Transpo Law Reviewer

San Beda College of Law 54
MEMORY AID IN COMMERCIAL LAW
TRANSPORTATION LAWS
CONTRACT OF TRANSPORTATION/ CARRIAGE Agency, 23 SCRA 24)

 A contract whereby a person, natural or juridical,
obligates to transport persons, goods, or both, from  TESTS WHETHER CARRIER IS COMMON OR
one place to another, by land, air or water, for a price PRIVATE:
or compensation.  The SC in First Philippine Industrial Corporation vs.
 Classifications: CA (1995) reiterated the following tests:
1. Common or Private 1. It must be engaged in the business of
2. Goods or Passengers carrying goods for others as a public
3. For a fee (for hire) or Gratuitous employment and must hold itself out as
4. Land, Water/maritime, or Air ready to engage in the transportation of
5. Domestic/inter-island/coastwise or goods generally as a business and not as a
International/foreign casual occupation;
 It is a relationship which is imbued with the public 2. It must undertake to carry goods of the
interest. kind to which its business in confined;
3. It must undertake to carry by the method
COMMON CARRIER by which his business is conducted and
 Persons, corporations, firms or associations over its established roads; and
engaged in the business of carrying or transporting 4. The transportation must be for hire.
passengers or goods or both, by land, water, or air,  In National Steel Corp. vs. CA (1997) the SC held
for compensation, offering their services to the public that the true test of a common carrier is the carriage
(Art. 1732, Civil Code). of goods or passengers provided it has space for all
 Art. 1732 of the New Civil Code avoids any who opt to avail themselves of its transportation for
distinction between one whose principal business a fee.
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 COMMON CARRIER PRIVATE
between a person or enterprise offering CARRIER
transportation service on a regular or scheduled basis 1. As to availability
and one offering such service on an occasional, Holds himself out for all Contracts with particular
episodic or unscheduled basis. people indiscriminately individuals or groups
Neither does the law distinguish between a only
carrier offering its services to the general public that 2. As to required diligence
is the general community or population and one who Extraordinary diligence is Ordinary diligence is
offers services or solicits business only from a narrow required required
segment of the general population.
3. As to regulation
A person or entity is a common carrier even if
Subject to State Not subject to State
he did not secure a Certificate of Public Convenience
regulation regulation
(De Guzman vs. CA, 168 SCRA 612).
 It makes no distinction as to the means of 4. Stipulation limiting liability
transporting, as long as it is by land, water or air. It Parties may not agree on Parties may limit the
does not provide that the transportation should be by limiting the carrier’s carrier’s liability,
motor vehicle. (First Philippine Industrial Corporation liability except when provided it is not
vs. CA) provided by law contrary to law, morals
 One is a common carrier even if he has no fixed or good customs
and publicly known route, maintains no terminals, 5. Exempting circumstance
and issues no tickets (Asia Lighterage Shipping, Inc. Prove extraordinary caso fortuito, Art. 1174
vs. CA). diligence and Art. 1733, NCC
 Characteristics: NCC
1. Undertakes to carry for all people indifferently 6.Presumption of negligence
and thus is liable for refusal without There is a presumption of No presumption of fault
sufficient reason (Lastimoso vs. Doliente, fault or negligence or negligence
October 20, 1961);
2. Cannot lawfully decline to accept a particular 7.Governing law
class of goods for carriage to the prejudice Law on common carriers Law on obligations and
of the traffic in these goods; contracts
3. No monopoly is favored (Batangas Trans.
vs. Orlanes, 52 PHIL 455); GOVERNING LAWS
4. Provides public convenience. A. Domestic/inter-island/coastwise
 Applicable to Land, Water, and Air transportation
PRIVATE CARRIER 1. Civil Code - primary
 One which, without being engaged in the business 2. Code of Commerce (Arts. 349, 379, 573-
of carrying as a public employment, undertakes to 734, 580, 806-845) - suppletory
deliver goods or passengers for compensation.
(Home Insurance Co. vs. American Steamship B. International/foreign/overseas (Foreign
COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation
Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula
(Banking Laws); Robespierre CU (Law on Intellectual Property)
country to Philippines) 1. CASO FORTUITO/FORCE MAJEURE

 Applicable to Water/maritime and Air  Requisites:
transportation a. Must be the proximate and only cause of
 The law of the country of destination generally the loss
applies. b. Exercise of due diligence to prevent or
1. Civil Code - primary minimize the loss before, during or after the
2. Code of Commerce - suppletory occurrence of the disaster (Art. 1739)
3. Others - suppletory c. Carrier has not negligently incurred in
a. Water/maritime: Carriage of Goods by delay in transporting the goods (Art. 1740)
Sea Act (COGSA)  Fire is not considered a natural disaster or calamity
b. Air: Warsaw Convention as it arises almost invariably from some act of man.
(Eastern Shipping Lines Inc. vs. IAC)
I. NEW CIVIL CODE  Mechanical defects are not force majeure if the
(Arts. 1732-1766) same was discoverable by regular and adequate
inspections. (Notes and Cases on the Law on
REQUIREMENT OF EXTRAORDINARY Transportation and Public Utilities, Aquino, T. &
DILIGENCE Hernando, R.P. 2004 ed. p.120-122)
 Rendition of service with the greatest skill and
utmost foresight. (Davao Stevedore Co. v. 2. ACTS OF PUBLIC ENEMY
Fernandez)  Requisites:
 Rationale: a. Must be the proximate and only cause of
1. From the nature of the business and for the loss
reasons of public policy (Art. 1733) b. Exercise of due diligence to prevent or
2. Relationship of trust minimize the loss before, during or after the act
3. Business is impressed with a special public causing the loss, deterioration or destruction of
duty the goods (Art. 1739)
4. Possession of the goods
5. Preciousness of human life 3. NEGLIGENCE OF THE SHIPPER OR OWNER
 A common carrier is not an absolute insurer of all a. Sole and proximate cause: absolute defense
risks of travel. b. Contributory: partial defense. (Art. 1741)
COVERAGE 4. CHARACTER OF THE GOODS OR DEFECTS IN THE

1. Vigilance over goods (Arts. 1734-1754); and PACKING OR IN THE CONTAINER
2. Safety of passengers (Arts. 1755-1763).  Even if the damage should be caused by the
inherent defect/character of the goods, the common
PASSENGER carrier must exercise due diligence to forestall or
 A person who has entered into a contract of lessen the loss. (Art. 1742)
carriage, express or implied, with the carrier. They  The carrier which, knowing the fact of improper
are entitled to extraordinary diligence from the packing of the goods upon ordinary observation, still
common carrier. accepts the goods notwithstanding such condition, is
 The following are not considered passengers, and not relieved of liability or loss or injury resulting
are entitled to ordinary diligence only: therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)
a. One who has not yet boarded any part of
a vehicle regardless of whether or not he 5. ORDER OR ACT OF PUBLIC AUTHORITY
has purchased a ticket;  Said public authority must have the power to issue
b. One who remains on a carrier for an the order (Art. 1743). Consequently, where the
unreasonable length of time after he has officer acts without legal process, the common carrier
been afforded every safe opportunity to will be held liable. (Ganzon v. CA 161 SCRA 646)
alight;  Diligence in the selection and supervision of
c. One who has boarded by fraud, stealth, or employees under Article 2180 of the Civil Code
deceit; cannot be interposed as a defense by the common
d. One who attempts to board a moving carrier because the liability of the carriers arises from
vehicle, although he has a ticket, unless the breach of the contract of carriage. The defense
the attempt be with the knowledge and under said articles is applicable to negligence in
consent of the carrier; quasi-delicts under Art. 2176. (Del Prado v. Manila
e. One who has boarded a wrong vehicle, has Electric Co., 52 Phil 900)
been properly informed of such fact, and
on alighting, is injured by the carrier; LIABILITY OF A COMMON CARRIER FOR
f. Invited guests and accommodation DEATH OR INJURIES TO PASSENGERS DUE TO
passengers. (Lara vs. Valencia) ACTS OF ITS EMPLOYEES AND OTHER
g. One who rides any part of the vehicle PASSENGERS OR STRANGERS
which is unsuitable or dangerous or which
he knows is not designed or intended for FOR ACTS OF OTHER
passengers. FOR ACTS OF ITS PASSENGERS OR
EMPLOYEES STRANGERS
DEFENSES OF A COMMON CARRIER IN THE
CARRIAGE OF GOODS Required diligence and defense

Laws);
Extraordinary diligence Ordinary diligence  The carrier is liable when its personnel allowed a
Nature of liability passenger to drive the vehicle causing it to collide
Tort; however, Not absolute; limited by with another vehicle resulting to the injuries suffered
The employee must be Art. 1763 by the other passengers. (MRR vs. Ballesteros, 16
on duty at the time of the SCRA 641)
act. (Maranan v. Perez)
CARRIAGE OF GOODS CARRIAGE OF PASSENGERS
Parties
1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or deterioration of Death or injury to the passengers
the goods
Duration of liability
From the time the goods are unconditionally placed in The duty of a common carrier to provide safety to its
the possession of, and received by the carrier for passengers so obligates it not only during the course
transportation until the same are delivered actually or of the trip, but for so long as the passengers are within
constructively by the carrier to the consignee or to the its premises and where they ought to be in pursuance
person who has the right to receive them. (Art. 1736) to the contract of carriage. (LRTA v. Navidad, [2003])
 It remains in full force and effect even when they are  All persons who remain on the premises within a
temporarily unloaded or stored in transit unless the reasonable time after leaving the conveyance are to be
shipper or owner has made use of the right of stoppage deemed passengers, and what is a reasonable time or
in transitu. (Art. 1737) a reasonable delay within this rule is to be determined
 It continues to be operative even during the time the from all the circumstances, and includes a reasonable
goods are stored in a warehouse of the carrier at the time to see after his baggage and prepare for his
place of destination until the consignee has bee advised departure. (La Mallorca v. CA, 17 SCRA 739 ; Abiotiz
of the arrival of the goods and has had reasonable Shipping Corporation v. CA, 179 SCRA 95)
opportunity thereafter to remove them or otherwise  It is the duty of common carriers of passengers to
dispose of them. (Art. 1738) stop their conveyances a reasonable length of time in
 Delivery of goods to the custom authorities is not order to afford passengers an opportunity to enter, and
delivery to the consignee. (Lu Do v. Binamira, 101 Phil they are liable for injuries suffered from the sudden
120) starting up or jerking of their conveyances while doing
so. The duty which the carrier of passengers owes to
its patrons extends to persons boarding the cars as
well as to those alighting therefrom (Dangwa Trans
Co., Inc. vs. CA 202 SCRA 574).
Presumption of negligence
Art.1735 Civil Code Art.1755 Civil Code

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

extraordinary diligence (Art. 1735) 1756)
2. Special circumstances: 2. Caso fortuito
a. Flood, storm, earthquake, lighting, or
other natural disaster or calamity (plus
force majeure)
b. Act of the public enemy in war, whether
international or civil
c. Act or omission of the shipper or the
owner of goods

Laws);
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)
Valid stipulations
1. Reduction of degree of diligence to ordinary diligence, Stipulation limiting liability when a passenger is carried
provided it be: gratuitously, but not for willful acts or gross
a) In writing, signed by the shipper or owner; negligence. (Art. 1758)
b) Supported by a valuable consideration other
than the service rendered by the carriers; and
c) Reasonable, just and not contrary to public
policy. (Art. 1744)
2. Fixed amount of liability: A contract fixing the sum to
be recovered by the owner or shipper for the loss,
destruction or deterioration of the goods, if it is
reasonable and just under the circumstances and has
been fairly and freely agreed upon. (Art. 1750)
3. Limited liability for delay: An agreement limiting the
common carrier’s liability for delay on account of strikes
or riots (Art. 1748)
4. Stipulation limiting liability to the value of the goods
appearing in the bill of lading, unless the shipper or
owner declares a greater value. (Art. 1749)
 The diligence required in the carriage of the goods

may be reduced by only one degree, from extraordinary
to ordinary diligence or diligence of a good father of a
family. (Art. 1744, Art. 1745, no. 4)
Void stipulations
1. That the goods are transported at the risk of the Dispensing with or lessening the extraordinary
owner or shipper; responsibility of a common carrier for the safety of
2. That carrier will not be liable for any loss, passengers imposed by law by stipulation, by posting
destruction or deterioration of the goods; of notices, by statements on tickets or otherwise. (Art.
3. That the carrier need not observe any diligence in 1757)
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 carrier’s liability for acts committed by
thieves or robbers who do not act with grave or
irresistible threat, violence or force is dispensed with
or diminished;
7. That the carrier is not responsible for the loss,
destruction or deterioration of the goods on account of
the defective condition of the car, vehicle, ship or other
equipment used in the contract of carriage. (Art. 1745)

Laws);
RULES ON PASSENGERS’ BAGGAGE injury to, or loss of, goods shipped where such injury
IN THE CUSTODY OF IN THE CUSTODY or loss was caused by its own negligence.
THE PASSENGERS OF THE COMMON (Shewaram vs. PAL, 17 SCRA 606)
(HAND-CARRIED) CARRIER
(CHECKED-IN) SPECIAL RULES ON LIABILITES OF AIRLINE
Legal nature of the baggage CARRIERS
Necessary deposit Considered as “goods” 1. In case of flight diversion due to bad weather or
Required diligence by the common carrier other circumstances beyond the pilot’s control, the
Diligence of a depositary Extraordinary relation between the carrier and the passenger
(ordinary diligence) diligence continues until the latter has been landed at the port
Applicable rules of destination and has left the carrier’s premises. The
Arts. 1998 and 2000-2003 Arts. 1733-1753 carrier should necessarily exercise extraordinary
diligence in safeguarding the comfort, convenience
and safety of its stranded passengers until they have
CONCURRING CAUSES OF ACTION ARISING
reached their final destination. (Philippine Airlines vs.
FROM THE NEGLIGENT ACT OF THE COMMON
CA, 226 SCRA 423)
CARRIER
2. Even where overbooking of passengers is allowed
1. Culpa contractual (breach of contract)
as a commercial practice, the airline company would
 Only the carrier is primarily liable and not the
still be guilty of bad faith and still be liable for
driver, because there is no privity between the driver
damages if it did not properly inform passenger that
and the passenger.
it could breach the contract of carriage even if they
 Basis: Art.1759, NCC.
were confirmed passengers. (Zalamea vs. CA, 228
 No defense of due diligence in the selection and
SCRA 23)
supervision of employees.
3. An open-dated ticket constitutes a complete
contract between the carrier and passenger. Hence,
2. Culpa aquiliana (quasi-delict)
the airline company is liable if it refused to confirm a
 The carrier and driver are solidarily liable as joint
passenger’s flight reservation. (Singson vs. CA, 282
tortfeasors.
SCRA 149)
 Basis: Art. 2180, NCC. 4. An airline company which issued a confirmed ticket
 Defense of due diligence in the selection and
to a passenger covering successive trips on different
supervision of employees is available. Exception: airlines can be held liable for damages occasioned by
maritime tort resulting in collision. (See notes on “bumping off” by one of the successive airlines.
Collision) (Lufthansa German Airlines vs. CA, 238 SCRA 290)
5. An airline ticket providing that carriage by
3. Culpa criminal (criminal negligence) successive air carriers is to be regarded as a “single
 The driver is primarily liable. The carrier is operation” is to make the issuing carrier liable for the
subsidiarily liable only if the driver is convicted and tortuous conduct of the other carrier. A printed
declared insolvent. provision in the ticket limiting liability only to its own
 Basis: Art. 100, RPC. conduct is not enough to rebut that liability. (KLM
Royal Dutch Airlines vs. CA, 65 SCRA 237)
 In case of injury to a passenger due to the
negligence of the driver of the bus on which he is II. CODE OF COMMERCE
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 A. OVERLAND TRANSPORTATION
difference that the liability of the bus driver and (Arts. 349-379)
owner springs from contract while that of the owner
and driver of the other vehicle arises from quasi- Applicability
delict. (Fabre vs. CA) 1. Domestic land and water/maritime transportation.
(Pandect of Commercial Law and Jurisprudence,
LIMITATIONS AS TO CARRIER’S LIABILITY Justice Jose Vitug, 1997 ed.)
INVALID AS BEING VALID & 2. Domestic Air Transportation. (Commercial Law
CONTRARY TO PUBLIC ENFORCEABLE Review, Cesar Villanueva, 2004 ed.)
POLICY
1. One exempting the 1. One limiting the IMPORTANT CONCEPTS:
carrier from any and all liability of the carrier to 1. Bill of lading
liability for loss or damage an agreed valuation, 2. Obligations of the carrier
occasioned by its own unless the shipper 3. Right of abandonment
negligence. declares a higher value 4. Notice of damage
2. An unqualified limitation and pays a higher rate 5. Combined carrier agreement
of liability to an agreed of freight
valuation. (H.E. Heacock BILL OF LADING
Company vs.  The written acknowledgment of receipt of goods
Macondray & Company and agreement to transport them to a specific place
Inc.) to a person named or to his order.
 Rules:
1. It is not indispensable for the creation of a
 However, the carrier cannot limit its liability for
contract of carriage. (Compania Maritima vs.

Laws);
Insurance Company of North America, 12 SCRA 213) port.

10. Port – One which is issued by the carrier to
2. Ambiguity is construed against the carrier, the whom the goods have been delivered, and
contract being one of adhesion. the vessel indicated in the bill of lading by
which the goods are to be shipped is already
3. The consignee, although the instrument is in the port where the goods are held for
oftentimes drawn up only by the consignor and shipment.
carrier, becomes bound by all the stipulations  Functions:
contained therein by making a claim for loss on the 1. Best evidence of the existence of the contract
basis of said bill of lading. (Sea-Land Services Inc. of carriage of cargo (Art. 353)
vs. IAC) 2. Document of title
3. Receipt of cargo
4. The right of a party to recover for loss of shipment 4. Contract to transport and deliver goods as
consigned to him under a bill of lading drawn up only stipulated
by and between the shipper and the carrier, springs 5. Symbol of the goods
from either a relation of agency between him and the
shipper, or his status as stranger in whose favor some OBLIGATIONS OF THE CARRIER
stipulation is made in said contract, and who A. Duty to accept the goods
becomes a party thereto when he demands GENERAL RULE: A common carrier cannot
fulfillment of that stipulation. (Art. 1311 (2), ordinarily refuse to carry a particular class of goods.
(Mendoza vs. PAL Inc.) EXCEPTION: For some sufficient reason the
discrimination against the traffic in such goods is
5. Acceptance of the bill of lading without dissent reasonable and necessary. (Fisher vs. Yangco
raises the presumption that all the terms therein Steamship Co. 31 Phil 1).
where brought to the knowledge of the shipper and  Instances when the carrier may validly refuse to
agreed to by him and, in the absence of fraud or accept the goods include the ff:
mistake; he is estopped from thereafter denying that 1.) Goods sought to be transported are dangerous
he assented to such terms. (Notes and Cases on the objects, or substances including dynamite and other
Law on Transportation and Public Utilities, Aquino, T. explosives
& Hernando, R.P. 2004 ed. p.261) 2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
 Kinds: 4.) Contrabands or illegal goods
1. On board - issued when the goods have been 5.) Goods are injurious to health
actually placed aboard the ship with very 6.) Goods will be exposed to untoward danger like
reasonable expectation that the shipment is flood, capture by enemies and the like
as good as on its way. 7.) Goods like livestock will be exposed to disease
2. Received - one in which it is stated that the 8.) Strike
goods have been received for shipment with 9.) Failure to tender goods on time. (Notes and Cases
or without specifying the vessel by which the on the Law on Transportation and Public Utilities,
goods are to be shipped. Aquino, T. & Hernando, R.P. 2004 ed. p.68)
3. Negotiable - one in which it is stated that the  In case of carriage by railway, the carrier is
goods referred to therein will be delivered to exempted from liability if carriage is insisted upon by
the bearer or to the order of any person the shipper, provided its objections are stated in the
named therein. bill of lading.
4. Non-negotiable - One in which it is stated that  However, when a common carrier accepts cargo
the goods referred to therein will be delivered for shipment for valuable consideration, it takes the
to a specified person. risk of delivering it in good condition as when it was
5. Clean – One which does not indicate any loaded. (PAL vs. CA)
defect in the goods.
6. Foul – One which contains a notation thereon B. Duty to deliver the goods
indicating that the goods covered by it are in  Not only to transport the goods safely but to the
bad condition. person indicated in the bill of lading. The goods
should be delivered to the consignee or any other
7. Spent – One which covers goods that already person to whom the bill of lading was validly
have been delivered by the carrier without a transferred or negotiated.
surrender of a signed copy of the bill.
8. Through – One issued by the carrier who is Time of delivery
obliged to use the facilities of other carriers Stipulated in No stipulation
as well as his own facilities for the purpose of Contract/Bill of
transporting the goods from the city of the Lading
seller to the city of the buyer, which bill of 1. Carrier is bound to 1. Within a reasonable
lading is honored by the second and other fulfill the contract and is time.
interested carriers who do not issue their own liable for any delay; no 2. Carrier is bound to
bills. matter from what cause forward them in the 1st
9. Custody – One wherein the goods are already it may have arisen. shipment of the same or
received by the carrier but the vessel similar goods which he
indicated therein has not yet arrived in the may make to the point of

Laws);
delivery. (ART. 358 Code Clause

of Commerce) 2. Water/maritime
transportation
Effects of delay 3. Carriage of goods
a. Merely suspends and generally does not Notice of damage
terminate the contract of carriage 1. Condition precedent 1. Not a condition
b. Carrier remains duty bound to exercise 2. 24-hour period for precedent
extraordinary diligence claiming latent damage 2. 3-day period for
c. Natural disaster shall not free the carrier from claiming latent damage
responsibility (Art.1740) Prescriptive period
d. If delay is without just cause, the contract None provided; Civil One year from the date
limiting the common carrier’s liability cannot be Code applies. of delivery (delivered
availed of in case of loss or deterioration of the goods but damaged goods), or
(Art.1747) date when the vessel
left port or from the
RIGHT OF CONSIGNEE TO ABANDON GOODS date of delivery to the
 Instances: arrastre (non-delivery
1. Partial non-delivery, where the goods are or loss).
useless without the others (Art. 363);
2. Goods are rendered useless for sale or COMBINED CARRIER AGREEMENT (ART. 373)
consumption for the purposes for which they are GENERAL RULE: In case of a contract of
properly destined (Art. 365); and transportation of several legs, each carrier is
3. In case of delay through the fault of the carrier responsible for its particular leg in the contract.
(Art. 371). EXCEPTION: A combined carrier agreement where
a carrier makes itself liable assuming the obligations
NOTICE OF DAMAGE (ART. 366) and acquiring as well the rights and causes of action
 Requisites for applicability: of those which preceded it.
1. Domestic/inter-island/coastwise transportation
2. Land/water/air transportation
3. Carriage of goods
B. MARITIME COMMERCE
(Arts. 573-869)
4. Goods shipped are damaged
 Rules:
IMPORTANT CONCEPTS:
a. Patent damage: shipper must file a claim against
1. Merchant vessel
the carrier immediately upon delivery (it may be
2. Maritime lien and Preference of Credit
oral or written)
3. Doctrine of limited liability
b. Latent damage: shipper should file a claim against
4. Causes of revocation of voyage
the carrier within 24 hours from delivery.
5. Participants in maritime commerce
Note: These rules does not apply to misdelivery of
6. Charter party
goods. (Roldan vs. Lim Ponzo)
7. Loans on bottomry and respondentia
Purpose of notice: To inform the carrier that the
8. Accidents in maritime commerce
shipment has been damaged, and it is charged with
liability therefore, and to give it an opportunity to
MARITIME/ADMIRALTY LAW
make an investigation and fix responsibility while the
 It is the system of laws which particularly relates
matter is fresh.
to the affairs and business of the sea, to ships, their
 The filing of notice of claim is a condition
crews and navigation, and to maritime conveyance of
precedent for recovery.
persons and property. (Notes and Cases on the Law
 Shorter period may be stipulated by the parties
on Transportation and Public Utilities, Aquino &
because it merely affects the shipper’s remedy and
Hernando, citing Francisco, p.254)
does not affect the liability of the carrier.
(PHILAMGEN vs. Sweetlines, Inc.)
 Maritime laws apply only to maritime trade and sea
Prescriptive Period
voyages. (Pandect of Commercial Law and
 Not provided by Article 366. Thus, in such
Jurisprudence, Justice Jose Vitug, 1997 ed.)
absence, Civil Code rules on prescription apply.
 If despite the notice of claim, the carrier refuses
 Arrastre service is not maritime in character. It
to pay, action must be filed in court.
refers to a contract for the unloading of goods from
1. No bill of lading was issued:
a vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA
within 6 years
244)
2. Bill of lading was issued: within
10 years.
CHARACTERISTICS OF MARITIME
ARTICLE 366 COGSA Sec.3 (6) TRANSACTION
Applicability 1. Real - similar to transactions over real property
1. Domestic/inter- 1. International/ with respect to effectivity against third persons which
island/coastwise overseas/foreign (from is done through registration. (Rubiso vs. Rivera, 37
transportation foreign country to Phil. 72). The evidence of real nature is shown by:
2. Land, water, air Phils.) 1) the limitation of the liability of the agents to the
transportation Note: subject to the actual value of the vessel and the freight money; and
3. Carriage of goods rule on Paramount

Laws);
2) the right to retain the cargo and embargo and salvage including prior in time to the
detention of the vessel (Luzon Stevedoring Corp v. contract salvage, recording of the
CA, 156 SCRA 169); bottomry loans, and preferred mortgage;
2. Hypothecary - the liability of the owner of the value indemnity due shippers 6. Damages arising out
of the vessel is limited to the vessel itself (Doctrine of for the value of goods of tort; and
Limited Liability). transported but which 7. Preferred mortgage
were not delivered to registered prior in time.
 The real and hypothecary nature of maritime law the consignee;
simply means that the liability of the carrier in 5. Costs of repair and
connection with losses related to maritime contracts equipment of the
is confined to the vessel, which stands as the vessel, and provisioning
guaranty for their settlement. (Aboitiz Shipping Corp. of food, supplies and
vs. General Accident Fire and Life Assurance Corp. fuel during its last
217 SCRA 359). voyage; and
6. Preferred mortgages
MERCHANT VESSEL registered prior in time.
 Vessel engaged in maritime commerce, whether
foreign or otherwise. (Bar Review Materials in
Commercial Law, Jorge Miravite, 2002 ed.)  Effect of sale: All pre-existing claims in the vessel
 Constitutes property which may be acquired and are terminated. They will then be satisfied from the
transferred by any of the means recognized by law. proceeds of the sale subject to the order of
They shall continue to be considered as personal preference.
property. (Arts. 573, 585)
 They are susceptible to maritime liens such as for DOCTRINE OF LIMITED LIABILITY
the repair, equipping and provisioning of the vessel (HYPOTHECARY RULE)
in the preparation of a voyage, as well as mortgage  Cases where applicable:
liabilities, in satisfaction of which a vessel may be 1. Art. 587 – civil liability for indemnities to
validly arrested and sold. (Ship Mortgage Decree of third persons
1978) 2. Art. 590 – indemnities from negligent acts
of the captain (not the shipowner or ship
MARITIME LIEN agent)
 It constitutes a present right of property in the 3. Art. 837 – collision
ship, a jus in re, to be afterward enforced in admiralty 4. Art. 643 – liability for wages of the captain
by process in rem. (PNB vs. CA, 337 SCRA 381) and the crew and for advances made by
 If the maritime lien arose prior to the recording of the ship agent if the vessel is lost by
a preferred mortgage, it shall have priority over the shipwreck or capture
said mortgage lien. (PNB vs. CA, 337 SCRA 381)
GENERAL RULE: The liability of shipowner and ship
agent is limited to the amount of interest in said
ORDER OF PREFERENCE IN CASE OF SALE OF vessel such that where vessel is entirely lost, the
VESSEL obligation is extinguished. (Luzon Stevedoring v.
Escano, 156 SCRA 169) The interest extends to: 1)
R.A. 6106 P.D. 1521 the vessel itself; 2) equipments; 3) freightage; and
Effectivity date 4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)
1969 1978 EXCEPTIONS:
Applicability 1. Claims under Workmen’s Compensation (Abueg
Overseas shipping only Both domestic and vs. San Diego 77 Phil 730);
overseas shipping 2. Injury or damage due to shipowner or to the
Kind of sale concurring negligence of the shipowner and the
Judicial Judicial and captain;
extrajudicial 3. The vessel is insured (Vasquez vs. CA 138 SCRA
553).
Order of Preference
4. Expenses for repair on vessel completed before
A preferred mortgage The preferred mortgage
loss;
shall have priority over lien shall have priority
5. In case there is no total loss and the vessel is
all claims against the over all claims against
not abandoned;
vessel, except the the vessel, except the
6. Collision between two negligent vessels;
following preferences in following preferences in
the order stated: the order stated:
 Abandonment of the vessel is necessary to limit
1. Judicial costs of the 1. Expenses and fees
the liability of the shipowner. The only instance were
proceedings; allowed and costs taxed
abandonment is dispensed with is when the vessel is
2. Taxes due the by the court and taxes
entirely lost (Luzon Stevedoring vs. CA 156 SCRA
Philippine Government; due to the Government;
169).
3. Salaries and wages of 2. Crew’s wages;
the Captain and Crew of 3. General average;
RIGHT OF SHIPOWNER OR SHIP AGENT TO
the vessel during its last 4. Salvage, including
ABANDON VESSEL
voyage; contract salvage;
 Instances:
4. General average or 5. Maritime liens arising
1. In case of civil liability from indemnities to third

Laws);
persons (Art. 587); Shipowner (proprietario)

2. In case of leakage of at least ¾ of the contents  Person who has possession, control and
of a cargo containing liquids (Art. 687); and management of the vessel and the consequent right
3. In case of constructive loss of the vessel (Sec. to direct her navigation and receive freight earned
138, Insurance Code). and paid, while his possession continues.
RIGHT OF ABANDONMENT Ship agent (naviero)

 Person entrusted with provisioning and
SHIPOWNER OR SHIP CONSIGNEE representing the vessel in the port in which it may be
AGENT found; also includes the shipowner.
What may be abandoned  Not a mere agent under civil law; he is solidarily
Vessel Goods shipped liable with the ship owner.
Instances  Powers and functions:
1. In case of civil liability 1. Partial non-delivery, 1. Capacity to trade;
from indemnities to third where the goods are 2. Discharge duties of the captain, subject to
persons (Art. 587); useless without the Art.609;
2. Sec. 138, Insurance others (Art. 363); 3. Contract in the name of the owners with respect
Code; 2. Goods are rendered to repairs, details of equipment, armament,
3. In case of leakage of at useless for sale or provisions of food and fuel, and freight of the
least ¾ of the contents of consumption for the vessel, and all that relate to the requirements of
a cargo containing liquids purposes for which they navigation;
(Art. 687) are properly destined 4. Order a new voyage, make a new charter or
(Art. 365); and insure the vessel after obtaining authorization
3. In case of delay from the shipowner or if granted in certificate of
through the fault of the appointment.
carrier (Art. 371).
Effects Civil Liabilities of the Shipowner And Ship
Agent
1. Transfer of ownership 1. Transfer of
1. All contracts of the captain, whether authorized
of the vessel from the ownership on the goods
or not, to repair, equip and provision the vessel;
shipowner to the from the shipper to the
(Art. 586)
shippers or insurer. carrier.
2. Loss and damage to the goods loaded on the
2. In case of (2), the 2. Carrier should pay
vessel without prejudice to their right to free
insurer must pay the the shipper the market
themselves from liability by abandoning the
insured as if there was value of the goods at
vessel to the creditors. (Art. 587)
actual total loss of the the point of destination.
vessel.
Duty of Ship Agent to Discharge the Captain
and Members of the Crew
CAUSES OF REVOCATION OF VOYAGE
 If the seamen contract is not for a definite period
1. War or interdiction of commerce;
or voyage, he may discharge them at his discretion.
2. Blockade;
(Art. 603)
3. Prohibition to receive cargo at destination;
 If for a definite period, he may not discharge them
4. Embargo;
until after the fulfillment of their contracts, except on
5. Inability of the vessel to navigate. (Art. 640)
the following grounds:
a. Insubordination in serious matters;
Terms:
b. Robbery;
1. Interdiction of commerce – A governmental
c. Theft;
prohibition of commercial intercourse intended
d. Habitual drunkenness;
to bring about an entire cessation for the time
e. Damage caused to the vessel or to its
being of all trade whatever.
cargo through malice or manifest or proven
2. Blockade – A sort of circumvallation of a place
negligence. (Art. 605)
by which all foreign connection and
correspondence is, as far as human power can
B. CAPTAINS AND MASTERS
effect it, to be cut off.
 They are the chiefs or commanders of ships.
3. Embargo – A proclamation or order of a state,
 The terms have the same meaning, but are
usually issued in time of war or threatened
particularly used in accordance with the size of the
hostilities, prohibiting the departure of ships or
vessel governed and the scope of transportation, i.e.,
goods from some or all the ports of such state
large and overseas, and small and coastwise,
until further order.
respectively.
 Nature of position (3-fold character):
PARTICIPANTS IN MARITIME COMMERCE
1. General agent of the shipowner;
A. Shipowners and ship agents
2. Technical director of the vessel;
B. Captains and masters of the vessel
3. Representative of the government of the
C. Officers and crew of the vessel
country under whose flag he navigates.
D. Supercargoes
 Qualifications:
E. Pilot
1. Filipino citizen;
2. Legal capacity to contract;
A. SHIPOWNERS AND SHIP AGENTS

Laws);
3. Must have passed the required physical 2. Thefts and robberies of the crew;
and mental examinations required for 3. Losses and fines for violation of laws;
licensing him as such. (Art. 609) 4. Damages due to mutinies;
 Inherent powers: 5. Damages due to misuse of power;
1. Appoint crew in the absence of ship agent; 6. For deviations;
2. Command the crew and direct the vessel 7. For arrivals under stress;
to its port of destination; 8. Damages due to non-observance of marine
3. Impose correctional punishment on those regulations. (Art. 618)
who, while on board vessel, fail to comply
with his orders or are wanting in discipline; C. OFFICERS AND CREW
4. Make contracts for the charter of vessel in 1. Sailing Mate/First Mate
the absence of ship agent. 2. Second Mate
5. Supply, equip, and provision the vessel; 3. Engineers
and 4. Crew
6. Order repair of vessel to enable it to  No liability under the following circumstances:
continue its voyage. (Art. 610) 1. If, before beginning voyage, captain attempts to
 Sources of funds to comply with the inherent change it, or a naval war with the power to
powers of the captain (in successive order): which the vessel was destined occurs;
1. From the consignee of the vessel; 2. If a disease breaks out and be officially declared
2. From the consignee of the cargo; an epidemic in the port of destination;
3. By drawing on the ship agent; 3. If the vessel should change owner or captain.
4. By a loan on bottomry; (Art. 647)
5. By sale of part of the cargo. (Art. 611)
 Duties: Sailing Mate/First Mate
1. Bring on board the proper certificate and  Second chief of the vessel who takes the place of
documents and a copy of the Code of the captain in case of absence, sickness, or death and
Commerce; shall assume all of his duties, powers and
2. Keep a Log Book, Accounting Book and responsibilities. (Art. 627)
Freight Book;  Duties:
3. Examine the ship before the voyage; 1. Provide himself with maps and charts with
4. Stay on board during the loading and astronomical tables necessary for the
unloading of the cargo; discharge of his duties;
5. Be on deck while leaving or entering the 2. Keep the Binnacle Book;
port; 3. Change the course of the voyage on
6. Protest arrivals under stress and in case of consultation with the captain and the
shipwreck; officers of the boat, following the decision
7. Follow instructions of and render an of the captain in case of disagreement;
accounting to the ship agent; 4. Responsible for all the damages caused to
8. Leave the vessel last in case of wreck; the vessel and the cargo by reason of his
9. Hold in custody properties left by deceased negligence. (Arts. 628 - 631)
passengers and crew members;
10. Comply with the requirements of customs, Second Mate
health, etc. at the port of arrival;  Takes command of the vessel in case of the
11. Observe rules to avoid collision; inability or disqualification of the captain and the
12. Demand a pilot while entering or leaving a sailing mate, assuming in such case their powers and
port. (Art. 612) responsibilities.
 Third in command
 A ship’s captain must be accorded a reasonable  Duties:
measure of discretionary authority to decide what the 1. Preserve the hull and rigging of the vessel;
safety of the ship and of its crew and cargo 2. Arrange well the cargo;
specifically requires on a stipulated ocean voyage 3. Discipline the crew;
(Inter-Orient Maritime Enterprises Inc. vs. CA). 4. Assign work to crew members;
5. Inventory the rigging and equipment of the
 No liability for the following: vessel, if laid up. (Art. 632)
1. Damages caused to the vessel or to the
cargo by force majeure; Engineers
2. Obligations contracted for the repair,  Officers of the vessel but have no authority except
equipment, and provisioning of the vessel in matters referring to the motor apparatus. When
unless he has expressly bound himself two or more are hired, one of them shall be the chief
personally or has signed a bill of exchange engineer.
or promissory note in his name. (Art. 620)  Duties:
1. In charge of the motor apparatus, spare
Solidary Liabilities of the Ship parts, and other instruments pertaining to
Agent/Shipowner for Acts Done by the Captain the engines;
towards Passengers and Cargoes 2. Keep the engines and boilers in good
1. Damages to vessel and to cargo due to lack condition;
of skill and negligence;

Laws);
3. Not to change or repair the engine without board at a particular place for the purpose of
authority of the captain; conducting a ship through a river, road or channel, or
4. Inform the captain of any damage to the from a port.
motor apparatus;  Master pro hac vice for the time being in the
5. Keep an Engine Book; command and navigation of the ship.
6. Supervise all personnel maintaining the  While in exercising his functions a pilot is in sole
engine. (Art. 632) command of the ship and supersedes the master for
the time being in the command and navigation of the
Crew ship, the master does not surrender his vessel to the
 The aggregate of seamen who man a ship, or the pilot and the pilot is not the master. There are
ship’s company. occasions when the master may and should interfere
 Hired by the ship agent, where he is present and and even displace the pilot, as when the pilot is
in his absence, the captain hires them, preferring obviously incompetent or intoxicated (Far Eastern
Filipinos, and in their absence, he may take in Shipping Company vs. CA).
foreigners, but not exceeding 1/5 of the crew. (Art.  Compulsory Pilotage – States possessing harbors
634) have enacted laws or promulgated rules requiring
vessels approaching their ports to take on board
Classes of Seaman’s Contracts pilots licensed under the local laws. (Notes and Cases
1. By the voyage; on the Law on Transportation and Public Utilities,
2. By the month; and Aquino, T. & Hernando, R.P. 2004 ed. p. 518)
3. By share of profits or freightage.
Liablity of Pilot
Just Causes for the Discharge of Seaman While GENERAL RULE: On compulsory pilotage grounds,
Contract Subsists the Harbor Pilot is responsible for damage to a vessel
1. Perpetration of a crime; or to life or property due to his negligence.
2. Repeated insubordination, want of discipline; EXCEPT:
3. Repeated incapacity and negligence; 1. Accident caused by force majeure or natural
4. Habitual drunkenness; calamity provided the pilot exercised prudence and
5. Physical incapacity; extra diligence to prevent or minimize damages.
6. Desertion. (Art. 637) 2. Countermand or overrule by the master of the
vessel in which case the registered owner of the
Rules in case of Death of a Seaman vessel is liable. (Sec.11, Art.III PPA Admin Order 03-
 The seaman’s heirs are entitled to payment as 85)
follows:
1. If death is natural: SPECIAL CONTRACTS OF MARITIME
a. compensation up to time of death if COMMERCE
engaged on wage 1. Charter party
b. if by voyage - half of amount if death 2. Bill of lading
occurs on voyage out; and full, if on 3. Contract of transportation of passengers
voyage in on sea voyages
c. if by shares - none, if before departure; 4. Loan on bottomry
full, if after departure 5. Loan on respondentia
2. if death is due to defense of vessel - full 6. Marine insurance
payment;
3. if captured in defense of vessel - full payment; CHARTER PARTY
4. if captured due to carelessness - wages up to  A contract by virtue of which the owner or agent
the date of the capture. (Art. 645) binds himself to transport merchandise or persons for
a fixed price.
Complement of the Vessel  A contract by which an entire ship, or some
 All persons on board, from the captain to the cabin principal part thereof is let/leased by the owner to
boy, necessary for the management, maneuvers, and another person for a specified time or use. (Planters
service, thus including the crew, the sailing mates, Products, Inc. vs. CA, 226 SCRA 476)
engineers, stokers and other employees on board not  Parties:
having specific designations. 1. Ship owner or ship agent
 Does not include the passengers or the persons 2. Charterer
whom the vessel is transporting.  Classes:
1. Bareboat or demise – The charterer provides crew,
D. SUPERCARGOES food and fuel. The charterer is liable as if he were the
 Persons who discharges administrative duties owner, except when the cause arises from the
assigned to him by ship agent or shippers, keeping unworthiness of the vessel. The shipowner leases to
an account and record of transaction as required in the charterer the whole vessel, transferring to the
the accounting book of the captain. (Art. 649) latter the entire command, possession and
consequent control over the vessel’s navigation,
E. PILOT including the master and the crew, who thereby
 A person duly qualified, and licensed, to conduct a become the charter’s servants. It transforms a
vessel into or out of ports, or in certain waters. common carrier into a private carrier.
 The term generally connotes a person taken on  The charterer becomes the owner of the

Laws);
vessel pro hac vice, just for that one particular

purpose only. Because the charterer is treated PERSONS WHO MAY MAKE A CHARTER
as owner pro hac vice, the charterer assumes 1. Owner or owners of the vessel, either in
the customary rights and liabilities of the whole or in majority part, who have legal
shipowner to third persons and is held liable for control and possession of the vessel
the expense of the voyage and the wages of the 2. Charterer may subcharter entire vessel to
seamen. 3rd person only if not prohibited in original
2. Contract of Affreightment – A contract whereby charter. (Art.679)
the owner of the vessel leases part or all of its space 3. Ship agent if authorized by the owner/s or
to haul goods for others. given such power in the certificate of
 The shipowner retains the possession, appointment. (Art.598)
command and navigation of the ship, the 4. Captain in the absence of the ship agent
charterer merely having use of the space in the or consignee and only if he acts in
vessel in return for his payment of the charter accordance with the instructions of the
hired. agent or owner and protects the latter’s
 Kinds: interests. (Art.609)
a. Time charter – vessel is chartered for a
fixed period of time or duration of voyage. REQUISITES OF A VALID CHARTER PARTY
b. Voyage or trip charter – the vessel is leased 1. Consent of the contracting parties
for one or series of voyages usually for 2. Existing vessel which should be placed at
purposes of transporting goods for the disposition of the shipper
charterer. 3. Freight
4. Compliance with Art. 652 of the Code of
LEASE CHARTER PARTY Commerce
If for a definite period, Charterer may rescind
lessee cannot give up the charter party by paying
lease by paying a portion half of the freightage
of the amount agreed agreed upon.
upon. Clauses Which May Be Included In a Charter
If the leased property is The new owner is not Party
sold to one who knows of compelled to respect the
the existence of the charter party so long as Jason clause Clause paramount or
lease, the new owner he can load the vessel paramount clause
must respect the lease. with his own cargo. (Art. A stipulation in a charter A clause in a charter
689) party that in case of a party providing that the
Civil law concept Commercial law concept maritime accident for COGSA shall apply, even
which the shipowner is though the
not responsible by law, transportation is
contract or otherwise, domestic, subject to the
CHARTER PARTY BILL OF LADING the cargo shippers, extent that any term of
An entire or complete More like a private consignees or owners the bill of lading is
contract. receipt which the captain shall contribute with the repugnant to the COGSA
gives to accredit goods shipowner in general or applicable law, then to
received from persons average. (Pandect of the extent thereof the
Commercial Law and provision of the bill of
Consensual contract Real contract
Jurisprudence, Justice lading is void. (Pandect
Jose Vitug, 1997 ed.) of Commercial Law and
BAREBOAT OR CONTRACT OF
Jurisprudence, Justice
DEMISE CHARTER AFFREIGHTMENT
Jose Vitug, 1997 ed.)
(TIME OR VOYAGE
CHARTER)
Charterer becomes liable Owner remains liable as
to others caused by its carrier and must answer
negligence for any breach of duty
Charterer regarded as Charterer is not regarded
owner pro hac vice for as owner.
Rights and Obligations of Parties
the voyage
Owner of vessel The vessel owner retains
SHIPOWNER OR CHARTERER
relinquishes possession, possession, command
SHIP AGENT
command and and navigation of the
1. If the vessel is 1. To pay the agreed
navigation to charterer ship
chartered wholly, not to charter price;
accept cargo from 2. To pay freightage
Common carrier is Common carrier is not others; on unboarded cargo;
converted to private converted to a private 2. To observe 3. To pay losses to
carrier. carrier. represented capacity; others for loading
3. To unload cargo uncontracted cargo and
clandestinely placed illicit cargo;

Laws);
4. To substitute 4. To wait if the TRANSSHIPMENT OF GOODS

another vessel if load is vessel needs repair;  The act of taking cargo out of one ship and loading
less than 3/5 of capacity; 5. To pay expenses it in another, or the transfer of goods from the vessel
5. To leave the port if for deviation. (Arts. stipulated in the contract of affreightment to another
the charterer does not 679-687) vessel before the place of destination named in the
bring the cargo within contract has been reached, or the transfer for further
the lay days and extra transportation from one ship or conveyance to
lay days allowed; another.
6. To place in a vessel  It is not dependent on the ownership of the
in a condition to transporting ships or in the change of carriers, but
navigate; rather on the fact of actual physical transfer of cargo
7. to bring cargo to from one vessel to another.
nearest neutral port in  If done without legal excuse, however competent
case of war or blockade. and safe the vessel into which the transfer is made,
(Arts. 669-678) 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
Rescission of a Charter Party Manufacturing vs. CA, 201 SCRA 102)
At charterer’s At Fortuitous
request shipowner’s causes LOAN ON BOTTOMRY AND RESPONDENTIA
(Art 688) request (Art. 690)  A real, unilateral, aleatory contract, by virtue of
(Art. 689) which one person lends to another a certain amount
1. By 1. If the extra 1. War or of money or goods on things exposed to maritime
abandoning the lay days interdiction of risks, which amount, with its earnings, is to be
charter and terminate commerce; returned if the things are safely transported, and
paying half of without the 2. Blockade; which is lost if the latter are lost.
the freightage; cargo being 3. Prohibition
2. Error in placed to receive
tonnage or alongside the cargo; LOAN ON LOAN ON
flag; vessel; 4. Embargo; BOTTOMRY RESPONDENTIA
3. Failure to 2. Sale by the and Definition
place the vessel owner of the 5. Inability of Loan made by Loan taken on security
at the vessel before the vessel to shipowner or ship agent of the cargo laden on a
charterer’s loading by the navigate. guaranteed by vessel vessel, and repayable
disposal; charterer; itself and repayable upon safe arrival of
4. Return of the upon arrival of vessel at cargo at destination.
vessel due to destination. (Art. 719) (Art. 719)
pirates,
enemies or bad
weather;
Who may contract
5. Arrival at a
Shipowner or ship Only the owner of the
port for repairs.
agent. Outside of the cargo.
residence of the owners
Terms:
- the captain.
1. Primage - bonus to be paid to the captain after
the successful voyage. Common elements:
2. Demurrage – the sum fixed in the charter party 1. Exposure of security to marine peril;
as a remuneration to the owner of the ship for 2. Obligation of the debtor conditioned only
the detention of his vessel beyond the number upon safe arrival of the security at the point
of days allowed by the charter party for loading of destination.
or unloading or for sailing. Forms:
3. Deadfreight – the amount paid by or 1. Public instrument
recoverable from a charterer of a ship for the 2. Policy signed by the contracting parties and
portion of the ship’s capacity the latter the broker taking part therein
contracted for but failed to occupy. 3. Private instrument (Art. 720)
4. Lay Days - days allowed to charter parties for Contents:
loading and unloading the cargo. 1. Kind, name and registry of the vessel;
5. Extra Lay Days – days which follow after the lay 2. Name, surname and domicile of the captain;
days have elapsed. 3. Names, surnames and domiciles of the
borrower and the lender;
USUAL FORMS OF CONSUMMATING 4. Amount of the loan and the premium
CONTRACTS stipulated;
1. C.I.F. – cost, insurance and freight; 5. Time for repayment;
2. F.O.B. - free on board; 6. Goods pledged to secure repayment;
3. F.A.S. - free alongside ship; and 7. Voyage during which the risk is run (Art.721)
4. C. & F. - cost and freight.

Laws);
1. The insurable interest of the owner of a

ship hypothecated by bottomry is only the
BOTTOMRY/ ORDINARY LOAN excess of the value over the amount
RESPONDENTIA (MUTUUM) secured by bottomry. (Sec. 101, Insurance
Not subject to Usury Subject to Usury Law Code)
Law 2. The value of what may be saved in case of
shipwreck shall be divided between the
Liability of the borrower Not subject to any lender and the insurer in proportion to the
is contingent on the contingency (absolute interest of each one. (Art. 735)
safe arrival of the vessel liability)
or cargo at destination 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
The last lender is a The first lender is a coverage to the extent of the loan accommodation.
preferred creditor preferred creditor The same rule would apply to the hypothecation of
the cargo by respondentia. (Pandect of Commercial
Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)
WHEN LOAN ON BOTTOMRY OR
RESPONDENTIA REGARDED AS SIMPLE LOAN ACCIDENTS IN MARITIME COMMERCE
1. Lender loaned an amount larger than the 1. Averages
value of the object due to fraudulent 2. Arrival Under Stress
means employed by the borrower. 3. Collision
(ART.726) 4. Shipwreck
2. Full amount of the loan is not used for the
cargo or given on the goods if all of them AVERAGE
could not have been loaded, the balance  An extraordinary or accidental expense incurred
will be considered a simple loan. (ART.727) during the voyage in order to preserve the cargo,
3. If the effects on which the money is taken vessel or both, and all damages or deterioration
is not subjected to any risk. (ART.729) suffered by the vessel from departure to the port of
destination, and to the cargo from the port of loading
Note: Under existing laws, the parties to a loan, to the port of consignment. (Art. 806)
whether ordinary or maritime, may agree on any rate  The person whose property has been saved must
of interest. (CB Circular 905) contribute to reimburse the damage caused or
expense incurred if the situation constitutes general
average.
MARINE INSURANCE LOAN ON  Classes:
BOTTOMRY OR 1. Particular or Simple Average
RESPONDENTIA 2. Gross or General Average
Indemnity is paid after the Indemnity is paid in  Where both vessel and cargo are saved, it is
loss has occurred advance by way of a general average; where only the vessel or only the
loan cargo is saved, it is particular average.
In case of loss of the vessel In case of loss of the  Expenses incurred to refloat a vessel, which
due to a risk insured vessel due to a accidentally ran aground, in order to continue its
against, the obligation of marine peril, the voyage, do not constitute general average. Not only
the insurer becomes obligation of the is there absence of a marine peril, common safety
absolute borrower to pay is factor, and deliberateness. It is the safety of the
extinguished property, and not the voyage, which constitutes the
Consensual contract Real contract true foundation of general average. (A. Magsaysay,
Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)
Hypothecary Nature of Bottomry/
Respondentia
GENERAL RULE: The obligation of the borrower to PARTICULAR OR GROSS OR GENERAL
pay the loan is extinguished if the goods given as SIMPLE
security are absolutely lost by reason of an accident Definition
of the sea, during the voyage designated, and if it is Damages or expenses Damages or expenses
proven that the goods were on board. caused to the vessel or deliberately caused in
EXCEPTIONS: cargo that did not inure order to save the
1. Loss due to inherent defect; to the common benefit, vessel, its cargo or both
2. Loss due to the barratry on the part of the and borne by respective from real and known
captain; owners. (Art. 809) risk. (Art. 811)
3. Loss due to the fault or malice of the borrower; Requisites
4. The vessel was engaged in contraband; and 1. common danger;
5. The cargo loaded on the vessel be different in 2. deliberate
from that agreed upon. sacrifice;
3. success;
Concurrence of Marine Insurance and Loan on 4. proper formalities
Bottomry/Respondentia and legal steps.

Laws);
Liability “abandoned” within the meaning of civil law so as to

The owner of the goods All the persons having be the object of occupation by salvage. (Pandect of
which gave rise to the an interest in the vessel Commercial Law and Jurisprudence, Justice Jose
expense or suffered the and the cargo therein at Vitug, 1997 ed.)
damage shall bear this the time of the  In order that the jettisoned goods may be included
average. (Art. 810) occurrence of the in the gross or general average, the existence of the
average shall contribute cargo on board should be proven by means of the bill
to satisfy this average. of lading. (Art. 816)
(Art. 812)
 The insurers York-Antwerp (Y-A) Rules on Determining
(Art.859) and lenders Liability for Averages With Regard To Deck
on bottomry and Cargo
respondentia shall 1. Deck cargo is allowed only in
likewise contribute. domestic/coastwise/inter-island shipping, and is
(Art.732). prohibited in international/overseas/foreign shipping.
Number of interests involved 2. If deck cargo is loaded with the consent of the
Only one interest Several interests shipper on overseas trade, it must always contribute
involved involved to general average, but should the same be
Share in the damage or expense jettisoned, it would not be entitled to reimbursement
100% share In proportion to the because there is violation of the Y-A Rules.
value of the owner’s 3. If deck cargo is loaded with the consent of the
property saved shipper on coastwise shipping, it must always
Right to recover contribute to general average and if jettisoned would
No reimbursement There may be be entitled to reimbursement.
reimbursement  Reason: In domestic shipping, voyages are usually
short and the seas are generally not rough. In
Kinds (not exclusive)
overseas shipping, the vessel is exposed for many
Art. 809 Art. 811
days to perils of the sea.
Procedure for recovery
1. Assembly and
DOMESTIC INTERNATIONAL
deliberation
2. Resolution of the Deck cargo is allowed Deck cargo is not
captain allowed
3. Entry of the With shipper’s consent
resolution in the General average Particular average
logbook Without shipper’s consent
4. Detailed minutes Captain is liable Captain is liable
5. Delivery of the
minutes to the maritime ARRIVAL UNDER STRESS (ARRIBADA)
judicial authority of the  The arrival of a vessel at the nearest and most
first port, within 24 convenient port instead of the port of destination, if
hours from arrival, during the voyage the vessel cannot continue the trip
6. Ratification by to the port of destination.
captain under oath.
(Arts. 813-814) When lawful When Who bears
unlawful expenses:
GOODS NOT COVERED BY GENERAL AVERAGE
EVEN IF SACRIFICED The inability to 1. Lack of The shipowner
1. Goods carried on deck. (ART.855) continue provisions due or ship agent is
2. Goods not recorded in the books or records voyage is due to negligence to liable in case of
of the vessel. (ART.855 (2)) to lack of carry according unlawful arrival
3. Fuel for the vessel if there is more than provisions, to usage and under stress.
sufficient fuel for the voyage. (Rule IX, well-founded customs; But they shall
York-Antwerp Rule) fear of seizure, 2. Risk of not be liable
privateers, enemy not well for the
Jettison pirates, or known or damages
 Act of throwing cargo overboard in order to lighten accidents of manifest caused by
the vessel. the sea 3. Defect of reason of a
 Order of goods to be cast overboard: disabling it to vessel due to lawful arrival.
1. Those which are on the deck, preferring navigate. (Art. improper repair; (Art. 821)
the heaviest one with the least utility and 819) and
value; 4. Malice,
2. Those which are below the upper deck, negligence, lack
beginning with the one with greatest of foresight or
weight and smallest value. (Art. 815) skill of captain.
(Art. 820)
 Jettisoned goods are not res nullius nor deemed

Laws);
 It is the duty of the captain to continue the voyage 1. Where a steamship and a sailing vessel are
without delay after the cause of the arrival under approaching each other from opposite
stress has ceased failing in such duty renders him directions, or on intersecting lines, the
liable. However, in case the cause has been risk of steamship from the moment the sailing vessel is
enemies, there must first be an assembly before seen, shall watch with the highest diligence her
departure. (Art. 825) course and movements so as to be able to adopt
 Steps: such timely means of precaution as will
1. Captain should determine during the necessarily prevent the two boats from coming
voyage if there is well founded fear of in contact.
seizure, privateers and other valid 2. The sailing vessel is required to keep her course
grounds; unless the circumstances require otherwise.
2. Captain shall assemble the officers and
summon the persons interested in the Zones of Time in the Collision of Vessels
cargo who may attend the meeting but 1. First zone – all time up to the moment when risk
without a right to vote; of collision begins.
3. The officers shall determine and agree if  No rule is as yet applicable for none is necessary.
there is well-founded reason after 2. Second zone – time between moment when risk
examining the circumstances. The captain of collision begins and moment it becomes a practical
shall have the deciding vote; certainty.
4. The agreement shall be drafted and the  It is in this period where conduct of the vessels is
proper minutes shall be signed and entered primordial. It is in this zone that vessels must strictly
in the log book; observe nautical rules, unless a departure therefrom
5. Objections and protests shall likewise be becomes necessary to avoid imminent danger.
entered in the minutes. 3. Third zone – time when collision is certain and
time of impact.
COLLISION  An error in this zone would no longer be legally
 Impact of two vessels both of which are moving. consequential.
 Error in Extremis - sudden movement made by a
Allision faultless vessel during the third zone of collision with
 Impact between a moving vessel and a stationary another vessel which is at fault during the 2nd zone.
one. Even if such sudden movement is wrong, no
responsibility will fall on said faultless vessel. (Urrutia
Nautical Rules to Determine Negligence and Co. v. Baco River Plantation Co., 26 PHIL 632)
1. When two vessels are about to enter a port, the
farther one must allow the nearer to enter first; Cases Covered By Collision and Allision
if they collide, the fault is presumed to be 1. One vessel at fault
imputable to the one who arrived later, unless it  Vessel at fault is liable for damage caused to
can be proved that there was no fault on its innocent vessel as well as damages suffered by the
part. owners of cargo of both vessels. (Art. 826)
2. When two vessels meet, the smaller should give 2. Both vessels at fault
the right of way to the larger one.  Each vessel must bear its own loss, but the
3. A vessel leaving port should leave the way clear shippers of both vessels may go against the
for another which may be entering the same shipowners who will be solidarily liable. (Art. 827)
port. 3. Vessel at fault not known
4. The vessel which leaves later is presumed to  Each vessel must bear its own loss, but the
have collided against one which has left earlier. shippers of both vessels may go against the
5. There is a presumption against the vessel which shipowners who will be solidarily liable. (Art. 828)
sets sail in the night.  Doctrine of Inscrutable Fault – In case of
6. There is a presumption against the vessel with collision where it cannot be determined which
spread sails which collides with another which is between the two vessels was at fault, both
at anchor and cannot move, even when the vessels bear their respective damage, but both
crew of the latter has received word to lift should be solidarily liable for damage to the
anchor, when there was not sufficient time to do cargo of both vessels.
so or there was fear of a greater damage or 4. Third vessel at fault
other legitimate reason.  The third vessel will be liable for losses and
7. There is a presumption against an improperly damages. (Art. 831)
moored vessel. 5. Fortuitous event/force majeure
8. There is a presumption against a vessel which  No liability. Each bears its own loss. (Art. 830)
has no buoys to indicate the location of its
anchors to prevent damage to vessels which  The doctrine of res ipsa loquitur applies in case a
may approach it. moving vessel strikes a stationary object, such as a
9. Vessels must have “proper look-outs” or persons bridge post, dock, or navigational aid. (Far Eastern
trained as such and who have no other duty Shipping v. CA, Luzon Stevedoring vs. CA)
aside therefrom. (Smith Bell v. CA)
 Even if the cause of action against the common
Nautical Rules as to Sailing Vessel and carrier is based on quasi-delict, the defense of due
Steamship diligence in the selection and supervision of

Laws);
employees is unavailing in case of a maritime tort public interest.

resulting in collision. It is not a civil tort governed by  Liability:
the Civil Code but a maritime one governed by Arts. 1. Similar to a warehouseman (Lua Kian v. Manila
826-839 of the Code of Commerce. (Manila Railroad)
Steamship vs. Insa Abdulhaman) 2. Similar to a common carrier (Northern Motors v.
Prince Line)
 Doctrine of Last Clear Chance and Rule on 3. Solidary liability with the common carrier
Contributory Negligence cannot be applied in collision
cases because of Art.827 of the Code of Commerce. Note: In order that the arrastre operator may be
(Notes and Cases on the Law on Transportation and held liable, the consignee must prove that the
Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed.) damage was due to the negligence and while the
goods are in the custody of the arrastre operator.
MARITIME PROTEST (Hartford Fire Insurance v. E. Razon, Inc.)
 Condition precedent or prerequisite to recovery of
damages arising from collisions and other maritime STEVEDORING SERVICE
accidents.  The carriage of goods from the warehouse or pier
 It is a written statement made under oath by the to the holds of the vessel. (Chief of Staff vs. CIR)
captain of a vessel after the occurrence of an accident  As understood in the port business, the term
or disaster in which the vessel or cargo is lost or consists of the handling of cargo from the hold of the
damaged, with respect to the circumstances ship to the dock, in case of pier-side unloading; or to
attending such occurrence, for the purpose of a barge, in case of unloading at sea. (Anglo-Fil
recovering losses and damages. Trading Corp. vs. Lazaro)
 Excuses for not filing protest: 1) where the  The loading on the ship of outgoing cargo is also
interested person is not on board the vessel; and 2) part of stevedoring work. (Ibid.)
on collision time, need not be protested. (Art. 836)
 Cases applicable: CONTAINERIZATION/ “SAID-TO-CONTAIN”/
1. Collision (Art. 835); “SHIPPER’S LOAD AND COUNT” SYSTEM
2. Arrival under stress (Art. 612(8));  System whereby the shipper loads his cargoes in
3. Shipwrecks (Arts. 612(15), 843); a specially designed container, seals the container
4. Where the vessel has gone through a and delivers it to the carrier for transportation. The
hurricane or when the captain believes that carrier does not participate in the counting of the
the cargo has suffered damages or merchandise for loading into the container, the actual
averages (Art. 624). loading, and the sealing of the container. (US Lines
 Who makes: Captain v. Comm. Of Customs, ICTSI v. Prudential
 When made: within 24 hours from the time the Guarantee)
collision took place.  The matter of quantity, description and conditions
 Before whom made: competent authority at the of the cargo inside the container is the sole
point of collision or at the first port of arrival, if in the responsibility of the shipper, unless there is
Philippines and to the Philippine consul, if the collision stipulation to the contrary. (US Lines vs. Comm. Of
took place abroad. (Art. 835) Customs, Reyma Brokerage v. Phil. Home Assurance)
SHIPWRECK Note: In order to attribute to the carrier any damage

 It is the loss of the vessel at sea as a consequence to the shipment that may be found, inspection of the
of its grounding, or running against an object in sea goods should be done at pier-side. (Bankers vs. CA)
or on the coast. It occurs when the vessel sustains
injuries due to a marine peril rendering her incapable III. CARRIAGE OF GOODS BY SEA ACT/COGSA
of navigation. (C.A. No. 65)
 If the wreck was due to malice, negligence or lack
of skill of the captain, the owner of the vessel may APPLICABILITY
demand indemnity from said captain. (Art. 841)  The transportation must be:
 The rules on collision or allision, as may be 1. Water/maritime transportation;
pertinent, can equally apply to shipwrecks. 2. for the carriage of goods; and
3. overseas/international/foreign (from
SPECIAL CONCEPTS foreign port to Philippine port).
ARRASTRE SERVICE  It can be applied in domestic sea transportation if
 A contract for the unloading of goods from a agreed upon by the parties. (Clause paramount or
vessel. paramount clause)
 Applicability: Overseas trade only. (Commercial
Law Review, C. Villanueva, 2004 ed.) IMPORTANT FEATURES:
 Significance: When a person brings in cargo 1. Amount of carrier’s liability
from abroad, he cannot unload and deliver the cargo 2. Notice of damage
by himself. The unloading must be done by the 3. Prescriptive period
arrastre operator, which will then deliver the cargo to
the importer. (Commercial Law Review, C. AMOUNT OF CARRIER’S LIABILITY
Villanueva, 2004 ed.)  Under the Sec. 4(5), the liability limit is set at $500
 Nature of business: It is a public utility, per package or customary freight unit unless the
discharging functions which are heavily invested with nature and value of such goods is declared by the

Laws);
shipper. This is deemed incorporated in the bill of 2. Air transportation; and

lading even if not mentioned in it. (Eastern Shipping 3. Carriage of passengers, baggage or goods.
vs. IAC, 150 SCRA 463)  The WC shall also apply to fortuitous
 Note that Art. 1749, NCC applies to domestic/inter- transportation by aircraft performed by an air
island/coastwise trade. transportation enterprise.
NOTICE OF DAMAGE (SEC. 3(6))  International transportation - any transportation in

 Rules: which the place of departure and the place of
a. Patent damage: shipper should file a claim with destination are situated either:
the carrier immediately upon delivery 1. Within the territories of two High Contracting
b. Latent damage: shipper should file a claim with Parties regardless of whether or not there be a
the carrier within three days from delivery. break in the transportation or transshipment, or
2. Within the territory of a single High
Note: The filing of a notice of claim is not a condition Contracting Party, if there is an agreed stopping
precedent. place within a territory subject to the
sovereignty, mandate or authority of another
PRESCRIPTIVE PERIOD power, even though that power is not a party to
 Action for loss or damage to the cargo should be the Convention. (“round trip”, Am. Jur.)
brought within one year after:
a. Delivery of the goods (delivered but  Transportation to be performed by several
damaged goods); or successive air carriers shall be deemed to be one
b. The date when the goods should have undivided transportation, if it has been regarded by
been delivered (non-delivery). (Sec. 3[6]) the parties as a single operation, whether it has been
agreed upon under the form of a single contract or
 “Loss or Damage” as applied to the COGSA of a series of contracts, and it shall not lose its
contemplates a situation where no delivery at all was international character merely because one contract
made by the shipper of the goods because the same or a series of contracts is to be performed entirely
had perished, gone out of commerce, or disappeared within a territory subject to the sovereignty,
in such a way that their existence is unknown or they suzerainty, mandate, or authority of the same High
cannot be recovered. Thus, it is inapplicable in case Contracting Party. (Art. 1 Sec.3)
of misdelivery or conversion. (Ang vs. American
Steamship Agencies Inc.) and damage arising from WHEN INAPPLICABLE
delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). 1. When public policy is contradicted;
In such instance the, Civil Code rules on prescription 2. If the requirements under the Convention
shall apply. are not complied with.
 The one-year prescriptive period is suspended by: IMPORTANT CONCEPTS:

1. The express agreement of the parties 1. Transportation documents
(Universal Shipping Lines, Inc. vs. IAC, 188 a. Passenger ticket
SCRA 170) b. Baggage check
2. The filing of an action in court until it is c. Air way bill
dismissed. (Stevens & Co. vs. 2. Liability of the carrier for damages
Nordeutscher Lloyd, 6 SCRA 180) a. Death or injury to passengers
b. Loss or damage to baggage or goods
 The one-year period shall run from delivery of the c. Delay
last package and is not suspended by extrajudicial 3. Successive carrier agreement
demand. (Dole Phils.,Inc. vs. Maritime Co.,148 SCRA 4. Jurisdiction
118) 5. Combined transportation agreement
 The one-year period shall run from delivery to the PASSENGER BAGGAGE AIR
arrastre operator and not to the consignee. (Union TICKET CHECK WAYBILL
Carbide Phils, Inc. vs. Manila Railroad Co.,SCRA 359) Passenger Checked-in Goods to be
baggage shipped
 The insurer exercising its right of subrogation is
bound by the one-year prescriptive period. However, LIABILITY OF CARRIER FOR DAMAGES
it does not apply to the claim against the insurer for 1. Death or injury of a passenger if the accident
the insurance proceeds. (Fil. Merchants Ins. Co. vs. causing it took place on board the aircraft or in the
Alejandro; Mayer Steel Pipe Corp. vs. CA) course of its operations of embarking or
disembarking; (Art. 17)
IV. WARSAW CONVENTION OF 1929 (WC) 2. Destruction, loss or damage to any baggage or
goods, if it took place during the “transportation by
PURPOSE: To protect the emerging air air”; (Art. 18) and
transportation industry and to secure the uniformity  Transportation by air – The period during which
of recovery by the passengers. the baggage or goods are in the charge of the carrier,
APPLICABILITY whether in an airport or on board an aircraft, or, in
 The transportation must be: case of a landing outside an airport, in any place
1. International transportation; whatsoever.

Laws);
It includes any transportation by land or water ACTION FOR DAMAGES

outside an airport if such takes place in the 1. Notice of claim
performance of a contract for transportation by air,  A written complaint must me made within:
for the purpose of loading, delivery, or a. 3 days from receipt of baggage
transshipment. b. 7 days from receipt of goods
3. Delay in the transportation of passengers, baggage c. In case of delay, 14 days from receipt of
or goods. (Art. 19) baggage/goods
 The complaint is a condition precedent. Without
Note: The Hague Protocol amended the WC by the complaint, the action is barred except in case of
removing the provision that if the airline took all fraud on the part of the carrier. (Art. 26)
necessary steps to avoid the damage, it could
exculpate itself completely (Art. 20(1)). (Alitalia vs. 2. Prescriptive period
IAC, 192 SCRA 9)  Action must be filed within 2 years from:
a. date of arrival at the destination
LIMIT OF LIABILITY (Art. 22, as amended by b. date of expected arrival
Guatemala Protocol, 1971; Alitalia vs. IAC) c. date on which the transportation stopped.
1. Passengers (Art. 29)
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit  In United Airlines vs. Uy the two-year prescriptive
period was not applied where the airline employed
delaying tactics.
2. Checked-in baggage RULE IN CASE OF VARIOUS SUCCESSIVE

GENERAL RULE: $20 per kilogram CARRIERS
EXCEPTION: In case of special declaration of value 1. Carriage of passengers
and payment of a supplementary sum by consignor, GENERAL RULE: Action is filed only against the
carrier is liable to not more than the declared sum carrier in which the accident or delay occurred.
unless it proves the sum is greater than actual value. EXCEPTION: Agreement or contract whereby the
3. Hand-carried baggage first carrier assumed liability for the whole journey.
 $1000/passenger 2. Carriage of baggage or goods
4. Goods to be shipped a. Passenger or consignor can file an action
GENERAL RULE: $20 per kilogram against the first carrier and the carrier in
EXCEPTION: In case of special declaration of value which the damage occurred
and payment of a supplementary sum by consignor, b. Passenger or consignee can file an action
carrier is liable to not more than the declared sum against the last carrier and the carrier in
unless it proves the sum is greater than actual value. which the damage occurred.
 These carriers are jointly and severally liable.
 An agreement relieving the carrier from liability or (Art. 30)
fixing a lower limit is null and void. (Art. 23)
 Carrier is not entitled to the foregoing limit if the  A contract of international carriage by air, although
damage is caused by willful misconduct or default on performed by different carriers under a series of
its part. (Art. 25) airline tickets constitutes a single operation. Members
of the International Air Transportation Association
 Thus, the WC does not operate as an exclusive (IATA) are under a general pool partnership
enumeration of the instances of an absolute limit of agreement wherein they act as agent of each other
the extent of liability. It does not preclude the in the issuance of tickets to contracted passengers to
application of the Civil Code and other pertinent local boost ticket sales worldwide and at the same time
laws. It does not regulate or exclude liability for other provide passengers easy access to airlines which are
breaches of contract by the carrier, or misconduct of otherwise inaccessible in some parts of the world.
its employees, or for some particular or exceptional (American Airlines vs. CA)
type of damage. (Alitalia vs. CA)
 Under a general pool partnership agreement, the
 In PanAm v. IAC, the WC was applied as regards ticket-issuing airline is the principal in a contract of
the limitation on the carrier’s liability, there being a carriage while the endorsee-airline is the agent. The
simple loss of baggage without any improper conduct obligation of the former remained and did not cease
on the part of the officials or employees of the airline even when the breach occurred not on its own flight
or other special injury sustained by the passenger. but on that of another airline which had undertaken
to carry the passengers to one of their destinations.
 In KLM Royal v. Tuller, the WC has invariably been (China Airlines vs. Chiok)
held inapplicable, or as not restrictive of the carrier’s
liability, where there was satisfactory evidence of JURISDICTION
malice or bad faith attributable to its officers and  At the option of the plaintiff, the action for
employees. (Alitalia vs. IAC) damages may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of business;

Laws);
c. Court where it has a place of business  If it is clear that the intention to return is slight,
through which the contract has been made; the salvage which was done thereafter is considered
or valid. (Notes and Cases on the Law on Transportation
d. Court of the place of destination. (Art. and Public Utilities, Aquino, T. & Hernando, R.P. 2004
28(1)) ed. p. 616)
NOTE: It is the passenger’s “ultimate destination”
not “an agreed stopping place” that determines the CONTRACT OF TOWAGE
country where suit is to be filed.  A contract whereby one vessel, usually motorized,
 The forum of action provided in Art. 28(1) is a pulls another, whether loaded or not with
matter of jurisdiction rather than of venue. (Santos merchandise, from one place to another, for a
III vs. Northwest; 2A C.J.S.) compensation. It is a contract for services rather
than a contract of carriage.
V. SALVAGE LAW (Act No. 2616)
SALVAGE SALVAGE TOWAGE

 Two concepts:
Governed by special Governed by Civil Code
1. Services one person renders to the owner of a
law (Act No. 2616) on contract of lease
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 Requires success, Success is not required
at sea, or are unable to protect or secure. otherwise no payment
2. Compensation allowed to persons by whose
voluntary assistance a ship at sea or her cargo or Must be done with the Only the consent of the
both have been saved in whole or in part from consent of the tugboat owner is
impending sea peril, or such property recovered from captain/crewmen needed
actual peril or loss, as in cases of shipwreck, derelict Vessel must be Vessel need not be
or recapture. involved in an accident involved in an accident
 Requisites:
1. Valid object of salvage;
2. Object must have been exposed to marine Fees distributed Fees belong to the
peril (not perils of the ship); among crewmen tugboat owner
3. Services rendered voluntarily (neither an
existing duty nor out of a pre-existing RULES ON SALVAGE REWARD
contract); 1. The reward is fixed by the RTC judge in the
4. Services are successful, total or partial. absence of agreement or where the latter is
 Subjects of Salvage: excessive. (Sec. 9)
1. Ship itself; 2. The reward should constitute a sufficient
2. Jetsam – goods which are cast into the sea, and compensation for the outlay and effort of the
there sink and remain under water; salvors and should be liberal enough to offer an
3. Floatsam or Flotsam – goods which float upon the inducement to others to render services in
sea when cast overboard; similar emergencies in the future.
4. Ligan or Lagan – goods cast into the sea tied to a 3. If sold (no claim being made within 3 months
buoy, so that they may be found again by the owners from publication), the proceeds, after deducting
(p.173, Judge Diaz). expenses and the salvage claim, shall go to the
 Persons who have no right to a reward for owner; if the latter does not claim it within 3
salvage: years, 50% of the said proceeds shall go to the
1. Crew of the vessel saved; salvors, who shall divide it equitably, and the
2. Person who commenced Salvage in spite of other half to the government. (Secs. 11-12)
opposition of the Captain or his representative; 4. If a vessel is the salvor, the reward shall be
3. In accordance with Sec. 3 of the Salvage Law, a distributed as follows:
person who fails to deliver a salvaged vessel or cargo a. 50% to the shipowner;
to the Collector of Customs. b. 25% to the captain; and
 Derelict – a ship or her cargo which is abandoned

and deserted at sea by those who are in charge of it, c. 25% to the officers and crew in proportion
without any hope of recovering it, or without any to their salaries. (Sec. 13)
intention of returning to it.
 Taking passengers from a sinking ship, without
 The intention of those in charge must be rendering any service in rescuing the vessel, is not a
ascertained. If those in charge left with the intention salvage service, being a duty of humanity and not for
of returning, or of procuring assistance, the property reward.
is not derelict, but if they quitted the property with
the intention of finally leaving it, it is derelict and a VI. PUBLIC SERVICE ACT
change of their intention and an attempt to return (C.A. No. 146)
will not change its nature (Erlanger & Galinger vs.
Swedish East Asiatic Co. Ltd.). PURPOSES:
1. To secure adequate, sustained service for

Laws);
the public at the least possible cost; An authorization An authorization

2. To protect the public against unreasonable issued by the issued by the
charges and poor, inefficient service; appropriate appropriate
3. To protect and secure investments in government agency for government agency for
public services; the operation of public the operation of public
4. To prevent ruinous competition. services for which no service for which a
franchise, either prior franchise is
AUTHORITY TO OPERATE PUBLIC SERVICES municipal or legislative, required by law; e.g.
GENERAL RULE: No public service shall operate is required by law, e.g., telephone and other
without having been issued a certificate of public common carriers. services.
convenience or a certificate of public convenience
and necessity.
EXCEPTIONS:
1. Warehouses;
2. Animal drawn vehicles and bancas moved  A CPC or a CPCN constitutes neither a franchise
by oar or sail; nor a contract, confers no property right, and is a
3. Airships, except for the fixing of maximum mere license or a privilege. The holder of said
rates for fare and freight; certificate does not acquire a property right in the
4. Radio companies, except for rates fixing; route covered thereby. Nor does it confer upon the
5. Public services owned or operated by the holder any proprietary right or interest or franchise in
government, except as to rates fixing; the public highways. Revocation of this certificate
6. Ice plants; and deprives him of no vested right. New and additional
7. Public markets. burdens, alteration of the certificate, or even
revocation or annulment thereof is reserved to the
PUBLIC SERVICE State. (Luque vs. Villegas, 30 SCRA 408)
 A person who owns, operates, manages or
controls in the Philippines for hire or compensation,  It is a “property” and has a considerable value and
with general or limited clientele, whether permanent, can be the subject of sale or attachment. (Cogeo-
occasional or accidental, and done for general Cubao Operators and Drivers Assn. vs. CA, 207 SCRA
business purposes, any common carrier or public 343, Raymundo vs. Luneta Motor Co.)
utility, ice plants, power and water supplies,
communication and similar public services. (Sec. 13b, REQUREMENTS FOR GRANTING CPC OR CPCN
CA 146) 1. Applicant must be a citizen of the Philippines or
 A casual or incidental service devoid of public a corporation or entity 60% of the capital of
character and interest is not brought within the which is owned by such citizens;
category. The question depends on such factors as 2. Applicant must prove public necessity;
the extent of services, whether such person or 3. Applicant must prove that the operation of the
company has held himself or itself out as ready to public service proposed and the authorization to
serve the public or a portion of the public generally. do business will promote the public interest on
(Luzon Stevedoring vs. PSC) a proper and suitable manner;
4. Applicant must have sufficient financial
NOTE: The Public Service Commission created under capability to undertake the proposed services
the Public Service Law has already been abolished and meeting the responsibilities incident to its
under P.D. No. 1 and other issuances. It has been operation.
replaced by the following government agencies: LTO;
LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
MIA. POWERS POWERS
REQUIRING PRIOR EXERCISABLE
NOTICE AND WITHOUT PRIOR
CERTIFICATE OF CERTIFICATE OF HEARING NOTICE AND
PUBLIC PUBLIC HEARING
CONVENIENCE CONVENIENCE AND
(CPC) NECESSITY (CPCN) 1. Issuance of CPC 1. Investigation any
or CPCN; matter concerning
2. Fixing of rates, public service;
tolls, and charges; 2. Requiring
3. Setting up of operators to furnish
standards and safe, adequate, and
classifications; proper service;
4. Establishment of 3. Requiring public
rules to secure services to pay
accuracy of all meters expenses of
and all measuring investigation;
appliances; 4. Valuation of
5. Issuance of properties of public
orders requiring utilities;
establishment or

Laws);
maintenance of 5. Examination and  It subordinates the prior applicant rule which gives
extension of facilities; test of measuring the first applicant priority only if things and
6. Revocation, or appliances; circumstances are equal.
modification of CPC or 6. Grant of special
CPCN; permits to make extra  Where the operator either fails or neglects to make
7. Suspension of CPC or special trips in the improvement or effect the increase in services,
or CPCN, except when territories specified in especially when given the opportunity, new operators
it is necessary to avoid the certificate; should be given the chance to give the services
serious and 7. Uniform needed by the public.
irreparable damage or accounting system and
inconvenience to the furnishing of annual PRIOR APPLICANT RULE
public or private reports;  Presupposes a situation when two interested
interest, in which 8. Compelling persons apply for a certificate to operate a public
case, a suspension not compliance with the utility in the same community over which no person
more than 30 days laws and regulations. has as yet granted any certificate. If it turns out, after
may be ordered, prior the hearing, that the circumstances between the two
to the hearing. applicants are more or less equal, then the applicant
(Soriano v. Medina, who applied ahead of the other, will be granted the
164 SCRA 36) certificate.
UNLAWFUL ACTS OF PUBLIC UTILITY RATE-FIXING POWER

COMPANIES  The rate to be fixed must be just, founded upon
1. Engagement in public service business without conditions which are fair and reasonable to both the
first securing the proper certificate; owner and the public.
2. Providing or maintaining unsafe, improper or  A rate is just and reasonable if it conforms to the
inadequate service as determined by the proper following requirements:
authority; 1. One which yields to the carrier a fair return
3. Committing any act of unreasonable and unjust upon the value of the property employed
preferential treatment to any particular person, in performing the service; and
corporation or entity as determined by the 2. One which is fair to the public for the
proper authority; service rendered.
4. Refusing or neglecting to carry public mail upon
request. (Secs. 18 and 19) REGISTERED OWNER RULE
 The registered owner of a certificate of public
ACTS REQUIRING PRIOR APPROVAL convenience is liable to the public for the injuries or
1. Establish and maintain individual or joint rates; damages suffered by third persons caused by the
2. Establish and operate new units; operation of said vehicle, even though the same had
3. Issue free tickets; been transferred to a third person.
4. Issue any stock or stock certificates  The registered owner is not allowed to escape
representing an increase of capital; responsibility by proving that a third person is the
5. Capitalize any franchise in excess of the amount actual and real owner Reason: It would be easy for
actually paid to the Government; him, by collusion with others or otherwise, to transfer
6. Sell, alienate, mortgage or lease property, the responsibility to an indefinite person, or to one
certificates or franchise. who possesses no property with which to respond
financially for the damage or injury done. (Erezo, et
 Under Sec. 20(g) of C.A. No. 146, the sale, etc. al. vs. Jepte 102 Phil 103).
may be negotiated and completed before the
approval by the proper authority. Its approval is not KABIT SYSTEM
a condition precedent to the validity of the contract.  A system whereby a person who has been granted
The approval is necessary only to protect public a certificate of public convenience allows other
interest. persons who own motor vehicles to operate under
such license, for a fee or percentage of such
PRIOR OPERATOR/OLD OPERATOR RULE earnings. It is void and inexistent under Art. 1409,
 The rule allowing an existing franchised operator Civil Code.
to invoke a preferential right within the authorized  Effects:
territory as long as he renders satisfactory and 1. The transfer, sale, lease or assignment of the
economical service. privilege granted is valid between the
 The policy is not to issue a certificate to a second contracting parties but not upon the public or
operator to cover the same field and in competition third persons. (Gelisan vs. Alday, 154 SCRA 388)
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.

Laws);
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)

Laws);

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San Beda College of Law 54

MEMORY AID IN COMMERCIAL LAW

CONTRACT OF TRANSPORTATION/ CARRIAGE Agency, 23 SCRA 24)

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

country to Philippines) 1. CASO FORTUITO/FORCE MAJEURE

COVERAGE 4. CHARACTER OF THE GOODS OR DEFECTS IN THE

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

Art.1735 Civil Code Art.1755 Civil Code

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

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

d. The character of the goods or defects

 The diligence required in the carriage of the goods

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

Insurance Company of North America, 12 SCRA 213) port.

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

delivery. (ART. 358 Code Clause

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

persons (Art. 587); Shipowner (proprietario)

RIGHT OF ABANDONMENT Ship agent (naviero)

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

vessel pro hac vice, just for that one particular

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

4. To substitute 4. To wait if the TRANSSHIPMENT OF GOODS

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

1. The insurable interest of the owner of a

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

Liability “abandoned” within the meaning of civil law so as to

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

employees is unavailing in case of a maritime tort public interest.

SHIPWRECK Note: In order to attribute to the carrier any damage

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

shipper. This is deemed incorporated in the bill of 2. Air transportation; and

NOTICE OF DAMAGE (SEC. 3(6))  International transportation - any transportation in

 The one-year prescriptive period is suspended by: IMPORTANT CONCEPTS:

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

It includes any transportation by land or water ACTION FOR DAMAGES

2. Checked-in baggage RULE IN CASE OF VARIOUS SUCCESSIVE

COMMERCIAL LAW COMMITTEE