and suffered financial downgrade, and
then it may be awarded of moral damages.
MORAL DAMAGES INCLUDE
1. Physical suffering
2. Mental anguish
3. Fright
4. Serious anxiety
5. Besmirched reputation
6. Wounded feelings
7. Moral shock
8. Social humiliation, and
9. Similar injury
11 PARA BRIGHT
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
IN BREACH OF CONTRACT OF CARRIAGE
1. General Rule – Moral damages are NOT recoverable in
damage actions predicated on a breach of contract of
carriage
2. Exceptions – moral damages may be awarded when:
a. the mishap results in DEATH of the passenger
b. it is proven that the carrier is guilty of FRAUD or BAD
FAITH, even if death does not result (Article 2201)
c. where the passenger suffered SOCIAL HUMILIATION,
WOUNDED FEELINGS, SERIOUS ANXIETY and
MENTAL ANGUISH.
PAL vs. CA, MEJIA (March 14, 1996)
FACTS: This is the case about the microwave oven. She
suffered serious anxiety and sleepless nights because of the
damage to her microwave oven.
ISSUE: Is Mejia entitled to moral damages? Should the court
award moral damages to Mejia?
HELD: The SC said YES. The unexplained cause of damage
to Mejia‟s cargo constitutes gross carelessness or negligence
which by itself justifies the present award of damages. The
equally unexplained and inordinate delay in acting on the
claim upon referral thereof to the claims officer is an indication
of bad faith. The unprofessional indifference of PAL‟s
personnel despite full and actual knowledge of the damage to
Mejia‟s cargo smacks of willful misconduct and insensitivity to a
passenger‟s plight tantamount to bad faith and renders
unquestionable PAL‟s liability for damages. And not only that.
The act of the check-in officer in San Francisco in misleading
her and telling her that she does not have to declare a higher
value and pay a higher rate for freight amounts to bad faith.
Therefore, the passenger is entitled to moral damages.
Bad Faith - Breach of a known duty through some motive of
interest or ill will
Mere carelessness of the carrier, absent bad faith, does not per
se constitute to justify an inference of malice or bad faith on its
part.
Bad faith justifying award for moral damages would 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 both defendants.
Example: The violation of rules and regulations of the Public
Service Commission prohibiting transfer of public vehicles
without approval is not considered bad faith justifying award of
moral damages.
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NOTES NOTES
CATHAY PACIFIC vs. VASQUEZ
FACTS: The passengers were upgraded instead of being
downgraded. They sued Cathay Pacific for breach of contract.
ISSUE: Was there a breach?
HELD: YES, there was a breach because there was no
consent on the part of the passengers when they were
upgraded to first class. Their ticket said business class and that
was the commitment of Cathay Pacific to them.
ISSUE: Are the passengers, spouses Vasquez, entitled to
moral damages?
HELD: NO, they are not entitled to moral damages. The
allegation of the Vasquez spouses that they were treated
shabbily in Hong Kong was not proven. Bad faith does not
simply connote bad judgment or negligence; it imports a
dishonest purpose or some moral obliquity and conscious
doing of a wrong, a breach of a known duty through some
motive or interest or ill will that partakes of the nature of fraud.
SINGAPORE AIRLINES vs. ANDION
FACTS: Andion Fernandez is a soprano based in Germany
and she was invited to sing before the King and Queen of
Malaysia on February 3 and 4, 1991. she was based in
Frankfurt. She took the flight from Frankfurt to Singapore on
January 27. She had a connecting flight from Singapore to
Manila. She was supposed to go home to Manila before
proceeding to Malaysia to get her costume and to pick up her
voice coach. The flight to Singapore from Frankfurt was
delayed. And therefore, when they arrived in Singapore, the
Singapore flight to Manila has already departed and left
earlier. So, she was not able to get on the flight. And she was
informed that there were no more flights to Manila. She asked
that if there was an alternative route. They said that she could
go to Hong Kong but she has to pay. She did not have any
money. What happened was she was not able to go to back to
Manila and she had to go straight to Malaysia. And her
performance before the King and Queen of Malaysia was below
par. Because of the rude and unkind treatment she received
from the Singapore Airline‟s personnel, she was engulfed with
fear, anxiety, humiliation and embarrassment causing her to
suffer mental fatigue and skin rashes. She was compelled to
seek immediate medical attention upon her return to Manila for
“acute urticaria.” Definitely, there was breach because she was
not able to take the flight from Singapore to Manila.
ISSUE: What is she entitled to? Is she entitled to moral
damages?
HELD: YES, Singapore Airlines acted in bad faith. It did not
accord Fernandez the attention and treatment allegedly
warranted under the circumstances. The staff was unkind and
of no help to her. They were rude to her when they curtly
retorted that they were busy attending to other passengers in
line.
12 PARA BRIGHT
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
Situation: Passenger on an airplane. Fasten seat belt sign is on.
Your seat belt is not on. There is an air pocket. Your head hit
the ceiling and you are injured. If there is no bad faith on the
part of the airline, there is no award of moral damages.
WHEN MORAL DAMAGES MAY BE RECOVERED
1. A criminal offense resulting in physical injuries
2. Quasi-delicts causing physical injuries
 While the carrier cannot be held to answer for moral
damages for breach of contract of carriage if there is no
death, the CC can be held SUBSIDIARILY LIABLE for such
damages in actions ex-delicto or for action is based upon
its liability arising from a crime.
 With respect to other causes of actions however, if your
cause of action is culpa criminal and there is injury, any
kind of injury, then, moral damages may be awarded
under Article 2219
 If the cause of action is culpa aquiliana and there is injury,
then, moral damages may be awarded.
 No need for death
General Rule
Appellate court should not interfere with lower court‟s
determination of moral damages.
Exception
If the awarded moral damages are palpably and
scandalously excessive “so as to indicate that it was the
result of passion, prejudice, or corruption” on the part of
the trial court.
Nominal, temperate, liquidated damages
ART 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.
ART 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 cannot,
from the nature of the case, be provided with certainty.
ART 2225: Temperate damages must be reasonable under
the circumstances.
ART 2226. Liquidated damages are those agreed upon
by the parties to a contract, to be paid in case of breach
thereof.
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NOTES NOTES
NOMINAL DAMAGES
NOMINAL DAMAGES ARE ADJUDICATED
2. In order that a right of the passenger, shipper or
consignee, which has been violated or invaded by the
common carrier, may be vindicated or recognized, and
3. Not for the purpose of indemnifying the passenger,
shipper or consignee for any loss suffered by him (Article
2221)
Nominal Damages are only awarded in the absence of proof of
actual damages. As laid in the case of Japan Airlines vs. Court of
Appeals, JAL failed to transport some tourists despite of their
contract of carriage to the said tourists, however, the court
finds JAL not guilty of negligence as the reason why they could
not transport was due to extraordinary circumstance, such as
the eruption of Mt. Pinatubo, then however, nominal damages
was still granted to the petitioners, as JAL could have made
necessary arrangements to the next available flight to secure
their passengers, and to redeem their contractual obligation
towards the tourists/petitioners of this case.
1. Nominal Damages stand alone
a. There can be NO longer be an award for nominal
damages IF there already has been an award for
actual, moral, temperate, liquidated and exemplary
damages
b. An award of nominal damages precludes the award
of actual, moral, temperate, liquidated and
exemplary damages
2. When the act of the common carrier did not amount to
fraud, malice or bad faith, moral damages cannot be
awarded. However, if there was an invasion of the
plaintiff‟s right, nominal damages may be awarded.
• Nominal damages are awarded if there are no other damages
that can be awarded.
ALITALIA vs. IAC
FACTS: Dr. Pablo was invited to speak in one of the cities in
Italy. So, she took an Alitalia flight from Manila to Rome and a
connecting flight from Rome to that city in Italy. It was all-
expense paid. But when she arrived in Rome, she realized that
her luggage did not arrive with her. She asked Alitalia for
luggage. She was not able to take the flight to that place where
she was supposed to give a talk because she did not have her
powerpoint, equipment, etc. She just went back to the
Philippines. She did not spend a single centavo from her own
pocket. When she got back to Manila, she sued Alitalia. Her
luggage arrived 11 months later, intact. She did not lose
anything since everything was there.
ISSUE: Can she be awarded actual damages?
HELD: NO, because she was paid for the cost even if she did
not talk. She cannot be paid for loss of earnings or
compensatory damages.
13 PARA BRIGHT
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
ISSUE: Was it proven that there was bad faith?
HELD: NO, in this case, there was no bad faith. There was
just negligence on the part of the airline.
ISSUE: What could be given to her? What could be awarded
to her? Was there a right violated? Was there a breach?
HELD: YES, there was a right violated. YES, there was a
breach. The SC said that you could not award anything else but
nominal damages.
JAPAN AIRLINES vs. ASUNCION
FACTS: During the explosion of Mt. Pinatubo, there was this
flight that came from US via Narita. They were supposed to fly
to Manila. However, on the day that they were supposed to go
back to Manila, Mt. Pinatubo exploded. And so, they were
accommodated for a few days. But after a few days, Japan
Airlines cannot accommodate them anymore and it was not
their fault because there was a fortuitous event. And when the
airport in Manila opened, these passengers wanted to take the
first flight out but they could not because their status was
changed from booked to wait-listed. They had to stay at Narita.
They sued Japan Airlines for breach of contract.
HELD: Only nominal damages were awarded to the
passengers, not for the hotel accommodations because of the
fortuitous event but since there were some right violated
because in a sense that their status as booked passengers was
not upheld by the airline. That was the ground for awarding
nominal damages.
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 cannot, from the nature of the case, be
provided with certainty (Article 2224)
Example: Loss of business credit, loss of goodwill.
LIQUIDATED DAMAGES
Liquidated Damages are those agreed upon by the parties and
stipulated in the contract to be paid in case of breach. The law
does not impose of any liquidated damages, except however, if
the court finds that the liquidated damages are unconscionable.
 If there is an agreement in the contract that this is how
much you will pay, there is no need to discuss or prove
anything.
 Best example: Bill of Lading (e.g. P 500 per kilo unless
you declare a higher value and payment of a higher
amount).
 The parties are limited to that amount – COGSA and
Warsaw Convention. These laws give the carrier the right
Page
NOTES NOTES
to stipulate how much they are going to pay in case of
breach
• The car that was lost because the ship sank because there was
a typhoon and the ship was unseaworthy. It was the fault of the
carrier. The car was proven to be worth P 1M. But in the Bill of
Lading, it was stated that the carrier will only be liable for P 500
per kilo unless a higher value is declared and there is payment
of a higher amount.
Q: What should the carrier pay? P 1M or P 500 per kilo?
A: P 500 per kilo. There is no need to prove the value of the car
because this is agreed upon already by the parties in case of
breach.
Exemplary Damages
ART 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.
ART 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.
ART 2233. Exemplary damages cannot be recovered as a
matter of right; the court will decide whether or not they
should be adjudicated.
EXEMPLARY OR CORRECTIVE DAMAGES
Exemplary or Corrective Damages are only addition to
compensatory damages. In case for instance of contracts and
quasi-contracts, if the defendant acted in a wanton, fraudlent,
reckless, oppressive or malevolent manner, then the award of
Exemplary or Corrective Damages may be imposed.
REQUISITES FOR AWARD OF EXEMPLARY DAMAGES
In the case of Philippine National Bank vs. CA, the court laid the
requisites for the award of exemplary damages;
1) they may be imposed by way of example in addition to
compensatory damages, and only after the right to them
has been established,
2) they cannot be recovered as a matter of right, their
determination depending upon the amount of
compensatory damages that may be awarded to the
claimant;
3) the act must be accompanied by bad faith or done in
wanton, fraudlent, oppressive or malevolent manner.
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• Unlike nominal damages which stand alone, exemplary
damages cannot stand alone. They have to be added to moral,
temperate, liquidated or compensatory damages.
1. Exemplary Damages can ONLY be granted in ADDITION
to:
a. moral damages
b. temperate damages
c. liquidated damages, or
d. actual or compensatory damages
2. If exemplary damages are granted, nominal damages
CANNOT BE awarded
WHEN EXEMPLARY DAMAGES MAY BE RECOVERED
1. In Criminal Offenses – if the crime was committed with
one or more aggravating circumstances (Article 2230)
2. In Quasi-Delicts – if the common carrier acted with gross
negligence (Article 2231)
3. In Contracts and Quasi-contracts – if the common carrier
acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner (Article 2232)
 Different causes of actions, different grounds for awarding
exemplary damages
 CC cannot be held liable for exemplary damages for act of
employee where it did not have anything to do with the
wrongful act or had not previously authorized or
subsequently ratified such act.
CRITERION FOR DETERMINING MORAL AND
EXEMPLARY DAMAGES
- Neither the social standing nor prestige of the passenger
determine the extent to which he would suffer because of
the wrong done. Propriety of damage award is judged by
their fairness considering all circumstance.
BAD FAITH
AIR FRANCE vs. CARRASCOSO
HELD: The passenger was downgraded and insulted by the
manager of Air France. He was told that another passenger
deserved the seat better than him.
ZULUETA vs. PAN AM
HELD: The aircraft landed in Wake island. The passenger had
to pee and he went to the beach because the toilet was full.
They were waiting for him. The plane was about to leave and
he was nowhere to be found. When he got back, he was
berated by the staff of Pan Am. He was called a monkey. He
was left behind. There was breach. He is entitled to moral
damages because he suffered serious anxiety, besmirched
reputation, social humiliation.
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NOTES NOTES
KOREAN AIRLINES vs. CA
HELD: This guy had a waitlisted ticket to Saudi Arabia to work
there. When he got to the airport, he was issued a boarding
pass. When he was about to go to the stairs, somebody called
him to get down. He was not allowed to board. He was not
able to take the flight. That is another example of bad faith
BUMP OFF
Q: If a passenger is bumped off because the flight is
overbooked, is there breach?
A: Definitely. The passenger was not able to get on the flight.
Q: Is the passenger entitled to moral damages?
A: YES, in the old cases of ORTIGAS, JR. vs. LUFTHANSA,
ZALAMEA vs. CA and ALITALIA vs. CA.
A: YES ONLY IF it exceeds 10% of the seating capacity, in the
new case of UNITED AIRLINES vs. CA
ALITALIA vs. CA
HELD: Existing jurisprudence state that overbooking
amounts to bad faith, entitling passengers to the award of moral
damages. In Alitalia vs. CA, it was stated that passengers with
confirmed booking were refused carriage on the last minute,
this Court held that when an airline issues a ticket to a
passenger confirmed on a particular flight, on a certain date, a
contract of carriage arises, and the passenger has every right
to expect that he would fly on that flight and on that date. If he
does not, then the carrier opens itself to a suit for breach of
contract of carriage. Where an airline had deliberately
overbooked, it took the risk of having to deprive some
passengers of their seats in case all of them would show up for
check in. For the indignity and inconvenience of being refused
a confirmed seat on the last minute, said passenger is entitled
to moral damages.
UNITED AIRLINES vs. CA
HELD: The SC reversed with respect to this issue on moral
damages to be awarded to passengers bumped off on the
ground of overbooking.
In UA vs. CA, Fontanilla case, the SC said when an airline
overbooks, you do not only look at that Civil Code provision
but you also take into account existing laws, particularly
Economic Regulation No. 7 of the Civil Aeronautics Board
(CAB). This Economic Regulation states that overbooking not
exceeding 10% of the seating capacity of an aircraft shall not
be considered a deliberate and willful act of non-
accommodation.
What this Court considers as bad faith is the willful and
deliberate overbooking on the part of the airline carrier. The
above-mentioned law clearly states that if the overbooking
does not exceed 10% it is not considered as deliberate and
therefore, does not amount to bad faith.
In other words, if the passenger is bumped off because
overbooking, there is breach. He is entitled to actual damages
– hotel accommodations, food, etc. He is entitled to moral
damages only if the overbooking is more than 10%. If it is less
15 PARA BRIGHT
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
than 10%, then, no. This means that airlines are allowed to
overbooked because there are those who will not show up.
What else did the SC say in this case? While there may
have been overbooking in this case, private respondent was
not able to prove that the overbooking of the United Airlines
exceeded 10%. In other words, the burden proof is on the
passenger that the overbooking exceeded 10%.
Forget the old ruling of the SC of overbooking entitling the
passenger to moral damages automatically. It is only
tantamount to bad faith if it is more than 10% and the burden of
proof is on the passenger.
CATHAY PACIFIC vs. VASQUEZ
FACTS: According to Vasquez, there was overbooking as to
the business class. And therefore, Vasquez spouses are
entitled to moral damages because that is tantamount to bad
faith.
HELD: The SC cited United Airlines case. The overbooking
must exceed 10% for you to be entitled to moral damages and
you have to prove it. AND the overbooking must result in you
being bumped-off. In this case, the spouses were not bumped-
off. They were upgraded.
FACTS: RTC awarded the Vasquez spouses the following:
Nominal damages – P 100T each, Moral damages – P 2M each,
Exemplary damages – P 5M each, Attorney‟s fees and expenses
of litigation – P 1M each. CA, on appeal, said that the Vasquez
spouses are entitled to: Nominal damages – P 50,000 each,
Moral damages – P 250,000 each, Exemplary damages –
deleted, Attorney‟s fees and litigation expenses – P 50,000 for
both.
HELD: There is something wrong. The RTC is wrong
because it awarded nominal damages because other damages
were also awarded. The CA ruling is still wrong because it still
awarded nominal damages. The SC said that there was breach.
Vasquez spouses did not lose anything. They are not entitled to
moral damages. If you are not entitled to moral damages,
you are not entitled to exemplary damages. If you are not
entitled to exemplary damages, you are not entitled to
attorney’s fees. The SC awarded the Vasquez spouse with
nominal damages of P 5,000.
ONG YIU vs CA
HELD: Where the CC has incurred DELAY in the delivery of
the luggage but had not acted in bad faith nor guilty of gross
negligence, the offended party is NOT entitled to moral nor
exemplary damages but only LIMITED to the amount printed in
the plane ticket, not having declared any higher value for his
luggage nor paid any additional transportation charge.
LRTA vs. NAVIDAD (BQ 2008)
FACTS: Navidad was a drunk passenger. He entered the
EDSA LRT Station after purchasing a token. While he was
standing waiting for the train, the security guard approached
him and they engaged in a fist fight. Nobody knew who started
the fist fight. Navidad fell on the track and he was ran over by
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NOTES NOTES
the train and he died.The train was operated by Rodolfo Roman
and owned by LRT.
There are possible actions here for the heirs of Navidad –
breach of contract against LRT, culpa criminal against the
driver of the train and culpa aquiliana against the security
agency, the employer of the security guard and culpa aquiliana
against the security guard.
The RTC ruled in favor Navidad against the security
agency. It did not hold LRT liable because according to the
RTC, it was between Navidad and the security guard. It
awarded: Actual damages – P 44,830; Compensatory damages
– P 443,520; Indemnity for death – P 50,000; Moral damages – P
50,000 and Attorney‟s fees – P 20,000.
CA ruling: The security agency was not liable and held
LRTA and the driver jointly and severally liable to pay: Actual
damages – P 44,830; Nominal damages – P 50,000; Moral
damages – P 50,000; Indemnity for the death – P 50,000 and
Attorney‟s fees P 20,000.
HELD: The SC held that CA should not have awarded
nominal damages. The SC held the carrier liable because
transportation already started. He was already inside. He has
bought the ticket and he was waiting for the train.
VICTORY LINER vs. GAMMAD
FACTS: Gammad was on board a Victory Liner bus. While
the bus was running at a high speed, it fell on a ravine which
resulted in the death of Gammad. The husband filed a
complaint for damages arising from culpa contractual against
Victory. (Ma‟am: The heirs of the victim can file a complaint for
culpa contractual even though they are not the contracting
parties)
RTC ordered Victory to pay to the husband: Actual
damages – P 122,000; Death indemnity – P 50,000; Exemplary
and Moral damages – P 400,000; Compensatory damages – P
1,500,000; Attorney‟s fees – 10% of the total amount granted.
Modification by the CA: Actual damages – P 88,270;
Compensatory damages – P 1,135,536.10; Moral and
Exemplary Damages – P 400,000. Attorney‟s fees – 10% of the
sum of the actual, compensatory, moral and exemplary
damages.
ISSUE: What is wrong with the decision?
HELD:
1. You cannot lump together moral and exemplary damages.
If you award damages, you give an amount and you give a
reason. (Article 8, Section 14 of the Constitution) The
court must explain and must give a ground for whatever
judgment or ruling it enters.
2. With respect to the compensatory damages, according to
the SC, it is not proper. It should be deleted for lack of
basis. Documentary evidence should be presented to
substantiate the claim for damages for loss of earning
capacity. By way of exception, damages for loss of
earning capacity may be awarded despite the absence of
documentary evidence when:
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a. the deceased is self-employed earning less than the
minimum wage under current labor law, and judicial
notice may be taken of the fact that in the deceased‟s line
of work, no documentary evidence is available; or
b. the deceased is employed as a daily wage worker earning
less than the minimum wage under current labor laws.
Only under these 2 situations where you do not have to prove
or substantiate to collect compensatory damages. In this case,
there was just an allegation that she was working with the BIR
and had a salary of P83,088 per annum. This is not enough to
prove that the husband is entitled to compensatory damages.
The SC here awarded temperate damages. The fact of loss
having been established, temperate damages in the amount of
P 500,000 should be awarded to Rosalito, the husband.
MMTC vs. MUSA
FACTS: This was about a young girl who was crossing
Katipunan Avenue and she was hit by a bus. She died.
ISSUE: Are the parents entitled to moral damages?
HELD: YES, definitely because it is based on culpa aquiliana.
The court awarded indemnity for death and actual damages.
They were able to prove that she was a promising student and
that she wanted to become a teacher. There was a computation
here. Moral damages and exemplary damages were also
awarded. This is by way of example since the driver was
careless. He acted with gross negligence.
KIERULF vs. CA
FACTS: In this case, Priscilla Kierulf was a passenger of a
pick-up that was driven by her driver. The pick-up was hit by a
bus. She was injured. She suffered some kind of deformity in
her person. He was no longer attracted to her. She and her
husband sued the bus company.
There was culpa aquiliana. What the husband wants is to
increase the moral damages because he said that he was
deprived of consortium because she was deformed by the
accident. They did not have what spouses usually have. Not
only that – the social and financial standing of his wife. They
are rich. So, the award should be higher.
HELD: The SC held that Victor's claim for deprivation of his
right to consortium, although argued before Respondent Court,
is not supported by the evidence on record. His wife might
have been badly disfigured, but he had not testified that, in
consequence thereof, his right to marital consortium was
affected.
The social and financial standing of Lucila cannot be
considered in awarding moral damages. The factual
circumstances prior to the accident show that no "rude and
rough" reception, no "menacing attitude," no "supercilious
manner," no "abusive language and highly scornful reference"
was given her. The social and financial standing of a claimant of
moral damages may be considered in awarding moral
damages only if he or she was subjected to contemptuous
conduct despite the offender's knowledge of his or her social
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NOTES NOTES
and financial standing. In this case, that will not affect the
amount of moral damages. But of course, it is still proper to
award moral damages because the cause of action is culpa
aquiliana and she was injured.
KLM ROYAL DUTCH AIRLINES vs CA
FACTS: The airline ticket issued by KLM stated “The carriage
includes the air carrier issuing this ticket and all carrier that
carry or undertake to carry the passenger or his baggage
hereunder or perform any other services incidental to such air
carriage… Carriage to be performed hereunder by several
successive carriers is regarded as a single operation.” The
passengers were mistreated by AER LINGUS which was the
second airlines tasked to carry the passengers.
HELD: The provision in the passage ticket that carriage by
successive air carriers is to be regarded as a single operation
is to make the ticket-issuing carrier LIABLE for tortuous conduct
of other carriers. KLM should be held responsible for the
abuse, injury and embarrassment suffered by the respondents
at the hands of a supercilious boor of the Aer Lingus.
 Recovery of exemplary damages is allowable under the
KABIT SYSTEM. The damages, among others, is payable
jointly and severally by the operation and the grantee o
the certificate of public convenience.
ART 1765. 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.
ART 1766. 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.
In case of breach of contract of carriage, the CC is Solidarily
Liable for his diver‟s negligence, unless he proves that he is
exempt therefrom. He cannot avail of the defense that he had
exercised due diligence in the selection of his employee. The
liability of the CC is primary and independent and does not
depend upon previous conviction of the driver/employee.
There is no need for first proving the insolvency of the driver
before damages can be recovered from the CC, for in culpa-
contractual, the liability of the carrier is not merely subsidiary
or secondary, but direct and immediate. Proved by mere
PREPONDERANCE OF EVIDENCE
In quasi-delicto cases, the CC is Solidarily Liable with its
driver for death and injuries of passengers of another vehicle
caused by the negligence of the driver where CC fails to
exercise due diligence in the selection and supervision of its
employees. (can use defense of exercising due diligence in
selection of employee). The subsidiary liability of the CC for
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the negligence of hthe driver/employee can be enforced ONLY
in the event of the DRIVER‟S INSOLVENCY, it is secondary and
dependent. Proved by PROOF BEYOND REASONABLE DOUBT
 The offended party has the option to base his action on
culpa criminal or culpa aquiliana. The civil liability based
on culpa-criminal is deemed simultaneously instituted in
the criminal action. But the civil liability arising from culpa
aquiliana is entirely apart and independent from the
criminal action and it can proceed independently, the
dismissal of the criminal case does not affect it provided
the right to file it separately has been reserved.
 A civil action based on quasi delict against the
CC/employer cannot be suspended by the filing of the
criminal action against the driver/employee. As
distinguished from a civil action based on a criminal action
for the subsidiary liability of the CC which is suspended
by the filing of the criminal action against the driver.
 The death of the driver is not a hindrance to a separate
quasi-delict civil action against employer.
 An independent civil action is barred after the defendants
acquittal in a previous criminal case where it was held
clear in the judgment that the fact from which the civil
judgment arises does not exist.
 A criminal case against CC is not barred by a previous
action based on culpa aquiliana if not based on the same
act or omission of the accused.
 There is no error in awarding civil damages against a
driver in a criminal case even when a separate civil action
was filed against the CC for culpa-contractual.
DUE PROCESS REQUIRMENTS FOR IMPOSING
SUBSIDIARY LIABILITY OF EMPLOYER-CARRIER
In order that an employer may be subsidiarily liable for
the employee‟s civil liability in the criminal action, it
should be shown
(1) that he is indeed the employer of the convict
(2) that he is engaged in any kind of industry,
(3) that the employee committed the offense in the
discharge of his duties, and
(4) that employee is insolvent.
The proceeding for the enforcement of the subsidiary
liability may be considered as part of the proceeding for
the execution of the judgment.
 Where plaintiff assigned his rights to recover damages
based on breach of contract of carriage to another, his
death will not result to the death of the action. The
transferee is substituted as party-plaintiff. If the
substitution Is not brought to the attention of the court, the
original plaintiff would hold the fruits of the action as
trustee for the assignee.
 The determination regarding the employers subsidiary
liability is APPEALABLE to a higher court by petition for
review on certiorari, or by special civil action of certiorari.
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NOTES NOTES
CODE OF COMMERCE
A. OVERLAND TRANSPORTATION
(Arts. 349-379)
What does the Code of Commerce cover?
It governs over overland transportation and maritime
admiralty. It governs only commercial contracts.
Applicability
1. Domestic land and water/maritime transportation.
2. Domestic Air Transportation.
 Commercial contracts involving common carriers -
refer first to the Civil Code, then to the Code of
Commerce.
 Private carriers involved in commercial contracts -
refer first to the Code of Commerce, then to the Civil
Code, but excluding the Civil Code provisions on
common carriers
A. Scope of Overland Transportation
What is overland transport?
Overland transport applies to transport on land and on small
bodies of water, waterways, both natural and artificial,
including transport on rivers which are not very large. (If it is
transport at sea, then it is admiralty)
B. Nature of Contract
ARTICLE 349 - A contract for all kinds of transportation over
land or river shall be considered commercial:
1. When it involves merchandise or any commercial goods.
2. When, no matter what its object may be, the carrier is a
merchant or is customarily engaged in making
transportation for the public. (Principal requirement)
C. Effect of Civil Code
- The Code of Commerce is SUPPLETORY to the provisions
of the New Civil Code on common carriers.
Art 1766 - 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.
Art. 2270
The following laws and regulations are hereby repealed:
(1) Those parts and provisions of the Civil Code of
1889 which are in force on the date when this new
Civil Code becomes effective:
(2) The provisions of the Code of Commerce governing
sales, partnership, agency, loan, deposit and guaranty;
(3) The provisions of the Code of Civil Procedure on
prescription as far as inconsistent with this Code; and
(4) All laws, Acts, parts of Acts, rules of court, executive
orders, and administrative regulations which are
inconsistent with this Code. (n)
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D. Contract of Carriage
BILL OF LADING
DEFINITION, SUBJECT MATTER
ARTICLE 352 - Bills of lading or tickets in the case of
transportation of passengers may be different, one for persons
and another for baggage, but all of them shall contain the name
of the carrier, the date of shipment, the points of departure and
arrival, the price, and with regard to baggage, the number and
weight of the packages, with any other indications which may
be considered necessary in order to easily identify them.
WHAT IS A BILL OF LADING?
It may be defined as 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 on his order. It
comprehends all methods of transportation. A.k.a.:
 Shipping receipts
 Forwarders receipts
 Receipt for transportation
 Freight tickets of bus companies
 Airway bills of lading
2 FOLD CHARACTER
1. Each bill of lading is a contract in itself and the parties are
bound by its terms.
2. A bill of lading is also a receipt, and it is likewise a symbol
of the goods covered by it.
It is also a document of title and if negotiable in form, they can
constitute a negotiable document of title. Bills of lading are not
those issued by masters of vessels alone, they now
comprehend all forms of transportation, whether by sea or land
3 FUNCTIONS OF A BILL OF LADING
 It is a receipt for the goods shipped
 It is a contract by which the three parties namely the
shipper, carrier and consignee undertake specific
responsibilities and assume stipulated obligations; and
 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.
KINDS OF BILLS OF LADING:
1. Negotiable - one in which it is stated that the goods
referred to therein will be delivered to the bearer or to
the order of any person named therein.
2. Non-negotiable - One in which it is stated that the goods
referred to therein will be delivered to a specified
person.
3. Clean – One which does not indicate any defect in the
goods.
4. Foul – One which contains a notation thereon indicating
that the goods covered by it are in bad condition.
5. Spent – One which covers goods that already have been
delivered by the carrier without a surrender of a signed
copy of the bill.
6. Through – One issued by the 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
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NOTES NOTES
the city of the seller to the city of the buyer, which bill of
lading is honored by the second and other interested
carriers who do not issue their own bills.
7. On board - issued when the goods have been actually
placed aboard the ship with very reasonable
expectation that the shipment is as good as on its way.
8. Received - one in which it is stated that the goods have
been received for shipment with or without specifying
the vessel by which the goods are to be shipped.
9. Custody – One wherein the goods are already received
by the carrier but the vessel indicated therein has not
yet arrived in the port.
10. Port – One which is issued by the carrier to whom the
goods have been delivered, and the vessel indicated in
the bill of lading by which the goods are to be shipped
is already in the port where the goods are held for
shipment.
WHO ARE THE PARTIES TO A BILL OF LADING?
1. shipper
2. consignee
3. carrier
RULES ON BILLS OF LADING
 It is not indispensable for the creation of a contract of
carriage. (Compania Maritima vs. Insurance Company of
North America, 12 SCRA 213) The contract itself arises
from the moment goods are delivered by shipper to
carrier and the carrier agrees to carry them.
 Ambiguity is construed against the carrier, the contract
being one of adhesion.
 The consignee, although the instrument is oftentimes
drawn up only by the consignor and carrier, becomes
bound by all the stipulations contained therein by making
a claim for loss on the basis of said bill of lading. (Sea-
Land Services Inc. vs. IAC)
 The right of a party to recover for loss of shipment
consigned to him under a bill of lading drawn up only by
and between the shipper and the carrier, springs from
either a relation of agency between him and the shipper,
or his status as stranger in whose favor some stipulation is
made in said contract, and who becomes a party thereto
when he demands fulfillment of that stipulation. (Art. 1311
(2), (Mendoza vs. PAL Inc.)
 Acceptance of the bill of lading without dissent raises the
presumption that all the terms therein where brought to
the knowledge of the shipper and agreed to by him and,
in the absence of fraud or mistake; he is estopped from
thereafter denying that he assented to such terms. (Notes
and Cases on the Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.261)
FORM, CONTENTS
ARTICLE 350 - The shipper as well as the carrier of
merchandise and goods may mutually demand of each other
the issue 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 goods are addressed, or whether they are to
be delivered to the bearer of the said bill.
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4. A description of the goods, stating their generic character,
their weight, and the external marks or signs of the packages
containing the same.
5. The cost of the transportation.
6. The date on which the shipment is made.
7. The place of the delivery to the carrier.
8. The place and time at which the delivery is to be made to the
consignee.
9. The damages to be paid by the carrier in case of delay, if any
agreement is made on this point.
ARTICLE 351 - In shipments made over railroads or by other
enterprises which are subject to schedules or the time fixed
by regulations, it shall be sufficient that the bills of lading or
declarations of shipment furnished by the shipper refer, with
regard to the rate, terms, and special conditions of the
transportation, to the schedules and regulations, the
application of which is requested; and should no schedule be
determined the carrier must apply the rate of the merchandise
paying the lowest, with the condition inherent thereto, always
including such statement or reference in the bill of lading
delivered to the shipper.
IS THE FORM MATERIAL?
No. As long as it contains an acknowledgment by the carrier of
the receipt of goods for transportation, it is in legal effect, a bill
of lading.
WHO MAY NEGOTIATE
1) Owner of the BOL
2) Any person to whom the possession or custody of the BOL
has been entrusted by the owner
RIGHTS ACQUIRED THROUGH NEGOTIATION
1) Such title to the goods as the person negotiating the BOL
had
2) Direct obligation of the carrier
RIGHTS ACQUIRED THROUGH TRANSFER
1) Title of the goods subject to the terms of any agreement
with the transferor
2) Right to notify the carrier and thereby acquire direct
obligation of the carrier
 Prior to notification, the title of the transferee may be
defeated by the levy of an attachment of execution
upon the goods by a creditor of the transferor or a
subsequent purchaser.
LIABILITY OF ONE NEGOTIATING OR TRANSFERING
1) That the BOL is genuine
2) That he has a legal right to negotiate or transfer it
3) That he has knowledge or no fact which would impair its
validity
4) That the goods are merchantable or fit for a particular
purpose.
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NOTES NOTES
FUNCTION
ARTICLE 353 - The LEGAL BASIS of the contract between
the shipper and the carrier shall be the bills of lading, by the
contents of which all disputes which may arise with regard
to their execution and fulfillment shall be decided without
admission of other exceptions than forgery or material errors in
the drafting thereof. After the contract has been complied
with the bill of lading issued by the carrier shall be returned to
him, and by virtue of the exchange of this certificate for the
article transported, the respective obligations and actions shall
be considered as canceled, unless in the same act the claims
which the contracting parties desired to reserve are reduced to
writing, exception being made of the provisions of Article 366.
If in case of loss or for any other reason whatsoever, the
consignee cannot return upon receiving the merchandise the
bill of lading subscribed by the carrier, he shall give said
carrier a receipt for the goods delivered, this receipt
producing the same effects as the return of the bill of lading.
NO BILL OF LADING
ARTICLE 354 - In the absence of a bill of lading the
respective claims of the parties shall be decided by the legal
proofs that each one may submit in support of his claims, in
accordance with the general provisions established in this
Code for commercial contracts.
- 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.
General Rule:
Parole evidence is not allowed. All disputes regarding the
execution and performance of the contract of
transportation shall be decided by the contents of the BOL.
Exception:
If falsity and material error occurs in the drafting of the
BOL
IS A BILL OF LADING ESSENTIAL TO A CONTRACT OF
TRANSPORTATION?
No. While under Art. 350 the shipper and the common carrier
may mutually demand that a bill of lading be made, it is not
obligatory. The fact that a bill of lading is not issued does not
preclude the existence of a contract of transportation. Where
no bill of lading is issued, the disputes between the parties
shall be decided according to the rules laid down in Art. 354.
OTHER LEGAL PROOF WHICH MAY BE USED
 Sales invoice
 Official receipt of shipment of cargoes
 Letter of credit
REFUSAL TO TRANSPORT
ARTICLE 356 - Carrier may refuse to accept packages which
appear unfit for transportation; and if said transportation is to
be made by railway and the shipment is insisted on, the
company shall carry them, being exempt from all liability if its
objections are so stated in the bill of lading.
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 L.A. Batch Unitas Personae - No. 543/FabianCPA 
General rule:
CC cannot ordinarily refuse to carry a particular class of
goods to the prejudice of the traffic in those goods
Exception:
CC can refuse if the goods are unfit for transportation.
OBLIGATIONS OF THE CARRIER
1) Duty to accept the goods
2) Duty to deliver the goods
INSTANCES WHEN THE CARRIER MAY VALIDLY REFUSE
TO ACCEPT THE GOODS INCLUDE THE FF:
1.) Goods sought to be transported are dangerous objects,
or substances including dynamite and other explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger like flood,
capture by enemies and the like
7.) Goods like livestock will be exposed to disease
8.) Strike
9.) Failure to tender goods on time. (Notes and Cases on the
Law on Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed. p.68)
 In case of carriage by railway, the carrier is exempted
from liability if carriage is insisted upon by the shipper,
provided its objections are stated in the bill of lading.
 However, when a common carrier accepts cargo for
shipment for valuable consideration, it takes the risk of
delivering it in good condition as when it was loaded. (PAL
vs. CA)
DOUBTFUL DECLARATION OF CONTENTS
ARTICLE 357 - If the carrier by reason of well-founded
suspicions as to the correctness of the declaration of the
contents of a package should determine to examine it, he
shall do so before witnesses, in the presence of the shipper or
of the consignee. Should the shipper or consignee to be cited
not appear, the examination shall be made before a notary,
who shall draft a certificate of the result of the examination, for
the proper purposes. If the declaration of the shipper should
be correct, the expenses caused by the examination and those
of carefully repacking the packages shall be defrayed by the
carrier, and in a contrary case by the shipper.
RESPONSIBILITY OF THE CARRIER
1. WHEN IT COMMENCES
ARTICLE 355 - The liability of the carrier shall begin from the
moment he receives the merchandise, in person or through a
person entrusted thereto in the place indicated for their
reception.
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NOTES NOTES
2. ROUTE
ARTICLE 359 - If there should be an agreement between the
shipper and the carrier with regard to the road over which the
transportation is to be made, the carrier cannot change the
route, unless obliged to do so by force majeure; and should he
do so without this cause, he shall be liable for any damage
which may be suffered by the goods transported for any other
cause whatsoever, besides being required to pay the amount
which may have been stipulated for such a case. When on
account of the said force majeure the carrier is obliged to take
another route, causing an increase in the transportation
charges, he shall be reimbursed for said increase after
presenting the formal proof thereof.
General Rule
Use the road agreed upon
Exception
Can use another road provided the change is caused by
force majeure
WITH AGREED ROUTE
- He shall be liable for = losses due not only to the change
in route but also to other causes + indemnity agreed upon
- He cannot avail the contract limiting his liability
WITHOUT AGREED ROUTE
- Carrier must select one which may be the shortest, least
expensive and practically passable.
3. CARE OF GOODS
*ARTICLE 361 - Merchandise shall be transported at the risk
and venture of the shipper, if the contrary was not expressly
stipulated. Therefore, all damages and impairment suffered
by the goods during the transportation, by reason of accident,
force majeure, or by virtue of the nature or defect of the
articles, shall be for the account and risk of the shipper. The
proof of these accidents is incumbent on the carrier.
 Article 361 has been superseded by Article 1745 CC
Art. 1745. Any of the following or similar stipulations
shall be considered unreasonable, unjust and
contrary to public policy: (1) That the goods are
transported at the risk of the owner or shipper; ,,,
ARTICLE 362 - The carrier, however, shall be liable for the
losses and damages arising from the causes mentioned in the
foregoing article if it is proved that they occurred on account of
his negligence or because he did not take the precautions
usually adopted by careful persons, unless the shipper
committed fraud in the bill of lading, making him believe that
the goods were of a class or quality different from what they
really were. If, notwithstanding the precaution referred to in
this article, the goods transported run the risk of being lost on
account of the nature or by reason of an unavoidable accident,
without there being time for the owners of the same to dispose
thereof, the carrier shall proceed to their sale, placing them
for this purpose at the disposal, of the judicial authority or the
officials determined by special provisions.
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Burden of proof RIGHT OF CONSIGNEE TO ABANDON GOODS

- The burden of proof is upon the carrier to show that the
damage was due to force majeure or the inherent nature 1)
and defect of the goods. After the carrier has proved that
the loss was due to one of the excepted causes, the burden 2)
of proof shifts to the shipper. The shipper in order to hold
the carrier liable is obliged to prove that the the damage 3)
was caused on account of the carrier‟s negligence.
Partial non-delivery, where the goods are useless without
the others (Art. 363);
Goods are rendered useless for sale or consumption for
the purposes for which they are properly destined (Art.
365); and
In case of delay through the fault of the carrier (Art. 371).

 Article 362 similar to Sec 34 of the Warehouse Receipts NOTICE OF DAMAGE

Law governing the sale of perishable and hazardous ARTICLE 366 - Within the twenty-four hours following the
goods. receipt of the merchandise a claim may be brought against the
carrier on account of damage or average found therein on
opening the packages, provided that the indications of the
DELIVERY damage or average giving rise to the claim cannot be
CONDITION OF GOODS ascertained from the exterior of said packages, in which
ARTICLE 363 - With the exception of the cases prescribed in case said claim would only be admitted on the receipt of the
the second paragraph of Article 361, the carrier shall be packages. After the periods mentioned have elapsed, or after
obliged to deliver the goods transported in the same condition the transportation charges have been paid, no claim
in which, according to the bill of lading, they were at the time whatsoever shall be admitted against the carrier with regard to
of their receipt, without any detriment or impairment, and the condition in which the goods transported were delivered.
should he not do so, he shall be obliged to pay the value of the
goods not delivered at the point where they should have been RULES:
and at the time the delivery should have taken place. If part of
the goods transported should be delivered the consignee a. Patent damage: shipper must file a claim against the carrier
may refuse to receive them, when he proves that he cannot immediately upon delivery/receipt (it may be oral or
make use thereof without the others. written)
ARTICLE 364 - If the effect of the damage referred to in Article
361 should be only a reduction in the value of the goods, the b. Latent damage: shipper should file a claim against the
obligation of the carrier shall be reduced to the payment of the carrier within 24 hours from delivery/receipt.
amount of said reduction in value, after appraisal by experts.
Note: These rules does not apply to misdelivery or non-
delivery of goods. (Roldan vs. Lim Ponzo)
ARTICLE 365 - If, on account of the damage, the goods are
rendered useless for purposes of sale or consumption in the
use for which they are properly destined the consignee shall
 Purpose of notice: To inform the carrier that the shipment
not be bound to receive them, and may leave them on the
has been damaged, and it is charged with liability
hands of the carrier, demanding payment therefor at
therefore, and to give it an opportunity to make an
current market prices. If among the goods damaged there
investigation and fix responsibility while the matter is
should be some in good condition and without any defect
fresh.
whatsoever, the foregoing provision shall be applicable with
 The filing of notice of claim is a condition precedent for
regard to the damaged ones, and the consignee shall receive
recovery, not limitations of action.
those which are sound, this separation being made by distinct
 Shorter period may be stipulated by the parties because
and separate articles, no object being divided for the purpose,
it merely affects the shipper‟s remedy and does not affect
unless the consignee proves the impossibility of conveniently
the liability of the carrier. (PHILAMGEN vs. Sweetlines,
making use thereof in this form. The same provision shall be
Inc.)
applied to merchandise in bales or packages, with distinction
of the packages which appear sound.  When a consignee receives the merchandise and the
indemnity offered for delay, paying the freight charges
without protest, all actions against the carrier are
WHEN DAMAGE RENDERS GOODS USELESS
extinguished.
 If damage affects ALL goods
 The carrier may require in the BOL that the goods be
- the consignee can ABANDON ALL the goods to the
examined at the time of delivery thereof. This right
carrier who shall pay the corresponding damages
however may be waived by him
 Provisional claim – need not state in detail list the
 If damage affects only SOME of the goods
shipment lost or damaged. Formal claim – state in detail.
- the consignee can ABANDON ONLY THE DAMAGED
goods unless the consignee proves that it is
impossible to conveniently use the undamaged
goods in that form without the damaged goods, he
can ABANDON ALL the goods.

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PRESCRIPTIVE PERIOD DUTY TO DELIVER THE GOODS

 Not provided by Article 366. Thus, in such absence, Civil - Not only to transport the goods safely but to the person
Code rules on prescription apply. indicated in the bill of lading. The goods should be
 If despite the notice of claim, the carrier refuses to pay, delivered to the consignee or any other person to whom
action must be filed in court. the bill of lading was validly transferred or negotiated.
1. No bill of lading was issued: within 6 years - The carrier is under duty not to deliver except upon
2. Bill of lading was issued: within 10 years. presentation of the BOL. Where the carrier delivered the
goods to another person who did not present the BOL, he
is liable for MISDELIVERY.
ARTICLE 366 COGSA Sec.3 (6) - MISDELIVERY – there is delivery but the delivery is made
to the wrong person
Applicability
- NON-DELIVERY - there is no delivery at all.
1. Domestic/inter- 1. International/
island/coastwise overseas/foreign (from
transportation foreign country to Phils.)
2. Land, water, air JUDICIAL DEPOSIT
Note: subject to the rule on
transportation ARTICLE 369 - Should the consignee be not found at the
Paramount Clause
3. Carriage of goods domicile indicated in the bill of lading, or should refuse to pay
4. Goods shipped are 2. Water/maritime
the transportation charges and expenses, or to receive the
damaged transportation
goods, the deposit of said goods shall be ordered by the
3. Carriage of goods
4. Goods shipped are municipal judge, where there is no judge of first instance, to be
damaged placed at the disposal of the shipper or sender, without
Notice of damage prejudice to a person having a better right, this deposit having
all the effects of a delivery.
1. Condition precedent 1. Not a condition precedent
2. 24-hour period for 2. 3-day period for claiming
claiming latent damage latent damage WHEN GOODS MAY BE DEPOSITED
1) consignee be not found at the domicile indicated in
Prescriptive period the bill of lading,
None provided; Civil Code One year from the date of 2) consignee refuse to pay the transportation charges
applies. delivery (delivered but and expenses,
damaged goods), or date 3) consignee refuse to receive the goods
when the vessel left port or
from the date of delivery to - such judicial deposit shall produce all the effects of delivery,
the arrastre (non-delivery or subject however to third parties with a better right.
loss).
DUTY TO LOOK FOR CONSIGNEE
 Consignee is present – deliver to him personally
 Consignee not present – he is entitle reasonable notice of
ARTICLE 367 - If there should occur doubts and disputes the arrival of the goods and fair opportunity to take care of
between the consignee and the carrier with regard to the and remove them
condition of goods transported at the time of their delivery  Consignee unknown – must use proper and reasonable
to the former, the said goods shall be examined by experts diligence to find him and if still not found, store goods in a
appointed by the parties, and a third one, in case of proper place to be discharged from liability.
disagreement, appointed by the judicial authority, the result of
the examination being reduced to writing; and if the persons DELIVERY WHEN TO BE MADE
interested should not agree to the report of the experts and ARTICLE 370 - If a period has been fixed for the delivery of
could not settle their disputes, said judicial authority shall
the goods, it must be made within the same, and otherwise the
order the deposits of the merchandise in a safe warehouse, and carrier shall pay the indemnity agreed upon in the bill of
the parties interested shall make use of their rights in the lading, neither the shipper nor consignee being entitled to
proper manner. anything else. Should no indemnity have been agreed upon
and the delay exceeds the time fixed in the bill of lading, the
carrier shall be liable for the damages which may have been
TO WHOM DELIVERY MADE caused by the delay.
ARTICLE 368 - The carrier must deliver to the consignee
without any delay or difficulty the merchandise received by ARTICLE 358 - Should no period within which goods are to
him, by reason of the mere fact of being designated in the bill be delivered be previously fixed, the carrier shall be under
of lading to receive it; and should said carrier not do so he
the obligation to forward them in the FIRST SHIPMENT of the
shall be liable for the damages which may arise therefrom. same or similar merchandise which he may make to the point of
delivery; and should he not do so, the damages occasioned by
the delay shall be suffered by him.

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 L.A. Batch Unitas Personae - No. 543/FabianCPA 

TIME OF DELIVERY ARTICLE 371 - In cases of delay on account of the fault of the
Stipulated in carrier, referred to in the foregoing articles, the consignee may
No stipulation leave the goods transported on the hands of the carrier,
Contract/Bill of Lading
1. Carrier is bound to fulfill 1. Within a reasonable time. informing him thereof in writing before the arrival of the
the contract and is liable for 2. Carrier is bound to forward same at the point of destination. When this abandonment
any delay; no matter from them in the 1st shipment of the occurs, the carrier shall satisfy the total value of the goods, as
what cause it may have same or similar goods which he if they had been lost or mislaid. Should the abandonment not
arisen. may make to the point of occur the indemnity for loss and damages on account of the
delivery. (ART. 358 Code of delays cannot exceed the current price of the goods
Commerce) transported on the day and at the place where the delivery was
 Article 358 is not violated by a judgment absolving the to have been made. The same provision shall be observed in
carrier from the payment of damages when it appears that all cases where this indemnity is due.
although the goods were not shipped on the train agreed
upon, they were shipped on another train which arrived RIGHT OF ABANDONMENT
earlier than the one agreed upon. - In case of delay through the fault of the carrier. Must be
exercised during the intervening period between the
EFFECTS OF DELAY moment when the fault of the carrier produces a delay,
which is the generative cause of the action, until the
a) Payment of damages
moment just BEFORE THE ARRIVAL OF THE GOODS AT
b) Merely suspends and generally does not terminate
the contract of carriage THE PLACE OF DELIVERY. By communicating such
c) Carrier remains duty bound to exercise abandonment IN WRITING.
extraordinary diligence
d) Natural disaster shall not free the carrier from RIGHT OF CONSIGNEE TO ABANDON GOODS
responsibility (Art.1740) 1) Partial non-delivery, where the goods are useless without
e) If delay is without just cause, the contract limiting the the others (Art. 363);
common carrier‟s liability cannot be availed of in 2) Goods are rendered useless for sale or consumption for
case of loss or deterioration of the goods (Art.1747) the purposes for which they are properly destined (Art.
365); and
DAMAGES WHER NO INDEMNITY STIPULATED 3) In case of delay through the fault of the carrier (Art. 371).
Damages = (MV @ time should be delivered –
PRICE @ time delivered) + added reasonable
expenses caused by delay AMOUNT OF DAMAGES FOR LOSS
ARTICLE 372 - The appraisement of the goods which the
WHEN DELAY AMOUNTS TO CONVERSION carrier must pay in case of their being lost or mislaid shall be
- If without legal exemption and after demand has been fixed in accordance with what is stated in the bill of lading, no
made and delivery is refuse the property is not delivered proofs being allowed on the part of the shipper that there were
within a reasonable time AFTER IT HAS REACHED ITS among the goods declared therein articles of greater value,
DESTINATION, the carrier is liable for conversion. and money. Horses, vehicles, vessels, equipment, and all the
other principal and accessory means of transportation, shall be
REQUISITES FOR CONVERSION especially obligated in favor of the shipper, although with
1) Demand from shipper relation to railroads said obligation shall be subordinated to
2) Delay by carrier the provisions of the laws of concession with regard to property
3) Refusal on the part of the carrier to deliver the goods and to those of this Code with regard to the manner and form of
within a reasonable time making attachments and retentions against the said companies.

- The consignee, under such circumstances, may elect to
waive all title to the property and sue for the conversion,
and after he has done so, a subsequent tender by the
carrier will not be available for it as a defense.
- And if there has been conversion of the goods by the
carrier, and the consignee has not thereafter accepted
them, he is entitled to recover the value of the goods at the
time they should have been delivered to him.
- If the goods are tendered before suit is brought, the
consignee cannot refuse to receive the goods and sue for
conversion, his SOLE REMEDY is to sue for DAMAGES.
- Though the carrier may delay ever so long, the owner
cannot charge him with a conversion, or for value of
the goods, if they are safely kept, unless they have been
demanded of the carrier and their delivery refused.
Art. 1744 - 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:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than
the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.

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 L.A. Batch Unitas Personae - No. 543/FabianCPA 
DAMAGES WHER LIABILITY IS LIMITED
- The parties may limit the liability of the carrier to an
agreed value unless the shipper declares a higher value
and pays a higher rate of freight. The value of the goods
stated in the BOL is conclusive between the parties; the
shipper is not allowed to prove a higher value. It is only in
cases where the carrier‟s fault is so gross as to amount to
actual fraud, that the actual amount of losses and damages
suffered may be proved by the shipper.
SHIPPERS LIEN
- Shipper has a lien over the horses, vehicles, vessels,
equipment, and all the other principal and accessory
means of transportation as a security for the payment of
the value of the goods which the carrier must pay in cases
of loss or misplacement.
TWO OR MORE CARRIERS
ARTICLE 373 - A carrier who delivers merchandise to a
consignee by virtue of agreements or combined services with
other carriers shall assume the obligations of the carriers who
preceded him, reserving his right to proceed against the latter
if he should not be directly responsible for the fault which gives
rise to the claim of the shipper or 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 sender 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 reserve. The
reservations made by the latter shall not exempt them,
however, from the liabilities they may have incurred by reason
of their own acts.
COMBINED CARRIER AGREEMENT
GENERAL RULE:
In case of a contract of transportation of several legs, each
carrier is responsible for its particular leg in the contract.
EXCEPTION:
A combined carrier agreement where a carrier makes
itself liable assuming the obligations and acquiring as well
the rights and causes of action of those which preceded it.
COMPLIANCE WITH ADMINISTRATIVE REGULATIONS
ARTICLE 377 - The carrier shall be liable for all the
consequences arising from noncompliance on his part with the
formalities prescribed by the laws and regulations of the public
administration during the entire course of the trip and on the
arrival at the point of destination, except when his omission
arises from his having been induced into error by false
statements of the shipper in the declaration of the merchandise.
If the carrier has acted in accordance with a formal order
received from the shipper or consignee of the merchandise
both shall incur liability.
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NOTES NOTES
OBLIGATION TO KEEP REGISTRY
ARTICLE 378 - Transportation agents shall be obliged to keep
a special registry, with the formalities required by Article 36,
in which there shall be entered, in progressive order of
numbers and dates, all the goods the transportation of which is
undertaken, stating the circumstances required by Articles 350
and others following for the respective bills of lading.
RIGHTS AND OBLIGATIONS OF SHIPPER AND/OR
CONSIGNEE
1. RIGHT TO DAMAGES
2. RIGHT TO ABANDON
3. RIGHT TO CHANGE CONSIGNMENT
ARTICLE 360 - The shipper may, without changing the place
where the delivery is to be made, change the consignment of
the goods delivered to the carrier, and the latter shall comply
with his orders, provided that at the time of making the change
of the consignee the bill of lading subscribed by the carrier be
returned to him, if one were issued, exchanging it for another
containing the novation of the contract. The expenses arising
from the change of consignment shall be defrayed by the
shipper.
4. OBLIGATION TO PAY
TRANSPORTATION CHARGES
ARTICLE 374 - The consignees to whom the remittance may
have been made cannot defer the payment of the expenses and
transportation charges on the goods that they received after
twenty-four hours have elapsed from the time of the delivery;
and in case of delay in making this payment, the carrier may
request the judicial sale of the goods he transported to a
sufficient amount to cover the transportation charges and the
expenses incurred.
ARTICLE 375 - The goods transported shall be specifically
obligated to answer for the transportation charges and for the
expenses and fees caused by the same during their
transportations, or until the time of their delivery. This special
right shall be limited to eight days (Now 30 Days) after the
delivery has been made, and after said prescription the carrier
shall have no further right of action than that corresponding to
an ordinary creditor.
ARTICLE 376 - The preference of the carrier to the payment
of what is due him for the transportation and expenses of the
goods delivered to the consignee shall not be affected by the
bankruptcy of the latter, provided the action is brought within
the eight days mentioned in the foregoing article.
Art. 2241 - With reference to specific movable
property of the debtor, the following claims or liens
shall be preferred: (9) Credits for transportation,
upon the goods carried, for the price of the contract
and incidental expenses, until their delivery and for
thirty days thereafter;
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ENFORCEMENT OF PAYMENT OF CHARGES by carrier
1) Art 374 – Judicial sale of the goods transported
2) Art 375 – Creating a lien in favor of the carrier on the
goods transported.
- Bankruptcy of the consignee shall not cut of the
preference of the carrier, provided the claim was made
within 30 days from the delivery date.
- After the lapse of 30 days, the right of preference given to
the carrier prescribes and his only remedy left is by
ordinary actions.
5. OBLIGATION TO RETURN BILL OF LADING
APPLICABILITY OF PROVISIONS
ARTICLE 379 - The provisions contained in Articles 349 and
following shall also be understood as relating to persons who,
although they do not personally effect the transportation of
commercial goods, contract to do so through others, either as
contractors for a special and fixed transaction or as freight
and transportation agents. In either case they shall be
subrogated to the place of the carriers with regard to the
obligations and liability of the latter, as well as with regard to
their right.
B. MARITIME COMMERCE
(Arts. 573-869)
Applicable laws: Code of Commerce; COGSA; Salvage Law
Governing body: Marina (Maritime Industry Authority)
Functions of Marina: CF PD 474
1. Issue certificate of public conveniece for the
operation of domestic and overseas water carriers;
2. Register and issue certificate, licenses, or documents
necessary or incident thereto.
Q: What is the requirement for a carrier to operate domestic
sea voyages?
A: Certificate of Public Convenience (CPC)
MARITIME/ADMIRALTY LAW
 It is the system of laws which particularly relates to the affairs
and business of the sea, to ships, their crews and navigation,
and to maritime conveyance of persons and property. (Notes
and Cases on the Law on Transportation and Public Utilities,
Aquino & Hernando, citing Francisco, p.254)
 Maritime laws apply only to maritime trade and sea voyages.
(Pandect of Commercial Law and Jurisprudence, Justice Jose
Vitug, 1997 ed.)
 Arrastre service is NOT maritime in character. It refers to a
contract for the unloading of goods from a vessel. (ICTSI vs.
Prudential Guarantee, 320 SCRA 244)
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NOTES NOTES
CHARACTERISTICS OF MARITIME TRANSACTION
1. Real - similar to transactions over real property with
respect to effectivity against third persons which is done
through registration. (Rubiso vs. Rivera, 37 Phil. 72). The
evidence of real nature is shown by: 1) the limitation of the
liability of the agents to the actual value of the vessel and
the freight money; and 2) the right to retain the cargo and
embargo and detention of the vessel (Luzon Stevedoring
Corp v. CA, 156 SCRA 169);
2. Hypothecary - the liability of the owner of the value of the
vessel is limited to the vessel itself (Doctrine of Limited
Liability).
 The real and hypothecary nature of maritime law simply
means that the liability of the carrier in connection with losses
related to maritime contracts is confined to the vessel, which
stands as the guaranty for their settlement. (Aboitiz Shipping
Corp. vs. General Accident Fire and Life Assurance Corp. 217
SCRA 359).
Kinds of VESSELS (under PD 474)
"Vessels" or "Watercraft" Any barge, lighter, bulk carrier,
passenger ship freighter, tanker, container ship, fishing boats
or other artificial contrivance utilizing any source of motive
power, designed, used or capable of being used as a means of
water transportation operating either as common contract
carrier, including fishing vessels covered under Presidential
Decree No. 43, except
(1) those owned and/or operated by the Armed Forces
of the Philippines and by foreign governments for
military purposes, and
(2) bancas, sailboats and other waterborne contrivance
of less than three(3) gross tons capacity and not
motorized.
MERCHANT VESSEL
 Vessel engaged in maritime commerce, whether foreign or
otherwise. (Bar Review Materials in Commercial Law, Jorge
Miravite, 2002 ed.)
 Constitutes property which may be acquired and transferred
by any of the means recognized by law. They shall continue to
be considered as personal property. (Arts. 573, 585)
 They are susceptible to maritime liens such as for the repair,
equipping and provisioning of the vessel in the preparation of a
voyage, as well as mortgage liabilities, in satisfaction of which
a vessel may be validly arrested and sold. (Ship Mortgage
Decree of 1978)
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HOW OWNERSHIP OF A VESSEL MAY BE ACQUIRED
ARTICLE 573. Merchant vessels constitute property which
may be acquired and transferred by any of the means
recognized by law1.
The acquisition of a vessel must be included in a written
instrument, which shall not produce any effect with regard to
third persons if not recorded in the mercantile registry.
The ownership of a vessel shall also be acquired by the
possession thereof in good faith for THREE YEARS, with a
good title duly recorded.
In the absence of any of these requisites, uninterrupted
possession for TEN YEARS shall be necessary in order to
acquire ownership.
A captain cannot acquire by prescription the ship of which he is
in command.
NOTES:
Q: What kind of property is a vessel?
A: Movable or personal, but considered to a certain extent as
real property because ownership must be evidenced by
certificate of ownership and transfers must be registered in the
proper registry to bind 3rd persons, and also on account of
their value and importance in the world of commerce. However
a Vessel is Not a merchandise.
Requisites for Legal Acquisition of a Merchant Vessel:
1. Must appear in a written instrument;
2. Recorded in the proper registry -- under EO 125,
transaction must be registered with the Marina but now
this is being conducted by the Philippine Ports
Authority (PPA). / office of the Collector of Customs/
Philippine Coast Guard
VESSELS REQUIRED TO BE REGISTERED
1) All vessels used in Philippine waters, not being a
transient o foreign registry, shall be registered with
the PPA within 15 days after vessel became subject to
registration
2) A vessel 3 TONS OR LESS shall not be registered
unless the owner shall so desire.
WHERE REGISTRATION BE EFFECTED
a) at its home port
b) at the nearest Coast Guard District or Station
1
In relation to Art. 712 of the Civil Code:
a. Purchase and sale
b. Construction,
c. Capture
d. Donation;
e. Testate or intestate succession;
f. Barter etc.
g. By prescription (3 years if possession in good faith, with just
title duly recorded, otherwise, 10 years)
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NOTES NOTES
CERTIFICATE OF PHILIPPINE REGISTRY
 15 tons gross or less – optional
 More than 15 tons - mandatory
CERTIFICATE OF OWNERSHIP
 5 tons gross or less, owner does not take certificate of
Philippine registry - optional
 More than 5 tons - mandatory
REGISTRATION is OPTIONAL
 3 tons gross or less - optional
 More than 3 tons - mandatory
Robiso vs. Rivera: It is undeniable that the defendant Rivera
acquired by purchase the pilot boat Valentina on a date prior
to that of the purchase and adjudication made at public
auction, by and on behalf of the plaintiff Rubiso; but it is no less
true that the sale of the vessel by Sy Qui to Florentino E.
Rivera, on January 4, 1915, was entered in the customs registry
only on March 17, 1915, while its sale at public auction to
Fausto Rubiso on the January 23, 1915 was recorded in the
office of the Collector of Customs on the January 27, 1915, and
in the commercial registry on March 4, following; that is, the
sale on behalf of the defendant Rivera was prior to that made at
public auction to Rubiso, but the registration of this latter sale
was prior by many days to the sale made to the defendant.
The requisite of registration in the registry, of the purchase of a
vessel, is necessary and indispensable in order that the
purchaser's rights may be maintained against a claim filed by a
third person.
In view of said legal provisions, it is undeniable that the
defendant Florentino E. Rivera's rights cannot prevail over
those acquired by Fausto Rubiso in the ownership of the pilot
boat Valentina, inasmuch as, though the latter's acquisition of
the vessel at public auction, on January 23, 1915, was
subsequent to its purchase by the defendant Rivera,
nevertheless said sale at public auction was antecedently
recorded in the office of the Collector of Customs, on January
27, and entered in the commercial registry-an unnecessary
proceeding--on March 4th; while the private and voluntary
purchase made by Rivera on a prior date was not recorded in
the office of the Collector of Customs until many days
afterwards, that is, not until March 17, 1915.
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.
REDEMPTION PRE-EMPTION
Arises after the sale is made Before making the sale
Dissolves a perfected and Prevents the sale to third
consummated sale parties
The action is against the The action is against the seller
purchaser
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ARTICLE 576.In the sale of a vessel it shall always be
understood as included the rigging, masts, stores and engine
of a streamer appurtenant thereto, which at the time belongs to
the vendor. The arms, munitions of war, provisions and fuel
shall not be considered as included in the sale. The vendor
shall be under the obligation to deliver to the purchaser a
certified copy of the record sheet of the vessel in the registry
up to the date of the sale.
ARTICLE 577.If the alienation of the vessel should be made
while it is on a voyage, the freightage which it earns from the
time it receives its last cargo shall pertain entirely to the
purchaser, and the payment of the crew and other persons who
make up its complement for the same voyage shall be for his
account. If the sale is made after the vessel has arrived at
the port of its destination, the freightage shall pertain to the
vendor, and the payment of the crew and other individuals who
make up its complement shall before his account, unless the
contrary is stipulated in either case.
ARTICLE 582.After the bill of the judicial sale at public
auction has been executed and inscribed in the registry of
vessels, all the other liabilities of the vessel in favor of the
creditors shall be considered extinguished. But if the sale
should have been voluntary and should have been made
while the vessel was on a voyage, the creditors shall
preserve their rights against the vessel until it returns to the
port of her registry, and three months after the inscription of
the sale in the registry of vessel or the arrival.
Repair and Maintenance of Vessel during the Voyage
(Art. 583)
ARTICLE 583. If the ship being on a voyage the captain
should find it necessary to contract one or more of the
obligations mentioned in Nos. 8 and 9 of Article 580, he shall
apply to the judge or court if he is in Philippine territory, and
otherwise to the Filipino Consul should there be one, and, in
his absence to the judge or court or to the proper local
authority, presenting the certificate of the registry of the vessel
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 in the certificate of their
result, in order that it may be recorded in the registry when the
vessel returns to the port of her registry, or so that it can be
admitted as a legal and preferred obligation in case of sale
before the return, by reason of the sale of the vessel by virtue
of a declaration of unseaworthiness.
The lack of this formality shall make the captain personally
liable to the creditors who may be prejudiced through his fault.
Notes:
1. Article 580 Nos. 8 and 92 = contract obligations for the repair
and equipment of the vessel and obtain loans and bottomry.
2
Art. 580 (8) The part of the price which has not been paid the last
vendor, the credits pending for the payment of material and work in the
construction of the vessel, when it has not navigated, and those arising
from the repair and equipment of the vessel and its provisioning with
victuals and fuel during its last voyage. x x x
(9) The amounts borrowed on bottomry bonds before the departure of
the vessel, proven by means of the contracts executed according to law
and recorded in the commercial registry; the amounts borrowed during
the voyage with the authority mentioned in the foregoing subdivision,
Page
NOTES NOTES
 the part of the price which has not been paid,
 unpaid credits for materials and labor in the
construction of the vessel,
 repair and equipment
 the amount borrowed on bottomry
 insurance premium
2. Why are these formalities required for the captain? Because
omission to follow these requirements will make the captain
personally liable. He cannot ask for a refund from the carrier.
Persons who take part in marine commerce
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
I. SHIP OWNER (proprietario) - Person who has possession,
control and management of the vessel and the consequent right
to direct her navigation and receive freight earned and paid,
while his possession continues
 “Husbanding Agent” – the general agent of the owner in
relation to the ship, with powers, among others, to engage
the vessel for general freight and the usual conditions, and
setter for freight and adjust averages with the merchant.
II. SHIP AGENT (naviero) - By agent is understood the person
entrusted with the provisioning of a vessel, or who represents
her in the port in which she happens to be. Also includes the
shipowner. Not a mere agent under civil law; he is solidarily
liable with the ship owner.
 Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject to Art.609;
3. Contract in the name of the owners with respect to
repairs, details of equipment, armament, provisions
of food and fuel, and freight of the vessel, and all that
relate to the requirements of navigation;
4. Order a new voyage, make a new charter or insure
the vessel after obtaining authorization from the
shipowner or if granted in certificate of appointment.
ARTICLE 586. The owner of a vessel and the 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 therein.
ARTICLE 587.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 equipment and the freight it
may have earned during the voyage.
filling the same requisites, and the insurance premium, proven by the
policy of the contract or certificate taken from the books of the broker.
28 PARA BRIGHT
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Civil Liabilities of the Shipowner And Ship Agent
1. All contracts of the captain, whether authorized or not, to
repair, equip and provision the vessel provided it was
invested for the benefit of the vessel; (Art. 586)
2. Loss and damage to the goods loaded on the vessel
without prejudice to their right to free themselves from
liability by abandoning the vessel to the creditors. (Art.
587)
3. Damages to third persons for tort or quasi delict
committed by the captain, except collision with another
vessel.
4. Damages in case of collision due to the fault, negligence,
or want of skill of the captain, sailing mate, or any other
member of the complement (Art. 826)
 If lawful acts of captain – SO/SA primarily liable
 If unlawful acts of captain – SO/SA solidarily liable
NB: Charterer of a ship is not solidarily liable for the negligent
acts of the captain if he has no control over him.
Notes:
Macondray vs. Provident (2004) - Canpotex, shipper,
shipped and loaded on board the vessel M/V „Trade Carrier‟,
5000 metric tons of Standard Grade Muriate of Potash in bulk
for transportation to and delivery at the port of Sangi, Toledo
City, Cebu, in favor of ATLAS FERTILIZER CORPORATION,
Consignee. Upon arrival, it was discovered that the shipment
sustained losses.
MACONDRAY filed ANSWER, denying liability over the losses,
having NO absolute relation with defendant TRADE AND
TRANSPORT, the alleged operator of the vessel who
transported the subject shipment; that accordingly,
MACONDRAY is the local representative of the SHIPPER; the
charterer of M/V TRADE CARRIER and not party to this case;
that it has no control over the acts of the captain and crew of the
Carrier and cannot be held responsible for any damage arising
from the fault or negligence of said captain and crew.
The CA affirmed the trial court‟s finding that petitioner was not
the agent of Trade and Transport. The appellate court ruled,
however, that petitioner could still be held liable for the
shortages of the shipment, because the latter was the ship
agent of Canpotex Shipping Services Ltd. -- the shipper and
charterer of the vessel M/V Trade Carrier.
H: In the present case, we find no compelling reason to
overturn the Court of Appeals in its categorical finding that
petitioner was the ship agent. Such factual finding was not in
conflict with the trial court‟s ruling, which had merely stated
that petitioner was not the agent of Trade and Transport.
Indeed, although it is not an agent of Trade and Transport,
petitioner can still be the ship agent of the vessel M/V Trade
Carrier.
Article 586 of the Code of Commerce states that a ship agent is
“the person entrusted with provisioning or representing the
vessel in the port in which it may be found.”
Hence, whether acting as agent of the owner of the vessel or
as agent of the charterer, petitioner will be considered as
the ship agent and may be held liable as such, as long as
the latter is the one that provisions or represents the vessel.
Page
NOTES NOTES
The trial court found that petitioner “was appointed as local
agent of the vessel, which duty includes arrangement for the
entrance and clearance of the vessel.” Further, the CA found
and the evidence shows that petitioner represented the vessel.
The latter prepared the Notice of Readiness, the Statement of
Facts, the Completion Notice, the Sailing Notice and Custom‟s
Clearance. Petitioner‟s employees were present at Sangi,
Toledo City, one day before the arrival of the vessel, where
they stayed until it departed. They were also present during
the actual discharging of the cargo. Moreover, Mr. de la Cruz,
the representative of petitioner, also prepared for the needs of
the vessel, like money, provision, water and fuel.
These acts all point to the conclusion that it was the entity that
represented the vessel in the Port of Manila and was the ship
agent within the meaning and context of Article 586 of the
Code of Commerce.
III. CAPTAINS AND MASTERS
CAPTAIN - one who governs vessels and navigates the high
seas or of large dimension and importance.
MASTER- commands small ships and engages exclusively in
coastwide trade.
The terms have the same meaning, but are particularly used in
accordance with the size of the vessel governed and the scope
of transportation, i.e., large and overseas, and small and
coastwise, respectively. But For purposes of maritime
commerce, captain, master, patron, they all mean the same.
 They are the chiefs or commanders of ships.
 Confidential and managerial employee, cannot be
arbitrarily dismissed without due process of law and
entitled to security of tenor.
 May be discharged if contract does not fix a period of
voyage but the SO/SA must pay salary for contract without
indemnity.
Qualifications of Captain
ARTICLE 609. Captains and masters of vessels must be
Filipino having legal capacity to bind themselves in
accordance with this Code, and must prove that they have the
skill, capacity, and qualifications required to command and
direct the vessel, as established by marine laws, ordinances, or
regulations, or by those of navigation, and that they are not
disqualified according to the same for the discharge of the
duties of that position.
If the owner of a vessel desires to be the captain thereof and
does not have the legal qualifications therefor, he shall limit
himself to the financial administration of the vessel, and shall
intrust her navigation to a person possessing the qualifications
required by said ordinances and regulations.
 Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required physical and mental
examinations required for licensing him as such. (Art.
609)
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Coastwise Lighterage vs. CA - Here, the patron of the lighter
admitted that he was not licensed.
H: Clearly, petitioner Coastwise Lighterage's embarking on a
voyage with an unlicensed patron violates Art. 609. It cannot
safely claim to have exercised extraordinary diligence, by
placing a person whose navigational skills are questionable, at
the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without
license to navigate, lacks not just the skill to do so, but also the
utmost familiarity with the usual and safe routes taken by
seasoned and legally authorized ones. Had the patron been
licensed, he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the
sunken derelict ship that lay on their way to Pier 18.
As a common carrier, petitioner is liable for breach of the
contract of carriage, having failed to overcome the
presumption of negligence with the loss and destruction of
goods it transported, by proof of its exercise of extraordinary
diligence.
General Functions of a Captain:
ARTICLE 610. The following powers are inherent in the
position of captain or master of a vessel:
1) To appoint or make contracts with the crew in the absence
of the agent and propose said crew, should said agent be
present; but the agent shall not be permitted to 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 agent.
3) To impose, in accordance with the agreements and the laws
and regulations of the merchants marine, on board the
vessel, correctional punishment upon those who do not
comply with his orders or who conduct themselves against
discipline, holding a preliminary investigation on the
crimes committed on board the vessel on the high seas,
which shall be turned over to the authorities, who are to
take cognizance thereof, at the first port touched.
4) To make contracts for the charter of the vessel in the
absence of the agent or of her consignee, acting in
accordance with the instructions received and protecting
the interests of the owner most carefully.
5) To adopt all the measures which may be necessary to keep
the vessel well supplied and equipped, purchasing for the
purpose all that may be necessary, provided there is no
time to request instructions of the agent.
6) To make, in similar urgent cases and on a voyage, the
repairs to the hull and engines of the vessel and to her
rigging and equipment which are absolutely necessary in
order for her to be able to continue and conclude her
voyage; but if she should arrive at a point where there is a
consignee of the vessel, he shall act in concurrence with the
latter.
 Inherent powers:
1. Appoint crew in the absence of ship agent;
2. Command the crew and direct the vessel to its port of
destination;
3. Impose correctional punishment on those who, while
on board vessel, fail to comply with his orders or are
wanting in discipline;
4. Make contracts for the charter of vessel in the
absence of ship agent.
5. Supply, equip, and provision the vessel; and
6. Order repair of vessel to enable it to continue its
voyage. (Art. 610)
Page
NOTES NOTES
 Nature of position (3-fold character):
1. General agent of the shipowner;
2. Commander and Technical director of the vessel;
3. Representative of the government of the country
under whose flag he navigates.
Notes:
Inter-orient Maritime vs. NLRC- Here, the captain refused to
leave the port, contrary to the ship agent's instructions, until the
supplies he requested necessary for the welding-repair of the
turbo-charger and the economizer were delivered.
Subsequently, the captain was dismissed. Issue: Was the
captain remiss of his duties?
H: NO. The captain has the authority to decide. The captain of a
vessel is a confidential and managerial employee within the
meaning of the above doctrine. A master or captain, for
purposes of maritime commerce, is one who has command of a
vessel. A captain commonly performs three (3) distinct roles:
(1) he is a general agent of the shipowner; (2) he is also
commander and technical director of the vessel; and (3) he is a
representative of the country under whose flag he navigates.
Of these roles, by far the most important is the role
performed by the captain as commander of the vessel; for such
role (which, to our mind, is analogous to that of "Chief
Executive Officer" [CEO] of a present-day corporate
enterprise) has to do with the operation and preservation of the
vessel during its voyage and the protection of the passengers
(if any) and crew and cargo. In his role as general agent of the
shipowner, the captain has authority to sign bills of lading,
carry goods aboard and deal with the freight earned, agree
upon rates and decide whether to take cargo. The ship captain,
as agent of the shipowner, has legal authority to enter into
contracts with respect to the vessel and the trading of the
vessel, subject to applicable limitations established by statute,
contract or instructions and regulations of the shipowner. To
the captain is committed the governance, care and
management of the vessel. Clearly, the captain is vested with
both management and fiduciary functions.
More importantly, a ship's captain must be accorded a
reasonable measure of discretionary authority to decide what
the safety of the ship and of its crew and cargo specifically
requires on a stipulated ocean voyage. The captain is held
responsible, and properly so, for such safety. He is right there
on the vessel, in command of it and (it must be presumed)
knowledgeable as to the specific requirements of
seaworthiness and the particular risks and perils of the voyage
he is to embark upon. The applicable principle is that the
captain has control of all departments of service in the vessel,
and reasonable discretion as to its navigation. It is the right
and duty of the captain, in the exercise of sound discretion and
in good faith, to do all things with respect to the vessel and its
equipment and conduct of the voyage which are reasonably
necessary for the protection and preservation of the interests
under his charge, whether those be of the shipowners,
charterers, cargo owners or of underwriters. It is a basic
principle of admiralty law that in navigating a merchantman,
the master must be left free to exercise his own best judgment.
The requirements of safe navigation compel us to reject any
suggestion that the judgment and discretion of the captain of a
vessel may be confined within a straitjacket, even in this age of
electronic communications.
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 Sources of funds to comply with the inherent powers of
the captain (in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
Solidary Liabilities of the Ship Agent/Shipowner/Captain
for Acts Done by the Captain towards Passengers and
Cargoes
1. Damages to vessel and to cargo due to lack of skill
and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of marine
regulations. (Art. 618)
PILOT
 A person duly qualified, and licensed, to conduct a vessel
into or out of ports, or in certain waters.
 The term generally connotes a person taken on board at a
particular place for the purpose of conducting a ship through a
river, road or channel, or from a port.
 Master pro hac vice for the time being in the command and
navigation of the ship.
 While in exercising his functions a pilot is in sole command
of the ship and supersedes the master for the time being in the
command and navigation of the ship, the master does not
surrender his vessel to the pilot and the pilot is not the master.
There are occasions when the master may and should interfere
and even displace the pilot, as when the pilot is obviously
incompetent or intoxicated (Far Eastern Shipping Company vs.
CA). Therefore, the Master may still be made liable for the
damage caused by the Pilot if the latter is incompetent or
intoxicated.
 Compulsory Pilotage – States possessing harbors have
enacted laws or promulgated rules requiring vessels
approaching their ports to take on board pilots licensed under
the local laws. (Notes and Cases on the Law on Transportation
and Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 518)
Page
NOTES NOTES
LIABLITY OF PILOT
GENERAL RULE: On compulsory pilotage grounds, the
Harbor Pilot is responsible for damage to a vessel or to life or
property due to his negligence.
EXCEPT:
1. Accident caused by force majeure or natural calamity
provided the pilot exercised prudence and extra
diligence to prevent or minimize damages.
2. Countermand or overrule by the master of the vessel in
which case the registered owner of the vessel is liable.
(Sec.11, Art.III PPA Admin Order 03-85)
Far Eastern Shipping vs. CA- There was a Russian vessel that
arrived in Manila, owned by Far Eastern Shipping. It was
assigned berth no. 4. There is such a thing as compulsory
pilotage -- there is a pilot assigned to pilot the vessel outside
the break water until it reaches its birth. In this case, A was
assigned to the vessel. The captain of the vessel was beside A.
Under the rules of compulsory pilotage, once a pilot takes over
the helm, the captain will have to stand aside and surrender all
his authority to the pilot who is more familiar with the docking
maneuvers. Now, A hit the pier. PPA filed a complaint against
Far Eastern Shipping. Issue: Can the captain of the vessel be
considered negligent in this case? Because the only way that
Far Eastern shipping can be held liable is for the courts to
declare the captain negligent.
HELD: YES.
A pilot, in maritime law, is a person duly qualified, and
licensed, to conduct a vessel into or out of ports, or in certain
waters. In a broad sense, the term "pilot" includes both (1)
those whose duty it is to guide vessels into or out of ports, or in
particular waters and (2) those entrusted with the navigation of
vessels on the high seas. However, the term "pilot" is more
generally understood as a person taken on board at a
particular place for the purpose of conducting a ship through a
river, road or channel, or from a port.
Under English and American authorities, generally
speaking, the pilot supersedes the master for the time being in
the command and navigation of the ship, and his orders must
be obeyed in all matters connected with her navigation. He
becomes the master pro hac vice and should give all directions
as to speed, course, stopping and reversing, anchoring, towing
and the like. And when a licensed pilot is employed in a place
where pilotage is compulsory, it is his duty to insist on having
effective control of the vessel, or to decline to act as pilot.
Under certain systems of foreign law, the pilot does not take
entire charge of the vessel, but is deemed merely the adviser
of the master, who retains command and control of the
navigation even on localities where pilotage is compulsory.
While it is indubitable that in exercising his functions a pilot-is
in sole command of the ship and supersedes the master for the
time being in the command and navigation of a ship and that he
becomes master pro hac vice of a vessel piloted by him, there
is overwhelming authority to the effect that the master does
not surrender his vessel to the pilot and the pilot is not the
master. The master is still in command of the vessel
notwithstanding the presence of a pilot. There are occasions
when the master may and should interfere and even
displace the pilot, as when the pilot is obviously incompetent
31 PARA BRIGHT
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or intoxicated and the circumstances may require the master to
displace a compulsory pilot because of incompetency or
physical incapacity. If, however, the master does not observe
that a compulsory pilot is incompetent or physically
incapacitated, the master is justified in relying on the pilot, but
not blindly.
The master is not wholly absolved from his duties while a pilot
is on board his vessel, and may advise with or offer suggestions
to him. He is still in command of the vessel, except so far as her
navigation is concerned, and must cause the ordinary work of
the vessel to be properly carried on and the usual precaution
taken. Thus, in particular, he is bound to see that there is
sufficient watch on deck, and that the men are attentive to their
duties, also that engines are stopped, towlines cast off, and the
anchors clear and ready to go at the pilot's order.
A perusal of Capt. Kabankov's testimony makes it apparent that
he was remiss in the discharge of his duties as master of the
ship, leaving the entire docking procedure up to the pilot,
instead of maintaining watchful vigilance over this risky
maneuver.
In sum, where a compulsory pilot is in charge of a ship, the
master being required to permit him to navigate it, if the
master observes that the pilot is incompetent or physically
incapable, then it is the duty of the master to refuse to permit
the pilot to act. But if no such reasons are present, then the
master is justified in relying upon the pilot, but not blindly.
Under the circumstances of this case, if a situation arose where
the master, exercising that reasonable vigilance which the
master of a ship should exercise, observed, or should have
observed, that the pilot was so navigating the vessel that she
was going, or was likely to go, into danger, and there was in
the exercise of reasonable care and vigilance an opportunity
for the master to intervene so as to save the ship from danger,
the master should have acted accordingly. The master of a
vessel must exercise a degree of vigilance commensurate with
the circumstances.
In general, a pilot is personally liable for damages caused by
his own negligence or default to the owners of the vessel, and
to third parties for damages sustained in a collision. Such
negligence of the pilot in the performance of duty constitutes a
maritime tort. At common law, a shipowner is not liable for
injuries inflicted exclusively by the negligence of a pilot
accepted by a vessel compulsorily. The exemption from
liability for such negligence shall apply if the pilot is actually in
charge and solely in fault. Since, a pilot is responsible only for
his own personal negligence, he cannot be held accountable
for damages proximately caused by the default of others, or, if
there be anything which concurred with the fault of the pilot in
producing the accident, the vessel master and owners are
liable.
WILDVALLEY SHIPPING VS. CA - Almost same facts, except
in this case the vessel was Filipino owned and it arrived in
Velenzuela. There was a compulsory pilotage. When the pilot
boarded the vessel, the captain left the bridge. When it
entered the Venezuelan channel, the vessel experienced some
vibration and the pilot assured the captain that the vibrations
were normal - the result of the shallowness of the channel. But
the vessel ran aground thereafter.
Held: The captain in this case was not negligent.
We find that the grounding of the vessel is attributable to the
pilot. When the vibrations were first felt the watch officer asked
him what was going on, and pilot Vasquez replied that "(they)
Page
NOTES NOTES
were in the middle of the channel and that the vibration was as
(sic) a result of the shallowness of the channel.
The law does provide that the master can countermand or
overrule the order or command of the harbor pilot on board.
The master of the Philippine Roxas deemed it best not to order
him (the pilot) to stop the vessel. The master of the Philippine
Roxas deemed it best not to order him (the pilot) to stop the
vessel, mayhap, because the latter had assured him that they
were navigating normally before the grounding of the vessel.
Based on these declarations, it comes as no surprise to us that
the master chose not to regain control of the ship. Admitting his
limited knowledge of the Orinoco River, Captain Colon relied
on the knowledge and experience of pilot Vasquez to guide the
vessel safely.
So the SC gave conflicting decisions, but if you look at it, the SC
ruled in these ways only for one reason -- ruling in favor of
Filipinos. (Very good, Lyndon!:D)
Books to be carried by the captain
ARTICLE 612. The following obligations are inherent in
the office of captain: x x x
3. To have three folioed and stamped books, placing at the
beginning of each one a note of the number of folios it contains,
signed by the maritime official, and in his absence by the
competent authority.
In the first book, which shall be called "log book," he shall
enter every day the condition of the atmosphere, the prevailing
winds, the course sailed, the rigging carried, the horsepower
of the engines, the distance 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 is its cause, as well as the
imperfections and averages of the cargo, and the effects and
consequence of the jettison, should there be any; and in cases
of grave resolutions which require the advice or a meeting of
the officers of the vessel, or even of the passengers and crew,
he shall record the decision adopted. For the informations
indicated he shall make use of the binnacle book, and of the
steam or engine book kept by the engineer.
In the second book, called the "accounting book," he shall
enter all the amounts collected and paid for the account of the
vessel, entering specifically article by article, the sources of
the collection, and the amounts invested in provisions, repairs,
acquisition of rigging or goods, fuel, outfits, wages, and all
other expenses. 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, either directly or by delivery to their families.
In the third book, called "freight book," he shall record the
entry and exit of all the goods, stating their marks and
packages, names of the shippers and of the consignees, ports
of loading and unloading, and the freight earned. In the same
book he shall record the names and places of sailing of the
passengers and the number of packages of which their
baggage consists, and the price of the passage.
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 Duties of the Captain:
1. Bring on board the proper certificate and documents
and a copy of the Code of Commerce;
2. Keep a Log Book, Accounting Book and Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and unloading of
the cargo;
5. Be on deck while leaving or entering the port;
6. Protest arrivals under stress and in case of shipwreck;
7. Follow instructions of and render an accounting to the
ship agent;
8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by deceased
passengers and crew members;
10. Comply with the requirements of customs, health,
etc. at the port of arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or leaving a port. (Art.
612)
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.
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
Notes:
1. Of the three books, the log book is the most important;
Haverton Shipping vs. NLRC - What is the probative value of
the entries in the logbook? Can you use the log book as
evidence? YES. It is an official record of entries made by a
person in the performance of his duty required by law and are
prima facie evidence of the facts entered therein
Centennial vs. Dela Cruz: - In Wallem Maritime Services, Inc.
v. National Labor Relations Commission, citing Haverton
Shipping Ltd. v. National Labor Relations Commission, the
Court ruled that a copy of an official entry in the logbook is
legally binding and serves as an exception to the hearsay rule.
In the said case, however, there was no controversy as to the
genuineness of the said entry and the authenticity of the copy
presented in evidence.
In the instant case, respondent has consistently assailed the
genuineness of the purported entry and the authenticity of such
copy. He alleged that before his repatriation, there was no
entry in the ship's official logbook regarding any incident that
might have caused his relief; that Captain Kowalewski's
signature in such purported entry was forged. In support of his
allegations, respondent submitted three official documents
bearing the signature of Capt. Sczepan Kowalewski which is
different from the one appearing in Annex E. Thus, it was
incumbent upon petitioners to prove the authenticity of Annex
E, which they failed to do. Likewise, the purported report of
Capt. Kowalewski dated September 1, 2000 and the statements
of Safety Officer Khaldun Nacem Faridi and Chief Officer Josip
Milin also cannot be given weight for lack of authentication.
Page
NOTES NOTES
Although technical rules of evidence do not strictly apply to
labor proceedings, however, in the instant case, authentication
of the above-mentioned documents is necessary because their
genuineness is being assailed, and since petitioners offered no
corroborating evidence. These documents and their contents
have to be duly identified and authenticated lest an injustice
would result from a blind adoption of such contents. Thus, the
unauthenticated documents relied upon by petitioners are
mere self-serving statements of their own officers and were
correctly disregarded by the Court of Appeals.
DURATION OF LIABILITY of Captain
Do not forget the duration of liability under the Civil Code, Art.
1736.
With respect to the captain:
ARTICLE 619. - The captain shall be liable for the cargo from
the time it is turned over to him at the dock, or afloat
alongside the ship, at the port of loading until he delivers it on
the shores or on the discharging wharf, of the port of unloading
unless the contrary has been expressly agreed upon.
Notes:
1. If the goods are delivered to Aboitiz in the warehouse, does
the liability of Aboitiz start? Yes, because the goods are
transferred already to Aboitize. Does the liability of the captain
start? NO. Only once the goods are at the dock and until the
goods are delivered to the shore. So the captain has a shorter
period of responsibility as compared to the carrier. Of course,
unless is a stipulation to the contrary.
 No liability for the following:
1. Damages caused to the vessel or to the cargo by
force majeure;
2. Obligations contracted for the repair, equipment, and
provisioning of the vessel unless he has expressly
bound himself personally or has signed a bill of
exchange or promissory note in his name. (Art. 620)
MARITIME PROTEST
Definition: This has to be done by the captain if the
vessel/cargo is lost or injured. It is a written statement under
oath, made by the captain or master of the vessel after the
occurrence of an accident or disaster in which the vessel or
cargo is lost or injured with respect to circumstances attending
such occurrence.
Purpose: It is usually intended to show that the loss or damage
resulted from a peril of the sea or some other cause for which
neither the master nor owner was responsible. It concludes
with the protestation against any liability of the owner for such
loss or damage.
ARTICLE 624. 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 the
twenty-four hours following his arrival, and shall ratify it
within the same period when he arrives at the place of his
destination, immediately proceeding with the proof of the facts,
it not being permitted to open the hatches until this has been
done.
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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 the facts.
The authority or the consul abroad shall verify the said facts,
receiving a sworn statement of the members of the crew and
passengers who may have been saved, and taking the other
steps which may assist in arriving at the facts, drafting a
certificate of the result of the proceedings in the log book and
in that of the sailing mate, and shall deliver the original records
of the proceedings to the captain, stamped and folioed, with a
memorandum of the folios, which he must rubricate, for their
presentation to the judge or court of the port of destination.
The statement of the captain shall be believed if it is in
accordance with those of the crew and passengers; if they
disagree, the latter shall be accepted, unless there is proof to
the contrary
Procedure:
1. Protest must be made with a competent authority at
first port he touches;
2. within 24 hours following his arrival
3. Captain must ratify it within 24 hours when he arrives
at the place of destination where he must proceed
immediately with the proof of the facts
4. He must not open the hatches until all of the above
are done.
IV. OFFICERS AND CREW OF THE VESSEL
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
ARTICLE 627. - 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, obligations, and
responsibilities.
SAILING MATE - He is the 2nd chief of the vessel; takes place
of the captain and assumes all his duties and powers in case of
absence, sickness or death and shall assume all of his duties,
powers and responsibilities. Managerial employee,
 Duties:
1. Provide himself with maps and charts with astronomical
tables necessary for the discharge of his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on consultation with
the captain and the officers of the boat, following the
decision of the captain in case of disagreement;
4. Responsible for all the damages caused to the vessel
and the cargo by reason of his negligence. (Arts. 628
- 631)
Notes:
Centennial vs. Dela Cruz, supra. (2008) - Petitioners allege
loss of trust and confidence due to incompetence as the ground
for respondent's dismissal. Loss of trust and confidence is
premised on the fact that the employee holds a position whose
functions may only be performed by someone who has the
confidence of management. Such employee may be
managerial or rank-and-file, but the nature of his position
determines the requirements for a valid dismissal.
Page
NOTES NOTES
Article 627 of the Code of Commerce defines the Chief Mate,
also called Chief Officer or 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." A Chief Officer, therefore, is second in
command, next only to the captain of the vessel.
Chief Mate is a managerial employee because the said officer
performed the functions of an executive officer next in
command to the captain; that in the performance of such
functions, he is vested with powers or prerogatives to lay down
and execute management policies.
The exercise of discretion and judgment in directing a ship's
course is as much managerial in nature as decisions arrived at
in the confines of the more conventional board room or
executive office. Important functions pertaining to the
navigation of the vessel like assessing risks and evaluating the
vessel's situation are managerial in nature. Thus, respondent,
as Chief Officer, is a managerial employee; hence, petitioners
need to show by substantial evidence the basis for their claim
that respondent has breached their trust and confidence.
Petitioners' basis for dismissing respondent was the alleged
entry by Captain Kowalewski in the ship's logbook regarding
respondent's inexperience and inefficiency. A ship's
log/logbook is the official record of a ship's voyage which its
captain is obligated by law to keep wherein he records the
decisions he has adopted, a summary of the performance of the
vessel, and other daily events. A logbook is a respectable
record that can be relied upon when the entries therein are
presented in evidence.
SECOND MATE- (which is actually the 3rd mate since the
sailing mate is the 2nd mate) In case of disability,
disqualification of the captain and the sailing mate, he takes
over, assuming in such case their powers and responsibilities.
Third in command.
 Duties:
1. Preserve the hull and rigging of the vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment of the vessel, if
laid up. (Art. 632)
ENGINEERS - Officers of the vessel but have no authority
except in matters referring to the motor apparatus. When two
or more are hired, one of them shall be the chief engineer.
 Duties:
1. In charge of the motor apparatus, spare parts, and
other instruments pertaining to the engines;
2. Keep the engines and boilers in good condition;
3. Not to change or repair the engine without authority
of the captain;
4. Inform the captain of any damage to the motor
apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining the engine. (Art.
632)
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CREW OR SAILORS - Under the Code of Commerce, they are
enlisted by the captain in such number he may deem proper.
But I think at present the captain has no business with the crew
as they are hired by the carrier. Hired by the ship agent, where
he is present and in his absence, the captain hires them,
preferring Filipinos, and in their absence, he may take in
foreigners, but not exceeding 1/5 of the crew. (Art. 634)
 The aggregate of seamen who man a ship, or the ship‟s
company.
CLASSES OF SEAMAN’S CONTRACTS
1. By the voyage;
2. By the month; and
3. By share of profits
4. By freightage.
SEAMANS’ RIGHT TO RESCIND HIS CONTRACT
- A seaman ordinarily cannot rescind his contract. He may
do so only 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 the written permission of the captain.
Should he do so without such permission, the following are
the effects:
1) The second contract shall be void
2) The captain may compel him to perform his first
contract or at his expense to look for a person to
substitute him
3) He shall lose the wages earned on his first
contract
DISCHARGE:
Who can discharge? The shipowner or the captain can
discharge the crew (Art. 637)
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 the return to the place where the contract was
made, unless there are good reasons for the discharge, all in
accordance with Articles 636 et seq. of this Code.
ARTICLE 605. - If the contracts of the captain and members of
the crew with the agent should be for a definite period or
voyage, they cannot be discharged until the fulfillment of their
contracts, except for reasons of insubordination in serious
matters, robbery, theft, habitual drunkenness, and damage
caused to the vessel or to its cargo by malice or manifest or
proven negligence.
CONTRACT NO FIXED PERIOD/VOYAGE
 If the seamen contract is not for a definite period or
voyage, he may discharge them at his discretion. (Art. 603)
Page
NOTES NOTES
 Discharged before voyage
- salaries earned according to their contracts, and without
any indemnity whatsoever
 unless there is an express and specific agreement in
respect thereto.
 Discharged during voyage
 Without just cause
- Continue to receive their salaries until their return to
the port where the contract was made. They have to
be paid the full round trip
 With just cause
- Only salaries earned as of the time of discharge
CONTRACT FOR A FIXED PERIOD/VOYAGE
 If for a definite period, he may not discharge them until
after the fulfillment of their contracts, otherwise entitled to
damages.
 except for just cause
- Only salaries earned as of the time of discharge
Just cause/grounds:
a) Insubordination in serious matters;
b) Robbery;
c) Theft;
d) Habitual drunkenness;
e) Damage caused to the vessel or to its cargo through
malice or manifest or proven negligence. (Art. 605)
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.
WITH SPECIAL AGREEMENT
- May not be discharged except for causes mentioned in
Art. 205
WITHOUT SPECIAL AGREEMENT
- May be discharged for any cause provided that the agent
returns to him the amount of his interest in the vessel.
Notes:
Madrigal vs. Ogilvie - The services of Jesus G. Ogilvie,
Salvador Ortile, Antonio C. Militar and Miguel M. Fermin were
engaged by Manuel Mascuñana, master or captain employed
by the petitioner Madrigal Shipping Company, Inc., to man and
fetch the vessel "S.S. Bridge" from Sasebu, Japan. Pursuant
thereto the respondents were flown to Sasebu, Japan, and they
manned the vessel out of the port of Sasebu. On 16 March 1948,
when the vessel reached Hongkong, the respondents were
dismissed and replaced by a crew of Chinese nationality. The
respondents were flown back to Manila and paid their
respective salaries up to the date of their dismissal.(So they
were only paid from Japan to Hongkong)
35 PARA BRIGHT
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H: The services of the respondents were engaged by the
petitioner to man its vessel for a determinate time or voyage,
with an express stipulation that "this contract expires on the
arrival of this boat at the port of Manila." Not having been
discharged for any of the causes enumerated in the Art. 605,
the respondents are entitled to the amounts they respectively
seek to collect from the petitioner.
Wallem vs. Minister of Labor: Wallem hired X and Y as
seamen for 10 months. For instigating the International
Transport Federation (ITF) Chapter to demand higher wages
they were dismissed. Was the dismissal proper?
No, the seamen cannot be dismissed without legal cause
because the contract was for a definite period of 10 months.
What X and Y did was not a legal cause under Art. 605 but an
exercise of the rights of all workmen to seek better rights and
higher benefits x x x
Grounds if captain discharges crew: (of course, the captain
cannot discharge himself!)
ARTICLE 636. - Should a fixed period for which a sailor has
signed not be stated, he cannot be discharged until the end of
the return voyage to the port where he enrolled.
ARTICLE 637. - Neither can the captain discharge a sailor
during the time of his contract except for sufficient cause, the
following being considered as such:
1. The perpetration of a crime which disturbs order on the
vessel.
2. Repeated offenses of insubordination, against discipline,
or against the fulfillment of the service.
3. Repeated incapacity or negligence in the fulfillment of the
service to be rendered.
4. Habitual drunkenness.
5. Any occurrence which incapacitates the sailor to carry out
the work under his charge, with the exception of the
provisions contained in Article 644.
6. Desertion.
ARTICLE 644. - 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 be caused by an injury received in
the service or defense of the vessel the sailor shall be
attended and cured from the common funds, there being
deducted before anything else from the proceeds of the
freight, the cost of the attendance and cure.
Just Causes for the Discharge made by the Captain of
SEAMAN While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Page
NOTES NOTES
ARTICLE 637. - 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 former.
Should this not be the case, it shall be paid by the captain
personally.
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.
RULES IN CASE OF DEATH OF A SEAMAN
 The seaman‟s heirs are entitled to payment as follows:
1. If death is natural:
a. compensation up to time of death if engaged on wage
b. if by voyage – half of amount if death occurs on
voyage out; and full, if on voyage in
c. if by shares - none, if before departure; full, if after
departure
2. if death is due to defense of vessel - full payment;
3. if captured in defense of vessel - full payment;
4. if captured due to carelessness - wages up to the date of
the capture. (Art. 645)
Officers and crew of vessel shall incur no liability under
the following circumstances:
1. If, before beginning voyage, captain attempts to change it,
or a naval war with the power to which the vessel was
destined occurs;
2. If a disease breaks out and be officially declared an
epidemic in the port of destination;
3. If the vessel should change owner or captain. (Art. 647)
COMPLEMENT OF THE VESSEL
 All persons on board, from the captain to the cabin boy,
necessary for the management, maneuvers, and service, thus
including the crew, the sailing mates, engineers, stokers and
other employees on board not having specific designations.
 Does not include the passengers or the persons whom the
vessel is transporting.
WHAT IS A SUPERCARGO? - A person specially
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.
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 Persons who discharges administrative duties assigned to
him by ship agent or shippers, keeping an account and record
of transaction as required in the accounting book of the captain.
(Art. 649)
ARTICLE 649. - Supercargoes shall discharge on board the
vessel the administrative duties which the agent or shippers
may have assigned 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 shall respect the latter in his duties as chief
of the vessel.
The powers and liabilities 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 650. - All the provisions contained in the second
section of Title III, Book II, with regard to qualifications, manner
of making contracts, and liabilities of factors shall be
applicable to supercargoes.
ARTICLE 651. - Supercargoes cannot, 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 a special authorization thereto from the
principals.
DOCTRINE OF LIMITED LIABILITY/
ABANDONMENT IN MARINE TRANSPORTATION
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE) - “no vessel, no liability”
 Cases where applicable:
1. Art. 587 – civil liability for indemnities to third persons
which arise from the conduct of the captain for damaged
goods, including death or injury to passengers
2. Art. 590 – indemnities from negligent acts of the captain
(not the shipowner or ship agent)
3. Art. 837 – collision
4. Art. 643 – liability for wages of the captain and the crew
and for advances made by the ship agent if the vessel is
lost by shipwreck or capture
GENERAL RULE: The liability of shipowner and ship agent is
limited to the amount of interest in said vessel such that, where
vessel is entirely lost, the obligation is extinguished. (Luzon
Stevedoring v. Escano, 156 SCRA 169)
The interest extends to:
1) the vessel itself;
2) equipment;
3) freightage; and
4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)
Page
NOTES NOTES
EXCEPTIONS:
1. Claims under Workmen‟s Compensation (Abueg vs. San
Diego 77 Phil 730);
2. When the SO/SA is at fault, Injury or damage due to
shipowner or to the concurring negligence of the
shipowner and the captain;
3. The vessel is insured (Vasquez vs. CA 138 SCRA 553).
4. Expenses for repair on vessel completed before loss;
5. In case there is no total loss and the vessel is not
abandoned;
6. Collision between two negligent vessels;
7. When the voyage is not maritime, but only in a river, bay,
or gulf
8. When the vessel is not acting as a common carrier but a
private carrier
9. Chattel mortgage of vessel
As already discussed, the CCOG can limit its liability by
stipulation. (Art. 1749-1750) For CCOP, liability can only be
limited when Pax is carried for free and there is a stipulation.
Under Maritime Commerce, there is a way for a CC to limits
its liability even without a stipulation because it is the law itself
which proves for this liability.
Recall: ARTICLE 586 and 583 (SO/SA civilly liable for acts of
captain and obligations contracted)
ARTICLE 587. - The agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the
conduct of the captain in the care of the goods which the vessel
carried; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the
freight he may have earned during the voyage.
ARTICLE 590. - The owners of a vessel shall be civilly liable in
the proportion of their contribution to the common fund, for the
results of the acts of the captain, referred to in Article 587. Each
part owner may exempt himself from this liability by the
abandonment before a notary of the part of the vessel
belonging to him.
And in cases of COLLISION if the same is caused by the
captain alone, under
Art. 837: The civil liability contracted by the shipowners in the
cases prescribed in this section, shall be understood as limited
to the value of the vessel with all her appurtenances and all the
freight earned during the voyage.
ABANDONMENT
RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON
VESSEL
 Instances:
1. Art. 587 - In case of civil liability from indemnities to third
persons
2. Art. 687 - In case of leakage of at least ¾ of the contents
of a cargo containing liquids and
3. Sec. 138, Insurance Code - In case of constructive loss of
the vessel
 Abandonment of the vessel is necessary to limit the liability
of the shipowner. If no abandonment is made, the SO/SO‟s
liability is not extinguished or even limited. Limited liability is
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not applicable when no abandonment of the vessel is made. a. To offset against the innumerable hazards and perils
The only instance were abandonment is dispensed with is of the sea;
when the vessel is entirely lost (Luzon Stevedoring vs. CA 156 b. To encourage ship building and marine commerce
SCRA 169).
- Note that when abandonment is made in the instances
provided by law, it cannot be refused.

RIGHT OF ABANDONMENT
SHIPOWNER OR SHIP
AGENT
What may be abandoned
Vessel
Instances
1. In case of civil liability from
indemnities to third persons
(Art. 587);
2. In case of leakage of at least
¾ of the contents of a cargo
containing liquids (Art. 687)
3. Sec. 138, Insurance Code in
case of constructive loss of the
vessel
Effects
1. Transfer of ownership of the
vessel from the shipowner to
the shippers or insurer.
2. In case of (2), the insurer
must pay the insured as if there
was actual total loss of the
vessel.
Can a charterer make an abandonment?
- NO, because he cannot be considered in place of the
CONSIGNEE owner or the ship agent in matters regarding to the
responsibility pertaining to ownership and possession of
the vessel. Even if the charter is a bareboat or demise
Goods shipped charter.
1. Partial non-delivery,
EXCEPTIONS TO RIGHT OF ABANDONMENT
where the goods are useless (meaning even if the right to abandonment exists, the
without the others (Art. 363); SO/SA will still pay for more than the value of the vessel)
2. Goods are rendered
useless for sale or 1. When the vessel is properly insured - the insurance
consumption for the will take care of the liability, the value of which may
be more than the value of the vessel, freight, etc.
purposes for which they are
properly destined (Art. 365);
2. When the liability for repairs of the vessel was
and incurred before the loss of such vessel (favorite BQ)
3. In case of delay through
the fault of the carrier (Art. 3. When the liability is one which arises from the
371). provisions of the labor code.
1. Transfer of ownership on
When abandonment CANNOT BE MADE
the goods from the shipper
to the carrier.
1. When the voyage is not maritime, but only in a river,
2. Carrier should pay the
bay, or gulf
shipper the market value of
the goods at the point of
2. When the vessel is not acting as a common carrier
destination.
but a private carrier.

3. When the SO/SA is at fault, i.e. when there is lack of

Notes:
What is abandonment? It is equivalent to an offer of the value
of the vessel, her equipment and freight earned in return for an
exemption from liability.
So if the vessel sank and the sinking of the vessel was caused
entirely by the negligence of the captain, the SO or SA can be
held liable. But if SO or SA abandons the vessel, then the
liability will only be limited to the value of the vessel, the
freightage and the equipment.
The real and hypothecary nature of maritime law, therefore,
distinguishes it from Civil law and commercial law because of
this doctrine.
A shipping transportation contract is "real and hypothecary" in
nature under Art. 587 which accord/issue a shipowner/agent
the right of abandonment and by necessary implication, his
liability is confined to that to which he is entitled as of right to
abandon, meaning the vessel and all her equipment and the
freight she may have earned during the voyage.
Abandonment cannot be refused by the creditor,
acceptance is compulsory.
Reasons why SO/SA are given the right to abandonment
(Heirs of Amparo vs. delos Santos)
proper equipment, lack of technical training of the
crew, unlicensed crew members, captain. So any
kind of negligence, no matter how minute will
remove the right of abandonment.
Heirs of Amparo delos Santos vs. CA: The vessel left late
because the carrier decided to load more unmanifested
passengers and cargo. Because the vessel left late, it
encountered a typhoon and the vessel sank. According to the
Board of Marine Inquiry (BMI) the sinking was caused by the
fault of the captain and its officers in operating the vessel. The
SO/SA claimed the right to abandon, but the SC said that the
doctrine of limited liability cannot be invoked in this case
because there was fault or negligence on the part of the carrier
because it overloaded the vessel even if it was cleared to
leave. And everytime it is discovered that a vessel is
overloaded with cargo/pax, goodbye abandonment.
It must be stressed at this point that Article 587 speaks only of
situations where the fault or negligence is committed solely by
its the captain. In cases where the shipowner is likewise to be
blamed, Article 587 does not apply. Such a situation will be
covered by the provisions of the New Civil Code on Common
Carriers. Owing to the nature of their business and for reasons
of public policy, common carriers are tasked to observe
extraordinary diligence in the vigilance over the goods and for
the safety of its passengers (Article 1733, New Civil Code).
Further, they are bound to carry the passengers safely as far as

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NOTES NOTES 38 PARA BRIGHT
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the
circumstances (Article 1755, New Civil Code). Whenever death
or injury to a passenger occurs, common carriers are
presumed to have been at fault or to have acted negligently
unless they prove that they observed extraordinary diligence
as prescribed by Articles 1733 and 1755
PHILAMGEN VS. CA- According to the SC, despite the fact
that the vessel was sea worthy, it was not cargo worthy. The
cases and cases of coca-cola bottles were loaded on deck and
the vessel was top heavy making it easy to tilt in case of strong
winds.
Q: What if the sinking of the vessel is caused by fortuitous
event, is the right of abandonment present?
A: No, the SO or SA will be exempt from liability.
Other important cases:
Aboitiz Shipping v. General Accident (1993) - The sinking of
this vessel caused a lot of cases to be filed against aboitiz. In
this case, the SC applied the findings of the BMI where it was
found that the sinking of the vessel was caused by a fortuitous
event. The SC even exonerated the captain and crew so
nothing could be collected from Aboitiz
Monarch Insurance vs. CA (2000) - It was discovered that
Aboitiz was negligent. So the sinking of the ship was not caused
by fortuitous event and it was not also caused by the captain of
the ship. So therefore the right of abandonment does not exist
as there was fault or negligence on the part of the CC.
BUT in this case, there was so many claimants, about 110
claimants, the claim amounting to about 43 Million and the
insurance proceeds were only 14 million. The SC said that the
claimants cannot get their 43 million claims. They have to share
pro-rata the proceeds of the insurance. There is no preference
of credit.
In the instant case, there is, therefore, a need to collate all
claims preparatory to their satisfaction from the insurance
proceeds on the vessel M/V P. Aboitiz and its pending
freightage at the time of its loss. No claimant can be given
precedence over the others by the simple expedience of
having completed its action earlier than the rest. Thus,
execution of judgment in earlier completed cases, even these
already final and executory must be stayed pending
completion of all cases occasioned by the subject sinking. Then
and only then can all such claims be simultaneously settled,
either completely or pro-rata should the insurance proceeds
and freightage be not enough to satisfy all claims.
Aboitiz Shipping vs. New India (2006) - The SC changed its
mind again.
Our ruling in Monarch may appear inconsistent with the
exception of the limited liability doctrine, as explicitly stated in
the earlier part of the Monarch decision. An exception to the
limited liability doctrine is when the damage is due to the fault
of the shipowner or to the concurrent negligence of the
shipowner and the captain. In which case, the shipowner shall
be liable to the full-extent of the damage. We thus find it
necessary to clarify now the applicability here of the decision
in Monarch. Where the shipowner fails to overcome the
presumption of negligence, the doctrine of limited liability
cannot be applied. Therefore, we agree with the appellate
Page
NOTES NOTES
court in sustaining the trial court's ruling that petitioner is
liable for the total value of the lost cargo.
Aboitiz Shipping vs. Equitable (2008) which affirmed the
New India ruling. Here, the SC traced the history starting from
GAFLAC to New India. So no pro-rata sharing of the insurance
proceeds.
The Court declared in the 1993 GAFLAC case that claims
against Aboitiz arising from the sinking of M/V P. Aboitiz
should be limited only to the extent of the value of the vessel.
Thus, the Court held that the execution of judgments in cases
already resolved with finality must be stayed pending the
resolution of all the other similar claims arising from the
sinking of M/V P. Aboitiz. Considering that the claims against
Aboitiz had reached more than 100, the Court found it
necessary to collate all these claims before their payment from
the insurance proceeds of the vessel and its pending
freightage. As a result, the Court exhorted the trial courts
before whom similar cases remained pending to proceed with
trial and adjudicate these claims so that the pro-rated share of
each claim could be determined after all the cases shall have
been decided.
In Monarch Insurance, the Court deemed it fit to settle once and
for all this factual issue by declaring that the sinking of M/V P.
Aboitiz was caused by the concurrence of the unseaworthiness
of the vessel and the negligence of both Aboitiz and the
vessel's crew and master and not because of force majeure.
Notwithstanding this finding, the Court did not reverse but
reiterated instead the pronouncement in GAFLAC to the effect
that the claimants be treated as "creditors in an insolvent
corporation whose assets are not enough to satisfy the totality
of claims against it."
However, on 02 May 2006, the Court rendered a decision in
Aboitiz Shipping Corporation v. New India Assurance
Company, Ltd. (New India), reiterating the well-settled
principle that the exception to the limited liability doctrine
applies when the damage is due to the fault of the shipowner or
to the concurrent negligence of the shipowner and the captain.
Where the shipowner fails to overcome the presumption of
negligence, the doctrine of limited liability cannot be applied.
In New India, the Court clarified that the earlier
pronouncement in Monarch Insurance was not an abandonment
of the doctrine of limited liability and that the circumstances
therein still made the doctrine applicable.
In New India, the Court declared that Aboitiz failed to
discharge its burden of showing that it exercised extraordinary
diligence in the transport of the goods it had on board in order
to invoke the limited liability doctrine. Thus, the Court rejected
Aboitiz's argument that the award of damages to respondent
therein should be limited to its pro rata share in the insurance
proceeds from the sinking of M/V P. Aboitiz.
The instant petitions provide another occasion for the Court to
reiterate the well-settled doctrine of the real and hypothecary
nature of maritime law. As a general rule, a ship owner's
liability is merely co-extensive with his interest in the vessel,
except where actual fault is attributable to the shipowner. Thus,
as an exception to the limited liability doctrine, a shipowner or
ship agent may be held liable for damages when the sinking of
the vessel is attributable to the actual fault or negligence of the
shipowner or its failure to ensure the seaworthiness of the
vessel. The instant petitions cannot be spared from the
application of the exception to the doctrine of limited liability in
view of the unanimous findings of the courts below that both
Aboitiz and the crew failed to ensure the seaworthiness of the
M/V P. Aboitiz.
39 PARA BRIGHT
 L.A. Batch Unitas Personae - No. 543/FabianCPA 

MARITIME LIEN CAUSES OF REVOCATION OF VOYAGE

 It constitutes a present right of property in the ship, a jus
in re, to be afterward enforced in admiralty by process in
rem. (PNB vs. CA, 337 SCRA 381)
 If the maritime lien arose prior to the recording of a
preferred mortgage, it shall have priority over the said
mortgage lien. (PNB vs. CA, 337 SCRA 381)
 The total destruction of the vessel extinguishes the
maritime lien.
ORDER OF PREFERENCE IN CASE OF SALE OF VESSEL
R.A. 6106 P.D. 1521
1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art. 640)
TERMS:
 Interdiction of commerce – A governmental prohibition of
commercial intercourse intended to bring about an entire
cessation for the time being of all trade whatever.
 Blockade – A sort of circumvallation of a place by which all
foreign connection and correspondence is, as far as
human power can effect it, to be cut off.
 Embargo – A proclamation or order of a state, usually
issued in time of war or threatened hostilities, prohibiting
the departure of ships or goods from some or all the ports
of such state until further order.

Effectivity date
SALVAGE
1969 1978
ARTICLE 643. - If the vessel and her cargo should be
Applicability totally lost, by reason of capture or wreck, all rights shall
Both domestic and overseas be extinguished, both as regards the crew to demand any
Overseas shipping only wages whatsoever, and as regards the ship agent to
shipping
recover the advances made.
Kind of sale
If a portion of the vessel or of the cargo, or of both,
Judicial Judicial and extrajudicial should be saved,

Order of Preference the crew engaged on wages, including the captain, shall
retain their rights on the salvage, so far as they go, on the
A preferred mortgage shall The preferred mortgage lien
remainder of the vessel as well as on the amount of the
have priority over all claims shall have priority over all
freightage of the cargo saved;
against the vessel, except the claims against the vessel,
following preferences in the except the following but sailors who are engaged on shares shall not have any
order stated: preferences in the order
right whatsoever on the salvage of the hull, but only on the
1. Judicial costs of the stated:
portion of the freightage saved.
proceedings; 1. Expenses and fees allowed
2. Taxes due the Philippine and costs taxed by the court If they should have worked to recover the remainder of
Government; and taxes due to the the shipwrecked vessel they shall be given from the
3. Salaries and wages of the Government;
amount of the salvage an award in proportion of the efforts
Captain and Crew of the 2. Crew‟s wages;
made and to the risks, encountered in order to accomplish
vessel during its last voyage; 3. General average;
the salvage.
4. General average or salvage 4. Salvage, including contract
including contract salvage, salvage;
bottomry loans, and 5. Maritime liens arising prior
indemnity due shippers for in time to the recording of the
the value of goods preferred mortgage;
transported but which were 6. Damages arising out of tort;
not delivered to the and
consignee; 7. Preferred mortgage
5. Costs of repair and registered prior in time.
equipment of the vessel, and
provisioning of food, supplies
and fuel during its last
voyage; and
6. Preferred mortgages
registered prior in time.

 Effect of sale: All pre-existing claims in the vessel are

terminated. They will then be satisfied from the proceeds of the
sale subject to the order of preference.

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 L.A. Batch Unitas Personae - No. 543/FabianCPA 
MARITIME PROTEST
Protest is the written statement by the master of a vessel or any
authorized officer, attested by proper officer or a notary, to the
effect that damages has been suffered by the ship. (Aquino and
Hernando, Notes and Cases on the Law on Transportation and
Public Utilities)
As provided in the Code of Commerce, protest is required in
the following cases;
1) When the vessel makes an arrival under stress,
2) Where the vessel is shipwrecked,
3) Where the vessel has gone through a hurricane or the
captain believes that the cargo has suffered damages or
averages, and
4) Maritime Collisions.
ADMIRALTY JURISDICTION
The Admiralty Jurisdiction as provided in Batas Pambansa Blg.
129 is under the jurisdiction of the Regional Trial Court, if the
demand or claim exceeds (Php 300,000) outside Metro Manila
or Pesos (Php 400,000) in Metro Manila. Thus, if the demand or
claim is below what is designated upon the Regional Trial
Court, then the jurisdiction shall be before the Metropolitan,
Municipal or Municipal Circuit Trial Court.
ADMIRALTY – branch of jurisprudence regulating maritime
matters of a civil and criminal character, and in a more
restricted sense is the tribunal administering maritime law by a
peculiar and distinct procedure and states that admiralty
jurisdiction covers “all maritime cases and only maritime cases
and extends to both person and res.”
 Not maritime: if the issue is only won defendant had fully
discharged its obligation to deliver 68 cartons of paint
 When contract is maritime: depends not on the place
where the contract is made and is to be executed, but on
the subject-matter of the contract.
 Effect of contract in a foreign country: a contract in foreign
lands is enforceable in the Philippines if it is not in
violation of our laws of public policy.
SPECIAL CONTRACTS IN MARITIME COMMERCE:
(CBC-BIR)
1. Charter party
2. Bill of lading
3. Contract of transportation of passengers on sea
voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance
1. CHARTER PARTY - a contract wherein the entire ship or
some principal part thereof is lent by the owner to another
person for a specified time or use, in consideration of the
payment of a fee. A charter party is the contract between the
owner of a vessel and the charterer for the use of a vessel.
Parties: 1.) Ship owner or ship agent 2.) Charterer
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NOTES NOTES
Two kinds of C/P:
a.) Contract of Affreightment - here the owner retains control
of the vessel, he provides the crew, what is being leased is only
the space of the vessel. A contract of affreightment can be a
time charter or a voyage charter.
A contract of affreightment is a lease of the charter in
a specific period of time, or may be leased only on a
single voyage provided that it is the shipowner providing
for the provisions of the ship, wages, and master of the
crew, and the expenses and the maintenance of the vessel.
A contract of affreightment is a contract whereby the
owner of the vessel leases part or all of its space to haul
goods for others. The shipowner retains the possession,
command and navigation of the ship, the charterer merely
having use of the space in the vessel in return for his
payment of the charter hired.
Kinds:
a. Time charter – vessel is chartered for a fixed period
of time or duration of voyage.
b. Voyage or trip charter – the vessel is leased for one
or series of voyages usually for purposes of
transporting goods for charterer.
 If VOYAGE OR TIME CHARTER = common carrier retains
its nature as a common carrier. Therefore, the law on CC
still governs, still with extraordinary diligence.
b. Bareboat/Demise Charter wherein the owner of the vessel
gives up the control and full possession of the vessel to the
charterer who becomes the owner pro hac vice.
The bareboat charter is when the shipowner leases a
ship, wherein the whole vessel shall be under the
charterer‟s command from the time of the charter until the
contract of charter extinguishes. The shipowner/shipagent
must exclusively relinquish navigation etc. to the
charterer. The charterer also assumes the responsibilities
as if he is the shipowner in case of third parties, in torts
and contractual damages which will be incurred by the
vessel, as well as the wages of the marine officers and
employees of the same.
The charterer provides crew, food and fuel (Victual
expenses). The charterer is liable as if he were the owner,
except when the cause arises from the unworthiness of the
vessel.
 If BAREBOAT CHARTER = the common carrier becomes a
private carrier for that particular charter only. The
business undertaking is private in character, therefore the
rights and obligations are principally governed by their
STIPULATION, not the laws governing CC. if claims arise,
the stipulations under the Charter Party is the basis.
WHEN CHARTERER MAY NOT FIX THE DATE OF DEPARTURE-
When the charter party is only PARTIAL, the charter does not as
a rule acquire the right to fix the date when the vessel should
depart, unless such right is expressly granted in the contract.
41 PARA BRIGHT
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
TOWAGE – a contract for the hire of serices by virtue of which
a vessel is engaged to tow another vessel from one port to
another for a consideration. The provisions of the Code of
Commerce on charter parties are NOT APPLICABLE to a
contract of towage.
 “Tug/tugboat/towboat” – the vessel towing
 “Tow” – the vessel being pulled or towed
TRANSSHIPMENT OF GOODS
 The act of taking cargo out of one ship and loading it in
another, or the transfer of goods from the vessel stipulated in
the contract of affreightment to another vessel before the place
of destination named in the contract has been reached, or the
transfer for further transportation from one ship or conveyance
to another.
 It is not dependent on the ownership of the transporting
ships or in the change of carriers, but rather on the fact of
actual physical transfer of cargo from one vessel to another.
 If done without legal excuse, however competent and safe
the vessel into which the transfer is made, is a violation of
contract and infringement of right of shipper and subjects
carrier to liability if freight is lost even by cause otherwise
excepted. (Magellan Manufacturing vs. CA, 201 SCRA 102)
FORMAL/SUBSTANTIAL REQUIREMENTS:
ARTICLE 652. A charter party must be drawn in duplicate and
signed by the contracting parties, and when either does not
know how or can not do so, by two witnesses at their request.
The charter party shall include, besides the conditions
unrestrictedly stipulated, the following statements:
1.The kind, name, and tonnage of the vessel.
2.Her flag and port of registry.
3.The name, surname, and domicile of the captain.
4.The name, surname, and domicile of the 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 weight, or measure which
they respectively bind themselves to load and transport, or
whether it is the total cargo.
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.
(PRIMAGE- a small allowance or compensation payable to the
master or owner of the vessel for the use of its cables to load
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NOTES NOTES
and unload the goods and to the mariners for lading and
unlading in port. So what you pay those who load;
DEMURRAGE - an amount stipulated in the charter party to be
paid by the charter/shipper to the ship owner for any delay. )
9.The amount of primage to be paid to the captain.
10.The days agreed upon for loading and unloading.
(LAY DAYS- no. of days between unloading and departure;
EXTRA LAY DAYS - days which follow after the lay days have
elapsed.)
11.The lay days and extra lay days to be allowed and the
rate of demurrage.
FORMALITIES REQUIRED FOR CHARTER PARTY
1) In writing
2) Drawn in duplicate
3) Signed by the parties
4) Contain the stipulations in Art 652 – but not all the
requisites are essential for the validity of the charter party.
REQUISITES OF A VALID CHARTER PARTY
1. Consent of the contracting parties
2. Existing vessel which should be placed at the disposition
of the shipper
3. Freight
4. Compliance with Art. 652 of the Code of Commerce
ARTICLE 653. If the freight 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, which shall be the only instrument with
regard to the freight to determine the rights and obligations of
the owner, of the captain, and of the charterer.
Is there a valid contract if there was no charter party and
bill of lading? If we take Art. 653 literally, no. However, if we
take into account the fact that delivery of the cargo does not
constitute the making of a contract but rather the partial
performance thereof, the mere fact of delivery and receipt of
such cargo, the good faith and mutual consent with which they
have been made, should be a better substitute for the charter
party than the bill of lading which is nothing more than proof of
such delivery.
 MAAM: the Bill of Lading operates a s a RECEIPT of the
goods. It does not vary or change the charter party. The
Charter Party prevails not the Bill of lading. In case of
dispute between the Charter Party and the Bill of Lading,
the Charter party prevails. However, the Charter party
may be ORAL. In such case, the bill of lading becomes the
basis.
CHARTER PARTY BILL OF LADING
An entire or complete More like a private receipt
contract. which the captain gives to
accredit goods received from
persons
Consensual contract Real contract
42 PARA BRIGHT
 L.A. Batch Unitas Personae - No. 543/FabianCPA 
CONTRACT OF
BAREBOAT OR DEMISE
AFFREIGHTMENT (TIME
CHARTER
OR VOYAGE CHARTER)
Charterer becomes liable to Owner remains liable as
others caused by its carrier and must answer for
negligence any breach of duty
Charterer regarded as owner Charterer is not regarded as
pro hac vice for the voyage owner.
Owner of vessel relinquishes The vessel owner retains
possession, command and possession, command and
navigation to charterer navigation of the ship
Common carrier is converted Common carrier is not
to private carrier. converted to a private carrier.
ARTICLE 654. The charter parties executed with the
intervention of a broker, who certifies to the authenticity of
the signatures of the contracting parties made in his presence,
shall be full evidence in court; and if said signatures should
not agree the ones identical with the signatures the broker
must keep in his registry, if kept in accordance to law, shall be
final.
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.
Should no broker have taken part in the charter party and
should the signatures not have been 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 655. Charter parties executed by the captain in
the absence of the agent shall be valid and effective, even
though in executing them he should have acted in violation of
the orders and instructions of the agent or shipowner; but the
latter shall have a right of action against the captain to recover
damages.
PERSONS WHO MAY MAKE A CHARTER
1. Owner or owners of the vessel, either in whole or in
majority part, who have legal control and possession of
the vessel
2. Broker, who shall intervene in the execution of the charter
between the principal and the charter himself
3. Charterer may subcharter entire vessel to 3rd person only
if not prohibited in original charter. (Art.679)
4. Ship agent if authorized by the owner/s or given such
power in the certificate of appointment. (Art.598)
5. Captain in the absence of the ship agent or consignee and
only if he acts in accordance with the instructions of the
agent or owner and protects the latter‟s interests. (Art.609)
ARTICLE 656. If in the charter party the time in which the
loading and unloading is to take place is not stated, the
customs of the port where these acts take place shall be
observed. After the period stipulated or the customary one
has passed, and should there not be in the freight contract an
express clause fixing the indemnification for the delay, the
captain shall be entitled to demand demurrage for the usual
and extra lay days which may have elapsed in loading and
unloading.
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NOTES NOTES
ARTICLE 657. If during the voyage the vessel should be
rendered unseaworthy the captain shall be obliged to charter
another one at his expense, in good condition, to take the cargo
to its destination, for which purpose he shall be obliged to look
for a vessel not only at the port of arrival but in the other ports
within a distance of 150 kilometers.
If the captain should not furnish a vessel to take the cargo to
its destination, either through indolence or malice, the
freighters, after a demand of the captain to charter a vessel
within an unextendible period, may charter one and apply to
the judicial authority requesting that the charter party which
may have been made be immediately approved.
The same authority shall judicially compel the captain to
confirm the charter made by the shippers for his account and
under his responsibility.
If the captain, notwithstanding his efforts, should not find a
vessel to charter, he shall deposit the cargo at the disposal of
the freighters, to whom he shall communicate the facts on the
first opportunity presenting itself, the charter being regulated
in such cases by the distance covered by the vessel, there
being no right to any indemnification whatsoever.
ART. 658 FREIGHT CHARGES
The freight may be fixed depending on the agreement of
the parties for as long as it not against public order and public
policy. It may be by form of sum of money, or some other forms
they may wish. Provided that, the freight shall begin to run
from the day of the loading of the vessel, in charters within the
fixed period, it shall begin upon the very day, and if the freight
is charged according to weight, the payment thereof shall be
made according to the gross weight, including the weight of
the containers.
ART. 659-664. GOODS BEING TRANSPORTED may be
1) Sold by the captain to pay for necessary repairs
2) Be jettisoned for the common safety (No F)
3) Be lost by reason of shipwreck or stranding (No F)
4) Be seized by pirates or enemies (No F)
5) Suffer deteriorations or diminutions
6) Increase by natural cause in weight or size
GOODS THAT SHALL NOT PAY FREIGHTAGE
1) Goods jettisoned for the common safety. But the amount of
the freightage that should have been paid shall be
considered as a GENERAL AVERAGE, and shall be
computed in proportion to the distance covered when
they were jettisoned.
2) Goods lost by reason of shipwreck or stranding. If the
freightage should have been paid in advance, it shall be
returned, unless there is an agreement to the contrary.
3) Goods seized by pirates or enemies. If the freightage
should have been paid in advance, it shall be returned,
unless there is an agreement to the contrary.
EFFECT OF REDEMPTION
 If the vessel or the goods are redeemed or the effects
are salvaged – the freightage corresponding to the
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 L.A. Batch Unitas Personae - No. 543/FabianCPA 
distance covered by the vessel transporting the
cargo shall be paid.
 If the vessel is repaired after it has been shipwrecked
and the goods lost but afterwards salvaged are
transported but the same vessel the full freight shall
be paid without prejudice to what may be due by
reason of the average.
GOODS REQUIRED TO PAY FREIGHTAGE
1) Goods sold by the captain to pay for necessary repairs to
the hull, machinery or equipment or for unavoidable and
urgent needs. But the freightage may or may not be
required to be paid in full. If the vessel arrives at her
destination,, the freightage shall be paid in proportion to
the distance covered until the vessel is lost.
2) Goods which suffer deteriorations or diminutions on
account of (a) inherent defects or bad quality of packing,
or of (b) fortuitous event.
3) Goods that increase in size or weight by natural cause.
Such goods shall pay the proper freightage fixed in the
contract for the same.
ARTICLE 665. The cargo shall be specially liable for the
payment of the freightage, expenses and duties arising
therefrom, which must be reimbursed by the shippers, a well
as for the part of the general average which may correspond to
it; but it shall not be legal for the captain to delay unloading on
account of suspicion that this obligation shall not be complied
with.
Should there be reasons for distrust, the judge or court, at the
instance of the captain, may order the deposit of the
merchandise until he has been paid in full.
The fact that the freight was already included in the purchase
price paid by the consignee to the supplier did not free the
cargo from the carrier‟s lien under Article 665, if the freight has
not been fully paid by the charterer.
LIEN ON THE GOODS TRANSPORTED
1) Freightage
2) Expense
3) Duties arising therefrom
The goods may be ordered deposited until the captain has
been paid in full. The goods may also be sold for the amount
necessary to pay such liens. Should the proceeds be
insufficient, the captain may demand the deficiency after he has
reserved the right.
WHEN GOODS MAY BE DEPOSITED (ordered by competent
court at the petition of the captain)
1) Where there are reasons for distrust that the liens will
not be paid
2) Where the consignee could not be found
3) Where the consignee refuses to receive the cargo
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NOTES NOTES
WHEN GOODS MAY BE SOLD (requested by the captain)
1) For the amount necessary to pay the freightage,
expenses and average due the captain. The captain
may reserve the right to demand the deficiency.
2) To pay the freight and expenses thereof.
3) Where the consignee could not be found. The goods
may be sold in such amount as may be necessary to
pay for the freightage and expenses.
4) Where the consignee refuses to receive the cargo.
The goods may be sold in such amount as may be
necessary to pay freightage and expenses.
5) Where the goods deposited run the risk of
deterioration, or by reason of their condition or other
circumstances the expenses of preservation and
custody should be disproportionate.
WHEN LIEN OR PREFERENCE TERMINATES
- ART. 2241 CC. Credits for transportation of the goods
carried shall constitute a SPECIAL PREFERED CREDIT or
lien on the goods carried until their delivery and for 30
DAYS thereafter.
- This right may not be used if the goods are no longer in
the possession of the carrier or turned over to a third
person in good faith and for value.
RIGHTS AND OBLIGAGTIONS OF SHIPOWNERS
ARTICLE 669. The owners or the captain shall observe in
charter parties the capacity of the vessel or that expressly
designated in the registry of the same, a difference greater
than 2 per cent between that stated and her true capacity not
being permissible.
If the owners or the captain should contract to carry a greater
amount of cargo than the vessel can hold, in view of her
tonnage, they shall indemnify the freighters whose contracts
they do not fulfill for the losses they may have caused them by
reason of their default, according to the cases, viz:
If the vessel has been chartered by one freighter 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 charter should be reduced in
proportion to the cargo 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.
If, on the contrary, there should be several charter parties,
and by reason of the want of space all the cargo contracted for
can not be received, 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 place corresponding to them in the
order of the dates of their contracts.
Should there be no priority, the charterers may load, if they
wish, pro rata of the amounts of weight or space they may have
engaged, and the person from whom the vessel was
chartered shall be obliged to indemnify them for the loss and
damage.
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ARTICLE 670. 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 (3/5) of the amount
which the vessel can 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 being defrayed by him, as well as the increase, should
there be any, in the price of the charter. Should he not be able
to make this change, the voyage shall be undertaken at the
time agreed upon; and should no time have been fixed, within
fifteen days from the time of beginning to load, should nothing
to the contrary have been 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 freighter shall have a right to demand that
the vessel put to sea with the cargo she may have on board.
ARTICLE 671. After three-fifths of the vessel is loaded, the
person from whom she is chartered can not, without the
consent of the charterers or freighters 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 the
person who did not consent to the change.
ARTICLE 672. If the vessel has been chartered in whole, the
captain can not, without the consent of the person chartering
her, accept freight from any other person; and should he do
so, said charterer may oblige him to unload it and require him
to indemnify him for the losses suffered thereby.
ARTICLE 673. The person from whom the vessel is
chartered shall be liable for all the losses caused 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 to put to sea at the proper time through a notary or
judicially.
ARTICLE 674. If the charterer should carry to the vessel
more freight 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
freighters, but if in order to stow said freight it should be
necessary to stow it in such manner as to throw the vessel out
of trim the captain must refuse it or unload it at the expense of
its owner.
The captain may likewise, before leaving the port, unload the
merchandise placed on board clandestinely, or transport it, if
he can do so and keep the vessel in trim, demanding by way of
freightage the highest price which may have been stipulated
for said voyage.
ARTICLE 675. 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 await his instructions, and in the meantime the
lay days agreed upon shall begin to run, or those allowed by
custom in the port, unless there is a special agreement to the
contrary.
Should the captain not receive an answer within the time
necessary therefor, he shall make efforts to find freight; and
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NOTES NOTES
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 for her return.
ARTICLE 676. The captain shall lose the freightage and
shall indemnify the charterers if the latter should prove, even
against the certificate of inspection, should one have taken
place at the port of departure, that the vessel was not in a
condition to navigate at the time of receiving the cargo.
ARTICLE 677. The charter party shall be enforced if the
captain should not have any instructions from the charterer,
and a declaration of war or a blockade should take place
during the voyage.
In such case the captain shall be obliged to make the nearest
safe and neutral port, and request and await orders from the
freighter; and the expenses incurred and salaries earned
during the detention shall be paid as general average.
If, by orders of the freighter, the cargo should be
discharged at the port of arrival, the freight for the voyage
out shall be paid in full.
ARTICLE 678. If the time necessary, in the opinion of the judge
or court, in which to receive orders from the freighters should
have elapsed without the captain having received any
instructions, the cargo shall be deposited, and it shall be
liable for the payment of the freight and expenses incurred by
reason of the delay which shall be paid from the proceeds of
the part first sold.
OBLIGATIONS OF THE SHIPOWNER OR CAPTAIN
1) to observe the capacity of the vessel as indicated in the
registry and to indemnify shippers whose contracts are
not fulfilled. A margin of two (2) percent more than what is
agreed upon is not allowable;
2) to undertake voyage at the time agreed upon or within 15
DAYS from the time of loading, even if less than 3/5 cargo
filled where he fails to change vessel;
3) to accept other cargo procured by the owner of the freight
already loaded under the same price and conditions if the
shipowner fails to fill 3/5 cargo;
4) not to change the vessel if 3/5 filled without the consent of
the charters or shippers, otherwise shipowner liable for
losses and damages to the cargo who did not give
consent;
5) not to accept cargo from any other person when the vessel
has been chartered in whole, otherwise captain liable for
losses and be required to unload;
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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) to proceed to the nearest safe and neutral port in case of
declaration of war or blockage during the voyage.
RIGHTS OF THE SHIPOWNER OR CAPTAIN
1) To substitute another vessel inspected and declared
suitable for voyage if the cargo is less than 3/5 filled.
Expenses of transfer and increase in price of charter, paid
by SO;
2) To collect freightage for excess cargo in accordance with
price stipulated if such can be properly stowed;
3) To refuse and unload excess cargo at the expense of its
owner;
4) To unload cargo clandestinely placed on board or to
transport them if he can do so demanding the highest
freightage;
5) To find freight to take the place of freight not received;
6) To receive the freightage in full discounting that which
may have been earned on cargo carried as substitute;
7) To have the charter party subsist, notwithstanding the
declaration of war or blockage during voyage, and where
the shipper order that the cargo be discharged at the port
of arrival.
RIGHTS AND OBLIGAGTIONS OF CHARTERERS
ARTICLE 679. The charterer of an entire vessel may
subcharter the whole or part thereof for the amounts he may
consider most convenient, without the captain being allowed to
refuse to receive on board the freight delivered by the second
charterers, provided the conditions of the first charter are not
changed, and that the person from whom the vessel is
chartered be paid the full price agreed upon even though the
full cargo is not embarked, with the limitation established in the
next article.
ARTICLE 680. A charterer who does not make up the full
cargo he bound himself to ship shall pay the freightage of the
amount he fails to ship, if the captain did not take other freight
to make up the cargo of the vessel, in which case he shall pay
the first charterer the difference should there be any.
Deadfreight – the amount paid by or recoverable from a
charterer of a ship for the portion of the ship‟s capacity the
latter contracted for but failed to occupy.
ARTICLE 681. If the charterer should ship goods different
from those indicated 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
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NOTES NOTES
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 682. If the merchandise shipped should have been
for the purpose of illicit commerce, and was 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 agreed, they can not demand any indemnity whatsoever
of the charterer for the damage caused the vessel.
ARTICLE 683. In case of making a port to repair the hull,
machinery, or equipment of the vessel, the freighters must wait
until the vessel is repaired, being permitted to unload her at
their own expense should they deem it advisable.
If, for the benefit of the cargo subject to deterioration, the
freighters or the court, or the consul, or the competent
authority in a foreign land should order the merchandise to
be unloaded, the expenses of loading and unloading shall be
for the account of the former.
ARTICLE 684. 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 freight,
the expenses of the stop made at his request, and the losses
and damages caused the other freighters, should there be any.
ARTICLE 685. In charters for transportation of general freight
any of the freighters may unload the merchandise before
the beginning of the voyage, by paying onehalf the freight,
the expense of stowing and restowing the cargo, and any other
damage which may be caused the other shippers.
ARTICLE 686. After the vessel has been unloaded and the
cargo placed at the disposal of the consignee, the latter must
immediately pay the captain the freight due and the other
expenses to which he may be liable for said cargo.
The primage must be paid in the same proportion and at the
same time as the freight, all the changes and modifications to
which the latter should be subject also governing the former.
ARTICLE 687. The charters and freighters can not abandon
merchandise damaged on account of the inherent vice of the
goods or by reason of an accidental case, for the payment of
the freight and other expenses.
The abandonment shall be proper, however, if the cargo
should consist of liquids and should they have leaked out, there
not remaining in the containers more than one-quarter (1/4) of
their contents.
OBLIGATION OF CHARTERERS
1) To pay freightage in full even if the charterer does not
complete the full cargo he bound himself to ship;
2) To answer for the value of his shipment for losses arising
from confiscation, embargo, detention, or other causes if
charterer loads goods different from those stated at the
time of execution of charter party
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3) To be jointly liable with the captain for losses if the

charterer ships goods for illicit commerce with the
knowledge of the shipowner or captain
4) To wait until the vessel is repaired or to pay for expenses
of unlading should he choose to unload in case of making
a port to repair the hull, machinery or equipment of the
vessel
5) To pay the expenses of arrival, freightage in full, damages
and losses if charterer unloads goods before arriving at
the port of destination without the occurrence of force
majeure
6) To pay ½ of the freightage, expenses of stowing and
restowing the cargo, other damage if charterer unload
before the beginning of the voyage
7) To pay for freightage, other expenses and primage after
the vessel has been unloaded and cargo place at the
disposal of the consignee
8) Not to abandon merchandise damaged on account of
inherent defect or fortuitous event.
ARTICLE 689. At the request of the person from whom
the vessel is chartered the charter party may be rescinded:
1.If the charterer at the termination of the extra lay days
does not place the cargo alongside the vessel.
In such case the charterer must pay half the freight stipulated
besides the demurrage for the lay days and extra lay days
elapsed.
2.If the person from whom the vessel was chartered should
sell her before the charterer has begun to load her and the
purchaser should load her 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 her for his
own account the charter party shall be respected (in such
case, the charter party is not rescinded) 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. Otherwise, if he
informed him, then no need to indemnify.

WHO CAN RESCIND A CHARTER PARTY: Either party

LEASE CHARTER PARTY

ARTICLE 688. A charter party may be annulled at the
request of the charterer: If for a definite period, lessee Charterer may rescind
cannot give up the lease by charter party by paying half
1.If before loading the vessel he should abandon the charter, paying a portion of the of the freightage agreed
paying half of the freightage agreed upon. (abandonment of amount agreed upon. upon.
charter before loading; pay 1/2 of the freight) If the leased property is sold The new owner is not
to one who knows of the compelled to respect the
2.If the capacity of the vessel should not agree with that existence of the lease, the charter party so long as he
stated in the certificate of the tonnage, or if there is an error
new owner must respect the can load the cargo with his
in the statement of the flag under which she sails. (Charterer
will be indemnified by the owner) lease. own vessel. (Art. 689)
Civil law concept Commercial law concept
3.If the vessel should not be placed at the disposal of the
charterer within the period and in the manner agreed upon.
(non placement at disposal of the charterer) ARTICLE 690. The charter party shall be rescinded and all
action arising therefrom shall be extinguished if, before the
4.If, after the vessel has put to sea, she should return to the port vessel puts to sea from the port of departure, any of the
of departure, on account of risk of pirates, enemies, or bad following cases should occur:
weather, and the freighters should agree to unload her.
(charterer must pay owner for the voyage out, meaning one 1. A declaration of war or interdiction of commerce with the
way) power to whose ports the vessel was going to sail.

In the second and third cases the person from whom the vessel
was chartered shall indemnify the charterer for the losses he
may suffer. In the fourth case the person from whom the vessel
was chartered shall have a right to the freightage in full for the
voyage out. If the charter should have been made by the
months, the charterers shall pay the full freightage for one
month, if the voyage were to a port in the same waters, and two
months, if the voyage were to a port in different waters. From
one port to another of the Peninsula and adjacent islands, the
freightage for one month only shall be paid.
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 the merchandise of the vessel
at the said port.
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 agent.

5.If a vessel should make a port during the voyage in order to 5. The impossibility of the vessel to navigate, without fault
make urgent repairs and the freighters should prefer to of the captain or agent. The unloading shall be made for the
dispose of the merchandise.(pay for voyage out) account of the charterer.
When the delay does not exceed thirty days, the freighters
shall pay the full freight for the voyage out. Should the delay
exceed thirty days, they shall only pay the freight in proportion
to the distance covered by the vessel.

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ARTICLE 691. If the vessel can not put to sea on account of the entitled to make or assert any claim against the OWNER on
closing of the port of departure, or any other temporary account of the representations or warranties expressed or
cause, the charter shall be in force without any of the implied with respect to the VESSEL but the OWNER shall be
contracting parties having a right to claim damages. responsible for repairs or renewals occasioned by latent
defects in the VESSEL, her machinery or appurtenances
The subsistence and wages of the crew shall be considered existing at the time of delivery under this Agreement, provided
as GENERAL AVERAGE. During the interruption the charterer such defects have manifested before turn-over.
may, at the proper time and for his own account, unload and
load the merchandise, paying demurrage if the reloading Issue: What is the liability of Santiago as the owner?
should continue after the reason for the detention has ceased.
Held: The mere physical transfer of MV Christine Gay from
ARTICLE 692. A charter party shall be partially rescinded, petitioner to Pelaez does not constitute full performance of its
unless there is an agreement to the contrary, and the captain obligation under their bareboat charter agreement. Neither is
shall only be entitled to the freight for the voyage out, if, by it considered a delivery. Under the agreement, physical
reason of a declaration of war, closing of ports, or interdiction transfer of a seaworthy vessel is necessary to satisfy delivery.
of commercial relations during the voyage, the vessel should Seaworthiness is a relative term. The degree of seaworthiness
make the port designated for such a case in the instructions of varies in relation to the contemplated voyage.
the charterer.
To be seaworthy, a vessel “must have that degree of fitness
which an ordinary, careful and prudent owner would require
his vessel to have at the commencement of her voyage, having
regard to all the probable circumstances of it.” Thus the
SUMMARY OF GROUNDS FOR RESCISSION degree of seaworthiness varies in relation to the contemplated
voyage. Crossing the Atlantic calls for stronger equipment
At charterer’s At shipowner’s Fortuitous causes than sailing across the Visayan Sea. It is essential to consider
request request (Art. 690) that once the necessary degree of seaworthiness has been
(Art 688) (Art. 689) ascertained, this obligation is an absolute one, i.e. the
1. By abandoning 1. If the extra lay 1. War or undertaking is that the vessel actually is seaworthy. It is no
the charter and days terminate interdiction of excuse that the shipowner took every possible precaution to
paying half of the without the cargo commerce; make her so, if in fact he failed.
freightage; being placed 2. Blockade;
2. Error in tonnage alongside the 3. Prohibition to In examining what is meant by seaworthiness we must bear in
or flag; vessel; receive cargo; mind the dual nature of the carrier‟s obligations under a
3. Failure to place 2. Sale by the 4. Embargo; and contract of affreightment. To satisfy these duties the vessel
the vessel at the owner of the 5. Inability of the must (a) be efficient as an instrument of transport and (b) as a
charterer‟s vessel before vessel to navigate. storehouse for her cargo. The latter part of the obligation is
disposal; loading by the sometimes referred to as cargoworthiness.
4. Return of the charterer;
vessel due to A ship is efficient as an instrument of transport if its hull,
pirates, enemies tackle and machinery are in a state of good repair, if she is
or bad weather; sufficiently provided with fuel and ballast, and is manned by an
5. Arrival at a port efficient crew.
for repairs.
And a vessel is cargoworthy if it is sufficiently strong and
equipped to carry the particular kind of cargo which she has
Santiago Lighterage vs. CA: Seaworthiness cannot be agreed contracted to carry, and her cargo must be so loaded that it is
to between the parties (parang jurisdiction of the court) safe for her to proceed on her voyage. A mere right given to
because it is a fact which has to be proven. the charterer to inspect the vessel before loading and to satisfy
himself that she was fit for the contracted cargo does not free
Facts: In this case two charter parties were entered into. The the shipowner from his obligation to provide a cargoworthy
owner of the vessel was Santiago. He chartered the vessel to B ship.
(bareboat charter). B chartered the vessel to C (voyage
charter). The vessel was supposed to carry an ore to South
Korea. On the way to pick up the ore from Manila to Zambales,
the vessel had to undergo repairs. In short it never reached
Korea.

The pertinent provisions of the contract between Santiago and

B reads: "3.Delivery – The VESSEL shall be delivered and taken
over by the CHARTERERS at the port of the City of Manila, in
such ready berth as the CHARTERERS may direct. The OWNER
shall before and at the time of delivery exercise due diligence
to make the VESSEL seaworthy and in every respect ready in
hull, machinery and equipment for service hereunder. The
VESSEL shall be properly documented at time of delivery. The
delivery to the CHARTERERS of the VESSEL and the taking over
of the VESSEL by the CHARTERERS shall constitute a full
performance by the OWNER of all the OWNER‟S obligations
hereunder, and thereafter the CHARTERERS shall not be

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LOANS ON BOTTOMRY AND RESPONDENTIA
(from San Beda Notes, Sevilla Notes, Sigma Notes, the book
of Agbayani, Atty. Valencia’s lectures, and Derije Notes)
ARTICLE 719. A loan on bottomry or respondentia shall
be considered that which the repayment of the sum loaned and
the premium stipulated, under any condition whatsoever,
depends on the safe arrival in port of the goods on which it is
made, or of their value in case of accident.
3. Secured by pledge of vessel or portion thereof in the case
of loan on bottomry or pledge of goods with respect to
respondentia.
4. Loan repayment depends or conditioned on the safe
arrival of the vessel for bottomry or safe arrival of goods
for respondentia and obligation to repay is extinguished if
pledged goods are lost.
5. Obligation to repay is extinguished if vessel is lost due to
specified marine perils in the course of voyage or within
limited time.

LOAN ON BOTTOMRY LOAN ON RESPONDENTIA

Definition LOAN ON BOTOMRY/
ORDINARY LOAN
Loan by which the owner of Loan made on the goods RESPONDENTIA
the ship pledges the vessel laden on board the ship, and First lender has right of Last lender has preference
(or keel and bottom of the which are sold or exchanged preference on the security over the previous ones, for
ship) as a security for its in the course of the voyage, over the subsequent lender the reason that if not for the
repayment, with maritime or the borrowers personal last creditor, prior creditors
extraordinary interest on responsibility being the would have not benefited for
account of the maritime risks principal security of the the preservation of the
to be borne by the lender, it performance of the contract. security
being stipulated that if the The lender must be paid his Absolutely repayable won the Payment depends on the safe
ship be lost in course of the principal and interest, though security is lost or destroyed arrival by the security at the
specific voyage, or during the the ship perishes, provided port of destination
limited time, by any of the that the goods are saved. Subject of Usury Law Not subject to Usury Law,
perils enumerated in the
without interest no loan; no
contract, the lender shall also
lose his money limit as to rate of interest
- Because of the real and May or may not have Must always have collateral
hypothecary nature of a collateral
vessel Collateral may be real or Collateral must be a vessel or
- If the ship arrives safely, pay personal property a cargo subject to maritime
the principal + interest risk
Who may contract Need not be in writing Must be in writing
Shipowner or ship agent. Only the owner of the cargo. To be binding on 3rd persons, Must be registered in the
Outside of the residence of need not be registered registry of vessels
the owners - the captain. Loss of collateral, if any does Loss of collateral extinguishes
not extinguish the loan the loan.
no need for such risk there is a need for a marine
NATURE OF LOAN OF BOTTOMRY OR RESPONDENTIA risk before a loan of Bottomry
and Respondentia is to be
 A real, unilateral, aleatory contract, by virtue of which one entered
person lends to another a certain amount of money or goods on subject to the provisions of a subject to the provision of the
things exposed to maritime risks, which amount, with its valid contract Code of Commerce
earnings, is to be returned if the things are safely transported,
and which is lost if the latter are lost. Note: Under existing laws, the parties to a loan, whether
ordinary or maritime, may agree on any rate of interest. (CB
1) delivery of the amount loaned is necessary for the Circular 905)
perfection of the contract

2) although there are reciprocal benefits, the contract LOAN ON BOTTOMRY AND
MARITIME INSURANCE
produces obligations only fro one party, the borrower, sho RESPONDENTIA
must return the amount borrowed plus premium Indemnity is paid after the Indemnity is paid in advance
loss has occurred by way of a loan
3) that the lender really runs known risks Obligation of the insurer to If maritime perils take place
pay the indemnity becomes causing the loss of the vessel
absolute or cargo, the obligation of the
REQUISITES OF LOANS OF BOTTOMRY AND borrower is extinguished
RESPONDENTIA Consensual contract, Real contract, perfected upon
perfected upon meeting of delivery of the thing loaned
the minds.
1. Ship owner borrows money for use, equipment or repair
of vessel.
2. For a definite term and with extraordinary interest called
premium

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FORMS AND REQUISITES

ARTICLE 720 (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 (bond) signed by the contracting
parties and the broker who took part therein; (contract must
conform with that recorded in the Registry of broker)
3) By means of a private instrument. (requires the
acknowledgment of the signatures for binding force)
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 COMMERCIAL REGISTRY,
without which requisites the credits originating from the
same 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 COMMERCIAL REGISTRY of
the port of registry of the vessel BEFORE EIGHT DAYS have
elapsed from the date of her arrival. If said eight days should
elapse without the record having been made in the
commercial registry, the contracts made during the voyage of a
vessel shall not have any effect with regard to third persons,
except from the day and date of their entry.
In order that the bonds of the contracts celebrated in
accordance with No. 2 may have legal force, they must conform
to the registry of the broker who took part therein. In those
celebrated in accordance with No. 3 the acknowledgment of
the signature must precede.
Contracts, which are NOT REDUCED TO WRITING, shall not be
the basis for a judicial action.
 ARTICLE 611
In order to comply with the obligations mentioned in the
foregoing article, the captain, when he has no funds and
does not expect to receive any from the agent, shall
procure the same in the successive order stated below:
1) By requesting said funds of the consignees or
correspondents of a vessel.
2) By applying to the consignees of the cargo or to the
persons interested therein.
3) By drawing on the agent.
4) By borrowing the amount required by means of a
bottomry bond.
5) By selling a sufficient amount of the cargo to cover the
amount absolutely necessary to repair the vessel, and to
equip her to pursue the voyage.
In the two latter cases he must apply to the judicial
authority of the port, if in Spain * and to the Spanish *
consul, if in a foreign country; and where there should be
none, to the local authority, proceeding in accordance
with the prescriptions of Article 583, and with the
provisions of the law of civil procedure.
EFFECT OF REGISTRATION
a) the loan shall have PREFERENCE (8th – Art 580, 7th - PD
1521); if unregistered, valid as between the parties but without
preference.
b) If DONE WITHIN 8 DAYS from execution; makes it
EFFECTIVE AGAINST THIRD PERSONS from date of execution
otherwise (beyond 8 days) only effective as of the time of
actual registration thereof.

CONTRACTS MADE DURING THE VOYAGE MUST

CONFORM WITH ART. 583 AND 611
WHO CAN CONTRACT A LOAN ON RESPONDENTIA
 ARTICLE 583
General Rule: Who can contract: Shipowner/Owner of cargo.
The captain cannot contract loans on respondentia secured by
If while on voyage the captain should find it necessary to
the cargo, and should he do so, the contract shall be VOID.
contract one or more obligations mentioned in Neither can he borrow money or bottomry for his own
subdivisions 8 and 9 (loan on bottomry) of Article 580, he transactions.
shall apply to the judge or court if he is in Philippine
territory, and otherwise to the consul of the Republic of Exceptions:
the Philippines, should there be one, and in his absence,
to the judge or court or proper local authority,
(1) On the portion of the vessel he owns, provided, no money
presenting the certificate of the registration sheet treated
has been previously borrowed on the whole vessel, nor
of in Article 612 and the instruments proving the
exists any other kind of lien or obligation chargeable
obligation contracted.
against her.
The judge or court, the consul, or the local authority, as
(2) When he is permitted to do so, he must necessarily state
the case may be, in view of the result of the proceedings
instituted, shall make a temporary memorandum of their what interest he has in the vessel.
result in the certificate, in order that it may be recorded in
the registry when the vessel returns to the port of its (3) When the captain is authorized while on voyage to do so
registry, or so that it can be admitted as a legal and outside the residence of the shipowners, provided he
preferred obligation in case of sale before its return, by follows Article 583 and 611.
reason of the sale of the vessel on account of a declaration
of unseaworthiness.

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ARTICLE 617. The captain cannot contract loans on
respondentia, and should he do so the contracts “shall be
void.” Neither can he borrow money on bottomry for his
own transactions, a) except on the portion of the vessel he
owns, provided b) no money has been previously borrowed on
the whole vessel, and provided c) there does not exist any
other kind of lien or obligation thereon. When he is permitted
to do so, he must necessarily state what interest he has in
the vessel.
In case of violation of this article the principal, interest, and
costs shall be charged to the private account of the captain, and
the agent may furthermore have the right to discharge him.
ARTICLE 721. In a bottomry or respondentia bond there 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 domicile of the person giving and
of 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 for which the risk is run.
ARTICLE 722. The bonds may be issued to order, in which
case they shall be transferable by indorsement, and the
assignee shall acquire all the rights and run all the risks
corresponding to the indorser.
 Not a negotiable instrument under the NIL.
ARTICLE 723. Loans made be made in goods and in
merchandise, fixing their value in order to determine the
principal of the loan.
 Loan may consist not necessarily in money therefore
payment need not be in money
ON WHAT CONSTITUTED
ARTICLE 724. 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 Cargo.
If the loan is constituted on the hull of the vessel, there shall
be understood as also subject to the liability of the loan, the
rigging, equipment and other goods, provisions, fuel, steam
engines, and the freight earned during the voyage subject to
the loan.
If the loan is made on the cargo, all that constitutes the same
shall be subject to the repayment; and if on a particular object
of the vessel or of the cargo, the object exclusively and
specifically mentioned only shall be liable.
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NOTES NOTES
ARTICLE 725. No loans can be made on the salaries of the
crew, nor on the profits, which it is expected to earn.
 Loans may be made on the freightage but not on the
salaries of the crew or on the profits expected.
INSTANCES WHEN THE CONTRACT IS CONSIDERED A
SIMPLE LOAN AND NOT A LOAN ON BOTTOMRY OR
RESPONDENTIA: (LCN)
1. When the loan on bottomry is LARGER than the value
of the object (vessel) liable for the loan on bottomry on
account of fraudulent means employed by the borrower,
the loan on the amount in excess of the value of the
object as appraised by experts is a simple loan. (Article
726)
2. If the amount of the loan contracted in order to load the
vessel should NOT BE USED FOR THE CARGO, the loan
in excess of the amount needed for the cargo shall be
considered as a simple loan. (Article 727); plus interest
(indemnity for damages) 6% per annum (Article 2209,
NCC)
3. Should the goods on which money is taken is NOT
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)
ARTICLE 728. The loan which the captain takes at the point
of residence of the owners of the vessel shall only affect that
part of the latter which belongs to the captain, if the other
owners or their agents should not have given their express
authorization thereto 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 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.
CAPTAINS AUTHORITY TO OBTAIN A LOAN
- Captain has no authority to obtain a loan on bottomry or
respondentia ta the point of residence of the shipowners
without their express authorization. But the captain has the
authority to do so outside the residence of the shipowners
provided he follows procedure laid down in Article 583
and 611.
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ARTICLE 730. Loans made during the voyage shall have
preference over those made before the clearing of the vessel,
and they shall be graduated by the inverse order to that of their
dates.
The loans for the last voyage shall have preference over prior
ones. Should several loans have been made at a port made
under stress and for the same purpose, all of them shall be paid
pro rata.
PREFERENCE IN REVERSE ORDER
- Because later loans contribute to the preservation of the
vessel and of the prior credits, and if this order of
preference did not exist, it would be impossible to obtain
the necessary loan in case of necessity if the vessel or
merchandise should already be burdened by prior loans.
ARTICLE 731. The actions which may be brought by the
lender shall be extinguished by the absolute loss of the goods
on which the loan was made, if said loss arose from an accident
of the sea at the time and during the voyage designated in the
contract, and should it be proven that the cargo was on board;
EXCEPTIONS: but this shall not take place if the loss were
caused by the inherent defect of the thing; or through the fault
or malice of the borrower, or through barratry on the part of
the captain, or if it were caused by damages suffered by the
vessel as a consequence of being engaged in contraband, or if
it arose through loading the merchandise on a vessel other than
that designated in the contract, unless this change should have
been made by reason of force majeure.
The proof of the loss as well as the proof of the existence in
the vessel of the goods declared to the lender as the object
thereof is incumbent upon the person who received the loan,
EFFECT OF LOSS OF COLLATERAL
General Rule: The obligation of the borrower to pay is
extinguished by:
a) absolute loss of the goods
b) by reason of accident of the sea during the designated
voyage; and
c) proven that such goods were on board
Exception: The obligation of the borrower is not extinguished
where loss caused/arose: (IF-BCD)
1) Inherent defect thing;
2) Fault or Malice of borrower;
3) Barratry (willful misconduct in pursuance of some unlawful
or fraudulent purpose without the consent of the owner
and to the prejudice of the owner‟s interest) of
master/captain;
4) Damage to the vessel as a consequence of its engaging in
Contraband;
5) Difference in merchandise loaded and that agreed to be
loaded, unless change is due to force majeure
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NOTES NOTES
ARTICLE 732. Lenders on bottomry/respondentia shall suffer
the general average/particular average (in absence of express
agreement) should it not belong to the kind of risk excepted IN
PROPORTION to their respective interest.
 Gross/General Average: contribution in case ship/cargo
is exposed to marine peril in order to preserve/save
ship/cargo from being in imminent danger e.g. jettison;
all benefited is required to contribute
 Particular/Simple Average: expense incurred/damage
suffered have not inured to the common benefit and profit
of all persons interested in the vessel and its cargo; only
borne by respective owners/shipowner
ARTICLE 733. If period when lender is to run the risk is not
stated:
 IF VESSEL, ENGINES, RIGGING, EQUIPMENT - from time
vessel is put to sea until she drops anchor at port of
destination (when legally received in said port);
 IF MERCHANDISE - from time loaded at shore/wharf of the
port of shipment until unloaded at port of consignment.
ARTICLE 734. Shipwreck. AMOUNT LIABLE FOR PAYMENT OF
LOAN = Proceeds of goods saved/salvaged - cost of salvage;
If loan is on the vessel or any part thereof = freightage earned
during the voyage for which the loan was contracted; as far as it
may reach.
CONCURRENCE OF MARINE INSURANCE AND LOAN ON
BOTTOMRY/RESPONDENTIA
1. The insurable interest of the owner of a ship
hypothecated by bottomry is only the excess of the
value over the amount secured by bottomry. (Sec.
101, Insurance Code)
2. The value of what may be saved in case of shipwreck
shall be divided between the lender and the insurer
in proportion to the interest of each one. (Art. 735)
Note: If a vessel is hypothecated by bottomry only the excess is
insurable, since a loan on bottomry partakes of the nature
likewise of an insurance coverage to the extent of the loan
accommodation. The same rule would apply to the
hypothecation of the cargo by respondentia. (Pandect of
Commercial Law and Jurisprudence, Justice Jose Vitug, 1997
ed.)
ARTICLE 736. If there should be delay in repayment of the
principal and premiums of the loan, only he former shall bear
legal interest.
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RISKS, DAMAGES AND ACCIDENTS OF MARITIME WHERE LAW ON AVERAGES NOT APPLICABLE.
COMMERCE
(1) Negligence of the captains of the colliding vessels being
the cause of the collision; and
ACCIDENTS IN MARITIME COMMERCE
(2) The cargoes not being jettisoned to save some of the
1. Averages cargoes and the vessel.
2. Arrival Under Stress
3. Collision
4. Shipwreck
PARTICULAR OR SIMPLE GROSS OR GENERAL
Definition
ARTICLE 806. For the purposes of this Code the following Damages or expenses caused Damages or expenses
shall be considered AVERAGES: to the vessel or cargo that did deliberately caused in order
not inure to the common to save the vessel, its cargo
1. All extraordinary or accidental expenses which may be benefit, and borne by or both from real and known
incurred during the navigation for the preservation of the respective owners. (Art. 809) risk. (Art. 811)
vessel or cargo, or both. (SIMPLE AVERAGE) Requisites
1. common danger;
2. All damages or deterioration the vessel may suffer from 2. sacrificed deliberately;
the time she puts to sea from the port of departure until she 3. successful saving;
casts anchor in the port of destination, and those suffered by 4. legal steps.
the merchandise from the time it is loaded in the port of Liability
shipment until it is unloaded in the port of consignment. The owner of the goods which All the persons having an
(GENERAL AVERGE) gave rise to the expense or interest in the vessel and the
suffered the damage shall bear cargo therein at the time of
AVERAGES - Averages are extraordinary or accidental this average. (Art. 810) the occurrence of the
expenses which may be incurred during the voyage, or any average shall contribute to
damages or deteriorations may suffer from the time it puts to satisfy this average. (Art.
sea from the port of departure until it casts anchor on the port 812)
 The insurers (Art.859) and
of destination.
lenders on bottomry and
respondentia shall likewise
NATURE AND CLASSES OF AVERAGES contribute. (Art.732).
1) Expenses Number of interests involved
a) extraordinary or accidental Only one interest involved Several interests involved
b) incurred during the voyage Share in the damage or expense
c) for the preservation of the vessel or cargo, or both. 100% share In proportion to the value of
the owner‟s property saved
2) Damages or deteriorations Right to recover
a) Suffered by the vessel from the time she puts to sea No reimbursement There may be
from the port of departure until she casts anchor in reimbursement
the port of destination Kinds (not exclusive)
b) suffered by the merchandise from the time it is Art. 809 Art. 811
loaded in the port of shipment until it is unloaded in Procedure for recovery
the port of consignment 1. Assembly and
deliberation
2. Resolution of the captain
3. Entry of the resolution in
ARTICLE 808. Averages shall be: 1.Simple or particular.
the logbook
2.General or gross.
4. Detailed minutes
5. Delivery of the minutes to
ARTICLE 807. The petty and ordinary expenses of the maritime judicial
navigation, such as pilotage of coasts and ports, lighterage and authority of the first port,
towage, anchorage dues, inspection, health, quarantine, within 24 hours from arrival,
lazaretto, and other so-called port expenses, costs of barges, 6. Ratification by captain
and unloading, until the merchandise is placed on the wharf, under oath. (Arts. 813-814)
and any other expenses common to navigation shall be
considered ordinary expenses to be defrayed by the
shipowner, unless there is a special agreement to the contrary.

NOT AVARAGES - Petty expenses under Art. 807

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SIMPLE OR PARTICULAR AVERAGE ARTICLE 810. The owner of the goods, which gave rise to the
expense or suffered the damage, shall bear the simple or
ARTICLE 809. Simple or particular averages shall be, as a particular averages.
general rule, all the expenses and damages caused to the
vessel or to her cargo which have not redounded to the benefit Simple Averages that do not inure common benefit, the owner
and common profit of all the persons interested in the vessel of the goods suffers the damages in accordance with the maxim
and her cargo, and especially the following: RES PERIT DOMINO. However, if the goods are secured in a
contract of loan of bottomry or respondentia, it is the lender
1) The damages suffered by the cargo from the time of its who shall bear the loss proportionate to his interest.
embarkation until it is unloaded, either on account of the
Nature of the goods or by reason of an Accident at sea or Force
majeure, and the expenses incurred to avoid and repair the GROSS OR GENERAL AVERAGE
same.
ARTICLE 811. General or gross averages shall be, as a
2) The damages suffered by the vessel in her Hull, Rigging,
general rule, all the damages and expenses which are
Arms, and Equipment, for the same causes and reasons, from
deliberately caused in order to save the vessel, her cargo, or
the time she puts to sea from the port of departure until she
both at the same time, from a real and known risk, and
anchored in the port of destination.
particularly the following:
3) The damages suffered by the merchandise Loaded on deck,
1) The Goods or Cash invested in the redemption of the vessel
except in coastwise navigation, if the marine ordinances allow it.
or cargo captured by enemies, privateers, or pirates, and the
provisions, wages, and expenses of the vessel detained during
4) The Wages and Victuals of the crew when the vessel should
the time the arrangement or redemption is taking place.
be Detained or Embargoed by a legitimate order or Force
majeure, if the charter should have been for a fixed sum for the
2) The goods Jettisoned to lighten the vessel, whether they
voyage.
belong to the vessel, to the cargo, or to the crew, and the
damage suffered through said act by the goods kept.
5) The Necessary expenses on arrival at a port, in order to
make repairs or secure provisions.
3) The Cables and Masts which are cut or rendered useless, the
Anchors and the Chains which are abandoned in order to save
6) The Lowest value of the goods sold by the captain in arrivals
the cargo, the vessel, or both.
under stress for the payment of provisions and in order to save
the crew, or to cover any other requirement of the vessel against
4) The expenses of Removing or Transferring a portion of the
which the proper amount shall be charged.
cargo in order to lighten the vessel and place her in condition to
enter a port or roadstead, and the damage resulting therefrom
7) The Victuals and Wages of the crew during the time the
to the goods removed or transferred.
vessel is in quarantine.
5) The damage suffered by the goods or the cargo through the
8) The damage suffered by the vessel or cargo by reason of an
Opening made in the vessel in order to drain her and prevent
Impact or Collision with another, if it were accidental and
her sinking.
unavoidable. If the accident should occur through the fault or
negligence of the captain, the latter shall be liable for all the
6) The expenses caused through Floating a vessel intentionally
damage caused.
stranded for the purpose of saving her. (stranding must be
intentional and not by accident i.e. when it ran aground a very
9) Any damage suffered by the cargo through the Faults,
shallow part of the river)
Negligence, or Barratry of the captain or of the crew, without
prejudice to the right of the owner to recover the
7) The damage caused to the vessel, which it is necessary to
corresponding indemnity from the captain, the vessel, and the Break open, Scuttle, or Smash in order to save the cargo.
freight.
8) The expenses of Curing and Maintaining, the members of
 Enumeration not exclusive: There‟s a general definition; the crew who may have been wounded or crippled in defending
then there‟s “and especially the following”
or saving the vessel.
SIMPLE AVERAGE: Simple or particular averages shall be, as
a general rule, all the expenses and damages caused to the 9) The Wages of any member of the crew detained as hostage
vessel or to her cargo which have not redounded to the benefit by enemies, privateers, or pirates, and the Necessary expenses,
and common profit of all the persons interested in the vessel which he may incur in his imprisonment, until he is returned to
and her cargo. the vessel or to his domicile, should he prefer it.

 Who bears the loss? The owner of the goods which gave
rise to the expense or suffered the damage shall bear the
simple or particular average (Art. 810)
10) The Wages and Victuals of the crew of a vessel chartered by
the month during the time it should be embargoed or detained
by force majeure or by order of the Government, or in order to

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repair the damage caused for the common good.
11) The loss suffered in the Value of the goods sold at arrivals
under stress in order to repair the vessel because of gross
average.
12) The expenses of the Liquidation of the average.
 Enumeration not exclusive: There‟s a general definition;
those enumerated are only illustrative
GENERAL AVERAGE: all the damages and expenses which
are deliberately caused in order to save the vessel, her cargo,
or both at the same time, from a real and known risk (Art. 811).
It is the deliverance form an immediate peril, by a common
sacrifice, that constitutes the essence of general average. It is
the safety of the property, and not the voyage, which
constitutes the true foundation of general average.
 Who bears the loss? All those who were benefited from
the sacrifice. (Art 812)
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.
REQUISITES FOR GENERAL AVERAGE:
(CD – SD – SS – LS)
1. CD – 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. (common danger
necessary)
 Arising from the
a) accidents of the sea,
b) dispositions of the authority, or
c) faults of men
 Peril imminent and ascertained
 Intended to save vessel and cargo, or both
2. SD– That for the common safety, part of the vessel or of the
cargo or both is SACRIFICED DELIBERATELY.
3. SS – That from the expenses or damages caused follows the
SUCCESSFUL SAVING of the vessel and cargo.
4. LS – That the expenses or damages should have been
incurred or inflicted after taking proper LEGAL STEPS and
authority (Article 813-815)
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NOTES NOTES
COMMON DANGER
- No common danger if upon the outbreak of war the vessel
goes to a neutral port and its cargo is not confiscated, the
expenses and damages occasioned by such arrival at a
neutral port cannot be considered general average, but
merely particular average to be borne by the vessel
alone.
- Expenses incurred to refloat a vessel, which accidentally
ran aground in fine weather inside the part of the mouth of
a river which was very shallow, in order to continue its
voyage, do not constitute general average. Not only is
there absence of a marine peril, common safety factor,
and deliberateness. It is the safety of the property, and not
the voyage, which constitutes the true foundation of
general average. The expenses were not incurred for the
common safety of the vessel and the cargoes; it was only
for the benefit of the vessel to enable it to proceed to its
destination. Since the cargoes were not in imminent peril
therefore the cargo owners are not bound to contribute to
the expenses. (A. Magsaysay, Inc. vs. Agan, G.R.No. L-6393,
Jan. 31, 1955)
LEGAL STEPS
ARTICLE 813.In order to incur the expenses and cause the
damages corresponding to gross average, a previous
resolution of the captain, adopted after deliberation with the
sailing mate and other officers of the vessel, and with a hearing
of the persons interested in the cargo who may be present,
shall be required.
If the latter shall object, and the captain and officers, or a
majority, or the captain, if opposed to the majority, should
consider certain measures necessary, they may be executed
under his liability, without prejudice to the freighters
exercising their rights against the captain before the judge or
court of competent jurisdiction, if they can prove that he acted
with malice, lack of skill, or negligence.
If the persons interested in the cargo, being on the vessel,
should not be heard, they shall not contribute to the gross
average, which contribution shall be paid by the captain,
unless the urgency of the case should be such that the time
necessary for previous deliberation was lacking.
ARTICLE 814. The resolution adopted to cause the damages
which constitute a general average must necessarily be
entered in the log book, stating the motives and reasons
therefor, the votes against it, and the reasons for the
disagreement should there be any, and the irresistible and
urgent causes which moved 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 by the captain
and by the officers of the vessel.
In the minutes and after the resolution there shall be stated in
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detail all the goods cast away, 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 by an
oath.
FORMALITIES FOR INCURRING GENERAL AVERAGE.
(DREAM)
1) Assembly of the sailing mate and other officers with the
captain; person interested in the cargo who‟s present shall
be heard;
2) Resolution of the captain after deliberation;
3) Enter resolution in logbook, stating: motives and reasons,
votes against and reason, irresistible and urgent causes of
captain acting in his own accord;
4) Make minutes, stating in detail: all jettisoned objects, and
injuries to objects kept on board, signed by all persons
present or by the captain and the officers of the vessel (if
captain acted in his own accord)
5) Deliver copy of minutes to MARITIME JUDICIAL
AUTHORITY, WITHIN 24 HOURS upon arrival at FIRST
PORT the captain makes.
JETTISON
JETTISON- The act of throwing cargo overboard in order to
lighten the vessel. Jettisoned goods are not res nullius nor
deemed “abandoned” within the meaning of civil law so as to
be the object of occupation by salvage. (Pandect of Commercial
Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)
ORDER OF JETTISON
ARTICLE 815. The captain shall supervise 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 handling of the vessel or damage her,
preferring, if possible, the heaviest ones and those of least
utility and value.
2. THOSE IN THE HOLD, 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 in so far 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 made up before the departure,
in accordance with the first paragraph of Article 612.
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NOTES NOTES
EXISTENCE OF GOODS; HOW PROVED
 Cargo belonging to different owners– by the bill of lading
 Goods belonging to the vessel – by the inventory made
prior to departure
ARTICLE 860. If, notwithstanding the jettison of the
merchandise, breakage of masts, ropes, and equipment, the
vessel should be lost running said risk, no contribution
whatsoever by reason of gross average shall be proper.
The owners of the goods saved shall not be liable for the
indemnity of those jettisoned, lost, or damaged.
ARTICLE 817. If in lightening a vessel on account of a
STORM, in order to facilitate her entry into a port or roadstead,
part of her 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 has originated from a gross average,
the amount thereof being distributed between the entire vessel
and cargo which caused the same.
If, on the contrary, the merchandise transferred should be
saved and the vessel should be lost, no liability can 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.
GENERAL AVERAGE EVEN IF JETTISON NOT MADE
DURING THE VOYAGE:
1) In order to facilitate her entry into a port or roadstead on
account of a STORM - part of her cargo should be
transferred to lighters or barges and be lost
2) As a necessary measure to extinguish a FIRE in a port;
roadstead; creek, or bay - it should be decided to sink any
vessel
JASON CLAUSES (YORK - ANTWERP RULES, RULE D)
What are the York-Antwerp Rules and the Jason Clause?
YORK-ANTWERP RULES - is an international system of rules
(they are not law or international treaties, but are just widely in
use) for the liquidation and payment of average to avoid the
problem of characterization.
JASON CLAUSE - is a standard provision in maritime contracts.
It provides for uniform rules on adjustment, proof and
liquidation of averages in maritime accidents to address
various systems of determining the same.
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York-Antwerp (Y-A) Rules on Determining Liability for
Averages With Regard To Deck Cargo
1) Deck cargo is allowed only in domestic/coastwise/inter-
island shipping, and is prohibited in international/
overseas/foreign shipping.
2) If deck cargo is loaded with the consent of the shipper on
overseas trade, it must always contribute to general
average, but should the same be jettisoned, it would not
be entitled to reimbursement because there is violation of
the Y-A Rules.
3) If deck cargo is loaded with the consent of the shipper on
coastwise shipping, it must always contribute to general
average and if jettisoned would be entitled to
reimbursement.
 Reason: In domestic shipping, voyages are usually short
and the seas are generally not rough. In overseas
shipping, the vessel is exposed for many days to perils of
the sea. International: prohibited because of distance;
exposed to the peril of the sea; Coastwise: there are
islands in between, so it is allowed.
DOMESTIC INTERNATIONAL
Deck cargo is allowed Deck cargo is not allowed
With shipper’s consent
General average Particular average
Without shipper’s consent
Captain is liable Captain is liable
ARRIVAL UNDER STRESS
ARTICLE 819
If the captain during the navigation should believe that the
vessel can not continue the voyage 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 her to navigate, he shall assemble the officers and
shall call 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
reasons should be considered well founded, it shall be decided
to make the nearest and most convenient port drafting and
entering in the log book the proper minutes, which shall be
signed by all.
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.
ARRIVAL UNDER STRESS. - Arrival of a vessel at the nearest and
most convenient port, if during the voyage the vessel cannot
continue the trip to the port of destination due to: (LAW)
1) Lack of provisions;
2) Well-founded fear of seizure, privateers, or pirates; or
3) Accident of the sea disabling the vessel to navigate.
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NOTES NOTES
FORMALITIES FOR MAKING ARRIVAL. (ADE)
1) Assembly of the officers, at which shall be summoned the
persons interested who may attend but who may not vote;
2) Drafting and entering the minutes in the proper logbook,
signed by all;
3) Enter objections and protests, of the persons interested, in
the logbook.
ARTICLE 820. The arrival under stress shall not be
considered legal 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 custom, 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
justifiable facts.
3. If the injury to the vessel should have been caused by reason
of her not being repaired, rigged, equipped, and arranged in a
convenient manner for the voyage, or by reason of some
erroneous order of the captain.
4. Whenever malice, negligence, want of foresight, or lack of
skill on the part of the captain is the reason for the act causing
the damage.
UNLAWFUL ARRIVALS. (NNIM)
1) Lack of provisions due to Negligence to carry according
to usage and customs;
2) risk of enemy Not well known or manifest;
3) defect of vessel due to Improper repair;
4) Malice, negligence, lack of foresight or skill of captain.
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
shipper by reason of the arrival, provided the latter is
legitimate.
Otherwise, the ship agent and the captain shall be jointly
liable.
EXPENSES OF ARRIVAL UNDER STRESS
- shall always be for the account of the Shipowner or Ship agent
DAMAGES CAUSED TO SHIPPER BY REASON OF THE
ARRIVAL
 If lawful arrival – Shipowner or Ship agent not liable
 If unlawful - Ship agent and Captain JOINTLY LIABLE
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SUMMARY ARTICLE 824. If the entire cargo or part thereof should appear
to be damaged, or there should be imminent danger of its
When lawful When unlawful
being damaged, the captain may request of the judge or court
The inability to continue 1. Lack of provisions due to of competent jurisdiction or the consul, in a proper case, the
voyage is due to: negligence to carry
sale of all or of part of the former, and the person taking
1. lack of provisions, according to usage and
customs; cognizance of the matter shall authorize it after an examination
2. well-founded fear of and declaration of experts, advertisements, and other
2. Risk of enemy not well known
seizure, privateers, pirates, or manifest formalities required by the case and an entry in the book, in
or 3. Defect of vessel due to accordance with the provisions of Article 624.
3. accidents of the sea improper repair; and
disabling it to navigate. 4. Malice, negligence, lack of The captain shall, in a proper case, justify the legality of the
(Art. 819) foresight or skill of captain.
procedure, under the penalty of answering to the shipper for
(Art. 820)
the price the merchandise would have brought if it should have
Who bears damages: arrived at the port of its destination in good condition.
Shipowner or ship agent The shipowner or ship agent is
shall not be liable for the liable in case of unlawful SALE OF CARGO
damages caused by reason arrival under stress. Cargo may be sold, but in order that such sale may be made:
of a lawful arrival. (Art. 821) (DAF)

1) Damage or imminent danger of being damaged, entire or

ARTICLE 822. If in order to make repairs to the vessel or
because there should be danger of the cargo suffering
damage it should be necessary to unload, the captain must
request authorization of the judge or court of competent
jurisdiction to lighten the vessel, and do so with the knowledge
of the person interested or representative of the cargo, should
there be one. In a foreign port, it shall be the duty of the
Spanish(Philippine) consul, where there is one, to give the
authorization.
In the first case (in order make repairs), the expenses shall be
defrayed by the ship agent or owner, and in the second
(danger of cargo suffering damage), they shall be for the
account of the owners of the merchandise, for whose benefit
the act took place. If the unloading should take place for both
reasons, the expenses shall be defrayed in proportion to the
value of the vessel and that of the cargo.
UNLOADING OF CARGO
In order that the captain may unload the cargo during the
arrival under stress: (DNA)
1) unloading must be Necessary to make repair;
2) unloading because there is Danger that the cargo may
suffer damage;
3) unloading is with Authority of either a COMPETENT
COURT (domestic) or the PHILIPPINE CONSUL (foreign).
part of the cargo;
2) Authorization (court/consul);
3) Formalities in accordance with Article 624 (infra).
 Procedure 624:
1. Protest must be made with a competent authority at
first port he touches;
2. within 24 hours following his arrival
3. Captain must ratify it within 24 hours when he arrives
at the place of destination where he must proceed
immediately with the proof of the facts
4. He must not open the hatches until all of the above
are done.
ARTICLE 825. The captain shall answer for the damages
caused by his delay, if the reason for the arrival under stress
having ceased, he should not continue the voyage.
If the reason for said arrival should have been the fear of
enemies, privateers, or pirates, BEFORE SAILING, a
discussion and resolution of a meeting of the officers of the
vessel and persons interested in the cargo who may be present
shall take place, in accordance with the provisions contained in
Article 819.
FORMALITIES FOR MAKING ARRIVAL (ART 819). (ADE)

1) Assembly of the officers, at which shall be summoned the

ARTICLE 823. The care and preservation of the cargo, which persons interested who may attend but who may not vote;
2) Drafting and entering the minutes in the proper logbook,
has been unloaded, shall be in charge of the captain, who shall
signed by all;
be responsible for the same, except in cases of force majeure. 3) Enter objections and protests, of the persons interested, in
the logbook.
 Captain is entrusted with custody and preservation; liable
for its use, destruction or deterioration, except if by force
majeure.

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