Preliminaries Coverage of "Commercial Law"

C o m m . L a w Re v.
| 1
NOTE: Most parts culled entirely from Commercial Law Review,

2012 Ed. and Revisiting Philippine Commercial Law, both by
Villanueva, except for Transportation Law, Negotiable Instruments
and Credit Transactions from Villanueva and Commercial Law
Review by Sundiang and Aquino, and Bouncing Checks from
Villanueva and Special Penal Laws by Boado. Follows Atty. Nick
Nangits Commercial Law Review course outline. - Weng
PRELIMINARIES
Coverage of Commercial Law
... the branch of private law that provides for the rules that govern the
rights, obligations, and relations of persons engaged in commerce or
trade, and necessarily includes the purchase, sale, exchange, traffic
or distribution of goods, commodities, productions, services or
property, tangible or intangible, including the instrumentalities and
agencies by which they are promoted and the means and appliances
by which they are carried on.
Likewise, the term includes both concept of laws relating to trade,
which is the business traffic within the limitations of a state, and
commerce, which covers the intercourse with foreign states.
c. Equitable - since commercial transactions involve the

exchange of values or consideration.
d. Customary embodies rules that are followed from time to
time or invoked in everyday transactions.
Postulates:
a. Habitualness - transactions generally arise from the element
of repetition (i.e. a single act of sale does not make the seller
a merchant within the law)
b. Time is of the essence if no period fixed an obligation
becomes demandable in 10 days, unlike in Civil Law where
the courts must fix an unspecified period.
c. Delay and Demand - every debtor to a commercial contract
would be in mora without making demand (mora ex re),
unlike in Civil Law where demand is necessary.
d. Independent branch of private laws mercantilist theory:
commercial law is distinct from civil law. However, what
prevails is the mixed theory, in that civil and commercial
laws supplement one another.
Constitutional Provisions on Commerce and Trade
Section 1 of Article XII on National Economy and Patrimony, our
present 1987 Constitution maps out in broad details the national goal
and the role of commerce and economy in the national life, thus:
Characteristics of Commercial Law

Principal characteristics of Commercial Law:
a. Universal - universal or international because it exist in
every civilized
b. Progressive - progressive because as time passes by
Commercial Law accumulates new ideas and keeps abreast
with contemporary developments
SECTION 1. THE GOALS OF THE NATIONAL ECONOMY ARE

A MORE EQUITABLE DISTRIBUTION OF OPPORTUNITIES,
INCOME, AND WEALTH; A SUSTAINED INCREASE IN THE
AMOUNT OF GOODS AND SERVICES PRODUCED BY THE
NATION FOR THE BENEFIT OF THE PEOPLE; AND AN
EXPANDING PRODUCTIVITY AS THE KEY TO RAISING THE
QUALITY OF LIFE FOR ALL, ESPECIALLY THE
UNDERPRIVILEGED.
If you want to build a ship, dont drum up the men to gather wood, divide the work, and give orders, but rather, teach them to
yearn for the endless immensity of the sea. Antoine de Saint-Exupery, The Wisdom of the Sands
C o m m . L a w Re v. | 2
THE STATE SHALL PROMOTE INDUSTRIALIZATION AND

FULL EMPLOYMENT BASED ON SOUND AGRICULTURAL
DEVELOPMENT AND AGRARIAN REFORM, THROUGH
INDUSTRIES THAT MAKE FULL AND EFFICIENT USE OF
HUMAN AND NATURAL RESOURCES, AND WHICH ARE
COMPETITIVE IN BOTH DOMESTIC AND FOREIGN
MARKETS. HOWEVER, THE STATE SHALL PROTECT
FILIPINO ENTERPRISES AGAINST UNFAIR FOREIGN
COMPETITION AND TRADE PRACTICES.
IN THE PURSUIT OF THESE GOALS, ALL SECTORS OF THE
ECONOMY AND ALL REGIONS OF THE COUNTRY SHALL BE
GIVEN OPTIMUM OPPORTUNITY TO DEVELOP, PRIVATE
ENTERPRISES, INCLUDING CORPORATIONS,
COOPERATIVES, AND SIMILAR COLLECTIVE
ORGANIZATIONS, SHALL BE ENCOURAGED TO BROADEN
THE BASE OF THEIR OWNERSHIP.
Fr. Bernas enumerates the 3 constitutional directions mandated by
the section, namely:
1. ...it sets the dual goal of dynamic productivity and a more
equitable distribution of what is produced.
2. ...it seeks complementarity between industrialization and
agricultural development.
3. ...it is protective of things Filipino.
Commissioner Villegas, who introduced the section during the
proceedings, admitted that equity has been placed in first order, and
economic growth being the last, to serve as constitutional guidelines
for the various branches of the government for the promotion of the
common good in the economic sphere.
The economic nationalism under Section 1, Article XII, is

complemented by Sections 19 and 20, in Article II on Declaration
of Principles and State Policies, thus
SEC. 19. THE STATE SHALL DEVELOP A SELF-RELIANT AND
INDEPENDENT NATIONAL ECONOMY EFFECTIVELY
CONTROLLED BY FILIPINOS.
SEC. 20. THE STATE RECOGNIZES THE INDISPENSABLE
ROLE OF THE PRIVATE SECTOR, ENCOURAGES PRIVATE
ENTERPRISE, AND PROVIDES INCENTIVES TO NEEDED
INVESTMENTS.
Sections 19 and 20 are said to represent two of the pillars of the
economic policy of the Constitution, and together with Section 1 of
Article XII, circumscribe the evolving Philippine economic policy by
which Filipino businessmen and entrepreneurs may fasten the
support they can expect from their Government, and by which
foreign investors may determine the legality and viability of their
investments within Philippine territory. The same flagship
provisions of the 1987 Constitution also provide framework upon
which it can be determined whether the actions taken the Executive
Department, or the laws enacted by the Legislative Department,
having a bearing on Philippine Commercial Law, may be adjudged
as being on a solid basis of reliance upon which to proceed with an
investment opportunity in the Philippines.
National Hierarchy of Values
We believe in being in a nation that cares first and foremost for its
masses, rather than emphasizing the individualistic rights to
property and livelihood. This point is well-conceded in Sections 9
and 10, Article II of the 1987 Constitution, in our "Declaration of
Principles," thus:
SEC. 9. THE STATE SHALL PROMOTE A JUST AND DYNAMIC

SOCIAL ORDER THAT WILL ENSURE THE PROSPERITY AND
INDEPENDENCE OF THE NATION AND FREE THE PEOPLE
FROM POVERTY THROUGH POLICIES THAT PROVIDE
ADEQUATE SOCIAL SERVICES, PROMOTE FULL
EMPLOYMENT, A RISING STANDARD OF LIVING, AND AN
IMPROVED QUALITY OF LIFE FOR ALL.
SEC. 10. THE STATE SHALL PRMOTE SOCIAL JUSTICE IN
ALL PHASES OF NATIONAL DEVELOPMENT.
In constitutional language, we declare that, above all else, equitable
distribution of wealth and opportunities should be the main goals of
society, and all activities, resources and equity shall be deployed to
achieve such ends; that economic progress, although important,
when it benefits only the few would be an unwanted boon.
This socialist spirit of preferring the greater good versus individual
rights is reinforced in many other
provisions of the 1987 Constitution. This is really in stark contrast to
the underlying philosophy of the free enterprise system that business
left to its own selfish end would eventually work out well to the
greater good of society by raising the standards of living. Thus,
although we recognize the institution of private ownership and
property rights and the indispensable role of the private sector, we
nevertheless declare that property bears a social function, and all
economic agents shall contribute to the common good, and always
subject to the duty of the State to promote distributive justice and to
intervene when the common good so demands.
We therefore emphasize in our society the spiritual oneness that the
members of our society must achieve; that material blessings must be
pursued not for individual ends but as a contribution of what is
good for the nation.
The emphasis on spiritual good over material blessings therefore is

the signet of our society. Whereas, the determination of what is
successful is an mercantile society and easily verifiable from the
bottom lines of financial statements, what is the common good and
the measure of achieving the public interests are difficult to verify
and often fluid in their meaning and coverage, and therefore makes it
difficult to pinpoint with certain degree of reliability the
guideposts in the playing field upon which businessmen and
investors make their business decisions.
When taken together with other provisions of the Constitution having
to do with economic and commercial matters, the constitutional
declarations are a forthright admission of the existing poverty and
privation that pervades our present society; the inability of most of
our people to fend for themselves; of the distrust we bear against our
local elite and foreign business interests; and the pivotal role of
Government and its agencies, to be the main agent to effect such
goals, and the bulwark against otherwise resultant exploitation of the
great majority of the Filipino people.
Judicial Review
By virtue of judicial review, the Constitution vests in the courts the
final word on commercial matters.
Lex Mercatoria
International law of merchants and mariners growing out of their
customary practices.
I.
Nationalized Activities and Undertakings
Activities which are reserved in part or in whole for Filipinos

1. Mass media (100% ownership, 100% management)
2. Advertising (75% capital)
3. All others, including BOT-scheme contractors (60%)
4. Those covered by Flag Laws (Filipino First; in bidding, 75%
considered 100% Filipino, although superfluous due to
Grandfather Rule)
EXCEPTION: FTAAs, which allow for 100% foreign investment;
exempt transactions provided by law
Constitutional Provisions
Sec 10, Art XII: Congress, upon the recommendation of NEDA, can
reserve to Filipinos certain areas of investment, and can regulate
foreign investment. (Filipino-first policy)
Sec 12, Art XII: preferential use of Filipino labour, domestic goods
Sec 19, Art II: self-reliant, independent economy
Sec 17, Art XII: in times of emergency, when dictated by publicinterest, State may temporarily take over or direct the operations of
privately-owned public utilities or businesses affected with public
interest, under reasonable terms.
An aspect of the emergency powers clause
No just compensation needed, as this is not expropriation
(there is no taking) and the ownership does not transfer.
The Philippine Mining Act of 1995 [RA 7942]
Sec 2, Art XII: allows the state to enter into co-production, joint
venture, or production-sharing agreements with Filipino citizens, or
corporation or associations at least sixty percentum of whose capital
is owned by such citizens. Such agreements may be for a period not
exceeding twenty-five years, renewable for not more than twentyfive years...
25 + 25 years (exploration, development, utilization).
However, this does not apply to FTAAs, and government can
always waive refusal of extension.
Mining law constitutional, FTAAs are allowed; laws provide
for more than enough Filipino control and supervision of
mining operations.
FTAAs are service contracts.
Even if the FTAA is assailable for involving foreigners in
mining, its transfer to Filipinos cures the defect.
Constitution does not fix an iron-clad 60% share of profits
for the State in mining, unlike in petroleum. However, costs
incurred by government in building roads to the mine site
cannot be deducted from its share.
Retail Trade Liberalization Act of 2000 [RA 8762 repealing
Retail Trade law RA 1180]
Law adopts a liberal policy towards foreign investments to bring
down prices for the Filipino consumer, create jobs, promote tourism,
assist small manufactures, stimulate economic growth, and make
Filipino goods and services globally-competitive. Aims for a retail
sector characterized by lower prices, better services, wider choices,
and higher-quality goods to empower the Filipino consumer.
Retail Trade
Retail trading is any act or occupation of habitually selling direct to
the general public merchandise, commodities, or goods for
consumption. Retail trade includes sales to employees and officers,

if company does not regularly sell to the public.
EXCEPTIONS:
1. Manufacturer, processor, labourer, worker, if capital does not
exceed PhP100K
2. Manufacturer in a single outlet
3. Farmer selling farm products
4. Restaurants incidental to hotel business
Consumer goods (for retail)
Consumption goods which directly satisfy human wants and desires,
needed for daily life; excludes raw materials and other producer
goods (tools for production).
Category C
Category D
If foreign ownership exceeds 80% of equity, must offer 30% of

stock exchange in the Philippines within 8 years from start of o
Foreign-owned groups may participate if organized under laws
but must obtain license from SEC for companies, or DTI if sin
May be wholly foreign-owned
Paid-up capital greater than US$ 7.5M; the establishment of a s
US$30K or greater
If foreign ownership exceeds 80% of equity, must offer 30% of
stock exchange in the Philippines within 8 years from start of o
but must obtain license from SEC for companies, or DTI if sin
May be wholly foreign-owned
Specializing in high-end or luxury products (good not necessar
maintenance demand generated by higher-income groups)
Paid-up capital at least US$ 250K per store.
Categories and Capitalization:
Category A
Reserved exclusively for Filipinos, former Filipinos who are residents, and
Use grandfather
rule to determine
if entity is local or foreign-owned.
corporations which are wholly owned by Filipinos. EXCEPTION:
Foreigners
may
Category B
engage in exempt transactions if licensed.

Qualifications and requirements for foreign investors:
EXEMPT TRANSACTIONS (foreigners can participate)
1. Minimum net worth of parent corporation: US$200M for
5. Manufacturer, processor, labourer, worker, if capital does not exceed
categories B & C, US$50M for category D
PhP100K
2. At least 5 branches worldwide, unless has one store
capitalized at US$25M or more
3. 5 years track record in retailing
4. Only nationals from countries that also allow the entry of
Paid-up capital less than US$2.5M
Filipino retailers
of themaintain
Philippines
5. Must
full amount of capitalization in Philippines
unless
notifies SEC/DTI of cessation of operations. Failure
but must obtain license from SEC for companies, or DTI if single
proprietorship
to maintain
capitalization prior to notice makes foreign
Before 2002, foreign ownership limited to 60%; April 2002, foreigners
may
trader
vulnerable
to penalties or future trade restrictions.
wholly-own
Minimum paid-up capital US$2.5 M but less than US$7.5M; the establishment of
Safeguards from foreign domination of retail trade
a store must cost US$30K or greater
1. Follow the categories delineated
2. Only nationals or parent corporations formed in countries

that allow the entry of Filipino retailers
3. Not allowed to retail outside their accredited stores through
the use of:
a. Mobile or rolling stores, or carts
b. Sales representatives
c. Door to door selling
d. Restaurants and sari-sari stores
e. Other similar retailing activities
Common-law wife of foreigner may engage in retail trade but must
use exclusively her own paraphernal property; allowing the husband
to take part in managing the business is a violation of the law.
An Act Limiting the Right to Engage in the Rice and Corn
Industry to Citizens of the Philippines; or Rice and Corn law
[RA 3018]
The rice and corn industry is limited to Filipino citizens, and to
partnerships, associations, corporations which are wholly Filipinoowned.
Rice and corn industry
1. Acquiring rice and corn and their by-products (includes
acquisition as raw materials) for manufacturing or
processing of other finished products
2. Engaging in:
a. Culture
b. Production
c. Milling
d. Processing
e. Trading, including wholesale, export, import (excludes
retailing, which is covered by Retail Law)
This law allows for the participation of foreigners in all rice and corn
industry activities (except retailing which is governed by the Retail
Law), if authorized by the National Grains Authority, when:
1. NGA certifies an urgent need for foreign investment, and the
same will not promote monopolies or restraint of trade
2. Alien has necessary finances and technical expertise; and
3. Alien submits an acceptable developmental plan to the NGA.
Flag Laws
May only be invoked against non-domestic bidders; or against
domestic bidders if such domestic bidder uses imported articles, or
local articles made from imported materials.
Merely dealing exclusively in foreign materials does not make the
company an alter-ego of a foreign entity.
a. An Act to Give Native Products and Domestic Entities
the Preference in the Purchase of Articles for the
Government [CA138]
In government (including local/GOCC) biddings, if the difference in
bid price between the native products and foreign entities is only
15%, preference shall be given to the Filipino.
b. An Act to Require the Use, Under Certain Conditions, of
Philippine Made Materials or Products in Government
Projects or Public Works Construction, Whether Done
Directly by the Government or Awarded thru Contracts
[RA 912]
Sec 1. In construction or repair work undertaken by the government,
whether done directly or through contract awards, Philippine-made
materials and products, whenever available, practicable and usable...

shall be used... upon proper certification of availability, practicality,
usability and durability... by the [DPWH].
Thus, the Anti-Dummy Law covers only nationalized businesses and

not partially-nationalized undertakings.
Sec. 3. No contract may be awarded... unless the contractor agrees to

comply... an award may be rescinded for unjustifiable failure to
comply.
Important Concepts
Requiring Government Offices, Agencies, Instrumentalities and

Government Owned or Controlled Corporations, Persons and
Entities Enjoying Tax Exemption, Incentive or Subsidy from the
Government to Utilize in International Transportation Services
of the Philippine Flag Air Carrier and Shipping Lines; or
Philippine Flag Carriers law [PD 894]
a. Exploitation of Natural Resources

Exploitation / development / utilization of natural resources shall be
under the full control and supervision of the State, but may also be
effected through: (60% Filipino)
1. Joint venture
2. Production sharing
3. Co-production
b. Retail Trade
Requires government and persons enjoying tax incentives to utilize

Philippine flag carriers.
Anti-Dummy law [CA 108 aa RAs 134 and 6084, and PD 715]
Law penalizes Filipinos who allow themselves to be used by aliens
as dummies in order to avail of certain Filipino-only privileges. The
law specifically bans the participation of aliens in the management of
nationalized businesses, whether as employees, labourers, officers,
whether paid or not.
EXCEPTION: Aliens may participate in technical aspects if:
1. No Filipino can do the technical work
2. Authorized by the President of the Philippines
PD 715 later allowed aliens to be voted as directors (not officers) in
corporations engaged in partially-nationalized activities in proportion
to their allowable share in the capitalization of such corporation.
Retail trading is any act or occupation of habitually selling direct to

the general public merchandise, commodities, or goods for
consumption. Retail trade includes sales to employees and officers,
if company does not regularly sell to the public.
EXCEPTIONS:
1. Manufacturer, processor, labourer, worker, if capital does not
exceed PhP100K
c. Foreign Ownership
Ownership by aliens of equity in Filipino enterprises. Generally
allowed, but prohibited in nationalized undertakings and limited in
partially-nationalized businesses, subject to exceptions allowed by
law. The restrictions on foreign ownership are founded on

Constitutional policies of a nationalized economy and Filipino-first.
Medium
More than P 15M up to P 100M
Eligibility for Government Assistance

d. Grandfather Rule
If 60% or more of the equity in an entity is Filipino-owned, the entity
in question is 100% Filipino. If it is less than 60%, it is Filipino only
to the exact percentage of ownership of Filipinos. Same goes if
equity is owned by another juridical entity (hence, grandfather),
check first the percentage of Filipino ownership in the parent
corporation.
II.
Laws to Protect Small and Domestic Enterprises
Magna Carta for Micro, Small and Medium Enterprises

(MSMEs) (Kalakalan 20) [RA6977 aa RAs 8289 and 9501]
Seeks to promote the growth and development of micro-smallmedium enterprises by:
1. Facilitating access to funds
2. Removing stringent collateral registration requirements
Principles:
1. Simplification on requirements and procedures
2. Encouragement of private sector participation
3. Coordination of government efforts
4. Decentralization of administration through regional and
provincial offices
Micro
Small
Capitalized at not more than P 3M

More than P 3M up to P 15M
1. Registered (micro enterprises, register with municipal/city

treasurer)
2. 100% Filipino capital; of juridical, 60% of equity Filipinoowned
3. Sectors: industry, trade, services (including practice of
profession), tourism-related establishments, agri-business
(manufacturing, processing, production of produce)
4. Not a branch or subsidiary of large-scale enterprise; must not
be controlled by large-scale enterprise or 3rd parties. (May
accept subcontracts, partner with large enterprises, and join
cooperatives.)
Eligible MSMEs shall be granted at least 10% of the procurements of
government for products and services annually
SB Corporation (attached to DTI).
Barangay Micro Business Enterprises (BMBEs) Act of 2000 [RA
9178]
Economic development through entrepreneurship and integration of
the informal sector.
A BMBE is:
1. A business entity / enterprise
2. Engaged in production, processing (including agroprocessing, manufacturing of products, trading, services
(excluding professional services pursuant to government
licensing)
3. Total assets (including loans, exclusive of land where

situated): P 3M
Benefits of registration as BMBE: (registration with municipal / city
treasurer, free certificates good for 2 years, renewable)
Exempt from income tax
Minimal requirements
LGUs encouraged to reduce amount of taxes / fees
imposable on BMBEs
Exempt from minimum wage (SSS / PhilHealth still
required)
Special credit windows
Creation of P 300M BMBE development fund from
PAGCOR
DTI matching up BMBEs with other enterprises for
incentives
Embroidery Law [RA 3137]
Allows for sub-contracting to sub-contractors or home workers of
other processes or completion in the manufacture of garments.
(Dispenses with complete assembly line requirement.) Required
only to ensure that goods released from its bonded warehouse for
embroidery has been stamped or cut in the pattern to be
manufactured.
Countervailing Duties on Imported Subsidized Products [302,
Part 2, Title II, Book I, TCCP aa RA 8751]
A countervailing duty equal to the amount of subsidy, which is in
addition to regular duties, taxes, and charges, will be imposed
whenever:
1. A subsidized foreign product is imported into the Philippines

2. Tending to cause material damage to a domestic industry or
retarding the establishment of a domestic industry
Anti-Dumping Act of 1999 [301, Part 2, Title II, Book I, TCCP
aa RA 8752]
An anti-dumping duty equal to the margin, which is in addition to
regular duties, taxes, and charges, will be imposed whenever:
1. A product is imported at less than normal value in the
exporting country
2. Tending to cause material damage to a domestic industry or
retarding the establishment of a domestic industry.
Safeguard Measures Act [RA 8800]
Objectives of Safeguard Measures Act
1. Promote competitiveness of domestic industries
2. Provide safeguards for domestic industries against exports
Determination
The DTI (non-agricultural) or DA (agricultural) may initiate or
implement appropriate safeguard measures motu propio or upon a
verified petition, a request of the President, or resolution of Congress
committee.
DTI/DA refers to the Tariff Commission for investigation, and shall
make a determination if a product is being imported in increased
quantities that may cause substantial injury to domestic industries.
Report must be submitted in 120 days (60 if urgent).
C o m m . L a w R e v . | 10
Factors to be considered:
1. Rate of increase of imports
2. Market share taken by imports
3. Changes in levels of sales, productivity, profits and
employment resulting
State policy
For agricultural products, consider volume and price.
Consumer petitions
Measures
Consumers may petition government for the recall of products and

for amendments to consumer safety rules.
Safeguard measures may be made to apply to all imported products.

DOF Secretary may order Customs Commissioner to impose a
provisional increase in tariffs, through a cash bond, to redress or
prevent injury to domestic industries
Tariff Commission shall recommend a definitive measure:
1. Increase duty
2. Decrease tariff-rate quota
3. Restrictions on import quantities
4. Others, including combinations
*measures cannot be made to apply if product originates from a
developing country and market share is less than 3%; developing
countries collectively should not account for more than 9% of total
imports
Period of measure must not exceed 4 years, and aggregate period not
to exceed 10.
III.
Laws on Consumer Protection
Consumer Act of the Philippines [RA 7394]
Protection against safety hazard and unfair practices

Provision of consumer education and rights
Involve consumers in economic policy-making
Safety standards and warranties

Consumer products must be inspected and certified by the
government before distribution. Imported products will be refused
admission for failing to comply with safety and quality standards.
In addition to warranties for sales in the Civil Code, the following
are provided:
1. Seller sets forth the identity of the warrantor and to whom
warranties are extended
2. Statement of coverage by warranty
3. Duties of warrantor, enforcement of consumer rights, period
for enforcement.
Labelling and deceptive acts
The following must appear on labels:
1. Trade names
2. Trademark
3. Business name
4. Address of manufacturer, importer, re-packer
5. Make or ingredients
6. Country of manufacture if applicable
C o m m . L a w R e v . | 11
An act is deceptive if it induces the consumer to buy a product

through concealment, misrepresentation, or fraud.
Retailer subsidiary liable
Retail seller is subsidiary liable if both manufacturer and distributor
fail to honour warranties.
The Meat Inspection Code of the Philippines [RA 9296 aa RA
10536]
Provides penalties for the sale or offering for sale of substandard
meat.
the implementing agency of the Milk Code but it cannot prohibit

such advertisement, only screen and control the same. Donations
from manufacturers may be refused or requested at the discretion of
the DOH.
IEC (info/educ/comm) materials regarding breast milk substitutes
from manufacturers must be directed towards doctors, and not to
women and children.
Law on Mislabeling [Act 3740 aa CA46]
Penalizes fraudulent advertising, mislabelling, misbranding of any
kind on any product or bond. Possession of mislabelled products in
excess of reasonable needs is prima facie evidence of possession
with intent to sell.
Food, Drug and Cosmetic (FDC) Act [RA 3720]

Prohibits the following:
1. Manufacture, transfer, or sale of FDC that is adulterated or
misbranded.
2. Adulteraltion or misbranding of FDC.
3. Refusal to allow inspection and sampling by BFAD.
4. False guaranties.
5. Faking identification marks required by BFAD.
6. Violation of trade secrets.
7. Alteration of labels.
8. False statements of effectiveness and compliance.
9. Using analysis by BFAD for promotion.
Law on Stamped or Marked Containers [RA 623 aa RA 5700]

Prohibits the use of registered bottles and containers for any purpose
other than that for which they were registered without express
permission of the owner. The purpose is the protection of public
health and the spread of disease.
Purchaser of containers have the right to use them in any way he
pleases, unless such use violates intellectual property rights or
creates a likelihood of confusion. Native products are exempted
from prohibitions of the law in order to render assistance to smallscale manufacturers and cottage industries.
Milk Code [EO 51]

Price Tag law [RA 71 aa RA 1074]
Law allows for the advertising of breast milk substitutes, the same
falling within the ambit of allowed commercial speech. The DOH is
C o m m . L a w R e v . | 12
Price tags must be affixed and products sold without discrimination

at the stated price.
Price Control laws [RAs 6124 and 6361]
Price Control Council to fix maximum selling prices.

Price control of essential commodities.
Metric System laws

a. Metric System law [BP 8]
Monopoly a solitary entity, or conspiracy of entities (cartel), whose

purpose is to dominate trade in such manner as to exclude
competition.
b. Monopolies and Combinations in Restraint of Trade
[Art. 186 RPC aa RA 1956; and Art. 28, CC]
Revised Penal Code (186) restraint of trade or artificial prevention
of free competition; monopoly by false rumours; combination of
importers prejudicial to commerce
Civil Code (28) person who suffers damage may obtain relief for
unfair competition because of force, deceit, machination, or unjust
method
Full implementation / dissemination of metric system by 1984.

b. Prescribing the Use of the Metric System of Weights and
Measures as the Standard easurement for All Products,
Commodities, Materials, Utilities and Services and in All
Business and Legal Transactions [PDs 187 aa 748]
Metric system to be used in Philippines for all transactions.
Laws against Monopolies and Restraint of Trade
a. An Act to Prohibit Monopolies and Combinations in
Restraint of Trade [Act 3247]
Constitution provides that the state shall regulate or prohibit
monopolies when public interest so requires, and that no restraint of
trade or unfair competition shall be allowed.
Downstream Oil Industry Deregulation Act of 1998 [RA 8479]

Policy
1. Ensure a competitive market under a regime of fair prices;
adequate supply of clean and quality petroleum products.
2. Encourage new participants in downstream oil industry.
Fair Trade Practice
DTI and DOE shall take measures to promote fair trade and prevent
cartels, and monitor relationships between industry participants to
ensure enforcement of contracts and equitable practices.
IV.
Maritime Commerce
Real
C o m m . L a w R e v . | 13
A vessel is essentially movable property; nevertheless, maritime

transactions are similar to real property transactions in that
registration is required to bind 3rd persons.
Hypothecary
Limited liability rule confines liability to the value of the vessel itself
(liability co-extensive with vessel), such that when the vessel is lost
the liability is extinguished. Vessels total destruction extinguishes
all maritime liens, subject to exceptions.
EXCEPTIONS:
1. Damage caused by negligence of ship owner (ship owners
fault) or concurring negligence of ship owner and captain.
2. Expenses for the repair/provisions of the ship before its loss.
3. Vessel made collateral and lost before public sale.
4. Vessel is insured. (up to extent insured)
5. Liabilities under the Labour Code / Workmens
Compensation Act.
1. No total loss or vessel was not abandoned. (Total loss and
abandonment of the vessel, to be a limitation on liability,
must be SOLELY through the fault or negligence of the
captain. If ship owner is to blame / equally to blame,
exception #1 to limited liability rule governs.)
By nature and place of performance of their functions

(loading/unloading/custody of cargo at port), arrastre
operations are not maritime transactions. (akin to warehouse
deposit)
Admiralty jurisdiction Philippine law follows the
American rule (subject matter test): local court has
jurisdiction over maritime transactions is subject matter is in
the Philippines (i.e. ship docked in Philippines).
Common carriers impliedly warrant the seaworthiness of their

vessels.
Charter Party
A contract whereby an entire ship or some principal part thereof is let
(leased) by the owner to another for a specified time or use for the
conveyance of goods or passengers in consideration for the payment
of freight.
A charterer has no obligation to check if the boat is

seaworthy or has complied with legal requirements because
such are presumed of a common carrier for being engaged in
public service.
If the vessel is under a charter party and controlled by the
charterers own captain and crew, and the captain was
negligent, the owner of the ship cannot be made liable for its
sinking just because it gave the sailing order.
Charterer remains holder of Bill of Lading, which operate as
a receipt of goods, and does not vary the contract between
the charterer and ship owner.
Even if the charter party has a condition against subchartering and was in fact sub-chartered without knowledge
on the part of the sub-charterer of the prohibition:
1. No cause of action accrues in favour of the owner of the
vessel
2. No lien on the cargo of sub-charterer, since the owner of
the vessel only has alien on goods he has in possession,
and by the contract, he relinquished possession of the
entire ship.
Primage
Bonus to be paid to the captain for a successful voyage.
C o m m . L a w R e v . | 14
Demurrage
The sum fixed in the charter party as renumeration to the ship owner
for the detention of his ship beyond the number of days allowed by
the contract for loading, unloading, sailing. It is a penal clause to
compensate owner for non-use.
Demurrage must be stipulated in the contract.

Loading and unloading must be for a reasonable amount of
time or customary quick dispatch
demurrage/dispatch: NONE means right to demurrage has
been waived
Delay in loading/unloading for the purpose of demurrage
runs from the moment the ship is detained for an
unreasonable time, if the circumstances of delay were
brought about by the fault or negligence of the charterer.
A claim for demurrage is an obligation NOT arising from a
loan or forbearance of money; interest rate 6%. If cost of
demurrage not stipulated, interest runs from the moment the
court imposes the proper demurrage charges.
Contract of affreighment
A contract for the use of space on vessels leased in part or in whole,
for the carriage of goods of others.
Rules for common carriers still govern.
Contract for special services rendered by the ship owner,
who retains possession, command, and navigation of the
ship. Charterer merely has use of space contracted for.
Ship owner must provision the ship, pay the master and
crews wages, answer for maintenance costs of the ship.
Carrier is still a common carrier.
It is the charterers obligations under the contract of

affreightment to exercise ordinary diligence in ensuring
berthing (loading/unloading) space for the vessel.
Time charter- leased for a particular or fixed period of time

Voyage charter- leased for a single voyage, regardless of number of
stops and connecting trips stipulated.
Bareboat of demise charter
A contract where the entire vessel is leased to the charterer; includes
the relinquishment of the command, possession, control, and
navigation by the ship owner to the charterer. The master and crew
are considered servants of the charterer.
Undertaking is private in character; contract governs, not law
on common carriers. Turnes common carrier into private
character.
Charterer mans the vessel with his own people, and in effect
becomes the owner pro hac vice (for the voyage or service
stipulated), subject to liability for damages caused by
negligence.
Owner must completely relinquish command, possession,
control, and navigation of the ship; anything short of a
complete transfer is a contract of affreightment, not a
bareboat or demise charter.
Charter party rules
If cargo of charterer is not sufficient to fill 3/5 the capacity

of the vessel, carrier may put it on a smaller vessel at the
expense of charterer.
Chartered in whole by one party, carrier cannot receive cargo
of other persons.
C o m m . L a w R e v . | 15
Owner liable for damage because of undue delay by captain.

If cargo is more than contracted for, carrier may accept and
require additional freightage as long as vessel is not
overloaded.
Upon arrival at port where cargo is to be loaded, in the
absence of cargo, captain may look for other cargo OR return
in ballast (no cargo; loaded with weight for stability) if the
lay days have expired and charterer is still obliged to pay in
cost of freightage full.
If charterer can prove that vessel is not in condition to
navigate, he does not have to pay freightage.
Charterer may sub-charter unless expressly prohibited (sublease principle)
Full freightage even if charterer cannot fill the vessel.
Carrier can open packages to find out if the cargo may
subject the vessel to forfeiture / confiscation. If vessel is
forfeited / confiscated due to cargo, charterer is liable for
damages.
If ship agent / captain know that merchandise for illicit
commerce have been loaded, they become jointly liable with
the ship owner for losses caused to other shippers.
Charterer must wait until necessary repairs are completed.
Charterer may unload vessel before destination but must pay
full freightage.
Before the trip, charterer may unload the vessel and pay of
freightage.
The obligation to pay freightage accrues after discharge of
cargo.
Liquid cargo, leaks out because of inherent defect: charterer /
shipper cannot abandon if more than still remains.
If charter party is only partial, charterer has no right to fix
the date of departure.
Rescission of charter party

By charterer:
Before loading, cancel unilaterally by paying of freight
agreed upon. Mere notice is sufficient; consent of ship
owner.
When vessel is does not have capacity agreed upon, or flag
is different than stipulated.
When vessel not placed at the disposal of charterer within
agreed-upon period.
If the vessel returns due to pirates or bad weather, charterer
may decide to unload but must pay of freightage.
If vessel stops for repairs for less than 30 days, full
freightage must be paid. If more than 30 days, freightage
paid in proportion to distance covered.
Total rescission by ship owner:
When charterer fails to load vessel and lay days expire, but
charterer must still pay freightage.
Owner sells vessel, and the new owner decides to load the
vessel with his own cargo despite knowledge of the charter
party.
Total rescission by due to fortuitous event: (mere occurrence of any)
War
Blockade
Prohibition to receive cargo
Embargo of vessel by government
Inability of vessel to navigate through no fault of captain or
ship agent
Vessel
Vessel is considered personal property regardless of value.
C o m m . L a w R e v . | 16
Unlicensed Persons
Co-owners
An unlicensed person does not possess the skill to navigate.
If the ship is co-owned, a co-owner desiring to sell his aliquot share
must first offer the same to the other co-owners (right of preemption). If the sale is made to 3rd parties without offering the same
first to the co-owners, co-owners may buy back the original share of
the seller within 30 days (right of redemption).
Co-ownership gives rise to a partnership by operation of law.
Ship Agent (Naviero)
When the ship owner is absent, liability is imposed upon the ship
agent as if he were the owner because he can exercise acts of
ownership (i.e. abandonment; termination of ship employees for just
cause) over the vessel. The naviero represents the owner and the
courts may acquire jurisdiction over him.
The ship owner and the ship agent are liable for the debts incurred by
the captain for the repair and provisioning of the vessel.
A naviero:
Is entrusted with the provisioning a ship / representing it in
the port where it is located; must reimburse captain for
legitimate advances.
May be a local corporation
Is liable solidarily with the ship owner to owners of cargo for
losses and damage, whithout prejudice to his rights against
the ship owner
Is liable when cargo is damaged or a collision occures and
the ship owner is absent
Is liable for taxes if ship owner is not within the taxing
jurisdiction
Captain
The captain acts as an agent of the vessel and acts by him exceeding
his authority will absolve the ship owner or ship agent from liability,
except to the extent of his own investment in the ship, if any.
(position of captain is agency coupled with interest)
The captain also holds the position of a trustee, such that there is no
acquisition by prescription in his favour.
The captain is liable for the cargo from the time it is turned over to
him (at the dock or afloat alongside the vessel) at the port of loading,
until he delivers the same (on the shore or wharf) at the port of
unloading, unless otherwise stipulated. As a representative of the
ship owner, the captains liability is ultimately that of the ship owner.
Roles of a captain
1. General agent of shipowner
2. Commender / technical director of vessel
3. Representative of the country under whose flag he sails
Powers of the captain
1. Contract with, command and discipline the crew
2. Enter into a charter party
3. Contract for fuel/provisions
4. Contract for needed repairs
Duties of the captain
In port:
1. Equipment inventory
2. Report to ship agent on arrival
C o m m . L a w R e v . | 17
3.
4.
5.
6.
Marine survey of vessel before loading

Remain on board while loading
Record loan on bottomry with customs
Demand for a pilot on departure and arrival at every port
If cargo has to be unloaded, the same shall be the responsibility of

the captain, who shall also be liable for undue delay in the recommencement of the voyage.
Succession
During Voyage:
7. Keep a copy of Code of Commerce on board
8. Keep a log book (prima facie evidence if made by person
required), freight book, accounting book
9. Stay on the ships bridge when sighting land
10. Keep papers / properties of deceased crew
11. Comply with rules / regulations of navigation
Arrival under stress: (lack of provisions / fuel, pirates, inability
to navigate)
12. File a marine protest within 24 hours for arrivals under stress
Destruction:
13. File a marine protest within 24 hours shipwreck
Captain is liable to ship agent, if ship agent is made liable for the
following:
1. Damages because of neglect or lack of skill of captain
2. Theft or robbery by crew
3. Mutiny
4. Effects of failure to comply with rules of navigation,
customs, health
5. Misuse of captains powers
6. Unjustified deviation
If voyage is diverted due to instructions of management to captain,
ship owner / ship agent liable for the damage caused.
1. Captain
2. 1st mate
3. 2nd mate
Grounds for rescission of contract of employment by captain or crew
1. War
2. Change of destination
3. Outbreak of disease
4. New ship owner
*vessels complement is from captain to cabin boy
Freightage and merchandise
Owner of merchandise sold to make necessary repairs should

still pay freightage
Merchandise jettisoned, no freightage, considered general
average
Lost at sea / seized by pirates, no freightage
Freightage may be paid by merchandise recovered by
salvage
Full freightage even if merchandise damaged, if damage is
cause by inherent defect
If freightage is based on weight and cargo increases in
weight (i.e. live cargo producing young) during the voyage,
charterer must pay for the weight increase
Ship has retaining lien on cargo carried; such lien may be
waived by surrender of cargo, but the lien subsists for 30
C o m m . L a w R e v . | 18
days after surrender. This lien is independent of the

transactions of 3rd persons.
Carrier may demand payment in cash and refuse a surety
bond.
2% greater than capacity not allowed; if beyond capacity, 1 st
come, 1st served, unless all are present in which case
shippers will be allowed to load in proportion they have
contracted for
Action to recover undelivered cargo:

1. 10 years with bill of lading (because bill of lading is a
written contract; may be reduced by carrier if reasonable)
2. 6 years if no bill of lading
3. 1 year for overseas trade (COGSA)
Delay
If the vessel cannot sail for temporary causes not attributable to the
vessel, the ship owner or ship agent cannot be made liable for
damages.
If the voyage has begun and was interrupted by:
1. Force majeure / fortuitous event - passengers are obliged to
pay fares in proportion to the distance covered, without right
to recover.
2. Fault of captain exclusively passengers have right to
indemnity
3. Disability of vessel, and passengers agree to wait not
required to pay increased fares, but must shoulder their own
living expenses
Desertion
Act of seaman in abandoning the vessel, without leave, before the

expiration of his time; an unauthorized absence from the ship with no
intention to return to her service. (animo non revertendi)
Philippine Coast Guard laws
a. Amending Section 808 of the TCCP, as amended, by
Allowing the Registration of Vessels the Ownership of
which is Vested in Corporations or Associations, at least
60% of the Capital Stock or Capital of Which Belong to
Citizens of the Philippines [PD 761]
A certificate of Philippine registry shall be issued only to a vessel of
domestic ownership of more than 15 tons gross. Domestic
ownership means ownership vested in Filipino citizens or juridical
entities organized under Philippine laws, at least 60% of which is
owned by Filipino citizens.
b. Transferring the Functions of Registration and
Documentation of Philippine Vessels to the Philippine
Coast Guard [PD 1064]
PD 1604 vests registration and documentation duties with the Coast
Guard. Registry with the Coast Guard of vessels 15 tons gross or
over makes the vessel of Philippine registry (registered under
Philippine flag) and allows vessel to engage in coastwise (domestic)
trade.
Reorganizing the Ministry of Transportation and
Communications, Defining its Powers and Functions [EO 125 aa
EO 125-A]
C o m m . L a w R e v . | 19
EO 125 has, by law, transferred the duty of registration to

MARINA (Maritime Industry Authority, under the DOTC)
from the Coast Guard; HOWEVER the Coast Guard has
NOT RELINQUISHED its registration functions.
MARINA issues certificates of competency.
The Ship Mortgage Decree of 1978 [PD 1521]

Allows the mortgage of a ship or its equipment with any financial
institution, for the purpose of financing the operation, construction,
acquisition of vessels. If such mortgage is taken for these purposes,
the mortgage is a preferred mortgage if it complies with the formal
requisites under law.
1. Mortgage must be registered with Coast Guard
2. Mortgage lien must be prioritized over all claims, EXCEPT:
- Fees taxed by court
- Taxes
- Crews wages
- General average
- Salvage
- Maritime liens prior to mortgage
- Damages from tort
- Preferred mortgage prior
Unpaid portion after sale enforceable by personal action against the
debtor. (not really a maritime transaction, otherwise deem as
exception to hypethecary nature)
A vessel may be attached.
Maritime lien under ship mortgage decree
A maritime lien is a present right of property in a ship. From the
moment it attaches, it is inchoate until brought into legal effect in
admiralty by a proceeding in rem, at which point it relates back to

the time when it first attached.
The Ship Mortgage Decree provides that any person furnishing
repairs or provisions for the ship shall have a maritime lien on such
vessel. If such maritime lien is prior to the recording of the preferred
mortgage, it shall have priority over the mortgage lien.
A person who extends credit for the discharge a maritime lien
becomes entitled to the said lien, if:
1. The funds were furnished to the ship on order of the master;
and
2. There is evidence that the funds were actually used to pay
the debts secured by the lien.
A local RTC can assume jurisdiction over a maritime case

involving foreign elements if the ship is docked in the
Philippines because the Philippines follows the American rule
(subject matter test) as opposed to a purely English rule
(locational test, or where the contract is made or to be
performed).
A foreign company cannot avail of the provisions of PD 1521

which was decreed specifically for the protection of Filipino
suppliers. The foreign company must therefore prove that the
maritime lien was constituted in its favour under applicable
foreign law.
Requisites of a maritime for the supplying of necessaries:

1. necessaries are furnished to the vessel for its benefit
2. necessaries are necessary for continuation of vessels
voyage
3. Credit must have been extended to the vessel
4. A necessity for the extension of credit
C o m m . L a w R e v . | 20
5. necessaries were ordered by persons authorized to contract

for the vessel
at destination
In case of shipwreck and salvage i
repayment will depend on what m
Bottomry and Respondentia

Loans secured by ship (bottomry) or cargo (respondentia).
Hypothecary in nature (limited liability). EXCEPTIONS to
hypothecary nature:
1. Loss due to inherent defect
2. Loss due to barratry on part of captain
3. Loss due to fault of malice of the borrower
4. Vessel engaged in contraband
5. Cargo loaded is different from agreed upon
Common elements:
1. Exposure of security to marine peril
2. Debtors obligation is conditioned on the safe arrival at
destination of security
Bottomry
Loan using vessel as
security
Not available for
crews salary
Loan availed of by
owner; in his absence,
by captain
Respondentia
Loan using cargo as
security
Loan not all used for
cargo, excess must be
returned.
Loan availed of only by
owner of cargo
Several; last is preferred
in payment
Averages
Average is damage or loss deliberately caused (i.e. jettison) to
successfully save the vessel and/or cargo from a marine peril.
General average inures to the benefit of all. Thus, when both vessel
and cargo are saved, it is general average, and all persons whose
property were saved by the deliberate sacrifice made must contribute
to reimburse the loss of the person whose cargo or part of the vessel
was sacrificed in the process.
If the average is particular, such as only the vessel or cargo is saved,
or only part of the cargo is saved, the owner must bear the loss.
General average procedure

Both
Loan in excess because of overvaluation
1. Before by
theborrower
sacrifice, captain must call a meeting of officers
and
cargo
owners
on board
to be returned with legal interest
2. becomes
They shall
decide by voting, but the captain has the final say.
If not subjected to marine peril,
ordinary
loan. Failure to pay loans on timeDecision
gives risetotobe made is on the sacrifice to be made.
liability for legal interest.
If the captainobligation
does not call a meeting before the sacrifice, it cannot
Loss due to marine peril extinguishes
be considered general average, and no claim for contribution can be
(hypothecary, general rule)
made, UNLESS the meeting cannot be called (i.e. dangerous storm,
no time to meet).
Insurable interest is only on the excess of value of
loan (if concurring with insurance)
If cargo is jettisoned, begin with those on deck, of bigger bulk, of
Lenders must contribute to
general
average
smaller
value.
The cargo must be covered by a bill of lading to be
Exposure to marine peril:reimbursable
from time anchors
are
as constituting
general average.
weighed at departure to the time anchors are dropped
C o m m . L a w R e v . | 21
Arrivals under stress, if justified and not attributable to the neglect or

fault of the crew, constitute particular average. No damage need be
paid to the shippers, who must wait patiently. But if the arrival under
stress is occasioned by bad faith, damages must be paid to the
shippers, and the vessel must bear its own losses.
Following York-Antwerp rules
Overseas Trade
Prohibition on deck loading
Deck cargo, with consent of owner, if saved:
Must contribute to general average
Deck cargo, with consent of owner, if jettisoned:
Owner NOT entitled to reimbursement
Last Clear Chance
Inapplicable as under the Code of Commerce, if both vessels are

negligent (negligence on both parties is a requirement for the
invocation of last clear chance), both must bear their own losses,
and are solidarily
liable for the damage sustained by the shippers.
Coastwise Shipping (interisland;
domestic)
Deck cargo permitted
Overtaking
Deck cargo, with consent
of owner,orif Crossing
saved:
Must contribute to general average
It isofthe
duty ifofjettisoned:
the crossing or overtaking vessel to stay out of the
Deck cargo, with consent
owner,
way even if the distance cannot be determined. In case of collision,
Owner entitled to reimbursement
overtaking vessel is liable since it is the one that can avoid the
collision.
Collision
Guilty vessel must pay for the damage caused by the collision.
EXCEPTION: If the guilty vessel sinks or is completely lost.
(hypothecary nature)
One vessel at fault OR third
vessel at fault
Both vessels at fault OR vessel
at fault not known
Fortuitous event
There is a presumption of loss if vessel sinks and cannot be salvaged.
Striking a stationary object

The presumption is that the moving vessel is at fault. The
presumption is rebuttable if the moving vessel can prove that it was
without fault, the stationary object was at fault, or it was an
inevitable accident.
Vessel at fault liable for damage, unless suchPilotage

vessel is completely lost.
Vessels must bear their own losses; shippersThe

mayfact
go after
owners
that aship
vessel
has a pilot on board will not exempt it from
who are solidarily liable for the shippers losses.
liability.
No liabilities; each must bear own loss.
Pilot is a person licensed to conduct a vessel in and out of ports or
through rivers and channels. He becomes the master of the ship pro
The ship owner may proceed against those responsible for civil and
hac vice. If pilotage is compulsory, it is the pilots duty to insist on
criminal liability. Within 24 hours upon reaching the nearest post,
effective control of the ship, otherwise he should decline to act as a
the captain of innocent ship must file a marine protest, otherwise
pilot. As a pilot, he must exercise the ordinary care required by the
there can be no recovery. However, such failure to file the protest on
circumstances. (Extraordinary care if circumstances dictate.)
time will not prejudice the rights of cargo owners, innocent vessels
without decks, and small crafts in the bay or river.
Occasions when master should interfere or even displace the pilot:
C o m m . L a w R e v . | 22
1. Pilot is incompetent, intoxicated, is not aware of dangers,

and in cases of great necessity
2. Advice or offer suggestions to the pilot
3. Ensure that there is sufficient watch on deck and that the
men are attentive of their duties, engines stopped, tow lines
cast off, anchors clear, ready to go on pilots order
The Salvage Law [Act 2616]
Provides for compulsory reward to those who brave the perils of the
sea to save cargoes or vessels. Owner of property saved must give
reward, the max of which is 50% the value of the property saved.
Requisites:
1. Valid object of salvage
2. Exposure to marine peril
3. Voluntary salvage service
4. Effort must be successful
Derelict
A vessel or cargo badly damaged and abandoned to the mercy of the
sea. It is not res nullius.
Procedure:
1. Salvor must tow it to nearest port where it will be delivered
to municipal treasurer or customs who will advertise the fact
of salvage.
2. If owner appears, he may take possession of vessel but must
pay a reward not more than 50% of the value of the vessel.
3. Reward is determined by:
Value of property saved
Zeal employed by salvor
Danger to the lives of participants in the salvage
Number of persons who took part

Services rendered
Exoenses incurred
4. No claim made within 3 months after publication, sell at
public auction. Salvor gets his reward, expenses will be
deducted from the proceeds, balance is deposited with
treasury.
5. No claim on the balance is made after 3 years, half goes to
salvor, half to government.
6. If a vessel saves another vessel, the reward shall be divided:
ship owner
captain
crew
*there is no salvage if there is no marine peril; differentiate salvage
from towage; towage can be waived
Domestic Shipping Development Act of 2004 [RA 9295 and its
Revised RRs]
The law recognizes:
1. Vitality of shipping industry to economic development.
2. The need to grant necessary incentives to the shipping
industry to encourage investments.
3. The need for a strong and competitive domestic merchant
fleet.
Domestic shipping transport of passenger or cargo or both, by ships
duly registered and licensed under Philippine law to engage in
commerce between Philippine ports.
Domestic trade sale or exchange of goods within the Philippines.
C o m m . L a w R e v . | 23
Domestic ship operator / owner citizen or juridical entity at least

60% Filipino, authorized by MARINA to engage in domestic
shipping
Shipper person who procures the services of the ship operator or
carrier
within Philippine waters only if granted a permit by MARINA on the

grounds of necessity that cannot be satisfied by domestic vessels
Issuance of authority to operate MARINA has power to issue
certificates of public convenience to qualified operators taking into
consideration economic and beneficial effect. Application must state
proposed route.
Policy
1. Promote Filipino ownership of vessels operating under the
flag.
2. Attract private capital investments in shipping.
3. Provide assistance and incentives for growth of Philippine
merchant marine fleet.
4. Encourage upgrading of existing fleet.
5. Ensure viability of domestic shipping.
6. Encourage the development of ship-building / ship repair
industry.
Incentives
Deregulation to encourage investments, ship operators are allowed

to:
1. Establish own domestic shipping rates, provided competition
is fostered
2. Fix passenger per cargo rates
Provided:
1. Obligation to carry mail; give preference to government
cargo
2. MARINA shall have authority to implement rules and
regulations in monopolized routes to determine fairness of
rates
3. Uphold safety standards and seaworthiness
Insurance
Ship-building / ship repair
Vat exemption on importation of equipment /
a. Compulsory
insurance for liabilities from breach of
materials not manufactured locally
in sufficient
contract of carriage, required:
amounts
NOLCO (net operating loss carr-over) for next 3 consecutive years following loss Adequate insurance coverage for each passenger;
total amount must correspond to number of
Accelerated depreciation rates on equipment for purposes to taxation
passenger accommodations offered
Adequate insurance coverage for cargo; total amount

Deregulation of Domestic Shipping
must correspond to capacity
Both passenger and cargo, insurance must be the

Authority to operate granted only to domestic ship owners /
totals for passenger accommodations and cargo
operators
combined
b. Other insurance MARINA shall require other necessary
Foreign vessels engage in trade on Philippine waters foreign
insurance to cover possible claims
vessels allowed to engage in transport of passengers and cargo on
Domestic ship operators
VAT exemption within 10 years from Act
C o m m . L a w R e v . | 24
Prohibited Acts
1. Operation without certificate of public convenience or
accreditation or authority
2. Refusal of passenger or cargo without just cause
3. Failure to maintain condition of vessel, violation of safety
rules
4. Failure to obtain or maintain adequate insurance
5. Failure to meet manning requirements
6. Other acts which MARINA determine are detrimental to
safety and stability of domestic shipping.
MARINA powers, functions, jurisdiction
1. Register vessels
2. Issue certificates of public convenience and extensions
3. Upon hearing, may modify, suspend, revoke at any time
certificates or authorities granted
4. Establish and prescribe routes and zones of operation
5. Require a domestic ship operator to provide services where
needed to meet emergencies or public interest needs
6. Set safety standards for vessels
7. Ensure domestic ship operators have financial ability to
sustain safe, reliable operations
8. Determine the impact of new services
9. Hear and adjudicate complaints, adopt and enforce rules and
regulations
Authorizes foreign-owned vessels under time charter or lease to a

Philippine national, to be allowed issuance of certificate of
Philippine resgistry by MARINA, provided:
1. Valid for at least 5 years
2. Exclusively used in coastwise trade
3. Operation shall be Filipino without interference from foreign
owner
4. Manned exclusively by a Filipino crew, except for
specialized fishing vessels
Important Concepts in Maritime Transactions
a. Characteristics of Maritime Transactions
Real- vessels are personal, movable property, but has the nature of a
real property, because maritime transactions, to be effective against
third parties, requires registration. Also, jurisprudence has provided
other aspects of the real nature of maritime transactions: the
limitation of liability to actual value of the ship, and the right to
retain the cargo, embargo of the vessel and the vessel itself.
Hypothecary- the liability of a ship owner is limited to the value of
the vessel itself. The vessel stands as the guaranty for the settlement
of the losses; thus said losses are confined to the vessel. Applies in
all cases, from loss of goods to injury of passengers.
b. Exceptions to Hypothecary Nature of Maritime
Transactions
Allowing the Temporary Registration of Foreign-Owned Vessels

under Time Charter or Lease to Philippine Nationals for Use in
the Philippine Coastwise Trade Subject to Certain Conditions
[PD 760]
General Rule: No vessel, no liability.

EXCEPTIONS:
1. Damage caused by negligence of ship owner (ship owners
fault) or concurring negligence of ship owner and captain.
C o m m . L a w R e v . | 25
2.
3.
4.
5.
Expenses for the repair/provisions of the ship before its loss.

Vessel made collateral and lost before public sale.
Vessel is insured. (up to extent insured)
Liabilities under the Labour Code / Workmens
Compensation Act.
6. No total loss or vessel was not abandoned. (Total loss and
abandonment of the vessel, to be a limitation on liability,
must be SOLELY through the fault or negligence of the
captain. If ship owner is to blame / equally to blame,
exception #1 to limited liability rule governs.)
c. Charter Party
A contract whereby an entire ship or some principal part thereof is let
by the owner to another for a specified time or use for the
conveyance of goods or passengers in consideration for the payment
of freight.
Obligations of Charterer
1. Pay the agreed-upon charter price
2. Pay freightage on unloaded cargo
3. Pay for losses to others for loading uncontracted or illicit
cargo
4. To wait if the vessel needs repair
5. Pay for deviation expenses
Obligations of ship owner / ship agent
1. Not to accept cargo from others if vessel is chartered wholly
2. Observe represented capacity
3. Unload clandestinely-placed cargo
4. Substitute another vessel if load is less than 3/5 of the
capacity
5. Lave port if charterer does not bring cargo within the lay
days / extra lay days allowed
6. Place vessel in condition to navigate

7. Bring cargo to nearest neutral port in case of war / blockade
Seaworthiness is implied! No need for charterer to inquire.
Classification of Charter Parties
1. Contract of affreightment
- Time charter
- Voyage or trip charter
2. Bareboat/Demise charter
d. Contract of Affreightment
A contract where the ship owner leases part or all of its space to haul
goods for others. Generally does not affect character as common
carrier.
Only the vessel is hired
Master and crew remain employees of the ship owner
ship owner remains the owner of the vessel and is liable
for the expenses of the voyage
charterer acquires right to use the carrying capacity and
facilities of the vessel and to designate destinations
during the time or voyage stipulated
2 kinds:
1. Time charter vessel is chartered for a fixed period
2. Voyage or trip charter vessel is chartered for a specific
voyage / set of voyages.
e. Bareboat / Demise Charter
Ship owner leases to the charterer the whole vessel, transferring the
command, possession, and control over the vessels navigation,
C o m m . L a w R e v . | 26
including the master and his crew who become the charterers
servants.
Charterer becomes owner of the vessel pro hac vice (for
this occasion)
Charterer is liable for the expenses of the voyage
including wages of seamen
Charterer is liable for damages arising from negligence
Charterer assumes customary rights / liabilities of ship
owner with respect to 3rd parties
Master of the vessel becomes agent of the charterer
Ship is converted from common to private carrier
f.
Primage, Demurrage, Lay Days, and Deadfreight
Primage - bonus due captain for a successful voyage

Demurrage - sum fixed in the charter party as renumeration to the
ship owner for the detention of his ship beyond the number of days
allowed by the contract for loading, unloading, sailing. (penal clause
to compensate owner for non-use; must be stipulated in the contract;
loading and unloading must be for a reasonable amount of time or
customary quick dispatch; demurrage/dispatch: NONE means
right to demurrage has been waived)
Lay Days - days allowed for loading / unloading cargo
Deadfreight - the amount paid by or recoverable from a charterer for
the portion of ships capacity the charterer contracted for but failed to
occupy.
g. Bottomry and Respondentia
Bottomry: A loan taken by the ship owner or ship agent guaranteed

by the ship itself, payable only upon the arrival of the ship at the
destination. This loan can also be taken by the ship captain outside
the residence of the ship owner or ship agent.
Respondentia: A loan taken by the owner of the cargo payable upon
the safe arrival of the cargo at the destination. Only the cargo owner
can take out this loan.
Hypothecary nature of bottomry/respondentia: Obligation to pay the
loan is extinguished if the goods given as security (vessel/cargo) are
absolutely lost by reason of an accident of the sea.
EXCEPTIONS:
1. Loss due to inherent defect
2. Barratry on the part of the captain
3. Fault or malice of borrower
4. Contraband
5. Cargo loaded is different than agreed upon
Concurrence with Marine Insurance: There is insurable interest only
on the excess of the value secured and hypothecated by bottomry or
respondentia. Value of what may be saved in case of shipwreck
divided pro rtate between lender and insurer.
h. Averages
Averages are the extraordinary or accidental expenses (damages and
deterioration) which may be incurred during the voyage to save the
vessel, cargo, or both, from the time it puts to sea until it casts anchor
at the destination (vessel) or from the time of loading until unloading
at the post of destination (cargo).
General Average: (Gross Average) Inured to the common benefit,
thus all persons having an interest in the vessel and cargo must
C o m m . L a w R e v . | 27
contribute pro rata, as well as the insurers and lenders on bottomry

and respndentia.
1. Common danger to both ship and cargo
2. Deliberate sacrifice/jettison during voyage (exceptions:
cargo transferred to lighten a ship during a storm for port
entry, or ship is deliberately sunk to extinguish a fire in port,
bay, creek, roadsteads)
3. Success
Extra fuel for the vessel and goods not recorded in the vessels books
are not covered by general average.
Article 1733. Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of
each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7,
while the extraordinary diligence for the safety of the passengers is
further set forth in articles 1755 and 1756.
SUBSECTION 2. Vigilance Over Goods
Particular Average: (Simple Average) Did not inure to the common

benefit; borne by respective owners.
i.
Collision and Allision
Collision: both vessels moving

Allision: 1 vessel moving, 1 stationary
V.
Transportation Law
Article 1734. Common carriers are responsible for the loss,

destruction, or deterioration of the goods, unless the same is due to
any of the following causes only:
1. Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
2. Act of the public enemy in war, whether international or
civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the
containers;
5. Order or act of competent public authority.
Constitutional Provisions
Arts. 1732-1763 NCC (COMMON CARRIERS)
SUBSECTION 1. General Provisions
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3,

4, and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed
extraordinary diligence as required in article 1733.
Article 1736. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the
same are delivered, actually or constructively, by the carrier to the
C o m m . L a w R e v . | 28
consignee, or to the person who has a right to receive them, without

prejudice to the provisions of article 1738.
Article 1737. The common carrier's duty to observe extraordinary
diligence over the goods remains in full force and effect even when
they are temporarily unloaded or stored in transit, unless the shipper
or owner has made use of the right of stoppage in transitu.
Article 1738. The extraordinary liability of the common carrier
continues to be operative even during the time the goods are stored
in a warehouse of the carrier at the place of destination, until the
consignee has been advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or otherwise
dispose of them.
Article 1739. In order that the common carrier may be exempted
from responsibility, the natural disaster must have been the
proximate and only cause of the loss. However, the common carrier
must exercise due diligence to prevent or minimize loss before,
during and after the occurrence of flood, storm or other natural
disaster in order that the common carrier may be exempted from
liability for the loss, destruction, or deterioration of the goods. The
same duty is incumbent upon the common carrier in case of an act of
the public enemy referred to in article 1734, No. 2.
Article 1740. If the common carrier negligently incurs in delay in
transporting the goods, a natural disaster shall not free such carrier
from responsibility.
Article 1741. If the shipper or owner merely contributed to the loss,
destruction or deterioration of the goods, the proximate cause thereof
being the negligence of the common carrier, the latter shall be liable
in damages, which however, shall be equitably reduced.
Article 1742. Even if the loss, destruction, or deterioration of the

goods should be caused by the character of the goods, or the faulty
nature of the packing or of the containers, the common carrier must
exercise due diligence to forestall or lessen the loss.
Article 1743. If through the order of public authority the goods are
seized or destroyed, the common carrier is not responsible, provided
said public authority had power to issue the order.
Article 1744. A stipulation between the common carrier and the
shipper or owner limiting the liability of the former for the loss,
destruction, or deterioration of the goods to a degree less than
extraordinary diligence shall be valid, provided it be:
1. In writing, signed by the shipper or owner;
2. Supported by a valuable consideration other than the service
rendered by the common carrier; and
3. Reasonable, just and not contrary to public policy.
Article 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy:
1. That the goods are transported at the risk of the owner or
shipper;
2. That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
3. That the common carrier need not observe any diligence in
the custody of the goods;
4. That the common carrier shall exercise a degree of diligence
less than that of a good father of a family, or of a man of
ordinary prudence in the vigilance over the movables
transported;
5. That the common carrier shall not be responsible for the acts
or omission of his or its employees;
6. That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or
C o m m . L a w R e v . | 29
irresistible threat, violence or force, is dispensed with or

diminished;
7. That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the
defective condition of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage.
Article 1746. An agreement limiting the common carrier's liability
may be annulled by the shipper or owner if the common carrier
refused to carry the goods unless the former agreed to such
stipulation.
Article 1747. If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual route,
the contract limiting the common carrier's liability cannot be availed
of in case of the loss, destruction, or deterioration of the goods.
Article 1748. An agreement limiting the common carrier's liability
for delay on account of strikes or riots is valid.
Article 1749. A stipulation that the common carrier's liability is
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
Article 1750. A contract fixing the sum that may be recovered. by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been fairly and freely agreed upon.
Article 1751. The fact that the common carrier has no competitor
along the line or route, or a part thereof, to which the contract refers
shall be taken into consideration on the question of whether or not a
stipulation limiting the common carrier's liability is reasonable, just
and in consonance with public policy.
Article 1752. Even when there is an agreement limiting the liability

of the common carrier in the vigilance over the goods, the common
carrier is disputably presumed to have been negligent in case of their
loss, destruction or deterioration.
Article 1753. The law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their
loss, destruction or deterioration.
Article 1754. The provisions of articles 1733 to 1753 shall apply to
the passenger's baggage which is not in his personal custody or in
that of his employee. As to other baggage, the rules in articles 1998
and 2000 to 2003 concerning the responsibility of hotel-keepers shall
be applicable.
SUBSECTION 3. Safety of Passengers
Article 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all
the circumstances.
Article 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
Article 1757. The responsibility of a common carrier for the safety of
passengers as required in articles 1733 and 1755 cannot be dispensed
with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise.
Article 1758. When a passenger is carried gratuitously, a stipulation
limiting the common carrier's liability for negligence is valid, but not
for wilful acts or gross negligence.
C o m m . L a w R e v . | 30
The reduction of fare does not justify any limitation of the common
carrier's liability.
Article 1759. Common carriers are liable for the death of or injuries
to passengers through the negligence or wilful acts of the former's
employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common
carriers.
This liability of the common carriers does not cease upon proof that
they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.
Article 1760. The common carrier's responsibility prescribed in the
preceding article cannot be eliminated or limited by stipulation, by
the posting of notices, by statements on the tickets or otherwise.
Article 1761. The passenger must observe the diligence of a good
father of a family to avoid injury to himself.
Article 1762. The contributory negligence of the passenger does not
bar recovery of damages for his death or injuries, if the proximate
cause thereof is the negligence of the common carrier, but the
amount of damages shall be equitably reduced.
Article 1763. A common carrier is responsible for injuries suffered
by a passenger on account of the wilful acts or negligence of other
passengers or of strangers, if the common carrier's employees
through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission.
SUBSECTION 4. Common Provisions
Article 1764. Damages in cases comprised in this Section shall be

awarded in accordance with Title XVIII of this Book, concerning
Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.
Article 1765. The Public Service Commission may, on its own
motion or on petition of any interested party, after due hearing,
cancel the certificate of public convenience granted to any common
carrier that repeatedly fails to comply with his or its duty to observe
extraordinary diligence as prescribed in this Section.
Article 1766. In all matters not regulated by this Code, the rights and
obligations of common carriers shall be governed by the Code of
Commerce and by special laws.
Common Carriers
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
[without discrimination].
A common carrier holds itself out as ready to engage in the
transportation of goods for hire as a regular business and not as a
casual occupation.
Tests
1. Engaged in the business of carrying goods for others as an
employment and hold himself out as ready to engage in the
transportation of goods as a business and not as a casual
occupation
2. Undertake to carry goods of the kind to which his business is
confined
C o m m . L a w R e v . | 31
3. Undertake to carry goods by the method by which his

business is conducted
4. Transportation must be for hire.
A common carrier offers the carriage of goods or passengers,
provided it has space for all who opt to avail themselves of the
transportation for a fee.
Specific examples of unusual common carriers
Pipeline operators
Warehouseman who carries goods from port to warehouse
for select parties
Shipping corporation with limited clientele
Freelance and irregular barge operators with no routes,
tickets, or terminals
Operator of beach resort who offers ferry services
Scrap dealer who engages in delivery of goods for others as
an ancillary activity
Transports goods as a business although hires the vehicle
from a 3rd person
Customs brokerage firm who delivers merchandise to
clients premises or otherwise transports goods
Transporters who have no permits or certificates to operate
as such
*stevedoring, arrastre operations, towage, and travel agencies are not
common carriers
Towage vessel is hired to bring one vessel to another place (i.e.
tugboat)
Arrastre loading / unloading / keeping in warehouse; no connection
to navigation. Also bound to exercise extraordinary diligence, and
solidary liable with common carrier.
Stevedoring loading / unloading of coastwise vessels

Common Carrier
Governed by law on common carriers
Subject to state regulation
A public service
Available to all people indiscriminately
Bound to carry for all who avail of the service
Extraordinary diligence required
Presumption of fault or negligence
General rule, parties may not agree to negate liability
Private Carrier
Governed by law on contracts
Not subject to state regulation
Not a public service
Available to particular groups
Not bound to carry for any rea
Only ordinary diligence requir
No presumption of fault of neg
Parties may limit liability as lo
to law, morals, policy
Diligence Required of Common Carriers

Because common carriage is imbued with public interest, common
carriers are required by law to carry passengers safely as far as
human care and foresight can provide.
Extraordinary diligence required (Utmost diligence.) - Common
carriage is an industry impressed with public interest. Extraordinary
diligence is the rendering of service with the greatest skill and
foresight to avoid damage and destruction to the goods entrusted for
carriage and delivery.
Presumption of negligence In an action for a breach of contract of
carriage, all that must be proven by the plaintiff is the existence of
such contract and its non-satisfaction by the carrier because of its
failure to carry the passenger safely to his destination. If goods are
lost or damaged, the common carrier is presumed to be at fault and it
is his duty to rebut the presumption.
Registered Owner Rule
C o m m . L a w R e v . | 32
Registered owner of vehicle primarily liable to public and 3 rd

persons while it is being operated; whether the driver is
authorized or not is irrelevant.
In the event of sale, the registered owner is still liable, but
registered owner has recourse against the transferee.
Obligations of Common Carriers

a. Duty to accept goods
A common carrier, as a general rule, cannot refuse to carry particular
goods. The certificate of public convenience means that the carrier is
duty bound to accept passengers or cargo without discrimination.
b. Duty to deliver goods
This encompassed the duty to seasonably deliver the goods or bring
the passengers to the destination, and the duty to deliver goods to the
right person.
A common carrier will be made liable under culpa contractual

through:
Negligence or wilful act acts of its employees
Negligence or wilful acts of other passengers or of strangers
if its employees could have prevented them with due
diligence
The best evidence of the contract of carriage is the ticket. However,
contract may also be oral.
b. Culpa Aquiliana based on tort
This is based on the negligence of the employee of the carrier (i.e.
driver). This is the weakest as the employer may raise the defence of
due diligence in the selection and supervision of the employee.
The liability of the registered owner of the vehicle is primary and
solidary with that of the driver. The owner, however, has a recourse
against the driver.
c. Duty to exercise extraordinary diligence

c. Culpa Criminal based on crime
Common carriage is impressed with public interest; it is the duty of
common carriers to exercise utmost diligence.
Liabilities of Common Carriers
a. Culpa Contractual based on contract
The contract of carriage with a common carrier is between the
passenger and company/owner, and it imposes the obligation on the
carrier to carry the passenger safely to the point of destination. Any
untoward incident that happens to the passenger while being
transported will give rise to the presumption that the common carrier
was negligent and thus in breach of contract.
This is based on the criminal act of the employee of the carrier (i.e.
driver), who, if convicted but insolvent, makes the company/owner
of the carrier subsidiary liable.
Vigilance over Goods
See NCC1734-1754
Exempting Causes
The presumption of fault or negligence can only be rebutted by proof
of: (exclusive list of defences)
C o m m . L a w R e v . | 33
1. Exercise of extraordinary diligence

2. Caso fortuito / force majeure (fire is almost always not a
natural disaster, unless proven to be caused exclusively by
nature)
3. Acts of Public Enemy (in war, whether international or civil)
4. Negligent act or omission of the shipper or owner of the
goods
5. Character of the goods / defects in packing or container
6. Order or Act of Public Authority (must be lawful and
competent, respectively)
*hijacking not included; common carrier presumed negligent for
allowing the acts of thieves or robbers; carrier must prove
extraordinary diligence, or that extraordinary diligence was not
possible because of grave irresistible threat, violence, or force.
Delivery of Goods to Common Carrier

Actual or Constructive Delivery
Temporary Unloading or Storage
Stipulation for Limitation of Liability
Void Stipulations
Limitation of Liability to Fixed Amount
Limitation of Liability in Absence of Declaration of Greater Value
Requirement of Absence of Negligence

Liability for Baggage of Passengers
Skill, competence, and utmost diligence are expected of common
carriers.
Checked-in Baggage
Absence of Delay
Baggage in Possession of Passengers
Due Diligence to Prevent or Lessen the Loss

Safety of Passengers
Contributory Negligence
Duration of Liability
From the time the carrier has unconditional possession, to the time
the consignee is made aware of their arrival and has had a reasonable
time to take them. Includes storage or temporary unloading in transit
(exception: shipper makes use of right of stoppage in transit) and the
storage at the warehouse of the carrier at the destination. (NCC
1736-1738)
Passengers have the right to be treated by the carriers employees

with kindness, respect, courtesy, and due consideration. Any
discourteous conduct toward a passenger gives the passenger a cause
of action for damages against the carrier.
Void Stipulations
Duration of Liability
C o m m . L a w R e v . | 34
Begins from the time that an attempt to board is allowed, including

allowing the stepping onto the carriers platform or slowing down to
allow boarding, until the time the passenger has had a reasonable
opportunity to gather his belongings and leave the carriers premises
or get out of the terminal.
Waiting for Carrier or Boarding of Carrier
Arrival at Destination
Extent of Liability for Damages

Bill of Lading
Three-Fold Character
1. Receipt
Functions as a receipt for the goods shipped.
Liability for Acts of Others

2. Contract
Employees
In culpa contractual, a common carrier will be made liable under
through the negligence or wilful act acts of its employees, even those
committed outside the scope of authority.
In culpa aquiliana, the liability of the registered owner of the vehicle
is primary and solidary with that of the driver. The owner, however,
has a recourse against the driver
A contract by which 3 parties (shipper / carrier / consignee)

undertake specific responsibilities and assume certain obligations.
3. Document of title
A document of title over the goods covered. Ownership of the goods
may be transferred by negotiation of the bill of lading.
Delivery of Goods
In culpa criminal, the carrier is not involved as this is based on the

criminal act of the employee of the carrier (i.e. driver). But, if the
employee is convicted but insolvent, such situation makes the
company/owner of the carrier subsidiary liable.
Period of Delivery
Delivery Without Surrender of Bill of Lading
Other Passengers and Strangers
Refusal of Consignee to Take Delivery
A common carrier will be made liable under culpa contractual

through the negligence or wilful acts of other passengers or of
strangers if its employees could have prevented them with due
diligence.
Period for Filing Claims

Period for Filing Actions

Preliminaries Coverage of "Commercial Law"

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C o m m . L a w Re v.

NOTE: Most parts culled entirely from Commercial Law Review,

c. Equitable - since commercial transactions involve the

Characteristics of Commercial Law

SECTION 1. THE GOALS OF THE NATIONAL ECONOMY ARE

THE STATE SHALL PROMOTE INDUSTRIALIZATION AND

The economic nationalism under Section 1, Article XII, is

SEC. 9. THE STATE SHALL PROMOTE A JUST AND DYNAMIC

The emphasis on spiritual good over material blessings therefore is

Nationalized Activities and Undertakings

Activities which are reserved in part or in whole for Filipinos

consumption. Retail trade includes sales to employees and officers,

If foreign ownership exceeds 80% of equity, must offer 30% of

Categories and Capitalization:

engage in exempt transactions if licensed.

2. Only nationals or parent corporations formed in countries

materials and products, whenever available, practicable and usable...

Thus, the Anti-Dummy Law covers only nationalized businesses and

Sec. 3. No contract may be awarded... unless the contractor agrees to

Requiring Government Offices, Agencies, Instrumentalities and

a. Exploitation of Natural Resources

Requires government and persons enjoying tax incentives to utilize

Retail trading is any act or occupation of habitually selling direct to

law. The restrictions on foreign ownership are founded on

More than P 15M up to P 100M

Eligibility for Government Assistance

Laws to Protect Small and Domestic Enterprises

Magna Carta for Micro, Small and Medium Enterprises

Capitalized at not more than P 3M

1. Registered (micro enterprises, register with municipal/city

3. Total assets (including loans, exclusive of land where

1. A subsidized foreign product is imported into the Philippines

For agricultural products, consider volume and price.

Consumers may petition government for the recall of products and

Safeguard measures may be made to apply to all imported products.

Laws on Consumer Protection

Consumer Act of the Philippines [RA 7394]

Protection against safety hazard and unfair practices

Safety standards and warranties

An act is deceptive if it induces the consumer to buy a product

the implementing agency of the Milk Code but it cannot prohibit

Food, Drug and Cosmetic (FDC) Act [RA 3720]

Law on Stamped or Marked Containers [RA 623 aa RA 5700]

Milk Code [EO 51]

Price tags must be affixed and products sold without discrimination

Price Control Council to fix maximum selling prices.

Metric System laws

Monopoly a solitary entity, or conspiracy of entities (cartel), whose

Full implementation / dissemination of metric system by 1984.

Downstream Oil Industry Deregulation Act of 1998 [RA 8479]

A vessel is essentially movable property; nevertheless, maritime

By nature and place of performance of their functions

Common carriers impliedly warrant the seaworthiness of their

A charterer has no obligation to check if the boat is

Demurrage must be stipulated in the contract.

It is the charterers obligations under the contract of

Time charter- leased for a particular or fixed period of time

If cargo of charterer is not sufficient to fill 3/5 the capacity

Owner liable for damage because of undue delay by captain.

Rescission of charter party

Marine survey of vessel before loading

If cargo has to be unloaded, the same shall be the responsibility of

Owner of merchandise sold to make necessary repairs should