Transpo Mem Aid

San Beda College of Law
54
MEMORY AID IN COMMERCIAL LAW
TRANSPORTATION LAWS
CONTRACT
OF
TRANSPORTATION/
CARRIAGE
A contract whereby a person, natural or
juridical, obligates to transport persons,
goods, or both, from one place to another,
by land, air or water, for a price or
compensation.
Classifications:
1. Common or Private
2. Goods or Passengers
3. For a fee (for hire) or Gratuitous
4. Land, Water/maritime, or Air
5. Domestic/inter-island/coastwise or
International/foreign
It is a relationship which is imbued with
the public interest.
COMMON CARRIER
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 (Art. 1732, Civil Code).
Art. 1732 of the New Civil Code avoids
any distinction between one whose principal
business activity is the carrying of persons
or goods or both and one who does such
carrying only as an ancillary activity
(sideline).
It also avoids a distinction
between a person or enterprise offering
transportation service on a regular or
scheduled basis and one offering such
service on an occasional, episodic or
unscheduled basis.
Neither does the law distinguish between
a carrier offering its services to the general
public that is the general community or
population and one who offers services or
solicits business only from a narrow
segment of the general population.
A person or entity is a common carrier
even if he did not secure a Certificate of

Public Convenience (De Guzman vs. CA,
168 SCRA 612).
It makes no distinction as to the means of
transporting, as long as it is by land, water or
air.
It does not provide that the
transportation should be by motor vehicle.
(First Philippine Industrial Corporation vs.
CA)
One is a common carrier even if he has
no fixed and publicly known route, maintains
no terminals, and issues no tickets (Asia
Lighterage Shipping, Inc. vs. CA).
Characteristics:
1. Undertakes to carry for all people
indifferently and thus is liable for
refusal without sufficient reason
(Lastimoso vs. Doliente, October 20,
1961);
2. Cannot lawfully decline to accept a
particular class of goods for carriage to
the prejudice of the traffic in these
goods;
3. No monopoly is favored (Batangas
Trans. vs. Orlanes, 52 PHIL 455);
4. Provides public convenience.
PRIVATE CARRIER
One which, without being engaged in the
business of carrying as a public
employment, undertakes to deliver goods or
passengers for compensation. (Home
Insurance Co. vs. American Steamship
Agency, 23 SCRA 24)
TESTS WHETHER CARRIER IS
COMMON OR PRIVATE:
The SC in First Philippine Industrial
Corporation vs. CA (1995) reiterated the
following tests:
1. It must be engaged in the business of
carrying goods for others as a public
COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws); Robespierre CU (Law on Intellectual
Property)

55
employment and must hold itself out

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

Property)

56
1. From the nature of the business and

for reasons of public policy (Art. 1733)
2. Relationship of trust
3. Business is impressed with a special
public duty
4. Possession of the goods
5. Preciousness of human life
A common carrier is not an absolute
insurer of all risks of travel.
COVERAGE
1. Vigilance over goods (Arts. 1734-1754);
and
2. Safety of passengers (Arts. 1755-1763).
PASSENGER
A person who has entered into a contract
of carriage, express or implied, with the
carrier. They are entitled to extraordinary
diligence from the common carrier.
The following are not considered
passengers, and are entitled to ordinary
diligence only:
a. One who has not yet boarded any part
of a vehicle regardless of whether or
not he has purchased a ticket;
b. One who remains on a carrier for an
unreasonable length of time after he
has been afforded every safe
opportunity to alight;
c. One who has boarded by fraud,
stealth, or deceit;
d. One who attempts to board a moving
vehicle, although he has a ticket,
unless the attempt be with the
knowledge and consent of the carrier;
e. One who has boarded a wrong
vehicle, has been properly informed of
such fact, and on alighting, is injured
by the carrier;
f. Invited guests and accommodation
passengers. (Lara vs. Valencia)
g. One who rides any part of the vehicle
which is unsuitable or dangerous or
which he knows is not designed or
intended for passengers.

DEFENSES OF A COMMON CARRIER IN
THE CARRIAGE OF GOODS
1. CASO FORTUITO/FORCE MAJEURE
Requisites:
a. Must be the proximate and only cause
of the loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after
the occurrence of the disaster (Art. 1739)
c. Carrier has not negligently incurred in
delay in transporting the goods (Art.
1740)
Fire is not considered a natural disaster
or calamity as it arises almost invariably
from some act of man. (Eastern Shipping
Lines Inc. vs. IAC)
Mechanical defects are not force majeure
if the same was discoverable by regular and
adequate inspections. (Notes and Cases on
the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004
ed. p.120-122)
2. ACTS OF PUBLIC ENEMY
Requisites:
a. Must be the proximate and only cause
of the loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after
the act causing the loss, deterioration or
destruction of the goods (Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR
OWNER
a. Sole and proximate cause: absolute
defense
b.
Contributory: partial defense. (Art.
1741)
4. CHARACTER OF THE GOODS OR
DEFECTS IN THE PACKING OR IN THE
CONTAINER
Even if the damage should be caused by

Property)

57
the inherent defect/character of the goods,

the common carrier must exercise due
diligence to forestall or lessen the loss. (Art.
1742)
The carrier which, knowing the fact of
improper packing of the goods upon
ordinary observation, still accepts the goods
notwithstanding such condition, is not
relieved of liability or loss or injury resulting
therefrom. (Southern Lines, Inc. v. CA, 4
SCRA 258)
5. ORDER
OR
ACT
OF
PUBLIC
AUTHORITY
Said public authority must have the power
to issue the order (Art. 1743). Consequently,
where the officer acts without legal process,
the common carrier will be held liable.
(Ganzon v. CA 161 SCRA 646)
Diligence in the selection and supervision
of employees under Article 2180 of the Civil
Code cannot be interposed as a defense by
the common carrier because the liability of
the carriers arises from the breach of the
contract of carriage. The defense under said
articles is applicable to negligence in quasidelicts under Art. 2176. (Del Prado v. Manila
Electric Co., 52 Phil 900)
CARRIAGE OF GOODS
LIABILITY OF A COMMON CARRIER FOR

DEATH OR INJURIES TO PASSENGERS
DUE TO ACTS OF ITS EMPLOYEES AND
OTHER PASSENGERS OR STRANGERS
FOR ACTS
FOR ACTS OF
OF OTHER
ITS
PASSENGER
EMPLOYEES
S OR
STRANGERS
Required diligence and defense
Extraordinary
Ordinary
diligence
diligence
Nature of liability
Tort; however, Not absolute;
The employee limited by Art.
must be on 1763
duty at the time
of
the
act.
(Maranan
v.
Perez)
The carrier is liable when its personnel
allowed a passenger to drive the vehicle
causing it to collide with another vehicle
resulting to the injuries suffered by the other
passengers. (MRR vs. Ballesteros, 16 SCRA
641)
CARRIAGE OF PASSENGERS
Parties
1. Common carrier
2. Shipper
3. Consignee
1. Common carrier
2. Passenger
Cause of liability
Delay in delivery, loss,
Death or injury to the passengers
destruction, or deterioration of the
goods
Duration of liability
From the time the goods are The duty of a common carrier to
unconditionally placed in the provide safety to its passengers
possession of, and received by so obligates it not only during the
Property)

58
the carrier for transportation until

the same are delivered actually or
constructively by the carrier to the
consignee or to the person who
has the right to receive them. (Art.
1736)
It 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. (Art. 1737)
It 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 bee
advised of the arrival of the goods
and
has
had
reasonable
opportunity thereafter to remove
them or otherwise dispose of
them. (Art. 1738)
Delivery of goods to the
custom authorities is not delivery
to the consignee. (Lu Do v.
Binamira, 101 Phil 120)
course of the trip, but for so long

as the passengers are within its
premises and where they ought
to be in pursuance to the contract
of carriage. (LRTA v. Navidad,
[2003])
All persons who remain on the
premises within a reasonable
time
after
leaving
the
conveyance are to be deemed
passengers, and what is a
reasonable time or a reasonable
delay within this rule is to be
determined
from
all
the
circumstances, and includes a
reasonable time to see after his
baggage and prepare for his
departure. (La Mallorca v. CA, 17
SCRA 739 ; Abiotiz Shipping
Corporation v. CA, 179 SCRA
95)
It is the duty of common
carriers of passengers to stop
their conveyances a reasonable
length of time in order to afford
passengers an opportunity to
enter, and they are liable for
injuries suffered from the sudden
starting up or jerking of their
conveyances while doing so.
The duty which the carrier of
passengers owes to its patrons
extends to persons boarding the
cars as well as to those alighting
therefrom (Dangwa Trans Co.,
Inc. vs. CA 202 SCRA 574).
Presumption of negligence
Art.1735 Civil Code

Reason: As to when and how
goods were damaged in transit is
a matter peculiarly within the
knowledge of the carrier and its
employees. (Mirasol v. Dollar, 53
PHIL 124)
Art.1755 Civil Code

Reason: The contract between
the passenger and the carrier
imposes on the latter the duty to
transport the passenger safely;
hence the burden of explaining
should fall on the carrier.

Property)

59
Mere proof of delivery of goods

to a carrier in good order and the
subsequent arrival of the same
goods at the place of destination
in bad order makes for a prima
facie case against the carrier.
(Coastwise Lighterage Corp. v.
CA, 245 SCRA 796)
Defenses
1. Ordinary
circumstance:
Exercise of extraordinary
diligence (Art. 1735)
2. Special circumstances:
a. Flood,
storm,
earthquake, lighting, or
other natural disaster or
calamity (plus force
majeure)
b. Act of the public
enemy in war, whether
international or civil
c. Act or omission of the
shipper or the owner of
goods
d. The character of the
goods or defects in the
packing or in the
containers
e. Order or act of
competent
public
authority (Art. 1734)
1. Exercise of extraordinary
diligence (Art. 1756)
2. Caso fortuito

Property)

60
Valid stipulations
1. Reduction of degree of
diligence to ordinary diligence,
provided it be:
a) In writing, signed by the
shipper or owner;
b) Supported by a valuable
consideration other than
the service rendered by the
carriers; and
c) Reasonable, just and not
contrary to public policy.
(Art. 1744)
2. Fixed amount of liability: A
contract fixing the sum to be
recovered by the owner or
shipper for the loss, destruction or
deterioration of the goods, if it is
reasonable and just under the
circumstances and has been
fairly and freely agreed upon.
(Art. 1750)
3. Limited liability for delay: An
agreement limiting the common
carriers liability for delay on
account of strikes or riots (Art.
1748)
4. Stipulation limiting liability to
the value of the goods appearing
in the bill of lading, unless the
shipper or owner declares a
greater value. (Art. 1749)
Stipulation limiting liability when a

passenger is carried gratuitously,
but not for willful acts or gross
negligence. (Art. 1758)
The diligence required in the

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

61
owner or shipper;
2. That carrier will not be liable
for any loss, destruction or
deterioration of the goods;
3. That the carrier need not
observe any diligence in the
custody of the goods;
4. That the carrier shall exercise
a degree of diligence less than
that of a good father of a family
over the movable transported;
5. That the carrier shall not be
responsible for the acts or
omissions
of
his
or
its
employees;
6. That the carriers liability for
acts committed by thieves or
robbers who do not act with
grave or irresistible threat,
violence or force is dispensed
with or diminished;
7. That the carrier is not
responsible
for
the
loss,
destruction or deterioration of the
goods on account of the
defective condition of the car,
vehicle, ship or other equipment
used in the contract of carriage.
(Art. 1745)
common carrier for the safety of

passengers imposed by law by
stipulation, by posting of notices,
by statements on tickets or
otherwise. (Art. 1757)

Property)
RULES ON PASSENGERS BAGGAGE

IN THE
IN THE
CUSTODY OF
CUSTODY
THE
OF THE
PASSENGERS
COMMON
(HANDCARRIER
CARRIED)
(CHECKEDIN)
Legal nature of the baggage
Necessary
Considered
deposit
as goods
Required diligence by the
common carrier
Diligence of a Extraordinary
depositary
diligence
(ordinary
diligence)
Applicable rules
Arts. 1998 and Arts.
17332000-2003
1753
CONCURRING CAUSES OF ACTION
ARISING FROM THE NEGLIGENT ACT OF
THE COMMON CARRIER
1. Culpa contractual (breach of contract)
Only the carrier is primarily liable and not
the driver, because there is no privity
between the driver and the passenger.
Basis: Art.1759, NCC.
No defense of due diligence in the
selection and supervision of employees.
2. Culpa aquiliana (quasi-delict)
The carrier and driver are solidarily liable
as joint tortfeasors.
Basis: Art. 2180, NCC.
Defense of due diligence in the selection
and supervision of employees is available.
Exception: maritime tort resulting in collision.
(See notes on Collision)
3. Culpa criminal (criminal negligence)
The driver is primarily liable. The carrier is
subsidiarily liable only if the driver is
convicted and declared insolvent.
Basis: Art. 100, RPC.
In case of injury to a passenger due to the
negligence of the driver of the bus on which
he is riding and of the driver of another

vehicle, the drivers as well as the owners of
the two vehicles are jointly and severally
liable for damages. It makes no difference
that the liability of the bus driver and owner
springs from contract while that of the owner
and driver of the other vehicle arises from
quasi-delict. (Fabre vs. CA)
LIMITATIONS
LIABILITY
INVALID AS
BEING
CONTRARY
TO PUBLIC
POLICY
1.
One
exempting the
carrier from any
and all liability
for
loss
or
damage
occasioned by
its
own
negligence.
2.
An
unqualified
limitation
of
liability to an
agreed
valuation.
AS
TO
CARRIERS
VALID &
ENFORCEAB
LE
1. One limiting
the liability of
the carrier to
an
agreed
valuation,
unless
the
shipper
declares
a
higher value
and pays a
higher rate of
freight
(H.E. Heacock
Company vs.
Macondray &
Company
Inc.)
However, the carrier cannot limit its liability

for injury to, or loss of, goods shipped where
such injury or loss was caused by its own
negligence.
(Shewaram vs. PAL, 17 SCRA 606)
SPECIAL RULES ON LIABILITES OF
AIRLINE CARRIERS
1. In case of flight diversion due to bad
weather or other circumstances beyond the
pilots control, the relation between the
carrier and the passenger continues until the
latter has been landed at the port of
destination and has left the carriers
premises. The carrier should necessarily
exercise
extraordinary
diligence
in
safeguarding the comfort, convenience and

safety of its stranded passengers until they
have reached their final destination.
(Philippine Airlines vs. CA, 226 SCRA 423)
2. Even where overbooking of passengers is
allowed as a commercial practice, the airline
company would still be guilty of bad faith and
still be liable for damages if it did not
properly inform passenger that it could
breach the contract of carriage even if they
were confirmed passengers. (Zalamea vs.
CA, 228 SCRA 23)
3. An open-dated ticket constitutes a
complete contract between the carrier and
passenger. Hence, the airline company is
liable if it refused to confirm a passengers
flight reservation. (Singson vs. CA, 282
SCRA 149)
4. An airline company which issued a
confirmed ticket to a passenger covering
successive trips on different airlines can be
held liable for damages occasioned by
bumping off by one of the successive
airlines. (Lufthansa German Airlines vs. CA,
238 SCRA 290)
5. An airline ticket providing that carriage by
successive air carriers is to be regarded as a
single operation is to make the issuing
carrier liable for the tortuous conduct of the
other carrier. A printed provision in the ticket
limiting liability only to its own conduct is not
enough to rebut that liability. (KLM Royal
Dutch Airlines vs. CA, 65 SCRA 237)
II. CODE OF COMMERCE
A. OVERLAND TRANSPORTATION
(Arts. 349-379)
Applicability
1. Domestic land and water/maritime
transportation. (Pandect of Commercial Law
and Jurisprudence, Justice Jose Vitug, 1997
ed.)
2. Domestic Air Transportation. (Commercial
Law Review, Cesar Villanueva, 2004 ed.)
IMPORTANT CONCEPTS:
1. Bill of lading
2. Obligations of the carrier
3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
BILL OF LADING
The written acknowledgment of receipt of
goods and agreement to transport them to a
specific place to a person named or to his
order.
Rules:
1. It is not indispensable for the creation of
a contract of carriage. (Compania Maritima
vs. Insurance Company of North America,
12 SCRA 213)
2. Ambiguity is construed against the carrier,
the contract being one of adhesion.
3. The consignee, although the instrument is
oftentimes drawn up only by the consignor
and carrier, becomes bound by all the
stipulations contained therein by making a
claim for loss on the basis of said bill of
lading. (Sea-Land Services Inc. vs. IAC)
4. The right of a party to recover for loss of
shipment consigned to him under a bill of
lading drawn up only by and between the
shipper and the carrier, springs from either a
relation of agency between him and the
shipper, or his status as stranger in whose
favor some stipulation is made in said
contract, and who becomes a party thereto
when he demands fulfillment of that
stipulation. (Art. 1311 (2), (Mendoza vs. PAL
Inc.)
5. Acceptance of the bill of lading without
dissent raises the presumption that all the
terms therein where brought to the
knowledge of the shipper and agreed to by
him and, in the absence of fraud or mistake;
he is estopped from thereafter denying that
he assented to such terms. (Notes and
Cases on the Law on Transportation and
Public Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p.261)
Kinds:
1. On board - issued when the goods have
2.
3.
4.
5.
6.
been actually placed aboard the ship

with 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 with or without specifying the
vessel by which the goods are to be
shipped.
Negotiable - one in which it is stated
that the goods referred to therein will be
delivered to the bearer or to the order of
any person named therein.
Non-negotiable - One in which it is
stated that the goods referred to therein
will be delivered to a specified person.
Clean One which does not indicate
any defect in the goods.
Foul One which contains a notation
thereon indicating that the goods
covered by it are in bad condition.
7. Spent One which covers goods that

already have been delivered by the
carrier without a surrender of a signed
copy of the bill.
8. Through One issued by the carrier
who is obliged to use the facilities of
other carriers as well as his own
facilities for the purpose of transporting
the goods from the city of the seller to
the city of the buyer, which bill of lading
is honored by the second and other
interested carriers who do not issue
their own bills.
9. Custody One wherein the goods are
already received by the carrier but the
vessel indicated therein has not yet
arrived in the port.
10. Port One which is issued by the
carrier to whom the goods have been
delivered, and the vessel indicated in
the bill of lading by which the goods are
to be shipped is already in the port
where the goods are held for shipment.
Functions:
1. Best evidence of the existence of the
contract of carriage of cargo (Art. 353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver goods
as stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier
cannot ordinarily refuse to carry a particular
class of goods.
EXCEPTION: For some sufficient reason
the discrimination against the traffic in such
goods is reasonable and necessary. (Fisher
vs. Yangco Steamship Co. 31 Phil 1).
Instances when the carrier may validly
refuse to accept the goods include the ff:
1.) Goods sought to be transported are
dangerous objects, or substances including
dynamite and other explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward
danger like flood, capture by enemies and
the like
7.) Goods like livestock will be exposed to
disease
8.) Strike
9.) Failure to tender goods on time. (Notes
and Cases on the Law on Transportation
and Public Utilities, Aquino, T. & Hernando,
R.P. 2004 ed. p.68)
In case of carriage by railway, the carrier
is exempted from liability if carriage is
insisted upon by the shipper, provided its
objections are stated in the bill of lading.
However, when a common carrier
accepts cargo for shipment for valuable
consideration, it takes the risk of delivering it
in good condition as when it was loaded.
(PAL vs. CA)
B. Duty to deliver the goods
Not only to transport the goods safely but
to the person indicated in the bill of lading.
The goods should be delivered to the
consignee or any other person to whom the
bill of lading was validly transferred or
negotiated.
Time of delivery
Stipulated in No stipulation
Contract/Bill
of Lading
1. Carrier is 1. Within a
bound to fulfill reasonable
the
contract time.
and is liable for 2. Carrier is
any delay; no bound
to
matter
from forward them
what cause it in
the
1st
may
have shipment
of
arisen.
the same or
similar goods
which he may
make to the
point
of
delivery. (ART.
358 Code of
Commerce)
Effects of delay
a. Merely suspends and generally does not
terminate the contract of carriage
b. Carrier remains duty bound to exercise
extraordinary diligence
c. Natural disaster shall not free the carrier
from responsibility (Art.1740)
d. If delay is without just cause, the contract
limiting the common carriers liability cannot
be availed of in case of loss or deterioration
of the goods (Art.1747)
RIGHT OF CONSIGNEE TO ABANDON
GOODS
Instances:
1. Partial non-delivery, where the goods are
useless without the others (Art. 363);
2. Goods are rendered useless for sale or
consumption for the purposes for which they
are properly destined (Art. 365); and
3. In case of delay through the fault of the
carrier (Art. 371).
NOTICE OF DAMAGE (ART. 366)
Requisites for applicability:
1. Domestic/inter-island/coastwise
transportation
2. Land/water/air transportation
3. Carriage of goods
4. Goods shipped are damaged
Rules:
a. Patent damage: shipper must file a claim
against the carrier immediately upon
delivery (it may be oral or written)
b. Latent damage: shipper should file a
claim against the carrier within 24 hours
from delivery.
Note: These rules does not apply to
misdelivery of goods. (Roldan vs. Lim
Ponzo)
Purpose of notice: To inform the carrier
that the shipment has been damaged, and it
is charged with liability therefore, and to give
it an opportunity to make an investigation
and fix responsibility while the matter is
fresh.
The filing of notice of claim is a condition
precedent for recovery.
Shorter period may be stipulated by the
parties because
it merely affects the
shippers remedy and does not affect the
liability of the carrier. (PHILAMGEN vs.
Sweetlines, Inc.)
Prescriptive Period
Not provided by Article 366. Thus, in such
absence, Civil Code rules on prescription
apply.
If despite the notice of claim, the carrier
refuses to pay, action must be filed in court.
1. No bill of lading was issued:
within 6 years
2. Bill of lading was issued: within
10 years.
ARTICLE 366
COGSA
Sec.3 (6)
Applicability
1.
Dom 1. International
estic/inter/
island/coastwis overseas/forei
e
gn
(from
transportation
foreign
2.
Land country
to
, water, air Phils.)
transportation
Note: subject
3.
Carri to the rule on
age of goods
Paramount
Clause
2.
Water/maritim
e
transportation
3. Carriage of
goods
Notice of damage
1.
1. Not a
Condition
condition
precedent
precedent
2.
2. 3-day period
24-hour period for claiming
for claiming
latent damage
latent damage
Prescriptive period
None provided; One year from
Civil
Code the date of
applies.
delivery
(delivered but
damaged
goods),
or
date when the
vessel left port
or from the
date
of
delivery to the
arrastre (nondelivery
or
loss).
COMBINED
CARRIER
AGREEMENT
(ART. 373)
GENERAL RULE: In case of a contract of
transportation of several legs, each carrier is
responsible for its particular leg in the
contract.
EXCEPTION:
A
combined
carrier
agreement where a carrier makes itself
liable assuming the obligations and
acquiring as well the rights and causes of
action of those which preceded it.
A. MARITIME COMMERCE
(Arts. 573-869)
IMPORTANT CONCEPTS:
1. Merchant vessel
2. Maritime lien and Preference of Credit
3. Doctrine of limited liability
4. Causes of revocation of voyage
5. Participants in maritime commerce
6. Charter party
7. Loans on bottomry and respondentia
8. Accidents in maritime commerce
MARITIME/ADMIRALTY LAW
It is the system of laws which particularly
relates to the affairs and business of the
sea, to ships, their crews and navigation,
and to maritime conveyance of persons and
property. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino &
Hernando, citing Francisco, p.254)
Maritime laws apply only to maritime
trade and sea voyages. (Pandect of
Commercial Law and Jurisprudence, Justice
Jose Vitug, 1997 ed.)
Arrastre service is not maritime in
character. It refers to a contract for the
unloading of goods from a vessel. (ICTSI vs.
Prudential Guarantee, 320 SCRA 244)
CHARACTERISTICS
OF
MARITIME
TRANSACTION
1. Real - similar to transactions over real
property with respect to effectivity against
third persons which is done through
registration. (Rubiso vs. Rivera, 37 Phil. 72).
The evidence of real nature is shown by: 1)
the limitation of the liability of the agents to
the actual value of the vessel and the freight
money; and 2) the right to retain the cargo
and embargo and detention of the vessel
(Luzon Stevedoring Corp v. CA, 156 SCRA
169);
2. Hypothecary - the liability of the owner of
the value of the vessel is limited to the
vessel itself (Doctrine of Limited Liability).
The real and hypothecary nature of
maritime law simply means that the liability
of the carrier in connection with losses
related to maritime contracts is confined to
the vessel, which stands as the guaranty for
their settlement. (Aboitiz Shipping Corp. vs.
General Accident Fire and Life Assurance
Corp. 217 SCRA 359).
MERCHANT VESSEL
Vessel engaged in maritime commerce,

whether foreign or otherwise. (Bar Review
Materials in Commercial Law, Jorge
Miravite, 2002 ed.)
Constitutes property which may be
acquired and transferred by any of the
means recognized by law. They shall
continue to be considered as personal
property. (Arts. 573, 585)
They are susceptible to maritime liens
such as for the repair, equipping and
provisioning of the vessel in the preparation
of a voyage, as well as mortgage liabilities,
in satisfaction of which a vessel may be
validly arrested and sold. (Ship Mortgage
Decree of 1978)
MARITIME LIEN
It constitutes a present right of property in
the ship, a jus in re, to be afterward enforced
in admiralty by process in rem. (PNB vs. CA,
337 SCRA 381)
If the maritime lien arose prior to the
recording of a preferred mortgage, it shall
have priority over the said mortgage lien.
(PNB vs. CA, 337 SCRA 381)
ORDER OF PREFERENCE IN CASE OF
SALE OF VESSEL
R.A. 6106
P.D. 1521
Effectivity date
1969
1978
Applicability
Overseas
Both domestic
shipping only
and overseas
shipping
Kind of sale
Judicial
Judicial and
extrajudicial
Order of Preference
A
preferred The preferred
mortgage
mortgage lien
shall
have shall
have
priority over all priority over all
claims against claims against
the
vessel, the
vessel,
except
the except
the
following
following
preferences in
the
order
stated:
1.
Judicial
costs of the
proceedings;
2. Taxes due
the Philippine
Government;
3.
Salaries
and wages of
the
Captain
and Crew of
the
vessel
during its last
voyage;
4.
General
average
or
salvage
including
contract
salvage,
bottomry
loans,
and
indemnity due
shippers
for
the value of
goods
transported
but
which
were
not
delivered
to
the consignee;
5. Costs of
repair
and
equipment of
the
vessel,
and
provisioning of
food, supplies
and
fuel
during its last
voyage; and
6.
Preferred
mortgages
registered
prior in time.
preferences in
the
order
stated:
1. Expenses
and
fees
allowed
and
costs taxed by
the court and
taxes due to
the
Government;
2.
Crews
wages;
3.
General
average;
4.
Salvage,
including
contract
salvage;
5.
Maritime
liens
arising
prior in time to
the recording
of
the
preferred
mortgage;
6. Damages
arising out of
tort; and
7.
Preferred
mortgage
registered
prior in time.
Effect of sale: All pre-existing claims in

the vessel are terminated. They will then be
satisfied from the proceeds of the sale

subject to the order of preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
Cases where applicable:
1. Art. 587 civil liability for indemnities
to third persons
2. Art. 590 indemnities from negligent
acts of the captain (not the shipowner
or ship agent)
3. Art. 837 collision
4. Art. 643 liability for wages of the
captain and the crew and for
advances made by the ship agent if
the vessel is lost by shipwreck or
capture
GENERAL RULE: The liability of

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

shipper
the
market value
of the goods
at the point of
destination.
CAUSES OF REVOCATION OF VOYAGE

1. War or interdiction of commerce;
2. Blockade;
3. Prohibition
to
receive
cargo
at
destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art.
640)
Terms:
1. Interdiction
of
commerce
A
governmental prohibition of commercial
intercourse intended to bring about an
entire cessation for the time being of all
trade whatever.
2. Blockade A sort of circumvallation of a
place by which all foreign connection and
correspondence is, as far as human
power can effect it, to be cut off.
3. Embargo A proclamation or order of a
state, usually issued in time of war or
threatened hostilities, prohibiting the
departure of ships or goods from some or
all the ports of such state until further
order.
PARTICIPANTS
IN
MARITIME
COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who has possession, control and
management of the vessel and the
consequent right to direct her navigation and
receive freight earned and paid, while his
possession continues.
Ship agent (naviero)

Person entrusted with provisioning and
representing the vessel in the port in which it
may be found; also includes the shipowner.
Not a mere agent under civil law; he is
solidarily liable with the ship owner.
Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject
to Art.609;
3. Contract in the name of the owners with
respect to repairs, details of equipment,
armament, provisions of food and fuel,
and freight of the vessel, and all that
relate to the requirements of navigation;
4. Order a new voyage, make a new charter
or insure the vessel after obtaining
authorization from the shipowner or if
granted in certificate of appointment.
Civil Liabilities of the Shipowner And
Ship Agent
1. All contracts of the captain, whether
authorized or not, to repair, equip and
provision the vessel; (Art. 586)
2. Loss and damage to the goods loaded on
the vessel without prejudice to their right
to free themselves from liability by
abandoning the vessel to the creditors.
(Art. 587)
Duty of Ship Agent to Discharge the
Captain and Members of the Crew
If the seamen contract is not for a definite
period or voyage, he may discharge them at
his discretion. (Art. 603)
If for a definite period, he may not
discharge them until after the fulfillment of
their contracts, except on the following
grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to its
cargo through malice or manifest or
proven negligence. (Art. 605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders of
ships.
The terms have the same meaning, but
are particularly used in accordance with the
size of the vessel governed and the scope of
transportation, i.e., large and overseas, and
small and coastwise, respectively.
Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government of
the country under whose flag he
navigates.
Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required
physical and mental examinations
required for licensing him as such.
(Art. 609)
Inherent powers:
1. Appoint crew in the absence of ship
agent;
2. Command the crew and direct the
vessel to its port of destination;
3. Impose correctional punishment on
those who, while on board vessel, fail
to comply with his orders or are
wanting in discipline;
4. Make contracts for the charter of
vessel in the absence of ship agent.
5. Supply, equip, and provision the
vessel; and
6. Order repair of vessel to enable it to
continue its voyage. (Art. 610)
Sources of funds to comply with the
inherent powers of the captain (in
successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
Duties:
1. Bring on board the proper certificate
and documents and a copy of the
Code of Commerce;
2. Keep a Log Book, Accounting Book
and Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and

unloading of the cargo;
5. Be on deck while leaving or entering
the port;
6. Protest arrivals under stress and in
case of shipwreck;
7. Follow instructions of and render an
accounting to the ship agent;
8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by
deceased passengers and crew
members;
10.
Comply with the requirements
of customs, health, etc. at the port of
arrival;
11.
Observe rules to avoid collision;
12.
Demand a pilot while entering
or leaving a port. (Art. 612)
A ships 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
(Inter-Orient Maritime Enterprises Inc. vs.
CA).
No liability for the following:
1. Damages caused to the vessel or to
the cargo by force majeure;
2. Obligations contracted for the repair,
equipment, and provisioning of the
vessel unless he has expressly bound
himself personally or has signed a bill
of exchange or promissory note in his
name. (Art. 620)
Solidary
Liabilities
of
the
Ship
Agent/Shipowner for Acts Done by the
Captain
towards
Passengers
and
Cargoes
1. Damages to vessel and to cargo due
to lack of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of

marine regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No liability under the following
circumstances:
1. If, before beginning voyage, captain
attempts to change it, or a naval war with
the power to which the vessel was
destined occurs;
2. If a disease breaks out and be officially
declared an epidemic in the port of
destination;
3. If the vessel should change owner or
captain. (Art. 647)
Sailing Mate/First Mate
Second chief of the vessel who takes the
place of the captain in case of absence,
sickness, or death and shall assume all of
his duties, powers and responsibilities. (Art.
627)
Duties:
1. Provide himself with maps and charts
with astronomical tables necessary for
the discharge of his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on
consultation with the captain and the
officers of the boat, following the
decision of the captain in case of
disagreement;
4. Responsible for all the damages
caused to the vessel and the cargo by
reason of his negligence. (Arts. 628 631)
Second Mate
Takes command of the vessel in case of
the inability or disqualification of the captain
and the sailing mate, assuming in such case
their powers and responsibilities.
Third in command
Duties:
1. Preserve the hull and rigging of the
vessel;
2.
3.
4.
5.
Arrange well the cargo;

Discipline the crew;
Assign work to crew members;
Inventory the rigging and equipment of
the vessel, if laid up. (Art. 632)
Engineers
Officers of the vessel but have no authority
except in matters referring to the motor
apparatus. When two or more are hired, one
of them shall be the chief engineer.
Duties:
1. In charge of the motor apparatus,
spare parts, and other instruments
pertaining to the engines;
2. Keep the engines and boilers in good
condition;
3. Not to change or repair the engine
without authority of the captain;
4. Inform the captain of any damage to
the motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining
the engine. (Art. 632)
Crew
The aggregate of seamen who man a
ship, or the ships company.
Hired by the ship agent, where he is
present and in his absence, the captain
hires them, preferring Filipinos, and in their
absence, he may take in foreigners, but not
exceeding 1/5 of the crew. (Art. 634)
Classes of Seamans Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman
While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of
discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
The seamans heirs are entitled to

payment as follows:
1. If death is natural:
a. compensation up to time of death if
engaged on wage
b. if by voyage - half of amount if death
occurs on voyage out; and full, if on
voyage in
c. if by shares - none, if before
departure; full, if after departure
2. if death is due to defense of vessel - full
payment;
3. if captured in defense of vessel - full
payment;
4. if captured due to carelessness - wages
up to the date of the capture. (Art. 645)
Complement of the Vessel
All persons on board, from the captain to
the cabin boy, necessary for the
management, maneuvers, and service, thus
including the crew, the sailing mates,
engineers, stokers and other employees on
board not having specific designations.
Does not include the passengers or the
persons whom the vessel is transporting.
D. SUPERCARGOES
Persons who discharges administrative
duties assigned to him by ship agent or
shippers, keeping an account and record of
transaction as required in the accounting
book of the captain. (Art. 649)
E. PILOT
A person duly qualified, and licensed, to
conduct a vessel into or out of ports, or in
certain waters.
The term generally connotes a person
taken on board at a particular place for the
purpose of conducting a ship through a river,
road or channel, or from a port.
Master pro hac vice for the time being in
the command and navigation of the ship.
While in exercising his functions a pilot is
in sole command of the ship and
supersedes the master for the time being in
the command and navigation of the ship, the
master does not surrender his vessel to the
pilot and the pilot is not the master. There
are occasions when the master may and

should interfere and even displace the pilot,
as when the pilot is obviously incompetent or
intoxicated (Far Eastern Shipping Company
vs. CA).
Compulsory Pilotage States possessing
harbors have enacted laws or promulgated
rules requiring vessels approaching their
ports to take on board pilots licensed under
the local laws. (Notes and Cases on the Law
on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.
518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage
grounds, the Harbor Pilot is responsible for
damage to a vessel or to life or property due
to his negligence.
EXCEPT:
1. Accident caused by force majeure or
natural calamity provided the pilot exercised
prudence and extra diligence to prevent or
minimize damages.
2. Countermand or overrule by the master
of the vessel in which case the registered
owner of the vessel is liable. (Sec.11, Art.III
PPA Admin Order 03-85)
SPECIAL CONTRACTS OF MARITIME
COMMERCE
1. Charter party
2. Bill of lading
3. Contract
of
transportation
of
passengers on sea voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance
CHARTER PARTY
A contract by virtue of which the owner or
agent
binds
himself
to
transport
merchandise or persons for a fixed price.
A contract by which an entire ship, or
some principal part thereof is let/leased by
the owner to another person for a specified
time or use. (Planters Products, Inc. vs. CA,
226 SCRA 476)
Parties:
1. Ship owner or ship agent
2. Charterer
Classes:
1. Bareboat or demise The charterer
provides crew, food and fuel. The charterer
is liable as if he were the owner, except
when the cause arises from the
unworthiness of the vessel. The shipowner
leases to the charterer the whole vessel,
transferring to the latter the entire command,
possession and consequent control over the
vessels navigation, including the master
and the crew, who thereby become the
charters servants. It transforms a common
carrier into a private carrier.
The charterer becomes the owner of
the vessel pro hac vice, just for that one
particular purpose only. Because the
charterer is treated as owner pro hac
vice, the charterer assumes the
customary rights and liabilities of the
shipowner to third persons and is held
liable for the expense of the voyage and
the wages of the seamen.
2. Contract of Affreightment A contract
whereby the owner of the vessel leases part
or all of its space to haul goods for others.
The shipowner retains the possession,
command and navigation of the ship, the
charterer merely having use of the space
in the vessel in return for his payment of
the charter hired.
Kinds:
a. Time charter vessel is chartered for
a fixed period of time or duration of
voyage.
b. Voyage or trip charter the vessel is
leased for one or series of voyages
usually for purposes of transporting
goods for charterer.
LEASE
If for a definite
period, lessee
cannot give up
the lease by
paying
a
portion of the
amount agreed
upon.
CHARTER
PARTY
Charterer may
rescind charter
party by paying
half of the
freightage
agreed upon.
If the leased
property
is
sold to one
who knows of
the existence
of the lease,
the new owner
must respect
the lease.
Civil
concept
The
new
owner is not
compelled to
respect
the
charter party
so long as he
can load the
vessel with his
own
cargo.
(Art. 689)
law Commercial
law concept
CHARTER
BILL OF
PARTY
LADING
An entire or More like a
complete
private receipt
contract.
which
the
captain gives
to
accredit
goods
received from
persons
Consensual
Real contract
contract
BAREBOAT
OR DEMISE
CHARTER
Charterer
becomes liable
to
others
caused by its
negligence
Charterer
regarded
as
owner pro hac
vice for the
voyage
Owner
of
vessel
relinquishes
possession,
command and
navigation to
CONTRACT
OF
AFFREIGHTM
ENT (TIME OR
VOYAGE
CHARTER)
Owner remains
liable as carrier
and
must
answer for any
breach of duty
Charterer
is
not regarded
as owner.
The
vessel
owner retains
possession,
command and
navigation of
the ship
charterer
Common
carrier
is
converted
to
private carrier.
Common
carrier is not
converted to a
private carrier.
PERSONS WHO MAY MAKE A CHARTER

1. Owner or owners of the vessel, either
in whole or in majority part, who have
legal control and possession of the
vessel
2. Charterer may subcharter entire
vessel to 3rd person only if not
prohibited in original charter. (Art.679)
3. Ship agent if authorized by the
owner/s or given such power in the
certificate of appointment. (Art.598)
4. Captain in the absence of the ship
agent or consignee and only if he acts
in accordance with the instructions of
the agent or owner and protects the
latters interests. (Art.609)
REQUISITES OF A VALID CHARTER
PARTY
1. Consent of the contracting parties
2. Existing vessel which should be
placed at the disposition of the shipper
3. Freight
4. Compliance with Art. 652 of the Code
of Commerce
Clauses Which May Be Included In a

Charter Party
Jason clause
Clause
paramount or
paramount
clause
A stipulation in
a charter party
that in case of
a
maritime
accident
for
which
the
shipowner is
not
responsible by
law, contract
or otherwise,
the
cargo
shippers,
consignees or
owners shall
contribute with
the shipowner
in
general
average.
(Pandect
of
Commercial
Law
and
Jurisprudence,
Justice
Jose
Vitug,
1997
ed.)
A clause in a
charter party
providing that
the
COGSA
shall
apply,
even
though
the
transportation
is
domestic,
subject to the
extent that any
term of the bill
of lading is
repugnant to
the COGSA or
applicable law,
then to the
extent thereof
the provision of
the
bill
of
lading is void.
(Pandect
of
Commercial
Law
and
Jurisprudence,
Justice
Jose
Vitug,
1997
ed.)
Rights and Obligations of Parties

SHIPOWNER
OR SHIP
AGENT
1. If the vessel
is
chartered
wholly, not to
accept cargo
from others;
2. To observe
represented
capacity;
3. To unload
cargo
clandestinely
placed
4. To
substitute
another vessel
if load is less
CHARTERER
1. To pay the
agreed charter
price;
2. To
pay
freightage on
unboarded
cargo;
3. To
pay
losses
to
others
for
loading
uncontracted
cargo
and
illicit cargo;
4. To wait if
the
vessel
than 3/5 of
capacity;
5. To
leave
the port if the
charterer does
not bring the
cargo
within
the lay days
and extra lay
days allowed;
6. To place in
a vessel in a
condition
to
navigate;
7. to
bring
cargo
to
nearest neutral
port in case of
war
or
blockade.
(Arts. 669-678)
needs repair;
5. To
pay
expenses for
deviation.
(Arts.
679687)
Rescission of a Charter Party

At
At
Fortuito
chartere shipown
us
rs
ers
causes
request request
(Art.
(Art 688)
(Art.
690)
689)
1.
By 1. If the 1. War or
abandoni extra lay interdicti
ng
the days
on of
charter
terminate commerc
and
without
e;
paying
the cargo 2.
half
of being
Blockade
the
placed
;
freightag alongsid 3.
e;
e
the Prohibitio
2. Error vessel;
n to
in
2. Sale receive
tonnage by
the cargo;
or flag;
owner of 4.
3. Failure the
Embargo
to place vessel
; and
the
before
5.
vessel at loading
Inability
the
by
the of the
charterer charterer vessel to
s
;
disposal;
4. Return
of
the
vessel
due
to
pirates,
enemies
or
bad
weather;
5. Arrival
at a port
for
repairs.
navigate.
Terms:
1. Primage - bonus to be paid to the captain
after the successful voyage.
2. Demurrage the sum fixed in the charter
party as a remuneration to the owner of
the ship for the detention of his vessel
beyond the number of days allowed by
the charter party for loading or unloading
or for sailing.
3. Deadfreight the amount paid by or
recoverable from a charterer of a ship for
the portion of the ships capacity the latter
contracted for but failed to occupy.
4. Lay Days - days allowed to charter
parties for loading and unloading the
cargo.
5. Extra Lay Days days which follow after
the lay days have elapsed.
USUAL FORMS OF CONSUMMATING
CONTRACTS
1. C.I.F. cost, insurance and freight;
2. F.O.B. - free on board;
3. F.A.S. - free alongside ship; and
4. C. & F. - cost and freight.
TRANSSHIPMENT OF GOODS
The act of taking cargo out of one ship and
loading it in another, or the transfer of goods
from the vessel stipulated in the contract of
affreightment to another vessel before the
place of destination named in the contract
has been reached, or the transfer for further
transportation from one ship or conveyance
to another.
It is not dependent on the ownership of

the transporting ships or in the change of
carriers, but rather on the fact of actual
physical transfer of cargo from one vessel to
another.
If done without legal excuse, however
competent and safe the vessel into which
the transfer is made, is a violation of contract
and infringement of right of shipper and
subjects carrier to liability if freight is lost
event by cause otherwise excepted.
(Magellan Manufacturing vs. CA, 201 SCRA
102)
2.
LOAN
ON
BOTTOMRY
AND
RESPONDENTIA
A real, unilateral, aleatory contract, by
virtue of which one person lends to another
a certain amount of money or goods on
things exposed to maritime risks, which
amount, with its earnings, is to be returned if
the things are safely transported, and which
is lost if the latter are lost.
2.
1.
2.
3.
1.
3.
4.
5.
6.
7.
LOAN ON
BOTTOMRY
LOAN ON
RESPONDEN
TIA
Definition
Loan made by Loan taken on
shipowner or security of the
ship
agent cargo
laden
guaranteed by on a vessel,
vessel
itself and repayable
and repayable upon
safe
upon arrival of arrival
of
vessel
at cargo
at
destination.
destination.
(Art. 719)
(Art. 719)
Who may contract
Shipowner or Only
the
ship
agent. owner of the
Outside of the cargo.
residence of
the owners the captain.
Common elements:
1. Exposure
of security to
marine peril;
Obligation of the debtor

conditioned only upon safe
arrival of the security at the
point of destination.
Forms:
Public instrument
Policy signed by the
contracting parties and the
broker taking part therein
Private instrument
(Art.
720)
Contents:
Kind, name and registry of
the vessel;
Name,
surname
and
domicile of the captain;
Names, surnames and
domiciles of the borrower
and the lender;
Amount of the loan and the
premium stipulated;
Time for repayment;
Goods pledged to secure
repayment;
Voyage during which the
risk is run (Art.721)
BOTTOMRY/
RESPONDEN
TIA
ORDINARY
LOAN
(MUTUUM)
Not subject to Subject

to
Usury Law
Usury Law
Liability of the
borrower
is
contingent on
the
safe
arrival of the
vessel
or
cargo
at
destination
Not subject to
any
contingency
(absolute
liability)
The
last
lender is a
preferred
creditor
The
first
lender is a
preferred
creditor
WHEN LOAN ON BOTTOMRY OR

RESPONDENTIA REGARDED AS SIMPLE
LOAN
1. Lender loaned an amount larger than
the value of the object due to
fraudulent means employed by the
borrower. (ART.726)
2. Full amount of the loan is not used for
the cargo or given on the goods if all
of them could not have been loaded,
the balance will be considered a
simple loan. (ART.727)
3. If the effects on which the money is
taken is not subjected to any risk.
(ART.729)
Note: Under existing laws, the parties to a
loan, whether ordinary or maritime, may
agree on any rate of interest. (CB Circular
905)
MARINE
INSURANCE
Indemnity is paid
after the loss
has occurred
In case of loss of
the vessel due to
a risk insured
against,
the
obligation of the
insurer becomes
absolute
Consensual
contract
LOAN ON
BOTTOMR
Y OR
RESPOND
ENTIA
Indemnity is
paid
in
advance by
way of a
loan
In case of
loss of the
vessel due
to a marine
peril,
the
obligation of
the
borrower to
pay
is
extinguishe
d
Real
contract
Hypothecary
Nature
of
Bottomry/
Respondentia
GENERAL RULE: The obligation of the
borrower to pay the loan is extinguished if
the goods given as security are absolutely

lost by reason of an accident of the sea,
during the voyage designated, and if it is
proven that the goods were on board.
EXCEPTIONS:
1. Loss due to inherent defect;
2. Loss due to the barratry on the part of the
captain;
3. Loss due to the fault or malice of the
borrower;
4. The vessel was engaged in contraband;
and
5. The cargo loaded on the vessel be
different in from that agreed upon.
Concurrence of Marine Insurance and
Loan on Bottomry/Respondentia
1. The insurable interest of the owner of
a ship hypothecated by bottomry is
only the excess of the value over the
amount secured by bottomry. (Sec.
101, Insurance Code)
2. The value of what may be saved in
case of shipwreck shall be divided
between the lender and the insurer in
proportion to the interest of each one.
(Art. 735)
Note: If a vessel is hypothecated by
bottomry only the excess is insurable, since
a loan on bottomry partakes of the nature
likewise of an insurance coverage to the
extent of the loan accommodation. The
same rule would apply to the hypothecation
of the cargo by respondentia. (Pandect of
Commercial Law and Jurisprudence, Justice
Jose Vitug, 1997 ed.)
ACCIDENTS IN MARITIME COMMERCE
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
AVERAGE
An extraordinary or accidental expense
incurred during the voyage in order to
preserve the cargo, vessel or both, and all
damages or deterioration suffered by the
vessel from departure to the port of
destination, and to the cargo from the port of

loading to the port of consignment. (Art.
806)
The person whose property has been
saved must contribute to reimburse the
damage caused or expense incurred if the
situation constitutes general average.
Classes:
1. Particular or Simple Average
2. Gross or General Average
Where both vessel and cargo are saved,
it is general average; where only the vessel
or only the cargo is saved, it is particular
average.
Expenses incurred to refloat a vessel,
which accidentally ran aground, in order to
continue its voyage, do not constitute
general average. Not only is there absence
of a marine peril, common safety factor, and
deliberateness. It is the safety of the
property, and not the voyage, which
constitutes the true foundation of general
average. (A. Magsaysay, Inc. vs. Agan,
G.R.No. L-6393, Jan. 31, 1955)
PARTICULAR
GROSS OR
OR SIMPLE
GENERAL
Definition
Damages
or Damages or
expenses
expenses
caused to the deliberately
vessel or cargo caused
in
that did not order to save
inure to the the vessel, its
common
cargo or both
benefit,
and from real and
borne
by known
risk.
respective
(Art. 811)
owners. (Art.
809)
Requisites
1. common
danger;
2. deliberate
sacrifice;
3. success;
4. proper
formalities
and legal
steps.
Liability
The owner of All
the
the
goods persons
which
gave having
an
rise
to
the interest in the
expense
or vessel and the
suffered
the cargo therein
damage shall at the time of
bear
this the
average. (Art. occurrence of
810)
the
average
shall
contribute to
satisfy
this
average. (Art.
812)
The
insurers
(Art.859) and
lenders
on
bottomry and
respondentia
shall likewise
contribute.
(Art.732).
Number of interests involved
Only
one Several
interest
interests
involved
involved
Share in the damage or
expense
100% share
In proportion
to the value of
the
owners
property
saved
Right to recover
No
There may be
reimbursement reimbursemen
t
Kinds (not exclusive)
Art. 809
Art. 811
Procedure for recovery
1. Assembly
and
deliberation
2. Resolution
of the captain
3. Entry of the
resolution in
the logbook
4. Detailed
minutes
5. Delivery of
the minutes to
the maritime
judicial
authority
of
the first port,
within
24
hours
from
arrival,
6. Ratification
by
captain
under
oath.
(Arts.
813814)
GOODS NOT COVERED BY GENERAL
AVERAGE EVEN IF SACRIFICED
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or
records of the vessel. (ART.855 (2))
3. Fuel for the vessel if there is more
than sufficient fuel for the voyage.
(Rule IX, York-Antwerp Rule)
Jettison
Act of throwing cargo overboard in order to
lighten the vessel.
Order of goods to be cast overboard:
1. Those which are on the deck,
preferring the heaviest one with the
least utility and value;
2. Those which are below the upper
deck, beginning with the one with
greatest weight and smallest value.
(Art. 815)
Jettisoned goods are not res nullius nor
deemed abandoned within the meaning of
civil law so as to be the object of occupation
by salvage. (Pandect of Commercial Law
and Jurisprudence, Justice Jose Vitug, 1997
ed.)
In order that the jettisoned goods may be
included in the gross or general average, the
existence of the cargo on board should be
proven by means of the bill of lading. (Art.
816)
York-Antwerp (Y-A) Rules on Determining
Liability for Averages With Regard To
Deck Cargo
1. Deck cargo is allowed only in
domestic/coastwise/inter-island
shipping,
and
is
prohibited
in
international/overseas/foreign shipping.
2. If deck cargo is loaded with the consent
of the shipper on overseas trade, it must
always contribute to general average, but
should the same be jettisoned, it would not
be entitled to reimbursement because there
is violation of the Y-A Rules.
3. If deck cargo is loaded with the consent
of the shipper on coastwise shipping, it must
always contribute to general average and if
jettisoned
would
be
entitled
to
reimbursement.
Reason: In domestic shipping, voyages
are usually short and the seas are generally
not rough. In overseas shipping, the vessel
is exposed for many days to perils of the
sea.
DOMESTIC
INTERNATIO
NAL
Deck cargo is Deck cargo is
allowed
not allowed
With shippers consent
General
Particular
average
average
Without shippers consent
Captain is
Captain is
liable
liable
ARRIVAL UNDER STRESS (ARRIBADA)
The arrival of a vessel at the nearest and
most convenient port instead of the port of
destination, if during the voyage the vessel
cannot continue the trip to the port of
destination.
When
lawful
When
unlawful
Who
bears
expense
s:
The
inability
to
continue
voyage
is due to
lack
of
provision
s, wellfounded
fear
of
seizure,
privateer
s,
pirates,
or
accident
s of the
sea
disabling
it
to
navigate.
(Art.
819)
1. Lack
of
provision
s due to
negligenc
e to carry
according
to usage
and
customs;
2. Risk of
enemy
not well
known or
manifest
3. Defect
of vessel
due
to
improper
repair;
and
4. Malice
,
negligenc
e, lack of
foresight
or skill of
captain.
(Art. 820)
The
shipowne
r or ship
agent is
liable in
case of
unlawful
arrival
under
stress.
But they
shall not
be liable
for
the
damages
caused
by
reason of
a lawful
arrival.
(Art. 821)
It is the duty of the captain to continue the

voyage without delay after the cause of the
arrival under stress has ceased failing in
such duty renders him liable. However, in
case the cause has been risk of enemies,
there must first be an assembly before
departure. (Art. 825)
Steps:
1. Captain should determine during the
voyage if there is well founded fear of
seizure, privateers and other valid
grounds;
2. Captain shall assemble the officers
and summon the persons interested in
the cargo who may attend the meeting
but without a right to vote;
3. The officers shall determine and agree
if there is well-founded reason after
examining the circumstances. The
captain shall have the deciding vote;
4. The agreement shall be drafted and

the proper minutes shall be signed
and entered in the log book;
5. Objections and protests shall likewise
be entered in the minutes.
COLLISION
Impact of two vessels both of which are
moving.
Allision
Impact between a moving vessel and a
stationary one.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a
port, the farther one must allow the
nearer to enter first; if they collide, the
fault is presumed to be imputable to the
one who arrived later, unless it can be
proved that there was no fault on its part.
2. When two vessels meet, the smaller
should give the right of way to the larger
one.
3. A vessel leaving port should leave the
way clear for another which may be
entering the same port.
4. The vessel which leaves later is
presumed to have collided against one
which has left earlier.
5. There is a presumption against the
vessel which sets sail in the night.
6. There is a presumption against the
vessel with spread sails which collides
with another which is at anchor and
cannot move, even when the crew of the
latter has received word to lift anchor,
when there was not sufficient time to do
so or there was fear of a greater damage
or other legitimate reason.
7. There is a presumption against an
improperly moored vessel.
8. There is a presumption against a vessel
which has no buoys to indicate the
location of its anchors to prevent damage
to vessels which may approach it.
9. Vessels must have proper look-outs or
persons trained as such and who have
no other duty aside therefrom. (Smith Bell
v. CA)
Nautical Rules as to Sailing Vessel and

Steamship
1. Where a steamship and a sailing vessel
are approaching each other from
opposite directions, or on intersecting
lines, the steamship from the moment the
sailing vessel is seen, shall watch with
the highest diligence her course and
movements so as to be able to adopt
such timely means of precaution as will
necessarily prevent the two boats from
coming in contact.
2. The sailing vessel is required to keep her
course unless the circumstances require
otherwise.
Zones of Time in the Collision of Vessels
1. First zone all time up to the moment
when risk of collision begins.
No rule is as yet applicable for none is
necessary.
2. Second zone time between moment
when risk of collision begins and moment it
becomes a practical certainty.
It is in this period where conduct of the
vessels is primordial. It is in this zone that
vessels must strictly observe nautical rules,
unless a departure therefrom becomes
necessary to avoid imminent danger.
3. Third zone time when collision is
certain and time of impact.
An error in this zone would no longer be
legally consequential.
Error in Extremis - sudden movement
made by a faultless vessel during the third
zone of collision with another vessel which is
at fault during the 2nd zone. Even if such
sudden
movement
is
wrong,
no
responsibility will fall on said faultless vessel.
(Urrutia and Co. v. Baco River Plantation
Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
Vessel at fault is liable for damage caused
to innocent vessel as well as damages
suffered by the owners of cargo of both
vessels. (Art. 826)
2. Both vessels at fault
Each vessel must bear its own loss, but

the shippers of both vessels may go against
the shipowners who will be solidarily liable.
(Art. 827)
3. Vessel at fault not known
Each vessel must bear its own loss, but
the shippers of both vessels may go against
the shipowners who will be solidarily liable.
(Art. 828)
Doctrine of Inscrutable Fault In case
of collision where it cannot be determined
which between the two vessels was at
fault, both vessels bear their respective
damage, but both should be solidarily
liable for damage to the cargo of both
vessels.
4. Third vessel at fault
The third vessel will be liable for losses
and damages. (Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss. (Art.
830)
The doctrine of res ipsa loquitur applies in
case a moving vessel strikes a stationary
object, such as a bridge post, dock, or
navigational aid. (Far Eastern Shipping v.
CA, Luzon Stevedoring vs. CA)
Even if the cause of action against the
common carrier is based on quasi-delict, the
defense of due diligence in the selection and
supervision of employees is unavailing in
case of a maritime tort resulting in collision.
It is not a civil tort governed by the Civil
Code but a maritime one governed by Arts.
826-839 of the Code of Commerce. (Manila
Steamship vs. Insa Abdulhaman)
Doctrine of Last Clear Chance and Rule
on Contributory Negligence cannot be
applied in collision cases because of Art.827
of the Code of Commerce. (Notes and
2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite to
recovery of damages arising from collisions
and other maritime accidents.

It is a written statement made under oath
by the captain of a vessel after the
occurrence of an accident or disaster in
which the vessel or cargo is lost or
damaged, with respect to the circumstances
attending such occurrence, for the purpose
of recovering losses and damages.
Excuses for not filing protest: 1) where
the interested person is not on board the
vessel; and 2) on collision time, need not be
protested. (Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a
hurricane or when the captain
believes that the cargo has suffered
damages or averages (Art. 624).
Who makes: Captain
When made: within 24 hours from the time
the collision took place.
Before whom made: competent authority
at the point of collision or at the first port of
arrival, if in the Philippines and to the
Philippine consul, if the collision took place
abroad. (Art. 835)
SHIPWRECK
It is the loss of the vessel at sea as a
consequence of its grounding, or running
against an object in sea or on the coast. It
occurs when the vessel sustains injuries due
to a marine peril rendering her incapable of
navigation.
If the wreck was due to malice,
negligence or lack of skill of the captain, the
owner of the vessel may demand indemnity
from said captain. (Art. 841)
The rules on collision or allision, as may
be pertinent, can equally apply to
shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from
a vessel.
Applicability: Overseas trade only.
(Commercial Law Review, C. Villanueva,

2004 ed.)
Significance: When a person brings in
cargo from abroad, he cannot unload and
deliver the cargo by himself. The unloading
must be done by the arrastre operator,
which will then deliver the cargo to the
importer.
(Commercial Law Review, C.
Villanueva, 2004 ed.)
Nature of business: It is a public utility,
discharging functions which are heavily
invested with public interest.
Liability:
1. Similar to a warehouseman (Lua Kian v.
Manila Railroad)
2. Similar to a common carrier (Northern
Motors v. Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may
be held liable, the consignee must prove
that the damage was due to the negligence
and while the goods are in the custody of the
arrastre operator. (Hartford Fire Insurance v.
E. Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse
or pier to the holds of the vessel. (Chief of
Staff vs. CIR)
As understood in the port business, the
term consists of the handling of cargo from
the hold of the ship to the dock, in case of
pier-side unloading; or to a barge, in case of
unloading at sea. (Anglo-Fil Trading Corp.
vs. Lazaro)
The loading on the ship of outgoing cargo
is also part of stevedoring work. (Ibid.)
CONTAINERIZATION/
SAID-TOCONTAIN/ SHIPPERS LOAD AND
COUNT SYSTEM
System whereby the shipper loads his
cargoes in a specially designed container,
seals the container and delivers it to the
carrier for transportation. The carrier does
not participate in the counting of the
merchandise for loading into the container,
the actual loading, and the sealing of the
container. (US Lines v. Comm. Of Customs,
ICTSI v. Prudential Guarantee)

The matter of quantity, description and
conditions of the cargo inside the container
is the sole responsibility of the shipper,
unless there is stipulation to the contrary.
(US Lines vs. Comm. Of Customs, Reyma
Brokerage v. Phil. Home Assurance)
Note: In order to attribute to the carrier any
damage to the shipment that may be found,
inspection of the goods should be done at
pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA
ACT/COGSA (C.A. No. 65)
APPLICABILITY
The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from
foreign port to Philippine port).
It can be applied in domestic sea
transportation if agreed upon by the parties.
(Clause paramount or paramount clause)
IMPORTANT FEATURES:
1. Amount of carriers liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIERS LIABILITY
Under the Sec. 4(5), the liability limit is set
at $500 per package or customary freight
unit unless the nature and value of such
goods is declared by the shipper. This is
deemed incorporated in the bill of lading
even if not mentioned in it. (Eastern
Shipping vs. IAC, 150 SCRA 463)
Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a. Patent damage: shipper should file a
claim with the carrier immediately upon
delivery
b. Latent damage: shipper should file a
claim with the carrier within three days
from delivery.
Note: The filing of a notice of claim is not a

condition precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo
should be brought within one year after:
a. Delivery of the goods (delivered but
damaged goods); or
b. The date when the goods should have
been delivered (non-delivery). (Sec.
3[6])
Loss or Damage as applied to the
COGSA contemplates 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. Thus, it is
inapplicable in case of misdelivery or
conversion. (Ang vs. American Steamship
Agencies Inc.) and damage arising from
delay or late delivery (Mitsui O.S.K. Lines
Ltd. vs. CA). In such instance the, Civil Code
rules on prescription shall apply.
The one-year prescriptive period is
suspended by:
1. The express agreement of the parties
(Universal Shipping Lines, Inc. vs.
IAC, 188 SCRA 170)
2. The filing of an action in court until it is
dismissed. (Stevens & Co. vs.
Nordeutscher Lloyd, 6 SCRA 180)
The one-year period shall run from
delivery of the last package and is not
suspended by extrajudicial demand. (Dole
Phils.,Inc. vs. Maritime Co.,148 SCRA 118)
The one-year period shall run from
delivery to the arrastre operator and not to
the consignee. (Union Carbide Phils, Inc.
vs. Manila Railroad Co.,SCRA 359)
The insurer exercising its right of
subrogation is bound by the one-year
prescriptive period. However, it does not
apply to the claim against the insurer for the
insurance proceeds. (Fil. Merchants Ins.

Co. vs. Alejandro; Mayer Steel Pipe Corp.
vs. CA)
IV. WARSAW CONVENTION OF 1929
(WC)
PURPOSE: To protect the emerging air
transportation industry and to secure the
uniformity of recovery by the passengers.
APPLICABILITY
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or
goods.
The WC shall also apply to fortuitous
transportation by aircraft performed by an air
transportation enterprise.
International transportation - any
transportation in which the place of
departure and the place of destination are
situated either:
1. Within the territories of two High
Contracting Parties regardless of whether
or not there be a break in the
transportation or transshipment, or
2. Within the territory of a single High
Contracting Party, if there is an agreed
stopping place within a territory subject to
the sovereignty, mandate or authority of
another power, even though that power is
not a party to the Convention. (round
trip, Am. Jur.)
Transportation to be performed by several
successive air carriers shall be deemed to
be one undivided transportation, if it has
been regarded by the parties as a single
operation, whether it has been agreed upon
under the form of a single contract or of a
series of contracts, and it shall 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. (Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the
Convention are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSEN BAGGA
GER
GE
TICKET CHECK
Passeng Checked
er
-in
baggage
AIR
WAYBIL
L
Goods to
be
shipped
LIABILITY OF CARRIER FOR DAMAGES

1. Death or injury of a passenger if the
accident causing it took place on board the
aircraft or in the course of its operations of
embarking or disembarking; (Art. 17)
2. Destruction, loss or damage to any
baggage or goods, if it took place during the
transportation by air; (Art. 18) and
Transportation by air The period during
which the baggage or goods are in the
charge of the carrier, whether in an airport or
on board an aircraft, or, in case of a landing
outside an airport, in any place whatsoever.
It includes any transportation by land or
water outside an airport if such takes place
in the performance of a contract for
transportation by air, for the purpose of
loading, delivery, or transshipment.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19)
Note: The Hague Protocol amended the WC
by removing the provision that if the airline
took all necessary steps to avoid the
damage, it could exculpate itself completely

(Art. 20(1)). (Alitalia vs. IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended
by Guatemala Protocol, 1971; Alitalia vs.
IAC)
1. Passengers
GENERAL
RULE:
$100,000
per
passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special
declaration of value and payment of a
supplementary sum by consignor, carrier is
liable to not more than the declared sum
unless it proves the sum is greater than
actual value.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special
declaration of value and payment of a
supplementary sum by consignor, carrier is
liable to not more than the declared sum
unless it proves the sum is greater than
actual value.
An agreement relieving the carrier from
liability or fixing a lower limit is null and void.
(Art. 23)
Carrier is not entitled to the foregoing limit
if the damage is caused by willful
misconduct or default on its part. (Art. 25)
Thus, the WC does not operate as an
exclusive enumeration of the instances of an
absolute limit of the extent of liability. It does
not preclude the application of the Civil
Code and other pertinent local laws. It does
not regulate or exclude liability for other
breaches of contract by the carrier, or
misconduct of its employees, or for some
particular or exceptional type of damage.
(Alitalia vs. CA)
In PanAm v. IAC, the WC was applied as

regards the limitation on the carriers liability,
there being a simple loss of baggage without
any improper conduct on the part of the
officials or employees of the airline or other
special injury sustained by the passenger.
In KLM Royal v. Tuller, the WC has
invariably been held inapplicable, or as not
restrictive of the carriers liability, where
there was satisfactory evidence of malice or
bad faith attributable to its officers and
employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES

1. Notice of claim
A written complaint must me made within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from receipt
of baggage/goods
The complaint is a condition precedent.
Without the complaint, the action is barred
except in case of fraud on the part of the
carrier. (Art. 26)
2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation
stopped. (Art. 29)
In United Airlines vs. Uy the two-year
prescriptive period was not applied where
the airline employed delaying tactics.
RULE
IN
CASE
OF
VARIOUS
SUCCESSIVE CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only
against the carrier in which the accident or
delay occurred.
EXCEPTION: Agreement or contract
whereby the first carrier assumed liability for
the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an

action against the first carrier and the
carrier in which the damage occurred
b. Passenger or consignee can file an
action against the last carrier and the
carrier in which the damage occurred.
These carriers are jointly and severally
liable. (Art. 30)
A contract of international carriage by air,
although performed by different carriers
under a series of airline tickets constitutes a
single
operation.
Members
of
the
International Air Transportation Association
(IATA) are under a general pool partnership
agreement wherein they act as agent of
each other in the issuance of tickets 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. (American Airlines vs. CA)
Under a general pool partnership
agreement, the ticket-issuing airline is the
principal in a contract of carriage while the
endorsee-airline is the agent. The obligation
of the former remained and did not cease
even when the breach occurred not on its
own flight but on that of another airline which
had undertaken to carry the passengers to
one of their destinations. (China Airlines vs.
Chiok)
JURISDICTION
At the option of the plaintiff, the action for
damages may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of business;
c. Court where it has a place of business
through which the contract has been
made; or
d. Court of the place of destination. (Art.
28(1))
NOTE: It is the passengers ultimate
destination not an agreed stopping place
that determines the country where suit is to
be filed.
The forum of action provided in Art. 28(1)
is a matter of jurisdiction rather than of
venue. (Santos III vs. Northwest; 2A C.J.S.)

V. SALVAGE LAW (Act No. 2616)
SALVAGE
Two concepts:
1. Services one person renders to the
owner of a ship or goods, by his own labor,
preserving the goods or the ship which the
owner or those entrusted with the care of
them have either abandoned in distress at
sea, or are unable to protect or secure.
2. Compensation allowed to persons by
whose voluntary assistance a ship at sea or
her cargo or both have been saved in whole
or in part from impending sea peril, or such
property recovered from actual peril or loss,
as in cases of shipwreck, derelict or
recapture.
Requisites:
1. Valid object of salvage;
2. Object must have been exposed to
marine peril (not perils of the ship);
3. Services rendered voluntarily (neither
an existing duty nor out of a preexisting contract);
4. Services are successful, total or
partial.
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the
sea, and there sink and remain under water;
3. Floatsam or Flotsam goods which float
upon the sea when cast overboard;
4. Ligan or Lagan goods cast into the sea
tied to a buoy, so that they may be found
again by the owners (p.173, Judge Diaz).
Persons who have no right to a reward
for salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite
of opposition of the Captain or his
representative;
3.
In accordance with Sec. 3 of the
Salvage Law, a person who fails to deliver a
salvaged vessel or cargo to the Collector of
Customs.
Derelict a ship or her cargo which is
abandoned and deserted at sea by those
who are in charge of it, without any hope of

recovering it, or without any intention of
returning to it.
The intention of those in charge must be
ascertained. If those in charge left with the
intention of returning, or of procuring
assistance, the property is not derelict, but if
they quitted the property with the intention of
finally leaving it, it is derelict and a change of
their intention and an attempt to return will
not change its nature (Erlanger & Galinger
vs. Swedish East Asiatic Co. Ltd.).
If it is clear that the intention to return is
slight, the salvage which was done
thereafter is considered valid. (Notes and
2004 ed. p. 616)
CONTRACT OF TOWAGE
A contract whereby one vessel, usually
motorized, pulls another, whether loaded or
not with merchandise, from one place to
another, for a compensation. It is a contract
for services rather than a contract of
carriage.
SALVAGE
Governed by
special
law
(Act
No.
2616)
Requires
success,
otherwise no
payment
Must be done
with the
consent of the
captain/crew
men
Vessel must
be involved in
an accident
Fees
distributed
TOWAGE
Governed by
Civil Code on
contract
of
lease
Success
is
not required
Only
the
consent of the
tugboat owner
is needed
Vessel need
not
be
involved in an
accident
Fees belong
to the tugboat
among
crewmen
owner
RULES ON SALVAGE REWARD

1. The reward is fixed by the RTC judge in
the absence of agreement or where the
latter is excessive. (Sec. 9)
2. The reward should constitute a sufficient
compensation for the outlay and effort of
the salvors and should be liberal enough
to offer an inducement to others to render
services in similar emergencies in the
future.
3. If sold (no claim being made within 3
months from publication), the proceeds,
after deducting expenses and the
salvage claim, shall go to the owner; if
the latter does not claim it within 3 years,
50% of the said proceeds shall go to the
salvors, who shall divide it equitably, and
the other half to the government. (Secs.
11-12)
4. If a vessel is the salvor, the reward shall
be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in
proportion to their salaries. (Sec. 13)
Taking passengers from a sinking ship,
without rendering any service in rescuing the
vessel, is not a salvage service, being a duty
of humanity and not for reward.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)
PURPOSES:
1. To secure adequate, sustained
service for the public at the least
possible cost;
2. To protect the public against
unreasonable charges and poor,
inefficient service;
3. To protect and secure investments in
public services;
4. To prevent ruinous competition.
AUTHORITY TO OPERATE PUBLIC

SERVICES
GENERAL RULE: No public service shall
operate without having been issued a
certificate of public convenience or a
certificate of public convenience and
necessity.
EXCEPTIONS:
1. Warehouses;
2. Animal drawn vehicles and bancas
moved by oar or sail;
3. Airships, except for the fixing of
maximum rates for fare and freight;
4. Radio companies, except for rates
fixing;
5. Public services owned or operated by
the government, except as to rates
fixing;
6. Ice plants; and
7. Public markets.
PUBLIC SERVICE
A person who owns, operates, manages
or controls in the Philippines for hire or
compensation, with general or limited
clientele, whether permanent, occasional or
accidental, and done for general business
purposes, any common carrier or public
utility, ice plants, power and water supplies,
communication and similar public services.
(Sec. 13b, CA 146)
A casual or incidental service devoid of
public character and interest is not brought
within the category. The question depends
on such factors as the extent of services,
whether such person or company has held
himself or itself out as ready to serve the
public or a portion of the public generally.
(Luzon Stevedoring vs. PSC)
NOTE: The Public Service Commission
created under the Public Service Law has
already been abolished under P.D. No. 1
and other issuances. It has been replaced
by the following government agencies: LTO;
LTFRB; ATO; BOE; NTC; NEA; ERB;
NWRC; CAB; and MIA.
CERTIFICAT
E OF
PUBLIC
CONVENIEN
CE (CPC)
An
authorization
issued by the
appropriate
government
agency
for
the operation
of
public
services for
which
no
franchise,
either
municipal or
legislative, is
required
by
law,
e.g.,
common
carriers.
CERTIFICAT
E OF PUBLIC
CONVENIEN
CE
AND
NECESSITY
(CPCN)
An
authorization
issued by the
appropriate
government
agency for the
operation of
public service
for which a
prior franchise
is required by
law;
e.g.
telephone and
other
services.
A CPC or a CPCN constitutes neither a

franchise nor a contract, confers no property
right, and is a mere license or a privilege.
The holder of said certificate does not
acquire a property right in the route covered
thereby. Nor does it confer upon the holder
any proprietary right or interest or franchise
in the public highways. Revocation of this
certificate deprives him of no vested right.
New and additional burdens, alteration of
the certificate, or even revocation or
annulment thereof is reserved to the State.
(Luque vs. Villegas, 30 SCRA 408)
It is a property and has a considerable
value and can be the subject of sale or
attachment. (Cogeo-Cubao Operators and
Drivers Assn. vs. CA, 207 SCRA 343,
Raymundo vs. Luneta Motor Co.)
REQUREMENTS FOR GRANTING CPC
OR CPCN
1. Applicant must be a citizen of the
Philippines or a corporation or entity 60%
of the capital of which is owned by such

citizens;
2. Applicant must prove public necessity;
3. Applicant must prove that the operation
of the public service proposed and the
authorization to do business will promote
the public interest on a proper and
suitable manner;
4. Applicant must have sufficient financial
capability to undertake the proposed
services and meeting the responsibilities
incident to its operation.
POWERS
REQUIRING
PRIOR
NOTICE
AND
HEARING
POWERS
EXERCISABL
E WITHOUT
PRIOR
NOTICE AND
HEARING
1. Issuance
of CPC or
CPCN;
2. Fixing of
rates,
tolls,
and charges;
3. Setting up
of standards
and
classification
s;
4. Establish
ment of rules
to
secure
accuracy of
all
meters
and
all
measuring
appliances;
5. Issuance
of
orders
requiring
establishmen
t
or
maintenance
of extension
of facilities;
6. Revocatio
1. Investigatio
n any matter
concerning
public service;
2. Requiring
operators
to
furnish safe,
adequate, and
proper
service;
3. Requiring
public
services
to
pay expenses
of
investigation;
4. Valuation
of properties
of
public
utilities;
5. Examinatio
n and test of
measuring
appliances;
6. Grant
of
special
permits
to
make extra or
n,
or
modification
of CPC or
CPCN;
7.
Suspension
of CPC or
CPCN,
except when
it
is
necessary to
avoid serious
and
irreparable
damage
or
inconvenienc
e
to
the
public
or
private
interest,
in
which case, a
suspension
not
more
than 30 days
may
be
ordered, prior
to
the
hearing.
(Soriano
v.
Medina, 164
SCRA 36)
special trips in
territories
specified
in
the certificate;
7. Uniform
accounting
system
and
furnishing of
annual
reports;
8. Compelling
compliance
with the laws
and
regulations.
UNLAWFUL ACTS OF PUBLIC UTILITY

COMPANIES
1. Engagement in public service business
without first securing the proper
certificate;
2. Providing
or
maintaining
unsafe,
improper or inadequate service as
determined by the proper authority;
3. Committing any act of unreasonable and
unjust preferential treatment to any
particular person, corporation or entity as
determined by the proper authority;
4. Refusing or neglecting to carry public
mail upon request. (Secs. 18 and 19)
ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint
rates;
2. Establish and operate new units;

3. Issue free tickets;
4. Issue any stock or stock certificates
representing an increase of capital;
5. Capitalize any franchise in excess of the
amount actually paid to the Government;
6. Sell, alienate, mortgage or lease
property, certificates or franchise.
Under Sec. 20(g) of C.A. No. 146, the
sale, etc. may be negotiated and completed
before the approval by the proper authority.
Its approval is not a condition precedent to
the validity of the contract. The approval is
necessary only to protect public interest.
PRIOR OPERATOR/OLD OPERATOR
RULE
The rule allowing an existing franchised
operator to invoke a preferential right within
the authorized territory as long as he
renders satisfactory and economical service.
The policy is not to issue a certificate to a
second operator to cover the same field and
in competition with a first operator who is
rendering
sufficient,
adequate
and
satisfactory service. The prior operator must
first be given an opportunity to improve its
service, if inadequate or deficient.
Purpose: To prevent ruinous and wasteful
competition in order that the interests of the
public would be conserved and preserved.
It subordinates the prior applicant rule
which gives the first applicant priority only if
things and circumstances are equal.
Where the operator either fails or neglects
to make the improvement or effect the
increase in services, especially when given
the opportunity, new operators should be
given the chance to give the services
needed by the public.
PRIOR APPLICANT RULE
Presupposes a situation when two
interested persons apply for a certificate to
operate a public utility in the same
community over which no person has as yet
granted any certificate. If it turns out, after
the hearing, that the circumstances between

the two applicants are more or less equal,
then the applicant who applied ahead of the
other, will be granted the certificate.
RATE-FIXING POWER
The rate to be fixed must be just, founded
upon conditions which are fair and
reasonable to both the owner and the public.
A rate is just and reasonable if it conforms
to the following requirements:
1. One which yields to the carrier a fair
return upon the value of the property
employed in performing the service;
and
2. One which is fair to the public for the
service rendered.
REGISTERED OWNER RULE
The registered owner of a certificate of
public convenience is liable to the public for
the injuries or damages suffered by third
persons caused by the operation of said
vehicle, even though the same had been
transferred to a third person.
The registered owner is not allowed to
escape responsibility by proving that a third
person is the actual and real owner Reason:
It would be easy for him, by collusion with
others or otherwise, to transfer the
responsibility to an indefinite person, or to
one who possesses no property with which
to respond financially for the damage or
injury done. (Erezo, et al. vs. Jepte 102 Phil
103).
KABIT SYSTEM
A system whereby a person who has been
granted a certificate of public convenience
allows other persons who own motor
vehicles to operate under such license, for a
fee or percentage of such earnings. It is void
and inexistent under Art. 1409, Civil Code.
Effects:
1. The transfer, sale, lease or assignment of
the privilege granted is valid between the
contracting parties but not upon the
public or third persons. (Gelisan vs.
Alday, 154 SCRA 388)
owner are jointly and severally liable with

the driver. (Zamboanga Transportation
Co. vs. CA)
2. The registered owner is primarily liable

for all the consequences flowing from the
operations of the carrier.
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 the public to enforce
their rights of action that they may have
for injuries inflicted by the vehicle if they
should be required to prove who the
actual owner is. (Benedicto vs. IAC, 187
SCRA 547)
3. The thrust of the law in enjoining the kabit
system is to identify the person upon
whom responsibility may be fixed with the
end in view of protecting the riding public
(Lim vs. CA 373 SCRA 394).
4. The registered owner cannot recover
from the actual owner and the latter
cannot obtain transfer of the vehicle to
himself, both being in pari delicto. (Teja
Marketing vs. IAC)
5. For the better protection of the public,
both the registered owner and the actual

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San Beda College of Law

even if he did not secure a Certificate of

COMMERCIAL LAW COMMITTEE

San Beda College of Law

employment and must hold itself out

COMMERCIAL LAW COMMITTEE

San Beda College of Law

1. From the nature of the business and

intended for passengers.

COMMERCIAL LAW COMMITTEE

San Beda College of Law

the inherent defect/character of the goods,

LIABILITY OF A COMMON CARRIER FOR

San Beda College of Law

the carrier for transportation until

course of the trip, but for so long

Art.1735 Civil Code

Art.1755 Civil Code

COMMERCIAL LAW COMMITTEE

San Beda College of Law

Mere proof of delivery of goods

COMMERCIAL LAW COMMITTEE

San Beda College of Law

Stipulation limiting liability when a

The diligence required in the

San Beda College of Law

common carrier for the safety of

COMMERCIAL LAW COMMITTEE

RULES ON PASSENGERS BAGGAGE

he is riding and of the driver of another

However, the carrier cannot limit its liability

safeguarding the comfort, convenience and

been actually placed aboard the ship

7. Spent One which covers goods that

Vessel engaged in maritime commerce,

Effect of sale: All pre-existing claims in

satisfied from the proceeds of the sale

GENERAL RULE: The liability of

should pay the

CAUSES OF REVOCATION OF VOYAGE

Ship agent (naviero)

4. Stay on board during the loading and

8. Damages due to non-observance of

Arrange well the cargo;

The seamans heirs are entitled to

are occasions when the master may and

PERSONS WHO MAY MAKE A CHARTER

Clauses Which May Be Included In a

Rights and Obligations of Parties

Rescission of a Charter Party

It is not dependent on the ownership of

Obligation of the debtor

Not subject to Subject

WHEN LOAN ON BOTTOMRY OR

the goods given as security are absolutely

destination, and to the cargo from the port of

It is the duty of the captain to continue the

4. The agreement shall be drafted and

Nautical Rules as to Sailing Vessel and

Each vessel must bear its own loss, but

and other maritime accidents.

(Commercial Law Review, C. Villanueva,

ICTSI v. Prudential Guarantee)

Note: The filing of a notice of claim is not a