Transportation Law Reviewer SAN BEDA

San Beda College of Law
54
MEMORY AID
IN
COMMERCIAL LAW
TRANSPORTATION LAWS
CONTRACT
OF
TRANSPORTATION/
CARRIAGE
A contract whereby a person, natural or
juridical, obligates to transport persons, goods,
or both, from one place to another, by land, air
or water, for a price or compensation.
Classifications:
1. Common or Private
2. Goods or Passengers
3. For a fee (for hire) or Gratuitous
4. Land, Water/maritime, or Air
5. Domestic/inter-island/coastwise or
International/foreign
It is a relationship which is imbued with the
public interest.
COMMON CARRIER
Persons, corporations, firms or associations
engaged in the business of carrying or
transporting passengers or goods or both, by
land, water, or air, for compensation, offering
their services to the public (Art. 1732, Civil
Code).
Art. 1732 of the New Civil Code avoids any
distinction between one whose principal
business activity is the carrying of persons or
goods or both and one who does such carrying
only as an ancillary activity (sideline). It also
avoids a distinction between a person or
enterprise offering transportation service on a
regular or scheduled basis and one offering
such service on an occasional, episodic or
unscheduled basis.
Neither does the law distinguish between a
carrier offering its services to the general public
that is the general community or population and
one who offers services or solicits business only
from a narrow segment of the general
population.
A person or entity is a common carrier even
if he did not secure a Certificate of Public
Convenience (De Guzman vs. CA, 168 SCRA
612).
It makes no distinction as to the means of
transporting, as long as it is by land, water or air.
It does not provide that the transportation should
be by motor vehicle. (First Philippine Industrial
Corporation vs. CA)

One is a common carrier even if he has no
fixed and publicly known route, maintains no
terminals, and issues no tickets (Asia Lighterage
Shipping, Inc. vs. CA).
Characteristics:
1. Undertakes to carry for all people
indifferently and thus is liable for refusal
without sufficient reason (Lastimoso vs.
Doliente, October 20, 1961);
2. Cannot lawfully decline to accept a
particular class of goods for carriage to
the prejudice of the traffic in these goods;
3. No monopoly is favored (Batangas Trans.
vs. Orlanes, 52 PHIL 455);
4. Provides public convenience.
PRIVATE CARRIER
One which, without being engaged in the
business of carrying as a public employment,
undertakes to deliver goods or passengers for
compensation. (Home Insurance Co. vs.
American Steamship Agency, 23 SCRA 24)
TESTS WHETHER CARRIER IS COMMON
OR PRIVATE:
The SC in First Philippine Industrial
Corporation vs. CA (1995) reiterated the
following tests:
1. It must be engaged in the business of
carrying goods for others as a public
employment and must hold itself out as
ready to engage in the transportation of
goods generally as a business and not as
a casual occupation;
2. It must undertake to carry goods of the
kind to which its business in confined;
3. It must undertake to carry by the method
by which his business is conducted and
over its established roads; and
4. The transportation must be for hire.
In National Steel Corp. vs. CA (1997) the SC
held that the true test of a common carrier is the
carriage of goods or passengers provided it has
space for all who opt to avail themselves of its
transportation for a fee.
COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula (Banking Laws); Robespierre CU (Law
on Intellectual Property)
55
MEMORY AID
COMMON CARRIER
PRIVATE
CARRIER
1. As to availability
Holds
himself Contracts with
out for all people particular
indiscriminately individuals
or
groups only
2. As to required diligence
Extraordinary
Ordinary
diligence
is diligence
is
required
required
3. As to regulation
Subject to State Not subject to
regulation
State regulation
4. Stipulation limiting liability
Parties may not Parties may limit
agree on limiting the
carriers
the
carriers liability, provided
liability except it is not contrary
when provided to law, morals or
by law
good customs
5. Exempting circumstance
Prove
caso
fortuito,
extraordinary
Art. 1174 NCC
diligence
and
Art. 1733, NCC
6.Presumption of negligence
There
is
a No presumption
presumption of of
fault
or
fault
or negligence
negligence
7.Governing law
Law on common Law
on
carriers
obligations and
contracts
GOVERNING LAWS
A. Domestic/inter-island/coastwise
Applicable to Land, Water, and Air
transportation
1. Civil Code - primary
2. Code of Commerce (Arts. 349, 379, 573734, 580, 806-845) - suppletory
B. International/foreign/overseas
(Foreign
country to Philippines)
Applicable to Water/maritime and Air
transportation
The law of the country of destination
IN
COMMERCIAL LAW
generally applies.
1. Civil Code - primary
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of Goods by
Sea Act (COGSA)
b. Air: Warsaw Convention
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT
OF
EXTRAORDINARY
DILIGENCE
Rendition of service with the greatest skill and
utmost foresight. (Davao Stevedore Co. v.
Fernandez)
Rationale:
1. From the nature of the business and for
reasons of public policy (Art. 1733)
2. Relationship of trust
3. Business is impressed with a special
public duty
4. Possession of the goods
5. Preciousness of human life
A common carrier is not an absolute insurer of
all risks of travel.
COVERAGE
1. Vigilance over goods (Arts. 1734-1754); and
2. Safety of passengers (Arts. 1755-1763).
PASSENGER
A person who has entered into a contract of
carriage, express or implied, with the carrier.
They are entitled to extraordinary diligence from
the common carrier.
The following are not considered passengers,
and are entitled to ordinary diligence only:
a. One who has not yet boarded any part of
a vehicle regardless of whether or not he
has purchased a ticket;
b. One who remains on a carrier for an
unreasonable length of time after he has
been afforded every safe opportunity to
alight;
c. One who has boarded by fraud, stealth,
or deceit;
d. One who attempts to board a moving
vehicle, although he has a ticket, unless
the attempt be with the knowledge and

56
MEMORY AID
consent of the carrier;

e. One who has boarded a wrong vehicle,
has been properly informed of such fact,
and on alighting, is injured by the carrier;
f. Invited guests and accommodation
passengers. (Lara vs. Valencia)
g. One who rides any part of the vehicle
which is unsuitable or dangerous or
which he knows is not designed or
intended for passengers.
DEFENSES OF A COMMON CARRIER IN THE
CARRIAGE OF GOODS
1. CASO FORTUITO/FORCE MAJEURE
Requisites:
a. Must be the proximate and only cause of
the loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after the
occurrence of the disaster (Art. 1739)
c. Carrier has not negligently incurred in
delay in transporting the goods (Art. 1740)
Fire is not considered a natural disaster or
calamity as it arises almost invariably from some
act of man. (Eastern Shipping Lines Inc. vs.
IAC)
Mechanical defects are not force majeure if
the same was discoverable by regular and
adequate inspections. (Notes and Cases on the
Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.120122)
2. ACTS OF PUBLIC ENEMY
Requisites:
a. Must be the proximate and only cause of
the loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after the
act causing the loss, deterioration or
destruction of the goods (Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR
OWNER
a. Sole and proximate cause: absolute
defense
b. Contributory: partial defense. (Art. 1741)
4. CHARACTER OF THE GOODS OR
DEFECTS IN THE PACKING OR IN THE
IN
COMMERCIAL LAW
CONTAINER
Even if the damage should be caused by the
inherent defect/character of the goods, the
common carrier must exercise due diligence to
forestall or lessen the loss. (Art. 1742)
The carrier which, knowing the fact of improper
packing of the goods upon ordinary observation,
still accepts the goods notwithstanding such
condition, is not relieved of liability or loss or
injury resulting therefrom. (Southern Lines, Inc.
v. CA, 4 SCRA 258)
5. ORDER OR ACT OF PUBLIC AUTHORITY
Said public authority must have the power to
issue the order (Art. 1743). Consequently, where
the officer acts without legal process, the
common carrier will be held liable. (Ganzon v.
CA 161 SCRA 646)
Diligence in the selection and supervision of
employees under Article 2180 of the Civil Code
cannot be interposed as a defense by the
common carrier because the liability of the
carriers arises from the breach of the contract of
carriage. The defense under said articles is
applicable to negligence in quasi-delicts under
Art. 2176. (Del Prado v. Manila Electric Co., 52
Phil 900)
LIABILITY OF A COMMON CARRIER FOR
DEATH OR INJURIES TO PASSENGERS DUE
TO ACTS OF ITS EMPLOYEES AND OTHER
PASSENGERS OR STRANGERS
FOR ACTS OF
FOR ACTS OF
OTHER
ITS
PASSENGERS
EMPLOYEES
OR
STRANGERS
Required diligence and defense
Extraordinary
Ordinary
diligence
diligence
Nature of liability
Tort; however,
Not absolute;
The employee limited by Art.
must be on duty 1763
at the time of
the
act.
(Maranan
v.
Perez)

57
MEMORY AID
The carrier is liable when its personnel

allowed a passenger to drive the vehicle
causing it to collide with another vehicle
CARRIAGE OF GOODS
IN
COMMERCIAL LAW
resulting to the injuries suffered by the other

passengers. (MRR vs. Ballesteros, 16 SCRA
641)
CARRIAGE OF PASSENGERS
Parties
1. Common carrier
2. Shipper
3. Consignee
1. Common carrier
2. Passenger
Cause of liability
Delay in delivery, loss, destruction,
Death or injury to the passengers
or deterioration of the goods
Duration of liability
From the time the goods are
unconditionally
placed
in
the
possession of, and received by the
carrier for transportation until the
same are delivered actually or
constructively by the carrier to the
consignee or to the person who has
the right to receive them. (Art. 1736)
It remains in full force and effect
even when they are temporarily
unloaded or stored in transit unless
the shipper or owner has made use
of the right of stoppage in transitu.
(Art. 1737)
It continues to be operative even
during the time the goods are stored
in a warehouse of the carrier at the
place of destination until the
consignee has bee advised of the
arrival of the goods and has had
reasonable opportunity thereafter to
remove them or otherwise dispose
of them. (Art. 1738)
Delivery of goods to the custom
authorities is not delivery to the
consignee. (Lu Do v. Binamira, 101
Phil 120)
The duty of a common carrier to

provide safety to its passengers so
obligates it not only during the
course of the trip, but for so long as
the passengers are within its
premises and where they ought to
be in pursuance to the contract of
carriage. (LRTA v. Navidad, [2003])
All persons who remain on the
premises within a reasonable time
after leaving the conveyance are to
be deemed passengers, and what is
a reasonable time or a reasonable
delay within this rule is to be
determined
from
all
the
circumstances, and includes a
reasonable time to see after his
baggage and prepare for his
departure. (La Mallorca v. CA, 17
SCRA 739 ; Abiotiz Shipping
Corporation v. CA, 179 SCRA 95)
It is the duty of common carriers of
passengers
to
stop
their
conveyances a reasonable length of
time in order to afford passengers
an opportunity to enter, and they are
liable for injuries suffered from the
sudden starting up or jerking of their
conveyances while doing so. The
duty which the carrier of passengers
owes to its patrons extends to
persons boarding the cars as well
as to those alighting therefrom
(Dangwa Trans Co., Inc. vs. CA 202
SCRA 574).

58
MEMORY AID
IN
COMMERCIAL LAW
Presumption of negligence
Art.1735 Civil Code
Art.1755 Civil Code
Reason: As to when and how goods Reason: The contract between the
were damaged in transit is a matter passenger and the carrier imposes
peculiarly within the knowledge of on the latter the duty to transport
the carrier and its employees. the passenger safely; hence the
(Mirasol v. Dollar, 53 PHIL 124)
burden of explaining should fall on
Mere proof of delivery of goods to the carrier.
a carrier in good order and the
subsequent arrival of the same
goods at the place of destination in
bad order makes for a prima facie
case against the carrier. (Coastwise
Lighterage Corp. v. CA, 245 SCRA
796)
Defenses
1. Ordinary
circumstance:
Exercise of extraordinary
diligence (Art. 1735)
2. Special circumstances:
a. Flood,
storm,
earthquake, lighting, or
other natural disaster or
calamity
(plus
force
majeure)
b. Act of the public enemy
in
war,
whether
international or civil
c. Act or omission of the
shipper or the owner of
goods
d. The character of the
goods or defects in the
packing
or
in
the
containers
e. Order
or
act
of
competent
public
authority (Art. 1734)
1. Exercise of extraordinary
diligence (Art. 1756)
2. Caso fortuito

59
MEMORY AID
IN
COMMERCIAL LAW
Valid stipulations
1. Reduction of degree of diligence
to ordinary diligence, provided it be:
a) In writing, signed by the
shipper or owner;
b) Supported by a valuable
consideration other than the
service rendered by the
carriers; and
c) Reasonable, just and not
contrary to public policy. (Art.
1744)
2. Fixed amount of liability: A
contract fixing the sum to be
recovered by the owner or shipper
for the loss, destruction or
deterioration of the goods, if it is
reasonable and just under the
circumstances and has been fairly
and freely agreed upon. (Art. 1750)
3. Limited liability for delay: An
agreement limiting the common
carriers liability for delay on account
of strikes or riots (Art. 1748)
4. Stipulation limiting liability to the
value of the goods appearing in the
bill of lading, unless the shipper or
owner declares a greater value. (Art.
1749)
Stipulation limiting liability when a

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

carriage of the goods may be
reduced by only one degree, from
extraordinary to ordinary diligence or
diligence of a good father of a family.
(Art. 1744, Art. 1745, no. 4)
Void stipulations
3. That the carrier need not
observe any diligence in the Dispensing with or lessening the
custody of the goods;
extraordinary responsibility of a
4. That the carrier shall exercise a common carrier for the safety of
degree of diligence less than that of passengers imposed by law by
a good father of a family over the stipulation, by posting of notices, by
movable transported;
statements on tickets or otherwise.
5. That the carrier shall not be (Art. 1757)
responsible for the acts or
omissions of his or its employees;
6. That the carriers liability for acts
committed by thieves or robbers
who do not act with grave or
60
MEMORY AID
IN
COMMERCIAL LAW
irresistible threat, violence or force

is dispensed with or diminished;
7. That
the
carrier
is
not
responsible for the loss, destruction
or deterioration of the goods on
account of the defective condition of
the car, vehicle, ship or other
equipment used in the contract of
carriage. (Art. 1745)

RULES ON PASSENGERS BAGGAGE

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

arises from quasi-delict. (Fabre vs. CA)
LIMITATIONS AS
INVALID AS
BEING
CONTRARY TO
PUBLIC POLICY
1.
One
exempting
the
carrier from any
and all liability for
loss or damage
occasioned by its
own negligence.
2. An unqualified
limitation
of
liability to an
agreed valuation.
TO CARRIERS LIABILITY
VALID &
ENFORCEABL
E
1. One limiting
the liability of
the carrier to
an
agreed
valuation,
unless
the
shipper
declares
a
higher
value
and pays a
higher rate of
freight
(H.E. Heacock
Company vs.
Macondray &
Company Inc.)
However, the carrier cannot limit its liability for

injury to, or loss of, goods shipped where such
injury or loss was caused by its own negligence.
(Shewaram vs. PAL, 17 SCRA 606)
SPECIAL RULES ON LIABILITES OF AIRLINE
CARRIERS
1. In case of flight diversion due to bad weather
or other circumstances beyond the pilots
control, the relation between the carrier and the
passenger continues until the latter has been
landed at the port of destination and has left the
carriers
premises.
The
carrier
should
necessarily exercise extraordinary diligence in
safeguarding the comfort, convenience and
safety of its stranded passengers until they have
reached their final destination. (Philippine
Airlines vs. CA, 226 SCRA 423)
2. Even where overbooking of passengers is
allowed as a commercial practice, the airline
company would still be guilty of bad faith and
still be liable for damages if it did not properly
inform passenger that it could breach the
contract of carriage even if they were confirmed
passengers. (Zalamea vs. CA, 228 SCRA 23)
3. An open-dated ticket constitutes a complete
contract between the carrier and passenger.
Hence, the airline company is liable if it refused
to confirm a passengers flight reservation.
(Singson vs. CA, 282 SCRA 149)

4. An airline company which issued a confirmed
ticket to a passenger covering successive trips
on different airlines can be held liable for
damages occasioned by bumping off by one of
the successive airlines. (Lufthansa German
Airlines vs. CA, 238 SCRA 290)
5. An airline ticket providing that carriage by
successive air carriers is to be regarded as a
single operation is to make the issuing carrier
liable for the tortuous conduct of the other
carrier. A printed provision in the ticket limiting
liability only to its own conduct is not enough to
rebut that liability. (KLM Royal Dutch Airlines vs.
CA, 65 SCRA 237)
II. CODE OF COMMERCE
A. OVERLAND TRANSPORTATION
(Arts. 349-379)
Applicability
1.
Domestic
land
and
water/maritime
transportation. (Pandect of Commercial Law
and Jurisprudence, Justice Jose Vitug, 1997
ed.)
2. Domestic Air Transportation. (Commercial
Law Review, Cesar Villanueva, 2004 ed.)
IMPORTANT CONCEPTS:
1. Bill of lading
2. Obligations of the carrier
3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
BILL OF LADING
The written acknowledgment of receipt of
goods and agreement to transport them to a
specific place to a person named or to his order.
Rules:
1. It is not indispensable for the creation of a
contract of carriage. (Compania Maritima vs.
Insurance Company of North America, 12 SCRA
213)
2. Ambiguity is construed against the carrier, the
contract being one of adhesion.
3. The consignee, although the instrument is
oftentimes drawn up only by the consignor and
carrier, becomes bound by all the stipulations
contained therein by making a claim for loss on
the basis of said bill of lading. (Sea-Land
Services Inc. vs. IAC)

4. The right of a party to recover for loss of
shipment consigned to him under a bill of lading
drawn up only by and between the shipper and
the carrier, springs from either a relation of
agency between him and the shipper, or his
status as stranger in whose favor some
stipulation is made in said contract, and who
becomes a party thereto when he demands
fulfillment of that stipulation. (Art. 1311 (2),
(Mendoza vs. PAL Inc.)
5. Acceptance of the bill of lading without
dissent raises the presumption that all the terms
therein where brought to the knowledge of the
shipper and agreed to by him and, in the
absence of fraud or mistake; he is estopped
from thereafter denying that he assented to
such terms. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed. p.261)
Kinds:
1. On board - issued when the goods have
been actually placed aboard the ship with
very reasonable expectation that the
shipment is as good as on its way.
2. Received - one in which it is stated that the
goods have been received for shipment
with or without specifying the vessel by
which the goods are to be shipped.
3. Negotiable - one in which it is stated that
the goods referred to therein will be
delivered to the bearer or to the order of
any person named therein.
4. Non-negotiable - One in which it is stated
that the goods referred to therein will be
delivered to a specified person.
5. Clean One which does not indicate any
defect in the goods.
6. Foul One which contains a notation
thereon indicating that the goods covered
by it are in bad condition.
7. Spent One which covers goods that
already have been delivered by the carrier
without a surrender of a signed copy of the
bill.
8. Through One issued by the carrier who is
obliged to use the facilities of other carriers
as well as his own facilities for the purpose
of transporting the goods from the city of
the seller to the city of the buyer, which bill
of lading is honored by the second and
other interested carriers who do not issue

their own bills.
9. Custody One wherein the goods are
already received by the carrier but the
vessel indicated therein has not yet arrived
in the port.
10. Port One which is issued by the carrier to
whom the goods have been delivered, and
the vessel indicated in the bill of lading by
which the goods are to be shipped is
already in the port where the goods are
held for shipment.
Functions:
1. Best evidence of the existence of the
contract of carriage of cargo (Art. 353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver goods as
stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier cannot
ordinarily refuse to carry a particular class of
goods.
EXCEPTION: For some sufficient reason the
discrimination against the traffic in such goods is
reasonable and necessary. (Fisher vs. Yangco
Steamship Co. 31 Phil 1).
Instances when the carrier may validly refuse
to accept the goods include the ff:
1.) Goods sought to be transported are
dangerous objects, or substances including
dynamite and other explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger
like flood, capture by enemies and the like
7.) Goods like livestock will be exposed to
disease
8.) Strike
9.) Failure to tender goods on time. (Notes and
Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed.
p.68)
In case of carriage by railway, the carrier is
exempted from liability if carriage is insisted
upon by the shipper, provided its objections are
stated in the bill of lading.
However, when a common carrier accepts
cargo for shipment for valuable consideration, it
takes the risk of delivering it in good condition

as when it was loaded. (PAL vs. CA)
B. Duty to deliver the goods
Not only to transport the goods safely but to
the person indicated in the bill of lading. The
goods should be delivered to the consignee or
any other person to whom the bill of lading was
validly transferred or negotiated.
Time of delivery
Stipulated in
Contract/Bill of
Lading
1. Carrier is
bound to fulfill
the contract and
is liable for any
delay; no matter
from
what
cause it may
have arisen.
No stipulation
1.
Within
a
reasonable
time.
2. Carrier is
bound
to
forward them in
the 1st shipment
of the same or
similar
goods
which he may
make to the
point of delivery.
(ART. 358 Code
of Commerce)
Effects of delay
a. Merely suspends and generally does not
terminate the contract of carriage
b. Carrier remains duty bound to exercise
extraordinary diligence
c. Natural disaster shall not free the carrier
from responsibility (Art.1740)
d. If delay is without just cause, the contract
limiting the common carriers liability cannot be
availed of in case of loss or deterioration of the
goods (Art.1747)
RIGHT OF CONSIGNEE TO ABANDON
GOODS
Instances:
1. Partial non-delivery, where the goods are
useless without the others (Art. 363);
2. Goods are rendered useless for sale or
consumption for the purposes for which they are
properly destined (Art. 365); and
3. In case of delay through the fault of the
carrier (Art. 371).
NOTICE OF DAMAGE (ART. 366)
Requisites for applicability:
1. Domestic/inter-island/coastwise
transportation
2. Land/water/air transportation
3. Carriage of goods
4. Goods shipped are damaged
Rules:
a. Patent damage: shipper must file a claim
against the carrier immediately upon delivery
(it may be oral or written)
b. Latent damage: shipper should file a claim
against the carrier within 24 hours from
delivery.
Note: These rules does not apply to misdelivery
of goods. (Roldan vs. Lim Ponzo)
Purpose of notice: To inform the carrier that the
shipment has been damaged, and it is charged
with liability therefore, and to give it an
opportunity to make an investigation and fix
responsibility while the matter is fresh.
The filing of notice of claim is a condition
precedent for recovery.
Shorter period may be stipulated by the
parties because it merely affects the shippers
remedy and does not affect the liability of the
carrier. (PHILAMGEN vs. Sweetlines, Inc.)
Prescriptive Period
Not provided by Article 366. Thus, in such
absence, Civil Code rules on prescription apply.
If despite the notice of claim, the carrier
refuses to pay, action must be filed in court.
1. No bill of lading was issued: within
6 years
2. Bill of lading was issued: within 10
years.
ARTICLE 366
COGSA Sec.3
(6)
Applicability
1.
Dome 1. International/
stic/interoverseas/foreig
island/coastwise n (from foreign
transportation
country
to
2.
Land, Phils.)
water,
air Note: subject to
transportation
the rule on
3.
Carri Paramount
age of goods
Clause
2.
Water/maritime
transportation
3. Carriage of
goods
Notice of damage
1.
1. Not a
Condition
condition
precedent
precedent
2.
2. 3-day period
24-hour period
for claiming
for claiming
latent damage
latent damage
Prescriptive period
None provided; One year from
Civil
Code the date of
applies.
delivery
(delivered but
damaged
goods), or date
when
the
vessel left port
or from the date
of delivery to
the
arrastre
(non-delivery or
loss).
COMBINED CARRIER AGREEMENT (ART.
373)
GENERAL RULE: In case of a contract of
transportation of several legs, each carrier is
responsible for its particular leg in the contract.
EXCEPTION: A combined carrier agreement
where a carrier makes itself liable assuming the
obligations and acquiring as well the rights and
causes of action of those which preceded it.
2. MARITIME
COMMERCE
(Arts. 573-869)
IMPORTANT CONCEPTS:
1. Merchant vessel
2. Maritime lien and Preference of Credit
3. Doctrine of limited liability
4. Causes of revocation of voyage
5. Participants in maritime commerce
6. Charter party
7. Loans on bottomry and respondentia
8. Accidents in maritime commerce
MARITIME/ADMIRALTY LAW
It is the system of laws which particularly
relates to the affairs and business of the sea, to
ships, their crews and navigation, and to
maritime conveyance of persons and property.
(Notes and Cases on the Law on Transportation
and Public Utilities, Aquino & Hernando, citing
Francisco, p.254)
Maritime laws apply only to maritime trade
and sea voyages. (Pandect of Commercial Law

and Jurisprudence, Justice Jose Vitug, 1997
ed.)
Arrastre service is not maritime in character.
It refers to a contract for the unloading of goods
from a vessel. (ICTSI vs. Prudential Guarantee,
320 SCRA 244)
CHARACTERISTICS
OF
MARITIME
TRANSACTION
1. Real - similar to transactions over real
property with respect to effectivity against third
persons which is done through registration.
(Rubiso vs. Rivera, 37 Phil. 72). The evidence
of real nature is shown by: 1) the limitation of
the liability of the agents to the actual value of
the vessel and the freight money; and 2) the
right to retain the cargo and embargo and
detention of the vessel (Luzon Stevedoring Corp
v. CA, 156 SCRA 169);
2. Hypothecary - the liability of the owner of the
value of the vessel is limited to the vessel itself
(Doctrine of Limited Liability).
The real and hypothecary nature of maritime
law simply means that the liability of the carrier
in connection with losses related to maritime
contracts is confined to the vessel, which stands
as the guaranty for their settlement. (Aboitiz
Shipping Corp. vs. General Accident Fire and
Life Assurance Corp. 217 SCRA 359).
MERCHANT VESSEL
Vessel engaged in maritime commerce,
whether foreign or otherwise. (Bar Review
Materials in Commercial Law, Jorge Miravite,
2002 ed.)
Constitutes property which may be acquired
and transferred by any of the means recognized
by law. They shall continue to be considered as
personal property. (Arts. 573, 585)
They are susceptible to maritime liens such as
for the repair, equipping and provisioning of the
vessel in the preparation of a voyage, as well as
mortgage liabilities, in satisfaction of which a
vessel may be validly arrested and sold. (Ship
Mortgage Decree of 1978)
MARITIME LIEN
It constitutes a present right of property in the
ship, a jus in re, to be afterward enforced in
admiralty by process in rem. (PNB vs. CA, 337
SCRA 381)
If the maritime lien arose prior to the recording

of a preferred mortgage, it shall have priority
over the said mortgage lien. (PNB vs. CA, 337
SCRA 381)
ORDER OF PREFERENCE IN CASE OF SALE
OF VESSEL
R.A. 6106
P.D. 1521
Effectivity date
1969
1978
Applicability
Overseas
Both domestic
shipping only
and overseas
shipping
Kind of sale
Judicial
Judicial and
extrajudicial
Order of Preference
A
preferred The preferred
mortgage shall mortgage lien
have
priority shall
have
over all claims priority over all
against
the claims against
vessel, except the
vessel,
the
following except
the
preferences in following
the
order preferences in
stated:
the
order
1.
Judicial stated:
costs of the 1.
Expenses
proceedings;
and
fees
2. Taxes due allowed
and
the Philippine costs taxed by
Government;
the court and
3. Salaries and taxes due to
wages of the the
Captain
and Government;
Crew of the 2.
Crews
vessel during wages;
its last voyage; 3.
General
4.
General average;
average
or 4.
Salvage,
salvage
including
including
contract
contract
salvage;
salvage,
5.
Maritime
bottomry loans, liens
arising
and indemnity prior in time to
due
shippers the recording of
for the value of the
preferred
goods
mortgage;
transported but 6.
Damages
which were not arising out of
delivered to the
consignee;
5. Costs of
repair
and
equipment
of
the vessel, and
provisioning of
food, supplies
and fuel during
its last voyage;
and
6.
Preferred
mortgages
registered prior
in time.
tort; and
7.
Preferred
mortgage
registered prior
in time.
Effect of sale: All pre-existing claims in the

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

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

1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art. 640)
Terms:
1. Interdiction of commerce A governmental
prohibition
of commercial intercourse
intended to bring about an entire cessation
for the time being of all trade whatever.
2. Blockade A sort of circumvallation of a
place by which all foreign connection and
correspondence is, as far as human power
can effect it, to be cut off.
3. Embargo A proclamation or order of a
state, usually issued in time of war or
threatened
hostilities,
prohibiting
the
departure of ships or goods from some or all
the ports of such state until further order.
PARTICIPANTS IN MARITIME COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who has possession, control and
management of the vessel and the consequent
right to direct her navigation and receive freight
earned and paid, while his possession
continues.
Ship agent (naviero)
Person entrusted with provisioning and
representing the vessel in the port in which it
may be found; also includes the shipowner.
Not a mere agent under civil law; he is
solidarily liable with the ship owner.
Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject to
Art.609;
3. Contract in the name of the owners with
respect to repairs, details of equipment,
armament, provisions of food and fuel, and
freight of the vessel, and all that relate to the
requirements of navigation;
4. Order a new voyage, make a new charter or
insure
the
vessel
after
obtaining
authorization from the shipowner or if
granted in certificate of appointment.
Civil Liabilities of the Shipowner And Ship
Agent
1. All contracts of the captain, whether
authorized or not, to repair, equip and
provision the vessel; (Art. 586)
2. Loss and damage to the goods loaded on
the vessel without prejudice to their right to
free themselves from liability by abandoning
the vessel to the creditors. (Art. 587)
Duty of Ship Agent to Discharge the Captain
and Members of the Crew
If the seamen contract is not for a definite
period or voyage, he may discharge them at his
discretion. (Art. 603)
If for a definite period, he may not discharge
them until after the fulfillment of their contracts,
except on the following grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to its
cargo through malice or manifest or proven
negligence. (Art. 605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders of ships.
The terms have the same meaning, but are
particularly used in accordance with the size of
the vessel governed and the scope of
transportation, i.e., large and overseas, and
small and coastwise, respectively.
Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government of the
country under whose flag he navigates.
Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required physical

and mental examinations required for
licensing him as such. (Art. 609)
Inherent powers:
1. Appoint crew in the absence of ship
agent;
2. Command the crew and direct the vessel
to its port of destination;
3. Impose correctional punishment on those
who, while on board vessel, fail to comply
with his orders or are wanting in
discipline;
4. Make contracts for the charter of vessel
in the absence of ship agent.
5. Supply, equip, and provision the vessel;
and
6. Order repair of vessel to enable it to
continue its voyage. (Art. 610)
Sources of funds to comply with the inherent
powers of the captain (in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
Duties:
1. Bring on board the proper certificate and
documents and a copy of the Code of
Commerce;
2. Keep a Log Book, Accounting Book and
Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and
unloading of the cargo;
5. Be on deck while leaving or entering the
port;
6. Protest arrivals under stress and in case
of shipwreck;
7. Follow instructions of and render an
accounting to the ship agent;
8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by
deceased
passengers
and
crew
members;
10. Comply with the requirements of
customs, health, etc. at the port of arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or leaving
a port. (Art. 612)
A ships captain must be accorded a
reasonable measure of discretionary authority to
decide what the safety of the ship and of its
crew and cargo specifically requires on a
stipulated ocean voyage (Inter-Orient Maritime

Enterprises Inc. vs. CA).
No liability for the following:
1. Damages caused to the vessel or to the
cargo by force majeure;
2. Obligations contracted for the repair,
equipment, and provisioning of the vessel
unless he has expressly bound himself
personally or has signed a bill of
exchange or promissory note in his
name. (Art. 620)
Solidary
Liabilities
of
the
Ship
Agent/Shipowner for Acts Done by the
Captain towards Passengers and Cargoes
1. Damages to vessel and to cargo due to
lack of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of
marine regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No liability under the following circumstances:
1. If, before beginning voyage, captain attempts
to change it, or a naval war with the power to
which the vessel was destined occurs;
2. If a disease breaks out and be officially
declared an epidemic in the port of
destination;
3. If the vessel should change owner or
captain. (Art. 647)
Sailing Mate/First Mate
Second chief of the vessel who takes the place
of the captain in case of absence, sickness, or
death and shall assume all of his duties, powers
and responsibilities. (Art. 627)
Duties:
1. Provide himself with maps and charts
with astronomical tables necessary for
the discharge of his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on
consultation with the captain and the
officers of the boat, following the decision

of the captain in case of disagreement;
4. Responsible for all the damages caused
to the vessel and the cargo by reason of
his negligence. (Arts. 628 - 631)
Second Mate
Takes command of the vessel in case of the
inability or disqualification of the captain and the
sailing mate, assuming in such case their
powers and responsibilities.
Third in command
Duties:
1. Preserve the hull and rigging of the
vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment of
the vessel, if laid up. (Art. 632)
Engineers
Officers of the vessel but have no authority
except in matters referring to the motor
apparatus. When two or more are hired, one of
them shall be the chief engineer.
Duties:
1. In charge of the motor apparatus, spare
parts, and other instruments pertaining to
the engines;
2. Keep the engines and boilers in good
condition;
3. Not to change or repair the engine
without authority of the captain;
4. Inform the captain of any damage to the
motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining the
engine. (Art. 632)
Crew
The aggregate of seamen who man a ship, or
the ships company.
Hired by the ship agent, where he is present
and in his absence, the captain hires them,
preferring Filipinos, and in their absence, he
may take in foreigners, but not exceeding 1/5 of
the crew. (Art. 634)
Classes of Seamans Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman

While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
The seamans heirs are entitled to payment as
follows:
1. If death is natural:
a. compensation up to time of death if
engaged on wage
b. if by voyage - half of amount if death
occurs on voyage out; and full, if on
voyage in
c. if by shares - none, if before departure;
full, if after departure
2. if death is due to defense of vessel - full
payment;
3. if captured in defense of vessel - full
payment;
4. if captured due to carelessness - wages up
to the date of the capture. (Art. 645)
Complement of the Vessel
All persons on board, from the captain to the
cabin boy, necessary for the management,
maneuvers, and service, thus including the
crew, the sailing mates, engineers, stokers and
other employees on board not having specific
designations.
Does not include the passengers or the
persons whom the vessel is transporting.
D. SUPERCARGOES
Persons who discharges administrative duties
assigned to him by ship agent or shippers,
keeping an account and record of transaction as
required in the accounting book of the captain.
(Art. 649)
E. PILOT
A person duly qualified, and licensed, to
conduct a vessel into or out of ports, or in
certain waters.
The term generally connotes a person taken
on board at a particular place for the purpose of
conducting a ship through a river, road or
channel, or from a port.
Master pro hac vice for the time being in the
command and navigation of the ship.
While in exercising his functions a pilot is in

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

concept
CHARTER
BILL OF
PARTY
LADING
An entire or More
like
a
complete
private receipt
contract.
which
the
captain gives to
accredit goods
received
from
persons
Consensual
Real contract
contract
BAREBOAT
OR DEMISE
CHARTER
Charterer
becomes liable
to
others
caused by its
negligence
Charterer
regarded
as
owner pro hac
vice for the
voyage
Owner of vessel
relinquishes
possession,
command and
navigation
to
charterer
Common carrier
is converted to
private carrier.
CONTRACT OF
AFFREIGHTME
NT (TIME OR
VOYAGE
CHARTER)
Owner remains
liable as carrier
and
must
answer for any
breach of duty
Charterer is not
regarded
as
owner.
The
vessel
owner
retains
possession,
command and
navigation of the
ship
Common carrier
is not converted
to a private
carrier.
PERSONS WHO MAY MAKE A CHARTER

1. Owner or owners of the vessel, either in
whole or in majority part, who have legal
control and possession of the vessel
2. Charterer may subcharter entire vessel to
3rd person only if not prohibited in original
charter. (Art.679)
3. Ship agent if authorized by the owner/s or
given such power in the certificate of
appointment. (Art.598)
4. Captain in the absence of the ship agent

or consignee and only if he acts in
accordance with the instructions of the
agent or owner and protects the latters
interests. (Art.609)
REQUISITES OF A VALID CHARTER PARTY
1. Consent of the contracting parties
2. Existing vessel which should be placed at
the disposition of the shipper
3. Freight
4. Compliance with Art. 652 of the Code of
Commerce
Clauses Which May Be Included In a Charter

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

SHIPOWNER
OR SHIP
CHARTERER
AGENT
1. If the vessel
is
chartered
wholly, not to
accept
cargo
from others;
2. To observe
represented
capacity;
3. To
unload
cargo
clandestinely
placed
4. To substitute
another vessel if
load is less than
3/5 of capacity;
5. To leave the
port
if
the
charterer does
not bring the
cargo within the
lay days and
extra lay days
allowed;
6. To place in a
vessel
in
a
condition
to
navigate;
7. to
bring
cargo to nearest
neutral port in
case of war or
blockade. (Arts.
669-678)
1. To pay the
agreed charter
price;
2. To
pay
freightage
on
unboarded
cargo;
3. To
pay
losses to others
for
loading
uncontracted
cargo and illicit
cargo;
4. To wait if the
vessel
needs
repair;
5. To
pay
expenses
for
deviation. (Arts.
679-687)
Rescission of a Charter Party

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

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

Private instrument (Art. 720)
Contents:
Kind, name and registry of the
vessel;
Name, surname and domicile
of the captain;
Names,
surnames
and
domiciles of the borrower and
the lender;
Amount of the loan and the
premium stipulated;
Time for repayment;
Goods pledged to secure
repayment;
Voyage during which the risk
is run (Art.721)
BOTTOMRY/
RESPONDENT
IA
ORDINARY
LOAN
(MUTUUM)
Not subject to Subject

Usury Law
Usury Law
Liability of the
borrower
is
contingent on
the safe arrival
of the vessel or
cargo
at
destination
to
Not subject to
any
contingency
(absolute
liability)
The last lender The first lender

is a preferred is a preferred
creditor
creditor
WHEN
LOAN
ON
BOTTOMRY
OR
RESPONDENTIA REGARDED AS SIMPLE
LOAN
1. Lender loaned an amount larger than the
value of the object due to fraudulent
means employed by the borrower.
(ART.726)
2. Full amount of the loan is not used for the
cargo or given on the goods if all of them
could not have been loaded, the balance
will be considered a simple loan.
(ART.727)
3. If the effects on which the money is taken
is not subjected to any risk. (ART.729)
Note: Under existing laws, the parties to a loan,
whether ordinary or maritime, may agree on any
rate of interest. (CB Circular 905)
MARINE
INSURANCE
Indemnity is paid
after the loss has
occurred
In case of loss of
the vessel due to
a risk insured
against,
the
obligation of the
insurer becomes
absolute
Consensual
contract
LOAN ON
BOTTOMRY
OR
RESPONDE
NTIA
Indemnity is
paid
in
advance by
way of a loan
In case of
loss of the
vessel due to
a
marine
peril,
the
obligation of
the borrower
to pay is
extinguished
Real contract
Hypothecary
Nature
of
Bottomry/
Respondentia
GENERAL RULE: The obligation of the
borrower to pay the loan is extinguished if the
goods given as security are absolutely lost by
reason of an accident of the sea, during the
voyage designated, and if it is proven that the
goods were on board.
EXCEPTIONS:
1. Loss due to inherent defect;
2. Loss due to the barratry on the part of the
captain;
3. Loss due to the fault or malice of the
borrower;
4. The vessel was engaged in contraband; and
5. The cargo loaded on the vessel be different
in from that agreed upon.
Concurrence of Marine Insurance and Loan
on Bottomry/Respondentia
1. The insurable interest of the owner of a
ship hypothecated by bottomry is only the
excess of the value over the amount
secured by bottomry. (Sec. 101,
Insurance Code)
2. The value of what may be saved in case
of shipwreck shall be divided between the
lender and the insurer in proportion to the
interest of each one. (Art. 735)
Note: If a vessel is hypothecated by bottomry
only the excess is insurable, since a loan on

bottomry partakes of the nature likewise of an
insurance coverage to the extent of the loan
accommodation. The same rule would apply to
the hypothecation of the cargo by respondentia.
(Pandect
of
Commercial
Law
and
Jurisprudence, Justice Jose Vitug, 1997 ed.)
ACCIDENTS IN MARITIME COMMERCE
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
AVERAGE
An extraordinary or accidental expense
incurred during the voyage in order to preserve
the cargo, vessel or both, and all damages or
deterioration suffered by the vessel from
departure to the port of destination, and to the
cargo from the port of loading to the port of
consignment. (Art. 806)
The person whose property has been saved
must contribute to reimburse the damage
caused or expense incurred if the situation
constitutes general average.
Classes:
1. Particular or Simple Average
2. Gross or General Average
Where both vessel and cargo are saved, it is
general average; where only the vessel or only
the cargo is saved, it is particular average.
Expenses incurred to refloat a vessel, which
accidentally ran aground, in order to continue its
voyage, do not constitute general average. Not
only is there absence of a marine peril, common
safety factor, and deliberateness. It is the safety
of the property, and not the voyage, which
constitutes the true foundation of general
average. (A. Magsaysay, Inc. vs. Agan, G.R.No.
L-6393, Jan. 31, 1955)
PARTICULAR
GROSS OR
OR SIMPLE
GENERAL
Definition
Damages
or Damages
or
expenses
expenses
caused to the deliberately
vessel or cargo caused in order
that
did
not to save the
inure to the vessel,
its
common benefit, cargo or both
and borne by from real and
respective
known
risk.
owners.
(Art. (Art. 811)
809)
Requisites
1. common
danger;
2. deliberate
sacrifice;
3. success;
4. proper
formalities
and legal
steps.
Liability
The owner of All the persons
the goods which having
an
gave rise to the interest in the
expense
or vessel and the
suffered
the cargo therein at
damage
shall the time of the
bear
this occurrence of
average.
(Art. the
average
810)
shall contribute
to satisfy this
average. (Art.
812)
The insurers
(Art.859)
and
lenders
on
bottomry
and
respondentia
shall
likewise
contribute.
(Art.732).
Number of interests involved
Only
one Several
interest involved interests
involved
Share in the damage or expense
100% share
In proportion to
the value of the
owners
property saved
Right to recover
No
There may be
reimbursement
reimbursement
Kinds (not exclusive)
Art. 809
Art. 811
Procedure for recovery
1. Assembly
and
deliberation
2. Resolution of
the captain
3. Entry of the
resolution in the
logbook
4. Detailed
minutes
5. Delivery
of
the minutes to
the
maritime
judicial
authority of the
first port, within
24 hours from
arrival,
6. Ratification
by
captain
under
oath.
(Arts. 813-814)
GOODS NOT COVERED BY GENERAL
AVERAGE EVEN IF SACRIFICED
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or
records of the vessel. (ART.855 (2))
3. Fuel for the vessel if there is more than
sufficient fuel for the voyage. (Rule IX,
York-Antwerp Rule)
Jettison
Act of throwing cargo overboard in order to
lighten the vessel.
Order of goods to be cast overboard:
1. Those which are on the deck, preferring
the heaviest one with the least utility and
value;
2. Those which are below the upper deck,
beginning with the one with greatest
weight and smallest value. (Art. 815)
Jettisoned goods are not res nullius nor
deemed abandoned within the meaning of civil
law so as to be the object of occupation by
salvage. (Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997 ed.)
In order that the jettisoned goods may be
included in the gross or general average, the
existence of the cargo on board should be
proven by means of the bill of lading. (Art. 816)
York-Antwerp (Y-A) Rules on Determining
Liability for Averages With Regard To Deck
Cargo
1. Deck
cargo
is
allowed
only
in
domestic/coastwise/inter-island shipping, and is
prohibited
in
international/overseas/foreign
shipping.
2. If deck cargo is loaded with the consent of
the shipper on overseas trade, it must always
contribute to general average, but should the
same be jettisoned, it would not be entitled to
reimbursement because there is violation of the
Y-A Rules.
3. If deck cargo is loaded with the consent of
the shipper on coastwise shipping, it must
always contribute to general average and if
jettisoned would be entitled to reimbursement.
Reason: In domestic shipping, voyages are
usually short and the seas are generally not
rough. In overseas shipping, the vessel is
exposed for many days to perils of the sea.
DOMESTIC
INTERNATION
AL
Deck cargo is Deck cargo is
allowed
not allowed
With shippers consent
General
Particular
average
average
Without shippers consent
Captain is liable Captain is liable
ARRIVAL UNDER STRESS (ARRIBADA)
The arrival of a vessel at the nearest and most
convenient port instead of the port of
destination, if during the voyage the vessel
cannot continue the trip to the port of
destination.
When
lawful
The
inability to
continue
voyage is
due
to
lack
of
provision
s,
wellfounded
fear
of
seizure,
privateers
, pirates,
or
accidents
When
unlawful
1. Lack of
provisions
due
to
negligenc
e to carry
according
to usage
and
customs;
2. Risk of
enemy not
well
known or
manifest
3. Defect
Who
bears
expenses
:
The
shipowner
or
ship
agent is
liable in
case
of
unlawful
arrival
under
stress.
But they
shall not
be liable
for
the
damages
of the sea
disabling
it
to
navigate.
(Art. 819)
of vessel
due
to
improper
repair;
and
4. Malice,
negligenc
e, lack of
foresight
or skill of
captain.
(Art. 820)
caused by
reason of
a lawful
arrival.
(Art. 821)
It is the duty of the captain to continue the

voyage without delay after the cause of the
arrival under stress has ceased failing in such
duty renders him liable. However, in case the
cause has been risk of enemies, there must first
be an assembly before departure. (Art. 825)
Steps:
1. Captain should determine during the
voyage if there is well founded fear of
seizure, privateers and other valid
grounds;
2. Captain shall assemble the officers and
summon the persons interested in the
cargo who may attend the meeting but
without a right to vote;
3. The officers shall determine and agree if
there is well-founded reason after
examining the circumstances.
The
captain shall have the deciding vote;
4. The agreement shall be drafted and the
proper minutes shall be signed and
entered in the log book;
5. Objections and protests shall likewise be
entered in the minutes.
COLLISION
Impact of two vessels both of which are
moving.
Allision
Impact between a moving vessel and a
stationary one.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a port,
the farther one must allow the nearer to
enter first; if they collide, the fault is
presumed to be imputable to the one who
arrived later, unless it can be proved that
there was no fault on its part.
2. When two vessels meet, the smaller should
3.
4.
5.
6.
7.
8.
9.
give the right of way to the larger one.

A vessel leaving port should leave the way
clear for another which may be entering the
same port.
The vessel which leaves later is presumed to
have collided against one which has left
earlier.
There is a presumption against the vessel
which sets sail in the night.
There is a presumption against the vessel
with spread sails which collides with another
which is at anchor and cannot move, even
when the crew of the latter has received
word to lift anchor, when there was not
sufficient time to do so or there was fear of a
greater damage or other legitimate reason.
There is a presumption against an
improperly moored vessel.
There is a presumption against a vessel
which has no buoys to indicate the location
of its anchors to prevent damage to vessels
which may approach it.
Vessels must have proper look-outs or
persons trained as such and who have no
other duty aside therefrom. (Smith Bell v.
CA)
Nautical Rules as to Sailing Vessel and

Steamship
1. Where a steamship and a sailing vessel are
approaching each other from opposite
directions, or on intersecting lines, the
steamship from the moment the sailing
vessel is seen, shall watch with the highest
diligence her course and movements so as
to be able to adopt such timely means of
precaution as will necessarily prevent the
two boats from coming in contact.
2. The sailing vessel is required to keep her
course unless the circumstances require
otherwise.
Zones of Time in the Collision of Vessels
1. First zone all time up to the moment when
risk of collision begins.
No rule is as yet applicable for none is
necessary.
2. Second zone time between moment when
risk of collision begins and moment it becomes
a practical certainty.
It is in this period where conduct of the vessels
is primordial. It is in this zone that vessels must
strictly observe nautical rules, unless a
departure therefrom becomes necessary to
avoid imminent danger.

3. Third zone time when collision is certain
and time of impact.
An error in this zone would no longer be legally
consequential.
Error in Extremis - sudden movement made
by a faultless vessel during the third zone of
collision with another vessel which is at fault
during the 2nd zone. Even if such sudden
movement is wrong, no responsibility will fall on
said faultless vessel. (Urrutia and Co. v. Baco
River Plantation Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
Vessel at fault is liable for damage caused to
innocent vessel as well as damages suffered by
the owners of cargo of both vessels. (Art. 826)
2. Both vessels at fault
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art.
827)
3. Vessel at fault not known
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art.
828)
Doctrine of Inscrutable Fault In case of
collision where it cannot be determined
which between the two vessels was at fault,
both vessels bear their respective damage,
but both should be solidarily liable for
damage to the cargo of both vessels.
4. Third vessel at fault
The third vessel will be liable for losses and
damages. (Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss. (Art. 830)
The doctrine of res ipsa loquitur applies in
case a moving vessel strikes a stationary object,
such as a bridge post, dock, or navigational aid.
(Far Eastern Shipping v. CA, Luzon Stevedoring
vs. CA)
Even if the cause of action against the
common carrier is based on quasi-delict, the
defense of due diligence in the selection and
supervision of employees is unavailing in case
of a maritime tort resulting in collision. It is not a
civil tort governed by the Civil Code but a
maritime one governed by Arts. 826-839 of the
Code of Commerce. (Manila Steamship vs. Insa
Abdulhaman)
Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied in
collision cases because of Art.827 of the Code
of Commerce. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite to recovery
of damages arising from collisions and other
maritime accidents.
It is a written statement made under oath by
the captain of a vessel after the occurrence of
an accident or disaster in which the vessel or
cargo is lost or damaged, with respect to the
circumstances attending such occurrence, for
the purpose of recovering losses and damages.
Excuses for not filing protest: 1) where the
interested person is not on board the vessel;
and 2) on collision time, need not be protested.
(Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a
hurricane or when the captain believes
that the cargo has suffered damages or
averages (Art. 624).
Who makes: Captain
When made: within 24 hours from the time the
collision took place.
Before whom made: competent authority at the
point of collision or at the first port of arrival, if in
the Philippines and to the Philippine consul, if
the collision took place abroad. (Art. 835)
SHIPWRECK
It is the loss of the vessel at sea as a
consequence of its grounding, or running
against an object in sea or on the coast. It
occurs when the vessel sustains injuries due to
a marine peril rendering her incapable of
navigation.
If the wreck was due to malice, negligence or
lack of skill of the captain, the owner of the
vessel may demand indemnity from said
captain. (Art. 841)
The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from a
vessel.
Applicability:
Overseas
trade
only.
(Commercial Law Review, C. Villanueva, 2004
ed.)
Significance: When a person brings in cargo
from abroad, he cannot unload and deliver the
cargo by himself. The unloading must be done
by the arrastre operator, which will then deliver
the cargo to the importer. (Commercial Law
Review, C. Villanueva, 2004 ed.)
Nature of business: It is a public utility,
discharging functions which are heavily invested
with public interest.
Liability:
1. Similar to a warehouseman (Lua Kian v.
Manila Railroad)
2. Similar to a common carrier (Northern
Motors v. Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may be
held liable, the consignee must prove that the
damage was due to the negligence and while
the goods are in the custody of the arrastre
operator. (Hartford Fire Insurance v. E. Razon,
Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse or
pier to the holds of the vessel. (Chief of Staff vs.
CIR)
As understood in the port business, the term
consists of the handling of cargo from the hold
of the ship to the dock, in case of pier-side
unloading; or to a barge, in case of unloading at
sea. (Anglo-Fil Trading Corp. vs. Lazaro)
The loading on the ship of outgoing cargo is
also part of stevedoring work. (Ibid.)
CONTAINERIZATION/ SAID-TO-CONTAIN/
SHIPPERS LOAD AND COUNT SYSTEM
System whereby the shipper loads his cargoes
in a specially designed container, seals the
container and delivers it to the carrier for
transportation. The carrier does not participate
in the counting of the merchandise for loading
into the container, the actual loading, and the
sealing of the container. (US Lines v. Comm. Of
Customs, ICTSI v. Prudential Guarantee)
The matter of quantity, description and
conditions of the cargo inside the container is
the sole responsibility of the shipper, unless
there is stipulation to the contrary. (US Lines vs.

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

been delivered (non-delivery). (Sec. 3[6])
Loss or Damage as applied to the COGSA
contemplates a situation where no delivery at all
was made by the shipper of the goods because
the same had perished, gone out of commerce,
or disappeared in such a way that their
existence is unknown or they cannot be
recovered. Thus, it is inapplicable in case of
misdelivery or conversion. (Ang vs. American
Steamship Agencies Inc.) and damage arising
from delay or late delivery (Mitsui O.S.K. Lines
Ltd. vs. CA). In such instance the, Civil Code
rules on prescription shall apply.
The one-year prescriptive period is
suspended by:
1. The express agreement of the parties
(Universal Shipping Lines, Inc. vs. IAC,
188 SCRA 170)
2. The filing of an action in court until it is
dismissed.
(Stevens
&
Co.
vs.
Nordeutscher Lloyd, 6 SCRA 180)
The one-year period shall run from delivery of
the last package and is not suspended by
extrajudicial demand. (Dole Phils.,Inc. vs.
Maritime Co.,148 SCRA 118)
The one-year period shall run from delivery to
the arrastre operator and not to the consignee.
(Union Carbide Phils, Inc. vs. Manila Railroad
Co.,SCRA 359)
The insurer exercising its right of subrogation
is bound by the one-year prescriptive period.
However, it does not apply to the claim against
the insurer for the insurance proceeds. (Fil.
Merchants Ins. Co. vs. Alejandro; Mayer Steel
Pipe Corp. vs. CA)
IV. WARSAW CONVENTION OF 1929 (WC)
PURPOSE: To protect the emerging air
transportation industry and to secure the
uniformity of recovery by the passengers.
APPLICABILITY
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or
goods.
The WC shall also apply to fortuitous
transportation by aircraft performed by an air

transportation enterprise.
International
transportation
any
transportation in which the place of departure
and the place of destination are situated either:
1. Within the territories of two High
Contracting Parties regardless of whether or
not there be a break in the transportation or
transshipment, or
2. Within the territory of a single High
Contracting Party, if there is an agreed
stopping place within a territory subject to
the sovereignty, mandate or authority of
another power, even though that power is
not a party to the Convention. (round trip,
Am. Jur.)
Transportation to be performed by several
successive air carriers shall be deemed to be
one undivided transportation, if it has been
regarded by the parties as a single operation,
whether it has been agreed upon under the form
of a single contract or of a series of contracts,
and it shall not lose its international character
merely because one contract or a series of
contracts is to be performed entirely within a
territory subject to the sovereignty, suzerainty,
mandate, or authority of the same High
Contracting Party. (Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the Convention
are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSEN
GER
TICKET
Passenge
r
BAGGAG
E CHECK
AIR
WAYBILL
Checkedin
Goods to
be
baggage
shipped
LIABILITY OF CARRIER FOR DAMAGES

1. Death or injury of a passenger if the accident
causing it took place on board the aircraft or in
the course of its operations of embarking or
disembarking; (Art. 17)
2. Destruction, loss or damage to any baggage
or goods, if it took place during the
transportation by air; (Art. 18) and
Transportation by air The period during
which the baggage or goods are in the charge of
the carrier, whether in an airport or on board an
aircraft, or, in case of a landing outside an
airport, in any place whatsoever.
It includes any transportation by land or
water outside an airport if such takes place in
the performance of a contract for transportation
by air, for the purpose of loading, delivery, or
transshipment.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19)
Note: The Hague Protocol amended the WC by
removing the provision that if the airline took all
necessary steps to avoid the damage, it could
exculpate itself completely (Art. 20(1)). (Alitalia
vs. IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended by
Guatemala Protocol, 1971; Alitalia vs. IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum by
consignor, carrier is liable to not more than the
declared sum unless it proves the sum is
greater than actual value.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum by
consignor, carrier is liable to not more than the
declared sum unless it proves the sum is
greater than actual value.
An agreement relieving the carrier from

liability or fixing a lower limit is null and void.
(Art. 23)
Carrier is not entitled to the foregoing limit if
the damage is caused by willful misconduct or
default on its part. (Art. 25)
Thus, the WC does not operate as an
exclusive enumeration of the instances of an
absolute limit of the extent of liability. It does not
preclude the application of the Civil Code and
other pertinent local laws. It does not regulate
or exclude liability for other breaches of contract
by the carrier, or misconduct of its employees,
or for some particular or exceptional type of
damage. (Alitalia vs. CA)
In PanAm v. IAC, the WC was applied as
regards the limitation on the carriers liability,
there being a simple loss of baggage without
any improper conduct on the part of the officials
or employees of the airline or other special
injury sustained by the passenger.
In KLM Royal v. Tuller, the WC has invariably
been held inapplicable, or as not restrictive of
the carriers liability, where there was
satisfactory evidence of malice or bad faith
attributable to its officers and employees.
(Alitalia vs. IAC)
ACTION FOR DAMAGES

1. Notice of claim
A written complaint must me made within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from receipt of
baggage/goods
The complaint is a condition precedent.
Without the complaint, the action is barred
except in case of fraud on the part of the carrier.
(Art. 26)
2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation stopped.
(Art. 29)
In United Airlines vs. Uy the two-year

prescriptive period was not applied where the
airline employed delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against
the carrier in which the accident or delay
occurred.
EXCEPTION: Agreement or contract whereby
the first carrier assumed liability for the whole
journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an action
against the first carrier and the carrier in
which the damage occurred
b. Passenger or consignee can file an
action against the last carrier and the
carrier in which the damage occurred.
These carriers are jointly and severally
liable. (Art. 30)
A contract of international carriage by air,
although performed by different carriers under a
series of airline tickets constitutes a single
operation. Members of the International Air
Transportation Association (IATA) are under a
general pool partnership agreement wherein
they act as agent of each other in the issuance
of tickets to contracted passengers to boost
ticket sales worldwide and at the same time
provide passengers easy access to airlines
which are otherwise inaccessible in some parts
of the world. (American Airlines vs. CA)
Under a general pool partnership agreement,
the ticket-issuing airline is the principal in a
contract of carriage while the endorsee-airline is
the agent.
The obligation of the former
remained and did not cease even when the
breach occurred not on its own flight but on that
of another airline which had undertaken to carry
the passengers to one of their destinations.
(China Airlines vs. Chiok)
JURISDICTION
At the option of the plaintiff, the action for
damages may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of business;
c. Court where it has a place of business
through which the contract has been
made; or
d. Court of the place of destination. (Art.

28(1))
NOTE: It is the passengers ultimate
destination not an agreed stopping place that
determines the country where suit is to be filed.
The forum of action provided in Art. 28(1) is a
matter of jurisdiction rather than of venue.
(Santos III vs. Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
Two concepts:
1. Services one person renders to the owner of
a ship or goods, by his own labor, preserving the
goods or the ship which the owner or those
entrusted with the care of them have either
abandoned in distress at sea, or are unable to
protect or secure.
2. Compensation allowed to persons by whose
voluntary assistance a ship at sea or her cargo
or both have been saved in whole or in part from
impending sea peril, or such property recovered
from actual peril or loss, as in cases of
shipwreck, derelict or recapture.
Requisites:
1. Valid object of salvage;
2. Object must have been exposed to
marine peril (not perils of the ship);
3. Services rendered voluntarily (neither an
existing duty nor out of a pre-existing
contract);
4. Services are successful, total or partial.
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea,
and there sink and remain under water;
3. Floatsam or Flotsam goods which float
upon the sea when cast overboard;
4. Ligan or Lagan goods cast into the sea tied
to a buoy, so that they may be found again by
the owners (p.173, Judge Diaz).
Persons who have no right to a reward for
salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite of
opposition of the Captain or his representative;
3. In accordance with Sec. 3 of the Salvage
Law, a person who fails to deliver a salvaged
vessel or cargo to the Collector of Customs.
Derelict a ship or her cargo which is
abandoned and deserted at sea by those who
are in charge of it, without any hope of
recovering it, or without any intention of

returning to it.
The intention of those in charge must be
ascertained. If those in charge left with the
intention of returning, or of procuring assistance,
the property is not derelict, but if they quitted the
property with the intention of finally leaving it, it
is derelict and a change of their intention and an
attempt to return will not change its nature
(Erlanger & Galinger vs. Swedish East Asiatic
Co. Ltd.).
If it is clear that the intention to return is
slight, the salvage which was done thereafter is
considered valid. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino, T.
& Hernando, R.P. 2004 ed. p. 616)
CONTRACT OF TOWAGE
A contract whereby one vessel, usually
motorized, pulls another, whether loaded or not
with merchandise, from one place to another, for
a compensation. It is a contract for services
rather than a contract of carriage.
SALVAGE
TOWAGE
Governed by Governed by
special
law Civil Code on
(Act No. 2616) contract
of
lease
Requires
Success is not
success,
required
otherwise no
payment
Must be done
Only
the
with the
consent of the
consent of the tugboat owner
captain/crewm is needed
en
Vessel must be Vessel
need
involved in an
not be involved
accident
in an accident
Fees
Fees belong to
distributed
the
tugboat
among
owner
crewmen
RULES ON SALVAGE REWARD
1. The reward is fixed by the RTC judge in the
absence of agreement or where the latter is
excessive. (Sec. 9)
2. The reward should constitute a sufficient
compensation for the outlay and effort of the

salvors and should be liberal enough to offer
an inducement to others to render services
in similar emergencies in the future.
3. If sold (no claim being made within 3 months
from publication), the proceeds, after
deducting expenses and the salvage claim,
shall go to the owner; if the latter does not
claim it within 3 years, 50% of the said
proceeds shall go to the salvors, who shall
divide it equitably, and the other half to the
government. (Secs. 11-12)
4. If a vessel is the salvor, the reward shall be
distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in proportion
to their salaries. (Sec. 13)
Taking passengers from a sinking ship,
without rendering any service in rescuing the
vessel, is not a salvage service, being a duty of
humanity and not for reward.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)
PURPOSES:
1. To secure adequate, sustained service
for the public at the least possible cost;
2. To
protect
the
public
against
unreasonable
charges
and
poor,
inefficient service;
3. To protect and secure investments in
public services;
4. To prevent ruinous competition.
AUTHORITY
TO
OPERATE
PUBLIC
SERVICES
GENERAL RULE: No public service shall
operate without having been issued a certificate
of public convenience or a certificate of public
convenience and necessity.
EXCEPTIONS:
1. Warehouses;
2. Animal drawn vehicles and bancas
moved by oar or sail;
3. Airships, except for the fixing of
maximum rates for fare and freight;
4. Radio companies, except for rates fixing;
5. Public services owned or operated by the
government, except as to rates fixing;
6. Ice plants; and

7. Public markets.
PUBLIC SERVICE
A person who owns, operates, manages or
controls in the Philippines for hire or
compensation, with general or limited clientele,
whether permanent, occasional or accidental,
and done for general business purposes, any
common carrier or public utility, ice plants,
power and water supplies, communication and
similar public services. (Sec. 13b, CA 146)
A casual or incidental service devoid of public
character and interest is not brought within the
category. The question depends on such factors
as the extent of services, whether such person
or company has held himself or itself out as
ready to serve the public or a portion of the
public generally. (Luzon Stevedoring vs. PSC)
NOTE: The Public Service Commission created
under the Public Service Law has already been
abolished under P.D. No. 1 and other issuances.
It has been replaced by the following
government agencies: LTO; LTFRB; ATO; BOE;
NTC; NEA; ERB; NWRC; CAB; and MIA.
CERTIFICATE
OF PUBLIC
CONVENIENC
E (CPC)
An
authorization
issued by the
appropriate
government
agency for the
operation
of
public services
for which no
franchise,
either
municipal
or
legislative, is
required
by
law,
e.g.,
common
carriers.
CERTIFICATE
OF
PUBLIC
CONVENIENC
E
AND
NECESSITY
(CPCN)
An
authorization
issued by the
appropriate
government
agency for the
operation
of
public service
for which a
prior franchise
is required by
law;
e.g.
telephone and
other services.
A CPC or a CPCN constitutes neither a

franchise nor a contract, confers no property
right, and is a mere license or a privilege. The

holder of said certificate does not acquire a
property right in the route covered thereby. Nor
does it confer upon the holder any proprietary
right or interest or franchise in the public
highways. Revocation of this certificate deprives
him of no vested right. New and additional
burdens, alteration of the certificate, or even
revocation or annulment thereof is reserved to
the State. (Luque vs. Villegas, 30 SCRA 408)
It is a property and has a considerable value
and can be the subject of sale or attachment.
(Cogeo-Cubao Operators and Drivers Assn. vs.
CA, 207 SCRA 343, Raymundo vs. Luneta
Motor Co.)
REQUREMENTS FOR GRANTING CPC OR
CPCN
1. Applicant must be a citizen of the Philippines
or a corporation or entity 60% of the capital
of which is owned by such citizens;
2. Applicant must prove public necessity;
3. Applicant must prove that the operation of
the public service proposed and the
authorization to do business will promote the
public interest on a proper and suitable
manner;
4. Applicant must have sufficient financial
capability to undertake the proposed
services and meeting the responsibilities
incident to its operation.
POWERS
REQUIRING
PRIOR
NOTICE AND
HEARING
POWERS
EXERCISABL
E WITHOUT
PRIOR
NOTICE AND
HEARING
1. Issuance
of CPC or
CPCN;
2. Fixing
of
rates,
tolls,
and charges;
3. Setting up
of standards
and
classifications;
4. Establishm
ent of rules to
secure
1. Investigatio
n any matter
concerning
public service;
2. Requiring
operators
to
furnish
safe,
adequate, and
proper service;
3. Requiring
public services
to
pay
expenses
of
accuracy of all
meters and all
measuring
appliances;
5. Issuance
of
orders
requiring
establishment
or
maintenance
of extension of
facilities;
6. Revocation
,
or
modification of
CPC
or
CPCN;
7. Suspension
of CPC or
CPCN, except
when
it is
necessary to
avoid serious
and
irreparable
damage
or
inconvenience
to the public or
private
interest,
in
which case, a
suspension
not more than
30 days may
be
ordered,
prior to the
hearing.
(Soriano
v.
Medina, 164
SCRA 36)
investigation;
4. Valuation of
properties
of
public utilities;
5. Examination
and test of
measuring
appliances;
6. Grant
of
special permits
to make extra
or special trips
in
territories
specified in the
certificate;
7. Uniform
accounting
system
and
furnishing
of
annual reports;
8. Compelling
compliance
with the laws
and
regulations.
UNLAWFUL ACTS OF PUBLIC UTILITY

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

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

certificate.
RATE-FIXING POWER
The rate to be fixed must be just, founded
upon conditions which are fair and reasonable
to both the owner and the public.
A rate is just and reasonable if it conforms to
the following requirements:
1. One which yields to the carrier a fair
return upon the value of the property
employed in performing the service; and
2. One which is fair to the public for the
service rendered.
REGISTERED OWNER RULE
The registered owner of a certificate of public
convenience is liable to the public for the injuries
or damages suffered by third persons caused by
the operation of said vehicle, even though the
same had been transferred to a third person.
The registered owner is not allowed to
escape responsibility by proving that a third
person is the actual and real owner Reason: It
would be easy for him, by collusion with others
or otherwise, to transfer the responsibility to an
indefinite person, or to one who possesses no
property with which to respond financially for the
damage or injury done. (Erezo, et al. vs. Jepte
102 Phil 103).
KABIT SYSTEM
A system whereby a person who has been
granted a certificate of public convenience
allows other persons who own motor vehicles to
operate under such license, for a fee or
percentage of such earnings. It is void and
inexistent under Art. 1409, Civil Code.
Effects:
1. The transfer, sale, lease or assignment of
the privilege granted is valid between the
contracting parties but not upon the public or
third persons. (Gelisan vs. Alday, 154 SCRA
388)
2. The registered owner is primarily liable for all
the consequences flowing from the
operations of the carrier.
The public has the right to assume that
the registered owner is the actual or lawful
owner thereof. It would be very difficult and
often impossible, as a practical matter, for
the public to enforce their rights of action that
they may have for injuries inflicted by the
vehicle if they should be required to prove
who the actual owner is. (Benedicto vs. IAC,

187 SCRA 547)
3. The thrust of the law in enjoining the kabit
system is to identify the person upon whom
responsibility may be fixed with the end in
view of protecting the riding public (Lim vs.
CA 373 SCRA 394).
4. The registered owner cannot recover from
the actual owner and the latter cannot obtain
transfer of the vehicle to himself, both being
in pari delicto. (Teja Marketing vs. IAC)
5. For the better protection of the public, both
the registered owner and the actual owner
are jointly and severally liable with the driver.
(Zamboanga Transportation Co. vs. CA)

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San Beda College of Law

Corporation vs. CA)

COMMERCIAL LAW COMMITTEE

San Beda College of Law

COMMERCIAL LAW COMMITTEE

San Beda College of Law

consent of the carrier;

COMMERCIAL LAW COMMITTEE

San Beda College of Law

The carrier is liable when its personnel

resulting to the injuries suffered by the other

The duty of a common carrier to

COMMERCIAL LAW COMMITTEE

San Beda College of Law

COMMERCIAL LAW COMMITTEE

San Beda College of Law

Stipulation limiting liability when a

The diligence required in the

San Beda College of Law

irresistible threat, violence or force

COMMERCIAL LAW COMMITTEE

RULES ON PASSENGERS BAGGAGE

that of the owner and driver of the other vehicle

However, the carrier cannot limit its liability for

(Singson vs. CA, 282 SCRA 149)

Services Inc. vs. IAC)

other interested carriers who do not issue

takes the risk of delivering it in good condition

and sea voyages. (Pandect of Commercial Law

If the maritime lien arose prior to the recording

Effect of sale: All pre-existing claims in the

GENERAL RULE: The liability of shipowner

CAUSES OF REVOCATION OF VOYAGE

3. Must have passed the required physical

stipulated ocean voyage (Inter-Orient Maritime

officers of the boat, following the decision

Just Causes for the Discharge of Seaman

While in exercising his functions a pilot is in

law Commercial law

PERSONS WHO MAY MAKE A CHARTER

4. Captain in the absence of the ship agent

Clauses Which May Be Included In a Charter

Rights and Obligations of Parties

Rescission of a Charter Party

It is not dependent on the ownership of the

broker taking part therein

Not subject to Subject

The last lender The first lender

only the excess is insurable, since a loan on

It is the duty of the captain to continue the

give the right of way to the larger one.

Nautical Rules as to Sailing Vessel and

avoid imminent danger.

there is stipulation to the contrary. (US Lines vs.

b. The date when the goods should have

transportation by aircraft performed by an air

LIABILITY OF CARRIER FOR DAMAGES

An agreement relieving the carrier from

ACTION FOR DAMAGES

In United Airlines vs. Uy the two-year

d. Court of the place of destination. (Art.

recovering it, or without any intention of