Transportation Law PDF

San Beda College of Law
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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.
COMMON CARRIER
PRIVATE
CARRIER
1. As to availability
Holds himself out for all Contracts with particular
people indiscriminately
individuals or groups
only
2. As to required diligence
Extraordinary diligence Ordinary diligence is
is required
required
3. As to regulation
Subject
to
State Not subject to State
regulation
regulation
4. Stipulation limiting liability
Parties may not agree Parties may limit the
on limiting the carriers carriers
liability,
liability except when provided
it
is
not
provided by law
contrary to law, morals
or good customs
5. Exempting circumstance
Prove
extraordinary caso fortuito, Art. 1174
diligence and Art. 1733, NCC
NCC
6.Presumption of negligence
There is a presumption
of fault or negligence
No presumption of fault
or negligence
7.Governing law
Law on common carriers
Law on 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, 573-734,
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
580, 806-845) - suppletory
B. International/foreign/overseas
(Foreign
country to Philippines)
Applicable to Water/maritime and Air transportation
The law of the country of destination generally
applies.
1. Civil Code - primary
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of Goods by
Sea Act (COGSA)
b. Air: Warsaw Convention
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT 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 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.120-122)
2. ACTS OF PUBLIC ENEMY
Requisites:
a. Must be the proximate and only cause of the
loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after the act
causing the loss, deterioration or destruction of
the goods (Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute defense
b. Contributory: partial defense. (Art. 1741)
4. CHARACTER OF THE GOODS OR DEFECTS IN
THE PACKING OR IN THE CONTAINER
Even if the damage should be caused by the
inherent defect/character of the goods, the common
carrier must exercise due diligence to forestall or
lessen the loss. (Art. 1742)
The carrier which, knowing the fact of improper
packing of the goods upon ordinary observation, still
accepts the goods notwithstanding such condition, is
not relieved of liability or loss or injury resulting
therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)
5. ORDER OR ACT OF PUBLIC AUTHORITY
Said public authority must have the power to issue
the order (Art. 1743). Consequently, where the officer
acts without legal process, the common carrier will be
held liable. (Ganzon v. CA 161 SCRA 646)
Diligence in the selection and supervision of
employees under Article 2180 of the Civil Code cannot
be interposed as a defense by the common carrier
because the liability of the carriers arises from the
breach of the contract of carriage. The defense under
said articles is applicable to negligence in 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


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FOR ACTS OF ITS

EMPLOYEES
FOR ACTS OF
OTHER
PASSENGERS OR
STRANGERS
The employee must be

on duty at the time of the
act. (Maranan v. Perez)
Art. 1763
The carrier is liable when its personnel allowed a

passenger to drive the vehicle causing it to collide with
another vehicle resulting to the injuries suffered by the
other passengers. (MRR vs. Ballesteros, 16 SCRA
641)
Required diligence and defense

Extraordinary diligence
Ordinary diligence
Nature of liability
Tort; however,
Not absolute; limited by
CARRIAGE OF GOODS
CARRIAGE OF PASSENGERS
Parties
1.
2.
3.
Common carrier
Shipper
Consignee
1.
2.
Common carrier
Passenger
Cause of liability
Delay in delivery, loss, destruction, or deterioration of
Death or injury to the passengers
the goods
Duration of liability
From the time the goods are unconditionally placed in
the 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).
Presumption of negligence
Art.1735 Civil Code

Reason: As to when and how goods were damaged in
transit is a matter peculiarly within the knowledge of the
carrier and its employees. (Mirasol v. Dollar, 53 PHIL
124)
Mere proof of delivery of goods to a carrier in good
order and the subsequent arrival of the same goods at
the place of destination in bad order makes for a prima
facie case against the carrier. (Coastwise Lighterage
Corp. v. CA, 245 SCRA 796)
Art.1755 Civil Code

Reason: The contract between the passenger and the
carrier imposes on the latter the duty to transport the
passenger safely; hence the burden of explaining
should fall on the carrier.


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Defenses
1.
2.
Ordinary
circumstance:
Exercise
of
1. Exercise of extraordinary diligence (Art.
extraordinary diligence (Art. 1735)
1756)
Special circumstances:
2. Caso fortuito
a. Flood, storm, earthquake, lighting, or
other natural disaster or calamity (plus
force majeure)
b. Act of the public enemy in war,
whether international or civil
c. Act or omission of the shipper or the
owner of goods
d. The character of the goods or defects
in the packing or in the containers
e. Order or act of competent public
authority (Art. 1734)
Valid stipulations
1. Reduction of degree of diligence to ordinary

diligence, 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
2. That carrier will not be liable for any loss,
destruction or deterioration of the goods;
Dispensing with or lessening the extraordinary
3. That the carrier need not observe any diligence responsibility of a common carrier for the safety of
in the custody of the goods;
passengers imposed by law by stipulation, by posting
4. That the carrier shall exercise a degree of of notices, by statements on tickets or otherwise. (Art.
diligence less than that of a good father of a family 1757)
over the movable transported;
5. That the carrier shall not be responsible for the
acts or omissions of his or its employees;
6. That the carriers liability for acts committed by
thieves or robbers who do not act with grave or
irresistible threat, violence or force is dispensed with
or diminished;
7. That the carrier is not responsible for the loss,


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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 CUSTODY OF
IN THE CUSTODY
THE PASSENGERS
OF THE COMMON
(HAND-CARRIED)
CARRIER
(CHECKED-IN)
Legal nature of the baggage
Necessary deposit
Considered
as
goods
Required diligence by the common carrier
Diligence of a depositary Extraordinary
(ordinary diligence)
diligence
Applicable rules
Arts. 1998 and 2000-2003 Arts. 1733-1753
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 TO CARRIERS LIABILITY
INVALID AS BEING
VALID &
CONTRARY TO PUBLIC
ENFORCEABLE
POLICY
1. One exempting the 1. One limiting the
carrier from any and all liability of the carrier to
liability for loss or damage an agreed valuation,
occasioned by its own unless the shipper
negligence.
declares a higher value
2.
An
unqualified and pays a higher rate
limitation of liability to an of freight
agreed valuation.
(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.
8.
Spent One which covers goods that already

have been delivered by the carrier without a
surrender of a signed copy of the bill.
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
No stipulation
1. Within a reasonable
fulfill the contract and is

liable for any delay; no
matter from what cause
it may have arisen.
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.
Domestic/inter- 1. International/
island/coastwise
overseas/foreign (from
transportation
foreign
country
to
2.
Land, water, air Phils.)
transportation
Note: subject to the rule
on Paramount Clause
2. Water/maritime
transportation
Notice of damage
1. Condition precedent
1. Not a condition
2. 24-hour period for
precedent
claiming latent damage
2. 3-day period for
claiming latent damage
Prescriptive period
None provided; Civil One year from the date
Code applies.
of 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.
A.
MARITIME COMMERCE
(Arts. 573-869)
IMPORTANT CONCEPTS:
1. Merchant vessel
2. Maritime lien and Preference of Credit
3. Doctrine of limited liability
4. Causes of revocation of voyage
5. Participants in maritime commerce
6. Charter party
7. Loans on bottomry and respondentia
8. Accidents in maritime commerce
MARITIME/ADMIRALTY LAW
It is the system of laws which particularly relates to
the affairs and business of the sea, to ships, their
crews and navigation, and to maritime conveyance of
persons and property. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino &
Hernando, citing Francisco, p.254)
Maritime laws apply only to maritime trade and sea
voyages. (Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997 ed.)
Arrastre service is not maritime in character. It
refers to a contract for the unloading of goods from a
vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA
244)
CHARACTERISTICS OF MARITIME TRANSACTION
1. Real - similar to transactions over real property with
respect to effectivity against third persons which is
done through registration. (Rubiso vs. Rivera, 37 Phil.
72). The evidence of real nature is shown by: 1) the
limitation of the liability of the agents to the actual
value of the vessel and the freight money; and 2) the
right to retain the cargo and embargo and detention of
the vessel (Luzon Stevedoring Corp v. CA, 156 SCRA
169);
2. Hypothecary - the liability of the owner of the value
of the vessel is limited to the vessel itself (Doctrine of
Limited Liability).
The real and hypothecary nature of maritime law
simply means that the liability of the carrier in
connection with losses related to maritime contracts is
confined to the vessel, which stands as the guaranty
for their settlement. (Aboitiz Shipping Corp. vs.
General Accident Fire and Life Assurance Corp. 217
SCRA 359).
MERCHANT VESSEL
Vessel engaged in maritime commerce, whether
foreign or otherwise. (Bar Review Materials in
Commercial Law, Jorge Miravite, 2002 ed.)
Constitutes property which may be acquired and
transferred by any of the means recognized by law.
They shall continue to be considered as personal
property. (Arts. 573, 585)
They are susceptible to maritime liens such as for
the repair, equipping and provisioning of the vessel in
the preparation of a voyage, as well as mortgage
liabilities, in satisfaction of which a vessel may be
validly arrested and sold. (Ship Mortgage Decree of
1978)
MARITIME LIEN
It constitutes a present right of property in the ship, a
jus in re, to be afterward enforced in admiralty by
process in rem. (PNB vs. CA, 337 SCRA 381)
If the maritime lien arose prior to the recording of a
preferred mortgage, it shall have priority over the said
mortgage lien. (PNB vs. CA, 337 SCRA 381)
ORDER OF PREFERENCE IN CASE OF SALE OF
VESSEL
R.A. 6106
P.D. 1521
Effectivity date
1969
1978
Applicability
Overseas shipping only
Both domestic and
overseas shipping
Kind of sale
Judicial
Judicial and
extrajudicial
Order of Preference
A preferred mortgage The preferred mortgage
shall have priority over lien shall have priority
all claims against the over all claims against
vessel,
except
the the vessel, except the
following preferences in
the order stated:
1. Judicial costs of the
proceedings;
2. Taxes due the
Philippine Government;
3. Salaries and wages
of the Captain and
Crew of the vessel
during its last voyage;
4. General average or
salvage
including
contract
salvage,
bottomry loans, and
indemnity due shippers
for the value of goods
transported but which
were not delivered to
the consignee;
5. Costs of repair and
equipment
of
the
vessel,
and
provisioning of food,
supplies and fuel during
its last voyage; and
6. Preferred mortgages
registered prior in time.
following preferences in
the order stated:
1. Expenses and fees
allowed
and
costs
taxed by the court and
taxes due to the
Government;
2. Crews wages;
3. General average;
4. Salvage, including
contract salvage;
5. Maritime liens arising
prior in time to the
recording
of
the
preferred mortgage;
6. Damages arising out
of tort; and
7. Preferred mortgage
registered prior in time.
Effect of sale: All pre-existing claims in the vessel

are terminated. They will then be satisfied from the
proceeds of the sale subject to the order of preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
Cases where applicable:
1. Art. 587 civil liability for indemnities to third
persons
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 OR SHIP
CONSIGNEE
AGENT
What may be abandoned
Vessel
Goods shipped
Instances
1. In case of civil liability 1. Partial non-delivery,
from indemnities to third where the goods are
persons (Art. 587);
useless without the
2. Sec. 138, Insurance others (Art. 363);
Code;
2. Goods are rendered
3. In case of leakage of useless for sale or
at least of the consumption for the
contents of a cargo purposes for which they
containing liquids (Art. are properly destined
687)
(Art. 365); and
3. In case of delay
through the fault of the
carrier (Art. 371).
Effects
1. Transfer of ownership 1. Transfer
of
of the vessel from the ownership on the goods
shipowner
to
the from the shipper to the
shippers or insurer.
carrier.
2. In case of (2), the 2. Carrier should pay
insurer must pay the the shipper the market
insured as if there was value of the goods at
actual total loss of the the point of destination.
vessel.
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.
2.
3.
4.
5.
Preserve the hull and rigging of the vessel;

Arrange well the cargo;
Discipline the crew;
Assign work to crew members;
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 0385)
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.
Civil law concept
CHARTER PARTY
An entire or complete
contract.
Consensual contract
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)
Commercial law concept
BILL OF LADING
More like a private
receipt
which
the
captain gives to accredit
goods received from
persons
Real 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
converted
carrier.
carrier
is
to private
CONTRACT OF
AFFREIGHTMENT
(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 3 rd
person only if not prohibited in original
charter. (Art.679)
3. Ship agent if authorized by the owner/s or
given such power in the certificate of
appointment. (Art.598)
4.
Captain in the absence of the ship agent or
consignee and only if he acts in accordance
with the instructions of the agent or owner
and protects the latters interests. (Art.609)
REQUISITES OF A VALID CHARTER PARTY
1. Consent of the contracting parties
2. Existing vessel which should be placed at
the disposition of the shipper
3. Freight
4. Compliance with Art. 652 of the Code of
Commerce
Clauses Which May Be Included In a Charter Party

Jason clause
Clause paramount or
paramount 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.)
A clause in a charter
party providing that the
COGSA shall apply,
even
though
the
transportation
is
domestic, subject to the
extent that any term of
the bill of lading is
repugnant
to
the
COGSA or applicable
law, then to the extent
thereof the provision of
the bill of lading is void.
(Pandect of Commercial
Law and Jurisprudence,
Justice Jose Vitug, 1997
ed.)
Rights and Obligations of Parties

SHIPOWNER OR SHIP
AGENT
1. If the 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)
CHARTERER
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 charterers
At
request
shipowners
(Art 688)
request
(Art. 689)
1.
By 1. If the extra
abandoning
lay
days
the charter and terminate
paying half of without
the
the freightage;
cargo
being
2.
Error
in placed
Fortuitous
causes
(Art. 690)
1. War or
interdiction of
commerce;
2. Blockade;
3. Prohibition
to receive
tonnage
or
flag;
3. Failure to
place
the
vessel at the
charterers
disposal;
4. Return of
the vessel due
to
pirates,
enemies
or
bad weather;
5. Arrival at a
port for repairs.
alongside the
vessel;
2. Sale by the
owner of the
vessel before
loading by the
charterer;
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
RESPONDENTIA
Definition
Loan
made
by Loan taken on security
shipowner
or
ship of the cargo laden on a
agent guaranteed by vessel, and repayable
vessel
itself
and upon safe arrival of
repayable upon arrival cargo at destination.
of vessel at destination. (Art. 719)
(Art. 719)
Who may contract
Shipowner
or
ship Only the owner of the
agent. Outside of the cargo.
residence
of
the
owners - the captain.
1.
2.
1.
2.
3.
1.
2.
3.
4.
5.
6.
7.
Common elements:
Exposure of security to marine peril;
Obligation of the debtor conditioned only
upon safe arrival of the security at the point
of destination.
Forms:
Public instrument
Policy signed by the contracting parties and
the 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/
RESPONDENTIA
ORDINARY LOAN
(MUTUUM)
Not subject to Usury

Law
Subject to Usury Law
Liability of the borrower

is contingent on the
safe arrival of the
vessel or cargo at
destination
Not subject to any

contingency (absolute
liability)
The last lender is a

preferred creditor
The first lender is a

preferred creditor
WHEN LOAN ON BOTTOMRY OR RESPONDENTIA

REGARDED AS SIMPLE LOAN
1. Lender loaned an amount larger than the
value of the object due to fraudulent means
employed by the borrower. (ART.726)
2. Full amount of the loan is not used for the
cargo or given on the goods if all of them
3.
could not have been loaded, the balance will

be considered a simple loan. (ART.727)
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
RESPONDENTIA
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 OR
GROSS OR GENERAL
SIMPLE
Definition
Damages or expenses Damages or expenses
caused to the vessel or deliberately caused in
cargo that did not inure order to save the
to the common benefit, vessel, its cargo or both
and borne by respective from real and known
owners. (Art. 809)
risk. (Art. 811)
Requisites
1. common danger;
2. deliberate
sacrifice;
3. success;
4. proper formalities
and legal steps.
Liability
The owner of the goods All the persons having
which gave rise to the an interest in the vessel
expense or suffered the and the cargo therein at
damage shall bear this the
time
of
the
average. (Art. 810)
occurrence
of
the
average 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
interest Several
interests
involved
involved
Share in the damage or expense
100% share
In proportion to the
value of the owners
property saved
Right to recover
No reimbursement
There
may
be
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
Deck cargo is allowed
INTERNATIONAL
Deck cargo is not
allowed
With shippers consent
General average
Particular 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
When
unlawful
Who
bears
expenses:
The inability to
continue
voyage is due
to
lack
of
provisions,
well-founded
fear of seizure,
privateers,
pirates,
or
accidents
of
the
sea
disabling it to
navigate. (Art.
819)
1. Lack
of
provisions due
to negligence to
carry according
to usage and
customs;
2. Risk
of
enemy not well
known
or
manifest
3. Defect of
vessel due to
improper repair;
and
4. Malice,
negligence,
lack of foresight
or
skill
of
captain.
(Art.
820)
The shipowner
or ship agent is
liable in case of
unlawful arrival
under stress.
But they shall
not be liable for
the damages
caused
by
reason of a
lawful arrival.
(Art. 821)
It is the duty of the captain to continue the voyage

without delay after the cause of the arrival under stress
has ceased failing in such duty renders him liable.
However, in case the cause has been risk of enemies,
there must first be an assembly before departure. (Art.
825)
Steps:
1. Captain should determine during the voyage
if there is well founded fear of seizure,
privateers and other valid grounds;
2. Captain shall assemble the officers and
summon the persons interested in the cargo
who may attend the meeting but without a
right to vote;
3. The officers shall determine and agree if
there is well-founded reason after examining
the circumstances. The captain shall have
the deciding vote;
4. The agreement shall be drafted and the
5.
proper minutes shall be signed and entered

in the log book;
Objections and protests shall likewise be
entered in the minutes.
COLLISION
Impact of two vessels both of which are moving.
Allision
Impact between a moving vessel and a stationary
one.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a port, the
farther one must allow the nearer to enter first; if
they collide, the fault is presumed to be imputable
to the one who arrived later, unless it can be
proved that there was no fault on its part.
2. When two vessels meet, the smaller should give
the right of way to the larger one.
3. A vessel leaving port should leave the way clear
for another which may be entering the same port.
4. The vessel which leaves later is presumed to
have collided against one which has left earlier.
5. There is a presumption against the vessel which
sets sail in the night.
6. 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.
7. There is a presumption against an improperly
moored vessel.
8. 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.
9. Vessels must have proper look-outs or persons
trained as such and who have no other duty aside
therefrom. (Smith Bell v. CA)
Nautical Rules as to Sailing Vessel and Steamship
1. Where a steamship and a sailing vessel are
approaching each other from opposite directions,
or on intersecting lines, the steamship from the
moment the sailing vessel is seen, shall watch
with the highest diligence her course and
movements so as to be able to adopt such timely
means of precaution as will necessarily prevent
the two boats from coming in contact.
2. The sailing vessel is required to keep her course
unless the circumstances require otherwise.
Zones of Time in the Collision of Vessels
1. First zone all time up to the moment when risk of
collision begins.
No rule is as yet applicable for none is necessary.
2. Second zone time between moment when risk of
collision begins and moment it becomes a practical
certainty.
It is in this period where conduct of the vessels is
primordial. It is in this zone that vessels must strictly
observe nautical rules, unless a departure therefrom
becomes necessary to avoid imminent danger.

3. Third zone time when collision is certain and time
of impact.
An error in this zone would no longer be legally
consequential.
Error in Extremis - sudden movement made by a
faultless vessel during the third zone of collision with
another vessel which is at fault during the 2nd zone.
Even if such sudden movement is wrong, no
responsibility will fall on said faultless vessel. (Urrutia
and Co. v. Baco River Plantation Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
Vessel at fault is liable for damage caused to
innocent vessel as well as damages suffered by the
owners of cargo of both vessels. (Art. 826)
2. Both vessels at fault
Each vessel must bear its own loss, but the shippers
of both vessels may go against the shipowners who
will be solidarily liable. (Art. 827)
3. Vessel at fault not known
Each vessel must bear its own loss, but the shippers
of both vessels may go against the shipowners who
will be solidarily liable. (Art. 828)
Doctrine of Inscrutable Fault In case of
collision where it cannot be determined which
between the two vessels was at fault, both
vessels bear their respective damage, but both
should be solidarily liable for damage to the cargo
of both vessels.
4. Third vessel at fault
The third vessel will be liable for losses and
damages. (Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss. (Art. 830)
The doctrine of res ipsa loquitur applies in case a
moving vessel strikes a stationary object, such as a
bridge post, dock, or navigational aid. (Far Eastern
Shipping v. CA, Luzon Stevedoring vs. CA)
Even if the cause of action against the common
carrier is based on quasi-delict, the defense of due
diligence in the selection and supervision of
employees is unavailing in case of a maritime tort
resulting in collision. It is not a civil tort governed by
the Civil Code but a maritime one governed by Arts.
826-839 of the Code of Commerce. (Manila Steamship
vs. Insa Abdulhaman)
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.)
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])
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)
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.
Note: In order to attribute to the carrier any damage to

the shipment that may be found, inspection of the
goods should be done at pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA
(C.A. No. 65)
APPLICABILITY
The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/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/interisland/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.
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
PASSENGER
TICKET
Passenger
BAGGAGE
CHECK
Checked-in
baggage
AIR WAYBILL
Goods to be
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 special
law (Act No. 2616)
Governed
by
Civil
Code on contract of
lease
Requires success,
otherwise no payment
Success
required
Must be done with the

consent of the
captain/crewmen
Only the consent of the

tugboat
owner
is
needed
Vessel must be
involved in an accident
Vessel need not be

involved in an accident
Fees distributed
among crewmen
Fees belong to the

tugboat owner
is
not
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
CONVENIENCE
(CPC)
CERTIFICATE
OF
PUBLIC
CONVENIENCE AND
NECESSITY (CPCN)
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.
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. (CogeoCubao 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
EXERCISABLE
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. Establishment of
rules
to
secure
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,
1. Investigation any
matter
concerning
public service;
2. Requiring
operators to furnish
safe, adequate, and
proper service;
3. Requiring
public
services
to
pay
expenses
of
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.
164 SCRA 36)

UNLAWFUL
ACTS
OF
PUBLIC
UTILITY
COMPANIES
1. Engagement in public service business without
first securing the proper certificate;
2. Providing or maintaining unsafe, improper or
inadequate service as determined by the proper
authority;
3. Committing any act of unreasonable and unjust
preferential treatment to any particular person,
corporation or entity as determined by the proper
authority;
4. Refusing or neglecting to carry public mail upon
request. (Secs. 18 and 19)
ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint rates;
2. Establish and operate new units;
3. Issue free tickets;
4. Issue any stock or stock certificates representing
an increase of capital;
5. Capitalize any franchise in excess of the amount
actually paid to the Government;
6. Sell, alienate, mortgage or lease property,
certificates or franchise.
Under Sec. 20(g) of C.A. No. 146, the sale, etc. may
be negotiated and completed before the approval by
the proper authority. Its approval is not a condition
precedent to the validity of the contract. The approval
is necessary only to protect public interest.
PRIOR OPERATOR/OLD OPERATOR RULE
The rule allowing an existing franchised operator to
invoke a preferential right within the authorized
territory as long as he renders satisfactory and
economical service.
The policy is not to issue a certificate to a second
operator to cover the same field and in competition
with a first operator who is rendering sufficient,
adequate and satisfactory service. The prior operator
must first be given an opportunity to improve its
service, if inadequate or deficient.
Purpose: To prevent ruinous and wasteful
competition in order that the interests of the public
would be conserved and preserved.
It subordinates the prior applicant rule which gives
the first applicant priority only if things and
circumstances are equal.
Where the operator either fails or neglects to make
the improvement or effect the increase in services,
especially when given the opportunity, new operators
should be given the chance to give the services
needed by the public.
PRIOR APPLICANT RULE
Presupposes a situation when two interested
persons apply for a certificate to operate a public utility
in the same community over which no person has as
yet granted any certificate. If it turns out, after the
hearing, that the circumstances between the two
applicants are more or less equal, then the applicant

who applied ahead of the other, will be granted the
certificate.
2.
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)
3.
4.
5.
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)
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).
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)
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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goods or passengers for compensation. (Home

COMMERCIAL LAW COMMITTEE

San Beda College of Law

DEFENSES OF A COMMON CARRIER IN THE

COMMERCIAL LAW COMMITTEE

San Beda College of Law

FOR ACTS OF ITS

The employee must be

The carrier is liable when its personnel allowed a

Required diligence and defense

The duty of a common carrier to provide safety to its

Art.1735 Civil Code

Art.1755 Civil Code

COMMERCIAL LAW COMMITTEE

San Beda College of Law

1. Reduction of degree of diligence to ordinary

Stipulation limiting liability when a passenger is carried

The diligence required in the carriage of the goods

COMMERCIAL LAW COMMITTEE

San Beda College of Law

COMMERCIAL LAW COMMITTEE

RULES ON PASSENGERS BAGGAGE

The written acknowledgment of receipt of goods and

Spent One which covers goods that already

lading is honored by the second and other

fulfill the contract and is

Effect of sale: All pre-existing claims in the vessel

GENERAL RULE: The liability of shipowner and ship

Collision between two negligent vessels;

Abandonment of the vessel is necessary to limit the

Embargo A proclamation or order of a state,

PARTICIPANTS IN MARITIME COMMERCE

B. CAPTAINS AND MASTERS

requires on a stipulated ocean voyage (Inter-Orient

Preserve the hull and rigging of the vessel;

All persons on board, from the captain to the cabin

PERSONS WHO MAY MAKE A CHARTER

Clauses Which May Be Included In a Charter Party

Rights and Obligations of Parties

Rescission of a Charter Party

Not subject to Usury

Subject to Usury Law

Liability of the borrower

Not subject to any

The last lender is a

The first lender is a

WHEN LOAN ON BOTTOMRY OR RESPONDENTIA

could not have been loaded, the balance will

Note: Under existing laws, the parties to a loan,

Hypothecary Nature of Bottomry/ Respondentia

An extraordinary or accidental expense incurred

contribute to general average and if jettisoned would

ARRIVAL UNDER STRESS (ARRIBADA)

It is the duty of the captain to continue the voyage

proper minutes shall be signed and entered

becomes necessary to avoid imminent danger.

damaged, with respect to the circumstances attending

As understood in the port business, the term

Loss or Damage as applied to the COGSA

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

The one-year prescriptive period is suspended by:

a territory subject to the sovereignty, mandate or