San Beda College of Law: Contract of Transportation/ Carriage

San Beda College of Law 54
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS
CONTRACT OF TRANSPORTATION/ A person or entity is a common carrier

CARRIAGE even if he did not secure a Certificate of
 A contract whereby a person, natural or Public Convenience (De Guzman vs. CA, 168
juridical, obligates to transport persons, SCRA 612).
goods, or both, from one place to another, by  It makes no distinction as to the means of
land, air or water, for a price or transporting, as long as it is by land, water or
compensation. air. It does not provide that the
 Classifications: transportation should be by motor vehicle.
1. Common or Private (First Philippine Industrial Corporation vs. CA)
2. Goods or Passengers  One is a common carrier even if he has no
3. For a fee (for hire) or Gratuitous fixed and publicly known route, maintains no
4. Land, Water/maritime, or Air terminals, and issues no tickets (Asia
5. Domestic/inter-island/coastwise or Lighterage Shipping, Inc. vs. CA).
International/foreign  Characteristics:
 It is a relationship which is imbued with 1. Undertakes to carry for all people
the public interest. indifferently and thus is liable for refusal
without sufficient reason (Lastimoso vs.
COMMON CARRIER Doliente, October 20, 1961);
 Persons, corporations, firms or 2. Cannot lawfully decline to accept a
associations engaged in the business of particular class of goods for carriage to
carrying or transporting passengers or goods the prejudice of the traffic in these
or both, by land, water, or air, for goods;
compensation, offering their services to the 3. No monopoly is favored (Batangas
public (Art. 1732, Civil Code). Trans. vs. Orlanes, 52 PHIL 455);
 Art. 1732 of the New Civil Code avoids any 4. Provides public convenience.
distinction between one whose principal
business activity is the carrying of persons or PRIVATE CARRIER
goods or both and one who does such  One which, without being engaged in the
carrying only as an ancillary activity business of carrying as a public employment,
(sideline). It also avoids a distinction undertakes to deliver goods or passengers for
between a person or enterprise offering compensation. (Home Insurance Co. vs.
transportation service on a regular or American Steamship Agency, 23 SCRA 24)
scheduled basis and one offering such service
on an occasional, episodic or unscheduled  TESTS WHETHER CARRIER IS
basis. COMMON OR PRIVATE:
Neither does the law distinguish between  The SC in First Philippine Industrial
a carrier offering its services to the general Corporation vs. CA (1995) reiterated the
public that is the general community or following tests:
population and one who offers services or 1. It must be engaged in the business of
solicits business only from a narrow segment carrying goods for others as a public
of the general population. employment and must hold itself out as
COMMERCIAL LAW COMMITTEE
CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws); Robespierre CU (Law on
Intellectual Property)

ready to engage in the transportation diligence and
of goods generally as a business and Art. 1733, NCC
not as a casual occupation; 6.Presumption of negligence
2. It must undertake to carry goods of the There is a No
kind to which its business in confined; presumption of presumption of
3. It must undertake to carry by the fault or fault or
method by which his business is negligence negligence
conducted and over its established 7.Governing law
roads; and Law on Law on
4. The transportation must be for hire. common obligations and
 In National Steel Corp. vs. CA (1997) the carriers contracts
SC held that the true test of a common carrier
is the carriage of goods or passengers GOVERNING LAWS
provided it has space for all who opt to avail A. Domestic/inter-island/coastwise
themselves of its transportation for a fee.  Applicable to Land, Water, and Air
transportation
1. Civil Code - primary
COMMON PRIVATE 2. Code of Commerce (Arts. 349, 379,
CARRIER CARRIER 573-734, 580, 806-845) - suppletory
1. As to availability
Holds himself Contracts with B. International/foreign/overseas
out for all particular (Foreign country to Philippines)
people individuals or  Applicable to Water/maritime and Air
indiscriminately groups only transportation
2. As to required diligence  The law of the country of destination
Extraordinary Ordinary generally applies.
diligence is diligence is 1. Civil Code - primary
required required 2. Code of Commerce - suppletory
3. As to regulation 3. Others - suppletory
Subject to Not subject to a. Water/maritime: Carriage of Goods
State State by Sea Act (COGSA)
regulation regulation b. Air: Warsaw Convention
4. Stipulation limiting liability
Parties may not Parties may I. NEW CIVIL CODE
agree on limit the (Arts. 1732-1766)
limiting the carrier’s
carrier’s liability liability, REQUIREMENT OF EXTRAORDINARY
except when provided it is DILIGENCE
provided by law not contrary to  Rendition of service with the greatest skill
law, morals or and utmost foresight. (Davao Stevedore Co.
good customs v. Fernandez)
5. Exempting circumstance  Rationale:
Prove caso fortuito, 1. From the nature of the business and for
extraordinary Art. 1174 NCC reasons of public policy (Art. 1733)

2. Relationship of trust
3. Business is impressed with a special DEFENSES OF A COMMON CARRIER IN
public duty THE CARRIAGE OF GOODS
4. Possession of the goods 1. CASO FORTUITO/FORCE MAJEURE
5. Preciousness of human life  Requisites:
 A common carrier is not an absolute a. Must be the proximate and only cause
insurer of all risks of travel. of the loss
b. Exercise of due diligence to prevent or
COVERAGE minimize the loss before, during or after
1. Vigilance over goods (Arts. 1734-1754); the occurrence of the disaster (Art. 1739)
and c. Carrier has not negligently incurred in
2. Safety of passengers (Arts. 1755-1763). delay in transporting the goods (Art.
1740)
PASSENGER  Fire is not considered a natural disaster or
 A person who has entered into a contract calamity as it arises almost invariably from
of carriage, express or implied, with the some act of man. (Eastern Shipping Lines Inc.
carrier. They are entitled to extraordinary vs. IAC)
diligence from the common carrier.  Mechanical defects are not force majeure
 The following are not considered if the same was discoverable by regular and
passengers, and are entitled to ordinary adequate inspections. (Notes and Cases on
diligence only: the Law on Transportation and Public
a. One who has not yet boarded any part Utilities, Aquino, T. & Hernando, R.P. 2004
of a vehicle regardless of whether or ed. p.120-122)
not he has purchased a ticket;
b. One who remains on a carrier for an 2. ACTS OF PUBLIC ENEMY
unreasonable length of time after he  Requisites:
has been afforded every safe a. Must be the proximate and only cause
opportunity to alight; of the loss
c. One who has boarded by fraud, b. Exercise of due diligence to prevent or
stealth, or deceit; minimize the loss before, during or after
d. One who attempts to board a moving the act causing the loss, deterioration or
vehicle, although he has a ticket, destruction of the goods (Art. 1739)
unless the attempt be with the
knowledge and consent of the carrier; 3. NEGLIGENCE OF THE SHIPPER OR OWNER
e. One who has boarded a wrong vehicle, a. Sole and proximate cause: absolute
has been properly informed of such defense
fact, and on alighting, is injured by the b. Contributory: partial defense. (Art.
carrier; 1741)
f. Invited guests and accommodation
passengers. (Lara vs. Valencia) 4. CHARACTER OF THE GOODS OR DEFECTS
g. One who rides any part of the vehicle IN THE PACKING OR IN THE CONTAINER
which is unsuitable or dangerous or  Even if the damage should be caused by
which he knows is not designed or the inherent defect/character of the goods,
intended for passengers. the common carrier must exercise due

diligence to forestall or lessen the loss. (Art. FOR
1742) DEATH OR INJURIES TO PASSENGERS
 The carrier which, knowing the fact of DUE TO ACTS OF ITS EMPLOYEES AND
improper packing of the goods upon ordinary OTHER PASSENGERS OR STRANGERS
observation, still accepts the goods
notwithstanding such condition, is not FOR ACTS
relieved of liability or loss or injury resulting FOR ACTS OF OF OTHER
therefrom. (Southern Lines, Inc. v. CA, 4 ITS PASSENGER
SCRA 258) EMPLOYEES S OR
STRANGERS
5. ORDER OR ACT OF PUBLIC AUTHORITY Required diligence and defense
 Said public authority must have the power Extraordinary Ordinary
to issue the order (Art. 1743). Consequently, diligence diligence
where the officer acts without legal process, Nature of liability
the common carrier will be held liable. Tort; however, Not absolute;
(Ganzon v. CA 161 SCRA 646) The employee limited by Art.
 Diligence in the selection and supervision must be on 1763
of employees under Article 2180 of the Civil duty at the time
Code cannot be interposed as a defense by of the act.
the common carrier because the liability of (Maranan v.
the carriers arises from the breach of the Perez)
contract of carriage. The defense under said
articles is applicable to negligence in quasi-  The carrier is liable when its personnel
delicts under Art. 2176. (Del Prado v. Manila allowed a passenger to drive the vehicle
Electric Co., 52 Phil 900) causing it to collide with another vehicle
resulting to the injuries suffered by the other
LIABILITY OF A COMMON CARRIER passengers. (MRR vs. Ballesteros, 16 SCRA
641)
CARRIAGE OF GOODS CARRIAGE OF PASSENGERS
Parties
1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, Death or injury to the
destruction, or deterioration of passengers
the goods
Duration of liability
From the time the goods are The duty of a common carrier to
unconditionally placed in the provide safety to its passengers
possession of, and received by the so obligates it not only during the

carrier for transportation until the course of the trip, but for so long
same are delivered actually or as the passengers are within its
constructively by the carrier to the premises and where they ought
consignee or to the person who to be in pursuance to the contract
has the right to receive them. (Art. of carriage. (LRTA v. Navidad,
1736) [2003])
 It remains in full force and  All persons who remain on the
effect even when they are premises within a reasonable
temporarily unloaded or stored in time after leaving the conveyance
transit unless the shipper or owner are to be deemed passengers,
has made use of the right of and what is a reasonable time or
stoppage in transitu. (Art. 1737) a reasonable delay within this rule
 It continues to be operative is to be determined from all the
even during the time the goods circumstances, and includes a
are stored in a warehouse of the reasonable time to see after his
carrier at the place of destination baggage and prepare for his
until the consignee has bee departure. (La Mallorca v. CA, 17
advised of the arrival of the goods SCRA 739 ; Abiotiz Shipping
and has had reasonable Corporation v. CA, 179 SCRA 95)
opportunity thereafter to remove  It is the duty of common
them or otherwise dispose of carriers of passengers to stop
them. (Art. 1738) their conveyances a reasonable
 Delivery of goods to the custom length of time in order to afford
authorities is not delivery to the passengers an opportunity to
consignee. (Lu Do v. Binamira, enter, and they are liable for
101 Phil 120) injuries suffered from the sudden
starting up or jerking of their
conveyances while doing so. The
duty which the carrier of
passengers owes to its patrons
extends to persons boarding the
cars as well as to those alighting
therefrom (Dangwa Trans Co.,
Inc. vs. CA 202 SCRA 574).
Presumption of negligence
Art.1735 Civil Code Art.1755 Civil Code

Reason: As to when and how Reason: The contract between
goods were damaged in transit is the passenger and the carrier
a matter peculiarly within the imposes on the latter the duty to
knowledge of the carrier and its transport the passenger safely;
employees. (Mirasol v. Dollar, 53 hence the burden of explaining
PHIL 124) should fall on the carrier.
Mere proof of delivery of goods

to a carrier in good order and the
subsequent arrival of the same
goods at the place of destination
in bad order makes for a prima
facie case against the carrier.
(Coastwise Lighterage Corp. v. CA,
245 SCRA 796)
Defenses
1. Ordinary circumstance: 1. Exercise of extraordinary

Exercise of extraordinary diligence (Art. 1756)
diligence (Art. 1735) 2. Caso fortuito
2. Special circumstances:
a. Flood, storm,
earthquake, lighting, or
other natural disaster or
calamity (plus force
majeure)
b. Act of the public
enemy in war, whether
international or civil
c. Act or omission of the
shipper or the owner of
goods
d. The character of the
goods or defects in the
packing or in the
containers
e. Order or act of
competent public
authority (Art. 1734)


Valid stipulations
1. Reduction of degree of diligence Stipulation limiting liability when a

to ordinary diligence, provided it passenger is carried gratuitously,
be: but not for willful acts or gross
a) In writing, signed by the negligence. (Art. 1758)
shipper or owner;
b) Supported by a valuable
consideration other than the
service rendered by the
carriers; and
c) Reasonable, just and not
contrary to public policy.
(Art. 1744)
2. Fixed amount of liability: A
contract fixing the sum to be
recovered by the owner or shipper
for the loss, destruction or
deterioration of the goods, if it is
reasonable and just under the
circumstances and has been fairly
and freely agreed upon. (Art.
1750)
3. Limited liability for delay: An
agreement limiting the common
carrier’s liability for delay on
account of strikes or riots (Art.
1748)
4. Stipulation limiting liability to
the value of the goods appearing
in the bill of lading, unless the
shipper or owner declares a
greater value. (Art. 1749)
 The diligence required in the

carriage of the goods may be
reduced by only one degree, from
extraordinary to ordinary diligence
or diligence of a good father of a
family. (Art. 1744, Art. 1745, no.
4)
Void stipulations
Dispensing with or lessening the


1. That the goods are extraordinary responsibility of a
transported at the risk of the common carrier for the safety of
owner or shipper; passengers imposed by law by
2. That carrier will not be liable stipulation, by posting of notices,
for any loss, destruction or by statements on tickets or
deterioration of the goods; otherwise. (Art. 1757)
3. That the carrier need not
observe any diligence in the
custody of the goods;
4. That the carrier shall exercise
a degree of diligence less than
that of a good father of a family
over the movable transported;
5. That the carrier shall not be
responsible for the acts or
omissions of his or its employees;
6. That the carrier’s liability for
acts committed by thieves or
robbers who do not act with
grave or irresistible threat,
violence or force is dispensed
with or diminished;
7. That the carrier is not
responsible for the loss,
destruction or deterioration of the
goods on account of the defective
condition of the car, vehicle, ship
or other equipment used in the
contract of carriage. (Art. 1745)


RULES ON PASSENGERS’ BAGGAGE subsidiarily liable only if the driver is
IN THE IN THE convicted and declared insolvent.
CUSTODY OF CUSTODY  Basis: Art. 100, RPC.
THE OF THE
PASSENGERS COMMON  In case of injury to a passenger due to the
(HAND- CARRIER negligence of the driver of the bus on which
CARRIED) (CHECKED- he is riding and of the driver of another
IN) vehicle, the drivers as well as the owners of
Legal nature of the the two vehicles are jointly and severally
baggage liable for damages. It makes no difference
Necessary Considered that the liability of the bus driver and owner
deposit as “goods” springs from contract while that of the owner
Required diligence by the and driver of the other vehicle arises from
common carrier quasi-delict. (Fabre vs. CA)
Diligence of a Extraordinary
depositary diligence LIMITATIONS AS TO CARRIER’S
(ordinary LIABILITY
diligence) INVALID AS VALID &
Applicable rules BEING ENFORCEAB
Arts. 1998 and Arts. 1733- CONTRARY LE
2000-2003 1753 TO PUBLIC
POLICY
CONCURRING CAUSES OF ACTION 1. One 1. One limiting
ARISING FROM THE NEGLIGENT ACT OF exempting the the liability of
THE COMMON CARRIER carrier from any the carrier to
1. Culpa contractual (breach of contract) and all liability an agreed
 Only the carrier is primarily liable and not for loss or valuation,
the driver, because there is no privity damage unless the
between the driver and the passenger. occasioned by shipper
 Basis: Art.1759, NCC. its own declares a
 No defense of due diligence in the negligence. higher value
selection and supervision of employees. 2. An and pays a
unqualified higher rate of
2. Culpa aquiliana (quasi-delict) limitation of freight
 The carrier and driver are solidarily liable liability to an (H.E. Heacock
as joint tortfeasors. agreed Company vs.
 Basis: Art. 2180, NCC. valuation. Macondray &
 Defense of due diligence in the selection Company
and supervision of employees is available. Inc.)
Exception: maritime tort resulting in collision.
(See notes on Collision)  However, the carrier cannot limit its
liability for injury to, or loss of, goods shipped
3. Culpa criminal (criminal negligence) where such injury or loss was caused by its
 The driver is primarily liable. The carrier is own negligence.

(Shewaram vs. PAL, 17 SCRA 606) Dutch Airlines vs. CA, 65 SCRA 237)
SPECIAL RULES ON LIABILITES OF II. CODE OF COMMERCE

AIRLINE CARRIERS
1. In case of flight diversion due to bad A. OVERLAND TRANSPORTATION
weather or other circumstances beyond the (Arts. 349-379)
pilot’s control, the relation between the
carrier and the passenger continues until the Applicability
latter has been landed at the port of 1. Domestic land and water/maritime
destination and has left the carrier’s transportation. (Pandect of Commercial Law
premises. The carrier should necessarily and Jurisprudence, Justice Jose Vitug, 1997
exercise extraordinary diligence in ed.)
safeguarding the comfort, convenience and 2. Domestic Air Transportation. (Commercial
safety of its stranded passengers until they Law Review, Cesar Villanueva, 2004 ed.)
have reached their final destination.
(Philippine Airlines vs. CA, 226 SCRA 423) IMPORTANT CONCEPTS:
2. Even where overbooking of passengers is 1. Bill of lading
allowed as a commercial practice, the airline 2. Obligations of the carrier
company would still be guilty of bad faith and 3. Right of abandonment
still be liable for damages if it did not properly 4. Notice of damage
inform passenger that it could breach the 5. Combined carrier agreement
contract of carriage even if they were
confirmed passengers. (Zalamea vs. CA, 228 BILL OF LADING
SCRA 23)  The written acknowledgment of receipt of
3. An open-dated ticket constitutes a goods and agreement to transport them to a
complete contract between the carrier and specific place to a person named or to his
passenger. Hence, the airline company is order.
liable if it refused to confirm a passenger’s  Rules:
flight reservation. (Singson vs. CA, 282 SCRA 1. It is not indispensable for the creation of
149) a contract of carriage. (Compania Maritima
4. An airline company which issued a vs. Insurance Company of North America, 12
confirmed ticket to a passenger covering SCRA 213)
successive trips on different airlines can be
held liable for damages occasioned by 2. Ambiguity is construed against the carrier,
“bumping off” by one of the successive the contract being one of adhesion.
airlines. (Lufthansa German Airlines vs. CA,
238 SCRA 290) 3. The consignee, although the instrument is
5. An airline ticket providing that carriage by oftentimes drawn up only by the consignor
successive air carriers is to be regarded as a and carrier, becomes bound by all the
“single operation” is to make the issuing stipulations contained therein by making a
carrier liable for the tortuous conduct of the claim for loss on the basis of said bill of
other carrier. A printed provision in the ticket lading. (Sea-Land Services Inc. vs. IAC)
limiting liability only to its own conduct is not
enough to rebut that liability. (KLM Royal 4. 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 7. Spent – One which covers goods that
shipper and the carrier, springs from either a already have been delivered by the
relation of agency between him and the carrier without a surrender of a signed
shipper, or his status as stranger in whose copy of the bill.
favor some stipulation is made in said 8. Through – One issued by the carrier who
contract, and who becomes a party thereto is obliged to use the facilities of other
when he demands fulfillment of that carriers as well as his own facilities for
stipulation. (Art. 1311 (2), (Mendoza vs. PAL the purpose of transporting the goods
Inc.) from the city of the seller to the city of
the buyer, which bill of lading is honored
5. Acceptance of the bill of lading without by the second and other interested
dissent raises the presumption that all the carriers who do not issue their own bills.
terms therein where brought to the 9. Custody – One wherein the goods are
knowledge of the shipper and agreed to by already received by the carrier but the
him and, in the absence of fraud or mistake; vessel indicated therein has not yet
he is estopped from thereafter denying that arrived in the port.
he assented to such terms. (Notes and Cases 10. Port – One which is issued by the
on the Law on Transportation and Public carrier to whom the goods have been
Utilities, Aquino, T. & Hernando, R.P. 2004 delivered, and the vessel indicated in the
ed. p.261) bill of lading by which the goods are to
be shipped is already in the port where
 Kinds: the goods are held for shipment.
1. On board - issued when the goods have  Functions:
been actually placed aboard the ship 1. Best evidence of the existence of the
with very reasonable expectation that contract of carriage of cargo (Art. 353)
the shipment is as good as on its way. 2. Document of title
2. Received - one in which it is stated that 3. Receipt of cargo
the goods have been received for 4. Contract to transport and deliver goods
shipment with or without specifying the as stipulated
vessel by which the goods are to be 5. Symbol of the goods
shipped.
3. Negotiable - one in which it is stated that OBLIGATIONS OF THE CARRIER
the goods referred to therein will be A. Duty to accept the goods
delivered to the bearer or to the order of GENERAL RULE: A common carrier cannot
any person named therein. ordinarily refuse to carry a particular class of
4. Non-negotiable - One in which it is goods.
stated that the goods referred to therein EXCEPTION: For some sufficient reason the
will be delivered to a specified person. discrimination against the traffic in such
5. Clean – One which does not indicate any goods is reasonable and necessary. (Fisher
defect in the goods. vs. Yangco Steamship Co. 31 Phil 1).
6. Foul – One which contains a notation  Instances when the carrier may validly
thereon indicating that the goods refuse to accept the goods include the ff:
covered by it are in bad condition. 1.) Goods sought to be transported are

dangerous objects, or substances including what cause it in the 1st
dynamite and other explosives may have shipment of
2.) Goods are unfit for transportation arisen. the same or
3.) Acceptance would result in overloading similar goods
4.) Contrabands or illegal goods which he may
5.) Goods are injurious to health make to the
6.) Goods will be exposed to untoward point of
danger like flood, capture by enemies and the delivery. (ART.
like 358 Code of
7.) Goods like livestock will be exposed to Commerce)
disease
8.) Strike Effects of delay
9.) Failure to tender goods on time. (Notes a. Merely suspends and generally does not
and Cases on the Law on Transportation and terminate the contract of carriage
Public Utilities, Aquino, T. & Hernando, R.P. b. Carrier remains duty bound to exercise
2004 ed. p.68) extraordinary diligence
 In case of carriage by railway, the carrier c. Natural disaster shall not free the carrier
is exempted from liability if carriage is from responsibility (Art.1740)
insisted upon by the shipper, provided its d. If delay is without just cause, the contract
objections are stated in the bill of lading. limiting the common carrier’s liability cannot
 However, when a common carrier accepts be availed of in case of loss or deterioration
cargo for shipment for valuable of the goods (Art.1747)
consideration, it takes the risk of delivering it
in good condition as when it was loaded. (PAL RIGHT OF CONSIGNEE TO ABANDON
vs. CA) GOODS
 Instances:
B. Duty to deliver the goods 1. Partial non-delivery, where the goods are
 Not only to transport the goods safely but useless without the others (Art. 363);
to the person indicated in the bill of lading. 2. Goods are rendered useless for sale or
The goods should be delivered to the consumption for the purposes for which they
consignee or any other person to whom the are properly destined (Art. 365); and
bill of lading was validly transferred or 3. In case of delay through the fault of the
negotiated. carrier (Art. 371).
Time of delivery NOTICE OF DAMAGE (ART. 366)

Stipulated in No  Requisites for applicability:
Contract/Bill stipulation 1. Domestic/inter-island/coastwise
of Lading transportation
1. Carrier is 1. Within a 2. Land/water/air transportation
bound to fulfill reasonable 3. Carriage of goods
the contract time. 4. Goods shipped are damaged
and is liable for 2. Carrier is  Rules:
any delay; no bound to a. Patent damage: shipper must file a claim
matter from forward them against the carrier immediately upon

delivery (it may be oral or written) Water/maritim
b. Latent damage: shipper should file a claim e
against the carrier within 24 hours from transportation
delivery. 3. Carriage of
Note: These rules does not apply to goods
misdelivery of goods. (Roldan vs. Lim Ponzo) Notice of damage
Purpose of notice: To inform the carrier 1. 1. Not a
that the shipment has been damaged, and it Condition condition
is charged with liability therefore, and to give precedent precedent
it an opportunity to make an investigation 2. 24-hour 2. 3-day
and fix responsibility while the matter is period for period for
fresh. claiming latent claiming
 The filing of notice of claim is a condition damage latent damage
precedent for recovery. Prescriptive period
 Shorter period may be stipulated by the None provided; One year from
parties because it merely affects the Civil Code the date of
shipper’s remedy and does not affect the applies. delivery
liability of the carrier. (PHILAMGEN vs. (delivered but
Sweetlines, Inc.) damaged
Prescriptive Period goods), or
 Not provided by Article 366. Thus, in such date when the
absence, Civil Code rules on prescription vessel left port
apply. or from the
 If despite the notice of claim, the carrier date of
refuses to pay, action must be filed in court. delivery to the
1. No bill of lading was issued: arrastre (non-
within 6 years delivery or
2. Bill of lading was issued: within loss).
10 years.
ARTICLE 366 COGSA COMBINED CARRIER AGREEMENT
Sec.3 (6) (ART. 373)
Applicability GENERAL RULE: In case of a contract of
1. 1. Internationa transportation of several legs, each carrier is
Domestic/inter- l/ responsible for its particular leg in the
island/coastwis overseas/forei contract.
e gn (from EXCEPTION: A combined carrier agreement
transportation foreign where a carrier makes itself liable assuming
2. Land, country to the obligations and acquiring as well the
water, air Phils.) rights and causes of action of those which
transportation Note: subject preceded it.
3. Carriage to the rule on
of goods Paramount B. MARITIME COMMERCE
Clause (Arts. 573-869)
2.

IMPORTANT CONCEPTS: 2. Hypothecary - the liability of the owner of
1. Merchant vessel the value of the vessel is limited to the vessel
2. Maritime lien and Preference of Credit itself (Doctrine of Limited Liability).
3. Doctrine of limited liability
4. Causes of revocation of voyage  The real and hypothecary nature of
5. Participants in maritime commerce maritime law simply means that the liability
6. Charter party of the carrier in connection with losses related
7. Loans on bottomry and respondentia to maritime contracts is confined to the
8. Accidents in maritime commerce vessel, which stands as the guaranty for their
settlement. (Aboitiz Shipping Corp. vs.
MARITIME/ADMIRALTY LAW General Accident Fire and Life Assurance
 It is the system of laws which particularly Corp. 217 SCRA 359).
relates to the affairs and business of the sea,
to ships, their crews and navigation, and to MERCHANT VESSEL
maritime conveyance of persons and  Vessel engaged in maritime commerce,
property. (Notes and Cases on the Law on whether foreign or otherwise. (Bar Review
Transportation and Public Utilities, Aquino & Materials in Commercial Law, Jorge Miravite,
Hernando, citing Francisco, p.254) 2002 ed.)
 Constitutes property which may be
 Maritime laws apply only to maritime trade acquired and transferred by any of the means
and sea voyages. (Pandect of Commercial recognized by law. They shall continue to be
Law and Jurisprudence, Justice Jose Vitug, considered as personal property. (Arts. 573,
1997 ed.) 585)
 They are susceptible to maritime liens such
 Arrastre service is not maritime in as for the repair, equipping and provisioning
character. It refers to a contract for the of the vessel in the preparation of a voyage,
unloading of goods from a vessel. (ICTSI vs. as well as mortgage liabilities, in satisfaction
Prudential Guarantee, 320 SCRA 244) of which a vessel may be validly arrested and
sold. (Ship Mortgage Decree of 1978)
CHARACTERISTICS OF MARITIME
TRANSACTION MARITIME LIEN
1. Real - similar to transactions over real  It constitutes a present right of property in
property with respect to effectivity against the ship, a jus in re, to be afterward enforced
third persons which is done through in admiralty by process in rem. (PNB vs. CA,
registration. (Rubiso vs. Rivera, 37 Phil. 72). 337 SCRA 381)
The evidence of real nature is shown by: 1)  If the maritime lien arose prior to the
the limitation of the liability of the agents to recording of a preferred mortgage, it shall
the actual value of the vessel and the freight have priority over the said mortgage lien.
money; and 2) the right to retain the cargo (PNB vs. CA, 337 SCRA 381)
and embargo and detention of the vessel
(Luzon Stevedoring Corp v. CA, 156 SCRA
ORDER OF PREFERENCE IN CASE OF
169);
SALE OF VESSEL
R.A. 6106 P.D. 1521


Effectivity date goods 6. Damages
1969 1978 transported arising out of
Applicability but which tort; and
Overseas Both domestic were not 7. Preferred
shipping only and overseas delivered to mortgage
shipping the consignee; registered
Kind of sale 5. Costs of prior in time.
Judicial Judicial and repair and
extrajudicial equipment of
Order of Preference the vessel, and
A preferred The preferred provisioning of
mortgage shall mortgage lien food, supplies
have priority shall have and fuel
over all claims priority over during its last
against the all claims voyage; and
vessel, except against the 6. Preferred
the following vessel, except mortgages
preferences in the following registered
the order preferences in prior in time.
stated: the order
1. Judicial stated:  Effect of sale: All pre-existing claims in the
costs of the 1. Expenses vessel are terminated. They will then be
proceedings; and fees satisfied from the proceeds of the sale
2. Taxes due allowed and subject to the order of preference.
the Philippine costs taxed by
Government; the court and DOCTRINE OF LIMITED LIABILITY
3. Salaries and taxes due to (HYPOTHECARY RULE)
wages of the the  Cases where applicable:
Captain and Government; 1. Art. 587 – civil liability for indemnities
Crew of the 2. Crew’s to third persons
vessel during wages; 2. Art. 590 – indemnities from negligent
its last 3. General acts of the captain (not the shipowner
voyage; average; or ship agent)
4. General 4. Salvage, 3. Art. 837 – collision
average or including 4. Art. 643 – liability for wages of the
salvage contract captain and the crew and for advances
including salvage; made by the ship agent if the vessel is
contract 5. Maritime lost by shipwreck or capture
salvage, liens arising
bottomry prior in time to GENERAL RULE: The liability of shipowner
loans, and the recording and ship agent is limited to the amount of
indemnity due of the interest in said vessel such that where vessel
shippers for preferred is entirely lost, the obligation is extinguished.
the value of mortgage; (Luzon Stevedoring v. Escano, 156 SCRA

169) The interest extends to: 1) the vessel Instances
itself; 2) equipments; 3) freightage; and 4) 1. In case of 1. Partial non-
insurance proceeds. (Chua v. IAC, 166 SCRA civil liability delivery,
183) from where the
EXCEPTIONS: indemnities to goods are
1. Claims under Workmen’s Compensation third persons useless
(Abueg vs. San Diego 77 Phil 730); (Art. 587); without the
2. Injury or damage due to shipowner or to 2. Sec. 138, others (Art.
the concurring negligence of the Insurance 363);
shipowner and the captain; Code; 2. Goods are
3. The vessel is insured (Vasquez vs. CA 138 3. In case of rendered
SCRA 553). leakage of at useless for
4. Expenses for repair on vessel completed least ¾ of the sale or
before loss; contents of a consumption
5. In case there is no total loss and the vessel cargo for the
is not abandoned; containing purposes for
6. Collision between two negligent vessels; liquids (Art. which they are
687) properly
 Abandonment of the vessel is necessary to destined (Art.
limit the liability of the shipowner. The only 365); and
instance were abandonment is dispensed 3. In case of
with is when the vessel is entirely lost (Luzon delay through
Stevedoring vs. CA 156 SCRA 169). the fault of the
carrier (Art.
RIGHT OF SHIPOWNER OR SHIP AGENT 371).
TO ABANDON VESSEL Effects
 Instances: 1. Transfer 1. Transfer of
1. In case of civil liability from indemnities of ownership of ownership on
to third persons (Art. 587); the vessel from the goods
2. In case of leakage of at least ¾ of the the shipowner from the
contents of a cargo containing liquids (Art. to the shippers shipper to the
687); and or insurer. carrier.
3. In case of constructive loss of the 2. In case 2. Carrier
vessel (Sec. 138, Insurance Code). of (2), the should pay the
insurer must shipper the
RIGHT OF ABANDONMENT pay the insured market value
as if there was of the goods
SHIPOWNER CONSIGNEE actual total loss at the point of
OR SHIP of the vessel. destination.
AGENT
What may be abandoned CAUSES OF REVOCATION OF VOYAGE
Vessel Goods 1. War or interdiction of commerce;
shipped 2. Blockade;
3. Prohibition to receive cargo at destination;

4. Embargo; 1. Capacity to trade;
5. Inability of the vessel to navigate. (Art. 2. Discharge duties of the captain, subject to
640) Art.609;
3. Contract in the name of the owners with
Terms: respect to repairs, details of equipment,
1. Interdiction of commerce – A armament, provisions of food and fuel,
governmental prohibition of commercial and freight of the vessel, and all that
intercourse intended to bring about an relate to the requirements of navigation;
entire cessation for the time being of all 4. Order a new voyage, make a new charter
trade whatever. or insure the vessel after obtaining
2. Blockade – A sort of circumvallation of a authorization from the shipowner or if
place by which all foreign connection and granted in certificate of appointment.
correspondence is, as far as human power
can effect it, to be cut off. Civil Liabilities of the Shipowner And
3. Embargo – A proclamation or order of a Ship Agent
state, usually issued in time of war or 1. All contracts of the captain, whether
threatened hostilities, prohibiting the authorized or not, to repair, equip and
departure of ships or goods from some or provision the vessel; (Art. 586)
all the ports of such state until further 2. Loss and damage to the goods loaded on
order. the vessel without prejudice to their right
to free themselves from liability by
PARTICIPANTS IN MARITIME abandoning the vessel to the creditors.
COMMERCE (Art. 587)
A. Shipowners and ship agents
B. Captains and masters of the vessel Duty of Ship Agent to Discharge the
C. Officers and crew of the vessel Captain and Members of the Crew
D. Supercargoes  If the seamen contract is not for a definite
E. Pilot period or voyage, he may discharge them at
his discretion. (Art. 603)
A. SHIPOWNERS AND SHIP AGENTS  If for a definite period, he may not
Shipowner (proprietario) discharge them until after the fulfillment of
 Person who has possession, control and their contracts, except on the following
management of the vessel and the grounds:
consequent right to direct her navigation and a. Insubordination in serious matters;
receive freight earned and paid, while his b. Robbery;
possession continues. c. Theft;
d. Habitual drunkenness;
Ship agent (naviero) e. Damage caused to the vessel or to its
 Person entrusted with provisioning and cargo through malice or manifest or
representing the vessel in the port in which it proven negligence. (Art. 605)
may be found; also includes the shipowner.
 Not a mere agent under civil law; he is B. CAPTAINS AND MASTERS
solidarily liable with the ship owner.  They are the chiefs or commanders of
 Powers and functions: ships.

 The terms have the same meaning, but are 2. Keep a Log Book, Accounting Book and
particularly used in accordance with the size Freight Book;
of the vessel governed and the scope of 3. Examine the ship before the voyage;
transportation, i.e., large and overseas, and 4. Stay on board during the loading and
small and coastwise, respectively. unloading of the cargo;
 Nature of position (3-fold character): 5. Be on deck while leaving or entering
1. General agent of the shipowner; the port;
2. Technical director of the vessel; 6. Protest arrivals under stress and in
3. Representative of the government of case of shipwreck;
the country under whose flag he 7. Follow instructions of and render an
navigates. accounting to the ship agent;
 Qualifications: 8. Leave the vessel last in case of wreck;
1. Filipino citizen; 9. Hold in custody properties left by
2. Legal capacity to contract; deceased passengers and crew
3. Must have passed the required physical members;
and mental examinations required for 10. Comply with the requirements of
licensing him as such. (Art. 609) customs, health, etc. at the port of
 Inherent powers: arrival;
1. Appoint crew in the absence of ship 11. Observe rules to avoid collision;
agent; 12. Demand a pilot while entering or
2. Command the crew and direct the leaving a port. (Art. 612)
vessel to its port of destination;
3. Impose correctional punishment on  A ship’s captain must be accorded a
those who, while on board vessel, fail reasonable measure of discretionary
to comply with his orders or are authority to decide what the safety of the ship
wanting in discipline; and of its crew and cargo specifically requires
4. Make contracts for the charter of vessel on a stipulated ocean voyage (Inter-Orient
in the absence of ship agent. Maritime Enterprises Inc. vs. CA).
5. Supply, equip, and provision the
vessel; and  No liability for the following:
6. Order repair of vessel to enable it to 1. Damages caused to the vessel or to the
continue its voyage. (Art. 610) cargo by force majeure;
 Sources of funds to comply with the 2. Obligations contracted for the repair,
inherent powers of the captain (in successive equipment, and provisioning of the
order): vessel unless he has expressly bound
1. From the consignee of the vessel; himself personally or has signed a bill
2. From the consignee of the cargo; of exchange or promissory note in his
3. By drawing on the ship agent; name. (Art. 620)
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611) Solidary Liabilities of the Ship
 Duties: Agent/Shipowner for Acts Done by the
1. Bring on board the proper certificate Captain towards Passengers and
and documents and a copy of the Code Cargoes
of Commerce;

1. Damages to vessel and to cargo due to 4. Responsible for all the damages caused
lack of skill and negligence; to the vessel and the cargo by reason
2. Thefts and robberies of the crew; of his negligence. (Arts. 628 - 631)
3. Losses and fines for violation of laws;
4. Damages due to mutinies; Second Mate
5. Damages due to misuse of power;  Takes command of the vessel in case of
6. For deviations; the inability or disqualification of the captain
7. For arrivals under stress; and the sailing mate, assuming in such case
8. Damages due to non-observance of their powers and responsibilities.
marine regulations. (Art. 618)  Third in command
 Duties:
C. OFFICERS AND CREW 1. Preserve the hull and rigging of the
1. Sailing Mate/First Mate vessel;
2. Second Mate 2. Arrange well the cargo;
3. Engineers 3. Discipline the crew;
4. Crew 4. Assign work to crew members;
 No liability under the following 5. Inventory the rigging and equipment of
circumstances: the vessel, if laid up. (Art. 632)
1. If, before beginning voyage, captain
attempts to change it, or a naval war with Engineers
the power to which the vessel was  Officers of the vessel but have no authority
destined occurs; except in matters referring to the motor
2. If a disease breaks out and be officially apparatus. When two or more are hired, one
declared an epidemic in the port of of them shall be the chief engineer.
destination;  Duties:
3. If the vessel should change owner or 1. In charge of the motor apparatus,
captain. (Art. 647) spare parts, and other instruments
pertaining to the engines;
Sailing Mate/First Mate 2. Keep the engines and boilers in good
 Second chief of the vessel who takes the condition;
place of the captain in case of absence, 3. Not to change or repair the engine
sickness, or death and shall assume all of his without authority of the captain;
duties, powers and responsibilities. (Art. 627) 4. Inform the captain of any damage to
the motor apparatus;
 Duties: 5. Keep an Engine Book;
1. Provide himself with maps and charts 6. Supervise all personnel maintaining the
with astronomical tables necessary for engine. (Art. 632)
the discharge of his duties;
2. Keep the Binnacle Book; Crew
3. Change the course of the voyage on  The aggregate of seamen who man a ship,
consultation with the captain and the or the ship’s company.
officers of the boat, following the  Hired by the ship agent, where he is
decision of the captain in case of present and in his absence, the captain hires
disagreement; them, preferring Filipinos, and in their

absence, he may take in foreigners, but not  Does not include the passengers or the
exceeding 1/5 of the crew. (Art. 634) persons whom the vessel is transporting.
Classes of Seaman’s Contracts D. SUPERCARGOES

1. By the voyage;  Persons who discharges administrative
2. By the month; and duties assigned to him by ship agent or
3. By share of profits or freightage. shippers, keeping an account and record of
transaction as required in the accounting
Just Causes for the Discharge of book of the captain. (Art. 649)
Seaman While Contract Subsists
1. Perpetration of a crime; E. PILOT
2. Repeated insubordination, want of  A person duly qualified, and licensed, to
discipline; conduct a vessel into or out of ports, or in
3. Repeated incapacity and negligence; certain waters.
4. Habitual drunkenness;  The term generally connotes a person
5. Physical incapacity; taken on board at a particular place for the
6. Desertion. (Art. 637) purpose of conducting a ship through a river,
road or channel, or from a port.
Rules in case of Death of a Seaman  Master pro hac vice for the time being in
 The seaman’s heirs are entitled to payment the command and navigation of the ship.
as follows:  While in exercising his functions a pilot is
1. If death is natural: in sole command of the ship and supersedes
a. compensation up to time of death if the master for the time being in the command
engaged on wage and navigation of the ship, the master does
b. if by voyage - half of amount if death not surrender his vessel to the pilot and the
occurs on voyage out; and full, if on pilot is not the master. There are occasions
voyage in when the master may and should interfere
c. if by shares - none, if before departure; and even displace the pilot, as when the pilot
full, if after departure is obviously incompetent or intoxicated (Far
2. if death is due to defense of vessel - full Eastern Shipping Company vs. CA).
payment;  Compulsory Pilotage – States possessing
3. if captured in defense of vessel - full harbors have enacted laws or promulgated
payment; rules requiring vessels approaching their
4. if captured due to carelessness - wages up ports to take on board pilots licensed under
to the date of the capture. (Art. 645) the local laws. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino,
Complement of the Vessel T. & Hernando, R.P. 2004 ed. p. 518)
 All persons on board, from the captain to
the cabin boy, necessary for the Liablity of Pilot
management, maneuvers, and service, thus GENERAL RULE: On compulsory pilotage
including the crew, the sailing mates, grounds, the Harbor Pilot is responsible for
engineers, stokers and other employees on damage to a vessel or to life or property due
board not having specific designations. to his negligence.
EXCEPT:

1. Accident caused by force majeure or the vessel pro hac vice, just for that one
natural calamity provided the pilot exercised particular purpose only. Because the
prudence and extra diligence to prevent or charterer is treated as owner pro hac vice,
minimize damages. the charterer assumes the customary
2. Countermand or overrule by the master of rights and liabilities of the shipowner to
the vessel in which case the registered owner third persons and is held liable for the
of the vessel is liable. (Sec.11, Art.III PPA expense of the voyage and the wages of
Admin Order 03-85) the seamen.
2. Contract of Affreightment – A contract
SPECIAL CONTRACTS OF MARITIME whereby the owner of the vessel leases part
COMMERCE or all of its space to haul goods for others.
1. Charter party  The shipowner retains the possession,
2. Bill of lading command and navigation of the ship, the
3. Contract of transportation of charterer merely having use of the space
passengers on sea voyages in the vessel in return for his payment of
4. Loan on bottomry the charter hired.
5. Loan on respondentia  Kinds:
6. Marine insurance a. Time charter – vessel is chartered for a
fixed period of time or duration of
CHARTER PARTY voyage.
 A contract by virtue of which the owner or b. Voyage or trip charter – the vessel is
agent binds himself to transport merchandise leased for one or series of voyages
or persons for a fixed price. usually for purposes of transporting
 A contract by which an entire ship, or some goods for charterer.
principal part thereof is let/leased by the
owner to another person for a specified time LEASE CHARTER
or use. (Planters Products, Inc. vs. CA, 226 PARTY
SCRA 476) If for a definite Charterer may
 Parties: period, lessee rescind charter
1. Ship owner or ship agent cannot give up party by paying
2. Charterer the lease by half of the
 Classes: paying a freightage
1. Bareboat or demise – The charterer portion of the agreed upon.
provides crew, food and fuel. The charterer is amount agreed
liable as if he were the owner, except when upon.
the cause arises from the unworthiness of the If the leased The new owner
vessel. The shipowner leases to the charterer property is sold is not
the whole vessel, transferring to the latter the to one who compelled to
entire command, possession and consequent knows of the respect the
control over the vessel’s navigation, including existence of charter party
the master and the crew, who thereby the lease, the so long as he
become the charter’s servants. It transforms new owner can load the
a common carrier into a private carrier. must respect vessel with his
 The charterer becomes the owner of the lease. own cargo.

(Art. 689) private carrier. private carrier.
Civil law Commercial
concept law concept
PERSONS WHO MAY MAKE A CHARTER

1. Owner or owners of the vessel, either
CHARTER BILL OF
in whole or in majority part, who have
PARTY LADING legal control and possession of the
An entire or More like a vessel
complete private receipt 2. Charterer may subcharter entire vessel
contract. which the to 3rd person only if not prohibited in
captain gives original charter. (Art.679)
to accredit 3. Ship agent if authorized by the owner/s
goods received or given such power in the certificate
from persons of appointment. (Art.598)
Consensual Real contract 4. Captain in the absence of the ship
contract agent or consignee and only if he acts
in accordance with the instructions of
BAREBOAT CONTRACT the agent or owner and protects the
OR DEMISE OF latter’s interests. (Art.609)
CHARTER AFFREIGHTM
ENT (TIME REQUISITES OF A VALID CHARTER
OR VOYAGE PARTY
CHARTER) 1. Consent of the contracting parties
Charterer Owner remains 2. Existing vessel which should be placed
becomes liable liable as carrier at the disposition of the shipper
to others and must 3. Freight
caused by its answer for any 4. Compliance with Art. 652 of the Code
negligence breach of duty of Commerce
Charterer Charterer is not
regarded as regarded as
owner pro hac owner.
vice for the
voyage Clauses Which May Be Included In a
Owner of The vessel Charter Party
vessel owner retains
relinquishes possession, Jason clause Clause
possession, command and paramount
command and navigation of or
navigation to the ship paramount
charterer clause
Common Common
carrier is carrier is not
converted to converted to a

A stipulation in A clause in a clandestinely loading
a charter party charter party placed uncontracted
that in case of providing that 4. To cargo and
a maritime the COGSA substitute illicit cargo;
accident for shall apply, another vessel 4. To wait if
which the even though if load is less the vessel
shipowner is the than 3/5 of needs repair;
not responsible transportation capacity; 5. To pay
by law, is domestic, 5. To leave the expenses for
contract or subject to the port if the deviation.
otherwise, the extent that any charterer does (Arts. 679-
cargo shippers, term of the bill not bring the 687)
consignees or of lading is cargo within
owners shall repugnant to the lay days
contribute with the COGSA or and extra lay
the shipowner applicable law, days allowed;
in general then to the 6. To place in
average. extent thereof a vessel in a
(Pandect of the provision of condition to
Commercial the bill of navigate;
Law and lading is void. 7. to bring
Jurisprudence, (Pandect of cargo to
Justice Jose Commercial nearest neutral
Vitug, 1997 Law and port in case of
ed.) Jurisprudence, war or
Justice Jose blockade.
Vitug, 1997 (Arts. 669-678)
ed.)
Rights and Obligations of Parties Rescission of a Charter Party

At At Fortuito
SHIPOWNER CHARTERER charter shipow us
OR SHIP er’s ner’s causes
AGENT request request (Art.
1. If the vessel 1. To pay the (Art (Art. 690)
is chartered agreed charter 688) 689)
wholly, not to price;
accept cargo 2. To pay 1. By 1. If the 1. War or
from others; freightage on abandoni extra lay interdicti
2. To observe unboarded ng the days on of
represented cargo; charter terminat commerc
capacity; 3. To pay and e without e;
3. To unload losses to paying the cargo
cargo others for half of being

the placed 2. 5. Extra Lay Days – days which follow after
freightag alongside Blockade the lay days have elapsed.
e; the ;
2. Error vessel; 3. USUAL FORMS OF CONSUMMATING
in 2. Sale by Prohibitio CONTRACTS
tonnage the n to 1. C.I.F. – cost, insurance and freight;
or flag; owner of receive 2. F.O.B. - free on board;
3. Failure the cargo; 3. F.A.S. - free alongside ship; and
to place vessel 4. 4. C. & F. - cost and freight.
the before Embargo
vessel at loading ; and TRANSSHIPMENT OF GOODS
the by the 5.  The act of taking cargo out of one ship and
charterer charterer Inability loading it in another, or the transfer of goods
’s ; of the from the vessel stipulated in the contract of
disposal; vessel to affreightment to another vessel before the
4. Return navigate. place of destination named in the contract
of the has been reached, or the transfer for further
vessel transportation from one ship or conveyance
due to to another.
pirates,  It is not dependent on the ownership of
enemies the transporting ships or in the change of
or bad carriers, but rather on the fact of actual
weather; physical transfer of cargo from one vessel to
5. Arrival another.
at a port  If done without legal excuse, however
for competent and safe the vessel into which the
repairs. transfer is made, is a violation of contract and
infringement of right of shipper and subjects
Terms: carrier to liability if freight is lost event by
1. Primage - bonus to be paid to the captain cause otherwise excepted. (Magellan
after the successful voyage. Manufacturing vs. CA, 201 SCRA 102)
2. Demurrage – the sum fixed in the charter
party as a remuneration to the owner of LOAN ON BOTTOMRY AND
the ship for the detention of his vessel RESPONDENTIA
beyond the number of days allowed by the  A real, unilateral, aleatory contract, by
charter party for loading or unloading or virtue of which one person lends to another a
for sailing. certain amount of money or goods on things
3. Deadfreight – the amount paid by or exposed to maritime risks, which amount,
recoverable from a charterer of a ship for with its earnings, is to be returned if the
the portion of the ship’s capacity the latter things are safely transported, and which is
contracted for but failed to occupy. lost if the latter are lost.
4. Lay Days - days allowed to charter parties
for loading and unloading the cargo.


LOAN ON LOAN ON 4. Amount of the loan and the
BOTTOMRY RESPONDEN premium stipulated;
TIA 5. Time for repayment;
Definition 6. Goods pledged to secure
Loan made by Loan taken on repayment;
shipowner or security of the 7. Voyage during which the
ship agent cargo laden on risk is run (Art.721)
guaranteed by a vessel, and
vessel itself repayable
and repayable upon safe BOTTOMRY/ ORDINARY
upon arrival of arrival of RESPONDEN LOAN
vessel at cargo at TIA (MUTUUM)
destination. destination.
(Art. 719) (Art. 719) Not subject to Subject to
Usury Law Usury Law
Who may contract Liability of the Not subject to
Shipowner or Only the borrower is any
ship agent. owner of the contingent on contingency
Outside of the cargo. the safe arrival (absolute
residence of of the vessel liability)
the owners - or cargo at
the captain. destination
Common elements: The last lender The first
1. Exposure of security to is a preferred lender is a
marine peril; creditor preferred
2. Obligation of the debtor
creditor
conditioned only upon safe
arrival of the security at the
point of destination. WHEN LOAN ON BOTTOMRY OR
Forms: RESPONDENTIA REGARDED AS SIMPLE
1. Public instrument
LOAN
2. Policy signed by the 1. Lender loaned an amount larger than
contracting parties and the the value of the object due to
broker taking part therein fraudulent means employed by the
3. Private instrument (Art. borrower. (ART.726)
720) 2. Full amount of the loan is not used for
Contents: the cargo or given on the goods if all of
1. Kind, name and registry of them could not have been loaded, the
the vessel; balance will be considered a simple
2. Name, surname and loan. (ART.727)
domicile of the captain; 3. If the effects on which the money is
3. Names, surnames and taken is not subjected to any risk.
domiciles of the borrower (ART.729)
and the lender;

Note: Under existing laws, the parties to a 4. The vessel was engaged in contraband;
loan, whether ordinary or maritime, may and
agree on any rate of interest. (CB Circular 5. The cargo loaded on the vessel be
905) different in from that agreed upon.
Concurrence of Marine Insurance and

MARINE LOAN ON Loan on Bottomry/Respondentia
INSURANCE BOTTOMR 1. The insurable interest of the owner of
Y OR a ship hypothecated by bottomry is
RESPOND only the excess of the value over the
ENTIA amount secured by bottomry. (Sec.
Indemnity is paid Indemnity is 101, Insurance Code)
after the loss has paid in 2. The value of what may be saved in
occurred advance by case of shipwreck shall be divided
way of a between the lender and the insurer in
loan proportion to the interest of each one.
In case of loss of In case of (Art. 735)
the vessel due to loss of the
a risk insured vessel due Note: If a vessel is hypothecated by bottomry
against, the to a marine only the excess is insurable, since a loan on
obligation of the peril, the bottomry partakes of the nature likewise of
insurer becomes obligation of an insurance coverage to the extent of the
absolute the loan accommodation. The same rule would
borrower to apply to the hypothecation of the cargo by
pay is respondentia. (Pandect of Commercial Law
extinguishe and Jurisprudence, Justice Jose Vitug, 1997
d ed.)
Consensual Real
contract contract ACCIDENTS IN MARITIME COMMERCE
1. Averages
Hypothecary Nature of Bottomry/ 2. Arrival Under Stress
Respondentia 3. Collision
GENERAL RULE: The obligation of the 4. Shipwreck
borrower to pay the loan is extinguished if the
goods given as security are absolutely lost by AVERAGE
reason of an accident of the sea, during the  An extraordinary or accidental expense
voyage designated, and if it is proven that the incurred during the voyage in order to
goods were on board. preserve the cargo, vessel or both, and all
EXCEPTIONS: damages or deterioration suffered by the
1. Loss due to inherent defect; vessel from departure to the port of
2. Loss due to the barratry on the part of the destination, and to the cargo from the port of
captain; loading to the port of consignment. (Art.
3. Loss due to the fault or malice of the 806)
borrower;

 The person whose property has been 4. proper
saved must contribute to reimburse the formalities
damage caused or expense incurred if the and legal
situation constitutes general average. steps.
 Classes: Liability
1. Particular or Simple Average The owner of All the persons
2. Gross or General Average the goods having an
 Where both vessel and cargo are saved, it which gave rise interest in the
is general average; where only the vessel or to the expense vessel and the
only the cargo is saved, it is particular or suffered the cargo therein
average. damage shall at the time of
 Expenses incurred to refloat a vessel, bear this the
which accidentally ran aground, in order to average. (Art. occurrence of
continue its voyage, do not constitute general 810) the average
average. Not only is there absence of a shall
marine peril, common safety factor, and contribute to
deliberateness. It is the safety of the satisfy this
property, and not the voyage, which average. (Art.
constitutes the true foundation of general 812)
average. (A. Magsaysay, Inc. vs. Agan,  The
G.R.No. L-6393, Jan. 31, 1955) insurers
(Art.859) and
lenders on
PARTICULAR GROSS OR bottomry and
OR SIMPLE GENERAL respondentia
Definition shall likewise
Damages or Damages or contribute.
expenses expenses (Art.732).
caused to the deliberately Number of interests
vessel or cargo caused in involved
that did not order to save Only one Several
inure to the the vessel, its interest interests
common cargo or both involved involved
benefit, and from real and Share in the damage or
borne by known risk. expense
respective (Art. 811) 100% share In proportion
owners. (Art. to the value of
809) the owner’s
Requisites property
1. common saved
danger; Right to recover
2. deliberate No There may be
sacrifice; reimbursement reimbursemen
3. success; t

Kinds (not exclusive) 2. Those which are below the upper deck,
Art. 809 Art. 811 beginning with the one with greatest
Procedure for recovery weight and smallest value. (Art. 815)
1. Assembly
and  Jettisoned goods are not res nullius nor
deliberation deemed “abandoned” within the meaning of
2. Resolution civil law so as to be the object of occupation
of the captain by salvage. (Pandect of Commercial Law and
3. Entry of the Jurisprudence, Justice Jose Vitug, 1997 ed.)
resolution in  In order that the jettisoned goods may be
the logbook included in the gross or general average, the
4. Detailed existence of the cargo on board should be
minutes proven by means of the bill of lading. (Art.
5. Delivery of 816)
the minutes to
the maritime York-Antwerp (Y-A) Rules on
judicial Determining Liability for Averages With
authority of Regard To Deck Cargo
the first port, 1. Deck cargo is allowed only in
within 24 domestic/coastwise/inter-island shipping,
hours from and is prohibited in
arrival, international/overseas/foreign shipping.
6. Ratification 2. If deck cargo is loaded with the consent of
by captain the shipper on overseas trade, it must always
under oath. contribute to general average, but should the
(Arts. 813- same be jettisoned, it would not be entitled
814) to reimbursement because there is violation
of the Y-A Rules.
GOODS NOT COVERED BY GENERAL 3. If deck cargo is loaded with the consent of
AVERAGE EVEN IF SACRIFICED the shipper on coastwise shipping, it must
1. Goods carried on deck. (ART.855) always contribute to general average and if
2. Goods not recorded in the books or jettisoned would be entitled to
records of the vessel. (ART.855 (2)) reimbursement.
3. Fuel for the vessel if there is more than  Reason: In domestic shipping, voyages are
sufficient fuel for the voyage. (Rule IX, usually short and the seas are generally not
York-Antwerp Rule) rough. In overseas shipping, the vessel is
exposed for many days to perils of the sea.
Jettison
 Act of throwing cargo overboard in order DOMESTIC INTERNATI
to lighten the vessel. ONAL
 Order of goods to be cast overboard: Deck cargo is Deck cargo is
1. Those which are on the deck, allowed not allowed
preferring the heaviest one with the With shipper’s consent
least utility and value;

General Particular (Art. 820)
average average
Without shipper’s consent  It is the duty of the captain to continue the
Captain is Captain is voyage without delay after the cause of the
liable liable arrival under stress has ceased failing in such
duty renders him liable. However, in case the
ARRIVAL UNDER STRESS (ARRIBADA) cause has been risk of enemies, there must
 The arrival of a vessel at the nearest and first be an assembly before departure. (Art.
most convenient port instead of the port of 825)
destination, if during the voyage the vessel  Steps:
cannot continue the trip to the port of 1. Captain should determine during the
destination. voyage if there is well founded fear of
seizure, privateers and other valid
When When Who grounds;
lawful unlawful bears 2. Captain shall assemble the officers and
expens summon the persons interested in the
es: cargo who may attend the meeting but
without a right to vote;
The 1. Lack of The 3. The officers shall determine and agree
inability provision shipown if there is well-founded reason after
to s due to er or ship examining the circumstances. The
continue negligenc agent is captain shall have the deciding vote;
voyage is e to carry liable in 4. The agreement shall be drafted and
due to according case of the proper minutes shall be signed and
lack of to usage unlawful entered in the log book;
provision and arrival 5. Objections and protests shall likewise
s, well- customs; under be entered in the minutes.
founded 2. Risk of stress.
fear of enemy But they COLLISION
seizure, not well shall not  Impact of two vessels both of which are
privateer known or be liable moving.
s, manifest for the
pirates, 3. Defect damages Allision
or of vessel caused  Impact between a moving vessel and a
accidents due to by stationary one.
of the improper reason of
sea repair; a lawful Nautical Rules to Determine Negligence
disabling and arrival. 1. When two vessels are about to enter a
it to 4. Malice, (Art. port, the farther one must allow the
navigate. negligenc 821) nearer to enter first; if they collide, the
(Art. e, lack of fault is presumed to be imputable to the
819) foresight one who arrived later, unless it can be
or skill of proved that there was no fault on its part.
captain. 2. When two vessels meet, the smaller

should give the right of way to the larger Zones of Time in the Collision of Vessels
one. 1.
3. A vessel leaving port should leave the way First zone – all time up to the moment when
clear for another which may be entering risk of collision begins.
the same port.  No rule is as yet applicable for none is
4. The vessel which leaves later is presumed necessary.
to have collided against one which has left 2.
earlier. Second zone – time between moment when
5. There is a presumption against the vessel risk of collision begins and moment it
which sets sail in the night. becomes a practical certainty.
6. There is a presumption against the vessel  It is in this period where conduct of the
with spread sails which collides with vessels is primordial. It is in this zone that
another which is at anchor and cannot vessels must strictly observe nautical rules,
move, even when the crew of the latter unless a departure therefrom becomes
has received word to lift anchor, when necessary to avoid imminent danger.
there was not sufficient time to do so or 3.
there was fear of a greater damage or Third zone – time when collision is certain
other legitimate reason. and time of impact.
7. There is a presumption against an  An error in this zone would no longer be
improperly moored vessel. legally consequential.
8. There is a presumption against a vessel  Error in Extremis - sudden movement
which has no buoys to indicate the made by a faultless vessel during the third
location of its anchors to prevent damage zone of collision with another vessel which is
to vessels which may approach it. at fault during the 2nd zone. Even if such
9. Vessels must have “proper look-outs” or sudden movement is wrong, no responsibility
persons trained as such and who have no will fall on said faultless vessel. (Urrutia and
other duty aside therefrom. (Smith Bell v. Co. v. Baco River Plantation Co., 26 PHIL 632)
CA)
Cases Covered By Collision and Allision
Nautical Rules as to Sailing Vessel and 1. One vessel at fault
Steamship  Vessel at fault is liable for damage caused
1. Where a steamship and a sailing vessel to innocent vessel as well as damages
are approaching each other from opposite suffered by the owners of cargo of both
directions, or on intersecting lines, the vessels. (Art. 826)
steamship from the moment the sailing 2. Both vessels at fault
vessel is seen, shall watch with the highest  Each vessel must bear its own loss, but the
diligence her course and movements so as shippers of both vessels may go against the
to be able to adopt such timely means of shipowners who will be solidarily liable. (Art.
precaution as will necessarily prevent the 827)
two boats from coming in contact. 3. Vessel at fault not known
2. The sailing vessel is required to keep her  Each vessel must bear its own loss, but the
course unless the circumstances require shippers of both vessels may go against the
otherwise. shipowners who will be solidarily liable. (Art.
828)

 Doctrine of Inscrutable Fault – In case the vessel or cargo is lost or damaged, with
of collision where it cannot be determined respect to the circumstances attending such
which between the two vessels was at occurrence, for the purpose of recovering
fault, both vessels bear their respective losses and damages.
damage, but both should be solidarily  Excuses for not filing protest: 1) where the
liable for damage to the cargo of both interested person is not on board the vessel;
vessels. and 2) on collision time, need not be
4. Third vessel at fault protested. (Art. 836)
 The third vessel will be liable for losses and  Cases applicable:
damages. (Art. 831) 1. Collision (Art. 835);
5. Fortuitous event/force majeure 2. Arrival under stress (Art. 612(8));
 No liability. Each bears its own loss. (Art. 3. Shipwrecks (Arts. 612(15), 843);
830) 4. Where the vessel has gone through a
hurricane or when the captain believes
 The doctrine of res ipsa loquitur applies in that the cargo has suffered damages or
case a moving vessel strikes a stationary averages (Art. 624).
object, such as a bridge post, dock, or  Who makes: Captain
navigational aid. (Far Eastern Shipping v. CA,  When made: within 24 hours from the time
Luzon Stevedoring vs. CA) the collision took place.
 Before whom made: competent authority
 Even if the cause of action against the at the point of collision or at the first port of
common carrier is based on quasi-delict, the arrival, if in the Philippines and to the
defense of due diligence in the selection and Philippine consul, if the collision took place
supervision of employees is unavailing in case abroad. (Art. 835)
of a maritime tort resulting in collision. It is
not a civil tort governed by the Civil Code but SHIPWRECK
a maritime one governed by Arts. 826-839 of  It is the loss of the vessel at sea as a
the Code of Commerce. (Manila Steamship consequence of its grounding, or running
vs. Insa Abdulhaman) against an object in sea or on the coast. It
occurs when the vessel sustains injuries due
 Doctrine of Last Clear Chance and Rule on to a marine peril rendering her incapable of
Contributory Negligence cannot be applied in navigation.
collision cases because of Art.827 of the Code  If the wreck was due to malice, negligence
of Commerce. (Notes and Cases on the Law or lack of skill of the captain, the owner of the
on Transportation and Public Utilities, Aquino, vessel may demand indemnity from said
T. & Hernando, R.P. 2004 ed.) captain. (Art. 841)
 The rules on collision or allision, as may be
MARITIME PROTEST pertinent, can equally apply to shipwrecks.
 Condition precedent or prerequisite to
recovery of damages arising from collisions SPECIAL CONCEPTS
and other maritime accidents. ARRASTRE SERVICE
 It is a written statement made under oath  A contract for the unloading of goods from
by the captain of a vessel after the a vessel.
occurrence of an accident or disaster in which  Applicability: Overseas trade only.

(Commercial Law Review, C. Villanueva, 2004 seals the container and delivers it to the
ed.) carrier for transportation. The carrier does
 Significance: When a person brings in not participate in the counting of the
cargo from abroad, he cannot unload and merchandise for loading into the container,
deliver the cargo by himself. The unloading the actual loading, and the sealing of the
must be done by the arrastre operator, which container. (US Lines v. Comm. Of Customs,
will then deliver the cargo to the importer. ICTSI v. Prudential Guarantee)
(Commercial Law Review, C. Villanueva, 2004  The matter of quantity, description and
ed.) conditions of the cargo inside the container is
 Nature of business: It is a public utility, the sole responsibility of the shipper, unless
discharging functions which are heavily there is stipulation to the contrary. (US Lines
invested with public interest. vs. Comm. Of Customs, Reyma Brokerage v.
 Liability: Phil. Home Assurance)
1. Similar to a warehouseman (Lua Kian v.
Manila Railroad) Note: In order to attribute to the carrier any
2. Similar to a common carrier (Northern damage to the shipment that may be found,
Motors v. Prince Line) inspection of the goods should be done at
3. Solidary liability with the common carrier pier-side. (Bankers vs. CA)
Note: In order that the arrastre operator III. CARRIAGE OF GOODS BY SEA
may be held liable, the consignee must prove ACT/COGSA (C.A. No. 65)
that the damage was due to the negligence
and while the goods are in the custody of the APPLICABILITY
arrastre operator. (Hartford Fire Insurance v.  The transportation must be:
E. Razon, Inc.) 1. Water/maritime transportation;
2. for the carriage of goods; and
STEVEDORING SERVICE 3. overseas/international/foreign (from
 The carriage of goods from the warehouse foreign port to Philippine port).
or pier to the holds of the vessel. (Chief of  It can be applied in domestic sea
Staff vs. CIR) transportation if agreed upon by the parties.
 As understood in the port business, the (Clause paramount or paramount clause)
term consists of the handling of cargo from
the hold of the ship to the dock, in case of IMPORTANT FEATURES:
pier-side unloading; or to a barge, in case of 1. Amount of carrier’s liability
unloading at sea. (Anglo-Fil Trading Corp. vs. 2. Notice of damage
Lazaro) 3. Prescriptive period
 The loading on the ship of outgoing cargo
is also part of stevedoring work. (Ibid.) AMOUNT OF CARRIER’S LIABILITY
 Under the Sec. 4(5), the liability limit is set
CONTAINERIZATION/ “SAID-TO- at $500 per package or customary freight unit
CONTAIN”/ “SHIPPER’S LOAD AND unless the nature and value of such goods is
COUNT” SYSTEM declared by the shipper. This is deemed
 System whereby the shipper loads his incorporated in the bill of lading even if not
cargoes in a specially designed container, mentioned in it. (Eastern Shipping vs. IAC,

150 SCRA 463) Nordeutscher Lloyd, 6 SCRA 180)
 Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.  The one-year period shall run from delivery
of the last package and is not suspended by
NOTICE OF DAMAGE (SEC. 3(6)) extrajudicial demand. (Dole Phils.,Inc. vs.
 Rules: Maritime Co.,148 SCRA 118)
a. Patent damage: shipper should file a claim
with the carrier immediately upon delivery  The one-year period shall run from delivery
b. Latent damage: shipper should file a claim to the arrastre operator and not to the
with the carrier within three days from consignee. (Union Carbide Phils, Inc. vs.
delivery. Manila Railroad Co.,SCRA 359)
Note: The filing of a notice of claim is not a  The insurer exercising its right of
condition precedent. subrogation is bound by the one-year
prescriptive period. However, it does not
PRESCRIPTIVE PERIOD apply to the claim against the insurer for the
 Action for loss or damage to the cargo insurance proceeds. (Fil. Merchants Ins. Co.
should be brought within one year after: vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)
a. Delivery of the goods (delivered but
damaged goods); or IV. WARSAW CONVENTION OF 1929
b. The date when the goods should have (WC)
been delivered (non-delivery). (Sec.
3[6]) PURPOSE: To protect the emerging air
transportation industry and to secure the
 “Loss or Damage” as applied to the COGSA uniformity of recovery by the passengers.
contemplates a situation where no delivery at APPLICABILITY
all was made by the shipper of the goods  The transportation must be:
because the same had perished, gone out of 1. International transportation;
commerce, or disappeared in such a way that 2. Air transportation; and
their existence is unknown or they cannot be 3. Carriage of passengers, baggage or
recovered. Thus, it is inapplicable in case of goods.
misdelivery or conversion. (Ang vs. American  The WC shall also apply to fortuitous
Steamship Agencies Inc.) and damage arising transportation by aircraft performed by an air
from delay or late delivery (Mitsui O.S.K. transportation enterprise.
Lines Ltd. vs. CA). In such instance the, Civil
Code rules on prescription shall apply.  International transportation - any
transportation in which the place of departure
 The one-year prescriptive period is and the place of destination are situated
suspended by: either:
1. The express agreement of the parties 1. Within the territories of two High
(Universal Shipping Lines, Inc. vs. IAC, Contracting Parties regardless of whether
188 SCRA 170) or not there be a break in the
2. The filing of an action in court until it is transportation or transshipment, or
dismissed. (Stevens & Co. vs. 2. Within the territory of a single High

Contracting Party, if there is an agreed
stopping place within a territory subject to LIABILITY OF CARRIER FOR DAMAGES
the sovereignty, mandate or authority of 1. Death or injury of a passenger if the
another power, even though that power is accident causing it took place on board the
not a party to the Convention. (“round aircraft or in the course of its operations of
trip”, Am. Jur.) embarking or disembarking; (Art. 17)
2. Destruction, loss or damage to any
 Transportation to be performed by several baggage or goods, if it took place during the
successive air carriers shall be deemed to be “transportation by air”; (Art. 18) and
one undivided transportation, if it has been  Transportation by air – The period during
regarded by the parties as a single operation, which the baggage or goods are in the charge
whether it has been agreed upon under the of the carrier, whether in an airport or on
form of a single contract or of a series of board an aircraft, or, in case of a landing
contracts, and it shall not lose its international outside an airport, in any place whatsoever.
character merely because one contract or a It includes any transportation by land or
series of contracts is to be performed entirely water outside an airport if such takes place in
within a territory subject to the sovereignty, the performance of a contract for
suzerainty, mandate, or authority of the same transportation by air, for the purpose of
High Contracting Party. (Art. 1 Sec.3) loading, delivery, or transshipment.
3. Delay in the transportation of passengers,
WHEN INAPPLICABLE baggage or goods. (Art. 19)
1. When public policy is contradicted;
2. If the requirements under the Note: The Hague Protocol amended the WC
Convention are not complied with. by removing the provision that if the airline
took all necessary steps to avoid the damage,
IMPORTANT CONCEPTS: it could exculpate itself completely (Art.
1. Transportation documents 20(1)). (Alitalia vs. IAC, 192 SCRA 9)
a. Passenger ticket
b. Baggage check LIMIT OF LIABILITY (Art. 22, as
c. Air way bill amended by Guatemala Protocol, 1971;
2. Liability of the carrier for damages Alitalia vs. IAC)
a. Death or injury to passengers 1. Passengers
b. Loss or damage to baggage or goods GENERAL RULE: $100,000 per passenger
c. Delay EXCEPTION: Agreement to a higher limit
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
2. Checked-in baggage
PASSEN BAGGA AIR GENERAL RULE: $20 per kilogram
GER GE WAYBIL EXCEPTION: In case of special declaration
TICKET CHECK L of value and payment of a supplementary
Passenge Checked- Goods to sum by consignor, carrier is liable to not more
r in be than the declared sum unless it proves the
baggage shipped sum is greater than actual value.

3. Hand-carried baggage ACTION FOR DAMAGES
 $1000/passenger 1. Notice of claim
4. Goods to be shipped  A written complaint must me made
GENERAL RULE: $20 per kilogram within:
EXCEPTION: In case of special declaration a. 3 days from receipt of baggage
of value and payment of a supplementary b. 7 days from receipt of goods
sum by consignor, carrier is liable to not more c. In case of delay, 14 days from receipt
than the declared sum unless it proves the of baggage/goods
sum is greater than actual value.  The complaint is a condition precedent.
Without the complaint, the action is barred
 An agreement relieving the carrier from except in case of fraud on the part of the
liability or fixing a lower limit is null and void. carrier. (Art. 26)
(Art. 23)
 Carrier is not entitled to the foregoing limit 2. Prescriptive period
if the damage is caused by willful misconduct  Action must be filed within 2 years from:
or default on its part. (Art. 25) a. date of arrival at the destination
b. date of expected arrival
 Thus, the WC does not operate as an c. date on which the transportation
exclusive enumeration of the instances of an stopped. (Art. 29)
absolute limit of the extent of liability. It does
not preclude the application of the Civil Code  In United Airlines vs. Uy the two-year
and other pertinent local laws. It does not prescriptive period was not applied where the
regulate or exclude liability for other breaches airline employed delaying tactics.
of contract by the carrier, or misconduct of its
employees, or for some particular or RULE IN CASE OF VARIOUS
exceptional type of damage. (Alitalia vs. CA) SUCCESSIVE CARRIERS
1. Carriage of passengers
 In PanAm v. IAC, the WC was applied as GENERAL RULE: Action is filed only against
regards the limitation on the carrier’s liability, the carrier in which the accident or delay
there being a simple loss of baggage without occurred.
any improper conduct on the part of the EXCEPTION: Agreement or contract
officials or employees of the airline or other whereby the first carrier assumed liability for
special injury sustained by the passenger. the whole journey.
2. Carriage of baggage or goods
 In KLM Royal v. Tuller, the WC has a. Passenger or consignor can file an
invariably been held inapplicable, or as not action against the first carrier and the
restrictive of the carrier’s liability, where there carrier in which the damage occurred
was satisfactory evidence of malice or bad b. Passenger or consignee can file an
faith attributable to its officers and action against the last carrier and the
employees. (Alitalia vs. IAC) carrier in which the damage occurred.
 These carriers are jointly and severally
liable. (Art. 30)
 A contract of international carriage by air,


although performed by different carriers SALVAGE
under a series of airline tickets constitutes a  Two concepts:
single operation. Members of the 1. Services one person renders to the owner
International Air Transportation Association of a ship or goods, by his own labor,
(IATA) are under a general pool partnership preserving the goods or the ship which the
agreement wherein they act as agent of each owner or those entrusted with the care of
other in the issuance of tickets to contracted them have either abandoned in distress at
passengers to boost ticket sales worldwide sea, or are unable to protect or secure.
and at the same time provide passengers 2. Compensation allowed to persons by
easy access to airlines which are otherwise whose voluntary assistance a ship at sea or
inaccessible in some parts of the world. her cargo or both have been saved in whole
(American Airlines vs. CA) or in part from impending sea peril, or such
property recovered from actual peril or loss,
 Under a general pool partnership as in cases of shipwreck, derelict or
agreement, the ticket-issuing airline is the recapture.
principal in a contract of carriage while the  Requisites:
endorsee-airline is the agent. The obligation 1. Valid object of salvage;
of the former remained and did not cease 2. Object must have been exposed to
even when the breach occurred not on its marine peril (not perils of the ship);
own flight but on that of another airline which 3. Services rendered voluntarily (neither
had undertaken to carry the passengers to an existing duty nor out of a pre-
one of their destinations. (China Airlines vs. existing contract);
Chiok) 4. Services are successful, total or partial.
 Subjects of Salvage:
JURISDICTION 1. Ship itself;
 At the option of the plaintiff, the action for 2. Jetsam – goods which are cast into the sea,
damages may be filed in the: and there sink and remain under water;
a. Court of domicile of the carrier; 3. Floatsam or Flotsam – goods which float
b. Court of its principal place of business; upon the sea when cast overboard;
c. Court where it has a place of business 4. Ligan or Lagan – goods cast into the sea
through which the contract has been tied to a buoy, so that they may be found
made; or again by the owners (p.173, Judge Diaz).
d. Court of the place of destination. (Art.  Persons who have no right to a
28(1)) reward for salvage:
NOTE: It is the passenger’s “ultimate 1. Crew of the vessel saved;
destination” not “an agreed stopping place” 2. Person who commenced Salvage in spite
that determines the country where suit is to of opposition of the Captain or his
be filed. representative;
 The forum of action provided in Art. 28(1) 3. In accordance with Sec. 3 of the Salvage
is a matter of jurisdiction rather than of Law, a person who fails to deliver a salvaged
venue. (Santos III vs. Northwest; 2A C.J.S.) vessel or cargo to the Collector of Customs.
V. SALVAGE LAW (Act No. 2616)  Derelict – a ship or her cargo which is
abandoned and deserted at sea by those who

are in charge of it, without any hope of Vessel must Vessel need
recovering it, or without any intention of be involved in not be
returning to it. an accident involved in an
accident
 The intention of those in charge must be Fees Fees belong
ascertained. If those in charge left with the distributed to the tugboat
intention of returning, or of procuring among owner
assistance, the property is not derelict, but if crewmen
they quitted the property with the intention
of finally leaving it, it is derelict and a change RULES ON SALVAGE REWARD
of their intention and an attempt to return will 1. The reward is fixed by the RTC judge in
not change its nature (Erlanger & Galinger vs. the absence of agreement or where the
Swedish East Asiatic Co. Ltd.). latter is excessive. (Sec. 9)
2. The reward should constitute a sufficient
 If it is clear that the intention to return is compensation for the outlay and effort of
slight, the salvage which was done thereafter the salvors and should be liberal enough
is considered valid. (Notes and Cases on the to offer an inducement to others to render
Law on Transportation and Public Utilities, services in similar emergencies in the
Aquino, T. & Hernando, R.P. 2004 ed. p. 616) future.
3. If sold (no claim being made within 3
CONTRACT OF TOWAGE months from publication), the proceeds,
 A contract whereby one vessel, usually after deducting expenses and the salvage
motorized, pulls another, whether loaded or claim, shall go to the owner; if the latter
not with merchandise, from one place to does not claim it within 3 years, 50% of
another, for a compensation. It is a contract the said proceeds shall go to the salvors,
for services rather than a contract of carriage. who shall divide it equitably, and the other
half to the government. (Secs. 11-12)
4. If a vessel is the salvor, the reward shall
SALVAGE TOWAGE be distributed as follows:
Governed by Governed by a. 50% to the shipowner;
special law Civil Code on b. 25% to the captain; and
(Act No. contract of
2616) lease
Requires Success is not c. 25% to the officers and crew in
success, required proportion to their salaries. (Sec. 13)
otherwise no
payment  Taking passengers from a sinking ship,
Must be done Only the without rendering any service in rescuing the
with the consent of the vessel, is not a salvage service, being a duty
consent of tugboat of humanity and not for reward.
the owner is
captain/crew needed VI. PUBLIC SERVICE ACT
men (C.A. No. 146)


PURPOSES: such factors as the extent of services,
1. To secure adequate, sustained service whether such person or company has held
for the public at the least possible cost; himself or itself out as ready to serve the
2. To protect the public against public or a portion of the public generally.
unreasonable charges and poor, (Luzon Stevedoring vs. PSC)
inefficient service;
3. To protect and secure investments in NOTE: The Public Service Commission
public services; created under the Public Service Law has
4. To prevent ruinous competition. already been abolished under P.D. No. 1 and
other issuances. It has been replaced by the
AUTHORITY TO OPERATE PUBLIC following government agencies: LTO; LTFRB;
SERVICES ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
GENERAL RULE: No public service shall MIA.
operate without having been issued a
certificate of public convenience or a
certificate of public convenience and CERTIFICAT CERTIFICAT
necessity. E OF E OF PUBLIC
EXCEPTIONS: PUBLIC CONVENIEN
1. Warehouses; CONVENIEN CE AND
2. Animal drawn vehicles and bancas CE (CPC) NECESSITY
moved by oar or sail; (CPCN)
3. Airships, except for the fixing of An An
maximum rates for fare and freight; authorization authorization
4. Radio companies, except for rates issued by the issued by the
fixing; appropriate appropriate
5. Public services owned or operated by government government
the government, except as to rates agency for the agency for the
fixing; operation of operation of
6. Ice plants; and public services public service
7. Public markets. for which no for which a
franchise, prior franchise
PUBLIC SERVICE either is required by
 A person who owns, operates, manages or municipal or law; e.g.
controls in the Philippines for hire or legislative, is telephone and
compensation, with general or limited required by other
clientele, whether permanent, occasional or law, e.g., services.
accidental, and done for general business common
purposes, any common carrier or public carriers.
utility, ice plants, power and water supplies,
communication and similar public services.  A CPC or a CPCN constitutes neither a
(Sec. 13b, CA 146) franchise nor a contract, confers no property
 A casual or incidental service devoid of right, and is a mere license or a privilege. The
public character and interest is not brought holder of said certificate does not acquire a
within the category. The question depends on property right in the route covered thereby.

Nor does it confer upon the holder any 2. Fixing of concerning
proprietary right or interest or franchise in the rates, tolls, public service;
public highways. Revocation of this certificate and charges; 2. Requiring
deprives him of no vested right. New and 3. Setting up operators to
additional burdens, alteration of the of standards furnish safe,
certificate, or even revocation or annulment and adequate, and
thereof is reserved to the State. (Luque vs. classifications proper
Villegas, 30 SCRA 408) ; service;
4. Establish 3. Requiring
 It is a “property” and has a considerable ment of rules public services
value and can be the subject of sale or to secure to pay
attachment. (Cogeo-Cubao Operators and accuracy of expenses of
Drivers Assn. vs. CA, 207 SCRA 343, all meters investigation;
Raymundo vs. Luneta Motor Co.) and all 4. Valuation
measuring of properties
REQUREMENTS FOR GRANTING CPC OR appliances; of public
CPCN 5. Issuance utilities;
1. Applicant must be a citizen of the of orders 5. Examinatio
Philippines or a corporation or entity 60% requiring n and test of
of the capital of which is owned by such establishmen measuring
citizens; t or appliances;
2. Applicant must prove public necessity; maintenance 6. Grant of
3. Applicant must prove that the operation of of extension special
the public service proposed and the of facilities; permits to
authorization to do business will promote 6. Revocatio make extra or
the public interest on a proper and n, or special trips in
suitable manner; modification territories
4. Applicant must have sufficient financial of CPC or specified in
capability to undertake the proposed CPCN; the certificate;
services and meeting the responsibilities 7. Suspension 7. Uniform
incident to its operation. of CPC or accounting
CPCN, except system and
when it is furnishing of
POWERS POWERS necessary to annual
REQUIRING EXERCISABL avoid serious reports;
PRIOR E WITHOUT and 8. Compelling
NOTICE PRIOR irreparable compliance
AND NOTICE AND damage or with the laws
HEARING HEARING inconvenienc and
e to the regulations.
public or
1. Issuance 1. Investigati private
of CPC or on any matter interest, in
CPCN; which case, a

suspension
not more PRIOR OPERATOR/OLD OPERATOR
than 30 days RULE
may be  The rule allowing an existing franchised
ordered, prior operator to invoke a preferential right within
to the the authorized territory as long as he renders
hearing. satisfactory and economical service.
(Soriano v.  The policy is not to issue a certificate to a
Medina, 164 second operator to cover the same field and
SCRA 36) in competition with a first operator who is
rendering sufficient, adequate and
UNLAWFUL ACTS OF PUBLIC UTILITY satisfactory service. The prior operator must
COMPANIES first be given an opportunity to improve its
1. Engagement in public service business service, if inadequate or deficient.
without first securing the proper  Purpose: To prevent ruinous and wasteful
certificate; competition in order that the interests of the
2. Providing or maintaining unsafe, improper public would be conserved and preserved.
or inadequate service as determined by
the proper authority;  It subordinates the prior applicant rule
3. Committing any act of unreasonable and which gives the first applicant priority only if
unjust preferential treatment to any things and circumstances are equal.
particular person, corporation or entity as
determined by the proper authority;  Where the operator either fails or neglects
4. Refusing or neglecting to carry public mail to make the improvement or effect the
upon request. (Secs. 18 and 19) increase in services, especially when given
the opportunity, new operators should be
ACTS REQUIRING PRIOR APPROVAL given the chance to give the services needed
1. Establish and maintain individual or joint by the public.
rates;
2. Establish and operate new units; PRIOR APPLICANT RULE
3. Issue free tickets;  Presupposes a situation when two
4. Issue any stock or stock certificates interested persons apply for a certificate to
representing an increase of capital; operate a public utility in the same
5. Capitalize any franchise in excess of the community over which no person has as yet
amount actually paid to the Government; granted any certificate. If it turns out, after
6. Sell, alienate, mortgage or lease property, the hearing, that the circumstances between
certificates or franchise. the two applicants are more or less equal,
then the applicant who applied ahead of the
 Under Sec. 20(g) of C.A. No. 146, the sale, other, will be granted the certificate.
etc. may be negotiated and completed before
the approval by the proper authority. Its RATE-FIXING POWER
approval is not a condition precedent to the  The rate to be fixed must be just, founded
validity of the contract. The approval is upon conditions which are fair and
necessary only to protect public interest. reasonable to both the owner and the public.

 A rate is just and reasonable if it conforms
to the following requirements:
1. One which yields to the carrier a fair
return upon the value of the property
employed in performing the service;
and
2. One which is fair to the public for the
service rendered.
REGISTERED OWNER RULE

 The registered owner of a certificate of
public convenience is liable to the public for
the injuries or damages suffered by third
persons caused by the operation of said
vehicle, even though the same had been
transferred to a third person.
 The registered owner is not allowed to
escape responsibility by proving that a third
person is the actual and real owner Reason:
It would be easy for him, by collusion with
others or otherwise, to transfer the
responsibility to an indefinite person, or to 2. The registered owner is primarily liable for
one who possesses no property with which to all the consequences flowing from the
respond financially for the damage or injury operations of the carrier.
done. (Erezo, et al. vs. Jepte 102 Phil 103).  The public has the right to assume that
the registered owner is the actual or lawful
KABIT SYSTEM owner thereof. It would be very difficult
 A system whereby a person who has been and often impossible, as a practical
granted a certificate of public convenience matter, for the public to enforce their
allows other persons who own motor vehicles rights of action that they may have for
to operate under such license, for a fee or injuries inflicted by the vehicle if they
percentage of such earnings. It is void and should be required to prove who the
inexistent under Art. 1409, Civil Code. actual owner is. (Benedicto vs. IAC, 187
 Effects: SCRA 547)
1. The transfer, sale, lease or assignment of 3. The thrust of the law in enjoining the kabit
the privilege granted is valid between the system is to identify the person upon
contracting parties but not upon the public whom responsibility may be fixed with the
or third persons. (Gelisan vs. Alday, 154 end in view of protecting the riding public
SCRA 388) (Lim vs. CA 373 SCRA 394).
4. The registered owner cannot recover from
the actual owner and the latter cannot
obtain transfer of the vehicle to himself,
both being in pari delicto. (Teja Marketing
vs. IAC)

5. For the better protection of the public,
both the registered owner and the actual
owner are jointly and severally liable with
the driver. (Zamboanga Transportation
Co. vs. CA)


San Beda College of Law: Contract of Transportation/ Carriage

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San Beda College of Law 54

MEMORY AID IN COMMERCIAL LAW

CONTRACT OF TRANSPORTATION/ A person or entity is a common carrier

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

MEMORY AID IN COMMERCIAL LAW

Art.1735 Civil Code Art.1755 Civil Code

MEMORY AID IN COMMERCIAL LAW

1. Ordinary circumstance: 1. Exercise of extraordinary

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

1. Reduction of degree of diligence Stipulation limiting liability when a

 The diligence required in the

Dispensing with or lessening the

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

SPECIAL RULES ON LIABILITES OF II. CODE OF COMMERCE

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

Time of delivery NOTICE OF DAMAGE (ART. 366)

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

R.A. 6106 P.D. 1521

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

Classes of Seaman’s Contracts D. SUPERCARGOES

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

PERSONS WHO MAY MAKE A CHARTER

MEMORY AID IN COMMERCIAL LAW

Rights and Obligations of Parties Rescission of a Charter Party

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

Concurrence of Marine Insurance and

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

 A contract of international carriage by air,

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

REGISTERED OWNER RULE

MEMORY AID IN COMMERCIAL LAW