COMMERCIAL LAW REVIEW

Fiscal Rocille S. Aquino-Tambasacan

TRANSPORTATION LAW

BAR 1872: Classes of transportation

Private Carrier

Common Carrier

BAR 2014, 1996: Common Carrier; Definition; Elements

Article 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.

The above article makes no distinctions between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity. Article 1732 also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the “general public,” i.e., the general community or
population, and one who offers services or solicits business only from a narrow segment of the
general population.

Examples of Common Carrier

1. Trucking Service – if there is no indication that the undertaking in the contract between the
carrier and the other party that the same was private in character, of there is no showing that
the service was solely and exclusively rendered to such party, then it is a common carrier.

2. Custom Broker – the transportation of goods being an integral part of its business.

In A.F. Sanchez Brokerage Inc. v. Court of Appeals, we held that a customs broker – whose
principal business is the preparation of the correct customs declaration and the proper
shipping documents – is still considered a common carrier if it also undertakes to deliver the
goods for its customers.

3. Pipeline –

The test for determining whether a party is a common carrier of goods is:

(1) He must be engaged in the business of carrying goods for others as a public
employment, and must hold himself out as ready to engage in the transportation of
goods for person generally as a business and not as a casual occupation;
(2) He must undertake to carry goods of the kind to which his business is confined;
(3) He must undertake to carry by the method by which his business is conducted and
over his established roads; and
(4) The transportation must be for hire.
Based on the above definitions and requirements, there is no doubt that petitioner is a
common carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum
products, for hire as a public employment. It undertakes to carry for all persons indifferently,
that is, to all persons who choose to employ its services, and transports the goods by land and
for compensation. The fact that petitioner has a limited clientele does not exclude it from the
definition of a common carrier. (De Guzman v. CA)

4. Though carrying of goods not the principal occupation – it is characterized as common

carrier even though he merely “back-hauled” goods for other merchants. (De Guzman v. CA)

5. Though with a limited clientele

6. Barges - In the case at bar, the petitioner admitted that it is engaged in the business of
shipping, lighterage and drayage, offering its barges to the public, despite its limited clientele
for carrying/transporting goods by water for compensation. Petitioner is clearly a common
carrier. (Asia Lighterage & Shipping, Inc. v. CA)

Examples of what are NOT common carriers

1. Rendering exclusively for a particular person and no other

2. Single Transaction – if the undertaking is a single transaction, not a part of the general
business or occupation, although involving the carriage of goods for a fee, the person or
corporation offering such service is a private carrier.

3. Travel agency - it is not an entity engaged in the business of transporting either passengers
or goods and is therefore, neither a private nor a common carrier; its services is simply to make
travel arrangements. (Crisostomo v. CA)

BAR 2005, 2002, 2000, 1996, 1990, 1987, 1984, 1974: Private vs. Common Carrier

COMMON CARRIER PRIVATE CARRIER

As to availability
Holds himself out for all people Contracts with particular individuals or groups
indiscriminately only
As to required diligence
Extraordinary diligence is required Ordinary diligence is required
As to regulation
Subject to State Regulation Not subject to State Regulation
Stipulation limiting liability
Parties may not agree on limiting the Parties may limit the carrier’s liability, provided
carrier’s liability except when provided by it is not contrary to law, morals, or good
law customs
Exempting circumstances
Prove extraordinary diligence and Art 1733 Caso Fortuito Art 1174 NCC
NCC
 Presumption of negligence
There is a presumption of fault or No presumption of fault or negligence
negligence
Governing Law
Law on common carrier Law on Obligations and Contracts

BAR 2012: Perena vs. Zarate

Topic: Private v. Common Carrier

Facts: The Perenas were owners of a van being used for private school transport. Zarate
contracted Perena to transport (Zarate) their son Aaron to school. The incident arose when the
driver of the said private van, while the children were on board, took a short cut crossing a
railroad of the PNR. He then tried to overtake a bus, however, Alfaro (driver) did not saw the
incoming train which resulted to a collision where Aaron was thrown off the van and died. The
Zarates sued PNR and Perenas. In their defense, Perenas invoked that they were private
carriers and not common carriers.

Held: The Perenas are common carriers. The Pereñas, as the operators of a school bus service
were: (a) engaged in transporting passengers generally as a business, not just as a casual
occupation; (b) undertaking to carry passengers over established roads by the method by which
the business was conducted; and (c) transporting students for a fee. Despite catering to a
limited clientèle, the Pereñas operated as a common carrier because they held themselves out
as a ready transportation indiscriminately to the students of a particular school living within or
near where they operated the service and for a fee. Being a common carrier, what is required of
the Pereñas is not mere diligence of a good father. What is specifically required from them by
law is extraordinary diligence – a fact which they failed to prove in court. Verily, their obligation
as common carriers did not cease upon their exercise of diligently choosing Alfaro as their
employee.

BAR 2012, 2001, 1997, 1996, 1995, 1994, 1992, 1991, 1987, 1986, 1977, 1971:
Fortuitous Event

Fortuitous Event

Elements:

1. The cause of the unforeseen and unexpected occurrence, or the failure of the debtors to
comply with their obligations, must have been independent of human will;
2. The event that constituted the caso fortuito must have been impossible to foresee, or if
foreseeable, impossible to avoid;
3. The occurrence must have been such as to render it impossible for the debtors to fulfil their
obligation in a normal manner; and
4. The obligor must have been free from any participation in the aggravation of the resulting
injury to the creditor.

Article 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

 (2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.

Article 1739. In order that the common carrier may be exempted from responsibility, the
natural disaster must have been the proximate and only cause of the loss. However, the
common carrier must exercise due diligence to prevent or minimize loss before, during and
after the occurrence of flood, storm or other natural disaster in order that the common carrier
may be exempted from liability for the loss, destruction, or deterioration of the goods. The same
duty is incumbent upon the common carrier in case of an act of the public enemy referred to in
article 1734, No. 2.

Notes:

The hijacking of the carrier's truck - does not fall within any of the five (5) categories of
exempting causes listed in Article 1734. Private respondent as common carrier is presumed to
have been at fault or to have acted negligently. This presumption, however, may be overthrown
by proof of extraordinary diligence on the part of private respondent. We believe and so hold
that the limits of the duty of extraordinary diligence in the vigilance over the goods carried are
reached where the goods are lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force." we hold that the occurrence of the loss must reasonably
be regarded as quite beyond the control of the common carrier and properly regarded as a
fortuitous event. It is necessary to recall that even common carriers are not made absolute
insurers against all risks of travel and of transport of goods, and are not held liable for acts or
events which cannot be foreseen or are inevitable, provided that they shall have complied with
the rigorous standard of extraordinary diligence. (De Guzman v. CA)

Fire is not one of those enumerated under the above provision which exempts a carrier from
liability for loss or destruction of the cargo.

Even if fire were to be considered a natural disaster within the purview of Article 1734, it is
required under Article 1739 of the same Code that the natural disaster must have been the
proximate and only cause of the loss, and that the carrier has exercised due diligence to
prevent or minimize the loss before, during or after the occurrence of the disaster. (DSR-Senator
Lines and C.F. Sharp Company, Inc. v. Federal Phoenix Assurance Co., Inc)

Simply put, the theft or the robbery of the goods is not considered a fortuitous event or a force
majeure Nevertheless, a common carrier may absolve itself of liability for a resulting loss: (1) if
it proves that it exercised extraordinary diligence in transporting and safekeeping the goods; or
(2) if it stipulated with the shipper/owner of the goods to limit its liability for the loss,
destruction, or deterioration of the goods to a degree less than extraordinary diligence.
(Torres-Madrid Brokerage, Inc. v. FEB Mistui Marine Insurance Co., Inc)

BAR 2015, 2013, 2012, 1997, 1996, 1990, 1989: Quantum of diligence; Presumption of
Negligence; Duration of diligence

Quantum of diligence

Common carriers, from the nature of their business and for reasons of public policy, are bound
to observe EXTRAORDINARY DILIGENCE:

1. In the vigilance over the goods; and

 2. For the safety of the passengers transported by them, according to all the
circumstances of each case.

Extraordinary diligence in the vigilance over the goods – Arts. 1734, 1735 and 1745 Nos. 5, 6,
and 7.

Extraordinary diligence for the safety of the passengers – Arts. 1755 and 1756.

Art. 1755 – A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard
for all the circumstances.

Extraordinary diligence – is the rendition of service with the greatest skill and utmost foresight.

Presumption of Negligence

1. Goods – Subject to the provision of Article 1734 of the Civil Code, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as required in article
1733.

To overcome the presumption of negligence, the common carrier must establish by adequate
proof that is exercised extraordinary diligence over the goods. It must do more than merely
show that some other party could be responsible for the damage.

2. Passengers – In case of death of or injuries to passengers, common carriers are presumed to

have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in Articles 1733 and 1755.

As such, the court need not make express finding of such fault or negligence on the part of the
carrier to hold it liable because it is presumed. However, it must be shown that:

1. There exist a contract of carriage between the common carrier and the passenger or
shipper; and
2. The loss, destruction or deterioration of goods or the death of or injury of passenger
took place during the existence of such contract of carriage.

Notes:

The doctrine of proximate cause is applicably only in actions for quasi-delict, no in actions
involving breach of contract.

Common carrier is not an insurer of all risks.

The presumption of fault and negligence may be overturned by COMPETENT EVIDENCE

showing that the common carrier has observed extraordinary diligence over the goods.

Duration of diligence

A. Possession and delivery

The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until
the same are delivered, actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them, without prejudice to the provisions of article 1738.
(Article 1736)

B. Unloaded or stored in transit

The common carrier's duty to observe extraordinary diligence over the goods remains in full
force and effect even when they are temporarily unloaded or stored in transit, unless the
shipper or owner has made use of the right of stoppage in transitu. (Article 1737)

C. Warehouse

The extraordinary liability of the common carrier continues to be operative even during the
time the goods are stored in a warehouse of the carrier at the place of destination, until the
consignee has been advised of the arrival of the goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose of them. (Article 1738)

Article 1738 contemplates a situation where the goods had already reached their place of
destination and are stored in the warehouse of the carrier.

BAR 2009, 1989: Gratuitous carriage, stowaway

When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability
for negligence is valid, but not for wilful acts or gross negligence.

The reduction of fare does not justify any limitation of the common carrier's liability.

ORDINARY CARE is only required to be observed by the common carrier.

BAR 2009, 2002, 2001, 1985, 1983, 1978: Reduction of liability

Stipulation for limitation of liability

A stipulation between the common carrier and the shipper or owner limiting the liability of the
former for the loss, destruction, or deterioration of the goods to a degree less than
extraordinary diligence shall be valid, provided it be:

(1) In writing, signed by the shipper or owner;

(2) Supported by a valuable consideration other than the service rendered by the
common carrier; and
(3) Reasonable, just and not contrary to public policy.

Void Stipulations

Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy:

(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration
of the goods;
 (3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good
father of a family, or of a man of ordinary prudence in the vigilance over the movables
transported;
(5) That the common carrier shall not be responsible for the acts or omission of his or
its employees;
(6) That the common carrier's liability for acts committed by thieves, or of robbers who
do not act with grave or irresistible threat, violence or force, is dispensed with or
diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration
of goods on account of the defective condition of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage.

Limitation of liability to fixed amount

A stipulation that the common carrier's liability is limited to the value of the goods appearing in
the bill of lading, unless the shipper or owner declares a greater value, is binding.

A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if:

(1) it is reasonable and just under the circumstances, and

(2) has been fairly and freely agreed upon.

Other considerations on stipulation limiting the liability

1. Refusal to carry goods

An agreement limiting the common carrier's liability may be annulled by the shipper or owner if
the common carrier refused to carry the goods unless the former agreed to such stipulation.
(Article 1746)

2. Delay or changing route

If the common carrier, without just cause, delays the transportation of the goods or changes
the stipulated or usual route, the contract limiting the common carrier's liability cannot be
availed of in case of the loss, destruction, or deterioration of the goods. (Article 1747)

3. Delay due to strikes and riots

An agreement limiting the common carrier's liability for delay on account of strikes or riots is
valid. (Article 1748)

4. No competitor clause

The fact that the common carrier has no competitor along the line or route, or a part thereof, to
which the contract refers shall be taken into consideration on the question of whether or not a
stipulation limiting the common carrier's liability is reasonable, just and in consonance with
public policy. (Article 1751)

5. Presumption of negligence
Even when there is an agreement limiting the liability of the common carrier in the vigilance
over the goods, the common carrier is disputably presumed to have been negligent in case of
their loss, destruction or deterioration. (Article 1752)

BAR 2016: Last Clear Chance Doctrine

Both parties are negligent, but the negligent act of one is appreciably later in time than that of
the other, or when it is impossible to determine whose fault or negligence should be attributed
to the incident.

The one who had the last clear opportunity to avoid the impending harm and failed to do so is
chargeable with the consequence thereof.

The Doctrine of Last Clear Chance Is Inapplicable in the Case of Tiu v. Laspias

Contrary to the petitioners contention, the principle of last clear chance is inapplicable in the
instant case, as it only applies in a suit between the owners and drivers of two colliding
vehicles. It does not arise where a passenger demands responsibility from the carrier to enforce
its contractual obligations, for it would be inequitable to exempt the negligent driver and its
owner on the ground that the other driver was likewise guilty of negligence. The common law
notion of last clear chance permitted courts to grant recovery to a plaintiff who has also been
negligent provided that the defendant had the last clear chance to avoid the casualty and failed
to do so. Accordingly, it is difficult to see what role, if any, the common law of last clear chance
doctrine has to play in a jurisdiction where the common law concept of contributory negligence
as an absolute bar to recovery by the plaintiff, has itself been rejected, as it has been in Article
2179 of the Civil Code.

Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgados wife due to
the negligence of petitioner Laspias, his employee, on this score. (Tiu v. Laspias)

BAR 1986, 1984: Assaults of employees

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

This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees. (Article
1759)

BAR 2008: LRTA vs. Natividad

Facts: Nicanor Navidad, then drunk, entered the EDSA LRT station after purchasing a "token"
(representing payment of the fare). While Navidad was standing on the platform near the LRT
tracks, Junelito Escartin, the security guard assigned to the area approached him. A
misunderstanding or an altercation between the two apparently ensued that led to a fist fight.
No evidence, however, was adduced to indicate how the fight started or who, between the two,
delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that
Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was
struck by the moving train, and he was killed instantaneously. The widow of Nicanor, Marjorie
Navidad, along with her children, filed a complaint for damages against Junelito Escartin,
Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for
the death of her husband. Trial court ruled in favor Navidad’s wife and against the defendants
Prudent Security and Junelito Escartin. LRTA and Rodolfo Roman were dismissed for lack of
merit. CA held LRTA and Roman liable, hence the petition.

ISSUE: Whether or not there was a perfected contract of carriage between Navidad and LRTA

HELD: Contract of carriage was deemed created from the moment Navidad paid the fare at the
LRT station and entered the premises of the latter, entitling Navidad to all the rights and
protection under a contractual relation. The appellate court had correctly held LRTA and
Roman liable for the death of Navidad in failing to exercise extraordinary diligence imposed
upon a common carrier. While the deceased might not have then as yet boarded the train, a
contract of carriage theretofore had already existed when the victim entered the place where
passengers were supposed to be after paying the fare and getting the corresponding token
therefor.

The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances. Such duty of a common carrier to
provide safety to its passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage. The statutory provisions render a common carrier liable for death of or
injury to passengers (a) through the negligence or willful acts of its employees or b) on account
of willful acts or negligence of other passengers or of strangers if the common carrier’s
employees through the exercise of due diligence could have prevented or stopped the act or
omission.

In case of such death or injury, a carrier is presumed to have been at fault or been negligent,
and by simple proof of injury, the passenger is relieved of the duty to still establish the fault or
negligence of the carrier or of its employees and the burden shifts upon the carrier to prove
that the injury is due to an unforeseen event or to force majeure. The liability of the common
carrier and that of the independent contractor is solidary.

BAR 2015, 1998, 1984, 1979: Bill of Lading; Three-fold Character; Delivery of goods;
Period for filing claim/actions

BILL OF LADING

A bill of lading is a written acknowledgement of the receipt of goods and an agreement to

transport and to deliver them at a specified place to a person named or on his or her order.

THREE-FOLD CHARACTER

1. RECEIPT – as to the quantity and description of the goods shipped

2. CONTRACT TO TRANSPORT – To deliver the goods to the consignee or other person therein
designated on terms specified in such instrument.
3. DOCUMENT OF TITLE – which makes it a symbol of goods.

DELIVERY OF GOODS

There is delivery to the carrier when the goods are ready for and have been placed in the
exclusive possession, custody and control of the carrier for the purpose of their immediate
transportation and the carrier has accepted them. Where such a delivery has thus been
accepted by the carrier, the liability of the common carrier eo instant.
Period of Delivery

If a period has been fixed for the delivery of the goods, it must be made within such time, and,
for failure to do so, the carrier shall pay the indemnity stipulated in the bill of lading, neither
the shipper nor the consignee being entitled to anything else.

If no indemnity has been stipulated and the delay exceeds the time fixed in the bill of lading,
the carrier shall be liable for the damages which the delay may have caused. (Art. 370, Code of
Commerce)

If there is no period fixed for the delivery of the goods the carrier shall be bound to forward
them in the first shipment of the same or similar goods which he may make point where he
must deliver them; and should he not do so, the damages caused by the delay should be for his
account. (Art. 358, Code of Commerce)

Delivery without surrender of BOL

After the contract has been complied with, the bill of lading which the carrier has issued shall
be returned to him, and by virtue of the exchange of this title with the thing transported, the
respective obligations and actions shall be considered cancelled, unless in the same act the
claim which the parties may wish to reserve be reduced to writing, with the exception of that
provided for in Article 366. (Art. 353 2nd par, Code of Commerce)

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by
the carrier, because of its loss or of any other cause, he must give the latter a receipt for the
goods delivered, this receipt producing the same effects as the return of the bill of lading. (Art.
353 3rd par, Code of Commerce)

Refusal of Consignee to take delivery

The consignee may refuse to take delivery in the following cases:

(1) If only part of the goods transported should be delivered, when he proves that he cannot
make use thereof without the others (Art. 363, Code of Commerce);
(2) When the goods are rendered useless for purposes of sale or consumption in the use for
which they are properly destined, in which case the consignee may demand payment of the
goods at current market prices (Art. 365, Code of Commerce);
(3) In case part of the goods is in good condition and separation is possible, the consignee may
refuse to receive only the damaged goods (Art. 365, Code of Commerce);
(4) Where the delay is through the fault of the carrier (Art. 371, Code of Commerce).

In case of dispute as to the condition of the goods, the same shall be examined by experts
appointed by the parties, and the third one, in case of disagreement, appointed by the judicial
authority.

If the persons interested should not agree with the report, said judicial authority shall order
the deposits of the merchandise in a safe warehouse, and the parties interested shall make use
of their rights in the proper manner. (Art. 367, Code of Commerce)

PERIOD FOR FILING CLAIMS

Within the twenty-four hours following the receipt of the merchandise, the claim against the
carrier for damage or average be found therein upon opening the packages, may be made,
provided that the indications of the damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which case the claim shall be admitted
only at the time of receipt.

After the periods mentioned have elapsed, or the transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered. (Art. 366, Code of Commerce)

Claims for damage to the merchandise transported may be made upon the carrier within
the following times:

a. Damage is apparent (Immediately) – if the damage is apparent from the exterior of the
package, the claim must be made upon the receipt of the package. For such purpose, a
verbal claim made immediately is sufficient compliance with the law.

b. Damage is not apparent (within 24 hours) – if the damage cannot be known from the
exterior part of the packages, the claim must be made within 24 hours following the
receipt of the merchandise.

The 24-hour claim requirement is a condition precedent to the accrual of a right of

action against a carrier for loss of, or damage to, the goods. The shipper must allege
and prove the fulfilment of the condition. Otherwise, no right of action against the
carrier can accrue in favour of the former.

c. When consignee receives the merchandise, paying the freight charges without protest,
all claims against the carrier are extinguished.

PERIOD FOR FILING ACTION

In any event, the carrier and the ship shall be discharged from all liability in respect to loss or
damage unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered. (Sec. 3(6), par, 4 COGSA)

Simply put, the one (1) by year prescriptive period under Section 3(6), paragraph 4 of the
Carriage of Goods by Sea Act does not apply to cases of misdelivery or conversion.

The applicable prescriptive period is found in the Civil Code, namely:

1. Within ten (10) years for breach of a written contract (Art. 1144);
2. Within six (6) years upon oral contract (Art. 1145);
3. Within four (4) years for quasi-delict (Art. 1146).

BAR 2016, 2015, 2013, 2007, 2005, 2004, 2000, 1999, 1997, 1996, 1995, 1994, 1992,
1991, 1989, 1988, 1987, 1986, 1983, 1980, 1978, 1977, 1975, 1972: Marine Commerce;
Charter Party; Limited Liability; Loans; Collision; Averages; COGSA

Maritime Commerce

CHARTER PARTY
A contract by which an entire ship, or some principal part hereof, is let by the owner to another
person for a specified time or use; a contract of affreightment by which the owner of a ship or
other vessel lets the whole or a part of her to a merchant or other person for the conveyance of
goods, on a particular voyage, in consideration of the payment of freight.

Types of charter parties

a. Contract of affreightment which involves the use of shipping space on vessels leased by
the owner in part as a while, to carry goods for others; and
b. Charter by demise of bareboat charter, by the terms of which the whole vessel is let to
the charterer with a transfer to him of its entire command and possession and
consequent control over its navigation, including the master and the crew, who are his
servants.

Contract of affreightment may either be:

a. Time charter, wherein the vessel is leased to the charterer for a fixed period of time, or
b. Voyage charter, wherein the ship is leased for a single voyage.

In both cases, the charter-party provides for the hire of vessel only.

By the contract of affreightment, a common carrier is not converted into a private carrier, but
remained a common carrier and is still liable as such.

LIMITED LIABILITY

The civil liability incurred by the shipowners in the cases provided in his section, shall be
understood to be limited to the value of the vessel with all her appurtenances and freightage
earned during voyage. (Article 837 Code of Commerce)

Also, Article 590 provides that the co-owners of a vessel shall be civilly liable, in proportion to
their contribution to the common fund, for the results of the acts of the captain referred to in
Article 587. Each part owner may exempt himself from this liability by the abandonment before
a notary public of the part of the vessel belonging to him.

The ship agent shall also be civilly liable for the indemnities in favour of third persons which
arise from the conduct of the captain in the care of the goods which the vessel carried; but he
may exempt himself therefrom by abandoning the vessel with all her equipment and the
freightage he may have earned during the voyage. (Art. 587)

1. Article 837 appeals the principle of limited liability in cases of collision hence, Articles
587 and 590 embody the universal principle of limited liability in all cases.

2. “No vessel, no liability.” Expresses in a nutshell the limited liability rule. The shipowner
or agents liability is merely co-extensive with his interest in the vessel such that a total loss
thereof results in its extinction. The total destruction of the vessel extinguishes maritime
liens because there is no longer any res to which it can attach.

3. This doctrine is based on the real and hypothecary nature of maritime law which has
its origin in the prevailing conditions of the maritime trade and sea voyages during the
medieval ages, attended by innumerable hazards and perils. To offset against these adverse
conditions and to encourage shipbuilding and maritime commerce, it was deemed
 necessary to confine the liability of the owner or agent arising from the operation of a ship
to the vessel, equipment, and freight, or insurance, if any.

4. The Court had categorically stated that Article 587 speaks only of situations where the
fault or negligence is committed solely by the captain. In cases where the shipowner is
likewise to be blamed, Article 587 does not apply. Such a situation will be covered by the
provisions of the Civil Code on common carriers.

The limited liability doctrine applies not only to the goods but also in all cases like death or
injury to passengers wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain.

Exceptions to limited liability rule

1. Where the injury or death to a passenger is due either to the fault of the shipowner, or to
the concurring negligence of the shipowner and the captain;
2. Where the vessel is insured;
3. In workmen's compensation claims; and
4. By reason of fault or negligence. (Supra)

LOANS

BOTTOMRY

A contract by which a shipowner pledges the ship as security for a loan to finance a voyage (as
to equip or repair the ship), the lender losing the money if the ship is lost during the voyage.
The term refers to the idea that the shipowner pledges the ship’s bottom, or keel.

RESPONDENTIA

A loan secured by the cargo on one’s ship rather than the ship itself.

A loan in which under any condition whatever, the repayment of the sum loaned and of the
premium stipulated depends upon the safe arrival in port of the goods on which it is made, or
of the price they may receive in case of accident, shall be considered a loan on bottomry or
respondentia. (Art. 719)

Loans on bottomry or respondentia may be executed:

1. By means of a public instrument;

2. By means of a policy signed by the contracting parties and the broker taking part
therein; or
3. By means of a private instrument. (Art. 720)

COLLISION

Collision simply means the crashing together of two (2) vessels. If only one is moving and the
other is stationary, the impact is called allision.

Doctrine of error in extremis

 1. The first zone-covers all the time up to the moment when the risk of collision may
be said to have begun. Within this zone, no rule is applicable because none is
necessary. Each vessel is free to direct its course as it deems best without reference to
the movements of the other vessel.
2. The second zone-covers the time between the moment when the risk of collision
begins and the moment when it has become a practical certainty.
3. The third zone-covers the time between the moment when collision has become a
practical certainty and the moment of actual contact.

It was during the time when the sail vessel was passing through the third zone that it changed
its course to port in order to avoid, if possible, the collision. This act may be said to have been
done in extremis, and, even if wrong, the sailing vessel is not responsible for the result.

Rules on collision

1. One vessel at fault

If a vessel should collide with another, through the fault, negligence, or lack of skill of the
captain, sailing mate, or any other member of the complement, the owner of the vessel at fault
shall indemnify the losses and damages suffered, after an expert appraisal. (Art. 826)

2. Both vessels at fault

If both vessels may be blamed for the collision, each one shall suffer its own damages, and
both shall be solidarity responsible for the losses and damages suffered by their cargoes (Art.
827)

The provisions of the foregoing article are applicable to the case in which it cannot be decided
which of the two (2) vessels had caused the collision (Art. 828). Also known as the doctrine of
inscrutable fault.

In the cases abovementioned the civil action of the owner against the person causing the injury
as well as the criminal liabilities, which may be proper, are reserved. (Art. 829)

3. Fortuitous event or force majeure

If a vessel should collide with another through fortuitous event or force majeure, each vessel
and its cargo shall be liable for its own damage. (Art. 830)

If, by reason of a storm or other causes of force majeure, a vessel which is properly anchored
and moored should collide with those nearby, causing them damage, the injury occasioned
shall be considered as particular average of the vessel run into. (Art. 832)

4. Third vessel at fault

If a vessel should be forced to collide with another one by a third vessel, the owner of the third
vessel shall indemnify the losses and damages caused, the captain thereof being civilly liable to
said owner. (Art 831)

5. Lost by reason of collision

A vessel which upon being run into, sinks immediately, as well as that which, having been
obliged to make a port to repair the damages caused by the collision is lost during the voyage,
or is obliged to be stranded in order to be saved, shall be presumed as lost by reason of
collision. (Art 833)

6. Action for damages

The action for the recovery of losses and damages arising from collisions cannot be admitted if
a protest or declaration is not presented within 24-hrs before the competent authority of the
point where the collision took place, or that of the first port of arrival of the vessel, if in the
Philippine territory, and to the consul of the Philippines if it occurred in a foreign country. (Art.
835)

With respect to damages caused to persons or to the cargo, the absence of a protest cannot
prejudice the persons interested who were not on board or were not in a condition to make
known their wishes. (Art. 836)

7. Limited liability rule

The civil liability incurred by the shipowners in the cases prescribed in this section, shall be
understood as limited to the value of the vessel with all her appurtenances and freightage
earned during the voyage. (Art. 837)

When the value of the vessel and her appurtenances should not be sufficient to cover all the
liabilities, the indemnity due by reason of the death or injury of persons shall have reference.
(Art. 838)

8. Collision in foreign waters

If the collision should take place between Philippine vessels in foreign waters, or if having
taken place in the open seas, and the vessels should make a foreign port, the Filipino consul in
said port shall hold a summary investigation of the accident, forwarding the proceedings to the
Secretary of the Department of Foreign Affairs for continuation and conclusion. (Art. 839)

The only instance where such abandonment is dispensed with is when the vessel was entirely
lost. In such case, the obligation is thereby.

Exception thereto in that while "the total destruction of the vessel extinguishes a maritime
lien, as there is no longer any risk to which it can attach, but the total destruction of the
vessel does not affect the liability of the owner for repairs of the vessel completed before its loss,
interpreting the provision of Article 591 of the Code of Commerce in relation with the other
Articles of the same Code.

Starboard to avoid collision

Rule 18 (a) of the International Rules of the Road ("Rules"), which provides as follows

(a) When two power-driven vessels are meeting end on, or nearly end on, so as to involve risk of
collision, each shall alter her course to starboard, so that each may pass on the port side of the
other.

AVERAGES
 1. Simple or particular;
2. General or gross. (Art. 808, Code of Commerce)

For the purposes of the Code, the following shall be considered averages:

1. All extraordinary or accidental expenses which may be incurred during the voyage for
the preservation of the vessel or cargo, or both.
2. All damages or deterioration which the vessel may suffer from the time she puts to
sea from the port of departure until she casts anchor in the port of destination, and
those suffered by the merchandise from the time it is loaded in the port of shipment
until it is unloaded in the port of consignment. (Art. 806)

Ordinary expenses

The petty and ordinary expenses incident to navigation, such as those of pilotage of coasts and
ports, lighterage and towage, anchorage, inspection, health, quarantine, lazaretto, and other
so-called port expenses, costs of barges, and unloading until the merchandise is placed on the
wharf, and any other expenses common to navigation shall be considered ordinary expenses to
be defrayed by the shipowner, unless there is a special agreement to the contrary. (Art. 807)

Simple or particular average

General rule, all the expenses and damages caused to the vessel or to her cargo which have not
inured to the benefit and common profit of all the person interested in the vessel and her cargo,
and especially the following:

1. The losses suffered by the cargo from the time of its embarkation until it is unloaded,
either on account of inherent defect of the goods or by reason of an accident of the sea
or force majeure, and the expenses incurred to avoid and repair the same.
2. The losses and expenses suffered by the vessel in its hull, rigging, arms, and
equipment, for the same causes and reasons, from the time it puts to sea from the port
of departure until it anchors and lands in the port of destination.
3. The losses suffered by the merchandise loaded on deck, except in coastwise
navigation, if the marine ordinances allow it.
4. The wages and victuals of the crew when the vessel is detained or embargoed by
legitimate order or force majeure, if the charter has been contracted for a fixed sum for
the voyage.
5. The necessary expenses on arrival at a port, in order to make repairs or secure
provisions.
6. The lowest value of the goods sold by the captain in arrivals under stress for the
payment of provisions and in order to save the crew, or to meet any other need of the
vessel, against which the proper amount shall be charged.
7. The victuals and wages of the crew while the vessel is in quarantine.
8. The loss inflicted upon the vessel or cargo by reason of an impact or collision with
another, if it is accidental and unavoidable. If the accident should occur through the
fault or negligence of the captain, the latter shall be liable for all the losses caused.
9. Any loss suffered by the cargo through the fault, negligence, or barratry of the
captain or of the crew, without prejudice to the right of the owner to recover the
corresponding indemnity from the captain, the vessel, and the freightage.

Liability of the owner of goods

The owner of the goods which gave rise to the expense or suffered the damage shall bear the
simple or particular averages. (Art. 810)

General or gross average

General rule, all the damages and expenses which are deliberately caused in order to save the
vessel, her cargo, or both at the same time, from a real and known risk, and particularly the
following:

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

Satisfaction of the gross or general averages

In order to satisfy the amount of the gross or general averages, all the persons having an
interest in the vessel and cargo therein at the tune of the occurrence of the average shall
contribute. (Art. 812)

Requisites of general average

1. First, there must be a common danger. This means, that both the ship and the
cargo, after has been loaded, are subject to the same danger, whether during the
voyage, or in the port of loading or unloading; that the danger arises from the accidents
of the sea, dispositions of the authority, or faults of men, provided that the
circumstances producing the peril should be ascertained and imminent or may
rationally be said to be certain and imminent. This last requirement exclude measures
undertaken against a distant peril.
 2. Second, that for the common safety, part of the vessel or of the cargo or both is
sacrificed deliberately.
3. Third, that from the expenses or damages caused follows the successful saving of the
vessel and cargo.
4. Fourth, that the expenses or damages should have been incurred or inflicted after
taking proper legal steps and authority.

Arrival under stress

1. If the captain during the navigation should believe that the vessel cannot continue
the voyage to the port of destination on account of:
2. The lack of provisions;
3. Well-founded fear of seizure, privateers or pirates; or
4. By reason of any accident of the sea disabling her to navigate.

Arrival under stress when not considered legal

1. If the lack of provisions should arise from the failure to take the necessary provisions
for the voyage, according to usage and customs, or if they should have been rendered
useless or lost through bad stowage or negligence on their care.
2. If the risk of enemies, privateers, or pirates should not have been well known,
manifest, and based on positive and justifiable facts.
3. If the defect of the vessel should have been caused by reason of her not being
repaired, rigged, equipped, and arranged in a convenient manner for the voyage or by
reason of some erroneous order of the captain
4. Whenever malice, negligence, want of foresight, or lack of skill on the part of the
captain exists in the act causing the damage. (Art. 820)

Expenses of an arrival under stress

The expenses of an arrival under stress shall always be for the account of the shipowner or
ship agent, but they shall not be liable for the damages which may be caused by the shippers
by reason of the arrival, provided the latter is legitimate. (Art. 821)

Otherwise the ship agent and the captain shall be jointly liable.

Custody and preservation of the cargo

The custody and preservation of the cargo which has been unloaded shall be in the charge of
the captain, who shall be responsible for the same, except in cases of force majeure. (Art. 823)

The captain shall be responsible for the damages caused by his delay, if after the cause of the
arrival under stress has ceased, lie should not continue the voyage.

If the cause of the arrival should have been the fear of enemies, privateers or pirates, a
deliberation and resolution in a meeting of the officers of the vessel and persons interested in
the cargo who may be present, in accordance with the provisions contained in Article 819, shall
precede the departure. (Art. 825)

CARRIAGE OF GOODS BY SEA ACT

Notice of loss or damage

Unless notice or loss or damage and the general nature of such loss or damage by given in
writing to the carrier or his agent at the port of discharge or at the time of the removal of the
goods into the custody of the person entitled to delivery thereof under the contract of carriage,
such removal shall be prima facie evidence of the delivery by the carrier of the goods as
described in the bill of lading. If the loss or damage is not apparent, the notice must be given
within three (3) days of the delivery.

Said notice of loss or damage may be endorsed upon the receipt for the goods given by the
person taking delivery thereof.

The notice in writing need not be given if the state of the goods has at the time of their receipt
been the subject of joint survey or inspection.

In any event the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one (1) year after delivery of the goods or the date
when the goods should have been delivered; provided, That, if a notice of loss or damage,
either apparent or concealed, is not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within one (1) year after the delivery of
the goods or the date when the goods should have been delivered.

In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give
all reasonable facilities to each other for inspecting and tallying the goods. (Sec. 3[6], COGSA)

Under the same provision, however, a failure to file a notice of claim within three (3) days will
not bar recovery if a suit is or from the date when the goods should have been delivered or from
the date when the goods should have been delivered.

Maritime protest and marine protest

A. Maritime protest

The action for the recovery of losses and damages arising from collisions cannot be admitted if
a protest or declaration is not presented within twenty-four hours before the competent
authority of the point where the collision took place, or that of the first port of arrival of
the vessel, if in Philippine territory, and to the consul of the Republic of the Philippines if it
occurred in a foreign country. (Art. 835)

Simply put, any action for damages arising from collision should be preceded by a marine
protest, which must be filed within 24 hours from the time the collision took place before a
competent authority at the first port where the collision took place or at the first port of arrival
filed by the captain of the vessel.

B. Marine protest

“Marine Protest” is a declaration on oath by the master, of the circumstances attending the
damage or loss of his vessel, intended to show that the loss accrued by the perils of the sea,
and conducting with the protestation against any liability of the owner to the freighters. Its use
and design is to authenticate the facts and circumstances of a loss to the insurer and all
concerned.

Marine protest shall be “the primary evidence in the investigation of accident involving the
vessel by a HEARING OFFICER, a BOARD OF INQUIRY or any investigation. However, its
absence shall not preclude the conduct of an investigation as deemed necessary by any Coast
Guard officer on official duty.

The protest shall be submitted to the Coast Guard Station.1 Commander of the area where the
accident or any incident has occurred or of the first immediate port of call.

Marine protest shall be submitted under the following circumstances:

a. Actual physical damage to property exceeding one thousand pesos (P1,000);

b. Material damage affecting seaworthiness or efficiency of a vessel;
c. Stranding, grounding or sinking of the vessel or fire on
c. Stranding, grounding or sinking of the vessel or fire on board;
d. Loss of life;
e. Injury causing any persons to remain incapacitated for a period in excess of 70
hours, except injury to harbour workers not resulting from vessel equipment casualty;
f. Any deviation from her course or delay beyond the control of the master;
g. Any serious breach of charter party terms if committed by any party other than the
ship’s crew as refusal to load, unduly delaying of loading, loading improper cargo,
refusal to pay discharge fees, and refusal to accept bill of lading in form signed by the
master;
h. failure of consignee to take delivery of cargoes or fails to discharge cargoes thereof or
pay freight in accordance with charter party bill of lading terms;
i. Arrival of vessel under stress; and
j. To provide additional information relevant to the incident or circumstances, which
may give rise or may have given rise to suspicion on the negligence or incompetence of
the master or crew.

Art 835 – Said article cannot be applied to small boats engaged in river and bay traffic.

Simply put, maritime protest is not required in minor vessels, riverboats and those carrying
passengers from ship to shore.

Under the Code of Commerce protest is required when:

1. In arrival under stress (Art. 612);

2. Shipwrecked (Art. 612);
3. The vessel has gone through a hurricane or the captain believes that the cargo has
suffered damages or averages (Art. 624);
4. Maritime collisions (Art. 835).

The aforementioned are likewise present in the Maritime Safety Services MC 06-90.

Period of Prescription

I. The action should be brought within one year after delivery of the goods or the date when
the goods should have been delivered. If not filed within such period, the carrier shall be
discharged from liability. (Sec. 3[6], COGSA)

One-year prescriptive period under Section 3(6), paragraph 4 of the Carriage of Goods by Sea
Act does not apply to cases of misdelivery or conversion.
The point that matters here is that the situation is either delivery or misdelivery, but not non-
delivery. Said one-year period of limitation is designed to meet the exigencies of maritime
hazards.

It follows that for suits predicated not upon loss or damage but on alleged misdelivery (or
conversion) of the goods, the applicable rule on prescription is that found in the Civil Code,
namely, either ten years for breach of a written contract or four years for quasi-delict.

Simply put, the one (1)-year prescriptive period under Section 3(6), paragraph 4 of the Carriage
of Goods by Sea Act does not apply to cases of misdelivery or conversion.

The applicable prescriptive period is found in the Civil Code, namely:

1. Within ten (10) years for breach of a written contract (Art. 1144);
2. Within six (6) years upon oral contract (Art. 1145);
3. Within four (4) for quasi-delict (Art. 1146).

A demand does not toll the running of the period.

4. If filed by the insurer, the one (1)-year rule still applies.

5. Ten (10)-year period will apply between the shipper or consignee and insurer.

Admiralty and maritime jurisdiction

RTC – demand or claim exceeds 300 outside Manila / 400 within Manila

MeTC or MTC – demand or claim does not exceed 300 outside Manila / 400 within Manila

Limitation of liability

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to
or in connection with the transportation of goods in an amount exceeding $500 per package of
lawful money of the United States, or in case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency, unless the nature and value of
such goods have been declared by the shipper before shipment and inserted in the bill of
lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but
shall not be conclusive on the carrier.

By agreement between the carrier, master or agent of the carrier, and the shipper another
maximum amount than that mentioned in this paragraph may be fixed: Provided, that such
maximum shall not be less than the figure above named. In no event shall the carrier be liable
for more than the amount of damage actually sustained.

Neither the carrier nor the ship shall be responsible in any event for loss damage to or in
connection with the transportation of the goods if the nature or value thereof has been
knowingly and fraudulently misstated by the shipper in the bill of lading. (Sec 4[5], COGSA)

Demurrage

Is the compensation provided for in the contract of affreightment for the detention of the vessel
beyond the laytime or that period of time agreed on for loading and unloading of cargo. It is
given to compensate the shipowner for the non-use of the vessel. On the other hand, the
following is well-settled:

Laytime runs according to the particular clause of the charter party. … If laytime is expressed
in “running days,” this means days when the ship would be run continuously, and holidays are
not excepted. A qualification of “weather permitting” excepts only those days when bad weather
reasonably prevents the work contemplated.

Primage

A small gratuity traditionally paid to the master (and sometimes the crew) of a ship for the care
of the cargo. Also termed as pocket money.

Husbanding Agent

A ‘ husbanding agent” is the general agent of the owner in relation to the ship, with powers,
among others, to engage the vessel for general freight and the usual conditions, and settle for
freight and adjust averages with the merchant.

Jettison

The act of voluntarily throwing cargo overboard to lighten or stabilize a ship that is in
immediate danger.

The captain shall direct the jettison, and shall order the goods cast overboard in the following
order:

1. Those which are on deck, beginning with those which embarrass the maneuver or
damage of the vessel, preferring, if possible, the heaviest ones with the least utility and
value.
2. Those which are below the upper deck, always beginning with those of the greatest
weight and smallest value, to the amount and number absolutely indispensable. (Art
815)

Salvage

(3) elements are necessary to a valid salvage claim, namely:

1. A marine peril;
2. Service voluntarily rendered when not required as an existing duty or from a special
contract; and
3. Success in whole or in part, or that the service rendered contributed to such success.

The distinction between salvage and towage is of importance to the crew of the salvaging ship,
for the following reasons: If the contract for towage is in fact towage, then the crew does not
have any interest or rights in the remuneration pursuant to the contract. But if the owners of
the respective vessels are of a salvage nature, the crew of the salvaging ship is entitled to
salvage, and can look to the salvaged vessel for its share.