San Beda College of Law: Contract of Transportation/ Carriage

San Beda College of Law
54
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.
MEMORY AID IN COMMERCIAL LAW
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:
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)

1. It must be engaged in the business of
carrying goods for others as a public
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
55
provided
law
by not contrary to
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
DILIGENCE
OF
EXTRAORDINARY

Property)

Rendition of service with the greatest skill
and utmost foresight. (Davao Stevedore Co.
v. Fernandez)
Rationale:
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
1.
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;
56
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
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.

Property)
57
1741)
Electric Co., 52 Phil 900)
4. CHARACTER OF THE GOODS OR

DEFECTS IN THE PACKING OR IN THE
CONTAINER
Even if the damage should be caused by
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
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
Property)
58
Duration of liability
From the time the goods are
unconditionally placed in the
possession of, and received by
the carrier for transportation until
the same are delivered actually or
constructively by the carrier to
the consignee or to the person
who has 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)
The duty of a common carrier to

provide safety to its passengers
so obligates it not only during the
course of the trip, but for so long
as the passengers are within its
premises and where they ought
to be in pursuance to the
contract of carriage. (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).

Property)
59
Presumption of negligence
Art.1735 Civil Code
Art.1755 Civil Code
Reason: As to when and how Reason: The contract between
goods were damaged in transit is the passenger and the carrier
a matter peculiarly within the imposes on the latter the duty to
knowledge of the carrier and its transport the passenger safely;
employees. (Mirasol v. Dollar, 53 hence the burden of explaining
PHIL 124)
should fall on the carrier.
Mere proof of delivery of goods
to a carrier in good order and the
subsequent arrival of the same
goods at the place of destination
in bad order makes for a prima
facie case against the carrier.
(Coastwise Lighterage Corp. v.
CA, 245 SCRA 796)
Defenses
1. Ordinary
circumstance:
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)

Property)
61
Void stipulations
1. That
the
goods
are
transported at the risk of the
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)
Dispensing with or lessening the

extraordinary responsibility of a
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 as
deposit
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)
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)
(Arts. 349-379)
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.)
Applicability
1. Domestic land and water/maritime
transportation. (Pandect of Commercial Law
and Jurisprudence, Justice Jose Vitug, 1997
ed.)
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;
II. CODE OF COMMERCE

A. OVERLAND TRANSPORTATION
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 been actually placed aboard the
ship with very reasonable expectation
that the shipment is as good as on its
way.
2. 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.
3. 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.
4. Non-negotiable - One in which it is
stated that the goods referred to
therein will be delivered to a specified
person.
5. Clean One which does not indicate
any defect in the goods.
6. 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.
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
10.
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
Contract/Bill
stipulation
of Lading
1. Carrier is 1. Within a
bound to fulfill reasonable
the
contract time.
and is liable 2. Carrier is
for any delay; bound
to
no 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
(Art.1747)
of
the
goods
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/interisland/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. Internat
estic/i
ional/
nter- overseas/forei
island gn
(from
/coast foreign
wise
country
to
trans Phils.)
portat Note: subject
ion
to the rule on
2.
Land, Paramount
water Clause
, air 2.
trans Water/maritim
portat e
ion
transportation
3.
Carri 3. Carriage of
age
goods
of
goods
Notice of damage
1.
1.
C
No
2.
2
2.
3-
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 priority
over
all
claims all
claims
against
the against
the
vessel, except vessel, except
the following the following
preferences in preferences in
the
order the
order
stated:
stated:
1.
Judicial 1.
Expenses
costs of the and
fees
proceedings;
allowed
and
2. Taxes due costs taxed by
the Philippine the court and
Government;
taxes due to
3. Salaries and the
wages of the Government;
Captain
and 2.
Crews
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.
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
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
2.
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.
Trans
of
fer of
ownershi
owne
p of the
rship
vessel
on
from the
the
shipown
good
er to the
s
shippers
from
or
the
insurer.
shipp
2.
In case
of
(2),
the
insurer
must pay
the
insured
as
if
there
was
actual
total loss
of
the
vessel.
2.
er to
the
carrie
r.
Carrie
r
shoul
d pay
the
shipp
er the
mark
et
value
of the
good
s at
the
point
of
desti
natio
n.
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.
abandoning the vessel to the creditors.

(Art. 587)
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
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)
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
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
nonobservance 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.
Arrange well the cargo;
3.
Discipline the crew;
4.
Assign work to crew members;
5.
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
Seaman While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want
discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
of
of
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
CHARTER
PARTY
If for a definite Charterer may
period, lessee rescind charter
cannot give up party
by
the lease by
paying
a
portion of the
amount 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
paying half of
the freightage
agreed upon.
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
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.
Owner
of
vessel
relinquishes
possession,
command and
navigation to
charterer
Common
carrier
is
converted
to
private carrier.
The
vessel
owner retains
possession,
command and
navigation of
the ship
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
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.)
or
paramount
clause
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
vesse
l
is
chart
ered
wholl
y, not
to
accep
t
cargo
CHARTERER
1. To pay the
agreed charter
price;
2. To
pay
freightage on
unboarded
cargo;
3. To
pay
losses
to
others
for
loading
2.
3.
4.
5.
from
other
s;
To
obser
ve
repre
sente
d
capac
ity;
To
unloa
d
cargo
cland
estin
ely
place
d
To
substi
tute
anoth
er
vesse
l
if
load
is
less
than
3/5
of
capac
ity;
To
leave
the
port
if the
chart
erer
does
not
bring
the
cargo
withi
uncontracted
cargo
and
illicit cargo;
4. To wait if
the
vessel
needs repair;
5. To
pay
expenses for
deviation.
(Arts.
679687)
n the
lay
days
and
extra
lay
days
allow
ed;
6. To
place
in a
vesse
l in a
condi
tion
to
navig
ate;
7. to
bring
cargo
to
neare
st
neutr
al
port
in
case
of
war
or
block
ade.
(Arts.
669678)
Rescission of a Charter Party
At
At
Fortuito
charter shipow
us
ers
ners
causes
request request
(Art.
(Art
(Art.
690)
688)
689)
1.
By
abandoni
ng
the
charter
and
paying
half
of
the
freightag
e;
2. Error
in
tonnage
or flag;
3. Failure
to place
the
vessel at
the
charterer
s
disposal;
4. Return
of
the
vessel
due
to
pirates,
enemies
or
bad
weather;
5. Arrival
at a port
for
repairs.
1. If the
extra lay
days
terminat
e without
the cargo
being
placed
alongside
the
vessel;
2.
Sale
by
the
owner of
the
vessel
before
loading
by
the
charterer
;
1. War or
interdicti
on of
commerc
e;
2.
Blockade;
3.
Prohibitio
n to
receive
cargo;
4.
Embargo
; and
5.
Inability
of the
vessel to
navigate.
Terms:
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
1.
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)
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.
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;
2. Obligation
of the debtor
conditioned only upon safe
arrival of the security at the
point of destination.
Forms:
1. Public instrument
2. Policy
signed
by
the
contracting parties and the
broker taking part therein
3. Private instrument
(Art.
720)
Contents:
1. Kind, name and registry of
the vessel;
2. Name,
surname
and
domicile of the captain;
3. Names,
surnames
and
domiciles of the borrower
and the lender;
4. Amount of the loan and the

premium stipulated;
5. Time for repayment;
6. Goods pledged to secure
repayment;
7. Voyage during which the
risk is run (Art.721)
BOTTOMRY/
RESPONDEN
TIA
ORDINARY
LOAN
(MUTUUM)
Not subject to Subject

Usury Law
Usury Law
to
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
paid after
loss
occurred
is
the
has
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 persons
the
goods having
an
which gave rise interest in the
to the expense vessel and the
or suffered the cargo therein
damage shall at the time of
bear
this the occurrence
average. (Art. of the average
810)
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 Who
unlawful bears
expense
s:
The
1. Lack
inability
of
to
provisi
continue
ons
voyage
due to
is due to
neglig
lack
of
ence
provision
to
s, wellcarry
founded
accord
fear
of
ing to
seizure,
usage
privateer
and
s,
custo
pirates,
ms;
or
2. Risk of
accidents
enemy
of
the
not
sea
well
disabling
known
it
to
or
navigate.
manife
(Art.
st
819)
3. Defect
of
vessel
due to
impro
per
repair;
and
4. Malice,
neglig
ence,
lack of
foresig
ht or
skill of
captai
n.
(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.
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.
against an improperly moored vessel.
8.
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)
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)
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 Cases
on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004
ed.)
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.
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.
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/f
oreign (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 (nondelivery). (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
AIR
GER
GE
WAYBIL
TICKET
CHECK
L
Passenge Checked- Goods to
r
in
be
baggage 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
pre-existing 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
Cases on the Law on Transportation and
Public Utilities, Aquino, T. & Hernando, R.P.
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
TOWAGE
Governed by
Civil Code on
contract
of
lease
Success is not
required
payment
Must be done
with the
consent of
the
captain/crew
men
Vessel must
be involved in
an accident
Fees
distributed
among
crewmen
Only
the
consent of the
tugboat
owner
is
needed
Vessel need
not
be
involved in an
accident
Fees belong
to the tugboat
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. 1112)
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
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.
carriers.
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
POWERS
REQUIRING EXERCISABL
PRIOR
E WITHOUT
NOTICE
PRIOR
AND
NOTICE AND
HEARING
HEARING
1. Issuance
of CPC or
CPCN;
2. Fixing of
rates,
tolls, and
charges;
3. Setting up
of
standards
and
classificati
ons;
4. Establish
ment
of
rules
to
secure
accuracy
of
all
meters
and
all
measuring
appliances
;
5. Issuance
of orders
requiring
establishm
ent
or
maintenan
ce
of
extension
of
facilities;
6. Revocatio
n,
or
modificati
on of CPC
or CPCN;
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
investigatio
n;
4. Valuation
of
properties
of
public
utilities;
5. Examinatio
n and test
of
measuring
appliances;
6. Grant
of
special
permits to
make extra
or special
trips
in
territories
specified in
7.
the
Suspension
certificate;
of CPC or 7. Uniform
CPCN, except
accounting
when it is
system and
necessary to
furnishing
avoid serious
of annual
and
reports;
irreparable
8. Compelling
damage
or
compliance
inconvenienc
with
the
e
to
the
laws
and
public
or
regulations.
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)
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)
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
owner are jointly and severally liable with
the driver. (Zamboanga Transportation
Co. vs. CA)

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MEMORY AID IN COMMERCIAL LAW

A person or entity is a common carrier

COMMERCIAL LAW COMMITTEE