Notes On Transportation Law 2

Notes on Transportation Law
TRANSPORTATION LAW
Transportation the movement of things or persons from one place to another; a carrying across Transportation includes: o Waiting time o Loading and unloading with respect to transportation of goods o Stopping in transit o All other accessorial movements in connection with the loaded movement
A common carrier need not have fixed or publicly known routes. Neither does it have to maintain terminals or issue tickets. The name of the contract does not matter so long as all the requisites are present. Hence, a contract of lease may be one of carriage if all the requisites are attendant.
DEFINITION OF COMMON CARRIER Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. Elements: o Must be a person, association, corporation, or firms o Engaged in a business o Transports persons or goods or both by land, water or air o Offers service to the public o Accepts compensation for services True test of common carrier the carriage of goods and passengers provided it has space for all who opt to avail themselves of its transportation for a fee. National Steel vs CA Whether the given undertaking is a part of the business engaged in by the carrier which he has held out to the general public as his occupation rather than the quantity or extent of the business transacted. Bascos vs CA Even if a carriage of goods or pax is only an ancillary or sideline, that person can still be considered as a common carrier. Even if transportation is merely occasional, sporadic or not on a regular basis. Even though the transportation is offered only to a narrow segment of the general population. And lastly, even if he has not secured a certificate of public convenience. de Guzman vs CA Mode of transportation need not be motorized; pipelines are considered as common carriers. Article 1732 does not make any distinction between a carrier: o Whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity; o Offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic, or unscheduled basis; o Offering its services to the general public, i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. Customs broker also considered as a common carrier since transportation of goods is an integral function Mode of transportation need not be owned by the common carrier.
DILIGENCE REQUIRED Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in Articles 1755 and 1756. Extraordinary diligence that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own properties or rights. In case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or negligent. The presumption of fault or negligence may be overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods. The surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill of lading is not possible, acknowledgement of the delivery by signing the delivery receipt suffices. National Trucking vs Lorenzo Shipping The duty to exercise the utmost diligence on the part of the common carrier is for the safety of passengers, as well as members of the crew. The registered owner is not allowed to deny liability by proving the identity of the alleged transferee. The public has the right to assume that the registered owner is the actual or lawful owner thereof. It would be very difficult and often impossible as a practical matter, for members of the general public to enforce the rights of action that they may have for injuries inflicted by the vehicles being negligently operated if they should be required to prove who the actual owner is. To prove the exercise of extraordinary diligence, petitioner must do more than merely show the possibility that some other party could be responsible for the damage. It must prove that it used all reasonable means to ascertain the nature and characteristic of the goods tendered for transport and that it exercised due care in handling them. Extraordinary diligence must include safeguarding the shipment from damage coming from natural elements such as rainfall. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for

transportation until the same is delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. STATE REGULATION Article 1765. The Public Service Commission may, on its own motion or on petition of any interested party, after due notice or hearing, cancel the certificate of public convenience granted to any common carrier that repeatedly fails to comply with his or its duty to observe extraordinary diligence as prescribed in this Section. Public Service Commission replaced by: o Land Transportation Office o Land Transportation Franchising and Regulatory Board o Civil Aeronautics Board o ATO o MARINA Cancellation of certificate of public convenience may not be done without hearing; although these bodies may initiate the hearing motu propio A certificate of public convenience constitutes neither a franchise not a contract. It confers no property rights and is a mere license or privilege and therefore can be subject to regulation founded on the police power of the State. The sale of certificate of public convenience without approval of the governing bodies is not binding against the public. It is binding only between the parties. There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an indispensable requirement for an entity to operate as a domestic air transport operator. Although Section 11 of Article XII recognizes Congress control over any franchise, certificate or authority to operate a public utility, it does not mean that Congress has exclusive authority to issue the same. Franchises issued by Congress are not required before each and every public utility may operate. In many instances, Congress has seen it fit to delegate this function to government agencies, specialized particularly in their respective areas of public service. The nature of the business of a common carrier as a public employment is such that it is clearly within the power of the state to impose such just and reasonable regulations thereon in the interest of the public as the legislator may deem proper. The right to enter the public employment as a common carrier and to offer ones services to the public for hire does not carry with it the right to conduct that business as one pleases, without regard to the interest of the public and free from such reasonable and just regulations as may be prescribed for the protection of the public from the reckless or careless indifference of the carrier as to the public welfare and for the prevention of unjust and unreasonable discrimination of any kind whatsoever in the performance of the carriers duties as a servant of the public. Distinctions between a common carrier and a private carrier Definition Involves a single undertaking As to whom it Bound to carry May choose may contract all pax who persons with choose to enjoy whom it may it contract Degree of Extraordinary Good father of a diligence diligence family required As to Negligence is Person who presumption of presumed if pax alleges negligence or goods do not negligence must reach final prove the same destination As to State A common Does not regulation carrier performs perform public public service service; also and is subject to subject to State State regulation regulation but not too strict. A common carrier shall remain as such notwithstanding the charter of the whole or portion of a vessel by one or more person provided that charter is not limited to the ship only as in the case of a time-charter or voyage charter. In the ordinary course of business, the ship is operated as common carrier transporting goods for all persons. The chartering of such vessel still leaves the captain, officers and compliment under the employ of the shipowner (keeping it under his direct supervision and control). COMMON CARRIER OF GOODS Article 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration. Test to determine if one is a common carrier of goods o He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for person generally as a business and not as a casual occupation. o He must undertake to carry goods of the kind to which his business is confined o He must undertake to carry by the method by which his business is conducted and over his established roads o The transportation must be for hire.
Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods. x x x

Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7 x x x Extraordinary diligence in the vigilance of goods requires rendering service with the greatest skill and foresight to avoid damage and destruction to the goods entrusted for carriage and delivery. Article 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced. Article 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of the goods, or the faulty nature of the packing or of the containers, the common carrier must exercise due diligence to forestall or lessen the loss. What shipper needs to show to have prima facie case against carrier: o Actual receipt of goods by the carrier o Failure to deliver the goods in the same conditions as it was received. The mere proof of delivery of goods in good order to a carrier, and of their arrival at the place of destination in bad order, makes out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstance inconsistent with its liability. RE: Containerized shipments In order to hold the carrier liable for whatever loss, damage or deterioration that happened on the goods inside the container, it has to be opened in front of the carrier and inspected. If the consignee received the container, does not check it, brings it to his warehouse and complains days later, then that is no longer allowed. The inspection should be done in front of the carrier. If the inspection is done upon arrival, there is presumption that the goods were received in good order. The carrier then will have to prove that the goods were received otherwise. Arrastre operator should observe the same degree of diligence as that required of a common carrier. He is the custodian of the goods discharged from a vessel, hence it is his duty to take good care of the goods and to turn them over to the party entitled to their possession. As a general rule, common carriers are presumed to have been at fault or negligent if the goods they transported deteriorated, got lost or destroyed. Unless they prove they exercised extraordinary diligence in transporting the goods in order the goods. In order to avoid any responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence. Where the shipper expressly consents to his goods being carried on deck, the shipper therefore, takes the risk of any damage or loss due to fortuitous event. Even if the damage was due to a fortuitous event, the carrier cannot escape liability if it was proven by the owner of goods that the injury might have been avoided by the exercise of reasonable skill and attention on the
Article 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packaging or in the containers; (5) Order or act of competent public authority. There is no automatic liability or responsibility for loss, destruction or deterioration of goods. What arises is automatic presumption of negligence. The common carrier of goods must prove that it exercised extraordinary diligence. Do not say by exercising XOD because that is different from proving that CCOG exercised XOD.
Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault and acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. Effect of the existence of any of the 5 instances under Article 1734 no automatic presumption of negligence, CCOG need not prove it exercised XOD. However, this does not mean that the CCOG is exempt from liability. It has to prove that it complied with the requirements of Article 1739, 1740, 1741 and 1742.
Article 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods. The same duty is incumbent upon the common carrier in case of an act of the public enemy referred to in article 1734, No. 2. Article 1740. If the common carrier negligently incurs in delay in transporting the goods, a natural disaster shall not free such carrier from responsibility.

part of the ships crew. The burden is then shifted upon the shipper to show the negligence. Fire is not one of those enumerated under Article 1734 which exempts a common carrier from liability for the loss/destruction of the goods it assumes to carry from one place to another. This being the case, the automatic presumption of negligence attaches and it is incumbent upon the carrier that it exercised XOD to exculpate itself from any liability. Assuming arguendo that fire is considered as a natural disaster, in order to free itself from liability, the common carrier must prove: o The natural disaster must have been the proximate and only case of the loss o It exercised due diligence to prevent/minimize the loss o It was not in delay Common carriers are bound to exercise XOD over the goods they transport. In the event of loss or destruction of the transported goods while in the custody of the common carrier, an automatic presumption arises that the common carrier was negligent, unless it is able to prove otherwise. Monsoon does not fall into the category of a storm or a natural disaster as contemplated in Article 1734 that would absolve the carrier from liability. Under Article 1734, there is no automatic presumption of negligence due to flood, storm, earthquake, lightning, or other natural calamity. However, the common carrier must prove the following: o The natural calamity or disaster must have been the proximate and only cause of the loss o The common carrier exercised due diligence to prevent/minimize the loss before, during and after the occurrence of the natural calamity. Requirements for act of public enemy in war: o The natural act of the public enemy must have been the proximate and only cause of the loss o The CCOG exercised due diligence to prevent or minimize the loss In order to totally escape liability, the CCOG must prove that the act/negligence of the shipper is the only and proximate cause of the loss. If the CCOG is not able to prove that the only and proximate cause of the loss is the act of the shipper, then, there will be an equitable reduction of the liability. If there is a defect in the packaging or character of the goods, then the requisite for CCOG to escape liability is that it must prove that it exercised due diligence to forestall or lessen the loss. If goods are delivered to the CCOG and the defect in the goods/packaging is apparent, then the CC may accept the goods with reservation or exception. It must be indicated in the bill of lading that the goods are already defective, etc. and if the goods arrived in the same condition as it was received, then that can be used as an exception. Requisite for an order or act of competent public authority: o o Person issuing order must have power to issue such The order must be lawful or must have been issued under legal process or authority
DURATION OF LIABILITY Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738. Article 1737. The common carrier's duty to observe extraordinary diligence over the goods remains in full force and effect even when they are temporarily unloaded or stored in transit, unless the shipper or owner has made use of the right of stoppage in transitu. Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them. From the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the goods are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them. The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier. The test as to whether the relation of shipper and carrier had been established is, had the control and possession of the goods been completely surrendered by the shipper to the carrier? Whenever the control and possession of goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established. RE: Transhipment When the carrier under the terms of the bill of lading had delivered the goods at the port of destination, at that point, he merely becomes the agent of consignee and ceases to be liable as carrier for loss or damages of the goods transported. Thereafter, the loss of the goods in its hand for causes beyond its control without negligence being proved, cannot sustain a claim for damage against the carrier.

VALIDITY OF STIPULATIONS Article 1744. A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be: (1) In writing, signed by the shipper or owner; (2) Supported by a valuable consideration other than the service rendered by the common carrier; and (3) Reasonable, just and not contrary to public policy. Article 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy: (1) That the goods are transported at the risk of the owner or shipper; (2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods; (3) That the common carrier need not observe any diligence in the custody of the goods; (4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported; (5) That the common carrier shall not be responsible for the acts or omission of his or its employees; (6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished; (7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage. Article 1746. An agreement limiting the common carrier's liability may be annulled by the shipper or owner if the common carrier refused to carry the goods unless the former agreed to such stipulation. Article 1747. If the common carrier, without just cause, delays the transportation of the goods or changes the stipulated or usual route, the contract limiting the common carrier's liability cannot be availed of in case of the loss, destruction, or deterioration of the goods. Article 1748. An agreement limiting the common carrier's liability for delay on account of strikes or riots is valid. Article 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Article 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. Article 1751. The fact that the common carrier has no competitor along the line or route, or a part thereof, to which the contract refers shall be taken into consideration on the question of whether or not a stipulation limiting the common carrier's liability is reasonable, just and in consonance with public policy. Article 1752. Even when there is an agreement limiting the liability of the common carrier in the vigilance over the goods, the common carrier is disputably presumed to have been negligent in case of their loss, destruction or deterioration. For the stipulation to be valid, it must not be just a stipulation. It must contain a statement which says that if the shipper agrees or has declared a higher valuation, and has paid for a higher price thereof, then the 500 peso limitation is not applicable. A stipulation which exempts the carrier from any and all liability from loss or damage occasioned by its own negligence is not valid. 3 kinds of stipulation: o No liability the carrier will not be liable at all for the negligent acts of its crew and employees void o Limited liability regardless of the value of the cargo, the maximum liability of the carrier will be only to a certain amount void o Qualified liability the carrier fixes a maximum liability in the event the shipper does not declare any value, or a value up to a certain amount. Should the shipper declare a higher value and willing to pay higher freightage, the carrier shall accordingly be liable for greater damage. A common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy and is deemed valid. In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the captain. BAGGAGE OF PASSENGERS Article 1754. The provisions of articles 1733 to 1753 shall apply to the passenger's baggage which is not in his personal custody or in that of his employee. As to other baggage, the rules in articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable. Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions

which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. Article 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care required of him. Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force. Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel. Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is suppressed or diminished shall be void. CARRIAGE OF PASSENGERS Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances. Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755. Automatic presumption of negligence, rebutted by proving that carrier exercised extraordinary diligence for the safety of passengers according to the circumstances of each case. Unlike the provisions of carriage of goods, in carriage of passengers, there are no exceptions as to the presumption of negligence. They will be automatically presumed to be negligent under 1756, there are no exceptions. Take note that proving extraordinary diligence is not the only way of escaping liability. A fortuitous event will always exempt the obligor from liability, if the fortuitous event is the cause of the death, injury of the passenger. In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it responsible to pay damages to the passenger. Because of the automatic presumption of negligence, the burden of proof is on the carrier. If the carrier rebuts the presumption, then it is absolved. If it does not rebut that presumption, there is no need for the passenger or his heirs to prove negligence. Defective parts of vehicles cannot be considered a fortuitous event because the manufacturer of the defective parts is considered in law the agent of the carrier, and the good repute of the manufacturer will not relieve the carrier from liability. As a general rule, hi-jacking of an airline cannot be a fortuitous event because this is not unforeseen, this is expected. That is why security checks are conducted. But in GACAL vs. PAL - this was considered a fortuitous event because the inspection was done by the military, and not PAL. This case is a special case. No provision for CC of pax for the duration of liability The relation of carrier and passenger does not necessarily cease where the latter, after alighting from the car, aids the carrier's servant or employee in removing his baggage from the car. It has been recognized as a rule that the (contractual) relation of carrier and passenger does not cease at the moment the passenger alights from the carrier's vehicle at a place selected by the carrier at the point of destination, but continues until the passenger has had a reasonable time or a reasonable opportunity to leave the carrier's premises. And, what is a reasonable time or a reasonable delay within this rule is to be determined from all the circumstances. Doctrine of Last Clear Chance -- this doctrine calls for application in suits between owners of two colliding vehicles. It does not apply where a pax demands responsibility from a carrier to enforce its contractual obligations. It would be inequitable to exempt the negligent driver and its owner on the ground that the other driver was likewise guilty of negligence. The common law notion of last clear chance permitted courts to grant recovery to a plaintiff who has also been negligent provided that the defendant had the last clear chance to avoid the casualty and failed to do so. VALIDITY OF STIPULATIONS Two kinds: 1. As to the diligence required 2. As to the amount of liability AS TO THE DILIGENCE REQUIRED Article 1757. The responsibility of a common carrier for the safety of passengers as required in Articles 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise. Diligence required: XOD What kind of XOD: Utmost diligence of a very cautious person

CC of Goods are allowed to lessened the degree of diligence, but NOT do away with the same completely. CC of Pax CANNOT dispense with nor lessen the degree of diligence. contributing to his negligence equitably reduces the liability of the CC. Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he is required to conform for his own protection. To hold a person as having contributed to his injuries, it must be shown that he performed an act that brought about his injuries in disregard of warning or signs of an impending danger to health and body. Test of negligence -- Was there anything in the circumstances surrounding the plaintiff at the time he alighted from the train which would have admitted a person of average prudence that to get off the train under the conditions then existing was dangerous? If so, the plaintiff should have deserted from alighting; and his failure so to desist was contributory negligence. When the bus is not in motion there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to board the same. It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. It is a prevailing rule that it is negligence per se for passengers on a railroad to protrude any part of his body and that no recovery can be had for an injury.
AS TO AMOUNT OF LIABILITY Article 1758. When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for negligence is valid, but not for wilful acts or gross negligence. The reduction of fare does not justify any limitation of the common carrier's liability. General Rule: Cannot be limited Requisites to limit liability o Pax carried gratuitously o Existence of stipulation limiting liability o Accident/Breach not caused by willful acts or gross negligence. Minimum amount that heirs of pax can collect from CC is P 50,000 because this is indemnity for death. CC is automatically liable for this minimum amount; if it wants to lessen this amount, CC must follow Art. 1758.
LIABILITY FOR ACTS OF EES Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. There is no express provision in CC of Goods exactly like Art. 1759. BUT, the absence of express stipulation does not mean that CC of Goods not liable for acts of ees. Under Art. 1775, par. 5, the CC cannot stipulate that it shall not be responsible for the acts of its ees. Defense of Diligence of Good father of family is available if the cause of action is culpa acquiliana (Art. 2176, 2180 of NCC), But if the cause of action is for breach of contract of carriage, this defense of GFOF cannot be invoked.
RESPONSIBILITY FOR ACTS OF STRANGERS Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission. This is one instance wherein the carrier need not prove that it exercised XOD to escape liability. If the injury/death of pax was caused by the act of a stranger (somebody who is not an ee of the carrier) the carrier need only prove that its ees exercised diligence of GFOF to prevent or stop the act or omission. It is not the responsibility of the CC of Pax to ensure that no injury from outside forces will be caused to the pax, i.e. when a bomb is thrown from the roadside. If a passenger is bumped off his flight and he has a confirmed booking, that is a breach because the carrier in the ticket ensured that it will deliver the pax to its destination on the time and date stipulated.
CONTRIBUTORY NEGLIGENCE Article 1761. The passenger must observe the diligence of a good father of a family to avoid injury to himself. Article 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced.
Contributory Negligence -- It is the principle that negligence, no matter how slight, on the part of the person injured which is one of the causes proximately

A round trip ticket issued by the carrier to the passenger was in itself a complete written contract by and between the carrier and the passenger. It had all the elements of a complete written contract, to wit: (a) the consent of the contracting parties manifested by the fact that the passenger agreed to be transported by the carrier to and from Los Angeles via San Francisco and Hongkong back to the Philippines, and the carriers acceptance to bring him to his destination and then back home; (b) cause or consideration, which was the fare paid by the passenger as stated in his ticket; and, (c) object, which was the transportation of the passenger from the place of departure to the place of destination and back, which are also stated in his ticket. When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger has every right to expect that he be transported on that flight and on that date, and it becomes the airline's obligation to carry him and his luggage safely to the agreed destination without delay. If the passenger is not so transported or if in the process of transporting, he dies or is injured, the carrier may be held liable for a breach of contract of carriage. Breach of contract is defined as the failure without legal reason to comply with the terms of a contract. It is also defined as the failure, without legal excuse, to perform any promise which forms the whole or part of the contract. VIP: When we talk about transportation laws we should not only focus on breach of contract of carriage. We should also include that there are other causes of action which may arise. MARITIME COMMERCE Applicable laws: o Code of Commerce o COGSA o Salvage Law Governing body -- MARINA (Maritime Industry Authority) Functions of Marina: CF PD 474 o Issue certificate of public convenience for the operation of domestic and overseas water carriers; o Register and issue certificate, licenses, or documents necessary or incident thereto. Certificate of Public Convenience (CPC) -- requirement for a carrier to operate domestic sea voyages Kinds of VESSELS (under PD 474) "Vessels" or "Watercraft" -- Any barge, lighter, bulk carrier, passenger ship freighter, tanker, container ship, fishing boats or other artificial contrivance utilizing any source of motive power, designed, used or capable of being used as a means of water transportation operating either as common contract carrier, including fishing vessels covered under Presidential Decree No. 43, except (1) those owned and/or operated by the Armed Forces of the Philippines and by foreign governments for military purposes, and (2) bancas, sailboats and other waterborne contrivance of less than three gross tons capacity and not motorized.
DISTINCTIONS BETWEEN CCOG AND CCOP Diligence Required extraordinary Utmost diligence diligence of very cautious person. When Loss, destruction death or injury presumption of or deterioration and nonnegligence arises and non-arrival of fulfillment of the the goods at contract destination and negligent delay When in the five (5) NONE, the presumption of instances presumption of negligence does mentioned; negligence will not arise natural calamity, ALWAYS arise in automatically etc. case the carriage of PAX W/N degree of For both, it cannot be dispensed with diligence can be dispensed with W/N degree of yes, under the NO diligence can be requisites lessened previously discussed W/N liability in yes, under Art. As a general rule, case of breach can 1748, 1749 and NO, unless carried be lessened? 1750 gratuitously; stipulation but only for simple negligence.
HOW OWNERSHIP OF A VESSEL MAY BE ACQUIRED Article 573. Merchant vessels constitute property which may be acquired and transferred by any of the means recognized by law. or In relation to Art. 712 of the Civil Code: a. Donation; b. law c. Testate or intestate succession; d. As a consequence of certain contracts e. By tradition f. By prescription (3 years if possession in good faith, with just title duly recorded, otherwise, 10 years) The acquisition of a vessel must be included in a written instrument, which shall not produce any effect with regard to third persons if not recorded in the mercantile registry. A captain cannot acquire by prescription the ship of which he is in command. possession is not adverse A vessel is a movable property, but ownership must be evidenced by certificate of ownership and transfers must be registered in the proper registry to bind 3rd persons. Requisites for Legal Acquisition of a Merchant Vessel: o Must appear in a written instrument;

o Recorded in the proper registry -- under EO 125, transaction must be registered with the Marina but now this is being conducted by the PPA. The requisite of registration in the registry, of the purchase of a vessel, is necessary and indispensable in order that the purchaser's rights may be maintained against a claim filed by a third person. o CAPTAIN one who governs the vessels and navigates the high seas or of large dimension and importance. MASTER commands small ships and engages exclusively in coastwise trade For purposes of maritime commerce, captain, master, and patron all mean the same. SAILING MATE the second chief of the vessel SECOND MATE the one who takes command of the vessel in case of disability or disqualification of the captain or sailing mate CREW OR SAILORS the persons who man the vessel and those who perform other duties
Repair and Maintenance of Vessel during the Voyage Article 583. If the ship being on a voyage the captain should find it necessary to contract one or more of the obligations mentioned in Nos. 8 and 9 of Article 580, he shall apply to the judge or court if he is in Philippine territory, and otherwise to the Filipino Consul should there be one, and, in his absence to the judge or court or to the proper local authority, presenting the certificate of the registry of the vessel treated of in Article 612, and the instruments proving the obligation contracted. The judge or court, the consul or the local authority as the case may be, in view of the result of the proceedings instituted, shall make a temporary memorandum in the certificate of their result, in order that it may be recorded in the registry when the vessel returns to the port of her registry, or so that it can be admitted as a legal and preferred obligation in case of sale before the return, by reason of the sale of the vessel by virtue of a declaration of unseaworthiness. The lack of this formality shall make the captain personally liable to the creditors who may be prejudiced through his fault. Article 580 Nos. 8 and 9 are contract obligations for the repair and equipment of the vessel and obtain loans and bottomry.
o o
Article 586. The owner of a vessel and the agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein. Powers and duties of a ship agent: o Article 595 (2) Represent the ownership of the vessel and may, in his own name and in such capacity, take judicial and extra-judicial steps in matters relating to commerce. o Article 596 (1) Occupy the duties of the captain, if he has the qualifications of a captain o Article 597 Select and come into an agreement with the captain and contract in the name of the owners, who shall be bound in all that refers to repairs, details of equipment, armament, provisions, fuel, freight, and in general that pertains to the requirement of navigation. o Article 602 Indemnify the captain for all expenses he may have incurred from his own funds or from those of other persons for the benefit of the vessel.
Article 580 (8). The part of the price which has not been paid the last vendor, the credits pending for the payment of material and work in the construction of the vessel, when it has not navigated, and those arising from the repair and equipment of the vessel and its provisioning with victuals and fuel during its last voyage. x x x (9) The amounts borrowed on bottomry bonds before the departure of the vessel, proven by means of the contracts executed according to law and recorded in the commercial registry; the amounts borrowed during the voyage with the authority mentioned in the foregoing subdivision, filling the same requisites, and the insurance premium, proven by the policy of the contract or certificate taken from the books of the broker. The omission to follow these requirements will make the captain personally liable. He cannot ask for a refund from the carrier. Persons who take part in marine commerce: o SHIP OWNER o SHIP AGENT - By agent is understood the person entrusted with the provisioning of a vessel, or who represents her in the port in which she happens to be.
Qualifications of Captain Article 609. Captains and masters of vessels must be Filipino having legal capacity to bind themselves in accordance with this Code, and must prove that they have the skill, capacity, and qualifications required to command and direct the vessel, as established by marine laws, ordinances, or regulations, or by those of navigation, and that they are not disqualified according to the same for the discharge of the duties of that position. If the owner of a vessel desires to be the captain thereof and does not have the legal qualifications therefor, he shall limit himself to the financial administration of the vessel, and shall entrust her navigation to a person possessing the qualifications required by said ordinances and regulations. Qualifications of a Captain or Master under RA 937 o Citizen of the Philippines o Physically fit and must be examined physically o Must undergo examination into moral, technical qualifications o Other prescribed requirements

Qualifications of a Master under Article 609 of the Code of Commerce o Filipino o Legal capacity to bind himself o Proof that they have skill, capacity, and qualifications required to command and direct a vessel as established by: Marine laws, ordinances or regulations Those of navigation o Not disqualified according to the same for the discharge of the duties of that position. A person without license to navigate, lacks not just the skill to do so, but also the utmost familiarity with the usual and safe routes taken by seasoned and legally authorized ones. the role performed by the captain as commander of the vessel; for such role (which, to our mind, is analogous to that of "Chief Executive Officer" [CEO] of a present-day corporate enterprise) has to do with the operation and preservation of the vessel during its voyage and the protection of the passengers (if any) and crew and cargo. In his role as general agent of the shipowner, the captain has authority to sign bills of lading, carry goods aboard and deal with the freight earned, agree upon rates and decide whether to take cargo. The ship captain, as agent of the shipowner, has legal authority to enter into contracts with respect to the vessel and the trading of the vessel, subject to applicable limitations established by statute, contract or instructions and regulations of the shipowner. To the captain is committed the governance, care and management of the vessel. Clearly, the captain is vested with both management and fiduciary functions. More importantly, a ship's captain must be accorded a reasonable measure of discretionary authority to decide what the safety of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage. The captain is held responsible, and properly so, for such safety. He is right there on the vessel, in command of it and (it must be presumed) knowledgeable as to the specific requirements of seaworthiness and the particular risks and perils of the voyage he is to embark upon. The applicable principle is that the captain has control of all departments of service in the vessel, and reasonable discretion as to its navigation. It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and preservation of the interests under his charge, whether those be of the shipowners, charterers, cargo owners or of underwriters. It is a basic principle of admiralty law that in navigating a merchantman, the master must be left free to exercise his own best judgment. The requirements of safe navigation compel us to reject any suggestion that the judgment and discretion of the captain of a vessel may be confined within a straitjacket, even in this age of electronic communications. Compulsory pilotage -- there is a pilot assigned to pilot the vessel outside the break water until it reaches its berth. Under the rules of compulsory pilotage, once a pilot takes over the helm, the captain will have to stand aside and surrender all his authority to the pilot who is more familiar with the docking maneuvers. A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters. In a broad sense, the term "pilot" includes both (1) those whose duty it is to guide vessels into or out of ports, or in particular waters and (2) those entrusted with the navigation of vessels on the high seas. However, the term "pilot" is more generally understood as a person taken on board at a particular place for the
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General Functions of a Captain Article 610. The following powers are inherent in the position of captain or master of a vessel: 1. To appoint or make contracts with the crew in the absence of the agent and propose said crew, should said agent be present; but the agent shall not be permitted to employ any member against the captain's express refusal. 2. To command the crew and direct the vessel to the port of its destination, in accordance with the instructions he may have received from the agent. 3. To impose, in accordance with the agreements and the laws and regulations of the merchants marine, on board the vessel, correctional punishment upon those who do not comply with his orders or who conduct themselves against discipline, holding a preliminary investigation on the crimes committed on board the vessel on the high seas, which shall be turned over to the authorities, who are to take cognizance thereof, at the first port touched. 4. To make contracts for the charter of the vessel in the absence of the agent or of her consignee, acting in accordance with the instructions received and protecting the interests of the owner most carefully. 5. To adopt all the measures which may be necessary to keep the vessel well supplied and equipped, purchasing for the purpose all that may be necessary, provided there is no time to request instructions of the agent. 6. To make, in similar urgent cases and on a voyage, the repairs to the hull and engines of the vessel and to her rigging and equipment which are absolutely necessary in order for her to be able to continue and conclude her voyage; but if she should arrive at a point where there is a consignee of the vessel, he shall act in concurrence with the latter. The captain of a vessel is a confidential and managerial employee within the meaning of the above doctrine. A master or captain, for purposes of maritime commerce, is one who has command of a vessel. A captain commonly performs three (3) distinct roles: (1) he is a general agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3) he is a representative of the country under whose flag he navigates. Of these roles, by far the most important is

purpose of conducting a ship through a river, road or channel, or from a port. Under English and American authorities, generally speaking, the pilot supersedes the master for the time being in the command and navigation of the ship, and his orders must be obeyed in all matters connected with her navigation. He becomes the master pro hac vice and should give all directions as to speed, course, stopping and reversing, anchoring, towing and the like. And when a licensed pilot is employed in a place where pilotage is compulsory, it is his duty to insist on having effective control of the vessel, or to decline to act as pilot. Under certain systems of foreign law, the pilot does not take entire charge of the vessel, but is deemed merely the adviser of the master, who retains command and control of the navigation even on localities where pilotage is compulsory. While it is indubitable that in exercising his functions a pilot-is in sole command of the ship and supersedes the master for the time being in the command and navigation of a ship and that he becomes master pro hac vice of a vessel piloted by him, there is overwhelming authority to the effect that the master does not surrender his vessel to the pilot and the pilot is not the master. The master is still in command of the vessel notwithstanding the presence of a pilot. There are occasions when the master may and should interfere and even displace the pilot, as when the pilot is obviously incompetent or intoxicated and the circumstances may require the master to displace a compulsory pilot because of incompetency or physical incapacity. If, however, the master does not observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified in relying on the pilot, but not blindly. In general, a pilot is personally liable for damages caused by his own negligence or default to the owners of the vessel, and to third parties for damages sustained in a collision. Such negligence of the pilot in the performance of duty constitutes a maritime tort. At common law, a shipowner is not liable for injuries inflicted exclusively by the negligence of a pilot accepted by a vessel compulsorily. The exemption from liability for such negligence shall apply if the pilot is actually in charge and solely in fault. Since, a pilot is responsible only for his own personal negligence, he cannot be held accountable for damages proximately caused by the default of others, or, if there be anything which concurred with the fault of the pilot in producing the accident, the vessel master and owners are liable. The law does provide that the master can countermand or overrule the order or command of the harbor pilot on board. contains, signed by the maritime official, and in his absence by the competent authority. In the first book, which shall be called "log book," he shall enter every day the condition of the atmosphere, the prevailing winds, the course sailed, the rigging carried, the horsepower of the engines, the distance covered, the maneuvers executed, and other incidents of navigation. He shall also enter the damage suffered by the vessel in her hull, engines, rigging, and tackle, no matter what is its cause, as well as the imperfections and averages of the cargo, and the effects and consequence of the jettison, should there be any; and in cases of grave resolutions which require the advice or a meeting of the officers of the vessel, or even of the passengers and crew, he shall record the decision adopted. For the informations indicated he shall make use of the binnacle book, and of the steam or engine book kept by the engineer. In the second book, called the "accounting book," he shall enter all the amounts collected and paid for the account of the vessel, entering specifically article by article, the sources of the collection, and the amounts invested in provisions, repairs, acquisition of rigging or goods, fuel, outfits, wages, and all other expenses. He shall furthermore enter therein a list of all the members of the crew, stating their domiciles, their wages and salaries, and the amounts they may have received on account, either directly or by delivery to their families. In the third book, called "freight book," he shall record the entry and exit of all the goods, stating their marks and packages, names of the shippers and of the consignees, ports of loading and unloading, and the freight earned. In the same book he shall record the names and places of sailing of the passengers and the number of packages of which their baggage consists, and the price of the passage. Books to be carried by the captain on board the vessel: o Logbook where he shall enter everyday everything significant about the voyage o Accounting book where he shall enter all the amounts collected and paid for the accounts of the vessel o Freight book where he shall record the entry anf exit of goods. The logbook is an official record of entries made by a person in the performance of his duty required by law and are prima facie evidence of the facts entered therein. A copy of an official entry in the logbook is legally binding and serves as an exception to the hearsay rule. Unless there is a controversy with regard to the genuineness of the said entry and the authenticity of the copy presented in evidence. Prohibited acts of a captain: o Make separate transactions for his own account (if he navigates for freight in common or on shares) o Fail to make the agreed voyage (refuse to leave port) o Substitute himself by other persons
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Books to be carried by the captain Article 612. The following obligations are inherent in the office of captain: x x x 3. To have three folioed and stamped books, placing at the beginning of each one a note of the number of folios it

o o o Art Contract loans on respondentia Borrow money on bottomry for his own transactions Commit fraud in his accounts Prohibited Act Effect/ Consequence 613 Making SEPARATE TRANSACTIONS for HIS OWN ACCOUNT [if he navigates for freight in common or on shares] FAILURE to MAKE Agreed Voyage 1 His profit shall belong to other peoples in interest, BUT His losses shall be for his exclusive account He shall indemnify all losses which his failure may cause He may be criminally penalized He shall be liable for the acts of the substitute Whatever profit is incurred by the substitute shall belong to other peoples in interest Whatever loss is incurred by the substitute shall be for his exclusive account He and the substitute may be discharged by the ship agent If he is prevented in making the voyage because of a fortuitous event When Allowed secured by the cargo 617 BORROW Money on BOTTOMRY for his OWN Transactions NOT the owner of the cargo] 1 Principal, interests and costs shall be charged to his exclusive account For the portion of the vessel which he owns, PROVIDED: 1 No money has been previously borrowed on the whole vessel, and There does not exist any other kind of lien or obligation chargeable against the vessel He must necessarily state what interest he has in the vessel
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614
He may be discharged by the ship agent
3 If he acquires the consent of the ship agent 621 BORROWS or SELLS outside of the cases and without the formalities prescribed by law 1 He shall be liable for the principal, interests, and costs He shall indemnify for the damages he may cause He shall reimburse the amount defrauded He shall be subject to the provisions of the Revised Penal Code
615
SUBSTITUTING himself by OTHER PERSONS
621
Commits FRAUD in his Accounts
617
CONTRACT Loans on RESPONDENTIA
Contract shall be VOID [because the captain is
DURATION OF LIABILITY OF THE CAPTAIN Article 619. The captain shall be liable for the cargo from the time it is turned over to him at the dock, or afloat alongside the ship, at the port of loading until he delivers it on the shores or on the discharging wharf, of the port of unloading unless the contrary has been expressly agreed upon.

o The captain has a shorter period of responsibility as compared to the carrier. Of course, unless is a stipulation to the contrary. Maritime protest -- This has to be done by the captain if the vessel/cargo is lost or injured. It is a written statement under oath, made by the captain or master of the vessel after the occurrence of an accident or disaster in which the vessel or cargo is lost or injured with respect to circumstances attending such occurrence. Purpose -- It is usually intended to show that the loss or damage resulted from a peril of the sea or some other cause for which neither the master nor owner was responsible. It concludes with the protestation against any liability of the owner for such loss or damage. o Second mate takes over in case of disability, disqualification of the captain and the sailing mate Crew or sailors -- they are enlisted by the captain in such number he may deem proper
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Article 627. The sailing mate, as the second chief of the vessel and unless the agent orders otherwise, shall take the place of the captain in cases of absence, sickness, or death, and shall then assume all his powers, obligations, and responsibilities. Article 627 of the Code of Commerce defines the Chief Mate, also called Chief Officer or Sailing Mate, as "the second chief of the vessel, and unless the agent orders otherwise, shall take the place of the captain in cases of absence, sickness, or death, and shall then assume all his powers, duties, and responsibilities." A Chief Officer, therefore, is second in command, next only to the captain of the vessel. Chief Mate is a managerial employee because the said officer performed the functions of an executive officer next in command to the captain; that in the performance of such functions, he is vested with powers or prerogatives to lay down and execute management policies.
Article 624. A captain whose vessel has gone through a hurricane or who believes that the cargo has suffered damages or averages, shall make a protest thereon before the competent authority at the first port he touches within the twenty-four hours following his arrival, and shall ratify it within the same period when he arrives at the place of his destination, immediately proceeding with the proof of the facts, it not being permitted to open the hatches until this has been done. The captain shall proceed in the same manner if, the vessel having been wrecked, he is saved alone or with part of his crew, in which case he shall appear before the nearest authority, and make a sworn statement of the facts. The authority or the consul abroad shall verify the said facts, receiving a sworn statement of the members of the crew and passengers who may have been saved, and taking the other steps which may assist in arriving at the facts, drafting a certificate of the result of the proceedings in the log book and in that of the sailing mate, and shall deliver the original records of the proceedings to the captain, stamped and folioed, with a memorandum of the folios, which he must rubricate, for their presentation to the judge or court of the port of destination. The statement of the captain shall be believed if it is in accordance with those of the crew and passengers; if they disagree, the latter shall be accepted, unless there is proof to the contrary. Procedure: o Protest must be made with a competent authority at first port he touches; o within 24 hours following his arrival o Captain must ratify it within 24 hours when he arrives at the place of destination where he must proceed immediately with the proof of the facts o He must not open the hatches until all of the above are done. Officers and crew of the vessel o Sailing mate - He is the 2nd chief of the vessel; takes place of the captain and assumes all his duties and powers in case of absence, sickness or death.
Art 632-633, Code of Commerce Art. 634-637 The shipowner or the captain can discharge the crew (Art. 637)
Article 604. If the captain or any other member of the crew should be discharged during the voyage, they shall receive their salary until the return to the place where the contract was made, unless there are good reasons for the discharge, all in accordance with Articles 636 et seq. of this Code. Gen Rule: They shall continue to receive their salaries until their return to the port where the contract was made. They have to be paid the full round trip. Except: If there is a just cause or just motive.
Rule in case of discharge if the contract is for a definite period or voyage Article 605. If the contracts of the captain and members of the crew with the agent should be for a definite period or voyage, they can not be discharged until the fulfillment of their contracts, except for reasons of insubordination in serious matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or to its cargo by malice or manifest or proven negligence. Grounds if captain discharges crew

Article 636. Should a fixed period for which a sailor has signed not be stated, he cannot be discharged until the end of the return voyage to the port where he enrolled. Article 637. Neither can the captain discharge a sailor during the time of his contract except for sufficient cause, the following being considered as such: 1. The perpetration of a crime which disturbs order on the vessel. 2. Repeated offenses of insubordination, against discipline, or against the fulfillment of the service. 3. Repeated incapacity or negligence in the fulfillment of the service to be rendered. 4. Habitual drunkenness. 5. Any occurrence which incapacitates the sailor to carry out the work under his charge, with the exception of the provisions contained in Article 644. 6. Desertion. Article 644. A sailor who falls sick shall not lose his right to wages during the voyage, unless the sickness is the result of his own fault. At any rate, the costs of the attendance and cure shall be defrayed from the common funds, in the form of a loan. If the sickness should be caused by an injury received in the service or defense of the vessel the sailor shall be attended and cured from the common funds, there being deducted before anything else from the proceeds of the freight, the cost of the attendance and cure. Supercargo -- A person specially employed by the owner of a cargo to take charge of and sell to the best advantage merchandise which has been shipped, and to purchase returning cargoes and to receive freight, as he may be authorized. ventures which, in accordance with the custom of the port of destination, they are permitted to do. Neither shall they be permitted to invest in the return trip more than the profits from the ventures, unless there is a special authorization thereto from the principals. ABANDONMENT/DOCTRINE MARINE TRANSPORTATION OF LIMITED LIABILITY IN
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Recall: Article 586 and 583 (SO/SA civilly liable for acts of captain and obligations contracted) Article 587. The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the voyage. Other provisions providing for abandonment: Article 590. The owners of a vessel shall be civilly liable in the proportion of their contribution to the common fund, for the results of the acts of the captain, referred to in Article 587. Each part owner may exempt himself from this liability by the abandonment before a notary of the part of the vessel belonging to him. And in cases of collision if the same is caused by the captain alone, under Article 837: The civil liability contracted by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all her appurtenances and all the freight earned during the voyage. Abandonment -- It is equivalent to an offer of the value of the vessel, her equipment and freight earned in return for an exemption from liability. So if the vessel sank and the sinking of the vessel was caused entirely by the negligence of the captain, the SO or SA can be held liable. But if SO or SA abandons the vessel, then the liability will only be limited to the value of the vessel, the freightage and the equipment. The real and hypothecary nature of maritime law, therefore, distinguishes it from Civil law and commercial law because of this doctrine. A shipping transportation contract is "real and hypothecary" in nature under Art. 587 which accord/issue a shipowner/agent the right of abandonment and by necessary implication, his liability is confined to that to which he is entitled as of right to abandon, meaning the vessel and all her equipment and the freight she may have earned during the voyage. Reasons why SO/SA are given the right to abandonment: o To offset against the innumerable hazards and perils of the sea; o To encourage ship building and marine commerce
Article 649. Supercargoes shall discharge on board the vessel the administrative duties which the agent or shippers may have assigned them; they shall keep an account and record of their transactions in a book which shall have the same conditions and requisites as required for the accounting book of the captain, and shall respect the latter in his duties as chief of the vessel. The powers and liabilities of the captain shall cease, when there is a supercargo, with regard to that part of the administration legitimately conferred upon the latter, but shall continue in force for all acts which are inseparable from his authority and office. Article 650. All the provisions contained in the second section of Title III, Book II, with regard to qualifications, manner of making contracts, and liabilities of factors shall be applicable to supercargoes.
Article 651. Supercargoes cannot, without special authorization or agreement, make any transaction for their own account during the voyage, with the exception of the

When abandonment is made in the instances provided by law, it cannot be refused. A charterer cannot make an abandonment because he cannot be considered in place of the owner or the shipagent in matters regarding to the responsibility pertaining to ownership and possession of the vessel. Even if the charter is a bareboat or demise charter. EXCEPTIONS TO RIGHT OF ABANDONMENT (meaning even if the right to abandonment exists, the SO/SA will still pay for more than the value of the vessel) o When the vessel is properly insured - the insurance will take care of the liability, the value of which may be more than the value of the vessel, freight, etc. o When the liability for repairs of the vessel was incurred before the loss of such vessel (favorite BQ) o When the liability is one which arises from the provisions of the labor code. When abandonment CANNOT BE MADE o When the voyage is not maritime, but only in a river, bay, or gulf o When the vessel is not acting as a common carrier but a private carrier. o When the SO/SA is at fault, i.e. when there is lack of proper equipment, lack of technical training of the crew, unlicensed crew members, captain. So any kind of negligence, no matter how minute will remove the right of abandonment. The doctrine of limited liability cannot be invoked in this case because there was fault or negligence on the part of the carrier because it overloaded the vessel even if it was cleared to leave. And everytime it is discovered that a vessel is overloaded with cargo/pax, goodbye abandonment. Article 587 speaks only of situations where the fault or negligence is committed solely by the captain. In cases where the shipowner is likewise to be blamed, Article 587 does not apply. Such a situation will be covered by the provisions of the New Civil Code on Common Carriers. Whenever death or injury to a passenger occurs, common carriers are presumed to have been at fault or to have acted negligently unless they prove that they observed extraordinary diligence as prescribed by Articles 1733 and 1755 Right of abandonment does not exist in case the sinking of the vessel was due to a fortuitous event. In this case the ship owner or ship agent will be exempt from liability. The exception to the limited liability doctrine applies when the damage is due to the fault of the shipowner or to the concurrent negligence of the shipowner and the captain. Where the shipowner fails to overcome the presumption of negligence, the doctrine of limited liability cannot be applied. As a general rule, a ship owner's liability is merely coextensive with his interest in the vessel, except where actual fault is attributable to the shipowner. Thus, as an exception to the limited liability doctrine, a shipowner or ship agent may be held liable for damages when the sinking of the vessel is attributable to the actual fault or negligence of the shipowner or its failure to ensure the seaworthiness of the vessel. SPECIAL CONTRACTS IN MARITIME COMMERCE: o Charter party o bill of lading o loans on bottomry and respondentia CHARTER PARTY - a contract wherein the entire ship or some principal part thereof is let by the owner to another person for a specified time or use, in consideration of the payment of a fee. Two kinds of charter paty o Contract of Affreightment - here the owner retains control of the vessel, he provides the crew, what is being leased is only the space of the vessel. A contract of affreightment can be a time charter or a voyage charter. o Bareboat/Demise Charter wherein the owner of the vessel gives up the control and full possession of the vessel to the charterer who becomes the owner pro hac vice. If Voyage or time charter = common carrier retains its nature as a common carrier; but if it is bareboat charter, the common carrier becomes a private carrier for that particular charter only.
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Formal/Substantial requirements Article 652. A charter party must be drawn in duplicate and signed by the contracting parties, and when either does not know how or cannot do so, by two witnesses at their request. The charter party shall include, besides the conditions unrestrictedly stipulated, the following statements: 1.The kind, name, and tonnage of the vessel. 2.Her flag and port of registry. 3.The name, surname, and domicile of the captain. 4.The name, surname, and domicile of the agent, if the latter should make the charter party. 5.The name, surname, and domicile of the charterer, and if he states that he is acting by commission, that of the person for whose account he makes the contract. 6.The port of loading and unloading. 7.The capacity, number of tons or weight, or measure which they respectively bind themselves to load and transport, or whether it is the total cargo. 8.The freightage to be paid, stating whether it is to be a fixed amount for the voyage or so much per month, or for the space to be occupied, or for the weight or measure of the goods of which the cargo consists, or in any other manner whatsoever agreed upon. 9.The amount of primage to be paid to the captain. 10.The days agreed upon for loading and unloading. 11.The lay days and extra lay days to be allowed and the rate of demurrage. PRIMAGE a small allowance or compensation payable to the master or owner of the vessel for the use of its cables to load and unload the goods and to the mariners

for lading and unlading in port. So what you pay those who load; DEMURRAGE an amount stipulated in the charter party to be paid by the charter/shipper to the ship owner for any delay. LAYDAYS -- no. of days between unloading and departure WHO CAN RESCIND A CHARTER PARTY Either party If the new owner of the vessel should not load her for his own account the charter party shall be respected (in such case, the charter party is not rescinded) and the vendor shall indemnify the purchaser if the former did not inform him of the charter pending at the time of making the sale. Otherwise, if he informed him, then no need to indemnify. Rescission by Charterer Ground 1. Abandonment of charter before loading 2. Capacity of vessel not found to be in conformity with that stated in certificate of tonnage 3. Error in the statement of the flag under which vessel navigates 4. Non placement of vessel at disposal of charterer within period and manner agreed upon 5. Vessel returns to port of departure on account of risk from pirates, enemies or inclement weather 6. Vessel makes port in order to make repairs Failure of charterer to place cargo alongside vessel at the termination of extra lay days (Agreed date November 10. But November 21 na wala pa rin) Sale of vessel before the charterer has begun to load the vessel. (November 10 entered the contract and November 14, the vessel has been sold to another)
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Article 688. A charter party may be annulled at the request of the charterer: 1.If before loading the vessel he should abandon the charter, paying half of the freightage agreed upon. (abandonment of charter before loading; pay 1/2 of the freight) 2.If the capacity of the vessel should not agree with that stated in the certificate of the tonnage, or if there is an error in the statement of the flag under which she sails. (Charterer will be indemnified by the owner) 3.If the vessel should not be placed at the disposal of the charterer within the period and in the manner agreed upon. (non placement at disposal of the charterer) 4.If, after the vessel has put to sea, she should return to the port of departure, on account of risk of pirates, enemies, or bad weather, and the freighters should agree to unload her. (charterer must pay owner for the voyage out, meaning one way) In the second and third cases the person from whom the vessel was chartered shall indemnify the charterer for the losses he may suffer. In the fourth case the person from whom the vessel was chartered shall have a right to the freightage in full for the voyage out. If the charter should have been made by the months, the charterers shall pay the full freightage for one month, if the voyage were to a port in the same waters, and two months, if the voyage were to a port in different waters. From one port to another of the Peninsula and adjacent islands, the freightage for one month only shall be paid. 5.If a vessel should make a port during the voyage in order to make urgent repairs and the freighters should prefer to dispose of the merchandise.(pay for voyage out) When the delay does not exceed thirty days, the freighters shall pay the full freight for the voyage out. Should the delay exceed thirty days, they shall only pay the freight in proportion to the distance covered by the vessel. Article 689. At the request of the person from whom the vessel is chartered the charter party may be rescinded: 1.If the charterer at the termination of the extra lay days does not place the cargo alongside the vessel. In such case the charterer must pay half the freight stipulated besides the demurrage for the lay days and extra lay days elapsed. 2.If the person from whom the vessel was chartered should sell her before the charterer has begun to load her and the purchaser should load her for his own account. In such case the vendor shall indemnify the charterer for the losses he may suffer.
Consequence 1. He must pay of freight agreed upon 2. He will be indemnified by owner for damages suffered 3. He will be indemnified by owner for damages suffered
1. He will be indemnified by owner for damages suffered 2. If he unloads the vessel, owner shall have the right to freight in full for voyage out 3. He must dispose of the goods
Charter is rescinded but he must pay the charterer: a. of the freight stipulated, and b. demurrage for the lay days and extra lay days 1. Charter is rescinded if the buyer of the vessel has loaded the vessel for his own account BUT seller/owner must indemnify charterer for damages suffered Charter is NOT rescinded if buyer has NOT loaded the vessel for his own account BUT the seller shall indemnify the buyer if he did not inform the buyer of the charter at the time of making the sale (if new owner has no intention of using the
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vessel but only bought it as investment, then the charterer can still use it. But if the owner has a plan and he will use the vessel on the same dates of the charter contract, then the previous ship owner shall be liable to the charterer. Charter Party vs Ordinary Lease Contract Charter Party Period If for definite period, the charterer may rescind the charter party by paying half of the freightage New owner cannot be compelled to respect the charter party. Ordinary Lease Contract If the lease is for a definite period, the lessee cannot terminate the contract b. recites the date and place of shipment and the fees paid by the shipper 2. It is evidence of a CONTRACT by which the 3 parties [shipper, carrier, consignee] undertake specific responsibilities and assume stipulated obligations; also fixes the route, destination, freight charges, and stipulates the rights and obligations assumed by the parties [Art. 353] 3. Document of title, under Negotiable instruments law Kinds of Bill of lading: 1. A clean bill of lading, says that the goods were received in good order/does not say anything on the condition of the goods. Meaning no defect. 2. Foul, there are notations, goods are rusty, packaging has holes. Spent, the goods are already delivered but the bill of lading was not returned by consignee to the carrier. Through, one issued by the carrier who is obliged to use the facilities of other carriers. So we have here Carrier A, B, C, D from davao to manial to hongkong so no need for each carrier to issue a Bill of lading pwede na si A lang and in w/c bill of lading is honoured by the second and other interested carriers who do not issue their own bills. Custody, one wherein the goods are already received by the carrier but the vessel indicated therein has not yet arrived in the port. Port, issued by the carrier to whom the goods have been delivered, and the vessel indicated in the bill of lading by which the goods are to be shipped is already in the port where the goods are held for shipment. Of course the shipper wants to know if the vessel arrived especially for perishable goods On board, issued when the goods have been actually placed abroad the ship w/ very reasonable expectation that the shipment is as good as on its way. Received, one in which it is stated that the goods have been received for shipment w/ or w/o specifying the vessel by which the goods are to be shipped.
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Effect of sale to 3rd person
If the leased property is sold to one who knows of the existence of the lease contract, the new owner must respect the lease
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Seaworthiness cannot be agreed to between the parties (parang jurisdiction of the court) because it is a fact which has to be proven. A ship is efficient as an instrument of transport if its hull, tackle and machinery are in a state of good repair, if she is sufficiently provided with fuel and ballast, and is manned by an efficient crew. A vessel is cargoworthy if it is sufficiently strong and equipped to carry the particular kind of cargo which she has contracted to carry, and her cargo must be so loaded that it is safe for her to proceed on her voyage. A mere right given to the charterer to inspect the vessel before loading and to satisfy himself that she was fit for the contracted cargo does not free the shipowner from his obligation to provide a cargoworthy ship. BILLS OF LADING An instrument in writing signed by the carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the contract of carriage and agreeing or directing that the freight be delivered to the order or assigns of a specified person at a specified place. 3-Fold Character of a BL 1. A RECIEPT which: a. specifies the quantity, condition and character of the goods received, and
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A "bill of lading delivered and accepted constitutes the contract of carriage even though not signed," because the "(a)cceptance of a paper containing the terms of a proposed contract generally constitutes an acceptance of

the contract and of all of its terms and conditions of which the acceptor has actual or constructive notice." In a nutshell, the acceptance of a bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the presumption that the same was a perfected and binding contract. Article 353. The legal basis of the contract between the shipper and the carrier shall be the bills of lading, by the contents of which all disputes which may arise with regard to their execution and fulfillment shall be decided without admission of other exceptions than forgery or material errors in the drafting thereof. After the contract has been complied with the bill of lading issued by the carrier shall be returned to him, and by virtue of the exchange of this certificate for the article transported, the respective obligations and actions shall be considered as cancelled, unless in the same act the claims which the contracting parties desired to reserve are reduced to writing, exception being made of the provisions of Article 366. If in case of loss or for any other reason whatsoever, the consignee cannot return upon receiving the merchandise the bill of lading subscribed by the carrier, he shall give said carrier a receipt for the goods delivered, this receipt producing the same effects as the return of the bill of lading. What is the presumption if the carrier does not hold the bill of lading after the fulfilment of the contract of transportation? The presumption is that the carrier did not deliver the goods. In the code of commerce, there is art.356; can the carrier refuse to accept goods? In general, No because it is obliged to offer services to whoever wants to avail its services but may refuse if the goods are unfit for transportation. When can carrier examine the goods? When there is a reason of well founded suspicion of falsity. So there are steps to be taken: 1. It must made in the presence of witnesses 2. The Shipper/consignee must be in attendance/ before a notary public It must open the goods in front of the shipper If after examination, the declaration is found to be true, like totoo pala na old clothes even though it is very heavy, the expenses for examination and repackage shall be borne by the carrier, otherwise, it shall be paid by the shipper. The expenses arising from the change of consignment shall be defrayed by the shipper. Conditions for changing consignee: o Carrier has to be informed o The carrier must comply with the change of the consignee if the place of delivery shall not be altered. o The original bill of lading must be returned to the carrier who shall issue another one containing the novation of contract and expenses in the change of consignee shall be paid by the shipper. TRANSSHIPMENT - It is the act of taking cargo from one ship and loading it into another. Transshipment cannot be made if the shipper does not consent because it is dangerous.. it will expose the goods to breakage, etc. So the effect if there was transshipment without consent is that there is a breach in the contract of carriage. And the carrier is liable to the shipper in case of loss, even for an otherwise excepted cause.
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BRINGING AN ACTION/CLAIM AGAINST THE CARRIER Article 366. Within the twenty-four hours following the receipt of the merchandise a claim may be brought against the carrier on account of damage or average found therein on opening the packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said claim would only be admitted on the receipt of the packages. After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. So if the damage is apparent, file a claim, which may be verbal, immediately upon receipt When does the 24 hour period begin to run? When the goods are actually received. All claims are extinguished if consignee receives the merchandise, and pays the freight charges without protest In order that the condition provided in Article 366 of the Code of Commerce may be demanded there should be a consignment of goods, through a common carrier, by a consignor in one place to a consignee in another place. And said article provides that the claim for damages must be made .within twenty-four hours following the receipt of the merchandise. by the consignee from the carrier. In other words, there must be delivery of the merchandise by the carrier to the consignee at the place of destination. Did the Civil Code repeal the prescriptive period to file a claim under the Code of Commerce? No, the limitations of actions mentioned in the Civil Code are without prejudice to those specified in the Code of Commerce.
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Article 360. The shipper may, without changing the place where the delivery is to be made, change the consignment of the goods delivered to the carrier, and the latter shall comply with his orders, provided that at the time of making the change of the consignee the bill of lading subscribed by the carrier be returned to him, if one were issued, exchanging it for another containing the novation of the contract.

Period to file for recovery of undelivered/lost cargo in the courts:(note that under the Code of commerce, it does not cover loss/non delivery of cargo) -- If there is a bill of lading, 10 years, otherwise, 6 years. If it involves overseas trading, 1 year from date when it was supposed to be received. The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time of delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties. The filing of a claim with the carrier within the time limitation therefore actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action. It is not only when the period to make a claim has elapsed that no claim whatsoever shall be admitted, as no claim may similarly be admitted after the transportation charges have been paid. In this case, there is no question that the transportation charges have been paid, as admitted by the petitioner, and the corresponding official receipt Under the Code of Commerce, the notice of claim must be made within twenty four (24) hours from receipt of the cargo if the damage is not apparent from the outside of the package. For damages that are visible from the outside of the package, the claim must be made immediately. The periods , as well as the manner of giving notice may be modified in the terms of the bill of lading, which is the contract between the parties. Prescriptive Period to File a Case in Court : o If there is a bill of lading 10 years [Art. 1144 based on a written contract] o If there is NO bill of lading 6 years [Art. 1145 based on a an oral or quasi-contract] o If it involves overseas trading 1 year [COGSA] If the collateral is the vessel = bottomry; if collateral is goods = respondentia. Characteristics of a loan on Bottomry: It is a loan the security of which is the vessel itself and conditioned on the safe arrival at the port of destination. Also the vessel must be exposed to maritime peril. (So it must be destroyed during its voyage) Who may contract such loan? o On bottomry: The owner of the vessel or the captain o on respondentia: owner of the cargo.
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Ordinary Loan May or may not have collateral Collateral may be real or personal property Absolutely repayable
Loan on Bottomry/Respondentia Must always have collateral Collateral must be a vessel or a cargo subject to maritime risk Payment depends on the safe arrival by the collateral at the port of the loan Must be in writing Must be registered in the registry of vessels Loss of collateral extinguishes the loan
Need not be in writing rd To be binding on 3 persons, need not be registered Loss of collateral, if any, does not extinguish the loan
Effect of loss of collateral: o Gen Rule: Extinguishes the loan provided requirements of Art. 731 are complied with.
Article 731. The actions which may be brought by the lender shall be extinguished by the absolute loss of the goods on which the loan was made, if said loss arose from an accident of the sea at the time and during the voyage designated in the contract, and should it be proven that the cargo was on board; o EXCEPTIONS: but this shall not take place if the loss were caused by the inherent defect of the thing; or through the fault or malice of the borrower, or through barratry on the part of the captain, or if it were caused by damages suffered by the vessel as a consequence of being engaged in contraband, or if it arose through loading the merchandise on a vessel other than that designated in the contract, unless this change should have been made by reason of force majeure.
LOANS ON BOTTOMRY AND RESPONDENTIA Article 719. A loan on bottomry or respondentia shall be considered that which the repayment of the sum loaned and the premium stipulated, under any condition whatsoever, depends on the safe arrival in port of the goods on which it is made, or of their value in case of accident.
The proof of the loss is incumbent upon the person who received the loan, as well as the proof of the existence in the vessel of the goods declared to the lender as the object thereof. The loan is extinguished, provided: o It arose from an accident of the sea at the time and during the voyage designated in the contract o It is proven that the cargo was on board

The loan is not extinguished when: o The loss was caused by: Inherent defect of the thing Malice of the borrower Barratry of the captain Damages suffered by the vessel as a consequence of being engaged in contraband. o The cargo loaded on the vessel is different from that agreed upon, unless the change should have been made by reason of force majeure. Barratry any wilful misconduct on the part of the master or crew in pursuance of some unlawful or fraudulent purpose without the consent of the owners and to the prejudice of the owners interest. o The damages suffered by the vessel in her hull, rigging, arms, and equipment, for the same causes and reasons, from the time she puts to sea from the port of departure until she anchored in the port of destination. o The damages suffered by the merchandise loaded on deck, except in coastwise navigation, if the marine ordinances allow it. o The wages and victuals of the crew when the vessel should be detained or embargoed by a legitimate order or force majeure, if the charter should have been for a fixed sum for the voyage. o The necessary expenses on arrival at a port, in order to make repairs or secure provisions. o The lowest value of the goods sold by the captain in arrivals under stress for the payment of provisions and in order to save the crew, or to cover any other requirement of the vessel against which the proper amount shall be charged. o The victuals and wages of the crew during the time the vessel is in quarantine. o The damage suffered by the vessel or cargo by reason of an impact or collision with another, if it were accidental and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be liable for all the damage caused. o Any damage suffered by the cargo through the faults, negligence, or barratry of the captain or of the crew, without prejudice to the right of the owner to recover the corresponding indemnity from the captain, the vessel, and the freight. GENERAL AVERAGE all the damages and expenses which are deliberately caused in order to save the vessel, her cargo, or both at the same time, from a real and known risk (Art. 811) Who bears the loss? ARTICLE 812. In order to satisfy the amount of the gross or general averages, all the persons having an interest in the vessel and cargo therein at the time of the occurrence of the average shall contribute. Example of General Ave: o The goods or cash invested in the redemption of the vessel or cargo captured by enemies, privateers, or pirates, and the provisions, wages, and expenses of the vessel detained during the time the arrangement or redemption is taking place. o The goods jettisoned to lighten the vessel, whether they belong to the vessel, to the cargo, or to the crew, and the damage suffered through said act by the goods kept. o The cables and masts which are cut or rendered useless, the anchors and the chains which are abandoned in order to save the cargo, the vessel, or both. o The expenses of removing or transferring a portion of the cargo in order to lighten the vessel and place her in condition to enter a port or roadstead, and
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RISKS, DAMAGES AND ACCIDENTS OF MARITIME COMMERCE Article 806. For the purposes of this Code the following shall be considered averages: 1. All extraordinary or accidental expenses which may be incurred during the navigation for the preservation of the vessel or cargo, or both. 2. All damages or deterioration the vessel may suffer from the time she puts to sea from the port of departure until she casts anchor in the port of destination, and those suffered by the merchandise from the time it is loaded in the port of shipment until it is unloaded in the port of consignment. Article 807. The petty and ordinary expenses of navigation, such as pilotage of coasts and ports, lighterage and towage, anchorage dues, inspection, health, quarantine, lazaretto, and other so-called port expenses, costs of barges, and unloading, until the merchandise is placed on the wharf, and any other expenses common to navigation shall be considered ordinary expenses to be defrayed by the shipowner, unless there is a special agreement to the contrary. Article 808. Averages shall be: 1.Simple or particular. 2.General or gross. PARTICULAR AVERAGE Simple or particular averages shall be, as a general rule, all the expenses and damages caused to the vessel or to her cargo which have not redounded to the benefit and common profit of all the persons interested in the vessel and her cargo x x x (Art. 809) Who bears the loss in particular average? The owner of the goods which gave rise to the expense or suffered the damage shall bear the simple or particular average (Art. 810) Examples of particular average: o The damages suffered by the cargo from the time of its embarkation until it is unloaded, either on account of the nature of the goods or by reason of an accident at sea or force majeure, and the expenses incurred to avoid and repair the same.

the damage resulting therefrom to the goods removed or transferred. The damage suffered by the goods of the cargo through the opening made in the vessel in order to drain her and prevent her sinking. The expenses caused through floating a vessel intentionally stranded for the purpose of saving her. The damage caused to the vessel which it is necessary to break open, scuttle, or smash in order to save the cargo. The expenses of curing and maintaining the members of the crew who may have been wounded or crippled in defending or saving the vessel. The wages of any member of the crew detained as hostage by enemies, privateers, or pirates, and the necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or to his domicile, should he prefer it. The wages and victuals of the crew of a vessel chartered by the month during the time it should be embargoed or detained by force majeure or by order of the Government, or in order to repair the damage caused for the common good. The loss suffered in the value of the goods sold at arrivals under stress in order to repair the vessel because of gross average. The expenses of the liquidation of the average. the hold; and naturally it is always the first cargo to go over in case of emergency. Indeed, in subsection 1 of article 815 of the Code of Commerce, it is expressly declared that deck cargo shall be cast overboard before cargo stowed in the hold. But this rule, denying deck cargo the right to contribution by way of general average in case of jettison, was first made in the days of sailing vessels; and with the advent of the steamship as the principal conveyer of cargo by sea, it has been felt that the reason for the rule has become less weighty, especially with reference to coastwise trade; and it is now generally held that jettisoned goods carried on deck, according to the custom of trade, by steam vessels navigating coastwise and inland waters, are entitled to contribution as a general average loss. What is Jason Clause: Part of the York-Antwerp Rules (Rule D): -- Right to contribution in general average shall not be affected, though the even which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure, BUT this shall not prejudice any remedies which may be open against that party for such cause. General Average: o Deliberately caused in order to save the vessel or cargo or both o Inures to the benefit of those interested in the vessel or her cargo o Shall be shared and contributed to by all persons benefited Particular average: o May be due to causes other than a deliberate act o Does not inure to the common benefit of all persons interested in the vessel and her cargo o Shall be borne by the owner of the things damaged which gave rise to the desctruction
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o o
REQUISITES FOR GENERAL AVERAGE: o There must be a COMMON DANGER, a danger in which the ship, cargo and crew all participate; o For the common safety or for the purposes of avoiding imminent peril, part of the cargo or vessel on board is sacrificed deliberately o There must be attempt to avoid the imminent peril must be successful in a sense that the vessel and some of the cargo are saved o Damages or expenses were incurred after taking the proper legal steps. RE: Jettison Art 815: o Those which are on deck, beginning those which embarrass the handling of the vessel or damage her, preferring, if possible the heaviest one and those of least utility and value. o Those in the hold, always beginning with those of the greatest weight and smallest value, to the amount and number absolutely indispensable. Ordinarily the loss of cargo carried on deck shall not be considered a general average loss. This is clearly expressed in Rule I of the York-Antwerp Rules, as follows: "No jettison of deck cargo shall be made good as general average." The reason for this rule is found in the fact that deck cargo is in an extra-hazardous position and, if on a sailing vessel, its presence is likely to obstruct the free action of the crew in managing the ship. Moreover, especially in the case of small vessels, it renders the boat top-heavy and thus may have to be cast overboard sooner than would be necessary if it were in
Article 665. The cargo shall be specially liable for the payment of the freight expenses, and duties arising therefrom, which must be reimbursed by the shippers, as well as for the part of the general average which may be due, but it shall not be legal for the captain to delay unloading on account of delay in complying with this obligation. Should there be reasons for distrust, the judge or court, at the instance of the captain, may order the deposit of the merchandise until he has been paid in full. EFFECTS OF DECLARATION OF WAR/BLOCKADE IF THERE IS CHARTER PARTY Article 677. The charter party shall be enforced if the captain should not have any instructions from the charterer, and a declaration of war or a blockade should take place during the voyage. In such case the captain shall be obliged to make the nearest safe and neutral port, and request and await orders from the freighter; and the expenses incurred and salaries earned during the detention shall be paid as general average .

If, by orders of the freighter, the cargo should be discharged at the port of arrival, the freight for the voyage out shall be paid in full. LIABILITY OF LENDERS ON BOTTOMRY OR RESPONDENTIA FOR GEN. AVE OR PARTICULAR AVE. IN THE THINGS ON WHICH THE LOAN WAS MADE Article 732. Lenders on bottomry or respondentia shall suffer in proportion to their respective interest, the general average which may take place in the goods on which the loan was made. In particular averages, in the absence of an express agreement between the contracting parties, the lender on bottomry or respondentia shall also contribute in proportion to his respective interest, should it not belong to the kind of risks excepted in the foregoing article. Provided that they do not fall under the exceptions under Article 731. The actions which may be brought by the lender shall be extinguished by the absolute loss of the goods on which the loan was made, if said loss arose from an accident of the sea at the time and during the voyage designated in the contract, and should it be proven that the cargo was on board; but this shall not take place if the loss were caused by the inherent defect of the thing or through the fault or malice of the borrower, or through barratry on the part of the captain, or if it were caused by damages suffered by the vessel as a consequence of being engaged in contraband, or if it arose through loading the merchandise on a vessel other than that designated in the contract, unless this change should have been made by reason of force majeure. Application: A- Borrower B- Lender Loan on Respondentia = P1M Security - Cargo of A worth 1.5M Facts: Vessel met a typhoon, to lighten the load, other cargoes were thrown overboard; A's cargo and the vessel were saved. It was determined that A's contribution to the average was P300,000. Determine the Interest of the parties in P1.5M worth of cargo/ Extent of share in the P300,000 contribution A: 1/3 (amount not loaned or P500,00 ) = 100,000 B: 2/3 (amount of loan or P1M) = 200,000 2. Suppose A's cargo was damaged to the extent of P1.2 M and the same was a particular average? 1/3 of 1.2 = 400,000 2/3 of 1.2 = 800,000 ARRIVAL UNDER STRESS Arrival of the vessel at the nearest and most convenient port because the vessel cannot continue the trip to the port of destination on the following grounds: o lack of provisions; o well founded fear of seizure, privateers or pirates; o by reason of any accident of the sea disabling the vessel to navigate. (Art. 819) LACK OF PROVISION -- note that the arrival under stress is NOT lawful If the lack of provisions should arise from the failure to take the necessary provisions for the voyage, according to usage and custom, or if they should have been rendered useless or lost through bad stowage or negligence in their care. WELL FOUNDED FEAR X X X not lawful If the risk of enemies, privateers, or pirates should not have been well known, manifest, and based on positive and justifiable facts. ACCIDENT OF SEA X X X not lawful if the vessel was unseaworthy or if it is the result of some erroneous order of the captain. Whenever malice, negligence, want of foresight, or lack of skill on the part of the captain is the reason for the act causing the damage, the arrival under stress is NOT lawful. Effect if arrival under stress is lawful losses are considered as particular average and damages need not be paid to the shipper. (Art. 821) If not lawful: Damages must be paid to the shipper. (Jointly liable S/A, S/O and captain) COLLISIONS It is the impact of two moving vessels. Includes allision in a broad sense. ALLISION striking of a moving vessel against one which is not moving. When the two vessels approach each other it covers all the time up to the moment when the risk of collision may be said to have begun. Within this zone no rule is applicable because none is necessary. Each vessel is free to direct its course as it deems best without reference to the movements of the other vessel. When the two vessels are so near to each other and contact is so eminent. This covers the time between the moment when the risk of collision begins and the moment when it has become a practical certainty. The rule here is before actual contact, the vessel w/c had the last clear chance to avoid collision but did not do so will be held liable. The third division covers the time between the moment when collision has become a practical certainty and the moment of actual contact. ONE VESSEL AT FAULT Said vessel is liable for the damage caused to the innocent vessel and for damages suffered by the owners of the cargo of the innocent vessel and the owners of the cargoes of its own vessel. Take note that the owners of the cargo of the innocent
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vessel can still sue the innocent vessel for breach of contract. BOTH VESSELS AT FAULT or IT CANNOT BE DETERMINED WHICH ONE IS AT FAULT Each vessel must bear its own loss; both ship owners are solidarily liable to the shippers for the damages occasioned to the cargo (Art. 827, 828) 3RD VESSEL IS AT FAULT - Third vessel liable for everything (Art. 831) COLLISION CAUSED BY FORTUITOUS EVENT - everybody must bear his/her own loss. (Art. 840) Can shipowner raise the defense of GFOF in case of collision? This defense is untenable. While it is true that plaintiff's action against petitioner is based on a tort or quasi-delict, the tort in question is not a civil tort under the Civil Code but a maritime tort resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce. Under Article 827 of the Code of Commerce, in case of collision between two vessels imputable to both of them, each vessel shall suffer her own damage and both shall be solidarily liable for the damages occasioned to their cargoes. The characteristic language of the law in making the "vessels" solidarily liable for the damages due to the maritime collision emphasizes the direct nature of the responsibilities on account of the collision incurred by the shipowner under maritime law, as distinguished from the civil law and mercantile law in general. This direct responsibility is recognized in Article 618 of the Code of Commerce under which the captain shall be civilly liable to the ship agent, and the latter is the one liable to third persons. Can the doctrine of limited liability be invoked? No, because there was fault on the part of both the vessels. Article 831. If a vessel should be forced to collide with another one by a third vessel, the owner of the third vessel shall indemnify for the losses and damages caused, the captain thereof being civilly liable to said owner. Article 832. If, by reason of a storm or other cause of force majeure, a vessel which is properly anchored and moored should collide with those in her immediate vicinity, causing them damage, the injury occasioned shall be looked upon as particular average to the vessel run into. Article 833. A vessel shall be presumed as lost thru a collision which, upon being run into, sinks immediately, and also any vessel which is obliged to make a port to repair the damages caused by the collision should be lost during the voyage, or should be obliged to be stranded in order to be saved. iatdc2005 Article 834. If the vessels colliding should have pilots on board discharging their duties at the time of the collision, their presence shall not exempt the captains from the liabilities they incur; but the latter shall have the right to be indemnified by the pilots without prejudice to the criminal liability which the latter may incur. Article 835. The action for the recovery of losses and damages arising from collisions cannot be admitted if a protest or declaration is not presented within twenty-four hours to the competent authority of the point where the collision took place, or that of the first port of arrival of the vessel, if in Spain, * and to the consul of Spain * if it should have occurred in a foreign country. Article 836. In so far as the damages caused to persons or to the cargo are concerned, the absence of a protest cannot prejudice the persons interested who were not on board or were not in a condition to make known their wishes. Article 837. The civil liability contracted by the shipowners in the cases prescribed in this section, shall be understood as limited to the value of the vessel with all her appurtenances and all the freight earned during the voyage. Article 838. When the value of the vessel and her appurtenances should not be sufficient to cover all the liabilities, the indemnity due by reason of the death or injury of persons shall have preference. Error in Extremis -- Where a navigator, suddenly realizing that a collision is imminent by no fault of his own, in confusion and excitement of the moment does something which contributes to the collision or omits to do something by which the collision might be avoided, such act or omission is ordinarily considered to be in extremis and the ordinary rules of strict accountability will not apply. When will the rule of error in extremis apply? It must appear that there was an imminent danger since the
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Article 826. If a vessel should collide with another through the fault, negligence, or lack of skill of the captain, sailing mate, or any other member of the complement, the owner of the vessel at fault shall indemnify the losses and damages suffered, after an expert appraisal. Article 827. If both vessels may be blamed for the collision, each one shall be liable for his own damages, and both shall be jointly responsible for the losses and damages suffered by their cargoes. Article 828. The provisions of the foregoing article are applicable to the case in which it cannot be decided which of the two vessels was the cause of the collision. Article 829. In the cases above mentioned the civil action of the owner against the person liable for the damage is reserved, as well as the criminal liabilities which may be proper. Article 830. If a vessel should collide with another by reason of an accident or through force majeure, each vessel and her cargo shall be liable for their own damage.

error of judgment is excusable only if it was committed during such peril. It is the actual risk of danger and not apprehension merely that determines the question whether the error is one extremis. Example: A stepped on the gas instead of stepping on the brake and there is a collision, then that is an error in extremis. What applies depends on the facts, but not the rules of collision. DOCTRINE OF INSCRUTABLE FAULT Means that the court can see that a fault has been committed, but is unable, from the conflict of testimony or otherwise to locate it. Hence, when it is impossible to determine to what direct and specific acts the collision is attributable, it is a case of damage arising for a cause that is inscrutable. CAN A SHIPOWNER RAISE THE DEFENSE OF GOOD FATHER OF A FAMILY? o if culpa contractual NO o If culpa acquiliana - Yes, except in cases of collision when both parties/vessel are at fault (Art. 827) o If culpa criminal - No. SHIPWRECK the demolition or shattering of a vessel caused by her driving ashore or on rocks and shoals in the midseas or by the violence of winds and waves in tempest. Who bears the damage? o Gen rule: borne individually by the respective owners, o exceptions: captain shall be liable for the damage of the shipwreck in case of malice, negligence, or lack of skill, or because the vessel was put to sea was insufficienty repaired and equipped (Art. 841, Code of Commerce) 3. The salvage service must be rendered voluntarily and must not arise from a pre-existing duty or from special contract (so it must be rendered by a 3rd party, not the ees) 4. The efforts must be successful. Towage is when a tugboat pulls a barge. There is salvage when a vessel, by towing, is aided to escape present or prospective danger. So even if the vessel being salvaged is not a wreck, and it is towed to escape danger, then that is still considered salvage. Towage is made to take the vessel from one place to another. For salvage, the captain and crew are entitled to a share in the reward. In towage, the captain and crew are not entitled to a share in the towage service payment. CARRIAGE OF GOODS BY SEA ACT Only refers to goods; does not refer to passenger liners. This is a US law. This applies only to foreign trade; does not apply in domestic trade. The fact that the transshipment was made by an interisland vessel did not operate to remove the transaction from the operation of the COGSA. Such transshipment was not a separate transaction from the one originally entered into. The contract of carriage was from New York to Cebu; it was one undivided contract for which the corresponding freight has been pre-paid. WHAT IS THE EFFECT OF COGSA ON OUR MARITIME LAW AND CIVIL CODE? It shall not repeal any existing provision of the code of commerce which are now in force nor does it limit the application of the code of commerce.
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SALVAGE LAW (ACT 2616) Salvage is a service which one person renders to the owner of a ship or goods by his own labor, preserving the goods or ship the owner or those entrusted with the care of them either abandoned in distress or at sea or are unable to protect and secure. The Salvage law provides for a compulsory reward to those who brave the perils of the sea to save the cargo or the vessel. If the salvage is successful, the owner of the vessel/cargo has to give a 50% (of the value of the property saved) reward to the salvagor. This is the maximum. REQUISITES: 1. There must be a valid object to salvage; 2. The subject to be salvaged must have been exposed to a marine peril
FILING OF CLAIM (Sec. 3.6) (6) Unless notice or loss or damage and the general nature of such loss or damage by given in writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery. Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection. In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered: Provided, that, if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one

year after the delivery of the goods or the date when the goods should have been delivered. In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods. The prescpriptive period for filing an action in court is 1 year after the delivery of the goods if the goods are destroyed or damaged or 1 year after the date when the goods should have been delivered if they are lost. What is the effect if you do not file a notice of loss? It shall NOT prejudice the right of the shipper to bring the suit within the one year period. So even if Section 3.6 requires a notice of claim to be filed with the carrier, according to the SC, under the COGSA, it is not jurisdictional. Unlike the Code of Commerce which does not have a prescriptive period for filing a complaint in court, follow the Civil Code provision ( 10 years or 6 years) What is the effect if you do not file a case in court within the one year period? The carrier and the ship shall be discharged from liability. WHAT LAW PREVAILS WITH RESPECT TO THE PRESCRIPTIVE PERIOD? The Civil Code did not impliedly repeal the prescriptive period of the COGSA. Because the COGSA is a special law, the one year period shall prevail for foreign trade of goods by sea. An extra judicial demand does not interrupt the running of the prescriptive period (of one year). Doctrine: Only the filing in court will interrupt the running of the period. Parties may agree on a longer prescriptive period and its interruption by extrajudicial demand. For the judicial demand to interrupt the prescriptive period, it must be filed against the correct parties. The one year period will only apply to foreign trade of goods by sea. The arrastre operator is no longer foreign transport of goods by sea. The prescriptive period in this case is 4 years because there is no written contract. Delivery should be made to the correct consignee. Where the imported goods are delivered to the wrong person, the 1 year limitation under the COGSA which refers to loss or damage does not apply. The applicable rule on prescription is found in the Civil Code. Is the one year period in Cogsa applicable to misdelivery or conversion? NO. What do you mean by LOSS? Must be physical loss and not loss of income. Hence is action is based on loss of income, not covered by the 1 year prescriptive period. Loss refers to the deterioration or disappearance of goods. As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, loss contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain. Effect of prescriptive period on liability of insurer There is subrogation. Note that it says in Section 3.6 that only the carrier's liability is extinguished if no suit is brought within 1 year from delivery of the goods. But the liability of the insurer is not extinguished because insurers are governed by insurance code (not less than 1 year if there is stipulation, or 10 years) BUT the insurance company cannot bring an action against the carrier beyond the one year prescriptive period.
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Sec. 4.5 of COGSA (5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package of lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier. By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph may be fixed: Provided, that such maximum shall not be less than the figure above named. In no event shall the carrier be liable for more than the amount of damage actually sustained. Neither the carrier nor the ship shall be responsible in any event for loss damage to or in connection with the transportation of the goods if the nature or value thereof has been knowingly and fraudulently misstated by the shipper in the bill of lading. The provisions of COGSA on limited liability are as much a part of the bill of lading as though placed in it by agreement of the parties. AIR TRANSPORTATION The primary law in air transportation the Civil Code. Air transportation general term. Air commerce air transportation for hire Domestic air carrier a citizen of the Philippines, or it carries the Philippine flag but it allows to engage in domestic or foreign transportation in the Philippines Foreign air carrier not a citizen of the Philippines

Spoiler: FREEDOMS OF THE AIR First Freedom of the Air - the right or privilege, in respect of scheduled international air services, granted by one State to another State or States to fly across its territory without landing (also known as a First Freedom Right). Second Freedom of the Air - the right or privilege, in respect of scheduled international air services, granted by one State to another State or States to land in its territory for nontraffic purposes (also known as a Second Freedom Right). Third Freedom of The Air - the right or privilege, in respect of scheduled international air services, granted by one State to another State to put down, in the territory of the first State, traffic coming from the home State of the carrier (also known as a Third Freedom Right). Fourth Freedom of The Air - the right or privilege, in respect of scheduled international air services, granted by one State to another State to take on, in the territory of the first State, traffic destined for the home State of the carrier (also known as a Fourth Freedom Right). Fifth Freedom of The Air - the right or privilege, in respect of scheduled international air services, granted by one State to another State to put down and to take on, in the territory of the first State, traffic coming from or destined to a third State (also known as a Fifth Freedom Right). ICAO characterizes all "freedoms" beyond the Fifth as "socalled" because only the first five "freedoms" have been officially recognized as such by international treaty. Sixth Freedom of The Air - the right or privilege, in respect of scheduled international air services, of transporting, via the home State of the carrier, traffic moving between two other States (also known as a Sixth Freedom Right). The so-called Sixth Freedom of the Air, unlike the first five freedoms, is not incorporated as such into any widely recognized air service agreements such as the "Five Freedoms Agreement". Seventh Freedom of The Air - the right or privilege, in respect of scheduled international air services, granted by one State to another State, of transporting traffic between the territory of the granting State and any third State with no requirement to include on such operation any point in the territory of the recipient State, i.e the service need not connect to or be an extension of any service to/from the home State of the carrier. Eighth Freedom of The Air - the right or privilege, in respect of scheduled international air services, of transporting cabotage traffic between two points in the territory of the granting State on a service which originates or terminates in the home country of the foreign carrier or (in connection with the so-called Seventh Freedom of the Air) outside the territory of the granting State (also known as a Eighth Freedom Right or "consecutive cabotage"). Ninth Freedom of The Air - the right or privilege of transporting cabotage traffic of the granting State on a service performed entirely within the territory of the granting State (also known as a Ninth Freedom Right or "stand alone" cabotage). Source: Manual on the Regulation of International Air Transport (Doc 9626, Part 4)
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Civil Aeronautics Board (CAB) regulatory board Certificate of Public Convenience and Necessity issued by the CAB authorizing a person to engage in air commerce &/or air transportation, foreign &/or domestic
Section 5. Composition of the CAB. The Civil Aeronautics shall be composed of the Secretary of Commerce and Industry as Chairman (Secretary of the DOTC), the Civil Aeronautics Administrator, the Commanding Officer of the Philippine Air Force and two other members to be appointed by the President of the Philippines. They shall hold office at the pleasure of the President and shall be entitled to per diem for each meeting actually attended by them in such amount as may be fixed by the President. In case of absence or incapacity of the Secretary of Commerce and Industry, the Civil Aeronautics Administrator shall act as Chairman. Section 10. Powers and duties of the Board. A. Except as otherwise provided herein, the Board shall have the power to regulate the economic aspect of air transportation, and shall have the general supervision and regulation of, and jurisdiction and control over, air carriers as well as their property, property rights, equipment, facilities, and franchise, in so far as may be necessary for the purpose of carrying out the provisions of this Act. B. The Board may perform such acts, conduct such investigations, issue and amend such orders, and make and amend such general or special rules, regulations, and procedures as it shall deem necessary to carry out the provisions of this Act. Section 8. Aircraft companies which operate as public utilities or operators of aircraft which are for hire are authorized to open and investigate suspicious packages and cargoes in the presence of the owner or shipper, or his authorized representatives if present; in order to help the authorities in the enforcement of the provisions of this Act: Provided, That if the owner, shipper or his representative refuses to have the same opened and inspected, the airline or air carrier is authorized to refuse the loading thereof.

WARSAW CONVENTION This is not a law. It is a treaty, a convention entered into Convention for the Unification of Certain Rules Relating to International Carriage by Air, Signed in Warsaw on 12 October 1929 (Warsaw Convention). But this is adhered only to by the Philippines only by the Philippines of September 23, 1955 by Proclamation 201 by President Magsaysay. International treaties have the force of law. Article 1.1. This Convention applies to all international carriage of persons, luggage or goods performed by aircraft for reward. It applies equally to gratuitous carriage by aircraft performed by an air transport undertaking. International Transportation has a technical meaning. 2 kinds of international transportation: o Country of departure and destination are 2 High Contracting Parties o Same country of departure and destination but with stop over at another country, even if such country is not high contracting Article 18 1. The carrier is liable for damage sustained in the event of the destruction or loss of, or of damage to, any registered luggage or any goods, if the occurrence which caused the damage so sustained took place during the carriage by air. Article 19 1. The carrier is liable for damage occasioned by delay in the carriage by air of passengers, luggage or goods. Above articles merely declare the carrier liable for damages in the enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier.
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Article 1.3. A carriage to be performed by several successive air carriers is deemed, for the purposes of this Convention, to be one undivided carriage, if it has been regarded by the parties as a single operation, whether it had been agreed upon under the form of a single contract or of a series of contracts, and it does not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate or authority of the same High Contracting Party.
Limitations to Liability of Air Carriers [Art. 22] 1. In transportation of PASSENGERS 125,000 francs [or equivalent], but carrier and pax may agree to a higher limit of liability; not allowed in our jurisdiction. Liability to pax not subject to stipulation 2. In transportation of CHECKED BAGGAGE or GOODS 125 francs [or equivalent] per kilo, unless the consignor declares a higher value and pays a supplementary sum or upon willful misconduct As regards OBJECTS of which pax takes charge HIMSELF [hand carried luggage] 5,000 francs [or equivalent] per pax
3.
Members of the IATA are under a general pool partnership agreement wherein they act as agent of each other in the issuance of ticket to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world. Booking and reservation among airline members are allowed even by telephone and it has become an accepted practice among them. A member airline which enters into a contract of carriage consisting of a series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and through the required process of interline settlement of accounts by way of the IATA clearing house an airline is duly compensated for the segment of the trip serviced.
The $20/kilo will apply only to simple negligence not willful misconduct of the carrier or carrier or its agents under article 25.
Q: What is the effect of receipt by the person entitled to delivery of luggage or goods without complaint? A: It is prima facie evidence that the goods have been delivered in good condition and in accordance with the document of transportation [Art. 26] If your goods are damaged, you have to make a complaint with the airline. Q: What is the duty of the shipper or consignee when the goods are DAMAGED or when there is DELAY in their delivery? A: He must make a complaint to the carrier: 1. In case of DAMAGE the complaint must be made forthwith after the discovery of the damage, and, at the latest, within: a. 3 days from the date of receipt in the case of luggage, and b. 7 days from date of receipt in the case of goods
Article 17. The carrier is liable for damage sustained in the event of the death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or disembarking.

2. In case of DELAY - the complaint must be made at the latest within 14 days from the date on which the luggage or goods have been placed at his disposal [Art. 26] Form of the Complaint: 1. in writing upon the document of carriage, or 2. by separate notice in writing dispatched within the times aforesaid [Art. 26] Effect of Failure to File Complaint within Periods Provided: 1. General Rule no action shall lie against the carrier 2. Exception save in the case of fraud on his *carriers+ part *Art. 26+ Against whom can Pax take Action: 1. General Rule only against the carrier who performed the transportation during which the accident or delay occurred, 2. Exception against the first carrier when, by express agreement, it has assumed liability for the whole journey If you notice, it seems na based sa cases baliktad na. maybe because of the IATA thing. One airline issuing a ticket for all the other airlines. The issuing airline can be sued. That article 30 is for accidents. Not applicable if the pax is bumped off Art 25 is only applicable to art 22. Despite willful misconduct the airline may use art 30 but not in bumping off delay is different from bumping off. Bumping off is the refusal to transport pax when there was reservation. Delay is postponement of enforcement of such right.
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According to section 25, if there is willful misconduct, carrier cannot invoke article 22, in relation to article 26. The reasons of such. 1. To inform the carrier that they are claiming for carriers liability. 2 to give the carrier an opportunity to examine the nature and extend of injury.
Rule with Respect to Baggage or Goods 1. The pax or consignor shall have a right to action against the FIRST carrier 2. The pax or consignee who is entitled to delivery shall have a right of action against the LAST carrier Each may take action against the carrier WHO PERFORMED the transportation during which the destruction, loss, damage or delay took place The carriers shall be JOINTLY liable to the pax or to the consignor or consignee
Where a Complaint for Damages Against an Air Carrier May be Instituted [Art. 28]: 1. The court of the domicile of the carrier; 2. The court of its principal place of business;
3.
3. The court where it has a place of business through which the contract had been made; 4. The court of the place of destination. Prescriptive Period in Filing a Case for Damages against Carrier [Art. 29]: Within two [2] years, reckoned from: 1. the date of arrival at the destination, or 2. the date on which the aircraft ought to have arrived, or the date on which the transportation stopped
4.
3.
Remember a pax travel with a baggage while as to consignee is just the shipper. If there are successive sectors, passenger arrives with a baggage so he can sue the first carrier since he was there. The consignee can sue the last carrier. Each may take action against the carrier WHO PERFORMED the transportation during which the destruction, loss, damage or delay took place. The first carrier and the airline that perform the travel are solidary liable. Q: Is the Warsaw Convention Binding in the Philippines? 1. General Rule YES, it has the force and effect of a law, being a treaty commitment assumed by the Philippine Government 2. However it does NOT operate as:
Effect of Failure to File Action against the Carrier within 2 years: The right to damages shall be extinguished Rule when Transportation Performed by Successive Carriers under Art. 1.3 Each carrier who accepts pax, baggage or goods shall be: 1. subject to the rules set out in the WC, and 2. deemed to be one of the contracting parties to the contract of transportation insofar as the contract deals with the part of transportation which is performed under his supervision [Art. 30]
a. an EXCLUSIVE enumeration of the instances for declaring a carrier liable for breach of contract of carriage, or b. an ABSOLUTE limit of the extent of that liability The WC must NOT be construed as to PRECLUDE the operation of the Civil Code and other pertinent laws It does not regulate, much less exempt the carrier from liability for damages for violating the rights of the passengers under the contract of carriage, ESPECIALLY if willful

misconduct on the part of the carriers employees is found or established. DAMAGES Kinds of Damages [Art. 2197 Civil Code] 1. Actual or compensatory 2. Moral 3. Nominal 4. Temperate or Moderate 5. Liquidated 6. Exemplary Actual Damages Features: 1. They pertain to such injuries or losses that are actually sustained and susceptible of measurement. If you ship a car and it was lost. The actual damage is the value of the car 2. Damages cannot be presumed to be recoverable, they must be pleaded and proven in court; in no instance may a judge award more than those so pleaded and proven. Show receipts. 3. Speculative damages cannot be awarded The award thereof must be based on the evidence presented, not on the personal knowledge of the court; and certainly not on flimsy, remote, speculative and non-substantial proof. If a pax was bumped off, what could be his expenses? Hotel accommodation, transpo, food, long distance calls etc but he has to present receipts to recover actual damages. b. it is proven that the carrier is guilty of FRAUD or BAD FAITH, even if death does not result [Art. 2220] Ordinary loss, or injury, like there was sudden turbulence sa plane and nasubsob siya sa CR but he cannot prove BF, no moral damages. But he can claim actual damages. Bad Faith - Breach of a known duty through some motive of interest or ill will Depending of the cause of action, not automatic you need death or BF. But for quasi delict under 2219, as long as there is physical injuries one can be awarded with moral damages but coupled with serious anxiety etc. in criminal cases, the same. When Moral Damages may be Recovered [ART. 2219] 1. In criminal offenses resulting in physical injuries 2. Quasi-delicts causing physical injuries 3. xxx With respect to other causes of actions however, if your cause of action is culpa criminal and there is injury, any kind of injury, then, moral damages may be awarded under Article 2219 If the cause of action is culpa aquiliana and there is injury, then, moral damages may be awarded. No need for death
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Nominal Damages Nominal Damages are Adjudicated: 1. in order that a right of the pax, shipper, or consignee, which has been violated or invaded by the common carrier, may be vindicated or recognized, and 2. not for the purpose of indemnifying the pax, shipper or consignee for any loss suffered by him [Art. 2221] Note: 1. Nominal Damages stand alone a. There can be NO longer be an award for nominal damages IF there already has been an award for actual, moral, temperate, liquidated and exemplary damages b. An award of nominal damages precludes the award of actual, moral, temperate, liquidated and exemplary damages 2.When the act of the common carrier did not amount to fraud, malice or bad faith, moral damages cannot be awarded. However, if there was an invasion of the plaintiffs right, nominal damages may be awarded Temperate Damages Temperate or Moderate Damages a. the mishaps results in the DEATH of the pax
Moral Damages Moral Damages include: 1. physical suffering, 2. mental anguish, 3. fright, 4. serious anxiety, 5. besmirched reputation, 6. wounded feelings, 7. moral shock, 8. social humiliation, and 9. similar injury Things to be suffered to claim moral damages. In Breach of Contract of Carriage: 1. General Rule Moral Damages are NOT recoverable in damage actions predicated on a breach of contract of carriage Exceptions Moral damages may be awarded when:
2.

damages, pecuniary loss has been suffered provided with certainty [Art. 2224] Liquidated Damages ito yung mga stipulations ng parties. Liquidated damages are those agreed upon by the parties to a contract, to be paid in case of breach thereof [Art. 2226] If there is an agreement in the contract that this is how much you will pay, there is no need to discuss or prove anything. Best example: Bill of Lading (e.g. P 500 per kilo unless you declare a higher value and payment of a higher amount). The parties are limited to that amount COGSA and Warsaw Convention. These laws give the carrier the right to stipulate how much they are going to pay in case of breach The unprofessional indifference of PALs personnel despite full and actual knowledge of the damage to Mejias cargo smacks of willful misconduct and insensitivity to a passengers plight tantamount to bad faith and renders unquestionable PALs liability for damages. And not only that. The act of the check-in officer in San Francisco in misleading her and telling her that she does not have to declare a higher value and pay a higher rate for freight amounts to bad faith. Therefore, the passenger is entitled to moral damages. Bumping off the pax (the pax is bumped off) despite the fact that he has a confirmed booking that is a breach of the contract of carriage because the carrier cannot comply with its obligation in the contract of carriage, which is ticket. The question is, Is bumping off a pax who has a confirmed seat, because of overbooking, tantamount to bad faith that would entitle the pax to moral damages in breach of contract? In the older cases, the SC said YES. But not anymore in newer cases. the new economic Regulations No. 7 says that, that overbooking not exceeding 10% of the seating capacity of the aircraft shall not be considered as a deliberate and willful act of non-accommodation. So what the SC considers as bad faith is the WILLFULL and DELIBERATE booking on the part of the airline. Sec. 3 of ER no. 7 of the CAB (civil aeronautics board) clearly states that if the overbooking does not exceed 10%, it is not considered deliberate, therefore does not amount to bad faith. if the pax dies, his heirs are not only entitled to moral damages but also to indemnity for death, which is P50,000. Under Art. 2206, who are entitled to damages for the death of a pax? The spouse, the legitimate and illegitimate descendants and ascendants of the deceased may demand moral damages for the mental anguish by reason of the death of the deceased. So the SIBLINGS are NOT entitled to moral damages. According to the SC, if you want to collect compensatory damages for loss of earning capacity, it has to be proven. However, there are 2 exceptions. According to SC, The award of compensatory damages for the loss of the deceaseds earning capacity should be deleted for lack of basis. As a rule, documentary evidence should be presented to substantiate the claim for damages for loss of earning capacity. By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when (1) the deceased is self-employed earning less than the minimum wage under current labor laws, and judicial notice may be taken of the fact that in the deceaseds line of work no documentary evidence is available; or 4. Do not mixed up the 3. Sa exam this is definitely will come out! Its very easy to memorize. Different causes of actions, different grounds for awarding exemplary damages
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Exemplary Damages Exemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages [Art. 2229] Unlike nominal damages which stand alone, exemplary damages cannot stand alone. They have to be added to moral, temperate, liquidated or compensatory damages. Note: 1. Exemplary Damages can ONLY be granted in ADDITION to: a. moral damages b. temperate damages c. liquidated damages, or d. actual or compensatory damages 2. If exemplary damages are granted, nominal damages CANNOT be awarded When Exemplary Damages may be Recovered: 1. In Criminal Offenses if the crime was committed with one or more aggravating circumstances [Art. 2230] In Quasi-delicts if the common carrier acted with gross negligence [Art. 2231] 3. In Contracts & Quasi-contracts if the common carrier acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner [Art. 2232]
2.
3.

(2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws. The standing of a claimant may only be considered in increasing the award of moral damages if he was subjected to contemptuous conduct despite the offenders knowledge of his standing. That is the only time the moral damages can be increased. PUBLIC SERVICE ACT Purpose: 1. to secure adequate sustained service for the public for the least possible cost. So this is for the benefit of the public. What else? 2. To protect and conserve investments which have already been made for the purpose Also the protection of the public utilities. In our case, the common carriers. the jeepney, then the operator of the jeepney is already a public utility. The basis of State regulation of public utilities is POLICE POWER. Therefore the legislature may interfere with the management of public utilities whenever public interest demands. But what is the extent of police power? 1. regulation of rates and charges. 2. prevent discrimination upon the part of the public utility against those who employ it. 3. to make orders governing the conduct of the public utility Whats the requisite for operation of public utility? In order to operate as public utility, one must get a CPC or a CPCN from the regulatory body concerned. There are certain entities that are exempt from obtaining a CPC. It says here, 1. 2. 3. Public service owned or operated by Government or GOCCS. Grantees of legislative franchise when expressly exempted from obtaining a CPC, And those expressly exempted from the jurisdiction of the regulating bodies.
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3.
So what do you mean by public in public service? This means individuals in general without restriction or selection to the extent that the capacity of the utility may admit of such service or use. So again, anyone who can avail of the services is considered public. A public utility is a business or service which is engaged in regulating, supplying the public with some commodity or service of public consequence, such as transportation. So common carriers are actually public utilities because they provide the public with transportation. What is the principal determinative characteristic of a public utility? That of service or readiness to serve an indefinite public which has the right to demand and receive its services or commodities. Indefinite meaning no discrimination. Whoever it is who has the right to demand, then the public utility must be ready to serve. So, 1. The fact that the service is limited to particular district or town does not prevent the business or town does not prevent the business from being a public utility 2. The number of people actually served does not determine whether a person or company is a public utility Such person or company which holds himself out to serve all who wish to avail themselves of the service may be a public utility even though only 1 or 2 people actually receive service. So maybe a jeepney in a town with only two houses, as long as the jeepney passes by everyday and the residents ride
How do you distinguish a CPC from a CPCN? A CPC no need for a legislative frachise. A CPCN is issued upon approval of any franchise or privilege granted by any political subdivision of the govt. CPC CPCN Issued when it is found Issued upon approval of that the operation of the any franchise or privilege proposed public service granted by any political will promote public subdivision of the interest in a proper Philippines, when in the manner for which a judgment of the municipal or legislative regulatory body, such franchise is not franchise or privilege will necessary properly conserve the (PAL vs. CAB) public interest (approval does not have to come from Congress; it can be from the mayor or barangay)
3.
So those engaged in providing land transportation, like tricycle operators, they get their CPC from the Municipal Council or City Council.

The tri-sikad operators, I think barangay. I dont know if theyre public utilities because they are being drawn by humans, not motors. Anyway. Lets look at the other agencies. The DOTC is the head of all agencies. CAB, LTFRB, etc. Take note, when it comes to National Railroad carriers, it is the DOTC that issues the CPC. The Coast Guard is a government entity that is in charge of safety or security. The PPA undertake the maintenance and operation of the wharfs, the sea wharfs. So they work hand-in-hand with the MARINA. The MARINA is the one issuing the CPC. The CAB of course we all know that. The ATO undertakes the maintenance and operation air traffic air transportation office. Registration of aircraft is done with the ATO (its like the LTO noh) and safety regulations on air transportation. I dont know under which body the CAAB? is. Maybe its CAB noh. So, what are the requisites for the grant of CPC? The applicant must be a citizen of the Phils, or a corporation which is 60% Filipino-owned. The applicant must be financially capable of undertaking the proposed service and meeting the responsibilities incident to its operation; The applicant must prove that the operation of the public service proposed and the authorization to do business will promote the public interest in a proper and suitable manner. What is the primordial consideration in granting franchises or CPCs? It is PUBLIC INTEREST. Thats why we are discussing the Public Service Act. PRIOR OPERATOR RULE. Before permitting a new operator to invade the territory of another already established with a CPC. The LTFRB must look at existing operators and allow them to extend their services to meet the needs of the public. That is the PRIOR OPERATOR RULE. Prior Applicant Rule. Lets say there are 2 applicants applying at the same time, all conditions being equal. According to this rule, priority in filing the application becomes an important factor in granting or refusal of CPC. What does that mean? Nothing. It is only an important factor in granting or refusing. It doesnt mean that if you apply first, youll be granted the CPC, all conditions being equal. Actually, that does not mean anything. Protection of Investment Rule. One of the purposes of the Public Service Act is to protect and conserve investments. If you can see that this particular route is already filled up with different operators who invested so much, then do not issue CPCs to applicants anymore. To protect the investment of those who already invested. There are also exceptions to the Prior Operator Rule: 1. Public interest is the primordial consideration of the Public Service Act so in case where public interest would better be served by the new operator. 2. In Manila Yellow Taxicab vs Castelo, where the prior operator has failed to make an offer to meet the increase traffic. Of course if you are an operator of this particular line, and you know very well that you dont have enough jeepneys and a lot of pax ar e stranded everyday because all the jeepneys are full. And you dont make an effort and will take a new applicant for you to realize it, then the SC said why will you be given a chance to extend your services when you already had the chance in the first place. So, lets give the CPC to the applicant. When is protection of Investment rule not applicable? If the application of the rule would be conducive to monopoly of service and contrary to the principle that promotes healthy competition. So a CPC has been issued by the proper regulatory/governing body. What are the grounds for suspension/revocation of a CPC? 1. Sec Sec. 16(m) of the Public Service Act The facts and circumstances on the strength on which CPC was issued have been misrepresented or materially changed.
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2. Section 16 (n) The holder thereof has violated or

willfully and contumaciously refused to comply with any order, rule or regulation of the regulatory bodies or any provision of the Public Service Act.
3. Article 1765, Civil Code The common carrier

repeatedly fails to comply with his duty to observe extraordinary diligence as prescribed by law. But it is necessary under Art. 1765 that due process be given to the operator before the CPC can be cancelled. There must be notice and hearing. What do you mean by notice and hearing? Within the body. No need for formal charge in court. The operator can be called by the governing body. He is given the right to be heard and if the body decides that the CPC should be cancelled, then cancelled. The power to regulate rates does not give the State the right to prescribe rates which are so low as to deprive the public utility of a reasonable return on investment. The rates must be reasonable. The only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. Take note that this power belongs to the regulatory agencies as delegate by Congress. Therefore these agencies CANNOT further delegate the power to fix the rates, to regulate the

rates. And of course, discrimination in the charging of rates is not allowed. Shipping rates are no longer regulated. EO 213 instituted the DE-REGULATION of domestic shipping rates. CPC, once it is issued, it can be revoked or suspended but there must be notice and hearing. Sec 16(n) says that a CPC can be suspended immediately. It may be done prior to a hearing but cannot exceed 30 days and the ground for immediate suspension is to avoid serious and irreparable damage or inconvenience to the public or private interest. According to Sec 19 (a) so a violation of this can cause the suspension or revocation of a CPC. It shall be unlawful for any public service to: 1. Provide or maintain any service that is unsafe, improper or inadequate. 2. Withhold or refuse any service which can reasonably be demanded and furnished. Now there are acts which are not unlawful per se but unlawful without the approval of the Commission or the proper regulatory body. 1. To increase rates. 2. To operate new units. 3. To sell, mortgage, or lease its CPC, property, franchise or rights. Can you sell your CPC? Yes you can. But you need to get the consent and approval of the proper regulatory body. Requirements if one wants to increase number of units that he has: 1. He must first show that there is a public need for it. 2. For the increase to be granted, he must show that he had regularly undertaken all his authorized trips, his vehicles were sufficiently loaded with pax and 3. Many travelers could not be conveniently accommodated. As already mentioned, if you want to sell your CPC and youre an operator, you dont want to operate anymore, you can sell but you need approval. What if you sell your CPC and you dont get the approval of the LTFRB? 1. The sale/lease is valid and binding upon the parties. 2. But it is NOT effective against the regulatory body concerned. 3. So the approval is only necessary to protect the public interest. 4. If there is a sale of a CPC without the consent of the LTFRB, obviously the registered owner of the CPC is still the seller and therefore if something happens, the registered owner is liable for damages sustained rd by a 3 person. Now if you want to sue, you have to complain about a carrier/public utility by invoking the provisions of the Public Service Act, then that is 180 days prescriptive period. 60 days for violation of orders, decisions, and regulations of the regulatory bodies. Kabit System is an arrangement whereby a person who has been granted a CPC allows another person who owns motor vehicles to operate under such franchise for a fee. Is it legal or not? Well its not penalized outright as a criminal offense but it is recognized as contrary to public policy therefore VOID and INEXISTENT. The boundary system. An arrangement between the owner of a motor vehicle who holds a CPC, and the driver. The important thing to remember is that despite the fact that the driver is not being paid a daily wage (he just pay the boundary to the owner/operator, and the he will get the excess/remaining as his wage), there is contract of employment between the two parties and therefore the driver can sue the operator for non-payment of wages, etc. There are some constitutional provisions in relation to public utilities and the first one is Filipinization. Very simple. To own public utility, one must be 60% Filipino-owned or a Filipino citizen. That is under the Constitution. In times of national emergency under Sec 17, Art 12, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privatelyowned public utility or business affected with public interest. Nationalization. Sec. 18, Art. 12: The State may, in the interest of national welfare or defense, establish and operate vital industries and, upon payment of just compensation, transfer to public ownership utilities and other private enterprises to be operated by the Government. That happened during the the PAL, there was a time when the state took over PAL. But of course, payment of just compensation is required. And Sec. 19 of course is the regulation and prohibition of monopolies. CAB only have regulatory authority. It cannot change the terms and conditions of the contract between two PRIVATE entities. It is up to them to change the terms and conditions of the contract. It is not up to the regulatory body.
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G.R. No. 156087 May 8, 2009 The Commercial Agreement likewise adverted to the annexed Joint Services Agreement covering the Kuwait-Manila (and vice versa) route, which both airlines had entered into "[i]n order to reflect the high level of friendly relationships between [Kuwait Airways] and [Philippine Airlines] and to 8 assist each other to develop traffic on the route." The Agreement likewise stipulated that "[u]ntil such time as [Philippine Airlines] commences its operations to or via Kuwait, the Joint Services shall be operated with the use of 9 [Kuwait Airways] aircraft and crew." By virtue of the Joint Services Agreement, Philippine Airlines was entitled to seat allocations on specified Kuwait Airways sectors, special prorates for use by Philippine Airlines to specified Kuwait Airways sectors, joint advertising by both carriers in each others timetables and other general advertising, and mutual assistance to each other with respect 10 to the development of traffic on the route. Most pertinently for our purposes, under Article 2.1 of the Commercial Agreement, Kuwait Airways obligated itself to "share with Philippine Airlines revenue earned from the uplift 11 of passengers between Kuwait and Manila and vice versa." The succeeding paragraphs of Article 2 stipulated the basis for the shared revenue earned from the uplift of passengers. The Commercial Agreement and the annexed Joint Services Agreement was subsequently amended by the parties six times between 1981 and 1994. At one point, in 1988, the agreement was amended to authorize Philippine Airlines to operate provisional services, referred to as "ad hoc joint services," on the Manila-Kuwait (and vice versa) route for the 12 period between April to June 1988. In 1989, another amendment was agreed to by the parties, subjecting the uplift of cargo between Kuwait and Manila to the same 13 revenue sharing arrangement as the uplift of passengers. From 1981 until when the present incidents arose in 1995, there seems to have been no serious disagreements relating to the contract. In April of 1995, delegations from the Philippines and Kuwait (Philippine Panel and Kuwait Panel) met in Kuwait. The talks culminated in a Confidential Memorandum of Understanding (CMU) entered into in Kuwait on 12 April 1995. Among the members of the Philippine Panel were officials of the Civil Aeronautics Board (CAB), the Department of Foreign Affairs (DFA), and four officials of Philippine Airlines: namely its VicePresident for Marketing, Director for International Relations, Legal Counsel, and a Senior International Relations Specialist. Dr. Victor S. Linlingan, the Head of the Delegation and Executive Director of the CAB, signed the CMU in behalf of the Government of the Republic of the Philippines. The present controversy stems from the fourth paragraph of the CMU, which read:
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KUWAIT AIRWAYS, CORPORATION, Petitioner, vs. PHILIPPINE AIRLINES, INC., Respondent. DECISION TINGA, J.: This petition for review filed by the duly designated air 2 carrier of the Kuwait Government assails a decision dated 25 October 2002 of the Makati Regional Trial Court (RTC), Branch 60, ordering Kuwait Airways to pay respondent Philippine Airlines the amount of US$1,092,690.00, plus 3 interest, attorneys fees, and cost of suit. The principal liability represents the share to Philippine Airlines in the revenues the foreign carrier had earned for the uplift of passengers and cargo in its flights to and from Kuwait and Manila which the foreign carrier committed to remit as a contractual obligation. On 21 October 1981, Kuwait Airways and Philippine Airlines 4 entered into a Commercial Agreement, annexed to which 5 was a Joint Services Agreement between the two airlines. The Commercial Agreement covered a twice weekly Kuwait Airways flight on the route Kuwait-Bangkok-Manila and vice 6 versa. The agreement stipulated that "only 3rd and 4th freedom traffic rights between Kuwait and Manila and vice versa will be exercised. No 5th freedom traffic rights will be exercised between Manila on the one hand and Bangkok on 7 the other." The "freedom traffic rights" referred to in the Agreement are the so-called "five freedoms" contained in the International Air Transport Agreement (IATA) signed in Chicago on 7 December 1944. Under the IATA, each contracting State agreed to grant to the other contracting states, five "freedoms of air." Among these freedoms were "[t]he privilege to put down passengers, mail and cargo taken on in the territory of the State whose nationality the aircraft possesses" (Third Freedom); "[t]he privilege to take on passengers, mail or cargo destined for the territory of the State whose nationality the aircraft possesses" (Fourth Freedom); and the right to carry passengers from one's own country to a second country, and from that country to a third country (Fifth Freedom). In essence, the Kuwait Airways flight was authorized to board passengers in Kuwait and deplane them in Manila, as well as to board passengers in Manila and deplane them in Kuwait. At the same time, with the limitation in the exercise of Fifth Freedom traffic rights, the flight was barred from boarding passengers in Bangkok and deplaning them in Manila, or boarding passengers in Manila and deplaning them in Bangkok.
1

4. The two delegations agreed that the unilateral operation and the exercise of third and fourth freedom traffic rights shall not be subject to any royalty payment or commercial arrangements, as from the date of signing of this [CMU]. The aeronautical authorities of the two Contracting Parties will bless and encourage any cooperation between the two designated airlines. The designated airlines shall enter into commercial arrangements for the unilateral exercise of fifth freedom traffic rights. Such arrangements will be subject to the approval of the aeronautical authorities of both contracting 14 parties. On 15 May 1995, Philippine Airlines received a letter from Dawoud M. Al-Dawoud, the Deputy Marketing & Sales Director for International Affairs of Kuwait Airways, addressed to Ms. Socorro Gonzaga, the Director for 15 International Relations of Philippine Airlines. Both AlDawoud and Gonzaga were members of their countrys respective delegations that had met in Kuwait the previous month. The letter stated in part: Regarding the [Kuwait Airways/Philippine Airlines] Commercial Agreement, pursuant to item 4 of the new MOU[,] we will advise our Finance Department that the Agreement concerning royalty for 3rd/4th freedom traffic will be terminated effective April 12, 1995. Although the royalty agreement will no longer be valid, we are very keen on seeing that [Philippine Airlines] continues to enjoy direct participation in the Kuwait/Philippines market through the Block Space Agreement and to that extent we would like to maintain the Jt. Venture (Block Space) Agreement, although 16 with some minor modifications. To this, Gonzaga replied to Kuwait Airways in behalf of 17 Philippine Airlines in a letter dated 22 June 1995. Philippine Airlines called attention to Section 6.5 of the Commercial Agreement, which read: This agreement may be terminated by either party by giving ninety (90) days notice in writing to the other party. However, any termination date must be the last day of any traffic 18 period, e.g.[,] 31st March or 31st October. Pursuant to this clause, Philippine Airlines acknowledged the 15 May 1995 letter as the requisite notice of termination. However, it also pointed out that the agreement could only be effectively terminated on 31 October 1995, or the last day of the then current traffic period. Thus, Philippine Airlines insisted that the provisions of the Commercial Agreement 19 "shall continue to be enforced until such date." Subsequently, Philippine Airlines insisted that Kuwait Airways pay it the principal sum of US$1,092,690.00 as revenue for the uplift of passengers and cargo for the period 13 April 20 1995 until 28 October 1995. When Kuwait Airways refused 21 to pay, Philippine Airlines filed a Complaint against the foreign airline with the Regional Trial Court (RTC) of Makati City, seeking the payment of the aforementioned sum with 22 interest, attorneys fees, and costs of suit. In its Answer, Kuwait Airways invoked the CMU and argued that its obligations under the Commercial Agreement were terminated as of the effectivity date of the CMU, or on 12 April 1995. Philippine Airlines countered in its Reply that it 23 was "not privy to the [CMU]," though it would eventually 24 concede the existence of the CMU. An exhaustive trial on the merits was had. On 25 October 2002, the RTC rendered a Decision in favor of Philippine Airlines. The RTC noted that "the only issue to resolve in this case is a legal one," particularly whether Philippine Airlines is entitled to the sums claimed under the terms of the Commercial Agreement. The RTC also considered as a corollary issue whether Kuwait Airways "validly terminated the Commercial Agreement x x x, plaintiffs contention being that [Kuwait Airways] had not complied with the terms of termination provided for in the Commercial Agreement." The bulk of the RTCs discussion centered on the Philippine Airlines claim that the execution of the CMU could not prejudice its existing rights under the Commercial Agreement, and that the CMU could only be deemed effective only after 31 October 1995, the purported effectivity date of termination under the Commercial Agreement. The rationale for this position of Philippine Airlines was that the execution of the CMU could not divest its proprietary rights under the Commercial Agreement. On this crucial point, the RTC agreed with Philippine Airlines. It asserted the obligatory force of contracts between contracting parties as the source of vested rights which may not be modified or impaired. After recasting Kuwait Airways arguments on this point as being that "the Confidential Memorandum of Understanding is superior to the Commercial Agreement[,] the same having been supposedly executed by virtue of the states sovereign power," the RTC rejected the argument, holding that "[t]he fact that the [CMU] may have been executed by a Philippine Panel consisting of representative [sic] of CAB, DFA, etc. does not necessarily give rise to the conclusion that the [CMU] is a superior contract*,+ for the exercise of the States sovereign power cannot be arbitrarily and indiscriminately utilized 25 specifically to impair contractual vested rights." Instead, the RTC held that "[t]he Commercial Agreement and its specific provisions on revenue sharing having been freely and voluntarily agreed upon by the affected parties x x x has the force of law between the parties and they are bound to the fulfillment of what has been expressly stipulated 26 therein." Accordingly, "the provision of the [CMU] must be
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applied in such a manner that it does not impair the vested rights of the parties." From this Decision, Kuwait Airways directly filed with this Court the present Petition for Review, raising pure questions of law. Kuwait Airways poses three questions of law for resolution: whether the designated air carrier of the Republic of the Philippines can have better rights than the government itself; whether the bilateral agreement between the Republic of the Philippines and the State of Kuwait is superior to the Commercial Agreement; and whether the enforcement of the CMU violates the non-impairment clause of the Constitution. Let us review the factual backdrop to appreciate the underlying context behind the Commercial Agreement and the CMU. The Commercial Agreement was entered into in 1981 at a time when Philippine Airlines had not provided a route to Kuwait while Kuwait Airways had a route to Manila. The Commercial Agreement established a joint commercial arrangement whereby Philippine Airlines and Kuwait Airways were to jointly operate the Manila-Kuwait (and vice versa) route, utilizing the planes and services of Kuwait Airways. Based on the preambular paragraphs of the Joint Services Agreement, as of 1981, Kuwait Airways was interested in establishing a "second frequency" (or an increase of its Manila flights to two) and that "as a result of cordial and frank discussions the concept of a joint service emerged as 27 the most desirable alternative option." As a result, the revenue-sharing agreement was reached between the two airlines, an agreement which stood as an alternative to both carriers offering competing flights servicing the Manila-Kuwait route. An apparent concession though by Philippine Airlines was the preclusion of the exercise of one of the fundamental air traffic rights, the Fifth Freedom traffic rights with respect to the Manila-BangkokKuwait, thereby precluding the deplaning of passengers from Manila in Bangkok and the boarding in Bangkok of passengers bound for Manila. The CMU effectively sought to end the 1981 agreement between Philippine Airlines and Kuwait Airways, by precluding any commercial arrangements in the exercise of the Third and Fourth freedom traffic rights. As a result, both Kuwait and the Philippines had the respective right to board passengers from their respective countries and deplane them in the other country, without having to share any revenue or enter into any commercial arrangements to exercise such rights. In exchange, the designated airline or airlines of each country was entitled to operate six frequencies per week in each direction. In addition, the designated airlines were allowed to enter into commercial arrangements for the unilateral exercise of the Fifth Freedom traffic rights. Another notable point, one not touched upon by the parties or the trial court. It is well known that at the time of the execution of the 1981 agreements, Philippine Airlines was controlled by the Philippine government, with the Government Service Insurance System (GSIS) holding the majority of shares. However, in 1992, Philippine Airlines was privatized, with a private consortium acquiring 67% of the 28 shares of the carrier. Thus, at the time of the signing of the CMU, Philippine Airlines was a private corporation no longer controlled by the Government. This fact is significant. Had Philippine Airlines remained a government owned or controlled corporation at the time the CMU was executed in 1995, its status as such would have bound Philippine Airlines to the commitments made in the document by no less than the Philippine government. However, since Philippine Airlines had already become a private corporation at that juncture, the question of impairment of private rights may come into consideration. In this regard, we observe that the RTC appears to have been under the impression that the CMU was brought about by machinations of the Philippine Panel and the Kuwait Panel of which Philippine Airlines was not aware or in which it had a part. This impression is not exactly borne by the record since no less than four of the nine members of the Philippine Panel were officials of Philippine Airlines. It should be noted though that one of these officials, Senior International Relations Specialist Arnel Vibar, testified for Philippine Airlines that the airline voiced its opposition to the withdrawal of the commercial agreements under the CMU even months before the signing of the CMU, but the objections were overruled. Now, the arguments raised in the petition. One line of argument raised by Kuwait Airways can be dismissed outright. Kuwait Airways points out that the third Whereas clause of the 1981 Commercial Agreement stated: "NOW, it is hereby agreed, subject to and without prejudice to any existing or future agreements between the Government Authorities of the Contracting Parties hereto " That clause, it is argued, evinces acknowledgement that from the beginning Philippine Airlines had known fully well that its rights under the Commercial Agreement would be limited by whatever agreements the Philippine and Kuwait governments may enter into later. But can a perambulatory clause, which is what the adverted "Whereas" clause is, impose a binding obligation or limitation on the contracting parties? In the case of statutes, while a preamble manifests the reasons for the passage of the statute and aids in the interpretation of any ambiguities within the statute to which it is prefixed, it nonetheless is not an essential part of an act, and it neither enlarges nor confers 29 powers. Philippine Airlines submits that the same holds true as to the preambular whereas clauses of a contract. What was the intention of the parties in forging the "Whereas" clause and the contexts the parties understood it in 1981? In order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be 30 principally considered, and in doing so, the courts may
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consider the relations existing between the parties and the 31 purpose of the contract. In 1981, Philippine Airlines was still owned by the Philippine government. In that context, it is evident that the Philippine government, as owner Philippine Airlines, could enter into agreements with the Kuwait government that would supersede the Commercial Agreement entered into by one of its GOCCs, a scenario that changed once Philippine Airlines fell to private ownership. Philippine Airlines argues before us that the cited preambular stipulation is in fact superfluous, and we can agree in the sense that as of the time of the execution of the Commercial Agreement, it was evident, without need of stipulation, that the Philippine government could enter into an agreement with the Kuwait government that would prejudice the terms of the commercial arrangements between the two airlines. After all, Philippine Airlines then would not have been in a position to challenge the wishes of its then majority stockholder the Philippine government. Yet by the time ownership of Philippine Airlines was transferred into private hands, the controverted "Whereas" clause had taken on a different complexion, for it was newly evident that an act of the Philippine government negating the commercial arrangement between the two airlines would infringe the vested rights of a private individual. The original intention of the "Whereas" clause was to reflect what was then a given fact relative to the nationalized status of Philippine Airlines. With the change of ownership of Philippine Airlines, the "Whereas" clause had ceased to be reflective of the current situation as it now stands as a seeming invitation to the Philippine government to erode private vested rights. We would have no problem according the interpretation preferred by Kuwait Airways of the "Whereas" clause had it been still reflective of the original intent to waive vested rights of private persons, rather than the rights in favor of the government by a GOCC. That is not the case, and we are not inclined to give effect to the "Whereas" clause in a manner that does not reflect the original intention of the contracting parties. Thusly, the proper focus of our deliberation should be whether the execution of the CMU between the Philippine and Kuwait governments could have automatically terminated the Commercial Agreement, as well as the Joint Services Agreement between Philippine Airlines and Kuwait Airways. Philippine Airlines is the grantee of a legislative franchise authorizing it to provide domestic and international air 32 services. Its initial franchise was granted in 1935 through Act No. 4271, which underwent substantial amendments in 33 1959 through Republic Act No. 2360. It was granted a new franchise in 1979 through Presidential Decree No. 1590, wherein statutory recognition was accorded to Philippine Airlines as the "national flag carrier." P.D. No. 1590 also recognized that the "ownership, control, and management" of Philippine Airlines had been reacquired by the Government. Section 19 of P.D. No. 1590 authorized Philippine Airlines to contract loans, credits and indebtedness from foreign sources, including foreign governments, with the unconditional guarantee of the Republic of the Philippines. At the same time, Section 8 of P.D. No. 1590 subjects Philippine Airlines "to the laws of the Philippines now existing or hereafter enacted." After pointing to this provision, Kuwait Airways correlates it to Republic Act (R.A.) No. 776, or the Civil Aeronautics Act of the Philippines, which grants the Civil Aeronautics Board (CAB) "the power to regulate the economic aspect of air transportation, [its] general supervision and regulation of, and jurisdiction and control over, air carriers as well as their property, property rights, equipment, facilities, and franchise." R.A. No. 776 also mandates that the CAB "shall take into consideration the obligation assumed by the Republic of the Philippines in any treaty, convention or agreement with foreign countries on matters affecting civil aviation." There is no doubt that Philippine Airlines forebears under several regulatory perspectives. First, its authority to operate air services in the Philippines derives from its legislative franchise and is accordingly bound by whatever limitations that are presently in place or may be subsequently incorporated in its franchise. Second, Philippine Airlines is subject to the other laws of the Philippines, including R.A. No. 776, which grants regulatory power to the CAB over the economic aspect of air transportation. Third, there is a very significant public interest in state regulation of air travel in view of considerations of public safety, domestic and international commerce, as well as the fact that air travel necessitates steady traversal of international boundaries, the amity between nations. At the same time, especially since Philippine Airlines was already under private ownership at the time the CMU was entered into, we cannot presume that any and all commitments made by the Philippine government are unilaterally binding on the carrier even if this comes at the expense of diplomatic embarrassment. While it may have been, prior to the privatization of Philippine Airlines, that the Philippine Government had the authority to bind the airline in its capacity as owner of the airline, under the postprivatization era, however, whatever authority of the Philippine Government to bind Philippine Airlines can only come in its capacity as regulator.1awphi1 As with all regulatory subjects of the government, infringement of property rights can only avail with due process of law. Legislative regulation of public utilities must not have the effect of depriving an owner of his property without due process of law, nor of confiscating or appropriating private property without due process of law, nor of confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter
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or franchise. The power to regulate is subject to these 34 constitutional limits. We can deem that the CAB has ample power under its organizing charter, to compel Philippine Airlines to terminate whatever commercial agreements the carrier may have. After all, Section 10 of R.A. No. 776 grants to the CAB the "general supervision and regulation of, and jurisdiction and control over, air carriers as well as their property, property rights, equipment, facilities and franchise," and this power correlates to Section 4(c) of the same law, which mandates that the Board consider in the exercise of its functions "the regulation of air transportation in such manner as to recognize and preserve the inherent advantages of, assure the highest degree of safety in, and foster sound economic condition in, such transportation, and to improve the relations between, and coordinate transportation by air carriers." We do not doubt that the CAB, in the exercise of its statutory mandate, has the power to compel Philippine Airlines to immediately terminate its Commercial Agreement with Kuwait Airways pursuant to the CMU. Considering that it is the Philippine government that has the sole authority to charter air policy and negotiate with foreign governments with respect to air traffic rights, the government through the CAB has the indispensable authority to compel local air carriers to comply with government determined policies, even at the expense of economic rights. The airline industry is a sector where government abjuration is least desired. However, this is not a case where the CAB had duly exercised its regulatory authority over a local airline in order to implement or further government air policy. What happened instead was an officer of the CAB, acting in behalf not of the Board but of the Philippine government, had committed to a foreign nation the immediate abrogation of Philippine Airliness commercial agreement with Kuwait Airways. And while we do not question that ability of that member of the CAB to represent the Philippine government in signing the CMU, we do question whether such member could have bound Philippine Airlines in a manner that can be accorded legal recognition by our courts. Imagine if the President of the Philippines, or one of his alter egos, acceded to the demands of a foreign counterpart and agreed to shut down a particular Filipino business or enterprise, going as far as to co-sign a document averring that the business "will be shut down immediately." Granting that there is basis in Philippine law for the closure of such business, could the mere declaration of the President have the legal effect of immediately rendering business operations illegal? We, as magistrates in a functioning democratic State with a fully fleshed Bill of Rights and a Constitution that emphatically rejects "letat cest moi" as the governing philosophy, think not. There is nothing to prevent the Philippine government from utilizing all the proper channels under law to enforce such closure, but unless and until due process is observed, it does not have legal effect in this jurisdiction. Even granting that the "agreement" between the two governments or their representatives creates a binding obligation under international law, it remains incumbent for each contracting party to adhere to its own internal law in the process of complying with its obligations. The promises made by a Philippine president or his alter egos to a foreign monarch are not transubstantiated by divine right so as to ipso facto render legal rights of private persons obviated. Had Philippine Airlines remained a governmentowned or controlled corporation, it would have been bound, as part of the executive branch, to comply with the dictates of the President or his alter egos since the President has executive control and supervision over the components of the executive branch. Yet Philippine Airlines has become, by this time, a private corporation one that may have labored under the conditions of its legislative franchise that allowed it to conduct air services, but private in character nonetheless. The President or his alter egos do not have the legal capacity to dictate insuperable commands to private persons. And that undesirable trait would be refuted on the President had petitioners position prevailed, since it is imbued with the presumption that the commitment made to a foreign government becomes operative without complying with the internal processes for the divestiture of private rights. Herein, we do not see why the Philippine government could not have observed due process of law, should it have desired to see the Commercial Agreement immediately terminated in order to adhere to its apparent commitment to the Kuwait government. The CAB, with its ample regulatory power over the economic affairs of local airliners, could have been called upon to exercise its jurisdiction to make it so. A remedy even exists in civil lawthe judicial annulment or reformation of contractswhich could have been availed of to effect the immediate termination of the Commercial Agreement. No such remedy was attempted by the government. Nor can we presume, simply because Dr. Linlingan, Executive Director of the CAB had signed the CMU in behalf of the Philippine Panel, that he could have done so bearing the authority of the Board, in the exercise of regulatory jurisdiction over Philippine Airlines. For one, the CAB is a 35 collegial body composed of five members, and no one membereven the chairmancan act in behalf of the entire Board. The Board is disabled from performing as such without a quorum. For another, the Executive Director of the CAB is not even a member of the Board, per R.A. No. 776, as amended. Even granting that the police power of the State, as given flesh in the various laws governing the regulation of the airline industry in the Philippines, may be exercised to impair the vested rights of privately-owned airlines, the deprivation of property still requires due process of law. In order to validate petitioners position, we will have to concede that the right to due process may be extinguished by executive
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command. While we sympathize with petitioner, who reasonably could rely on the commitment made to it by the Philippine government, we still have to respect the segregate identity of the government and that of a private corporation and give due meaning to that segregation, vital as it is to the very notion of democracy. WHEREFORE, the petition is DENIED. No pronouncement as to costs. SO ORDERED. -END-
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AD MAJOREM DEI GLORIAM!!!!

Notes On Transportation Law 2

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Notes on Transportation Law