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San Beda College of Law



CONTRACT OF TRANSPORTATION/ 4. Provides public convenience.

 A contract whereby a person, natural or PRIVATE CARRIER
juridical, obligates to transport persons,  One which, without being engaged in the
goods, or both, from one place to another, by business of carrying as a public employment,
land, air or water, for a price or undertakes to deliver goods or passengers for
compensation. compensation. (Home Insurance Co. vs.
 Classifications: American Steamship Agency, 23 SCRA 24)
1. Common or Private
3. For a fee (for hire) or Gratuitous OR PRIVATE:
4. Land, Water/maritime, or Air  The SC in First Philippine Industrial
5. Domestic/inter-island/coastwise or Corporation vs. CA (1995) reiterated the
International/foreign following tests:
 It is a relationship which is imbued with the 1. It must be engaged in the business
public interest. of carrying goods for others as a
public employment and must hold
COMMON CARRIER itself out as ready to engage in the
 Persons, corporations, firms or associations transportation of goods generally as
engaged in the business of carrying or a business and not as a casual
transporting passengers or goods or both, by occupation;
land, water, or air, for compensation, offering 2. It must undertake to carry goods of
their services to the public (Art. 1732, Civil the kind to which its business in
Code). confined;
 Art. 1732 of the New Civil Code avoids any 3. It must undertake to carry by the
distinction between one whose principal method by which his business is
business activity is the carrying of persons or conducted and over its established
goods or both and one who does such roads; and
carrying only as an ancillary activity 4. The transportation must be for hire.
(sideline). It also avoids a distinction  In National Steel Corp. vs. CA (1997) the SC
between a person or enterprise offering held that the true test of a common carrier is
transportation service on a regular or the carriage of goods or passengers provided
scheduled basis and one offering such service it has space for all who opt to avail
on an occasional, episodic or unscheduled themselves of its transportation for a fee.
Neither does the law distinguish between
a carrier offering its services to the general COMMON CARRIER PRIVATE
public that is the general community or CARRIER
population and one who offers services or 1. As to availability
solicits business only from a narrow segment Holds himself out for Contracts with
of the general population. all people particular individuals
A person or entity is a common carrier indiscriminately or groups only
even if he did not secure a Certificate of 2. As to required diligence
Public Convenience (De Guzman vs. CA, 168 Extraordinary Ordinary diligence is
SCRA 612). diligence is required required
 It makes no distinction as to the means of 3. As to regulation
transporting, as long as it is by land, water or Subject to State Not subject to State
air. It does not provide that the regulation regulation
transportation should be by motor vehicle. 4. Stipulation limiting liability
(First Philippine Industrial Corporation vs. CA) Parties may not agree Parties may limit the
 One is a common carrier even if he has no on limiting the carrier’s liability,
fixed and publicly known route, maintains no carrier’s liability provided it is not
terminals, and issues no tickets (Asia except when contrary to law,
Lighterage Shipping, Inc. vs. CA). provided by law morals or good
 Characteristics: customs
1. Undertakes to carry for all people 5. Exempting circumstance
indifferently and thus is liable for Prove extraordinary caso fortuito, Art.
refusal without sufficient reason diligence and Art. 1174 NCC
(Lastimoso vs. Doliente, October 20, 1733, NCC
1961); 6.Presumption of negligence
2. Cannot lawfully decline to accept a
particular class of goods for carriage There is a No presumption of
to the prejudice of the traffic in these presumption of fault fault or negligence
goods; or negligence
3. No monopoly is favored (Batangas 7.Governing law
Trans. vs. Orlanes, 52 PHIL 455);


 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)
San Beda College of Law

Law on common Law on obligations ticket, unless the attempt be with

carriers and contracts the knowledge and consent of the
e. One who has boarded a wrong
vehicle, has been properly informed
A. Domestic/inter-island/coastwise
of such fact, and on alighting, is
 Applicable to Land, Water, and Air
injured by the carrier;
f. Invited guests and accommodation
1. Civil Code - primary
passengers. (Lara vs. Valencia)
2. Code of Commerce (Arts. 349, 379,
g. One who rides any part of the
573-734, 580, 806-845) - suppletory
vehicle which is unsuitable or
dangerous or which he knows is not
B. International/foreign/overseas
designed or intended for passengers.
(Foreign country to Philippines)
 Applicable to Water/maritime and Air DEFENSES OF A COMMON CARRIER IN
transportation THE CARRIAGE OF GOODS
 The law of the country of destination CASO FORTUITO/FORCE MAJEURE
generally applies.  Requisites:
1. Civil Code - primary a. Must be the proximate and only cause of
2. Code of Commerce - suppletory the loss
3. Others - suppletory b. Exercise of due diligence to prevent or
a. Water/maritime: Carriage of minimize the loss before, during or after
Goods by Sea Act (COGSA) the occurrence of the disaster (Art. 1739)
b. Air: Warsaw Convention c. Carrier has not negligently incurred in
delay in transporting the goods (Art.
(Arts. 1732-1766)
 Fire is not considered a natural disaster or
calamity as it arises almost invariably from
some act of man. (Eastern Shipping Lines Inc.
vs. IAC)
 Rendition of service with the greatest skill
 Mechanical defects are not force majeure if
and utmost foresight. (Davao Stevedore Co.
the same was discoverable by regular and
v. Fernandez)
adequate inspections. (Notes and Cases on
 Rationale: the Law on Transportation and Public Utilities,
1. From the nature of the business and Aquino, T. & Hernando, R.P. 2004 ed. p.120-
for reasons of public policy (Art. 122)
2. Relationship of trust 2. ACTS OF PUBLIC ENEMY
3. Business is impressed with a special
 Requisites:
public duty
a. Must be the proximate and only
4. Possession of the goods
cause of the loss
5. Preciousness of human life
b. Exercise of due diligence to prevent
 A common carrier is not an absolute or minimize the loss before, during or
insurer of all risks of travel. after the act causing the loss,
deterioration or destruction of the goods
COVERAGE (Art. 1739)
1. Vigilance over goods (Arts. 1734-1754);
2. Safety of passengers (Arts. 1755-1763). a. Sole and proximate cause: absolute
PASSENGER b. Contributory: partial defense. (Art.
 A person who has entered into a contract 1741)
of carriage, express or implied, with the
carrier. They are entitled to extraordinary 4. CHARACTER OF THE GOODS OR DEFECTS
diligence from the common carrier. IN THE PACKING OR IN THE CONTAINER
 The following are not considered  Even if the damage should be caused by
passengers, and are entitled to ordinary the inherent defect/character of the goods,
diligence only: the common carrier must exercise due
a. One who has not yet boarded any diligence to forestall or lessen the loss. (Art.
part of a vehicle regardless of 1742)
whether or not he has purchased a  The carrier which, knowing the fact of
ticket; improper packing of the goods upon ordinary
b. One who remains on a carrier for an observation, still accepts the goods
unreasonable length of time after he notwithstanding such condition, is not
has been afforded every safe relieved of liability or loss or injury resulting
opportunity to alight; therefrom. (Southern Lines, Inc. v. CA, 4 SCRA
c. One who has boarded by fraud, 258)
stealth, or deceit;
d. One who attempts to board a 5. ORDER OR ACT OF PUBLIC AUTHORITY
moving vehicle, although he has a


 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)
San Beda College of Law

 Said public authority must have the power FOR ACTS OF

to issue the order (Art. 1743). Consequently, FOR ACTS OF ITS OTHER
where the officer acts without legal process, EMPLOYEES PASSENGERS OR
the common carrier will be held liable. STRANGERS
(Ganzon v. CA 161 SCRA 646) Required diligence and defense
 Diligence in the selection and supervision Extraordinary Ordinary diligence
of employees under Article 2180 of the Civil diligence
Code cannot be interposed as a defense by Nature of liability
the common carrier because the liability of
Tort; however, Not absolute; limited
the carriers arises from the breach of the
The employee must by Art. 1763
contract of carriage. The defense under said
be on duty at the
articles is applicable to negligence in quasi-
time of the act.
delicts under Art. 2176. (Del Prado v. Manila
(Maranan v. Perez)
Electric Co., 52 Phil 900)

LIABILITY OF A COMMON CARRIER FOR  The carrier is liable when its personnel
DEATH OR INJURIES TO PASSENGERS allowed a passenger to drive the vehicle
DUE TO ACTS OF ITS EMPLOYEES AND causing it to collide with another vehicle
OTHER PASSENGERS OR STRANGERS resulting to the injuries suffered by the other
passengers. (MRR vs. Ballesteros, 16 SCRA


1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or Death or injury to the passengers
deterioration of the goods
Duration of liability

From the time the goods are unconditionally The duty of a common carrier to provide safety
placed in the possession of, and received by the to its passengers so obligates it not only during
carrier for transportation until the same are the course of the trip, but for so long as the
delivered actually or constructively by the passengers are within its premises and where
carrier to the consignee or to the person who they ought to be in pursuance to the contract
has the right to receive them. (Art. 1736) of carriage. (LRTA v. Navidad, [2003])
 It remains in full force and effect even when  All persons who remain on the premises
they are temporarily unloaded or stored in within a reasonable time after leaving the
transit unless the shipper or owner has made conveyance are to be deemed passengers, and
use of the right of stoppage in transitu. (Art. what is a reasonable time or a reasonable delay
1737) within this rule is to be determined from all the
 It continues to be operative even during the circumstances, and includes a reasonable time
time the goods are stored in a warehouse of the to see after his baggage and prepare for his
carrier at the place of destination until the departure. (La Mallorca v. CA, 17 SCRA 739 ;
consignee has bee advised of the arrival of the Abiotiz Shipping Corporation v. CA, 179 SCRA
goods and has had reasonable opportunity 95)
thereafter to remove them or otherwise dispose  It is the duty of common carriers of
of them. (Art. 1738) passengers to stop their conveyances a
 Delivery of goods to the custom authorities is reasonable length of time in order to afford
not delivery to the consignee. (Lu Do v. passengers an opportunity to enter, and they
Binamira, 101 Phil 120) are liable for 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).


 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)
San Beda College of Law

Presumption of negligence

Art.1735 Civil Code Art.1755 Civil Code

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

1. Ordinary circumstance: Exercise of 1. Exercise of extraordinary diligence

extraordinary diligence (Art. 1735) (Art. 1756)
2. Special circumstances: 2. Caso fortuito
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
e. Order or act of competent public
authority (Art. 1734)
Valid stipulations

1. Reduction of degree of diligence to ordinary Stipulation limiting liability when a passenger is

diligence, provided it be: carried gratuitously, but not for willful acts or
a) In writing, signed by the shipper or gross negligence. (Art. 1758)
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.

 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
4. That the carrier shall exercise a degree of
diligence less than that of a good father of a Dispensing with or lessening the extraordinary
family over the movable transported; responsibility of a common carrier for the
5. That the carrier shall not be responsible safety of passengers imposed by law by
for the acts or omissions of his or its stipulation, by posting of notices, by


 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)
San Beda College of Law

employees; statements on tickets or otherwise. (Art. 1757)

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)


 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)
(HAND-CARRIED) CARRIER  However, the carrier cannot limit its
(CHECKED-IN) liability for injury to, or loss of, goods shipped
Legal nature of the baggage where such injury or loss was caused by its
Necessary deposit Considered as own negligence.
“goods” (Shewaram vs. PAL, 17 SCRA 606)
Required diligence by the common
Diligence of a Extraordinary AIRLINE CARRIERS
depositary (ordinary diligence 1. In case of flight diversion due to bad
diligence) weather or other circumstances beyond the
Applicable rules pilot’s control, the relation between the
Arts. 1998 and 2000- Arts. 1733-1753 carrier and the passenger continues until the
2003 latter has been landed at the port of
destination and has left the carrier’s
CONCURRING CAUSES OF ACTION premises. The carrier should necessarily
ARISING FROM THE NEGLIGENT ACT OF exercise extraordinary diligence in
THE COMMON CARRIER safeguarding the comfort, convenience and
1. Culpa contractual (breach of contract) safety of its stranded passengers until they
 Only the carrier is primarily liable and not have reached their final destination.
the driver, because there is no privity (Philippine Airlines vs. CA, 226 SCRA 423)
between the driver and the passenger. 2. Even where overbooking of passengers is
 Basis: Art.1759, NCC. allowed as a commercial practice, the airline
 No defense of due diligence in the company would still be guilty of bad faith and
selection and supervision of employees. still be liable for damages if it did not properly
inform passenger that it could breach the
2. Culpa aquiliana (quasi-delict) contract of carriage even if they were
 The carrier and driver are solidarily liable confirmed passengers. (Zalamea vs. CA, 228
as joint tortfeasors. SCRA 23)
3. An open-dated ticket constitutes a
 Basis: Art. 2180, NCC.
complete contract between the carrier and
 Defense of due diligence in the selection
passenger. Hence, the airline company is
and supervision of employees is available.
liable if it refused to confirm a passenger’s
Exception: maritime tort resulting in collision.
flight reservation. (Singson vs. CA, 282 SCRA
(See notes on Collision)
4. An airline company which issued a
3. Culpa criminal (criminal negligence)
confirmed ticket to a passenger covering
 The driver is primarily liable. The carrier is successive trips on different airlines can be
subsidiarily liable only if the driver is held liable for damages occasioned by
convicted and declared insolvent. “bumping off” by one of the successive
 Basis: Art. 100, RPC. airlines. (Lufthansa German Airlines vs. CA,
238 SCRA 290)
 In case of injury to a passenger due to the 5. An airline ticket providing that carriage by
negligence of the driver of the bus on which successive air carriers is to be regarded as a
he is riding and of the driver of another “single operation” is to make the issuing
vehicle, the drivers as well as the owners of carrier liable for the tortuous conduct of the
the two vehicles are jointly and severally other carrier. A printed provision in the ticket
liable for damages. It makes no difference limiting liability only to its own conduct is not
that the liability of the bus driver and owner enough to rebut that liability. (KLM Royal
springs from contract while that of the owner Dutch Airlines vs. CA, 65 SCRA 237)
and driver of the other vehicle arises from
quasi-delict. (Fabre vs. CA) II. CODE OF COMMERCE


1. One exempting the 1. One limiting the
1. Domestic land and water/maritime
carrier from any and liability of the carrier
transportation. (Pandect of Commercial Law
all liability for loss or to an agreed
and Jurisprudence, Justice Jose Vitug, 1997
damage occasioned by valuation, unless the
its own negligence. shipper declares a
2. Domestic Air Transportation. (Commercial
2. An unqualified higher value and
Law Review, Cesar Villanueva, 2004 ed.)
limitation of liability to pays a higher rate of
an agreed valuation. freight
(H.E. Heacock
1. Bill of lading
Company vs.
2. Obligations of the carrier
3. Right of abandonment any defect in the goods.
4. Notice of damage 6. Foul – One which contains a notation
5. Combined carrier agreement thereon indicating that the goods
covered by it are in bad condition.
 The written acknowledgment of receipt of 7. Spent – One which covers goods that
goods and agreement to transport them to a already have been delivered by the
specific place to a person named or to his carrier without a surrender of a signed
order. copy of the bill.
 Rules:
1. It is not indispensable for the creation of a
8. Through – One issued by the carrier
who is obliged to use the facilities of
contract of carriage. (Compania Maritima vs.
other carriers as well as his own
Insurance Company of North America, 12
facilities for the purpose of
SCRA 213)
transporting the goods from the city of
the seller to the city of the buyer,
2. Ambiguity is construed against the carrier,
which bill of lading is honored by the
the contract being one of adhesion.
second and other interested carriers
who do not issue their own bills.
3. The consignee, although the instrument is
oftentimes drawn up only by the consignor 9. Custody – One wherein the goods
and carrier, becomes bound by all the are already received by the carrier but
stipulations contained therein by making a the vessel indicated therein has not
claim for loss on the basis of said bill of yet arrived in the port.
lading. (Sea-Land Services Inc. vs. IAC) 10. Port – One which is issued
by the carrier to whom the goods have
4. The right of a party to recover for loss of been delivered, and the vessel
shipment consigned to him under a bill of indicated in the bill of lading by which
lading drawn up only by and between the the goods are to be shipped is already
shipper and the carrier, springs from either a in the port where the goods are held
relation of agency between him and the for shipment.
shipper, or his status as stranger in whose  Functions:
favor some stipulation is made in said 1. Best evidence of
contract, and who becomes a party thereto the existence of the contract of
when he demands fulfillment of that carriage of cargo (Art. 353)
stipulation. (Art. 1311 (2), (Mendoza vs. PAL 2. Document of
Inc.) title
3. Receipt of cargo
5. Acceptance of the bill of lading without 4. Contract to
dissent raises the presumption that all the transport and deliver goods as
terms therein where brought to the stipulated
knowledge of the shipper and agreed to by 5. Symbol of the
him and, in the absence of fraud or mistake; goods
he is estopped from thereafter denying that
he assented to such terms. (Notes and Cases OBLIGATIONS OF THE CARRIER
on the Law on Transportation and Public A. Duty to accept the goods
Utilities, Aquino, T. & Hernando, R.P. 2004 ed.
GENERAL RULE: A common carrier cannot
ordinarily refuse to carry a particular class of
 Kinds:
EXCEPTION: For some sufficient reason the
1. On board - issued when the goods discrimination against the traffic in such
have been actually placed aboard the goods is reasonable and necessary. (Fisher
ship with very reasonable expectation vs. Yangco Steamship Co. 31 Phil 1).
that the shipment is as good as on its  Instances when the carrier may validly
way. refuse to accept the goods include the ff:
2. Received - one in which it is stated 1.) Goods sought to be transported are
that the goods have been received for dangerous objects, or substances including
shipment with or without specifying dynamite and other explosives
the vessel by which the goods are to 2.) Goods are unfit for transportation
be shipped. 3.) Acceptance would result in overloading
3. Negotiable - one in which it is stated 4.) Contrabands or illegal goods
that the goods referred to therein will 5.) Goods are injurious to health
be delivered to the bearer or to the 6.) Goods will be exposed to untoward danger
order of any person named therein. like flood, capture by enemies and the like
4. Non-negotiable - One in which it is 7.) Goods like livestock will be exposed to
stated that the goods referred to
8.) Strike
therein will be delivered to a specified
9.) Failure to tender goods on time. (Notes
and Cases on the Law on Transportation and
5. Clean – One which does not indicate
Public Utilities, Aquino, T. & Hernando, R.P. destined (Art.
2004 ed. p.68) 365); and
 In case of carriage by railway, the carrier is 3. In case of delay
exempted from liability if carriage is insisted through the fault
upon by the shipper, provided its objections of the carrier
are stated in the bill of lading. (Art. 371).
 However, when a common carrier accepts
cargo for shipment for valuable consideration, NOTICE OF DAMAGE (ART. 366)
it takes the risk of delivering it in good  Requisites for applicability:
condition as when it was loaded. (PAL vs. CA) 1. Domestic/inter-
island/coastwise transportation
B. Duty to deliver the goods 2. Land/water/air
 Not only to transport the goods safely but transportation
to the person indicated in the bill of lading. 3. Carriage of
The goods should be delivered to the goods
consignee or any other person to whom the 4. Goods shipped
bill of lading was validly transferred or are damaged
negotiated.  Rules:
a. Patent damage: shipper must file a claim
Time of delivery against the carrier immediately upon
Stipulated in No stipulation delivery (it may be oral or written)
Contract/Bill of b. Latent damage: shipper should file a claim
Lading against the carrier within 24 hours from
1. Carrier is bound to 1. Within a delivery.
fulfill the contract reasonable time. Note: These rules does not apply to
and is liable for any 2. Carrier is bound to misdelivery of goods. (Roldan vs. Lim Ponzo)
delay; no matter forward them in the Purpose of notice: To inform the carrier that
from what cause it 1st shipment of the the shipment has been damaged, and it is
may have arisen. same or similar charged with liability therefore, and to give it
goods which he may an opportunity to make an investigation and
make to the point of fix responsibility while the matter is fresh.
delivery. (ART. 358  The filing of notice of claim is a condition
Code of Commerce) precedent for recovery.
 Shorter period may be stipulated by the
Effects of delay parties because it merely affects the
a. Merely suspends and shipper’s remedy and does not affect the
generally does not liability of the carrier. (PHILAMGEN vs.
terminate the contract of Sweetlines, Inc.)
carriage Prescriptive Period
b. Carrier remains duty bound  Not provided by Article 366. Thus, in such
to exercise extraordinary absence, Civil Code rules on prescription
diligence apply.
c. Natural disaster shall not  If despite the notice of claim, the carrier
free the carrier from refuses to pay, action must be filed in court.
responsibility (Art.1740) 1. No bill of lading was issued:
d. If delay is without just within 6 years
cause, the contract limiting
the common carrier’s 2. Bill of lading was issued:
liability cannot be availed of within 10 years.
in case of loss or ARTICLE 366 COGSA Sec.3 (6)
deterioration of the goods Applicability
(Art.1747) 1. Domest 1. Internationa
ic/inter- l/
RIGHT OF CONSIGNEE TO ABANDON island/co overseas/foreign
GOODS astwise (from foreign
 Instances: transpor country to Phils.)
1. Partial non- tation Note: subject to the
delivery, where 2. Land, rule on Paramount
the goods are water, Clause
useless without air 2. Water/maritime
the others (Art. transpor transportation
363); tation 3. Carriage of goods
2. Goods are 3. Carriag
rendered useless e of
for sale or goods
consumption for Notice of damage
the purposes for 1. 1.
which they are C Not
2. 2. the actual value of the vessel and the freight
2 3- money; and 2) the right to retain the cargo
and embargo and detention of the vessel
Prescriptive period (Luzon Stevedoring Corp v. CA, 156 SCRA
None provided; Civil One year from the 169);
Code applies. date of delivery 2. Hypothecary - the liability of the owner of
(delivered but the value of the vessel is limited to the vessel
damaged goods), or itself (Doctrine of Limited Liability).
date when the
vessel left port or  The real and hypothecary nature of
from the date of maritime law simply means that the liability
delivery to the of the carrier in connection with losses
arrastre (non- related to maritime contracts is confined to
delivery or loss). the vessel, which stands as the guaranty for
their settlement. (Aboitiz Shipping Corp. vs.
COMBINED CARRIER AGREEMENT (ART. General Accident Fire and Life Assurance
373) Corp. 217 SCRA 359).
GENERAL RULE: In case of a contract of
transportation of several legs, each carrier is
responsible for its particular leg in the  Vessel engaged in maritime commerce,
contract. whether foreign or otherwise. (Bar Review
Materials in Commercial Law, Jorge Miravite,
EXCEPTION: A combined carrier agreement
2002 ed.)
where a carrier makes itself liable assuming
the obligations and acquiring as well the  Constitutes property which may be
rights and causes of action of those which acquired and transferred by any of the means
preceded it. recognized by law. They shall continue to be
considered as personal property. (Arts. 573,
A. MARITIME COMMERCE  They are susceptible to maritime liens such
(Arts. 573-869) as for the repair, equipping and provisioning
of the vessel in the preparation of a voyage,
IMPORTANT CONCEPTS: as well as mortgage liabilities, in satisfaction
1. Merchant vessel of which a vessel may be validly arrested and
2. Maritime lien and Preference of sold. (Ship Mortgage Decree of 1978)
3. Doctrine of limited liability MARITIME LIEN
4. Causes of revocation of voyage  It constitutes a present right of property in
5. Participants in maritime commerce the ship, a jus in re, to be afterward enforced
6. Charter party in admiralty by process in rem. (PNB vs. CA,
7. Loans on bottomry and respondentia 337 SCRA 381)
8. Accidents in maritime commerce  If the maritime lien arose prior to the
recording of a preferred mortgage, it shall
MARITIME/ADMIRALTY LAW have priority over the said mortgage lien.
 It is the system of laws which particularly (PNB vs. CA, 337 SCRA 381)
relates to the affairs and business of the sea,
to ships, their crews and navigation, and to
maritime conveyance of persons and ORDER OF PREFERENCE IN CASE OF SALE
property. (Notes and Cases on the Law on OF VESSEL
Transportation and Public Utilities, Aquino &
Hernando, citing Francisco, p.254) R.A. 6106 P.D. 1521
Effectivity date
 Maritime laws apply only to maritime trade 1969 1978
and sea voyages. (Pandect of Commercial Applicability
Law and Jurisprudence, Justice Jose Vitug, Overseas shipping Both domestic and
1997 ed.) only overseas shipping
Kind of sale
 Arrastre service is not maritime in Judicial Judicial and
character. It refers to a contract for the extrajudicial
unloading of goods from a vessel. (ICTSI vs. Order of Preference
Prudential Guarantee, 320 SCRA 244) A preferred The preferred
mortgage shall have mortgage lien shall
CHARACTERISTICS OF MARITIME priority over all have priority over all
TRANSACTION claims against the claims against the
1. Real - similar to transactions over real vessel, except the vessel, except the
property with respect to effectivity against following following
third persons which is done through preferences in the preferences in the
registration. (Rubiso vs. Rivera, 37 Phil. 72). order stated: order stated:
The evidence of real nature is shown by: 1) 1. Judicial costs of 1. Expenses and
the limitation of the liability of the agents to the proceedings; fees allowed and
2. Taxes due the costs taxed by the 3. The vessel is insured (Vasquez vs. CA
Philippine court and taxes due 138 SCRA 553).
Government; to the Government; 4. Expenses for repair on vessel completed
3. Salaries and 2. Crew’s wages; before loss;
wages of the 3. General average;
Captain and Crew of 4. Salvage, including 5. In case there is no total loss and the
the vessel during its contract salvage; vessel is not abandoned;
last voyage; 5. Maritime liens 6. Collision between two negligent vessels;
4. General average arising prior in time
or salvage including to the recording of  Abandonment of the vessel is necessary to
contract salvage, the preferred limit the liability of the shipowner. The only
bottomry loans, and mortgage; instance were abandonment is dispensed
indemnity due 6. Damages arising with is when the vessel is entirely lost (Luzon
shippers for the out of tort; and Stevedoring vs. CA 156 SCRA 169).
value of goods 7. Preferred
transported but mortgage registered RIGHT OF SHIPOWNER OR SHIP AGENT
which were not prior in time. TO ABANDON VESSEL
delivered to the  Instances:
consignee; 1. In case of civil liability from
5. Costs of repair indemnities to third persons (Art.
and equipment of 587);
the vessel, and 2. In case of leakage of at least ¾ of
provisioning of food, the contents of a cargo containing
supplies and fuel liquids (Art. 687); and
during its last 3. In case of constructive loss of the
voyage; and vessel (Sec. 138, Insurance Code).
6. Preferred
registered prior in
 Effect of sale: All pre-existing claims in the What may be abandoned
vessel are terminated. They will then be Vessel Goods shipped
satisfied from the proceeds of the sale Instances
subject to the order of preference. 1. In case of civil 1. Partial non-
liability from delivery, where the
DOCTRINE OF LIMITED LIABILITY indemnities to third goods are useless
(HYPOTHECARY RULE) persons (Art. 587); without the others
 Cases where applicable: 2. Sec. 138, (Art. 363);
1. Art. 587 – civil Insurance Code; 2. Goods are
liability for indemnities to third 3. In case of leakage rendered useless for
persons of at least ¾ of the sale or consumption
contents of a cargo for the purposes for
2. Art. 590 –
containing liquids which they are
indemnities from negligent acts of
(Art. 687) properly destined
the captain (not the shipowner or
(Art. 365); and
ship agent)
3. In case of delay
3. Art. 837 –
through the fault of
the carrier (Art.
4. Art. 643 –
liability for wages of the captain and
the crew and for advances made by
1. Transfer of 1. Transfer
the ship agent if the vessel is lost by
ownership of of
shipwreck or capture
the vessel ownersh
from the ip on
GENERAL RULE: The liability of shipowner
shipowner to the
and ship agent is limited to the amount of
the shippers goods
interest in said vessel such that where vessel
or insurer. from
is entirely lost, the obligation is extinguished.
2. In case of the
(Luzon Stevedoring v. Escano, 156 SCRA 169)
(2), the shipper
The interest extends to: 1) the vessel itself; 2)
insurer must to the
equipments; 3) freightage; and 4) insurance
pay the carrier.
proceeds. (Chua v. IAC, 166 SCRA 183)
insured as if 2. Carrier
EXCEPTIONS: there was should
1. Claims under Workmen’s Compensation actual total pay the
(Abueg vs. San Diego 77 Phil 730); loss of the shipper
2. Injury or damage due to shipowner or to vessel. the
the concurring negligence of the market
shipowner and the captain; value of
the Civil Liabilities of the Shipowner And
goods Ship Agent
at the 1. All contracts of the captain, whether
point of authorized or not, to repair, equip and
destinat provision the vessel; (Art. 586)
ion. 2. Loss and damage to the goods loaded on
the vessel without prejudice to their right
CAUSES OF REVOCATION OF VOYAGE to free themselves from liability by
1. War or interdiction of commerce; abandoning the vessel to the creditors.
2. Blockade; (Art. 587)
3. Prohibition to receive cargo at
destination; Duty of Ship Agent to Discharge the
4. Embargo; Captain and Members of the Crew
5. Inability of the vessel to navigate. (Art.  If the seamen contract is not for a definite
640) period or voyage, he may discharge them at
his discretion. (Art. 603)
Terms:  If for a definite period, he may not
1. Interdiction of discharge them until after the fulfillment of
commerce – A governmental prohibition their contracts, except on the following
of commercial intercourse intended to grounds:
bring about an entire cessation for the a. Insubordination in serious matters;
time being of all trade whatever. b. Robbery;
2. Blockade – A c. Theft;
sort of circumvallation of a place by d. Habitual drunkenness;
which all foreign connection and e. Damage caused to the vessel or to its
correspondence is, as far as human cargo through malice or manifest or
power can effect it, to be cut off. proven negligence. (Art. 605)
3. Embargo – A
proclamation or order of a state, usually B. CAPTAINS AND MASTERS
issued in time of war or threatened  They are the chiefs or commanders of
hostilities, prohibiting the departure of ships.
ships or goods from some or all the ports
 The terms have the same meaning, but are
of such state until further order.
particularly used in accordance with the size
of the vessel governed and the scope of
transportation, i.e., large and overseas, and
A. Shipowners and ship agents
small and coastwise, respectively.
B. Captains and masters of the vessel
 Nature of position (3-fold character):
C. Officers and crew of the vessel
1. General agent of the
D. Supercargoes
E. Pilot
2. Technical director of the
3. Representative of the
Shipowner (proprietario)
government of the country under
 Person who has possession, control and
whose flag he navigates.
management of the vessel and the
 Qualifications:
consequent right to direct her navigation and
1. Filipino citizen;
receive freight earned and paid, while his
2. Legal capacity to contract;
possession continues.
3. Must have passed the
required physical and mental
Ship agent (naviero)
examinations required for licensing
 Person entrusted with provisioning and
him as such. (Art. 609)
representing the vessel in the port in which it
 Inherent powers:
may be found; also includes the shipowner.
1. Appoint crew in the
 Not a mere agent under civil law; he is
absence of ship agent;
solidarily liable with the ship owner.
2. Command the crew and
 Powers and functions: direct the vessel to its port of
1. Capacity to trade; destination;
2. Discharge duties of the captain, subject 3. Impose correctional
to Art.609; punishment on those who, while on
3. Contract in the name of the owners with board vessel, fail to comply with his
respect to repairs, details of equipment, orders or are wanting in discipline;
armament, provisions of food and fuel, 4. Make contracts for the
and freight of the vessel, and all that charter of vessel in the absence of
relate to the requirements of navigation; ship agent.
4. Order a new voyage, make a new charter 5. Supply, equip, and provision
or insure the vessel after obtaining the vessel; and
authorization from the shipowner or if 6. Order repair of vessel to
granted in certificate of appointment. enable it to continue its voyage. (Art.
 Sources of funds to comply with the 2. Thefts and robberies of the
inherent powers of the captain (in successive crew;
order): 3. Losses and fines for
1. From the consignee of the violation of laws;
vessel; 4. Damages due to mutinies;
2. From the consignee of the 5. Damages due to misuse of
cargo; power;
3. By drawing on the ship 6. For deviations;
agent; 7. For arrivals under stress;
4. By a loan on bottomry; 8. Damages due to non-
5. By sale of part of the cargo. observance of marine regulations.
(Art. 611) (Art. 618)
 Duties:
1. Bring on board the proper C. OFFICERS AND CREW
certificate and documents and a 1. Sailing Mate/First Mate
copy of the Code of Commerce; 2. Second Mate
2. Keep a Log Book, 3. Engineers
Accounting Book and Freight Book; 4. Crew
3. Examine the ship before the  No liability under the following
voyage; circumstances:
4. Stay on board during the 1. If, before beginning voyage, captain
loading and unloading of the cargo; attempts to change it, or a naval war
5. Be on deck while leaving or with the power to which the vessel was
entering the port; destined occurs;
6. Protest arrivals under stress 2. If a disease breaks out and be officially
and in case of shipwreck; declared an epidemic in the port of
7. Follow instructions of and destination;
render an accounting to the ship 3. If the vessel should change owner or
agent; captain. (Art. 647)
8. Leave the vessel last in
case of wreck; Sailing Mate/First Mate
9. Hold in custody properties  Second chief of the vessel who takes the
left by deceased passengers and place of the captain in case of absence,
crew members; sickness, or death and shall assume all of his
10. Comply with the duties, powers and responsibilities. (Art. 627)
requirements of customs, health,  Duties:
etc. at the port of arrival; 1. Provide himself with maps
11. Observe rules to avoid and charts with astronomical tables
collision; necessary for the discharge of his
12. Demand a pilot while duties;
entering or leaving a port. (Art. 612) 2. Keep the Binnacle Book;
3. Change the course of the
 A ship’s captain must be accorded a voyage on consultation with the
reasonable measure of discretionary captain and the officers of the boat,
authority to decide what the safety of the following the decision of the captain
ship and of its crew and cargo specifically in case of disagreement;
requires on a stipulated ocean voyage (Inter- 4. Responsible for all the
Orient Maritime Enterprises Inc. vs. CA). damages caused to the vessel and
the cargo by reason of his
 No liability for the following: negligence. (Arts. 628 - 631)
1. Damages caused to the
vessel or to the cargo by force Second Mate
majeure;  Takes command of the vessel in case of
2. Obligations contracted for the inability or disqualification of the captain
the repair, equipment, and and the sailing mate, assuming in such case
provisioning of the vessel unless he their powers and responsibilities.
has expressly bound himself  Third in command
personally or has signed a bill of  Duties:
exchange or promissory note in his 1. Preserve the hull and
name. (Art. 620) rigging of the vessel;
2. Arrange well the cargo;
Solidary Liabilities of the Ship 3. Discipline the crew;
Agent/Shipowner for Acts Done by the 4. Assign work to crew
Captain towards Passengers and members;
Cargoes 5. Inventory the rigging and
1. Damages to vessel and to equipment of the vessel, if laid up.
cargo due to lack of skill and (Art. 632)
 Officers of the vessel but have no authority  Does not include the passengers or the
except in matters referring to the motor persons whom the vessel is transporting.
apparatus. When two or more are hired, one
of them shall be the chief engineer. D. SUPERCARGOES
 Duties:  Persons who discharges administrative
1. In charge of the motor duties assigned to him by ship agent or
apparatus, spare parts, and other shippers, keeping an account and record of
instruments pertaining to the transaction as required in the accounting
engines; book of the captain. (Art. 649)
2. Keep the engines and
boilers in good condition; E. PILOT
3. Not to change or repair the  A person duly qualified, and licensed, to
engine without authority of the conduct a vessel into or out of ports, or in
captain; certain waters.
4. Inform the captain of any  The term generally connotes a person
damage to the motor apparatus; taken on board at a particular place for the
5. Keep an Engine Book; purpose of conducting a ship through a river,
6. Supervise all personnel road or channel, or from a port.
maintaining the engine. (Art. 632)  Master pro hac vice for the time being in
the command and navigation of the ship.
Crew  While in exercising his functions a pilot is in
 The aggregate of seamen who man a ship, sole command of the ship and supersedes the
or the ship’s company. master for the time being in the command
 Hired by the ship agent, where he is and navigation of the ship, the master does
present and in his absence, the captain hires not surrender his vessel to the pilot and the
them, preferring Filipinos, and in their pilot is not the master. There are occasions
absence, he may take in foreigners, but not when the master may and should interfere
exceeding 1/5 of the crew. (Art. 634) and even displace the pilot, as when the pilot
is obviously incompetent or intoxicated (Far
Classes of Seaman’s Contracts Eastern Shipping Company vs. CA).
1. By the voyage;  Compulsory Pilotage – States possessing
2. By the month; and harbors have enacted laws or promulgated
3. By share of profits or freightage. rules requiring vessels approaching their
ports to take on board pilots licensed under
Just Causes for the Discharge of Seaman the local laws. (Notes and Cases on the Law
While Contract Subsists on Transportation and Public Utilities, Aquino,
1. Perpetration of a crime; T. & Hernando, R.P. 2004 ed. p. 518)
2. Repeated insubordination, want of
discipline; Liablity of Pilot
3. Repeated incapacity and negligence; GENERAL RULE: On compulsory pilotage
4. Habitual drunkenness; grounds, the Harbor Pilot is responsible for
5. Physical incapacity; damage to a vessel or to life or property due
6. Desertion. (Art. 637) to his negligence.
Rules in case of Death of a Seaman 1. Accident caused by force majeure or
 The seaman’s heirs are entitled to natural calamity provided the pilot exercised
payment as follows: prudence and extra diligence to prevent or
1. If death is natural: minimize damages.
a. compensation up to time of 2. Countermand or overrule by the master of
death if engaged on wage the vessel in which case the registered owner
b. if by voyage - half of of the vessel is liable. (Sec.11, Art.III PPA
amount if death occurs on voyage Admin Order 03-85)
out; and full, if on voyage in
c. if by shares - none, if before SPECIAL CONTRACTS OF MARITIME
departure; full, if after departure COMMERCE
2. if death is due to defense of vessel - full 1. Charter party
payment; 2. Bill of lading
3. if captured in defense of vessel - full 3. Contract of transportation of
payment; passengers on sea voyages
4. if captured due to carelessness - wages 4. Loan on bottomry
up to the date of the capture. (Art. 645) 5. Loan on respondentia
6. Marine insurance
Complement of the Vessel
 All persons on board, from the captain to CHARTER PARTY
the cabin boy, necessary for the  A contract by virtue of which the owner or
management, maneuvers, and service, thus agent binds himself to transport merchandise
including the crew, the sailing mates, or persons for a fixed price.
engineers, stokers and other employees on  A contract by which an entire ship, or some
board not having specific designations. principal part thereof is let/leased by the
owner to another person for a specified time accredit goods
or use. (Planters Products, Inc. vs. CA, 226 received from
SCRA 476) persons
 Parties: Consensual contract Real contract
1. Ship owner or ship agent
1. Bareboat or demise – The charterer (TIME OR VOYAGE
provides crew, food and fuel. The charterer is CHARTER)
liable as if he were the owner, except when Charterer becomes Owner remains liable
the cause arises from the unworthiness of the liable to others as carrier and must
vessel. The shipowner leases to the charterer caused by its answer for any
the whole vessel, transferring to the latter the negligence breach of duty
entire command, possession and consequent Charterer regarded Charterer is not
control over the vessel’s navigation, including as owner pro hac regarded as owner.
the master and the crew, who thereby vice for the voyage
become the charter’s servants. It transforms Owner of vessel The vessel owner
a common carrier into a private carrier. relinquishes retains possession,
 The charterer becomes the owner of possession, command and
the vessel pro hac vice, just for that one command and navigation of the ship
particular purpose only. Because the navigation to
charterer is treated as owner pro hac charterer
vice, the charterer assumes the Common carrier is Common carrier is
customary rights and liabilities of the converted to private not converted to a
shipowner to third persons and is held carrier. private carrier.
liable for the expense of the voyage and
the wages of the seamen.
2. Contract of Affreightment – A contract
whereby the owner of the vessel leases part PERSONS WHO MAY MAKE A CHARTER
or all of its space to haul goods for others. 1. Owner or owners of the vessel,
 The shipowner retains the possession, either in whole or in majority part,
command and navigation of the ship, the who have legal control and
charterer merely having use of the space possession of the vessel
in the vessel in return for his payment of
2. Charterer may subcharter entire
the charter hired.
vessel to 3rd person only if not
 Kinds: prohibited in original charter.
a. Time (Art.679)
charter – vessel is chartered for a 3. Ship agent if authorized by the
fixed period of time or duration of owner/s or given such power in the
voyage. certificate of appointment. (Art.598)
b. Voya 4. Captain in the absence of the ship
ge or trip charter – the vessel is agent or consignee and only if he
leased for one or series of voyages acts in accordance with the
usually for purposes of transporting instructions of the agent or owner
goods for charterer. and protects the latter’s interests.
If for a definite Charterer may REQUISITES OF A VALID CHARTER PARTY
period, lessee cannot rescind charter party 1. Consent of the contracting parties
give up the lease by by paying half of the 2. Existing vessel which should be
paying a portion of freightage agreed placed at the disposition of the
the amount agreed upon. shipper
upon. 3. Freight
If the leased property The new owner is not 4. Compliance with Art. 652 of the
is sold to one who compelled to respect Code of Commerce
knows of the the charter party so
existence of the long as he can load
lease, the new owner the vessel with his
must respect the own cargo. (Art. 689)
lease. Clauses Which May Be Included In a
Civil law concept Commercial law Charter Party
Jason clause Clause paramount
or paramount
An entire or complete More like a private
contract. receipt which the
captain gives to
A stipulation in a A clause in a charter cargo
charter party that in party providing that within
case of a maritime the COGSA shall the lay
accident for which apply, even though days
the shipowner is not the transportation is and
responsible by law, domestic, subject to extra
contract or the extent that any lay days
otherwise, the cargo term of the bill of allowed;
shippers, consignees lading is repugnant to 6. To
or owners shall the COGSA or place in
contribute with the applicable law, then a vessel
shipowner in general to the extent thereof in a
average. (Pandect of the provision of the conditio
Commercial Law and bill of lading is void. n to
Jurisprudence, Justice (Pandect of navigat
Jose Vitug, 1997 ed.) Commercial Law and e;
Jurisprudence, Justice 7. to bring
Jose Vitug, 1997 ed.) cargo to
port in
case of
war or
Rights and Obligations of Parties blockad
e. (Arts.
1. If the 1. To pay the
vessel agreed charter
is price; Rescission of a Charter Party
charter 2. To pay At At Fortuitous
ed freightage on charterer’s shipowner’s causes
wholly, unboarded cargo; request request (Art. 690)
not to 3. To pay losses to (Art 688) (Art. 689)
accept others for loading
cargo uncontracted cargo 1. By 1. If the extra 1. War or
from and illicit cargo; abandoning lay days interdiction
others; 4. To wait if the the charter terminate of commerce;
2. To vessel needs repair; and paying without the 2. Blockade;
observe 5. To pay half of the cargo being 3. Prohibition
represe expenses for freightage; placed to receive
nted deviation. (Arts. 679- 2. Error in alongside the cargo;
capacit 687) tonnage or vessel; 4. Embargo;
y; flag; 2. Sale by and
3. To 3. Failure to the owner of 5. Inability of
unload place the the vessel the vessel to
cargo vessel at the before navigate.
clandes charterer’s loading by
tinely disposal; the
placed 4. Return of charterer;
4. To the vessel
substitu due to
te pirates,
another enemies or
vessel if bad weather;
load is 5. Arrival at a
less port for
than 3/5 repairs.
capacit Terms:
y; 1. Primage - bonus
5. To to be paid to the captain after the
leave successful voyage.
the port 2. Demurrage – the
if the sum fixed in the charter party as a
charter remuneration to the owner of the ship for
er does the detention of his vessel beyond the
not number of days allowed by the charter
party for loading or unloading or for Shipowner or ship Only the owner of
sailing. agent. Outside of the cargo.
3. Deadfreight – the residence of the
the amount paid by or recoverable from owners - the
a charterer of a ship for the portion of the captain.
ship’s capacity the latter contracted for Common elements:
but failed to occupy. 1. Exposure of security to marine peril;
4. Lay Days - days 2. Obligation of the debtor conditioned
allowed to charter parties for loading and only upon safe arrival of the security at
unloading the cargo. the point of destination.
5. Extra Lay Days – Forms:
days which follow after the lay days have 1. Public instrument
elapsed. 2. Policy signed by the contracting parties
and the broker taking part therein
USUAL FORMS OF CONSUMMATING 3. Private instrument (Art. 720)
1. C.I.F. – cost, insurance and freight; 1. Kind, name and registry of the vessel;
2. F.O.B. - free on board; 2. Name, surname and domicile of the
3. F.A.S. - free alongside ship; and captain;
4. C. & F. - cost and freight. 3. Names, surnames and domiciles of the
borrower and the lender;
TRANSSHIPMENT OF GOODS 4. Amount of the loan and the premium
 The act of taking cargo out of one ship and stipulated;
loading it in another, or the transfer of goods 5. Time for repayment;
from the vessel stipulated in the contract of 6. Goods pledged to secure repayment;
affreightment to another vessel before the 7. Voyage during which the risk is run
place of destination named in the contract (Art.721)
has been reached, or the transfer for further
transportation from one ship or conveyance
to another.
 It is not dependent on the ownership of the
transporting ships or in the change of
carriers, but rather on the fact of actual Not subject to Usury Subject to Usury
physical transfer of cargo from one vessel to Law Law
 If done without legal excuse, however Liability of the Not subject to any
competent and safe the vessel into which the borrower is contingency
transfer is made, is a violation of contract and contingent on the (absolute liability)
infringement of right of shipper and subjects safe arrival of the
carrier to liability if freight is lost event by vessel or cargo at
cause otherwise excepted. (Magellan destination
Manufacturing vs. CA, 201 SCRA 102) The last lender is a The first lender is a
preferred creditor preferred creditor
 A real, unilateral, aleatory contract, by WHEN LOAN ON BOTTOMRY OR
virtue of which one person lends to another a RESPONDENTIA REGARDED AS SIMPLE
certain amount of money or goods on things LOAN
exposed to maritime risks, which amount, 1. Lender loaned an amount larger
with its earnings, is to be returned if the than the value of the object due to
things are safely transported, and which is fraudulent means employed by the
lost if the latter are lost. borrower. (ART.726)
2. Full amount of the loan is not used
for the cargo or given on the goods if
LOAN ON LOAN ON all of them could not have been
BOTTOMRY RESPONDENTIA loaded, the balance will be
Definition considered a simple loan. (ART.727)
Loan made by Loan taken on 3. If the effects on which the money is
shipowner or ship security of the cargo taken is not subjected to any risk.
agent guaranteed laden on a vessel, (ART.729)
by vessel itself and and repayable upon
repayable upon safe arrival of cargo Note: Under existing laws, the parties to a
arrival of vessel at at destination. (Art. loan, whether ordinary or maritime, may
destination. (Art. 719) agree on any rate of interest. (CB Circular
719) 905)

Who may contract

RESPONDENTIA  The person whose property has been saved
Indemnity is paid after Indemnity is paid must contribute to reimburse the damage
the loss has occurred in advance by caused or expense incurred if the situation
way of a loan constitutes general average.
In case of loss of the In case of loss of  Classes:
vessel due to a risk the vessel due to 1. Particular or Simple Average
insured against, the a marine peril, 2. Gross or General Average
obligation of the insurer the obligation of  Where both vessel and cargo are saved, it
becomes absolute the borrower to is general average; where only the vessel or
pay is only the cargo is saved, it is particular
extinguished average.
Consensual contract Real contract  Expenses incurred to refloat a vessel,
which accidentally ran aground, in order to
Hypothecary Nature of Bottomry/ continue its voyage, do not constitute general
Respondentia average. Not only is there absence of a
GENERAL RULE: The obligation of the marine peril, common safety factor, and
borrower to pay the loan is extinguished if the deliberateness. It is the safety of the
goods given as security are absolutely lost by property, and not the voyage, which
reason of an accident of the sea, during the constitutes the true foundation of general
voyage designated, and if it is proven that the average. (A. Magsaysay, Inc. vs. Agan,
goods were on board. G.R.No. L-6393, Jan. 31, 1955)
1. Loss due to inherent defect;
2. Loss due to the barratry on the part of PARTICULAR OR GROSS OR
the captain; SIMPLE GENERAL
3. Loss due to the fault or malice of the Definition
borrower; Damages or Damages or
4. The vessel was engaged in contraband; expenses caused to expenses
and the vessel or cargo deliberately caused
5. The cargo loaded on the vessel be that did not inure to in order to save the
different in from that agreed upon. the common benefit, vessel, its cargo or
and borne by both from real and
Concurrence of Marine Insurance and respective owners. known risk. (Art.
Loan on Bottomry/Respondentia (Art. 809) 811)
1. The insurable interest of the owner Requisites
of a ship hypothecated by bottomry 1. common
is only the excess of the value over danger;
the amount secured by bottomry. 2. deliberate
(Sec. 101, Insurance Code) sacrifice;
2. The value of what may be saved in 3. success;
case of shipwreck shall be divided 4. proper
between the lender and the insurer formalities and
in proportion to the interest of each legal steps.
one. (Art. 735) Liability
The owner of the All the persons
Note: If a vessel is hypothecated by bottomry goods which gave having an interest in
only the excess is insurable, since a loan on rise to the expense or the vessel and the
bottomry partakes of the nature likewise of suffered the damage cargo therein at the
an insurance coverage to the extent of the shall bear this time of the
loan accommodation. The same rule would average. (Art. 810) occurrence of the
apply to the hypothecation of the cargo by average shall
respondentia. (Pandect of Commercial Law contribute to satisfy
and Jurisprudence, Justice Jose Vitug, 1997 this average. (Art.
ed.) 812)
 The insurers
1. Averages lenders on bottomry
2. Arrival Under Stress and respondentia
3. Collision shall likewise
4. Shipwreck contribute.
Number of interests involved
 An extraordinary or accidental expense
Only one interest Several interests
incurred during the voyage in order to
involved involved
preserve the cargo, vessel or both, and all
Share in the damage or expense
damages or deterioration suffered by the
100% share In proportion to the
vessel from departure to the port of
value of the owner’s
destination, and to the cargo from the port of
property saved
loading to the port of consignment. (Art. 806)
Right to recover general average, but should the
No reimbursement There may be same be jettisoned, it would not be
reimbursement entitled to reimbursement because
Kinds (not exclusive) there is violation of the Y-A Rules.
Art. 809 Art. 811 3. If deck cargo is loaded with the
Procedure for recovery consent of the shipper on
1. Assembly and coastwise shipping, it must always
deliberation contribute to general average and
2. Resolution of the if jettisoned would be entitled to
captain reimbursement.
3. Entry of the  Reason: In domestic shipping, voyages are
resolution in the usually short and the seas are generally not
logbook rough. In overseas shipping, the vessel is
4. Detailed minutes exposed for many days to perils of the sea.
5. Delivery of the
maritime judicial Deck cargo is allowed Deck cargo is not
authority of the allowed
first port, within With shipper’s consent
24 hours from General average Particular average
arrival, Without shipper’s consent
6. Ratification by Captain is liable Captain is liable
captain under
814)  The arrival of a vessel at the nearest and
most convenient port instead of the port of
GOODS NOT COVERED BY GENERAL destination, if during the voyage the vessel
AVERAGE EVEN IF SACRIFICED cannot continue the trip to the port of
1. Goods carried on deck. (ART.855) destination.
2. Goods not recorded in the books or
records of the vessel. (ART.855 (2)) When When Who bears
3. Fuel for the vessel if there is more lawful unlawful expenses:
than sufficient fuel for the voyage.
(Rule IX, York-Antwerp Rule) The inability 1. Lack of The
to continue provision shipowner or
Jettison voyage is s due to ship agent is
 Act of throwing cargo overboard in order to due to lack negligenc liable in case
lighten the vessel. of provisions, e to carry of unlawful
 Order of goods to be cast overboard: well-founded accordin arrival under
1. Those which are on the fear of g to stress. But
deck, preferring the heaviest one seizure, usage they shall not
with the least utility and value; privateers, and be liable for
2. Those which are below the pirates, or customs; the damages
upper deck, beginning with the one accidents of 2. Risk of caused by
with greatest weight and smallest the sea enemy reason of a
value. (Art. 815) disabling it not well lawful arrival.
to navigate. known or (Art. 821)
 Jettisoned goods are not res nullius nor (Art. 819) manifest
deemed “abandoned” within the meaning of 3. Defect of
civil law so as to be the object of occupation vessel
by salvage. (Pandect of Commercial Law and due to
Jurisprudence, Justice Jose Vitug, 1997 ed.) improper
 In order that the jettisoned goods may be repair;
included in the gross or general average, the and
existence of the cargo on board should be 4. Malice,
proven by means of the bill of lading. (Art. negligenc
816) e, lack of
York-Antwerp (Y-A) Rules on or skill of
Determining Liability for Averages With captain.
Regard To Deck Cargo (Art. 820)
1. Deck cargo is allowed only in
domestic/coastwise/inter-island  It is the duty of the captain to continue the
shipping, and is prohibited in voyage without delay after the cause of the
international/overseas/foreign arrival under stress has ceased failing in such
shipping. duty renders him liable. However, in case the
2. If deck cargo is loaded with the cause has been risk of enemies, there must
consent of the shipper on overseas first be an assembly before departure. (Art.
trade, it must always contribute to 825)
 Steps:
1. Captain should determine during the Nautical Rules as to Sailing Vessel and
voyage if there is well founded fear Steamship
of seizure, privateers and other valid 1. Where a steamship and a sailing vessel
grounds; are approaching each other from
2. Captain shall assemble the officers opposite directions, or on intersecting
and summon the persons interested lines, the steamship from the moment
in the cargo who may attend the the sailing vessel is seen, shall watch
meeting but without a right to vote; with the highest diligence her course and
3. The officers shall determine and movements so as to be able to adopt
agree if there is well-founded reason such timely means of precaution as will
after examining the circumstances. necessarily prevent the two boats from
The captain shall have the deciding coming in contact.
vote; 2. The sailing vessel is required to keep her
4. The agreement shall be drafted and course unless the circumstances require
the proper minutes shall be signed otherwise.
and entered in the log book;
5. Objections and protests shall Zones of Time in the Collision of Vessels
likewise be entered in the minutes. 1. First zone – all time up to the moment
when risk of collision begins.
COLLISION  No rule is as yet applicable for none is
 Impact of two vessels both of which are necessary.
moving. 2. Second zone – time between moment
when risk of collision begins and moment
Allision it becomes a practical certainty.
 Impact between a moving vessel and a  It is in this period where conduct of the
stationary one. vessels is primordial. It is in this zone that
vessels must strictly observe nautical rules,
Nautical Rules to Determine Negligence unless a departure therefrom becomes
1. When two necessary to avoid imminent danger.
vessels are about to enter a port, the
farther one must allow the nearer to 3. Third zone – time when collision is certain
enter first; if they collide, the fault is and time of impact.
presumed to be imputable to the one  An error in this zone would no longer be
who arrived later, unless it can be proved legally consequential.
that there was no fault on its part.  Error in Extremis - sudden movement made
2. When two by a faultless vessel during the third zone of
vessels meet, the smaller should give the collision with another vessel which is at fault
right of way to the larger one. during the 2nd zone. Even if such sudden
3. A vessel leaving movement is wrong, no responsibility will fall
port should leave the way clear for on said faultless vessel. (Urrutia and Co. v.
another which may be entering the same Baco River Plantation Co., 26 PHIL 632)
4. The vessel which Cases Covered By Collision and Allision
leaves later is presumed to have collided 1. One vessel at fault
against one which has left earlier.  Vessel at fault is liable for damage caused
5. There is a to innocent vessel as well as damages
presumption against the vessel which suffered by the owners of cargo of both
sets sail in the night. vessels. (Art. 826)
6. There is a 2. Both vessels at fault
presumption against the vessel with  Each vessel must bear its own loss, but the
spread sails which collides with another shippers of both vessels may go against the
which is at anchor and cannot move, shipowners who will be solidarily liable. (Art.
even when the crew of the latter has 827)
received word to lift anchor, when there 3. Vessel at fault not known
was not sufficient time to do so or there
 Each vessel must bear its own loss, but the
was fear of a greater damage or other
shippers of both vessels may go against the
legitimate reason.
shipowners who will be solidarily liable. (Art.
7. There is a
presumption against an improperly
moored vessel.  Doctrine of Inscrutable Fault – In case
8. There is a of collision where it cannot be
presumption against a vessel which has determined which between the two
no buoys to indicate the location of its vessels was at fault, both vessels bear
anchors to prevent damage to vessels their respective damage, but both should
which may approach it. be solidarily liable for damage to the
9. Vessels must cargo of both vessels.
have “proper look-outs” or persons 4. Third vessel at fault
trained as such and who have no other  The third vessel will be liable for losses and
duty aside therefrom. (Smith Bell v. CA) damages. (Art. 831)
5. Fortuitous event/force majeure vessel may demand indemnity from said
 No liability. Each bears its own loss. (Art. captain. (Art. 841)
830)  The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
 The doctrine of res ipsa loquitur applies in
case a moving vessel strikes a stationary SPECIAL CONCEPTS
object, such as a bridge post, dock, or ARRASTRE SERVICE
navigational aid. (Far Eastern Shipping v. CA,  A contract for the unloading of goods from
Luzon Stevedoring vs. CA) a vessel.
 Applicability: Overseas trade only.
 Even if the cause of action against the (Commercial Law Review, C. Villanueva, 2004
common carrier is based on quasi-delict, the ed.)
defense of due diligence in the selection and  Significance: When a person brings in
supervision of employees is unavailing in cargo from abroad, he cannot unload and
case of a maritime tort resulting in collision. It deliver the cargo by himself. The unloading
is not a civil tort governed by the Civil Code must be done by the arrastre operator, which
but a maritime one governed by Arts. 826- will then deliver the cargo to the importer.
839 of the Code of Commerce. (Manila (Commercial Law Review, C. Villanueva, 2004
Steamship vs. Insa Abdulhaman) ed.)
 Nature of business: It is a public utility,
 Doctrine of Last Clear Chance and Rule on discharging functions which are heavily
Contributory Negligence cannot be applied in invested with public interest.
collision cases because of Art.827 of the Code  Liability:
of Commerce. (Notes and Cases on the Law 1. Similar to a warehouseman (Lua Kian v.
on Transportation and Public Utilities, Aquino, Manila Railroad)
T. & Hernando, R.P. 2004 ed.) 2. Similar to a common carrier (Northern
Motors v. Prince Line)
MARITIME PROTEST 3. Solidary liability with the common carrier
 Condition precedent or prerequisite to
recovery of damages arising from collisions Note: In order that the arrastre operator may
and other maritime accidents. be held liable, the consignee must prove that
 It is a written statement made under oath the damage was due to the negligence and
by the captain of a vessel after the while the goods are in the custody of the
occurrence of an accident or disaster in which arrastre operator. (Hartford Fire Insurance v.
the vessel or cargo is lost or damaged, with E. Razon, Inc.)
respect to the circumstances attending such
occurrence, for the purpose of recovering STEVEDORING SERVICE
losses and damages.  The carriage of goods from the warehouse
 Excuses for not filing protest: 1) where the or pier to the holds of the vessel. (Chief of
interested person is not on board the vessel; Staff vs. CIR)
and 2) on collision time, need not be  As understood in the port business, the
protested. (Art. 836) term consists of the handling of cargo from
 Cases applicable: the hold of the ship to the dock, in case of
1. Collision (Art. 835); pier-side unloading; or to a barge, in case of
2. Arrival under stress (Art. 612(8)); unloading at sea. (Anglo-Fil Trading Corp. vs.
3. Shipwrecks (Arts. 612(15), 843); Lazaro)
4. Where the  The loading on the ship of outgoing cargo
vessel has gone through a hurricane is also part of stevedoring work. (Ibid.)
or when the captain believes that
the cargo has suffered damages or CONTAINERIZATION/ “SAID-TO-
averages (Art. 624). CONTAIN”/ “SHIPPER’S LOAD AND
 Who makes: Captain COUNT” SYSTEM
 When made: within 24 hours from the time  System whereby the shipper loads his
the collision took place. cargoes in a specially designed container,
 Before whom made: competent authority seals the container and delivers it to the
at the point of collision or at the first port of carrier for transportation. The carrier does not
arrival, if in the Philippines and to the participate in the counting of the
Philippine consul, if the collision took place merchandise for loading into the container,
abroad. (Art. 835) the actual loading, and the sealing of the
container. (US Lines v. Comm. Of Customs,
SHIPWRECK ICTSI v. Prudential Guarantee)
 It is the loss of the vessel at sea as a  The matter of quantity, description and
consequence of its grounding, or running conditions of the cargo inside the container is
against an object in sea or on the coast. It the sole responsibility of the shipper, unless
occurs when the vessel sustains injuries due there is stipulation to the contrary. (US Lines
to a marine peril rendering her incapable of vs. Comm. Of Customs, Reyma Brokerage v.
navigation. Phil. Home Assurance)
 If the wreck was due to malice, negligence
or lack of skill of the captain, the owner of the Note: In order to attribute to the carrier any
damage to the shipment that may be found, from delay or late delivery (Mitsui O.S.K. Lines
inspection of the goods should be done at Ltd. vs. CA). In such instance the, Civil Code
pier-side. (Bankers vs. CA) rules on prescription shall apply.

III. CARRIAGE OF GOODS BY SEA  The one-year prescriptive period is

ACT/COGSA (C.A. No. 65) suspended by:
1. The express
APPLICABILITY agreement of the parties (Universal
 The transportation must be: Shipping Lines, Inc. vs. IAC, 188
1. Water/maritime SCRA 170)
transportation; 2. The filing of
2. for the carriage an action in court until it is
of goods; and dismissed. (Stevens & Co. vs.
3. overseas/interna Nordeutscher Lloyd, 6 SCRA 180)
tional/foreign (from foreign port to
Philippine port).  The one-year period shall run from delivery
 It can be applied in domestic sea of the last package and is not suspended by
transportation if agreed upon by the parties. extrajudicial demand. (Dole Phils.,Inc. vs.
(Clause paramount or paramount clause) Maritime Co.,148 SCRA 118)

IMPORTANT FEATURES:  The one-year period shall run from delivery

1. Amount of to the arrastre operator and not to the
carrier’s liability consignee. (Union Carbide Phils, Inc. vs.
2. Notice of Manila Railroad Co.,SCRA 359)
3. Prescriptive  The insurer exercising its right of
period subrogation is bound by the one-year
prescriptive period. However, it does not
AMOUNT OF CARRIER’S LIABILITY apply to the claim against the insurer for the
 Under the Sec. 4(5), the liability limit is set insurance proceeds. (Fil. Merchants Ins. Co.
at $500 per package or customary freight unit vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)
unless the nature and value of such goods is
declared by the shipper. This is deemed IV. WARSAW CONVENTION OF 1929 (WC)
incorporated in the bill of lading even if not
mentioned in it. (Eastern Shipping vs. IAC, PURPOSE: To protect the emerging air
150 SCRA 463) transportation industry and to secure the
 Note that Art. 1749, NCC applies to uniformity of recovery by the passengers.
domestic/inter-island/coastwise trade. APPLICABILITY
 The transportation must be:
NOTICE OF DAMAGE (SEC. 3(6)) 1. International transportation;
 Rules: 2. Air transportation; and
a. Patent damage: shipper should file a 3. Carriage of passengers, baggage or
claim with the carrier immediately upon goods.
delivery  The WC shall also apply to fortuitous
b. Latent damage: shipper should file a transportation by aircraft performed by an air
claim with the carrier within three days transportation enterprise.
from delivery.
 International transportation - any
Note: The filing of a notice of claim is not a transportation in which the place of departure
condition precedent. and the place of destination are situated
PRESCRIPTIVE PERIOD 1. Within the territories of two High
 Action for loss or damage to the cargo Contracting Parties regardless of whether
should be brought within one year after: or not there be a break in the
a. Delivery of the goods transportation or transshipment, or
(delivered but damaged goods); or 2. Within the territory of a single High
b. The date when the goods Contracting Party, if there is an agreed
should have been delivered (non- stopping place within a territory subject
delivery). (Sec. 3[6]) to the sovereignty, mandate or authority
of another power, even though that
 “Loss or Damage” as applied to the COGSA power is not a party to the Convention.
contemplates a situation where no delivery at (“round trip”, Am. Jur.)
all was made by the shipper of the goods
because the same had perished, gone out of  Transportation to be performed by several
commerce, or disappeared in such a way that successive air carriers shall be deemed to be
their existence is unknown or they cannot be one undivided transportation, if it has been
recovered. Thus, it is inapplicable in case of regarded by the parties as a single operation,
misdelivery or conversion. (Ang vs. American whether it has been agreed upon under the
Steamship Agencies Inc.) and damage arising form of a single contract or of a series of
contracts, and it shall not lose its 2. Checked-in baggage
international character merely because one GENERAL RULE: $20 per kilogram
contract or a series of contracts is to be EXCEPTION: In case of special declaration of
performed entirely within a territory subject value and payment of a supplementary sum
to the sovereignty, suzerainty, mandate, or by consignor, carrier is liable to not more
authority of the same High Contracting Party. than the declared sum unless it proves the
(Art. 1 Sec.3) sum is greater than actual value.
3. Hand-carried baggage
WHEN INAPPLICABLE  $1000/passenger
1. When public policy is contradicted; 4. Goods to be shipped
2. If the requirements under the GENERAL RULE: $20 per kilogram
Convention are not complied with. EXCEPTION: In case of special declaration of
value and payment of a supplementary sum
IMPORTANT CONCEPTS: by consignor, carrier is liable to not more
1. Transportation documents than the declared sum unless it proves the
a. Passenger ticket sum is greater than actual value.
b. Baggage check
c. Air way bill
 An agreement relieving the carrier from
2. Liability of the carrier for damages
liability or fixing a lower limit is null and void.
a. Death or injury to
(Art. 23)
b. Loss or damage to baggage  Carrier is not entitled to the foregoing limit
or goods if the damage is caused by willful misconduct
c. Delay or default on its part. (Art. 25)
3. Successive carrier agreement
4. Jurisdiction  Thus, the WC does not operate as an
5. Combined transportation agreement exclusive enumeration of the instances of an
absolute limit of the extent of liability. It does
PASSENGER BAGGAGE AIR not preclude the application of the Civil Code
TICKET CHECK WAYBILL and other pertinent local laws. It does not
Passenger Checked-in Goods to be regulate or exclude liability for other
baggage shipped breaches of contract by the carrier, or
misconduct of its employees, or for some
particular or exceptional type of damage.
(Alitalia vs. CA)
1. Death or injury of a passenger if the
accident causing it took place on board the
aircraft or in the course of its operations of  In PanAm v. IAC, the WC was applied as
embarking or disembarking; (Art. 17) regards the limitation on the carrier’s liability,
2. Destruction, loss or damage to any there being a simple loss of baggage without
baggage or goods, if it took place during the any improper conduct on the part of the
“transportation by air”; (Art. 18) and officials or employees of the airline or other
special injury sustained by the passenger.
 Transportation by air – The period during
which the baggage or goods are in the charge
of the carrier, whether in an airport or on  In KLM Royal v. Tuller, the WC has
board an aircraft, or, in case of a landing invariably been held inapplicable, or as not
outside an airport, in any place whatsoever. restrictive of the carrier’s liability, where
It includes any transportation by land or there was satisfactory evidence of malice or
water outside an airport if such takes place in bad faith attributable to its officers and
the performance of a contract for employees. (Alitalia vs. IAC)
transportation by air, for the purpose of
loading, delivery, or transshipment.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19) ACTION FOR DAMAGES
1. Notice of claim
Note: The Hague Protocol amended the WC  A written complaint must me made within:
by removing the provision that if the airline a. 3 days from receipt of baggage
took all necessary steps to avoid the damage, b. 7 days from receipt of goods
it could exculpate itself completely (Art. c. In case of delay, 14 days from
20(1)). (Alitalia vs. IAC, 192 SCRA 9) receipt of baggage/goods
 The complaint is a condition precedent.
LIMIT OF LIABILITY (Art. 22, as amended Without the complaint, the action is barred
by Guatemala Protocol, 1971; Alitalia vs. except in case of fraud on the part of the
IAC) carrier. (Art. 26)
1. Passengers
GENERAL RULE: $100,000 per passenger 2. Prescriptive period
EXCEPTION: Agreement to a higher limit  Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation
stopped. (Art. 29)
venue. (Santos III vs. Northwest; 2A C.J.S.)
 In United Airlines vs. Uy the two-year
prescriptive period was not applied where the V. SALVAGE LAW (Act No. 2616)
airline employed delaying tactics.
CARRIERS 1. Services one person renders to the owner
1. Carriage of passengers of a ship or goods, by his own labor,
GENERAL RULE: Action is filed only against preserving the goods or the ship which the
the carrier in which the accident or delay owner or those entrusted with the care of
occurred. them have either abandoned in distress at
EXCEPTION: Agreement or contract sea, or are unable to protect or secure.
whereby the first carrier assumed liability for 2. Compensation allowed to persons by
the whole journey. whose voluntary assistance a ship at sea or
2. Carriage of baggage or goods her cargo or both have been saved in whole
a. Passenger or consignor can file an or in part from impending sea peril, or such
action against the first carrier and property recovered from actual peril or loss,
the carrier in which the damage as in cases of shipwreck, derelict or
occurred recapture.
 Requisites:
b. Passenger or consignee can file an 1. Valid object of salvage;
action against the last carrier and 2. Object must have been
the carrier in which the damage exposed to marine peril (not perils of
occurred. the ship);
 These carriers are jointly and severally 3. Services rendered
liable. (Art. 30) voluntarily (neither an existing duty
nor out of a pre-existing contract);
 A contract of international carriage by air, 4. Services are successful,
although performed by different carriers total or partial.
under a series of airline tickets constitutes a  Subjects of Salvage:
single operation. Members of the 1. Ship itself;
International Air Transportation Association 2. Jetsam – goods which are cast into the sea,
(IATA) are under a general pool partnership and there sink and remain under water;
agreement wherein they act as agent of each 3. Floatsam or Flotsam – goods which float
other in the issuance of tickets to contracted upon the sea when cast overboard;
passengers to boost ticket sales worldwide 4. Ligan or Lagan – goods cast into the sea
and at the same time provide passengers tied to a buoy, so that they may be found
easy access to airlines which are otherwise again by the owners (p.173, Judge Diaz).
inaccessible in some parts of the world.  Persons who have no right to a reward
(American Airlines vs. CA) for salvage:
1. Crew of the vessel saved;
 Under a general pool partnership 2. Person who commenced Salvage in spite
agreement, the ticket-issuing airline is the of opposition of the Captain or his
principal in a contract of carriage while the representative;
endorsee-airline is the agent. The obligation 3. In accordance with Sec. 3 of the Salvage
of the former remained and did not cease Law, a person who fails to deliver a salvaged
even when the breach occurred not on its vessel or cargo to the Collector of Customs.
own flight but on that of another airline which
had undertaken to carry the passengers to  Derelict – a ship or her cargo which is
one of their destinations. (China Airlines vs. abandoned and deserted at sea by those who
Chiok) are in charge of it, without any hope of
recovering it, or without any intention of
JURISDICTION returning to it.
 At the option of the plaintiff, the action for
damages may be filed in the:  The intention of those in charge must be
a. Court of domicile of the ascertained. If those in charge left with the
carrier; intention of returning, or of procuring
b. Court of its principal place assistance, the property is not derelict, but if
of business; they quitted the property with the intention of
c. Court where it has a place finally leaving it, it is derelict and a change of
of business through which the their intention and an attempt to return will
contract has been made; or not change its nature (Erlanger & Galinger vs.
d. Court of the place of Swedish East Asiatic Co. Ltd.).
destination. (Art. 28(1))
NOTE: It is the passenger’s “ultimate
 If it is clear that the intention to return is
destination” not “an agreed stopping place”
slight, the salvage which was done thereafter
that determines the country where suit is to
is considered valid. (Notes and Cases on the
be filed.
Law on Transportation and Public Utilities,
 The forum of action provided in Art. 28(1) Aquino, T. & Hernando, R.P. 2004 ed. p. 616)
is a matter of jurisdiction rather than of
 A contract whereby one vessel, usually 1. To secure
motorized, pulls another, whether loaded or adequate, sustained service for the
not with merchandise, from one place to public at the least possible cost;
another, for a compensation. It is a contract 2. To protect the
for services rather than a contract of carriage. public against unreasonable charges
and poor, inefficient service;
3. To protect and
SALVAGE TOWAGE secure investments in public
Governed by special Governed by Civil 4. To prevent
law (Act No. 2616) Code on contract of ruinous competition.
Requires success, Success is not AUTHORITY TO OPERATE PUBLIC
otherwise no required SERVICES
payment GENERAL RULE: No public service shall
Must be done with Only the consent of operate without having been issued a
the consent of the the tugboat owner certificate of public convenience or a
captain/crewmen is needed certificate of public convenience and
Vessel must be Vessel need not be
involved in an involved in an EXCEPTIONS:
accident accident 1. Warehouses;
2. Animal drawn
Fees distributed Fees belong to the vehicles and bancas moved by oar or
among crewmen tugboat owner sail;
3. Airships, except
RULES ON SALVAGE REWARD for the fixing of maximum rates for
1. The fare and freight;
reward is fixed by the RTC judge in the 4. Radio
absence of agreement or where the companies, except for rates fixing;
latter is excessive. (Sec. 9) 5. Public services
2. The owned or operated by the
reward should constitute a sufficient government, except as to rates
compensation for the outlay and effort of fixing;
the salvors and should be liberal enough 6. Ice plants; and
to offer an inducement to others to 7. Public markets.
render services in similar emergencies in
the future. PUBLIC SERVICE
3. If sold (no  A person who owns, operates, manages or
claim being made within 3 months from controls in the Philippines for hire or
publication), the proceeds, after compensation, with general or limited
deducting expenses and the salvage clientele, whether permanent, occasional or
claim, shall go to the owner; if the latter accidental, and done for general business
does not claim it within 3 years, 50% of purposes, any common carrier or public
the said proceeds shall go to the salvors, utility, ice plants, power and water supplies,
who shall divide it equitably, and the communication and similar public services.
other half to the government. (Secs. 11- (Sec. 13b, CA 146)
12)  A casual or incidental service devoid of
4. If a vessel public character and interest is not brought
is the salvor, the reward shall be within the category. The question depends on
distributed as follows: such factors as the extent of services,
a. 5 whether such person or company has held
0% to the shipowner; himself or itself out as ready to serve the
b. 2 public or a portion of the public generally.
5% to the captain; and (Luzon Stevedoring vs. PSC)

NOTE: The Public Service Commission

c. 2 created under the Public Service Law has
5% to the officers and crew in already been abolished under P.D. No. 1 and
proportion to their salaries. (Sec. 13) other issuances. It has been replaced by the
following government agencies: LTO; LTFRB;
 Taking passengers from a sinking ship, ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
without rendering any service in rescuing the MIA.
vessel, is not a salvage service, being a duty
of humanity and not for reward.


(C.A. No. 146)
tolls, and public service;
PUBLIC PUBLIC 3. Setting up of operators to
CONVENIENCE CONVENIENCE standards and furnish safe,
(CPC) AND NECESSITY classifications; adequate, and
(CPCN) 4. Establishment proper service;
of rules to 3. Requiring public
An authorization An authorization secure services to pay
issued by the issued by the accuracy of all expenses of
appropriate appropriate meters and all investigation;
government agency government agency measuring 4. Valuation of
for the operation of for the operation of appliances; properties of
public services for public service for 5. Issuance of public utilities;
which no franchise, which a prior orders 5. Examination
either municipal or franchise is required requiring and test of
legislative, is by law; e.g. establishment measuring
required by law, telephone and other or appliances;
e.g., common services. maintenance 6. Grant of special
carriers. of extension of permits to make
facilities; extra or special
6. Revocation, or trips in
modification of territories
 A CPC or a CPCN constitutes neither a CPC or CPCN; specified in the
franchise nor a contract, confers no property 7. Suspension of certificate;
right, and is a mere license or a privilege. The CPC or CPCN, 7. Uniform
holder of said certificate does not acquire a except when it is accounting
property right in the route covered thereby. necessary to avoid system and
Nor does it confer upon the holder any serious and furnishing of
proprietary right or interest or franchise in the irreparable annual reports;
public highways. Revocation of this certificate damage or 8. Compelling
deprives him of no vested right. New and inconvenience to compliance with
additional burdens, alteration of the the public or the laws and
certificate, or even revocation or annulment private interest, in regulations.
thereof is reserved to the State. (Luque vs. which case, a
Villegas, 30 SCRA 408) suspension not
more than 30 days
 It is a “property” and has a considerable may be ordered,
value and can be the subject of sale or prior to the
attachment. (Cogeo-Cubao Operators and hearing. (Soriano v.
Drivers Assn. vs. CA, 207 SCRA 343, Medina, 164 SCRA
Raymundo vs. Luneta Motor Co.) 36)


1. Applicant must be a citizen of the 1. Engagement in public service business
Philippines or a corporation or entity 60% without first securing the proper
of the capital of which is owned by such certificate;
citizens; 2. Providing or maintaining unsafe,
2. Applicant must prove public necessity; improper or inadequate service as
3. Applicant must prove that the operation determined by the proper authority;
of the public service proposed and the 3. Committing any act of unreasonable and
authorization to do business will promote unjust preferential treatment to any
the public interest on a proper and particular person, corporation or entity as
suitable manner; determined by the proper authority;
4. Applicant must have sufficient financial 4. Refusing or neglecting to carry public
capability to undertake the proposed mail upon request. (Secs. 18 and 19)
services and meeting the responsibilities
incident to its operation. ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint
POWERS POWERS 2. Establish and operate new units;
REQUIRING EXERCISABLE 3. Issue free tickets;
PRIOR NOTICE WITHOUT PRIOR 4. Issue any stock or stock certificates
AND HEARING NOTICE AND representing an increase of capital;
HEARING 5. Capitalize any franchise in excess of the
amount actually paid to the Government;
1. Issuance of 1. Investigation 6. Sell, alienate, mortgage or lease
CPC or CPCN; any matter property, certificates or franchise.
2. Fixing of rates, concerning
 Under Sec. 20(g) of C.A. No. 146, the sale, would be easy for him, by collusion with
etc. may be negotiated and completed before others or otherwise, to transfer the
the approval by the proper authority. Its responsibility to an indefinite person, or to
approval is not a condition precedent to the one who possesses no property with which to
validity of the contract. The approval is respond financially for the damage or injury
necessary only to protect public interest. done. (Erezo, et al. vs. Jepte 102 Phil 103).


 The rule allowing an existing franchised  A system whereby a person who has been
operator to invoke a preferential right within granted a certificate of public convenience
the authorized territory as long as he renders allows other persons who own motor vehicles
satisfactory and economical service. to operate under such license, for a fee or
 The policy is not to issue a certificate to a percentage of such earnings. It is void and
second operator to cover the same field and inexistent under Art. 1409, Civil Code.
in competition with a first operator who is  Effects:
rendering sufficient, adequate and 1. The transfer, sale, lease or assignment of
satisfactory service. The prior operator must the privilege granted is valid between the
first be given an opportunity to improve its contracting parties but not upon the
service, if inadequate or deficient. public or third persons. (Gelisan vs.
 Purpose: To prevent ruinous and wasteful Alday, 154 SCRA 388)
competition in order that the interests of the
public would be conserved and preserved.

 It subordinates the prior applicant rule

which gives the first applicant priority only if
things and circumstances are equal.

 Where the operator either fails or neglects

to make the improvement or effect the
increase in services, especially when given
the opportunity, new operators should be
given the chance to give the services needed
by the public.


 Presupposes a situation when two
interested persons apply for a certificate to
operate a public utility in the same
community over which no person has as yet
granted any certificate. If it turns out, after
the hearing, that the circumstances between
the two applicants are more or less equal,
then the applicant who applied ahead of the
other, will be granted the certificate.

2. The registered owner is primarily liable
 The rate to be fixed must be just, founded
for all the consequences flowing from the
upon conditions which are fair and reasonable
operations of the carrier.
to both the owner and the public.
 The public has the right to assume
 A rate is just and reasonable if it conforms
that the registered owner is the actual or
to the following requirements:
lawful owner thereof. It would be very
1. One which yields
difficult and often impossible, as a
to the carrier a fair return upon the
practical matter, for the public to enforce
value of the property employed in
their rights of action that they may have
performing the service; and
for injuries inflicted by the vehicle if they
2. One which is fair
should be required to prove who the
to the public for the service
actual owner is. (Benedicto vs. IAC, 187
SCRA 547)
3. The thrust of the law in enjoining the
kabit system is to identify the person
 The registered owner of a certificate of upon whom responsibility may be fixed
public convenience is liable to the public for with the end in view of protecting the
the injuries or damages suffered by third riding public (Lim vs. CA 373 SCRA 394).
persons caused by the operation of said 4. The registered owner cannot recover
vehicle, even though the same had been from the actual owner and the latter
transferred to a third person. cannot obtain transfer of the vehicle to
 The registered owner is not allowed to himself, both being in pari delicto. (Teja
escape responsibility by proving that a third Marketing vs. IAC)
person is the actual and real owner Reason: It
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)