TRANSPORTATION LAWS

Atty. J.P. Leo Fuentes Asong

Transportation is simply defined as a movement
of things or persons from one place to
another; a carrying across; and it is immaterial
whether the carrying be by rail, by water, or
by air. (87 C.J.S Transportation)
Transportation includes waiting time, loading
and unloading, stopping in transit, and all
other accessorial services in connection with
the loaded movement. (87 C.J.S
Transportation)
Public utility is a business or service which is
engaged in regularly supplying the public with
some commodity or service of public
consequences, such as electricity, gas, water,
transportation, or telephone or telegraph
service. (64 Am Jur 2d)
The basis for the State to regulate public
utilities, including those engaged in
transportation, is POLICE POWER. It is
expressly provided for under Sections 11, 17,
18 and 19 of the 1987 Constitution.
Section 11. No franchise, certificate, or any
other form of authorization for the operation
of a public utility shall be granted except to
citizens of the Philippines or to corporations
or associations organized under the laws of
the Philippines at least sixty per centum of
whose capital is owned by such citizens, nor
shall such franchise, certificate or
authorization be exclusive in character for a
longer period than fifty years.
Neither shall any franchise or right to be granted
except under the condition that it shall be subject
to amendment, alteration, or repeal by Congress
when the common good requires. The State shall
encourage equity participation in public utilities
by the general public. The participation of foreign
investors in the governing body of any public
utility enterprise shall be limited to their
proportionate share in its capital, and all
executive and managing officers of such
corporation or association must be citizen of the
Philippines.
Section 17. In times of national emergency,
when the public interest so requires, the State
may, during the emergency and under
reasonable terms prescribed by it, temporarily
take over or direct the operation of any
privately owned public utility or business
affected with public interest.
Section 18. The State may, in the interest of
national welfare or defense, establish and
operate vital industries and, upon payment of just
compensation, transfer to public ownership
utilities and other private enterprises to be
operated by the government.

Section 19. The State shall regulate or prohibit

monopolies when the public interest so requires.
No combinations in restraint of trade or unfair
competition shall be allowed.
 Contract of Transportation
... when a person obligates himself to transport
persons or property from one place to
another for a consideration.
 Parties
 Carriage of Passengers
1. Common carrier
2. Passenger

 Carriage of Goods
1. Shipper
2. Carrier
3. Consignee? (may be the shipper himself or a
third person)
 Perfection
 Carriage of Passengers

a) Contract to carry – (agreement to carry at some future

time) perfected by mere consent
b) Contract of carriage or of common carriage – real
contract

 Carriage of Goods
1. Contract to carry
2. Contract of carriage
The presence of a ticket or a bill of lading or any
written contract is NOT necessary for the
perfection of the contract.
A CARRIER is a person or corporation
who undertakes to transport or convey
goods or persons from one place to
another, gratuitously or for hire. It is
classified either as a private/special carrier
or as a common/public carrier. [SPOUSES
PEREÑA vs. SPOUSES ZARATE, G.R.
No. 157917, August 29, 2012]
 A PRIVATE CARRIER is one who,
• without making the activity a vocation,
• or without holding himself or itself out to
the public as ready to act for all who may
desire his or its services,
• undertakes, by special agreement in a
particular instance only, to transport goods
or persons from one place to another
either gratuitously or for hire.
The provisions on ordinary contracts of the Civil
Code govern the contract of private carriage.

The diligence required of a private carrier is only

ordinary, that is, the diligence of a good father
of the family.
 Common Carriers
• Article 1732. Common carriers are
persons, corporations, firms or associations
engaged in the business of carrying or transporting
passengers or goods or both,
by land, water, or air
for compensation,
offering their services to the public.

• The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline").
• Article 1732 also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis.
• Neither does Article 1732 distinguish between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. [PEDRO DE GUZMAN vs.
COURT OF APPEALS and ERNESTO CENDANA, G.R. No. L-47822, December 22, 1988]
At the outset, it is essential to establish whether
the contract of carriage as entered into as a
common carrier or as a private carrier, since
the resolution of this preliminary question
determines:
a) The law applicable to the case;
b) Standard of diligence required of the carrier;
c) Burden of proof applicable to the case.
(National Steel Corp v. CA, 283 CRA 45)
As all the foregoing indicate, the true test for a
common carrier is not the quantity or extent
of the business actually transacted, or the
number and character of the conveyances
used in the activity, but whether the
undertaking is a part of the activity engaged
in by the carrier that he has held out to the
general public as his business or occupation.
The true test of a common carrier is the carriage
of goods or passengers, provided it has space
for all who opt to avail of it transportation for
a fee. [National Steel Corp vs. CA, December
29, 1998]
 Common Carrier Private Carrier

Availability Holds himself out in Agrees in some special

common, that is, to all case with some private
persons who choose to individual to carry for hire
employ him, as ready to
carry for hire
Binding effect Bound to carry all who Not bound to carry for
offer and tender any reason, such goods
reasonable compensation as it is accustomed to
for carrying them carry, unless it enters into
a special agreement to
do so
Diligence required Extraordinary Ordinary

Governing Law Principally, NCC on Obligations and contracts

common carriers
Regulation A public service and is Not subject to regulation
therefore subject to as a common carrier
regulation
Article 1733. Common carriers, from the nature of
their business and for reasons of public policy, are
bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the
passengers transported by them, according to all
the circumstances of each case.
Such extraordinary diligence in the vigilance over
the goods is further expressed in articles 1734,
1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the
passengers is further set forth in articles 1755
and 1756.
The hazards of modern transportation demand
an extraordinary diligence (Report of the Code
Commission, 66-67).
When the Court speaks of extraordinary
diligence, it is that extreme measure of care
and caution which persons of unusual
prudence and circumspection observe for
securing and preserving their own property or
rights.
This exacting standard imposed on common
carriers in a contract of carriage of goods is
intended to tilt the scales in favor of the
shipper who is at the mercy of the common
carrier once the goods have been lodged for
shipment.
 SUBSECTION 2. Vigilance Over Goods

Article 1734. Common carriers are responsible for the

loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes
only:

(1) Flood, storm, earthquake, lightning, or other natural

disaster or calamity;
(2) Act of the public enemy in war, whether international
or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing
or in the containers;
(5) Order or act of competent public authority.
In the instances enumerated in the article, the
common carrier is not responsible [exempting
causes].
However, if there be fault on the part of the
carrier, it will be liable.
It is important to point out that the above list of
causes of loss, destruction or deterioration
which exempt the common carrier for
responsibility therefor, is a closed list. Causes
falling outside the foregoing list, even if they
appear to constitute a species of force
majeure fall within the scope of Article 1735.
(De Guzman vs. CA, 1993)
Concept of “public enemy”

This refers to the government with which the country of the

carrier is at war [not country of shipper/ owner of goods]; also
to pirates, who are enemies of all mankind.

When the parties in rebellion occupy and hold in hostile manner

a certain portion of territory, when they have declared their
independence, cast off their allegiance, and have in the field a
regularly organized force in armed hostility to the
government, and the authority of the latter is overthrown,
such an uprising may take on the dignity of a civil war, and
when so magnified and matured, the parties are belligerents .
“Act or omission”

This may be wilful or negligent.

Note: Contributory negligence of shipper is not a

defense but will only mitigate (equitable
reduction) liability. [cf Art. 1741]
“Order or act of competent public authority”

This may refer to destruction or seizure

because the goods may be prohibited goods
or dangerous to life and property or infected
with disease.

Defense not available if:

1. Public authority has no authority to issue the
subject order;
2. He exceeded his authority
 Fortuitous Event – Requisites
1. The cause of the unforeseen and unexpected occurrence, or
of the failure of the debtor to comply with his obligation,
must be independent of the human will.
2. It must be impossible to foresee the event that constitutes
caso fortuito, or if it can be foreseen, it must be impossible
to avoid.
3. The occurrence must be such as to render it impossible for
the debtor to fulfill his obligation in a normal manner.
4. The obligor (debtor) must be free from any participation in
or the aggravation of the injury resulting to the creditor. [see
Art. 1174, NCC; Yobido vs. CA, 1997]
To fully free a common carrier from any liability,
the fortuitous event must have been
the proximate and only cause of the loss. And
it should have exercised due diligence to
prevent or minimize the loss before, during
and after the occurrence of the fortuitous
event. [Cruz vs. Sun Holidays, 2010]
 Exceptions
1. Express stipulation
2. Obligor in delay (Art. 1165)
3. When the obligor has promised the same thing to 2 or
more persons who do not have the same interest (Art.
1165)
4. When the possessor is in bad faith and the thing is lost
or deteriorated (Art. 552)
5. When the obligor contributed to the loss
6. Delivery of a generic thing
7. Obligor is guilty of fraud, negligence or delay or he
contravened the tenor of the obligation
Note: The defense of fortuitous event or natural
disaster cannot be successfully made when
the injury could have been avoided by human
precaution. (Central vs. Insurance, 2004)
Mechanical defects and tire-blowouts are NOT
fortuitous events. [Necesito vs. Paras, 1958;
Yobido vs. CA, 1997]
 Fire

Fire is not considered a natural disaster or

calamity. [Eastern vs. IAC, 1987]
 Storm
As per PAGASA, a storm is described as having a
wind force of 48 to 55 knots or 55 to 63 miles
per hour.

Strong monsoon winds are not a storm within

the contemplation of Art. 1734 (1). Monsoon
wind is not an unusual occurrence and is
normal and foreseeable condition while
navigating in the sea. [Central Shipping vs.
Insurance, 2004]
The theft or robbery of goods is not
considered a fortuitous event or force
majeure. BUT a robbery attended by
“grave or irresistible threat, violence or
force” is a fortuitous event. [Torres-Madrid
Brokerage vs. FEB Mitsui, 2016]
Article 1735. In all cases other than those
mentioned in Nos. 1, 2, 3, 4, and 5 of the
preceding article [1734] , if the goods are lost,
destroyed or deteriorated, common carriers
are presumed to have been at fault or to have
acted negligently, unless they prove that they
observed extraordinary diligence as required
in article 1733. [cf Art. 1756]
 Test of Negligence
The test by which to determine the existence of
negligence in a particular case may be stated
as follows: Did the defendant in doing the
alleged negligent act use that reasonable care
and caution which an ordinarily prudent
person would have used in the same
situation? If not, then he is guilty of
negligence. [Picart vs. Smith]
 Presumption of Negligence
The court need not make an express finding of
fault or negligence, the law imposes
liability upon common carriers:
1. There exist a contract between the
passenger or shipper and common
carrier;
2. That the loss, deterioration, injury or
death took place during the existence of
a contract.
BUT there is no presumption of bad faith – it
should be established by clear and
convincing evidence.
Article 1736. The extraordinary responsibility of
the common carrier lasts from the time the
goods are unconditionally placed in the
possession of, and received by the carrier for
transportation until the same are delivered,
actually or constructively, by the carrier to
the consignee, or to the person who has a
right to receive them, without prejudice to the
provisions of Article 1738.
There is constructive tradition when the
delivery of the thing is not actual but
representative or symbolic in essence.
a) Tradicion symbolica
b) Tradicion instrumental
c) Tradicion longa manu
d) Tradicion brevi manu
e) Constitutum possesorium
Article 1737. The common carrier's duty to
observe extraordinary diligence over the
goods remains in full force and effect even
when they are temporarily unloaded or
stored in transit, unless the shipper or owner
has made use of the right of stoppage in
transitu.
Note that liability exists even if the goods are:

a.) temporarily unloaded, or

b.) stored in transit.

This means that the goods have not yet been

delivered to consignee and that the voyage
will resume.

Exception: right of stoppage in transitu (Art.

1530-1532)
The right of stoppage in transitu is the right of
an unpaid seller to resume possession of the
goods at any time while the goods are in
transit, and he will then become entitled to
the same rights in regard to the goods as he
would have had if he had never parted with
the possession.
How the right of stoppage in transitu may
be exercised:

a.) obtaining actual possession

b.) giving notice of the claim

To whom notice is given

a.) to the person in actual possession of the

goods;
B.) or to his principal
Effects of the exercise of the right

a.) the goods are no longer in transitu

b.) the contract of carriage ends; instead, the
carrier now becomes a mere bailee, and will
be liable as such.
c.) the carrier should not deliver anymore to the
buyer or to the latter’s agent; otherwise, he
will be liable for damages
d.) the carrier must redeliver to or according to
the directions of the seller.
Article 1738. The extraordinary liability of the
common carrier continues to be operative
even during the time the goods are stored in a
warehouse of the carrier at the place of
destination, until the consignee has been
advised of the arrival of the goods and has
had reasonable opportunity thereafter to
remove them or otherwise dispose of them.
Here, for the extraordinary liability to continue,
the right of stoppage in transitu must not have
been exercised.
Article 1739. In order that the common carrier may
be exempted from responsibility, the natural
disaster must have been the proximate and only
cause of the loss. However, the common carrier
must exercise due diligence to prevent or
minimize loss before, during and after the
occurrence of flood, storm or other natural
disaster in order that the common carrier may be
exempted from liability for the loss, destruction,
or deterioration of the goods. The same duty is
incumbent upon the common carrier in case of
an act of the public enemy referred to in article
1734, No. 2.
Even in cases where a natural disaster is the
proximate and only cause, a common carrier is
still required to exercise due diligence to
prevent, minimize loss before, during, and
after the occurrence of the natural disaster,
for it to be exempt from liability.
If a common carrier fails to exercise due
diligence – or that ordinary care which the
circumstances of the particular case demand –
to preserve and protect goods carried by it on
the occasion of a natural disaster, it will be
deemed to have been NEGLIGENT, and the
loss will NOT be considered as having been
due to natural disaster under Art. 1734 (1).
[Philam Gen vs. Gaerlan, 2002]
 Arada vs. CA
210 SCRA 624
July 1, 1992

Held: Babao knew of the impending typhoon on March 24, 1982 when
the Philippine Coast Guard denied him the issuance of a clearance
to sail. Less than 24 hours, having elapsed, a clearance was finally
issued on March 25, 1982.
Records show that Babao did not ascertain where the typhoon was
headed by the use of his vessel’s barometer and radio. Neither did
he monitor and record the weather conditions everyday as required
by Art. 612 of the Code of Commerce. Had he done so, he could
have anticipated the strong winds and big waves and taken shelter.
Furthermore, the crew did of M/L Maya did not have the qualifications
provided for in P.D. No. 97, all of whom were unlicensed.
Therefore, Arada is liable to SMC for the cargoes lost.
Article 1740. If the common carrier negligently
incurs in delay in transporting the goods, a
natural disaster shall not free such carrier
from responsibility.
If the natural disaster occurs when the carrier is
already in default (due to negligence), the
carrier can still be held liable.
If delay is inexcusable, the following are the
consequences:

1. Carrier is liable even if natural disaster

caused damage;
2. Stipulation limiting liability is inoperative;
3. Carrier is liable for delay;
4. Right to abandon under Art. 371 CC
[consignee may leave goods in hands of
carrier, advising him thereof in writing]
Article 1741. If the shipper or owner merely
contributed to the loss, destruction or
deterioration of the goods, the proximate
cause thereof being the negligence of the
common carrier, the latter shall be liable in
damages, which however, shall be equitably
reduced.
The contributory fault of the shipper or owner
reduces the carrier’ s liability but the carrier’s
negligence must be the proximate cause.
 Compania Maritima vs. CA
164 SCRA 685
August 29, 1988
Vicente Concepcion shipped his construction
equipment consisting of 1 unit payloader, 4 units of
6x6 Reo trucks and 2 pieces of water tanks to
CDO aboard M/V Cebu of Compania Maritima.
While unloading, the swivel pin of the heel block of
the port block of Hatch No. 2. The payloader fell
and was damaged.
Issue: Whether or not the act of Concepcion in
furnishing CM with an inaccurate weight of 2.5
tons instead of the payloader’s actual weight (7.5
tons) was the proximate and only cause of the
damage as would absolutely exempt petitioner
from liability for damages.
Held: While the act of Concepcion in furnishing
petitioner with an inaccurate weight of the
payloader cannot successfully be used as an
excuse by petitioner to avoid liability for
damages thus caused, said act constitutes a
contributory circumstance to the damage
caused on the payloader, which mitigates the
liability for damages of petitioner in
accordance with Art. 1741 of the Civil Code.
Article 1742. Even if the loss, destruction, or
deterioration of the goods should be caused
by the character of the goods, or the faulty
nature of the packing or of the containers, the
common carrier must exercise due diligence to
forestall or lessen the loss. [cf Art. 1734 (4)]
1742 stresses the duty of the carrier to prevent
or minimize the loss, even if it was not at fault.

Note: If the fact of improper packing is known to

the carrier or apparent upon ordinary
observation but it accepts the goods
notwithstanding such condition, the common
carrier is not relieved of liability. [Calvo vs. CA,
2002]
Article 1743. If through the order of public
authority the goods are seized or destroyed,
the common carrier is not responsible,
provided said public authority had power to
issue the order.
The public authority must have had the power,
not merely apparent power.

The defense is not available if:

1. The public authority has no authority to issue
the subject order
2. If the public authority exceeded his authority.
 Ganzon vs CA
May 30, 1988

Facts: Tumambing contracted the services of Ganzon to

haul 305 tons of scrap iron from Mariveles to Manila.
Ganzon then sent his lighter to Mariveles. On
December 1, 1956 Tumambing delivered the scrap
iron to Niza, captain of the lighter, for loading. When
about half of the scrap iron was already loaded,
Mayor Advincula arrived and demanded P5,000 from
Tumambing. The latter resisted and after a heated
argument, Advincula drew his gun and fired at
Tumambing.
After sometime, the loading was resumed. But on
December 4, 1956, Acting Mayor Rub, ordered Niza to
dump the scrap iron.
Ganzon’s defense was that the loss of the scraps was due to
an “order or act of competent authority.”

Held: It must be shown that Acting Mayor Rub had the

power to issue the disputed order, or that it was lawful,
or that it was issued under legal process of authority.
Ganzon failed to establish this. The order given by the
acting mayor was part of the pressure applied by Mayor
Advincula to shakedown Tumambing. The order given of
the acting mayor did not constitute valid authority for
Ganzon to carry out. (See dissent, Melencio-Herrera)
Article 1744. A stipulation between the
common carrier and the shipper or owner
limiting the liability of the former for the loss,
destruction, or deterioration of the goods to a
degree less than extraordinary diligence shall
be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other
than the service rendered by the common
carrier; and
(3) Reasonable, just and not contrary to public
policy.
Note that the 3 requisites are necessary.

If the stipulation is ORAL, said stipulation is

VOID.

The diligence should not be less than ordinary.

No such stipulation reducing the degree
of diligence to be observed by the
carrier is allowed for carriage of
passengers.
Article 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction,
or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the
custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less
than that of a good father of a family, or of a man of ordinary
prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts or
omission of his or its employees;
(6) That the common carrier's liability for acts committed by thieves,
or of robbers who do not act with grave or irresistible threat,
violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction,
or deterioration of goods on account of the defective condition of
the car, vehicle, ship, airplane or other equipment used in the
contract of carriage.
The 7 stipulations are VOID.
Meaning of no. (1): It is unreasonable, unjust
and contrary to public policy to unreasonable,
unjust and contrary to public policy to
stipulate that the owner or shipper bears the
risk or loss in ALL cases.
Under Article 1745 (6) above, a common carrier
is held responsible — and will not be allowed
to divest or to diminish such responsibility —
even for acts of strangers like thieves or
robbers, except where such thieves or robbers
in fact acted "with grave or irresistible threat,
violence or force." We believe and so hold
that the limits of the duty of extraordinary
diligence in the vigilance over the goods
carried are reached where the goods are lost
as a result of a robbery which is attended by
"grave or irresistible threat, violence or
force.“ (De Guzman vs. CA, 1993)
Contra: There can be no stipulation lessening
the utmost diligence that is owed to
passengers. [Ar. 1757]
Article 1746. An agreement limiting the
common carrier's liability may be annulled by
the shipper or owner if the common carrier
refused to carry the goods unless the former
agreed to such stipulation.
The agreement here is only VOIDABLE.

Reason: When stipulation is vitiated by threat or

undue influence.
Article 1747. If the common carrier, without just
cause, delays the transportation of the goods
or changes the stipulated or usual route, the
contract limiting the common carrier's
liability cannot be availed of in case of the
loss, destruction, or deterioration of the
goods.
Limited liability, even if previously agreed upon,
cannot be availed of in case of:
1. Unjustified delay,
2. Or unjustified change of route.
Article 1748. An agreement limiting the
common carrier's liability for delay on account
of strikes or riots is valid.
Whether the strikes are legal or illegal is
immaterial.
Article 1749.* A stipulation that the common
carrier's liability is limited to the value of the
goods appearing in the bill of lading, unless
the shipper or owner declares a greater value,
is binding. [repealed Art. 372 Code of
Commerce; see COGSA, SEC. 4(5)]
Illustration:

If a shipper ships cargo worth P1,000 with X, Inc.

and cargo is completely damaged, generally,
the liability of X, Inc, will be P1, 000.
 Kinds of Stipulations
Limiting Liability
[Heacock v. Macondray,
42 Phil 205]
Exempting the common carrier VOID (against public policy)
from any and all liability for loss
or damage occasioned by its own
negligence
Providing for an unqualified VOID (against public policy)
limitation of such liability to an
agreed stipulation

Limiting the liability of the VALID

common carrier to an agreed
valuation unless the shipper
declares a higher value and pays a
higher rate of freight
Article 1750. A contract fixing the sum that may
be recovered by the owner or shipper for the
loss, destruction, or deterioration of the goods
is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely
agreed upon.
Article 1751. The fact that the common carrier
has no competitor along the line or route, or a
part thereof, to which the contract refers shall
be taken into consideration on the question of
whether or not a stipulation limiting the
common carrier's liability is reasonable, just
and in consonance with public policy.
Lack of competition may lead to undue
influence.
Article 1752. Even when there is an agreement
limiting the liability of the common carrier in
the vigilance over the goods, the common
carrier is disputably presumed to have been
negligent in case of their loss, destruction or
deterioration.
There is presumption of negligence even if there
is an agreement on limited liability.
 Purpose of Limiting Stipulations
Such stipulations oblige the shipper/consignee
to notify the common carrier of the amount
that the latter may be liable for in case of loss
of goods.
Article 1753. The law of the country to which
the goods are to be transported shall govern
the liability of the common carrier for their
loss, destruction or deterioration.
The law of the country of destination applies
even if the goods never reached the
destination
BUT it does not apply if the goods were never
transported.

If the country of destination is the Philippines, it

is the Philippine internal law on loss,
destruction or deterioration that must govern.
Article 1754. The provisions of articles 1733 to
1753 shall apply to the passenger's baggage
which is not in his personal custody or in that
of his employee [checked-in]. As to other
baggage [hand-carried], the rules in articles
1998 and 2000 to 2003 concerning the
responsibility of hotel-keepers shall be
applicable.
Rules as to baggage

a.) if in personal custody of the passenger or his

employees, the carrier has the same
responsibility as that of an innkeeper.
b.) if otherwise (as when it is in the baggage
compartment), the carrier’s responsibility is
that of a common carrier of goods.
With respect to hand-carried baggage, the
passenger is bound to:

1. Give notice to the common carrier or the

carrier’ s employees, of the effects brought
by the passenger; and
2. Take the precautions which the common
carrier or their substitutes advised relative to
the care and vigilance of their effects.
When hotel-keeper liable regardless of the amount of care exercised:

1. loss or injury is caused by his servants or employees as well as by strangers

(Art 2000) provided that:
a) notice has been given by the guest, and
b) proper precautions taken by the guest (Art 1998)
2. loss is caused by the act of a thief or robber done without the use of arms
or irresistible force (Art 2001)

When hotel-keeper not liable

1. loss or injury is caused by force majeure (Art 2000), theft or robbery by a

stranger (not by hotel-keeper‘s servant or employee) with the use of
arms or irresistible force (Art 2001), etc unless he is guilty of fault or
negligence in failing to provide against the loss or injury from his cause
2. 2. loss is due to the acts of the guests, his family, servants, or visitors (Art
2002)
3. 3. loss arises from the character of the things brought into the hotel (Art
2002)
Note: Art. 2003. The hotel-keeper [carrier]
cannot free himself from responsibility by
posting notices to the effect that he is not
liable for the articles brought by the guest
[passenger]. Any stipulation... whereby the
responsibility of the former as set forth in
Arts. 1998 to 2001 is suppressed or diminished
shall be void.
 SUBSECTION 3. Safety of Passengers

Article 1755. A common carrier is bound to

carry the passengers safely as far as human
care and foresight can provide, using the
utmost diligence of very cautious persons,
with a due regard for all the circumstances.
Utmost diligence, which is required of common
carriers, refers not only to the safety of the
passengers but also to that of the crew,
particularly the pilot. (PAL vs. CA, 1981)
To successfully fend off liability in an action
upon the death or injury to a passenger, the
common carrier must prove his or its
observance of that extraordinary diligence;
otherwise, the legal presumption that he or it
was at fault or acted negligently would stand.
No device, whether by stipulation, posting of
notices, statements on tickets, or otherwise,
may dispense with or lessen the responsibility
of the common carrier as defined under
Article 1755 of the Civil Code.
 Seaworthiness
For a vessel to seaworthy, it must be adequately
equipped for the voyage and manned with a
sufficient number of competent officers and
crew. The failure to maintain in a seaworthy
condition of the vessel is a clear breach of its
duty under Art. 1755.
Where the vessel is found unseaworthy, the ship
owner is also presumed to be negligent since
it is tasked with the maintenance of the ship.
[Aboitiz vs. New India, 2006]

Cargoworthiness means that the vessel must be

sufficiently strong and equipped to carry the
cargo that she has contracted to carry and her
cargo must be so loaded that it is safe for her
to proceed on her voyage.
Article 1756. In case of death of or
injuries to passengers, common
carriers are presumed to have been at
fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as
prescribed in articles 1733 and 1755.
To successfully fend off liability in an action
upon the death or injury to a passenger, the
common carrier must prove his or its
observance of that extraordinary diligence;
otherwise, the legal presumption that he or it
was at fault or acted negligently would stand.
[Perena vs. Nicolas, 2012]
 Railroad Crossing Cases
Every corporation constructing or operating a
railway shall make and construct at all points
where such railway crosses any public road, good,
sufficient, and safe crossings and erect at such
points, at a sufficient elevation from such road as
to admit a free passage of vehicles of every kind,
a sign with large and distinct letters placed
thereon, to give notice of the proximity of the
railway, and warn persons of necessity of looking
out for trains. [PNR vs. Brunty, 2006]
It is the responsibility of the railroad company to
use reasonable care to keep the signal devices
in working order. Failure to do so would be an
indication of negligence. [PNR vs. Vizcara,
2012]
Article 1757. The responsibility of a common
carrier for the safety of passengers as required
in articles 1733 and 1755 cannot be dispensed
with or lessened by stipulation, by the posting
of notices, by statements on tickets, or
otherwise.
Article 1758. When a passenger is carried
gratuitously, a stipulation limiting the
common carrier's liability for negligence is
valid, but not for wilful acts or gross
negligence.

The reduction of fare does not justify any

limitation of the common carrier's liability.
Even if the passenger is carried for free, he is still
a passenger, and, therefore, extraordinary
diligence would still be required.
Article 1759. Common carriers are liable for the
death of or injuries to passengers through the
negligence or wilful acts of the former's
employees, although such employees may have
acted beyond the scope of their authority or in
violation of the orders of the common carriers.

This liability of the common carriers does not cease

upon proof that they exercised all the diligence of
a good father of a family in the selection and
supervision of their employees.
A common carrier is liable even if employees:

1. acted beyond the scope of their authority or

2. in violation of the orders of the common
carrier
Article 1760. The common carrier's
responsibility prescribed in the preceding
article cannot be eliminated or limited by
stipulation, by the posting of notices, by
statements on the tickets or otherwise.
Article 1761. The passenger must observe the
diligence of a good father of a family to avoid
injury to himself.
Article 1762. The contributory negligence of the
passenger does not bar recovery of damages
for his death or injuries, if the proximate
cause thereof is the negligence of the
common carrier, but the amount of damages
shall be equitably reduced.
Contributory negligence is conduct on the part of the
injured party, contributing as legal cause to harm he
has suffered, which falls below the standard to which
he is required to conform for his own protection.
[Valenzuela vs. CA, 1996]

To hold a person as having contributed to his injuries, it

must be shown that he performed an act that brought
about his injuries in disregard of warning or signs of an
impending danger to health and body.

To prove contributory negligence, it is still necessary to

establish a causal link, although not proximate,
between the negligence of the party and succeeding
injury. [Anonuevo vs. CA, 2004]
If the contributory negligence of passenger is
the proximate cause of death or injury, no
recovery can be had.
Article 1763. A common carrier is responsible
for injuries suffered by a passenger on
account of the wilful acts or negligence of
other passengers or of strangers, if the
common carrier's employees through the
exercise of the diligence of a good father of a
family could have prevented or stopped the
act or omission.
 SUBSECTION 4. Common Provisions

Article 1764. Damages in cases comprised in this

Section shall be awarded in accordance with
Title XVIII of this Book, concerning Damages.
Article 2206 shall also apply to the death of a
passenger caused by the breach of contract
by a common carrier.
Article 1764 vis-à-vis Article 2206 of the Civil
Code holds the common carrier in breach of
its contract of carriage that results in the
death of a passenger liable to pay the
following:
(1) indemnity for death,
(2) indemnity for loss of earning capacity and
(3) moral damages.
Article 1766. In all matters not regulated by this
Code, the rights and obligations of common
carriers shall be governed by the Code of
Commerce and by special laws.
Causes of action arising from same act
X, Inc. – bus company
Y – bus driver, recklessly driving
Z – passenger injured

Z as injured passenger can avail of any 3 causes of

action:
1. Culpa contractual [driver not included as party;
no privity]
2. Culpa aquiliana
3. Culpa criminal [employer – subsidiary liability, if
employee is insolvent]
 CULPA CULPA CULPA
CONTRACTUAL AQUILIANA CRIMINAL
Negligence: Negligence: direct, Negligence: direct,
merely incidental to the substantitive, substantitive,
performance of an independent independent
obligation already
existing
Pre-existing obligation No No
pre-existing obligation pre-existing obligation
Preponderance of Preponderance of Guilt beyond reasonable
evidence evidence doubt
Defense of a good father Defense of a good father Not a proper defense
of a family in the of a family in the
selection and selection and
supervision of supervision of
employees: NOT a employees
defense
 Doctrine of Last Clear Chance
(Doctrine of Discovered Peril/ Supervening
Negligence/ Humanitarian Doctrine)

Even if the injured party was originally at fault

still if the person who finally caused the
accident had the “last clear opportunity” to
avoid striking him, he who could have
prevented the injury is still liable if he did not
take advantage of such opportunity or chance.
Where both parties are negligent but the
negligent act of one is appreciably later than
that of the other, or where it is impossible to
determine whose fault or negligence caused
the loss, the one who had the last clear
opportunity to avoid the loss.
Stated differently, the antecedent
negligence of plaintiff does not preclude
him from recovering damages caused by
the supervening negligence of defendant,
who had the last fair chance to prevent the
impending harm by the exercise of due
diligence. [PNR vs. Brunty, 2006]
The person cannot be applied against a
passenger. The rule applies in a suit between
the owners and drivers of colliding vehicles.
[Tiu vs. Arriesgado, 2004]
 Picart vs. Smith
37 Phil 809
A person driving an automobile on a bridge saw a man on
horseback riding towards him but on the wrong side of
the bridge. The driver sounded his horn several times;
the horse-rider made no move to go on the correct side;
the driver continued in his original direction until it was
too late to avoid collision. Is the auto-driver liable?

HELD: Yes, for although the horse-rider was originally at

fault, it was the auto-driver who had the last clear chance
to avoid the injury by merely swerving, while still some
distance away, to the other part of the bridge.
Article 1765. The Public Service Commission
may, on its own motion or on petition of any
interested party, after due hearing, cancel the
certificate of public convenience granted to
any common carrier that repeatedly fails to
comply with his or its duty to observe
extraordinary diligence as prescribed in this
Section.
 Public Service Act
 Public Utility

It is a business or service engaged in regularly supplying the

public with some commodity or service of public consequence
such as electricity, gas, water, transportation, telephone or
telegraph service.

Two tests for determining public utility:

1. Is it engaged in regularly supplying the public with some
commodity or service? [per definition in Albano v. Reyes]
2. If #1 is uncertain, is it a public service as defined in the Public
Service Law under CA 146 Sec. 13(b)?
If it falls under any one of the examples given under CA 146
Sec 13(b), then it is a public utility.
CA 146, Section 13(b). The term “public service” includes every
person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with
general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any
common carrier, railroad, street railway, traction railway, sub-
way motor vehicle, either for freight or passenger, or both with
or without fixed route and whether may be its classification,
freight or carrier service of any class, express service, steamboat
or steamship line, pontines, ferries, and water craft, engaged in
the transportation of passengers or freight or both, shipyard,
marine railways, marine repair shop, [warehouse] wharf or
dock, ice plant, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power water supply and power,
petroleum, sewerage system, wire or wireless communications
system, wire or wireless broadcasting stations and other similar
public services…
 Certificate of Public Convenience
A CPC is any authorization to operate a public service
issued by the pertinent government agency (DOTC,
NTC, LTFRB, etc) for the operation of public services for
which no franchise, either municipal or legislative, is
required by law (e.g. motor vehicles.)

It constitutes neither a franchise nor a contract; it does

not confer property rights, it is a mere license or
privilege. Such privilege is forfeited when the grantee
fails to comply with his commitments to serve the
public and public necessity.
However, these certificates represent property rights to the
extent that if the rights which any public utility is exercising
pursuant to the lawful orders of the PSC (now DOTC) have
been invaded by another public utility, in appropriate cases,
actions may be maintained by the complainant public
utility. [Cui vs. Cui (1934)]

Also, it is a ―property‖ and has a considerable value and can

be the subject of sale or attachment. [Cogeo-Cubao
Operators and Drivers Assn. v. CA, Raymundo v. Luneta
Motor Co.]

The revocation of this certificate deprives the grantee of no

vested right. New and additional burdens, alteration of the
certificate, or even revocation or annulment thereof is
reserved to the State. [Luque v. Villegas, 30 SCRA 408]
The regulating administrative bodies
have previously applied different
policies and rules in determining
who among a number of applicants is
entitled to a CPN.

1. Prior operator rule

2. Prior applicant rule
3. Third operator rule
4. Protection of investment rule
 Prior operator rule
The rule which prohibits the issuance of a license to a
subsequent operator for the same route in order to protect
the prior operator that already maintains an adequate service
and is able to meet the demands of the public.

The policy is not to issue a certificate to a second operator to

cover the same field and in competition with a first operator
who is rendering sufficient, adequate and satisfactory service.
If inadequate or deficient, the prior operator must first be
given an opportunity to improve its service.

Rationale: the preservation of public convenience and the

prevention of ruinous competition in order that the interests
of the public would be conserved and preserved.
 Ruinous competition exists when there is actual
ruin of the business of the operator; that the
existing operator will not gain enough profits
if another person is allowed to enter the
business; that which will result in the
deprivation of sufficient gain in respect of
reasonable return of investment, therefore the
oppositor, alleging this, must show that he will
be deprived of a reasonable return on his
investment.
 Mere possibility of reduction in the earnings of
the business or the deterioration in the income of
his business is not sufficient to prove ruinous
competition. It must be shown that the business
would not have sufficient gains to pay a fair rate
of interest on his capital investments [Manila
Electric Co. vs. Pasay Transportation Co; Ice &
Cold Storage Industries v. Valero]
 Exceptions to Prior Operator Rule
1. When the subsequent CPC or CPCN covers a new route,
even if it overlaps with the route of the prior operator;
2. Where the corporate existence of the prior operator has
expired;
3. When regularity is at issue – regular operators are
preferred over irregular operators.
4. When the CPC or CPCN already granted comprises a larger
territory than that applied for;
5. Where public interest would be better served by the new
operator;
6. When the application of the rule would be conducive to
monopoly.
 PRIOR APPLICANT RULE
The rule presupposes a situation where two
interested persons apply for a certificate to
operate a public utility in the same community
over which no person has as yet granted any
certificate.
If it turns out, after the hearing, that the
circumstances between the two applicants are
more or less equal, then the applicant who
applied ahead of the other, will be granted the
certificate. This rule is subordinated under the
Prior Operator Rule.
 Third Operator Rule
 It is a variation of the Prior Operator Rule.
 “Where 2 operators are more than serving
the public there is no reason to permit a third
operator to engage in competition with
them”
 PROTECTION OF INVESTMENT RULE
It means that one of the purposes of the Public
Service Act is to protect and conserve
investments which have already been made
for that purpose by public service operators.

It is the duty of government to protect said

operators from unfair, unjustified and ruinous
competition.
 Registered Owner Rule
The person who is the registered owner of a
vehicle is liable for any damage caused by the
negligent operation of the vehicle although
the same was already sold or conveyed to
another person at the time of the accident.
This rule is a matter of public interest. [see
Erezo vs. Jepte, 1957]
An oil tanker running along Del Monte Avenue in Quezon City hit
Loretta Baylon. Due to the strong impact she died. The oil tanker
was registered in the name of FEB Leasing and Finance Corporation.
It was being leased to BG Hauler, Inc. and was being driven by its
driver.
The Spouses Sergio Baylon and Maritess Baylon, the parents of Loretta
Baylon, sued FEB Leasing and Finance Corporation. It claimed that it
was exempt from liability under Republic Act No. 8556, because the
oil tanker was being operated by BG Hauler as financial lessee.

HELD: Under Section 5 of Republic Act No. 4136, all motor vehicles
being operated on any highway must be registered with the Land
Transportation Office. Any encumbrances of motor vehicles must be
recorded to be valid against third parties. Even if a motor vehicle
has been sold, leased, or transferred to another person at the time it
figured in an accident, the registered owner is still liable for
damages caused by the accident. (FEB Leasing and Finance
Corporation vs. Baylon, 653 SCRA 22.)
 Unlawful arrangements
1. Boundary system

The boundary system is a scheme by an owner/operator

engaged in transporting passengers as a common carrier to
primarily govern the compensation of the driver, that is, the
latter‘s daily earnings are remitted to the owner/operator less
the excess of the boundary, which represents the driver‘s
compensation.

Under this system, the owner/operator exercises control and

supervision over the driver. It is different from lease of
chattels because in the latter, the lessor loses complete
control over the chattel and the lessee is still ultimately
responsible for the consequences of its use.
In the boundary system, the management of the
business is still in the hands of the
owner/operator, who, being the holder of the
certificate of public convenience, must see to
it that the driver follows the route prescribed
by the franchising and regulatory authority,
and the rules promulgated with regard to the
business operations. [Villamaria v. Court of
Appeals (2006)]
To exempt from liability the owner of a public
vehicle who operates it under the boundary
system on the ground that he is a mere lessor
would not only to abet flagrant violations of the
Public Service Law, but also places the riding
public at the mercy of reckless and irresponsible
drivers – reckless because the measure of their
earnings depends largely upon the number of
trips they make, and, hence, the speed at which
they drive; and irresponsible because most if not
all of them are in no position to pay damages
they might cause. [Hernandez vs. Dolor, 2004]
2. Kabit system (Asked in ‘90 and ‘05)

A system whereby a person who has been granted a certificate of

public convenience allows other persons who own motor
vehicles to operate under such license, for a fee or
percentage of such earnings.

Although not penalized outright as a criminal offense, the "kabit

system" is invariably recognized as being contrary to public
policy and, therefore, void and inexistent under Art 1409 of
the Civil Code.

"Kabit System" has been identified as one of the root causes of

graft and corruption in the government transportation offices.
It is a "pernicious system" that cannot be too severely
condemned. It constitutes an imposition upon the good faith
of the government. It is an abuse of a certificate of public
convenience, which is a special privilege granted by the
government. [Teja Marketing v. IAC, 1987]
Example:

A, a grantee of a CPC from the LTFRB, is given the authority to

operate 10 units of taxis. B, a nongrantee, wishes to operate as
a common carrier and ―”kabits” with the CPC of A who will
obtain approval from the LTFRB to operate another taxi. The
taxi will be registered in the name of A, who will be paid by B.

Assume that A executed a deed of sale in favor of B in case B

decides not to go on with the arrangement, in order to
safeguard the rights of B. However, in case of injury to a
passenger of the taxi actually operated by B (and previously
sold to B as well) it is still A who will be liable. The illegal
contract of sale between A & B cannot be used as a defense.

A does not have a cause of action against B either. They are in

pari delicto.
 The kabit system is invariably recognized as
being contrary to public policy and therefore
void and inexistent under Art. 1409 CC. [Lim
vs. CA, 2002]

 Pari delicto rule applicable. [Lita vs. IAC, 1984]

Air Transportation
 Air Transportation
Under Article 1732, carrying or transporting
passengers or goods or both by “air” has been
expressly included in the definition of a
common carrier.
A contract to transport passengers is quite
different in kind and degree from any other
contractual relation, and this is because of the
relation which an air carrier sustains with the
public. (PAL v. Court of Appeals, 275 SCRA
621)
 Air Passenger Bill of Rights
[DOTC-DTI Joint A.O. No. 1, series of 2012]
Applies to:
1. Flights or portions of a flight INTO, FROM, and WITHIN
the Philippines operated by Philippine air carriers;
2. Flights or portions of a flight FROM the Philippines
operated by FOREIGN air carriers

Provided that: Compensation rules shall NOT apply to

carriers flying INTO the Philippines, if the laws of the
country of origin provide similar or HIGHER
compensation. Otherwise, these rules shall apply in
FULL.
 Major rights of a passenger
1. Right to be provided with accurate info
before purchase
2. Right to receive full value of the service
purchased
3. Right to compensation
 Right to receive full value
of the service purchased
a) Right to be processed for check-in (pax not late/no
show if he is within check-in area 1 hour before ETD
or as prescribed by carrier)
b) Right to sufficient processing time (e.g. Check-in
counters for international flights, PWDs, senior
citizens, etc)
c) Right to board aircraft
Gen. Rule: pax cannot be denied right to board without consent
Exc: 1. overbooking – “auction system” [carrier to look for
volunteers willing to give up seats, provide amenities and
offers (i.e. Priority booking to next flight, endorsment to
another carrier), and increased compensation package]
2. legal or other valid reasons (immigration, health, security
etc.)
 Right to Compensation

1. In case of cancellations
a) Cancellation at least 24 hours (due to carrier)
i. Pax to be notified before fact of cancellation
ii. Rebook or reimburse, at option of pax
b) Cancellation less than 24 hours (due to carrier)
i. Pax to be notified before fact of cancellation
ii. Rebook ticket without additional charge
iii. or reimburse of the value of the fare, taxes
c) Cancellation due to other causes (force majeure,
etc.)
i. To be reimbursed of the value of the fare
2. Flight delay and exceptions thereto

a) Terminal delay of at least 3 hours after ETD

i. Avail of refreshments and meals
ii. Free phone calls, text or e-mails, and first aid
iii. To be endorsed to another carrier

b) Terminal delay of at least 6 hours after ETD

i. To consider flight cancelled
iii. Additional compensation equivalent to at least the value
of the sector delayed
iv. To board the flight and pax has not opted to rebook
and/or refund

c) Tarmac delay (pax already on board) at least 2 hours after ETD

i. Sufficient food and beverage
3. For delayed, lost, and damaged baggage

a. right to be informed of the fact of off-loading

b. P2, 000 for every 24 hours of delay
c. Refund of checked baggage fees if not delivered within 24
hours from arrival of flight

d. If baggage is lost or damaged:

i. International flights: relevant convention
ii. Domestic: pax has right to a maximum amount
equivalent to ½ in the relevant convention in its peso
equivalent

Presumption of loss: no delivery after a period of 7 days from

pax should have received the baggage
4. In case of death or bodily injury

a.) international – relevant convention and inter-carrier agreements

1. 1996 Montreal Inter-carrier Agreement* - $75, 000, if U.S. is
point of origin, destination or agreed stopping place
b.) domestic - compensation will be based on the stipulated
amount in relevant convention (international)

5. Right to immediate payment of compensation

a.) payment available at:

i. Carrier’ s counter at the airport on date incident occurred; or
ii. Main office or any branch, at discretion of pax
b.) modes:
i. Tendering a check;
ii. cash
iii. Document necessary to claim compensation shall
be convertible to cash within 15 days from date incident
occurred.
 The Warsaw Convention
The WC (Convention for Unification of
Certain Rules Relating to International
Transportation by Air) is a treaty
commitment voluntarily assumed by
Philippine government and, as such, has
the force and effect of law in this country.
(Santos III vs. Northwest Airlines, 210 SCRA
256)
The WC was concurred in by the Senate on
May 16, 1950. It entered into force, 13
February 1933, and, with respect to the
Philippines, February 9, 1951. It was
amended by the Hague (1955/ 1966-PH),
Guatemala (1971) and Montreal (1975)
Protocols (not acceded yet by PH).

Note: 1999 Montreal Convention maintains core

provisions of WC but modernizes key areas
(damages, etc.).
The cardinal purpose of the WC is to provide
uniformity of rules governing claims arising
from international air travel. (PAL vs. Savillo,
2008)

When contract of air carriage is a contract of

international transportation, provisions of the
WC automatically apply and exclusively govern
rights and liabilities of the airline and its
passengers (American Airlines vs. CA, 1998)
The Convention is applicable to:
1. International transportation of persons,
baggage, or goods performed by an aircraft for
hire;
2. Fortuitous transportation by aircraft
performed by an air transportation
enterprise [WC, Art. 1]
The Convention does not apply to carriage
performed under the terms of any
international postal Convention. [WC, Article
2, No. 2]
 Two Categories Of "International
Transportation By Air"
1. That where the place of departure and the place of
destination are situated within the territories of two
High Contracting Parties regardless of whether or not
there be a break in the transportation or a
transshipment; and
2. That where the place of departure and the place of
destination are within the territory of a single High
Contracting Party if there is an agreed stopping place
within a territory subject to the sovereignty, mandate
or authority of another power, even though the power
is not a party to the Convention. [WC, Article 1, No. 2]
A carriage to be performed by several
successive air carriers is deemed, for the
purposes of this Convention, to be one
undivided carriage, if it has been regarded by
the parties as a single operation, whether it
had been agreed upon under the form of a
single contract or of a series of contracts. [WC,
Article 1, No. 3]
If an airline is a member of IATA, it is part of a
general pool partnership agreement wherein they
act as agent of each other.

The obligation of the ticket-issuing airline remains

and will not cease even if others qill in fact carry
the passengers in other portions of the trip.

The fact that a successive carrier is considered an

agent does not necessarily excuse the agent from
liability. The agent is liable for its own negligent
acts or omission.
 Liability of Carrier for Damages
1. Death or injury of a passenger if the accident causing it took
place on board the aircraft or in the course of the operations
of embarking or disembarking [Art. 17];
2. Destruction, loss, or damage to any baggage or goods, if it
took place during the transportation by air [Art. 18]
Transportation by Air – the period during which the baggage or
goods are in the charge of the carrier whether in an airport or
on board an aircraft, or in case of a landing outside an airport,
in any place whatsoever. It includes any transportation by
land or water outside an airport if such takes place in the
performance of a contract for transportation by air, for the
purpose of loading, delivery, or transshipment.
3. Delay in the transportation of passengers, baggage, or goods
[Art. 19]
 Limitation of Liability
1. Liability to passengers

General Rule: 125, 000 francs; 250, 000 francs

(Alitalia vs. IAC, 1990); 16, 600 special drawing
rights; $100,000 per passenger (Guatemala)
Exception: Agreement to a higher limit [Article
22(1)]
2. Liability for checked baggage

General Rule: 250 francs; 17 SDR; $20 (for non-

signatories of Montreal) per kilogram
Exception: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more than
the declared sum unless it proves the sum is
greater than actual value. [Article 22(2)]
3. Liability for hand-carried baggage

5, 000 francs; 332 SDR (forex reserve assets by IMF)

$1000/passenger (Guatemala) [Article 22(3)]

 An agreement relieving the carrier from liability or

fixing a lower limit is null and void. [Art. 23]
 Carrier is not entitled to the foregoing limit if the
damage is caused by willful misconduct or default on
its part. [Art. 25]
 The right to damages under the WC is extinguished
after 2 years from the date of arrival at the destination
or from the date on which the aircraft ought to have
arrived, or from the date on which the carriage
stopped. [Art. 29(1)]
Under Art. 22 (1), a contract of air carriage requires
declaration by a passenger of a higher value to
recover a greater amount... Nevertheless, there
can be no blind reliance on adhesion contracts
where:
1. The facts and circumstances justify that they
should be disregarded;
2. When the benefits of limited liability have been
waived when the air carrier failed to raise timely
objections during the trial when questions and
answers regarding the actual claims and
damages sustained by the passenger were
asked. (British Airways vs. CA, 1998)
 Defenses Against Limit of Liability
1. Wilful misconduct
2. Gross negligence (amounts to bad faith)
3. Absence of baggage check [Art. 4]
4. Absence of ticket [Art. 3(1)]
5. Waiver on part of carrier
6. Estoppel on carrier (PAL vs. Mejia, 1996)
 Wilful misconduct

Intentional performance of an act (or failure to

act) with knowledge that the act will probably
result in injury or damage, or in some manner
as to imply reckless disregard of the
consequence of its importance, or a deliberate
purpose not to discharge some duty necessary
to safety. (In re Korean Airlines, 1988)
The carrier guilty of willful misconduct cannot
avail of the provisions limiting liability but may
still invoke other provisions of the WC.
The WC does not operate as an exclusive
enumeration of the instances of an absolute
limit of the extent of liability.
It does not preclude the application of the Civil
Code and other pertinent local laws.
It does not regulate or exclude liability for other
breaches of contract by the carrier, or
misconduct of its employees, or for some
particular or exceptional type of damage.
In United Airlines vs. Uy, the Court distinguished
1.) between damage to passenger’ s baggage
and 2.) humiliation he suffered at the hands of
airline’ s employees. The first cause of action
was covered by the Warsaw Convention which
prescribes in 2 years, while the second in 4
years (torts).
The WC has invariably been held inapplicable, or as not
restrictive of the carrier’s liability, where there was
satisfactory evidence of malice or bad faith attributable to its
officers and employees.
1. Where carrier’s employees rudely put a passenger holding a
first-class ticket in the tourist or economy section
(Northwest vs. Cuenca, 1965); or
2. Ousted a brown Asiatic from the plane to give his seat to a
White man (Air France vs. Carrascoso, 18 SCRA 155); or
3. Gave the seat to a passenger with a confirmed reservation to
another (Korea Airlines vs. CA, 154 SCRA 211); or
4. Subjected a passenger to extremely rude, even barbaric
treatment as by calling him a monkey (Zulueta vs. Pan Am,
43 SCAR 397)
 Venue of Action
1) The court where the carrier is domiciled;
2) The court where the carrier has its principal place of
business;
3) The court where the carrier has an establishment by which
the contract has been made; or
4) The court of the place of destination. [Art. 28(1)]

Art. 28(1) is jurisdictional in character (Lhuillier vs. British

Airways , 2010)
 Notice of Claim or Complaint
(condition precedent)
Complaint must be filed within:

1. 3 days from receipt of baggage (damaged);

2. 7 days from receipt of goods; or
3. 14 days, in case of delay, counted from the
time the baggage as placed at passenger’ s
disposal. (Art. 26)
Note: Art. 26 not applicable if there is FRAUD
[Art. 26(4)]and delay on the part of carrier
(PAL vs. Mejia, 1996)
 Prescription
Art. 29. The right to damages shall be
extinguished if an action is not brought within
2 years, reckoned from the date of arrival at
the destination, or from the date on which the
aircraft ought to have arrived, or from the
date on which the carriage stopped.
The 2-year limitation is an absolute bar to suit
and not be made subject to the various tolling
provisions of the laws of the forum. (United
Airlines vs. Uy, 1999)
MARITIME LAW
 Maritime Law
“that system of law which particularly relates to
marine commerce and navigation, to business
transacted at sea or relating to navigation, to
ships and shipping, to seamen, to the
transportation of persons and property by sea
and to marine affairs generally.” (Black’s Law
Dictionary, 1990)
 Special Laws
1. Book 3, Code of Commerce (Maritime
Commerce)
2. Act 2616 (Salvage Law)
3. C.A. 65 (COGSA)
4. P.D. 1521 (Ship Mortgage Decree of 1978)
5. Other special laws relating to maritime
commerce [e.g. R.A. 7471 (Philippine
Overseas Shipping Act, R.A. 9295 (Domestic
Shipping Act)]
The primary law is the New Civil Code.*

The Code of Commerce and special laws apply

only suppletorily.

Treaties: UNCLOS; SOLAS (Safety of Life at Sea)

and Tonnage Convention
 Vessels
“any barge, lighter, bulk carrier, passenger ship, freighter, tanker,
container ship, fishing boats, or other artificial contrivance
utilizing any source of motive power, designed, used or capable
of being used as a means of transportation operating either as
a common contract carrier, including fishing vessels covered
under P.D. 43, except
(i) those owned and operated/or operated by the AFP and by
foreign governments for military purposes, and
(ii) bancas, sailboats, and other waterborne contrivance of less
than 3 gross tons capacity and not motorized. [Sec. 3 (b), P.D.
474, Decree Providing for the Reorganization of Maritime
Functions in the Philippines, Creating the MARINA and for
Other Purposes]
Vessels are personal property under Art. 416 of
the Civil Code and Art. 585 of the Code of
Commerce. (see Philippine Refining vs. Jarque,
1935)
Vessels may be acquired or transferred by any
means recognized by law. The acquisition
must appear in a written instrument, which
shall not produce any effect with respect to
third persons if not inscribed in the registry of
vessels [Art. 573, Code of Commerce]
Note: Vessels under the jurisdiction of MARINA
can be transferred only with its approval.
(MARINA Memorandum Circular No. 2013-02)
 Nationality of Vessels

Vessels duly registered in the Philippines are

Philippine Flag Vessels. (see also sections 91-
94, Part VII, UNCLOS)

Vessels are registered through MARINA. The

person who is the registered owner is
presumed to be the owner of the vessel.
 Cabotage
It is the right of foreign vessels to engage in
coastwise shipping, i.e., to provide service
from one place within the Philippines to
another place in the Philippines. It is now
provided under R.A. 10668 (Foreign Ships Co-
Loading Act)
 Bill of Lading
It is a written acknowledgment of the receipt of
goods and an agreement to transport and to
deliver them at a specified place to a person
named or on his order. (Unsworth Transport
vs. CA, 2011)
 Nature of Bill of Lading

1. As a receipt
2. As a contract
3. As a document of title (symbol of the goods)

Note: The three-fold nature is applicable only to

carriage of goods. (For passengers – BOL as
contract)
As a receipt, it recites the date and place of
shipment, describes the goods as to quantity,
weight, dimensions, identification marks,
condition, quality, and value. (quantity and
description)

As a contract, it names the contracting parties,

which include the consignee; fixes the route,
destination, and freight rate or charges; and
stipulates the rights and obligations assumed by
the parties. Being a contract, it is the law
between the parties who are bound by its terms.
 Parties
1) Shipper
2) Carrier
3) Consignee

Note: Although not a signatory to the contract of carriage,

consignee becomes a party by reason of:

a.) relationship of agency between the consignee and the

shipper/consignor;
b.) unequivocal acceptance of BOL delivered to the
consignee, with full knowledge of its contents;
c.) availment of stipulation pour autrui (when consignee, a
3rd person, demands before the carrier the fulfilment of
stipulation made by the shipper/consignor in consignee's
favor, specifically delivery of goods shipped.) [MOF
Company vs. Shin Yang Brokerage, 2009]
 When Effective
It is effective upon its delivery to and acceptance
by the shipper.

It is presumed that the stipulations of the bill

are, in the absence of fraud, concealment or
improper conduct, known to the shipper, and
he is generally bound by his acceptance
whether he reads the bill or not.
A bill of lading constitutes a class of contracts of
adhesion. The one who adheres to the
contract is in reality free to reject it entirely; if
he adheres, he gives his consent.
 Kinds
1) Clean Bill of Lading – one that does not
contain any notation indicating any defects in
the goods.
2) Foul Bill of Lading – contains notation
indicating defects
3) Spent Bill of Lading – if the goods were
already delivered but the bill of lading was
not returned
4) Through Bill of Lading – one issued by a carrier who is
obliged to use the facilities of other carriers as well as his own
facilities for the purpose of transporting the goods from the
city of the seller to the city of the buyer, which bill of lading is
honored by the second and other interested carriers who do
not issue their own lading

5) On Board Bill of Lading – one in which it is stated that the

goods have been received on board the vessel which is to
carry the goods

6) Received for Shipment Bill of Lading – one in which it is

stated that the goods have been received for shipment with
or without specifying the vessel by which the goods are to be
shipped
7) Custody Bill of Lading – the goods are already
received by the carrier but the vessel
indicated therein has not yet arrived in the
port

8) Port Bill of Lading – the vessel indicated in

the bill of lading that will transport the goods
is already in the port
 “Shipper’ s Load and
Count” Agreement
The contents are not required to be checked and
inventoried by the carrier at the port of
loading or before said carrier enters the port
of unloading in the Philippines since it is the
shipper who has the sole responsibility for the
quantity, description and condition of the
cargoes shipped in container vans. [Philam vs.
Heung-A, 2014]
 Parol Evidence Rule
Under the rule, the terms of a contract are
rendered conclusive upon the parties, and
evidence aliunde is not admissible to carry or
contradict a complete and enforceable
agreement embodied in a document, subject
to exceptions (e.g. mistake of fact mutual to
parties)
 Delivery without surrender of
bill of lading
Under Art. 353 of the Code of Commerce, the
surrender of the original bill of lading is not a
condition precedent for a common carrier to
be discharged of its contractual obligation. If
surrender of the original is not possible,
acknowledgment of the delivery by signing the
delivery receipt suffices. (Republic vs. Lorenzo
Shipping, 2005)
Art. 353. The legal basis of the contract between the shipper and the
carrier shall be the bills of lading, by the contents of which all
disputes which may arise with regard to their execution and
fulfillment shall be decided without admission of other exceptions
than forgery or material errors in the drafting thereof.
After the contract has been complied with the bill of lading issued by
the carrier shall be returned to him, and by virtue of the exchange
of this certificate for the article transported, the respective
obligations and actions shall be considered as canceled, unless in
the same act the claims which the contracting parties desired to
reserve are reduced to writing, exception being made of the
provisions of Article 366.
If in case of loss or for any other reason whatsoever, the consignee can
not return upon receiving the merchandise the bill of lading
subscribed by the carrier, he shall give said carrier a receipt for the
goods delivered, this receipt producing the same effects as the
return of the bill of lading.
 Absence of Bill of Lading
Art. 354. In the absence of a bill of lading,
disputes shall be determined by the legal
proofs which the parties may present in
support of their respective claims, according
to the general provisions established in this
Code [of Commerce] for commercial
contracts.
Art. 350. The shipper as well as the carrier of
merchandise or goods may mutually demand
that a bill of lading be made, xxx
 Delivery of Goods
 Period of delivery

If no period is fixed, the carrier shall be under

the obligation to forward the goods in the first
shipment of the same or similar merchandise
which he may make to the point of delivery;
and should he not do so, the damages caused
by the delay should be for his account. [Art.
358, Code of Commerce]
If period has been fixed, it must be made within
such time; for failure to do so, the carrier shall
pay the indemnity stipulated in the bill of
lading. [Art. 370]
 When consignee may refuse
to receive goods
1. Partial Delivery. The consignee may refuse to receive
them, when he proves that he cannot make use
thereof without the others. [Art. 363, Code of
Commerce]
2. When the goods are rendered useless for purposes of
sale or consumption in the use for which they are
properly destined. [Effect: consignee may demand
payment of the goods at current market prices]
3. In case part of the goods is in good condition, the
consignee may refuse to receive only the damaged
goods if separation is possible. [Art. 365, Code of
Commerce]
 Shipment terms
Functions

1) Determine the point at which risk of loss

passes from seller to buyer;
2) Determine what performance by the seller
amounts to tender which will put the buyer,
if he refuses to accept delivery, in breach;
3) Are used for quoting the price.
a) F.O.B. (Free on Board) Point of Destination – seller
still assumes the risk until goods reach the point of
destination

Ex: F.O.B Isulan – place of delivery: Isulan, point

of destination

b) F.A.S (Free Alongside) Vessel – seller relinquishes

the risk the moment the goods are delivered
alongside the vessel; seller no obligation to see to
the loading, delivery to wharf all that is required
c) C.I.F (Cost, Insurance, Freight) – price quoted by
seller includes invoice, cost of crating and
packaging, etc, plus insurance and freight

Example: A seller in Manila has 1, 000 piculs of sugar

which he wants to sell to a buyer B in New York for
P70, 000. His quotation will be: P70, 000 C.I.F NY.

The seller is owner of the sugar from Manila to

NY. Under the rule of res perit domino, he, as owner,
still shall bear risk of loss.
 Real and Hypothecary Nature
of Maritime Law

In Roman and civil law, hypothec is defined as

“mortgage or security held by a creditor on
the property of a debtor without possession
of it, created by either agreement or by
operation of law.”
 Real and Hypothecary Nature
It simply means that the liability of the carrier in
connection with losses related to maritime
contracts is confined to the vessel, which is
hypothecated for such obligations or which
stands as the guaranty for their settlement.
The doctrine has its origin in the prevailing
conditions of maritime trade and sea voyages
during the medieval ages, attended by
innumerable hazards and perils.

To offset against these adverse conditions and to

encourage shipbuilding and maritime
commerce...
liability confined to vessel, equipment, and
freight, or insurance, if any.
 Limited Liability Rule
“No vessel, No liability”

The ship owner's or agent's liability is merely co-

extensive with his interest in the vessel

such that...

a total loss thereof results in its extinction.

 Statutory Provisions

1. Article 587 (liability to third persons)

2. Article 590
3. Articles 643 and 837 (collision cases)
Art. 587. The ship agent shall also be civilly
liable for the indemnities in favor of third
persons which may arise from the conduct of
the captain in the care of the goods which he
loaded on the vessel; but he may exempt
himself therefrom by abandoning the vessel
with all her equipments and the freight it may
have earned during the voyage.
Note: The term “ship agent” as used in Art. 587
is broad enough to include the ship owner.
[Chua Yek Hong vs. IAC, 1988]
The consensus of authorities is to the effect that
notwithstanding the language of [Art. 587],
the benefit of limited liability therein provided
for, applies in all cases wherein the ship owner
or agent may be properly held liable for the
negligent or illicit acts of the captain. [Yangco
vs. Laserna, 1941]
In cases where the ship owner is likewise to be
blamed, Art. 587 does not apply. Such a
situation will be covered by the provisions of
the New Civil Code on Common Carriers.
(1733, 1775, 1776) [Heirs of Amparo de los
Santos vs. CA, 1990]
Art. 590. The co-owners of the vessel shall be
civilly liable in the proportion of their
contribution to the common fund for the
results of the acts of the captain, referred to
in Article 587.

Each co-owner may EXEMPT himself from this

liability by the abandonment, before a notary,
of that part of the vessel belonging to him.
Art. 643. If the vessel and her cargo should be totally lost, by
reason of capture or wreck, all rights shall be extinguished,
both as regards the crew to demand any wages whatsoever,
and as regards the ship agent to recover the advance made.

If a portion of the vessel or of the cargo, or of both, should be

saved, the crew engaged on wages, including the captain,
shall retain their rights on the salvage, so far as they go, on
the remainder of the vessel as well as on the amount of the
freightage of the cargo saved; but sailors who are engaged on
shares shall not have any right whatsoever on the salvage of
the hull, but only on the portion of the freightage saved. If
they should have worked to recover the remainder of the
shipwrecked vessel they shall be given from the amount of
the salvage an award in proportion of the efforts made and to
the risks, encountered in order to accomplish the salvage.
Art. 837. The civil liability incurred by the
shipowners in the cases prescribed in this
section, shall be understood as limited to the
value of the vessel with all her appurtenances
and freight earned during the voyage.
Abandonment of the vessel, its appurtenances
and freightage is an indispensable
requirement before the ship owner or ship
agent can enjoy the benefits of the limited
liability principle.
 Exceptions to Limited Liability
1) where the injury or death to a passenger due either
to the fault of the shipowner or to the concurring
negligence of the shipowner and captain;
2) where the vessel is insured;
3) workmen’s compensation claims (Labor laws - ECC
liable; not employer);
4) repairs of the vessel before loss (Government of
Phil vs. Maritime, 45 Phil 805)
5) Total destruction of the vessel
 2016 Bar Question
Nautica Shipping Lines (Nautica) bought a second hand
passenger ship from Japan. It modified the design of
the bulkhead of the deck of the ship to accommodate
more passengers. The ship sunk with its passengers in
Tablas Strait due to heavy rains brought by the
monsoon. The heirs of the passengers sued Nautica for
its liability as a common carrier based on the
reconfiguration of the bulkhead which may have
compromised the stability of the ship. Nautica raised
the defense that the monsoon is a fortuitous event and,
at most, its liability is prescribed by the Limited Liability
Rule. Decide with reasons. ( 5%)
 Protest
a written statement by the master of a vessel or any
authorized officer, attested by a proper officer or
notary, to the effect that damages has been
suffered by the ship. It is required when:
1. the vessel makes an arrival under stress (Art.
612);
2. vessel is shipwrecked (Arts. 612, 624, 843);
3. vessel has gone through a hurricane or the
captain believes that the cargo has suffered
damages or averages (Art. 624);
4. maritime collisions (Art. 835)
Note: Art. 835 contemplates sea-going vessels
only (Lopez vs. Duruelo, 1928)
 Abandonment

2 characteristics:

a) It is a unilateral right: perfected by mere

notice;
b) Once perfected, ownership over damaged
goods passes to carrier and carrier must pay
shipper the market value of goods at point of
destination.
 5 cases of abandonment
1. Art. 365, Code of Commerce

Where shipper ships goods and goods arrive in damaged

condition and damage is so great that shipper may not use
goods for the purpose for which they had been shipped, the
shipper may exercise the right of abandonment.

Notice to the carrier is sufficient - consent of carrier is not

necessary and once perfected, ownership over damaged
goods passes to carrier and carrier must pay shipper the
market value of goods at point of destination
Illustration:

Shipper loads cargo with a vessel of X, Inc. The goods arrive at

the point of destination in: a.) damaged condition; and b.) the
damage is so great that shipper cannot use it for purpose for
which cargo was shipped.

The Code of Commerce allows shipper to exercise right of

abandonment. The consent of X, Inc. is not necessary.

Upon giving of notice, the unilateral right of shipper to

abandon is perfected and ownership of damaged cargo passes
to X, Inc., which must pay the market value of damaged goods
at point of destination.
2. Art. 371, Code of Commerce

Shipper and carrier agree in advance that

cargo must arrive on a certain date. The date
arrives and cargo has not yet arrived due to
carrier’s fault.
The shipper may exercise the right of
abandonment by notifying carrier, and once
having done so, ownership over undelivered
cargo passes to carrier and carrier must pay
shipper market value of the goods at the point
of destination.
Illustration:
Shipper loads cargo with X, Inc. with the
agreement that the cargo will arrive in Manila
on 5 November 2002. The date came but the
cargo did not arrive due to the fault of the
carrier.
Once notice (abandonment) is given, ownership
over the undelivered cargo passes to carrier
and carrier must pay the shipper the market
value of the goods at the point of destination.
3. Art. 578, Code of Commerce: reflects the
hypothecary nature of maritime transactions

Where vessel carries goods and goods are

damaged and the liability of carrier for damaged
goods exceeds the value of vessel, owner or ship
agent may exercise right of abandonment.

Notice to shipper/s of exercise of right will suffice

and once all have done so, ownership over vessel
passes to shipper/s and all liability of shipowner
for the damaged cargo is limited to the value of
the abandoned vessel.
4. Art. 687, Code of Commerce

The charterers and shippers may abandon the

merchandise damaged if the cargo should
consist of liquids and they have leaked out,
nothing remaining in the containers but ¼ of
their contents, on account of inherent defect
or fortuitous event.
5. Sec. 138, Insurance Code

Permits the exercise of the right of

abandonment for constructive loss, which
takes place when vessel suffers damage in
excess of ¾ of its insured value.

Ownership over damaged vessel passes to

insurer, and insurer must pay insured as if it
were an actual loss.
 Liability of Ship Owners and
Shipping Agents

The shipowner is the person who is primarily

liable for damages sustained in the operation
of a vessel.

A ship agent is a person entrusted with

provisioning of the vessel, or who represents
her in the port in which she happens to be.
(Art. 595 CC).
The ship agent, even though he is not the
owner, is liable in every way to the creditor for
losses or damages, without prejudice to his
right against the owner, the vessel and its
equipment and freight.
Art. 586. The shipowner and the ship agent shall
be civilly liable for the acts of the captain and
for the obligations contracted by the latter to
repair, equip, and provision the vessel,
provided the creditor proves that the amount
claimed was invested for the benefit of the
same.
Under Art. 586, both shipowner and the ship
agent are liable for the supplies that were
furnished to the ship.
 Powers and Functions of Ship Agent
Whether acting as agent of the owner of the
vessel or as agent of the charterter... as long
as it is the one that provisions or represents
the vessel. (Macondray vs. Provident, 2004)
Not a ship agent if its only function is limited to
informing the consignee of the arrival of the
vessel in order for the latter to take possession
of the cargoes. (Ace Navigation vs. FGU, 2012)
Note: If ordinary agent only, apply NCC (e.g. Art.
1897)
 Powers of Ship Agent

The ship agent can enter into contracts to

provision the ship. He can purchase necessary
supplies and fuel.
 He can represent the ownership of the vessel and
may, in his own name and in such capacity, take
judicial and extra-judicial steps in matters relating
to commerce. (Art. 595)
 He can occupy the duties of the captain, if he has
the qualifications of a captain. (Art. 596)
 He can select and come into an agreement with
the captain and contract in the name of the
owners, WHO shall be bound in all that refers to
repairs, details of equipment, armament,
provisions, fuel, freight, and in general that
pertains to the requirement of navigation. (Art.
597)
 He shall indemnify the captain for all expenses
he may have incurred from his own funds or
from those of other persons for the BENEFIT
of the vessel (Art. 602)
 Limitation on power: The ship agent may not
order a new voyage, or make contracts for a
new charter, or insure the vessel, without the
authorization of its owner or resolution of the
majority of the co-owners, unless these
powers ere granted him in the certificate of
his appointment.
 Captain and Master of Vessel

In maritime commerce, both terms are used

interchangeably.

But:
 captain – applied to those who govern vessels that
navigate high seas or ships of large dimension
 master – those who command smaller ships engaged
exclusively in coastwise trade (Yu vs. Ipil, 1919)
 Powers and Functions
3 distinct roles:

a) General agent of the shipowner (authority to sign

bills of lading, carry goods aboard and deal with
freight earned, agree upon rates and decide
whether to take cargo);
b) Commander and technical director of the vessel;
c) Representative of the country under whose flag he
navigates
Of these roles, by far the most important is the
role performed by the captain as commander
of the vessel; for such role has to do with the
operation and preservation of the vessel
during its voyage and the protection of the
passengers (if any)and crew and cargo. (Inter-
Orient v. CA, 1994)
The captain is vested with both management
and fiduciary functions.
Art. 610. The following powers shall be inherent in the position
of captain, master or patron of the vessel:
1. To appoint or make contracts with the crew in the absence
of the ship agent, and to propose said crew, should said
agent be present; but the ship agent may not employ any
member against the captain’ s express;
2. To command the crew and direct the vessel to the port of its
destination, in accordance with the instructions he may have
received from the ship agent.
3. To impose, in accordance with the contracts and with the
laws and regulations of the merchant marine, and when on
board the vessel, correctional punishment upon those who
fail to comply with his orders or are wanting in discipline,
holding a preliminary hearing on the crimes committed on
board the vessel on the seas, which crimes shall be turned
over to the authorities having jurisdiction over the same at
the first port touched.
4. To make contracts for the charter of the vessel in the
absence of the ship agent or of its consignee, acting in
accordance with the instructions received and
protecting the interests of the owner with utmost care.
5. To adopt all proper measures to keep the vessel ell
supplied and equipped, purchasing all that may be
necessary for the purpose, provided there is no time to
request instruction from the ship agent.
6. To order, in similar urgent cases while on a voyage, the
repairs on the hull and engines of the vessel and in its
rigging and equipment, which are absolutely necessary
to enable it to continue and finish its voyage; but if he
should arrive at a point where there is a consignee of
the vessel, he shall act in occurrence with the latter.
 Liability of captains and masters

Art. 618. The captain shall be civilly liable to the ship agent, and
the latter to the third persons who may have made contracts
with the former;
1. For all damages suffered by the vessel and its cargo by
reason of want of skill or negligence on his part. If a
misdemeanor or crime has been committed, he shall be
liable in accordance with the Penal Code.
2. For all thefts committed by the crew, reserving his right of
action against the guilty parties.
3. For the losses, fines and confiscations imposed an account of
violation of customs, police, health, and navigation laws and
regulations.
4. For the losses and damages caused by mutinies on
board the vessel or by reason of faults committed by
the crew in the service and defense of the same, if
he does not prove that he made timely use of all his
authority to prevent or avoid them.
5. For those caused by the misuse of the powers and
the non-fulfillment of the obligations pertaining to
him in accordance with Arts. 610 and 612.
6. For those arising by reason of his going out of his
course or taking course which he should not have
taken without sufficient cause, in the opinion of the
officers of the vessel, at a meeting with the shippers
or supercargoes who may be on board.
7. For those arising by reason of his voluntarily
entering a port other than that of his
destination, outside of the cases or without
the formalities referred to in Art. 612.
8. For those arising by reason of non-observance
of the provisions contained in the regulations
on situation of lights and maneuvers for the
purpose of preventing collisions.
Art. 619. The captain shall be liable for the cargo
from the time it is delivered to him at the dock
or afloat alongside the vessel at the port of
loading, until he delivers it on the shore or on
the discharging wharf at the port of
unloading, unless the contrary has been
expressly agreed upon.
Art. 620. The captain shall not be liable for the
damages caused to the vessel or to the cargo by
force majeure; but he shall always be so for
those arising through his own fault, no
agreement to the contrary being valid.

Neither shall he be personally liable for the

obligations he may have contracted for the repair,
equipment, and provisioning of the vessel, which
shall devolve upon the ship agent, unless the
former has a bill of expressly bound himself
personally or has signed a bill of exchange or
promissory note in his name.
Art. 621. A captain who borrows money on the
hull, engine, rigging or tackle of the vessel, or
pledges or sells merchandise or provisions
outside of the cases and without the
formalities prescribed in this Code, shall be
liable for the principal, interests, and costs,
and shall indemnify for the damages he may
cause.
He who commits fraud in his accounts shall pay
the amount defrauded and shall be the
subject to the provisions of the Penal Code.
 Prohibited Acts
The Captain of the Vessel may not:

1. Make SEPARATE TRANSACTIONS for HIS OWN ACCOUNT [if

he navigates for freight in common or on shares] [Art. 613]
2. FAIL to MAKE the Agreed Voyage [refuse to leave port] [Art.
614]
3. SUBSTITUTE himself by OTHER PERSONS [Art. 615]
4. CONTRACT Loans on RESPONDENTIA [Art. 617] - void
5. BORROW money on BOTTOMRY for his OWN transactions
[Art. 617]
6. Commit FRAUD in his Accounts [Art. 621]
 Pilotage
The term “pilot” is more generally understood
as a person taken on board at a particular
place for the purpose of conducting a ship
through a river, road or channel, or from a
port. (Far Eastern vs. CA, 1998)
 Compulsory Pilotage
States possessing harbors have enacted laws or
promulgate laws requiring vessels
approaching their ports to take on board
pilots licensed under the local laws.
The purpose of these laws is to create a body of
seamen thoroughly acquainted with the
harbor, to pilot vessels seeking to enter or
depart, and thus protect life and property
from dangers of navigation.
In general, a pilot is personally liable for
damages caused by his own negligence or
default to the owners of the vessel, and to
third parties for damages sustained in a
collision. Such negligence of the pilot in the
performance of duty constitutes a maritime
tort.
 Other Officers and Crew
under Code of Commerce
1. Sailing mate/ Chief Mate – managerial employee
next in rank to master
2. Second mate (Art. 632)
3. Marine Engineer
4. Crew (Arts. 634-648)
5. Supercargoes

*For regulation of merchant marine profession, see

R.A. 8544 (Philippine Merchant Marine Officers Act
of 1998)
 Supercargoes
Art. 649. Supercargoes shall discharge on board the vessel the
administrative duties which the ship agent or the shippers
may have assigned to them; they shall keep an account and
record of their transactions in a book which shall have the
same conditions and requisites as required for the accounting
book of the captain, and they shall respect the latter in his
capacity as chief of the vessel.

The powers and responsibilities of the captain shall cease,

when there is a supercargo, with regard to that part of the
administration legitimately conferred upon the latter, but shall
continue in force for all acts which are inseparable from his
authority and office.
 Arrastre

It is a broad term which refers to a contract for

the unloading of goods from a vessel.

But in mercantile law, the term has a technical

meaning as it applies only to overseas trade.
When a person brings in cargo from abroad, he
cannot unload and deliver the cargo himself.
This is done by the arrastre operator, which
will then deliver the cargo to the importer.
The functions of an arrastre operator usually
include the following:
1) To receive, handle, care for, and deliver all
merchandise imported and exported, upon or
passing over government-owned wharves and
piers in the port;
2) To record or check all merchandise which may
be delivered to said port at shipside, and in
general; and
3) To furnish light, and water services and other
incidental services in order to undertake its
arrastre service. [Asian Terminals vs. Allied
Guarantee, 2015]
The operation of an arrastre operator starts on
and its responsibility for the merchandise and
goods begins from the time they are placed
upon the wharves or piers or delivered along
sides of ships. (West Wind vs. UCPB, 2013)
 Parties in Arrastre Contract
1. Republic of the Philippines
2. Arrastre Operator – private party awarded
the privilege of operating the arrastre
service.

The implementation of the management

contract affects “third parties,” e.g. Importer-
consignee and the carrier.
 Relationship between Consignee and
Arrastre Operator
The legal relationship between the consignee and the
arrastre operator is akin to that of a depositor and
warehouseman. The relationship between the consignee
and the common carrier is similar to that of the
consignee and the arrastre operator.

Since it is the duty of the ARRASTRE to take good care of

the goods that are in its custody and to deliver them in
good condition to the consignee, such responsibility also
devolves upon the CARRIER. Both the ARRASTRE and the
CARRIER are therefore charged with and obligated to
deliver the goods in good condition to the consignee.
(West Wind vs. UCPB, 2013)
In the performance of its obligations, an arrastre
operator should observe the same degree of
diligence as that required of a common carrier
and a warehouseman under Art. 1733 NCC
and sec. 3(d) of the Warehouse Receipts Law:
extraordinary diligence.
Being the custodian of the goods discharged
from a vessel, an arrastre operator’ s duty is to
take good care of the goods and to turn them
over to the party entitled to their possession.
[Summa Insurance vs. CA, 1996]
 Freight
Who will pay the freight?

1. Shipper – before or at the time he delivers

goods to carrier for shipment
2. Consignee (stipulation)
 Freight
• Accrual of freightage

– General rule: stipulations in the contract

– Exceptions: a) no stipulation; b) stipulation ambiguous
1. chartered by months/days: to run from
day of loading
2. charters with fixed period: upon very day
3. if freight charged according to weight,
payment shall be according to gross weight,
including weight of containers (Art. 659)
 Cases when freightage is not due
1) Jettisoned goods that are considered general
average loss;
2) Merchandise lost due to shipwreck or
stranding;
3) Goods lost due to seizure by pirates or
enemies
If freight paid in advance – same must be
returned (Arts. 660-661)
 Remedies of a carrier
for collection of freightage
1. Retaining lien – the carrier cannot be compelled to
deliver or surrender cargo until the freightage is
paid
2. Carrier’s lien – the carrier may deliver the cargo and
waive the retaining lien but will have a right of
preference over the cargo for 30 days (as amended
by Art. 2241, NCC)
3. Civil case for collection of sum of money

4. Consignation (Art. 369, CC)

Consignation is allowed in the ff cases:
a. consignee cannot be found
b. Consignee refuses to accept goods
c. Consignee refuses to pay freightage
 Primage – payment for the use of the
equipment belonging to the captain
 Demurrage – sum of money due by express
contract for the detention of the vessel in
loading or unloading beyond the time allowed
for that purpose in the charter party (fine)
 Lay days – days kept aside in a ship’s voyage
for loading and unloading
Loans on bottomry or respondentia
ARTICLE 719. A loan on bottomry or
respondentia shall be considered that which
the repayment of the sum loaned and the
premium stipulated, under any condition
whatsoever, depends on the safe arrival in
port of the goods on which it is made, or of
their value in case of accident.
 Loans on Bottomry
Bottomry is a contract whereby the owner of a
ship borrows for the use, equipment or repair
of the vessel, for a definite term, and pledges
the ship as security...
... with the stipulation that if the ship is
lost during the voyage or during the limited
time on account of the perils enumerated, the
lender shall lose his money. (Black’s Law
Dictionary)
 Loans on Respondentia
Where goods, or some part thereof, are
hypothecated as security for a loan, the
repayment of which is dependent upon
maritime risks. (usually in the form of a bond)

It is the borrower's personal responsibility which

is deemed to be the principal security for the
performance of the contract.
Note: The lender in a loan on respondentia does
not lose his capital should the ship perish due
to marine peril, so long as the goods subject
of loan survived or are saved...

BUT where the ship and the cargo on board

should disappear due to perils of the sea, the
lender on respondentia shall suffer loss oh his
capital.
 When simple loan applies
Art. 729. Should the goods on which the
money is taken not be subjected to risk,
the contract shall be considered a simple
loan xxx
1. If loaned amount is larger than the value of the object
liable for bottomry loan – on account of fraud by
borrower –
a) loan valid only for the amount at which object is
appraised by experts
b) Surplus principal shall be repaid as if it were a simple
loan, with legal interest thereon.

2. If a.) full amount of the loan in order to load the vessel

should not be used for cargo, or b.) given on goods if
all of them could not have been loaded,
- the balance will be considered as a simple loan
There is neither bottomry or respondentia if the
money borrowed is subject to repayment in
any event. (marine risk important)
The loans must be executed in accordance with the
form and manner required in the Code of
Commerce (Art. 720):

1. Public instrument
2. A policy signed by the contracting parties and
the broker taking part therein
3. Private instrument

To bind third persons: must be recorded in the

registry of vessels
 Authority to Constitute Loan
• Bottomry
1. Ship owner
2. Part owner (limited to interest)
3. Captain (also part owner)
Note: Captain (no interest) may enter into loan on
account of extreme necessity

• Respondentia
1. Cargo owner
2. Captain? VOID loan [Art. 617]
ARTICLE 731. The actions which may be brought
by the lender shall be extinguished by the
absolute loss of the goods on which the loan
was made, if said loss arose from an accident
of the sea at the time and during the voyage
designated in the contract, and should it be
proven that the cargo was on board.
EXCEPTIONS:

but this shall not take place if the loss were

1. caused by the inherent defect of the thing; or

2. through the fault or malice of the borrower, or
3. through barratry on the part of the captain, or
4. it were caused by damages suffered by the vessel as a
consequence of being engaged in contraband, or
5. if it arose through loading the merchandise on a vessel other
than that designated in the contract, unless this change should
have been made by reason of force majeure.

The proof of the loss is incumbent upon the person who received the
loan, as well as the proof of the existence in the vessel of the
goods declared to the lender as the object thereof.
 Barratry
 Any willful misconduct on the part of the
master or crew,
 in pursuance of some unlawful or fraudulent
purpose,
 without the consent of the owners, and
 to the prejudice of the owner’s interest
Art. 725. No loans on bottomry may
be made on the salaries of the
crew or on profits expected.
 Averages
ARTICLE 806. For the purposes of this Code the
following shall be considered averages:
1. All extraordinary or accidental expenses which
may be incurred during the navigation for the
preservation of the vessel or cargo, or both.
2. All damages or deterioration the vessel may
suffer from the time she puts to sea from the port
of departure until she casts anchor in the port of
destination, and those suffered by the
merchandise from the time it is loaded in the port
of shipment until it is unloaded in the port of
consignment.
 What are Considered as Averages
[Art. 806]
1. All extraordinary or accidental expenses which may be
incurred during the voyage for the preservation of the
vessel, cargo, or both
2. All damages or deterioration:
a. which the vessel may suffer:
i. from the time she puts to sea at the port of departure
ii. until she casts anchor at the port of destination b.
suffered by the goods:
iii. from the time they are loaded in the port of shipment
iv. until they are unloaded in the port of their consignment
 What are NOT averages?
ARTICLE 807. The petty and ordinary expenses of
navigation, such as pilotage of coasts and ports,
lighterage and towage, anchorage dues,
inspection, health, quarantine, lazaretto, and
other so-called port expenses, costs of barges,
and unloading, until the merchandise is placed on
the wharf, and any other expenses common to
navigation shall be considered ordinary expenses
to be defrayed by the shipowner, unless there is
a special agreement to the contrary.
The law on averages under the Code of
Commerce cannot be applied in determining
liability where there is negligence. [American
Home vs. CA, 1992]
 Claims not admissible
Art. 848. Claims for averages shall not be admitted if
they do not exceed 5% of the interest which the
claimant may have in the vessel or in the cargo if it is
GROSS average, and 1% of the goods damaged if
PARTICULAR average, deducting in both cases the
expenses of appraisal, unless there is an agreement
to the contrary.

5%↓ - gross
1% ↓- particular
 Kinds of Averages
1. Simple or Particular
2. General
 Particular Average
All the expenses and damage caused to the
vessel or to her cargo which have NOT inured
to the common benefit and profit of ALL the
persons interested in the vessel and her cargo
[Art. 809]
1. The damages suffered by the cargo from the time of its
embarkation until it is unloaded, either on account of the
nature of the goods or by reason of an accident at sea or
force majeure, and the expenses incurred to avoid and
repair the same.
2. The damages suffered by the vessel in her hull, rigging, arms,
and equipment, for the same causes and reasons, from the
time she puts to sea from the port of departure until she
anchored in the port of destination.
3. The damages suffered by the merchandise loaded on deck,
except in coastwise navigation, if the marine ordinances allow
it.
4. The wages and victuals of the crew when the vessel should be
detained or embargoed by a legitimate order or force
majeure, if the charter should have been for a fixed sum for
the voyage.
5. The necessary expenses on arrival at a port, in
order to make repairs or secure provisions.
6. The lowest value of the goods sold by the
captain in arrivals under stress for the
payment of provisions and in order to save the
crew, or to cover any other requirement of the
vessel against which the proper amount shall
be charged.
7. The victuals and wages of the crew during the
time the vessel is in quarantine.
8. The damage suffered by the vessel or cargo by
reason of an impact or collision with another, if it
were accidental and unavoidable. If the accident
should occur through the fault or negligence of
the captain, the latter shall be liable for all the
damage caused.
9. Any damage suffered by the cargo through the
faults, negligence, or barratry of the captain or of
the crew, without prejudice to the right of the
owner to recover the corresponding indemnity
from the captain, the vessel, and the freight.
The owner of the goods that suffered the
damage bears the loss. [Art. 810]
 Liquidation of Particular Average
Art. 869. The experts which the judge or court or
the persons interested may appoint, as the
case may be, shall proceed with the
examination and appraisment of the average
in the manner prescribed in Arts. 853 and 854,
Rules 2 to 7, in so far as they are applicable.
 General Average
All the damages and expenses which are
DELIBERATELY CAUSED in order to save the
vessel, her cargo, or both at the same time
from a REAL KNOWN risk. [Art. 811]
 Requisites of a General Average
1. There must be a common danger, a danger in
which ship, cargo and crew all participate
2. For the common safety or for the purpose of
avoiding an imminent peril, part of the vessel or
cargo or both is sacrificed deliberately
3. This attempt to avoid the imminent peril must
be successful in a sense that the vessel and
some of the cargo are saved
4. The expenses were incurred or damages were
afflicted after taking the proper legal steps and
authority [A. Magsaysay, Inc. vs. Agan, 1955]
 Common Danger
“means that both the ship and the cargo, after
being loaded, are subject to the same danger,
whether during the voyage, or in the port of
loading or unloading;
that the danger arises from accidents of the sea,
dispositions of authority, or faults of men,
provided that the circumstances producing the
peril should be ascertained and imminent or may
rationally be said to be certain or imminent.”
Note: even if there is a common peril, the same
may not justify a voluntary sacrifice if the
same can be easily be avoided by the ship
without sacrifice.

NO general average if there is no danger at all.

 Deliberate sacrifice
Normally made through jettison of cargo or part of ship.

a) Those which are on deck, beginning with those

which embarrass the handling of the vessel or
damage her, preferring, if possible the heaviest
ones and those of least utility and value
b) Those in the hold, always beginning with those of
the greatest weight and smallest value, to the
amount and number absolutely indispensable.
[Order of jettison, Art. 815]
Even if sacrifice is not made during voyage,
there is general average:
1. Sinking of vessel necessary to extinguish fire
in a port, roadstead, creek or bay;
2. Cargo is transferred to lighten the ship on
account of a storm to facilitate entry into a
port. [Arts. 816-817]
 Successful sacrifice
No general contribution can be divided if the
vessel or cargo sought to be saved were in fact
NOT saved.

“periculi imminentis evitandi causa” [a transfer

of peril from the whole to a particular portion
of the whole]
 Compliance with Legal Steps
Art. 813. In order to incur the expenses aand
cause the damages corresponding to gross
average, there must be a resolution of the
captain, adopted after deliberation with the
sailing mate and other officers of the vessel,
and after hearing the persons interested in
the cargo who may be present.
If the latter shall object, and the captain and
officers or a majority of them, or the captain,
if opposed to the majority, should consider
certain measures necessary, they may be
executed under his responsibility, without
prejudice to the right of the shippers to
proceed against the captain before the
competent judge or court, if they can prove
that he acted with malice, lack of skill, or
negligence.
If the persons interested in the cargo, being on
board the vessel, have not been heard, they
shall not contribute to the gross average, their
share being chargeable against the captain,
unless the urgency of the case should be such
that the time necessary for previous
deliberations was wanting.
Art. 814. The resolution adopted to cause the
damages which constitute general average must
necessarily be entered in the log book, stating the
motives and reasons for the dissent, should there
be any, and the irresistible and urgent causes
which impelled the captain if he acted on his own
accord.
In the first case the minutes shall be signed by all
the persons present ho could do so before taking
action, if possible; and if not, at the first
opportunity. In the second case, it shall be signed
by the captain and by the officers of the vessel.
In the minutes, and after the resolution, shall be
stated in detail all the goods jettisoned, and
mention shall be made of the injuries caused
to those kept on board.
The captain shall be obliged to deliver one copy
of these minutes to the maritime judicial
authority of the first port he may take, within
24 hours after his arrival, and to ratify it
immediately under oath.
It is the deliverance from an immediate peril, by
reason of a common sacrifice, that constitutes
the essence of a general average.
 Examples of General Average
1. The goods or cash invested in the redemption of the vessel or
cargo captured by enemies, privateers, or pirates, and the
provisions, wages, and expenses of the vessel detained during
the time the arrangement or redemption is taking place.
2. The goods jettisoned to lighten the vessel, whether they
belong to the vessel, to the cargo, or to the crew, and the
damage suffered through said act by the goods kept.
3. The cables and masts which are cut or rendered useless, the
anchors and the chains which are abandoned in order to save
the cargo, the vessel, or both.
4. The expenses of removing or transferring a portion of the
cargo in order to lighten the vessel and place her in condition
to enter a port or roadstead*, and the damage resulting
therefrom to the goods removed or transferred.
5. The damage suffered by the goods of the cargo
through the opening made in the vessel in order
to drain her and prevent her sinking.
6. The expenses caused through floating a vessel
intentionally stranded for the purpose of saving
her.
7. The damage caused to the vessel which it is
necessary to break open, scuttle, or smash in
order to save the cargo.
8. The expenses of curing and maintaining the
members of the crew who may have been
wounded or crippled in defending or saving the
vessel.
9. The wages of any member of the crew detained as
hostage by enemies, privateers, or pirates, and the
necessary expenses which he may incur in his
imprisonment, until he is returned to the vessel or to
his domicile, should he prefer it.
10. The wages and victuals of the crew of a vessel
chartered by the month during the time it should be
embargoed or detained by force majeure or by order of
the Government, or in order to repair the damage
caused for the common good.
11. The loss suffered in the value of the goods sold at
arrivals under stress in order to repair the vessel
because of gross average.
12. The expenses of the liquidation of the average.
Note: All the persons having an interest in the
vessel and cargo therein at the time of the
occurrence of the average shall contribute and
bear the loss. [Art. 812]

a) Ship owner
b) Cargo owners
c) Insurers of vessel/cargo [Art. 859/ secs. 166-167,
ICC]
d) Lenders on bottomry/ respondentia
The owners of goods sacrificed is entitled to
receive the general average contribution.
 Appraisal and Liquidation
Art. 851. At the instance of the captain, the
adjustment, liquidation, and distribution of
gross averages shall be held privately, with the
consent of all the parties in interest.
For this purpose, within 48 hours following the
arrival of the vessel at the port, the captain
shall call all the persons interested, in order
that they may decide as to whether the
adjustment or liquidation of the gross is to be
made by experts and liquidators appointed by
themselves, in which case it shall be done if
the interested persons agree.
Should an agreement not be possible, the
captain shall apply to the judge or court of
competent jurisdiction, who shall be the one
in the port where these proceedings are to be
held in accordance with the provisions of this
Code, or to the consul of the Philippines,
should there be one, and otherwise to the
local authority when they are to be held in a
foreign port.
Art. 853. After the experts have been appointed
by the persons interested, or by the judge or
court, and after the acceptance, they shall
proceed to the examination of the vessel...
separating those loses and damages from
those arising from the inherent defect of the
things.
With regard to merchandise, if the average
should be visible at a mere glance, the
examination thereof must be made before
they are delivered. Should it not be visible at
the time of unloading, said examination may
be made after delivery, provided it is done
within 48 hours from the unloading and
without prejudice to other proofs which the
experts may deem proper.
Art. 857. After the appraisment of the goods
saved has been concluded by the experts, as
well as that of the goods lost which constitute
the gross average, and after the approval of
the accounts of the same by the persons
interested or by the judge or court, the entire
record shall be turned over to the liquidator
appointed, in order that he may proceed with
the distribution of the average.
Art. 865. The distribution of the gross average
shall not be final until it has been agreed to, or
in the absence thereof, until it has been
approved by the judge or court after an
examination of the liquidation and a hearing
of the persons interested who may be
present, or of their representatives.
 Who collects?
Art. 866. After the liquidation has been
approved, it shall be the duty of the captain
to collect the amount of the distribution, and
he shall be liable to the owners of the goods
averaged for the damages they suffer through
his delay or negligence.
Art. 867. If the contributions should not pay the
amount of the assessment within the third
day after having been requested to do so, the
goods saved shall be attached, at the request
of the captain, and shall be sold to cover the
payment.
 York- Antwerp Rules*
The parties may by stipulation agree that the
Rules shall be applied.

*first codification of general average in 1890,

later modified [1974]
 Jason Clause
Rights to contribution in general average shall
not be affected, though the event which gave
rise to the sacrifice or expenditure may have
been due to the fault of one of the parties to
the adventure, but this shall not prejudice any
remedies or defences which may be open
against or to that party in respect of such
fault. [Rule D]
 Collisions
In Maritime Commerce, collision is an impact or
sudden contact of a vessel with another
whether both are in motion or one stationary
(“allision”).
 Zones in Collision
1) covers all the time up to the moment when the risk of collision
may be said to have begun. Within this zone, no rule is applicable
because none is necessary. Each vessel is free to direct its course
as it deems best without reference to the movements of the other
vessel.
2) covers the time between the moment when the risk of collision
begins and the moment when it has become a practical certainty.
[burden on the vessel required to keep away and avoid the
danger]
3) covers the time between the moment when collision has become
a practical certainty and the moment of actual contact [vessel
which has forced the privileged vessel into danger is responsible
even if the privileged vessel ha committed an error within that
zone – error in extremis]
 Rules on Liability

a. Fortuitous event/Force Majeure: Each vessel and her

cargo shall be liable for their own damage [Art. 830,
Code of Commerce]
b. Vessel forced to collide with another one by a third
vessel: Owner of third vessel shall indemnify for the
losses and damages caused, the captain thereof being
civilly liable to said owner [Art. 831, Code of
Commerce]
c. By reason of storm or other force majeure, vessel
properly anchored and moored collides with another:
The injury occasioned shall be looked upon as
particular average to the vessel run into. [Article 832,
Code of Commerce]
d. Culpable: The owner of the vessel at fault (through
fault, negligence, lack of skill of captain, sailing mate,
other members of complement) shall indemnify the
losses and damages suffered, after an expert
appraisal. [Art. 826, Code of Commerce]

e. Both vessels may be blamed for the collision: Each one shall
be liable for his own damages, and both shall be jointly
responsible for the losses and damages suffered by their
cargoes. [Art. 827, Code of Commerce].

f. Doctrine of Inscrutable Fault (it can not be decided which of

the two vessels was the cause of the collision): Each one
shall be liable for his own damages, and both shall be
jointly responsible for the losses and damages suffered by
their cargoes. [Art. 828, Code of Commerce]
Under the Doctrine of Inscrutable Fault,
neither of the carriers may go after the
other. The shipper may claim damages
against the ship owners and the captains
of both vessels, having been both
negligent.
 Presumption of collision
1. A vessel which being run into sinks
immediately;
2. A vessel obliged to make a port to repair
the damages caused by the collision is
lost during the voyage;
3. A vessel obliged to be stranded in order
to be saved
... shall be presumed as lost by reason of
collision.
 Protest is mandatory in maritime collisions.

Art. 835. The action for recovery of losses and

damages arising from collisions cannot be
admitted if a protest or declaration is not
presented within 24 hours before the
competent authority of the point where the
collision took place, or that of the first port of
arrival of the vessel, if in Philippine territory, and
to the consul of the Republic of the Philippines if
it occurred in a foreign country.
The absence of a protest cannot prejudice the:

1. Persons interested who were not on board

2. Persons interested who were not in a condition
to make known their wishes

With respect to damages caused to persons or

cargo [Art. 836]
 Limited Liability Rule
Art. 837. The civil liability incurred by the
shipowners in the cases prescribed in this
section, shall be understood as limited to the
value of the vessel with all her appurtenances
and freight earned during the voyage.
Art. 837 on collision of vessels is a mere
amplification of Art. 587 and 590 where
abandonment is a pre-condition. It is
considered a superfluity. [Luzon
stevedoring vs. CA, 1987]
Note: Contributory negligence and doctrine of
last clear chance are NOT applicable
because under Art. 827, each vessel must
suffer its own damage.
 Arrival under stress
... the arrival of a vessel at the nearest and most
convenient port instead of the port of
destination, if during the voyage the vessel
cannot continue the trip to the port of
destination.
It is lawful when the inability to continue voyage is
due to lack of provisions, well-founded fear of
seizure, privateers, pirates, or accidents of the
sea disabling it to navigate. [Art. 819]
Steps taken in determination of propriety of
an arrival under stress
a) The captain should determine during the voyage if there is a
well-founded fear of seizure, privateers [armed ships
commissioned by a government to harass enemy ships], lack of
provisions, any accident of the sea;
b) The captain shall then assemble the officers;
c) The captain shall summon the persons interested in the
cargo who may be present and who may attend but without
right to vote;
d) The officers shall determine and agree if there is well-
founded reason after examining the circumstances. The
captain shall have the deciding vote;
e) The agreement shall be drafted and the proper minutes shall
be signed and entered in the log book;
f) Objections and protests shall likewise be entered in the
minutes.
 Protest is necessary.
It is the duty of captain to present himself, when making a
port in distress, to the maritime authority if in PH and to
consul of PH if in a foreign country, before 24 hours
have elapsed, and to make a statement of the name
registry, and port of departure of the vessel, of its cargo,
and the cause of the arrival which declaration shall be
vised by the authority or the consul, if after examining
the same it is found to be acceptable, giving the
captain the proper certificate proving his arrival in
distress and the reasons therefor. In the absence of the
maritime authority or of the consul, the declaration must
be made before the local authority. [Art. 612 (8)]
 When unlawful
1) Lack of provisions arising from the failure to
take the necessary provisions for the voyage
according to usage and customs;
2) Risk of enemies, et al. not well known or
manifest and based on positive and
justifiable facts;
3) Defect of vessel due to improper repair; and
4) Malice, negligence, lack of foresight or skill
of captain. [Art. 820]
 Responsibility for expenses
Always for the account of the ship owner or ship
agent BUT they shall NOT be liable for the
damages which may be caused by the
shippers by reason of the arrival, provided the
latter is legitimate. [Art. 821]
Art. 825. The captain shall be
responsible for the damages caused
by his delay, if after the cause of the
arrival under stress has ceased, he
should not continue the voyage. xxx
 Charter Parties
Etymology: carta partita (“divided document”)

A charter party is a contract by virtue of which the

owner or agent of a vessel binds himself to
transport merchandise or persons for a fixed
price.

It is a contract by which the owner or agent of the

vessel leases for a certain price the whole or
portion of a vessel for the transportation of the
goods or persons from one port to another.
 Formal requirements
A charter party must be drawn in duplicate and signed by the contracting
parties. It shall contain, besides the conditions freely stipulated:
1. The kind, name, tonnage of the vessel
2. Her flag and port of registry
3. Name, surname, and domicile of the captain
4. Name, surname, and domicile of the ship agent, if the latter should make
the charter party
5. Name, surname, and domicile of the charterer
6. Port of loading and unloading (destination)
7. Capacity, number of tons or weight, or measurement which they
respectively bind themselves to load
8. Freight to be paid
9. Primage to be paid to the captain
10. Days agreed upon for loading and unloading
11. Lay days and extra lay days to be allowed and the demurrage for each of
them to be paid (Art. 625)
Towage is not a charter party. It is a contract for
the hire of services by which a vessel is
engaged to tow another vessel from one port
to another for consideration.
 Parties
1. Charterer or charter party (who may subcharter the vessel if not prohibited
in original charter)
2. Shipowner
a) Part owners of vessel
b) Ship Agent? General Rule: Not allowed
Exceptions: 1.) authorized by owner/co-owners
2.) extended to him in certificate of appointment (Art. 598)
a) Captain/master? He has inherent power into a contract but only in the
event of absence of ship agent or consignee, and only in accordance with
instructions of agent/owner.
Effect of violation of order? Validity of charter not affected but
agent/owner shall have right of action against erring
captain. (Art. 655)
 Kinds of Charter Parties
1. Bareboat or Demise Charter
2. Contract of Affreightment
a) Time Charter
b) Voyage/ Trip Charter
 Bareboat/ Demise Charter
Under the demise or bareboat charter of the vessel, the
charterer will generally be regarded as the owner for the
voyage or service stipulated.

The charterer mans the vessel with his own people and
becomes the owner pro hac vice (just for that one
particular purpose only), subject to liability to others for
damages caused by negligence.

To create a demise, the owner of a vessel must completely

and exclusively relinquish possession, command and
navigation thereof to the charterer, anything short of such
a complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all.
The charterer takes over the ship, lock, stock
and barrel. As the shipowner is not normally
required to provide for a crew, the charterer
gains possession of the vessel “bare” i.e.
without a crew (hence, the term “bareboat”)
The bareboat charterer assumes the rights and
obligations of the shipowner in relation to
third persons who may have dealt with him or
with the vessel.
NOTE: In a bareboat or demise charter, the
common carrier is converted to private carrier,
at least insofar as the particular voyage
covering the charter party is concerned.
(Planters Products vs. CA, 1993)
 Contract of Affreightment
One in which the owner of the vessel leases part or
all of its space to haul goods for others.

It is a contract for special service to be rendered by

the owner of the vessel and under such contract
the general owner retains the possession,
command and navigation of the ship, the
charterer or freighter merely having use of the
space in the vessel in return for his payment of
the charter hire.
In a contract of affreightment, the common
carrier is NOT converted into a private carrier.
 Time Charter

It is a contract of affreightment wherein the

vessel is let for a fixed day or for a
determined number of days or months.
What the time-charterer acquires is the right to
utilize the carrying capacity and facilities of
the vessel and to designate her destinations
during the term of the charter.
 Voyage/ Trip Charter

A contract of affreightment wherein the vessel is

let for a particular or single voyage.
In both cases, the charter-party provides
for the hire of the vessel only, either for
a definite period of time or for a single
or consecutive voyage, the shipowner
to supply ship’s stores, pay for the
wages of the master of the crew, and
defray the expenses for the
maintenance of the ship. (Caltex vs.
Sulpicio, 1999)
The voyage remains under the responsibility of
the carrier and it is answerable for the loss of
goods received for transportation. The
charterer is free from liability to third persons
in respect of the ship (Philam vs. Heung-A,
2014)
 Does a charter party agreement turn a
common carrier into a private one?
It is only when the charter includes both the vessel
and its crew, as in a bareboat or demise, that a
common carrier becomes private, at least insofar
as the particular voyage covering the charter
party concerned.
Indubitably, a shipowner in a time or voyage charter
retains possession and control of the ship,
although her holds may, for the moment, be the
property of the charterer. (Planters Products vs.
CA, 1993)
 Rescission of Charter Parties
The charterer may rescind the charter party if:

1. Before loading, he should not agree with that stated in the

certificate of tonnage or there be error in the statement of
the flag
2. Vessel not placed in his disposal within period agreed upon
3. Vessel should return to port of departure on account of risk
from pirates, enemies, or bad weather, and shippers should
agree to unload
4. Vessel should make a port during the voyage to make urgent
repairs, and charterers should prefer to dispose of the
merchandise (Art. 688)
The ship owner may rescind the charter party if:

1) The charterer, at the termination of the extra lay

days, does not place the cargo alongside the
vessel;
2) He should sell it before the charterer has begun
loading, and the purchaser should load for his
own (if not, charter party shall be respected but
seller shall indemnify buyer) [Art. 689]
The charter party shall be rescinded if, before the vessel puts to
sea from port of departure, any of the following cases should
occur:

1. a declaration of war or interdiction of commerce with the

power to whose ports the vessel was to make its voyage;
2. blockade of the port of destination or breaking out of an
epidemic after contract was executed;
3. prohibition to receive merchandise at said port;
4. indefinite detention by reason of an embargo of the vessel
by order of government or for any other reason independent
of the will of the ship agent.
5. inability of the vessel to navigate without fault of the captain
or ship agent. [Art. 690]
 Carriage of Goods by Sea Act
(Commonwealth Act No. 65)

COGSA is a special law that governs all contracts

of carriage of goods by sea between or to and
from the Philippine ports.
The COGSA was passed by the U.S. Congress on
April 16, 1936 (Public Act 521); later adopted
by the Philippine Commonwealth on October
22, 1936 (C.A. 65)

BUT NCC is the primary law on goods

transported from a foreign port to PH
a. If the common carrier is coming to the Philippines:
First: Civil Code
Second: COGSA (in foreign trade)
Third: Code of Commerce

b. If the private carrier is coming to the Philippines:

First: COGSA
Second: Code of Commerce
Third: Civil Code (excluding rules on common carriers)

c. If the private or common carrier is from the Philippines

to a foreign country: Apply the law of the foreign
country [per Art. 1753, CC] UNLESS the parties make
COGSA applicable
 American Insurance Co., vs.
Compania Martima, 1967
A certain cargo was shipped in NY aboard MS
Toreador (Macondray was general agent in
PH), with freight prepaid to Cebu City.
Inasmuch as the final port of call was Manila,
the carrier transhipped the cargo after its
discharge in Manila, aboard MS Siquijor, an
inter-island vessel. The shipment was
discharged in Cebu, short of 2 pieces of cargo.
Is the COGSA applicable considering that the
transhipment was made via an interisland
vessel?

NY  Manila  Cebu
Yes. The transhipment from Manila to Cebu was
not a separate transaction from that of
originally entered into by Macondray. It was
part of Macondray’s obligation under the
contract of carriage.
 Duties of a Carrier
Sec 3 (1). The carrier shall be bound before and
at the beginning of the voyage to exercise due
diligence to –
a) Make the ship seaworthy
b) Properly man, equip, and supply the ship;
c) Make the holds, refrigerating and cooling
chambers, and all other parts of the ship in
which goods are carried, fit, and safe for their
reception, carriage, and preservation.
(2) The carrier shall properly and carefully load,
handle, stow, carry, keep, care for, and
discharge the goods carried.
(3) After receiving the goods into his carrier, or
the master or agent of the carrier, shall, on
demand of the shipper, issue to the shipper a
BOL...
(4) Such BOL shall be prima facie evidence of the
receipt by the carrier of the goods...
(8) Any clause, covenant, or agreement in a
contract of carriage relieving the carrier of the
ship from liability for loss or damage to or in
connection with the goods, arising from
negligence, fault, or failure in the duties and
obligations provided in this section or
lessening such liability otherwise than as
provided in this Act, shall be null and void and
of no effect.
 Defenses and Immunities

Defenses or immunities under Sec. 4 that are

inconsistent with or are not contemplated under
Art. 1734 NCC and other provisions are already
deemed repealed.

Example: Sec. 4(1) [carrier not liable for loss arising

from unseaworthiness] vis-a-vis Art. 1734 NCC
[only if it can show proof that unseaworthiness
caused exclusively by any of those specified in
1734]
Note: The shipowner and ship agent may waive
the benefit of any of the defenses in its favor
(Section 5) provided such is embodied in BOL

Example: carrier may assume liability even if loss

due to defective packaging
 Limitation of Liability

(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with
the transportation of goods in an amount exceeding $500 per
package of lawful money of the United States, or in case of
goods not shipped in packages, per customary freight unit, or
the equivalent of that sum in other currency, unless the
nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading, shall be prima
facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master or agent
of the carrier, and the shipper another maximum
amount than that mentioned in this paragraph
may be fixed: Provided, that such maximum shall
not be less than the figure above named. In no
event shall the carrier be liable for more than the
amount of damage actually sustained. Neither
the carrier nor the ship shall be responsible in
any event for loss damage to or in connection
with the transportation of the goods if the nature
or value thereof has been knowingly and
fraudulently misstated by the shipper in the bill of
lading.
 Limitation of Liability
Under Sec. 4(5), the limit is set at a maximum of
$500 per package or customary freight unit in the
absence of a higher declaration. The condition is
deemed part of the bill even if not expressly
stated.

Note: The declaration made by the shipper stating a

amount bigger than $500 per package will make
the carrier liable for such bigger amount.
The Civil Code does not limit the liability of the common
carrier to a fixed amount per package. In all matters not
regulated by the Civil Code, the right and the obligations
of common carriers shall be governed by the Code of
Commerce and special laws.

Thus, the COGSA, which is suppletory to the provisions of

the Civil Code, supplements the latter by establishing a
statutory provision limiting the carrier's liability in the
absence of a shipper's declaration of a higher value in the
bill of lading. (Belgian Overseas vs. First Philippines,
2002)
 Notice of Loss or Damage
Notice and the general nature of the loss or
damage must be given in writing to the carrier
or his agent at the port of discharge before or
at the time of the removal of the goods. [Sec.
3 (6)]
If damage is not patent or cannot be ascertained
from the package, the shipper should file the
claim with the carrier within three days from
delivery.
Sec. 3 (6) Unless notice or loss or damage and
the general nature of such loss or damage by
given in writing to the carrier or his agent at
the port of discharge or at the time of the
removal of the goods into the custody of the
person entitled to delivery thereof under the
contract of carriage, such removal shall be
prima facie evidence of the delivery by the
carrier of the goods as described in the bill of
lading.
If the loss or damage is not apparent, the notice must be
given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the
receipt for the goods given by the person taking delivery
thereof.
The notice in writing need not be given if the state of the
goods has at the time of their receipt been the subject
of joint survey or inspection.
In any event the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or
the date when the goods should have been delivered:
Provided, that, if a notice of loss or damage, either
apparent or concealed, is not given as provided for in
this section, that fact shall not affect or prejudice the
right of the shipper to bring suit within one year after
the delivery of the goods or the date when the goods
should have been delivered.
 Notice of Claim
• Period to File Claim
a) If the damage is apparent, the claim should
be filed IMMEDIATELY upon discharge of the
goods.
b) The claim must be made within 3 days from
delivery if the damage is NOT apparent.
[Section 3 (6)]
 Failure to file notice of claim within
the given period will NOT bar recovery.
Regardless of whether the notice of loss or
damage has been given, the shipper can still
bring an action to recover said loss within 1
year after delivery of the goods.
Note: Notice of claim need not be given if the
state of the goods, at the time of their receipt,
has been the subject of a joint inspection or
survey. [sec. 3(6); Belgian Overseas vs. Phil.
First, 2002]
 Period of Prescription
(Asked in 92, 95, 00 and 04 Bar Exams)

In any event the carrier and the ship shall be

discharged from all liability in respect of loss or
damage unless suit is brought within one year
after delivery of the goods or the date when the
goods should have been delivered.
The absence of a notice shall not affect or prejudice
the right of the shipper to bring suit within one
year after the delivery of the goods or the date
when the goods should have been delivered.
[Sec. 3 (6)]
 Prescription
The action for damages must be filed within 1
year from discharge of the goods.

Note: Period not suspended by an extra-judicial

demand (Art. 1155 NCC)
Reason: extends the period and permits
delays in the settlement of questions
affecting transportation, contrary to intent
of law (See DOLE Phil vs. Maritime, 1987)
Note: 1 year-period refers to “loss” of the cargo

A thing is lost when:

a) it perishes;
b) goes out of commerce;
c) disappears in such a way that its existence is
unknown or it cannot be recovered.
Where the imported goods were delivered to
the wrong person, the 1 year time limitation
in par 4, Sec. 3(6) of COGSA, referring to loss
or damage, does NOT apply. Said 1 year period
of limitation is designed to meet the
exigencies of maritime hazards. (Ang vs.
American Steamship, 1967)

Delivery to wrong person – prescriptive period is

10 years because of breach of contract
The 1 year-prescriptive period can be extended
by agreement of the parties. (Cua vs. Wallen,
2012)

Note: The insurer in the exercise of its right of

subrogation is bound by the prescriptive
period. (Filipino Merchant vs. Alejandro, 1986)
It has been held that not only the shipper, but
also the consignee or legal holder of the bill
may invoke the prescriptive period. However,
the COGSA does not mention that an arrastre
operator may invoke the prescriptive period of
one year; hence, it does not cover the
arrastre operator. Insurance Company of
North America vs. Asian Terminals, Inc., G.R.
No. 180784, February 15, 2012.
CONTRA: Overland transportation and
Coastwise Shipping
Under Art. 366 of the Code of Commerce, an action
for damages is barred if the goods arrived in
damaged condition and the shipper files no claim
within the following period:
1. The claim for damage must be filed
IMMEDIATELY if the damage is APPARENT
(oral/written); or
2. The claim for damage must be made within 24
hours from RECEIPT of the merchandise if the
damage is NOT apparent. (Lorenzo Shipping vs.
Chubb, 2004)
Article 366 does not apply to
misdelivery of goods.
 Notice of Claim Mandatory

Non-filing of the claim BARS recovery, even if an

action therefore is meritorious. [condition
precedent]

The whole purpose of the law is to give the

carrier an opportunity to ascertain whether
the claim is well-founded.
Note: The carrier may WAIVE the notice of claim
requirement.
Instances:
1. Failure to plead as defense in answer to
complaint and the defense of absence of
such notice cannot be raised for the first time
on appeal;
2. Payment by the shipper of the transport
charges without protest knowing that there is
damage. [Art. 366 (2); Southern Lines vs. CA,
1962]
 Commencement Period
There must be delivery of the cargo by the
carrier to the consignee at the place of
destination. (Lorenzo Shipping vs. Chubb,
2004)
The period prescribed in Art. 366 may be subject
to modification by the agreement of the
parties. [Philam General vs. Sweet Lines, 1992]
If there is doubt or dispute as to condition of
goods, the goods shall be:
1. Examined by experts appointed by the
parties;
2. In case of disagreement, examined by a third
one appointed by judicial authority;
3. Deposited in a safe warehouse by order of
judicial authority if parties should not agree
with expert opinion and they do not settle
their differences [Art. 367]
 Prescription
If the claim is filed, but carrier refuses to pay:
enforce carrier’s liability in court by filing a
case:

6 years – no written contract (Art. 1145, NCC)

10 years – written contract (Art. 1144)

It’ s not how long the journey is,
it’ s the drive to the finish that
matters!

Good Luck!