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MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ CARRIAGE PRIVATE CARRIER

A contract whereby a person, natural or juridical, One which, without being engaged in the business
obligates to transport persons, goods, or both, from of carrying as a public employment, undertakes to
one place to another, by land, air or water, for a price deliver goods or passengers for compensation. (Home
or compensation. Insurance Co. vs. American Steamship Agency, 23
Classifications: SCRA 24)
1. Common or Private
2. Goods or Passengers TESTS WHETHER CARRIER IS COMMON OR
3. For a fee (for hire) or Gratuitous PRIVATE:
4. Land, Water/maritime, or Air The SC in First Philippine Industrial Corporation vs.
5. Domestic/inter-island/coastwise or CA (1995) reiterated the following tests:
International/foreign 1. It must be engaged in the business of
It is a relationship which is imbued with the public carrying goods for others as a public
interest. employment and must hold itself out as
ready to engage in the transportation of
COMMON CARRIER goods generally as a business and not as a
Persons, corporations, firms or associations casual occupation;
engaged in the business of carrying or transporting 2. It must undertake to carry goods of the kind
passengers or goods or both, by land, water, or air, to which its business in confined;
for compensation, offering their services to the public 3. It must undertake to carry by the method by
(Art. 1732, Civil Code). which his business is conducted and over its
Art. 1732 of the New Civil Code avoids any established roads; and
distinction between one whose principal business 4. The transportation must be for hire.
activity is the carrying of persons or goods or both and In National Steel Corp. vs. CA (1997) the SC held
one who does such carrying only as an ancillary that the true test of a common carrier is the carriage
activity (sideline). It also avoids a distinction between of goods or passengers provided it has space for all
a person or enterprise offering transportation service who opt to avail themselves of its transportation for a
on a regular or scheduled basis and one offering such fee.
service on an occasional, episodic or unscheduled
basis.
Neither does the law distinguish between a COMMON CARRIER PRIVATE
carrier offering its services to the general public that is CARRIER
the general community or population and one who 1. As to availability
offers services or solicits business only from a narrow
Holds himself out for all Contracts with particular
segment of the general population.
people indiscriminately individuals or groups
A person or entity is a common carrier even if he
only
did not secure a Certificate of Public Convenience (De
2. As to required diligence
Guzman vs. CA, 168 SCRA 612).
Extraordinary diligence is Ordinary diligence is
It makes no distinction as to the means of
required required
transporting, as long as it is by land, water or air. It
does not provide that the transportation should be by 3. As to regulation
motor vehicle. (First Philippine Industrial Corporation Subject to State Not subject to State
vs. CA) regulation regulation
One is a common carrier even if he has no fixed 4. Stipulation limiting liability
and publicly known route, maintains no terminals, and Parties may not agree on Parties may limit the
issues no tickets (Asia Lighterage Shipping, Inc. vs. limiting the carriers carriers liability,
CA). liability except when provided it is not
Characteristics: provided by law contrary to law, morals
1. Undertakes to carry for all people indifferently or good customs
and thus is liable for refusal without sufficient 5. Exempting circumstance
reason (Lastimoso vs. Doliente, October 20, Prove extraordinary caso fortuito, Art. 1174
1961); diligence and Art. 1733, NCC
2. Cannot lawfully decline to accept a particular NCC
class of goods for carriage to the prejudice of 6.Presumption of negligence
the traffic in these goods;
There is a presumption No presumption of fault
3. No monopoly is favored (Batangas Trans. vs.
of fault or negligence or negligence
Orlanes, 52 PHIL 455);
4. Provides public convenience. 7.Governing law

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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,
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
MEMORY AID IN COMMERCIAL LAW
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)
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Diligence in the selection and supervision of
employees under Article 2180 of the Civil Code cannot
be interposed as a defense by the common carrier
because the liability of the carriers arises from the
breach of the contract of carriage. The defense under
said articles is applicable to negligence in quasi-delicts
under Art. 2176. (Del Prado v. Manila Electric Co., 52
Phil 900)
LIABILITY OF A COMMON CARRIER FOR
DEATH OR INJURIES TO PASSENGERS DUE TO
ACTS OF ITS EMPLOYEES AND OTHER
PASSENGERS OR STRANGERS
FOR ACTS OF OTHER
FOR ACTS OF ITS PASSENGERS OR
EMPLOYEES STRANGERS
CARRIAGE OF GOODS
Parties
1. Common carrier
2. Shipper
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or deterioration of
the goods
Duration of liability
From the time the goods are unconditionally placed in
the possession of, and received by the carrier for
transportation until the same are delivered actually or
constructively by the carrier to the consignee or to the
person who has the right to receive them. (Art. 1736)
It remains in full force and effect even when they
are temporarily unloaded or stored in transit unless the
shipper or owner has made use of the right of
stoppage in transitu. (Art. 1737)
It continues to be operative even during the time
the goods are stored in a warehouse of the carrier at
the place of destination until the consignee has bee
advised of the arrival of the goods and has had
reasonable opportunity thereafter to remove them or
otherwise dispose of them. (Art. 1738)
Delivery of goods to the custom authorities is not
delivery to the consignee. (Lu Do v. Binamira, 101 Phil
120)
MEMORY AID IN COMMERCIAL LAW
Required diligence and defense
Extraordinary diligence Ordinary diligence
Nature of liability
Tort; however, Not absolute; limited
The employee must be by Art. 1763
on duty at the time of
the act. (Maranan v.
Perez)
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)
CARRIAGE OF PASSENGERS
1. Common carrier
2. Passenger
Death or injury to the passengers
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).
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MEMORY AID IN COMMERCIAL LAW

Presumption of negligence

Art.1735 Civil Code Art.1755 Civil Code

Reason: As to when and how goods were damaged in Reason: The contract between the passenger and the
transit is a matter peculiarly within the knowledge of carrier imposes on the latter the duty to transport the
the carrier and its employees. (Mirasol v. Dollar, 53 passenger safely; hence the burden of explaining
PHIL 124) should fall on the carrier.
Mere proof of delivery of goods to a carrier in good
order and the subsequent arrival of the same goods at
the place of destination in bad order makes for a prima
facie case against the carrier. (Coastwise Lighterage
Corp. v. CA, 245 SCRA 796)
Defenses

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

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

diligence, provided it be: carried gratuitously, but not for willful acts or gross
a) In writing, signed by the shipper or owner; negligence. (Art. 1758)
b) Supported by a valuable consideration other
than the service rendered by the carriers;
and
c) Reasonable, just and not contrary to public
policy. (Art. 1744)
2. Fixed amount of liability: A contract fixing the sum
to be recovered by the owner or shipper for the loss,
destruction or deterioration of the goods, if it is
reasonable and just under the circumstances and has
been fairly and freely agreed upon. (Art. 1750)
3. Limited liability for delay: An agreement limiting the
common 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)

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)

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MEMORY AID IN COMMERCIAL LAW

Void stipulations

1. That the goods are transported at the risk of the Dispensing with or lessening the extraordinary
owner or shipper; responsibility of a common carrier for the safety of
2. That carrier will not be liable for any loss, passengers imposed by law by stipulation, by posting
destruction or deterioration of the goods; of notices, by statements on tickets or otherwise. (Art.
3. That the carrier need not observe any diligence 1757)
in the custody of the goods;
4. That the carrier shall exercise a degree of
diligence less than that of a good father of a family
over the movable transported;
5. That the carrier shall not be responsible for the
acts or omissions of his or its employees;
6. That the 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,
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)

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Rules on Passengers Baggage Company vs.
Macondray & Company
IN THE CUSTODY OF IN THE CUSTODY
Inc.)
THE PASSENGERS OF THE COMMON
(HAND-CARRIED) CARRIER
(CHECKED-IN) However, the carrier cannot limit its liability for
Legal nature of the baggage injury to, or loss of, goods shipped where such injury
Necessary deposit Considered as goods or loss was caused by its own negligence.
Required diligence by the common carrier (Shewaram vs. PAL, 17 SCRA 606)
Diligence of a depositary Extraordinary diligence
SPECIAL RULES ON LIABILITES OF AIRLINE
(ordinary diligence)
CARRIERS
Applicable rules
1. In case of flight diversion due to bad weather or
Arts. 1998 and 2000-2003 Arts. 1733-1753
other circumstances beyond the pilots control, the
relation between the carrier and the passenger
CONCURRING CAUSES OF ACTION ARISING continues until the latter has been landed at the port
FROM THE NEGLIGENT ACT OF THE COMMON of destination and has left the carriers premises. The
CARRIER carrier should necessarily exercise extraordinary
1. Culpa contractual (breach of contract) diligence in safeguarding the comfort, convenience
Only the carrier is primarily liable and not the and safety of its stranded passengers until they have
driver, because there is no privity between the driver reached their final destination. (Philippine Airlines vs.
and the passenger. CA, 226 SCRA 423)
Basis: Art.1759, NCC. 2. Even where overbooking of passengers is allowed
No defense of due diligence in the selection and as a commercial practice, the airline company would
supervision of employees. still be guilty of bad faith and still be liable for
damages if it did not properly inform passenger that it
2. Culpa aquiliana (quasi-delict) could breach the contract of carriage even if they were
The carrier and driver are solidarily liable as joint confirmed passengers. (Zalamea vs. CA, 228 SCRA
tortfeasors. 23)
Basis: Art. 2180, NCC. 3. An open-dated ticket constitutes a complete
Defense of due diligence in the selection and contract between the carrier and passenger. Hence,
supervision of employees is available. Exception: the airline company is liable if it refused to confirm a
maritime tort resulting in collision. (See notes on passengers flight reservation. (Singson vs. CA, 282
Collision) SCRA 149)
4. An airline company which issued a confirmed ticket
3. Culpa criminal (criminal negligence) to a passenger covering successive trips on different
The driver is primarily liable. The carrier is airlines can be held liable for damages occasioned by
subsidiarily liable only if the driver is convicted and bumping off by one of the successive airlines.
declared insolvent. (Lufthansa German Airlines vs. CA, 238 SCRA 290)
Basis: Art. 100, RPC. 5. An airline ticket providing that carriage by
successive air carriers is to be regarded as a single
In case of injury to a passenger due to the operation is to make the issuing carrier liable for the
negligence of the driver of the bus on which he is tortuous conduct of the other carrier. A printed
riding and of the driver of another vehicle, the drivers provision in the ticket limiting liability only to its own
as well as the owners of the two vehicles are jointly conduct is not enough to rebut that liability. (KLM
and severally liable for damages. It makes no Royal Dutch Airlines vs. CA, 65 SCRA 237)
difference that the liability of the bus driver and owner
springs from contract while that of the owner and II. CODE OF COMMERCE
driver of the other vehicle arises from quasi-delict.
(Fabre vs. CA)
A. OVERLAND TRANSPORTATION
LIMITATIONS AS TO CARRIERS LIABILITY (Arts. 349-379)
INVALID AS BEING VALID &
CONTRARY TO PUBLIC ENFORCEABLE Applicability
POLICY 1. Domestic land and water/maritime transportation.
1. One exempting the 1. One limiting the (Pandect of Commercial Law and Jurisprudence,
carrier from any and all liability of the carrier to
Justice Jose Vitug, 1997 ed.)
2. Domestic Air Transportation. (Commercial Law
liability for loss or an agreed valuation,
damage occasioned by its unless the shipper
Review, Cesar Villanueva, 2004 ed.)
own negligence. declares a higher value
IMPORTANT CONCEPTS:
2. An unqualified and pays a higher rate
1. Bill of lading
limitation of liability to an of freight
2. Obligations of the carrier
agreed valuation. (H.E. Heacock
 3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
BILL OF LADING
The written acknowledgment of receipt of goods
and agreement to transport them to a specific place to
a person named or to his order.
Rules:
1. It is not indispensable for the creation of a contract
of carriage. (Compania Maritima vs. Insurance
Company of North America, 12 SCRA 213)
2. Ambiguity is construed against the carrier, the
contract being one of adhesion.
3. The consignee, although the instrument is
oftentimes drawn up only by the consignor and
carrier, becomes bound by all the stipulations
contained therein by making a claim for loss on the
basis of said bill of lading. (Sea-Land Services Inc. vs.
IAC)
4. The right of a party to recover for loss of shipment
consigned to him under a bill of lading drawn up only
by and between the shipper and the carrier, springs
from either a relation of agency between him and the
shipper, or his status as stranger in whose favor some
stipulation is made in said contract, and who becomes
a party thereto when he demands fulfillment of that
stipulation. (Art. 1311 (2), (Mendoza vs. PAL Inc.)
5. Acceptance of the bill of lading without dissent
raises the presumption that all the terms therein
where brought to the knowledge of the shipper and
agreed to by him and, in the absence of fraud or
mistake; he is estopped from thereafter denying that
he assented to such terms. (Notes and Cases on the
Law on Transportation and Public Utilities, Aquino, T.
& Hernando, R.P. 2004 ed. p.261)
Kinds:
1. On board - issued when the goods have been
actually placed aboard the ship with very
reasonable expectation that the shipment is as
good as on its way.
2. Received - one in which it is stated that the
goods have been received for shipment with or
without specifying the vessel by which the
goods are to be shipped.
3. Negotiable - one in which it is stated that the
goods referred to therein will be delivered to
the bearer or to the order of any person
named therein.
4. Non-negotiable - One in which it is stated that
the goods referred to therein will be delivered
to a specified person.
5. Clean One which does not indicate any
defect in the goods.
6. Foul One which contains a notation thereon
indicating that the goods covered by it are in
bad condition.
7. Spent One which covers goods that already
have been delivered by the carrier without a
surrender of a signed copy of the bill.
8. Through One issued by the carrier who is
obliged to use the facilities of other carriers as
well as his own facilities for the purpose of
transporting the goods from the city of the
seller to the city of the buyer, which bill of
lading is honored by the second and other
interested carriers who do not issue their own
bills.
9. Custody One wherein the goods are already
received by the carrier but the vessel indicated
therein has not yet arrived in the port.
10. Port One which is issued by the carrier to
whom the goods have been delivered, and the
vessel indicated in the bill of lading by which
the goods are to be shipped is already in the
port where the goods are held for shipment.
Functions:
1. Best evidence of the existence of the contract
of carriage of cargo (Art. 353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver goods as
stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier cannot ordinarily
refuse to carry a particular class of goods.
EXCEPTION: For some sufficient reason the
discrimination against the traffic in such goods is
reasonable and necessary. (Fisher vs. Yangco
Steamship Co. 31 Phil 1).
Instances when the carrier may validly refuse to
accept the goods include the ff:
1.) Goods sought to be transported are dangerous
objects, or substances including dynamite and other
explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger like
flood, capture by enemies and the like
7.) Goods like livestock will be exposed to disease
8.) Strike
9.) Failure to tender goods on time. (Notes and Cases
on the Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.68)
In case of carriage by railway, the carrier is
exempted from liability if carriage is insisted upon by
the shipper, provided its objections are stated in the
bill of lading.
However, when a common carrier accepts cargo for
shipment for valuable consideration, it takes the risk of
delivering it in good condition as when it was loaded.
(PAL vs. CA)
 matter is fresh.
B. Duty to deliver the goods The filing of notice of claim is a condition precedent
Not only to transport the goods safely but to the for recovery.
person indicated in the bill of lading. The goods Shorter period may be stipulated by the parties
should be delivered to the consignee or any other because it merely affects the shippers remedy and
person to whom the bill of lading was validly does not affect the liability of the carrier. (PHILAMGEN
transferred or negotiated. vs. Sweetlines, Inc.)
Prescriptive Period
Time of delivery Not provided by Article 366. Thus, in such absence,
Stipulated in No stipulation Civil Code rules on prescription apply.
Contract/Bill of If despite the notice of claim, the carrier refuses to
Lading pay, action must be filed in court.
1. Carrier is bound to 1. Within a reasonable 1. No bill of lading was issued: within
fulfill the contract and is time. 6 years
liable for any delay; no 2. Carrier is bound to 2. Bill of lading was issued: within
matter from what cause forward them in the 1st 10 years.
it may have arisen. shipment of the same or ARTICLE 366 COGSA Sec.3 (6)
similar goods which he Applicability
may make to the point 1. Domestic/inter- 1. International/
of delivery. (ART. 358 island/coastwise overseas/foreign (from
Code of Commerce) transportation foreign country to
2. Land, water, air Phils.)
Effects of delay transportation Note: subject to the
a. Merely suspends and generally does not 3. Carriage of goods rule on Paramount
terminate the contract of carriage Clause
b. Carrier remains duty bound to exercise 2. Water/maritime
extraordinary diligence transportation
c. Natural disaster shall not free the carrier from 3. Carriage of goods
responsibility (Art.1740) Notice of damage
d. If delay is without just cause, the contract 1. Condition precedent 1. Not a condition
limiting the common carriers liability cannot be availed 2. 24-hour period for precedent
of in case of loss or deterioration of the goods claiming latent damage 2. 3-day period for
(Art.1747) claiming latent damage
Prescriptive period
RIGHT OF CONSIGNEE TO ABANDON GOODS None provided; Civil One year from the date
Instances: Code applies. of delivery (delivered
1. Partial non-delivery, where the goods are useless but damaged goods),
without the others (Art. 363); or date when the vessel
2. Goods are rendered useless for sale or left port or from the
consumption for the purposes for which they are date of delivery to the
properly destined (Art. 365); and arrastre (non-delivery
3. In case of delay through the fault of the carrier or loss).
(Art. 371).
COMBINED CARRIER AGREEMENT (ART. 373)
NOTICE OF DAMAGE (ART. 366) GENERAL RULE: In case of a contract of
Requisites for applicability: transportation of several legs, each carrier is
1. Domestic/inter-island/coastwise transportation responsible for its particular leg in the contract.
2. Land/water/air transportation EXCEPTION: A combined carrier agreement where a
3. Carriage of goods carrier makes itself liable assuming the obligations and
4. Goods shipped are damaged acquiring as well the rights and causes of action of
Rules: those which preceded it.
a. Patent damage: shipper must file a claim against
the carrier immediately upon delivery (it may be
oral or written)
B. MARITIME COMMERCE
b. Latent damage: shipper should file a claim against (Arts. 573-869)
the carrier within 24 hours from delivery.
Note: These rules does not apply to misdelivery of IMPORTANT CONCEPTS:
goods. (Roldan vs. Lim Ponzo) 1. Merchant vessel
Purpose of notice: To inform the carrier that the 2. Maritime lien and Preference of Credit
shipment has been damaged, and it is charged with 3. Doctrine of limited liability
liability therefore, and to give it an opportunity to 4. Causes of revocation of voyage
make an investigation and fix responsibility while the 5. Participants in maritime commerce
 6. Charter party process in rem. (PNB vs. CA, 337 SCRA 381)
7. Loans on bottomry and respondentia If the maritime lien arose prior to the recording of a
8. Accidents in maritime commerce preferred mortgage, it shall have priority over the said
mortgage lien. (PNB vs. CA, 337 SCRA 381)
MARITIME/ADMIRALTY LAW
It is the system of laws which particularly relates to
ORDER OF PREFERENCE IN CASE OF SALE OF
the affairs and business of the sea, to ships, their
VESSEL
crews and navigation, and to maritime conveyance of
persons and property. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino & R.A. 6106 P.D. 1521
Hernando, citing Francisco, p.254) Effectivity date
1969 1978
Maritime laws apply only to maritime trade and sea Applicability
voyages. (Pandect of Commercial Law and Overseas shipping only Both domestic and
Jurisprudence, Justice Jose Vitug, 1997 ed.) overseas shipping
Kind of sale
Arrastre service is not maritime in character. It Judicial Judicial and
refers to a contract for the unloading of goods from a extrajudicial
vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA Order of Preference
244) A preferred mortgage The preferred mortgage
shall have priority over lien shall have priority
CHARACTERISTICS OF MARITIME all claims against the over all claims against
TRANSACTION vessel, except the the vessel, except the
1. Real - similar to transactions over real property with following preferences in following preferences in
respect to effectivity against third persons which is the order stated: the order stated:
done through registration. (Rubiso vs. Rivera, 37 Phil. 1. Judicial costs of the 1. Expenses and fees
72). The evidence of real nature is shown by: 1) the proceedings; allowed and costs taxed
limitation of the liability of the agents to the actual 2. Taxes due the by the court and taxes
value of the vessel and the freight money; and 2) the Philippine Government; due to the Government;
right to retain the cargo and embargo and detention 3. Salaries and wages 2. Crews wages;
of the vessel (Luzon Stevedoring Corp v. CA, 156 of the Captain and 3. General average;
SCRA 169); Crew of the vessel 4. Salvage, including
2. Hypothecary - the liability of the owner of the value during its last voyage; contract salvage;
of the vessel is limited to the vessel itself (Doctrine of 4. General average or 5. Maritime liens arising
Limited Liability). salvage including prior in time to the
contract salvage, recording of the
The real and hypothecary nature of maritime law bottomry loans, and preferred mortgage;
simply means that the liability of the carrier in indemnity due shippers 6. Damages arising out
connection with losses related to maritime contracts is for the value of goods of tort; and
confined to the vessel, which stands as the guaranty transported but which 7. Preferred mortgage
for their settlement. (Aboitiz Shipping Corp. vs. were not delivered to registered prior in time.
General Accident Fire and Life Assurance Corp. 217 the consignee;
SCRA 359). 5. Costs of repair and
equipment of the
MERCHANT VESSEL vessel, and provisioning
Vessel engaged in maritime commerce, whether of food, supplies and
foreign or otherwise. (Bar Review Materials in fuel during its last
Commercial Law, Jorge Miravite, 2002 ed.) voyage; and
Constitutes property which may be acquired and 6. Preferred mortgages
transferred by any of the means recognized by law. registered prior in time.
They shall continue to be considered as personal
property. (Arts. 573, 585)
They are susceptible to maritime liens such as for Effect of sale: All pre-existing claims in the vessel
the repair, equipping and provisioning of the vessel in are terminated. They will then be satisfied from the
proceeds of the sale subject to the order of
the preparation of a voyage, as well as mortgage
liabilities, in satisfaction of which a vessel may be preference.
validly arrested and sold. (Ship Mortgage Decree of
1978) DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
MARITIME LIEN Cases where applicable:
It constitutes a present right of property in the ship, 1. Art. 587 civil liability for indemnities to
third persons
a jus in re, to be afterward enforced in admiralty by
 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. Preserve the hull and rigging of the vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment of the
vessel, if laid up. (Art. 632)
Engineers
Officers of the vessel but have no authority except
in matters referring to the motor apparatus. When two
or more are hired, one of them shall be the chief
engineer.
Duties:
1. In charge of the motor apparatus, spare
parts, and other instruments pertaining to
the engines;
2. Keep the engines and boilers in good
condition;
3. Not to change or repair the engine without
authority of the captain;
4. Inform the captain of any damage to the
motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining the
engine. (Art. 632)
Crew
The aggregate of seamen who man a ship, or the
ships company.
Hired by the ship agent, where he is present and in
his absence, the captain hires them, preferring
Filipinos, and in their absence, he may take in
foreigners, but not exceeding 1/5 of the crew. (Art.
634)
Classes of Seamans Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman While
Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
The seamans heirs are entitled to payment as
follows:
1. If death is natural:
a. compensation up to time of death if
engaged on wage
b. if by voyage - half of amount if death occurs
on voyage out; and full, if on voyage in
c. if by shares - none, if before departure; full,
if after departure
2. if death is due to defense of vessel - full
payment;
3. if captured in defense of vessel - full payment;
4. if captured due to carelessness - wages up to the
date of the capture. (Art. 645)
Complement of the Vessel
All persons on board, from the captain to the cabin
boy, necessary for the management, maneuvers, and
service, thus including the crew, the sailing mates,
engineers, stokers and other employees on board not
having specific designations.
Does not include the passengers or the persons
whom the vessel is transporting.
D. SUPERCARGOES
Persons who discharges administrative duties
assigned to him by ship agent or shippers, keeping an
account and record of transaction as required in the
accounting book of the captain. (Art. 649)
E. PILOT
A person duly qualified, and licensed, to conduct a
vessel into or out of ports, or in certain waters.
The term generally connotes a person taken on
board at a particular place for the purpose of charters servants. It transforms a common carrier into
conducting a ship through a river, road or channel, or a private carrier.
from a port. The charterer becomes the owner of the
Master pro hac vice for the time being in the vessel pro hac vice, just for that one particular
command and navigation of the ship. purpose only. Because the charterer is treated as
While in exercising his functions a pilot is in sole owner pro hac vice, the charterer assumes the
command of the ship and supersedes the master for customary rights and liabilities of the shipowner
the time being in the command and navigation of the to third persons and is held liable for the expense
ship, the master does not surrender his vessel to the of the voyage and the wages of the seamen.
pilot and the pilot is not the master. There are 2. Contract of Affreightment A contract whereby the
occasions when the master may and should interfere owner of the vessel leases part or all of its space to
and even displace the pilot, as when the pilot is haul goods for others.
obviously incompetent or intoxicated (Far Eastern The shipowner retains the possession,
Shipping Company vs. CA). command and navigation of the ship, the
Compulsory Pilotage States possessing harbors charterer merely having use of the space in the
have enacted laws or promulgated rules requiring vessel in return for his payment of the charter
vessels approaching their ports to take on board pilots hired.
licensed under the local laws. (Notes and Cases on the Kinds:
Law on Transportation and Public Utilities, Aquino, T. a. Time charter vessel is chartered for a fixed
& Hernando, R.P. 2004 ed. p. 518) period of time or duration of voyage.
b. Voyage or trip charter the vessel is leased
Liablity of Pilot for one or series of voyages usually for
GENERAL RULE: On compulsory pilotage grounds, purposes of transporting goods for
the Harbor Pilot is responsible for damage to a vessel charterer.
or to life or property due to his negligence.
EXCEPT: LEASE CHARTER PARTY
1. Accident caused by force majeure or natural If for a definite period, Charterer may rescind
calamity provided the pilot exercised prudence and lessee cannot give up charter party by paying
extra diligence to prevent or minimize damages. the lease by paying a half of the freightage
2. Countermand or overrule by the master of the portion of the amount agreed upon.
vessel in which case the registered owner of the vessel agreed upon.
is liable. (Sec.11, Art.III PPA Admin Order 03-85) If the leased property is The new owner is not
sold to one who knows compelled to respect the
SPECIAL CONTRACTS OF MARITIME COMMERCE of the existence of the charter party so long as
1. Charter party lease, the new owner he can load the vessel
2. Bill of lading must respect the lease. with his own cargo. (Art.
3. Contract of transportation of passengers on 689)
sea voyages Civil law concept Commercial law concept
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance
CHARTER PARTY BILL OF LADING
CHARTER PARTY
An entire or complete More like a private
A contract by virtue of which the owner or agent
contract. receipt which the
binds himself to transport merchandise or persons for
captain gives to accredit
a fixed price.
goods received from
A contract by which an entire ship, or some
persons
principal part thereof is let/leased by the owner to
another person for a specified time or use. (Planters Consensual contract Real contract
Products, Inc. vs. CA, 226 SCRA 476)
Parties: BAREBOAT OR CONTRACT OF
1. Ship owner or ship agent DEMISE CHARTER AFFREIGHTMENT
2. Charterer (TIME OR VOYAGE
Classes: CHARTER)
1. Bareboat or demise The charterer provides crew, Charterer becomes Owner remains liable as
food and fuel. The charterer is liable as if he were the liable to others caused carrier and must answer
owner, except when the cause arises from the by its negligence for any breach of duty
unworthiness of the vessel. The shipowner leases to Charterer regarded as Charterer is not
the charterer the whole vessel, transferring to the owner pro hac vice for regarded as owner.
latter the entire command, possession and consequent the voyage
control over the vessels navigation, including the
master and the crew, who thereby become the
Owner of vessel The vessel owner retains
relinquishes possession, possession, command Rights and Obligations of Parties
command and and navigation of the
navigation to charterer ship SHIPOWNER OR CHARTERER
SHIP AGENT
1. If the vessel is 1. To pay the agreed
Common carrier is Common carrier is not
chartered wholly, not to charter price;
converted to private converted to a private
accept cargo from 2. To pay freightage
carrier. carrier.
others; on unboarded cargo;
2. To observe 3. To pay losses to
represented capacity; others for loading
3. To unload cargo uncontracted cargo and
PERSONS WHO MAY MAKE A CHARTER clandestinely placed illicit cargo;
1. Owner or owners of the vessel, either in
4. To substitute 4. To wait if the
whole or in majority part, who have legal another vessel if load is vessel needs repair;
control and possession of the vessel
less than 3/5 of 5. To pay expenses
2. Charterer may subcharter entire vessel to 3rd capacity; for deviation. (Arts.
person only if not prohibited in original
5. To leave the port if 679-687)
charter. (Art.679) the charterer does not
3. Ship agent if authorized by the owner/s or
bring the cargo within
given such power in the certificate of the lay days and extra
appointment. (Art.598)
lay days allowed;
4. Captain in the absence of the ship agent or 6. To place in a vessel
consignee and only if he acts in accordance
in a condition to
with the instructions of the agent or owner navigate;
and protects the latters interests. (Art.609)
7. to bring cargo to
nearest neutral port in
REQUISITES OF A VALID CHARTER PARTY
case of war or blockade.
1. Consent of the contracting parties (Arts. 669-678)
2. Existing vessel which should be placed at
the disposition of the shipper
3. Freight
4. Compliance with Art. 652 of the Code of Rescission of a Charter Party
Commerce At charterers At Fortuitous
request shipowners causes
(Art 688) request (Art. 690)
Clauses Which May Be Included In a Charter (Art. 689)
Party 1. By 1. If the extra 1. War or
abandoning lay days interdiction of
Jason clause Clause paramount or the charter and terminate commerce;
paramount clause paying half of without the 2. Blockade;
A stipulation in a charter A clause in a charter the freightage; cargo being 3. Prohibition
party that in case of a party providing that the 2. Error in placed to receive
maritime accident for COGSA shall apply, even tonnage or alongside the cargo;
which the shipowner is though the flag; vessel; 4. Embargo;
not responsible by law, transportation is 3. Failure to 2. Sale by the and
contract or otherwise, domestic, subject to the place the owner of the 5. Inability of
the cargo shippers, extent that any term of vessel at the vessel before the vessel to
consignees or owners the bill of lading is charterers loading by the navigate.
shall contribute with the repugnant to the COGSA disposal; charterer;
shipowner in general or applicable law, then 4. Return of
average. (Pandect of to the extent thereof the the vessel due
Commercial Law and provision of the bill of to pirates,
Jurisprudence, Justice lading is void. (Pandect enemies or bad
Jose Vitug, 1997 ed.) of Commercial Law and weather;
Jurisprudence, Justice 5. Arrival at a
Jose Vitug, 1997 ed.) port for
repairs.

Terms:
1. Primage - bonus to be paid to the captain after
the successful voyage.
2. Demurrage the sum fixed in the charter party Shipowner or ship Only the owner of the
as a remuneration to the owner of the ship for agent. Outside of the cargo.
the detention of his vessel beyond the number of residence of the
days allowed by the charter party for loading or owners - the captain.
unloading or for sailing. Common elements:
3. Deadfreight the amount paid by or recoverable 1. Exposure of security to marine peril;
from a charterer of a ship for the portion of the 2. Obligation of the debtor conditioned only
ships capacity the latter contracted for but failed upon safe arrival of the security at the point
to occupy. of destination.
4. Lay Days - days allowed to charter parties for Forms:
loading and unloading the cargo. 1. Public instrument
5. Extra Lay Days days which follow after the lay 2. Policy signed by the contracting parties and
days have elapsed. the broker taking part therein
3. Private instrument (Art. 720)
USUAL FORMS OF CONSUMMATING CONTRACTS
Contents:
1. C.I.F. cost, insurance and freight;
1. Kind, name and registry of the vessel;
2. F.O.B. - free on board;
2. Name, surname and domicile of the captain;
3. F.A.S. - free alongside ship; and
3. Names, surnames and domiciles of the
4. C. & F. - cost and freight.
borrower and the lender;
4. Amount of the loan and the premium
TRANSSHIPMENT OF GOODS
stipulated;
The act of taking cargo out of one ship and loading
5. Time for repayment;
it in another, or the transfer of goods from the vessel
6. Goods pledged to secure repayment;
stipulated in the contract of affreightment to another
7. Voyage during which the risk is run (Art.721)
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. BOTTOMRY/ ORDINARY LOAN
It is not dependent on the ownership of the RESPONDENTIA (MUTUUM)
transporting ships or in the change of carriers, but
rather on the fact of actual physical transfer of cargo Not subject to Usury Subject to Usury Law
from one vessel to another. Law
If done without legal excuse, however competent Liability of the Not subject to any
and safe the vessel into which the transfer is made, is borrower is contingent contingency (absolute
a violation of contract and infringement of right of on the safe arrival of liability)
shipper and subjects carrier to liability if freight is lost the vessel or cargo at
event by cause otherwise excepted. (Magellan destination
Manufacturing vs. CA, 201 SCRA 102)

LOAN ON BOTTOMRY AND RESPONDENTIA The last lender is a The first lender is a
A real, unilateral, aleatory contract, by virtue of preferred creditor preferred creditor
which one person lends to another a certain amount of
money or goods on things exposed to maritime risks,
WHEN LOAN ON BOTTOMRY OR
which amount, with its earnings, is to be returned if
RESPONDENTIA REGARDED AS SIMPLE LOAN
the things are safely transported, and which is lost if
1. Lender loaned an amount larger than the
the latter are lost.
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
LOAN ON LOAN ON cargo or given on the goods if all of them
BOTTOMRY RESPONDENTIA could not have been loaded, the balance will
Definition be considered a simple loan. (ART.727)
Loan made by Loan taken on security 3. If the effects on which the money is taken is
shipowner or ship of the cargo laden on a not subjected to any risk. (ART.729)
agent guaranteed by vessel, and repayable
vessel itself and upon safe arrival of Note: Under existing laws, the parties to a loan,
repayable upon arrival cargo at destination. whether ordinary or maritime, may agree on any rate
of vessel at (Art. 719) of interest. (CB Circular 905)
destination. (Art. 719)

Who may contract

 MARINE INSURANCE LOAN ON The person whose property has been saved must
BOTTOMRY OR contribute to reimburse the damage caused or
RESPONDENTIA expense incurred if the situation constitutes general
Indemnity is paid after the Indemnity is paid in average.
loss has occurred advance by way of Classes:
a loan 1. Particular or Simple Average
In case of loss of the vessel In case of loss of 2. Gross or General Average
due to a risk insured the vessel due to a Where both vessel and cargo are saved, it is
against, the obligation of marine peril, the general average; where only the vessel or only the
the insurer becomes obligation of the cargo is saved, it is particular average.
absolute borrower to pay is Expenses incurred to refloat a vessel, which
extinguished accidentally ran aground, in order to continue its
Consensual contract Real contract voyage, do not constitute general average. Not only is
there absence of a marine peril, common safety factor,
Hypothecary Nature of Bottomry/ Respondentia and deliberateness. It is the safety of the property,
GENERAL RULE: The obligation of the borrower to and not the voyage, which constitutes the true
pay the loan is extinguished if the goods given as foundation of general average. (A. Magsaysay, Inc. vs.
security are absolutely lost by reason of an accident of Agan, G.R.No. L-6393, Jan. 31, 1955)
the sea, during the voyage designated, and if it is
proven that the goods were on board.
EXCEPTIONS: PARTICULAR OR GROSS OR GENERAL
1. Loss due to inherent defect; SIMPLE
2. Loss due to the barratry on the part of the Definition
captain; Damages or expenses Damages or expenses
3. Loss due to the fault or malice of the borrower; caused to the vessel or deliberately caused in
4. The vessel was engaged in contraband; and cargo that did not inure order to save the
5. The cargo loaded on the vessel be different in to the common benefit, vessel, its cargo or both
from that agreed upon. and borne by respective from real and known
owners. (Art. 809) risk. (Art. 811)
Concurrence of Marine Insurance and Loan on Requisites
Bottomry/Respondentia 1. common danger;
1. The insurable interest of the owner of a ship 2. deliberate
hypothecated by bottomry is only the excess sacrifice;
of the value over the amount secured by 3. success;
bottomry. (Sec. 101, Insurance Code) 4. proper formalities
2. The value of what may be saved in case of and legal steps.
shipwreck shall be divided between the Liability
lender and the insurer in proportion to the The owner of the goods All the persons having
interest of each one. (Art. 735) which gave rise to the an interest in the vessel
expense or suffered the and the cargo therein
Note: If a vessel is hypothecated by bottomry only the damage shall bear this at the time of the
excess is insurable, since a loan on bottomry partakes average. (Art. 810) occurrence of the
of the nature likewise of an insurance coverage to the average shall contribute
extent of the loan accommodation. The same rule to satisfy this average.
would apply to the hypothecation of the cargo by (Art. 812)
respondentia. (Pandect of Commercial Law and The insurers
Jurisprudence, Justice Jose Vitug, 1997 ed.) (Art.859) and lenders
on bottomry and
ACCIDENTS IN MARITIME COMMERCE respondentia shall
1. Averages likewise contribute.
2. Arrival Under Stress (Art.732).
3. Collision Number of interests involved
4. Shipwreck Only one interest Several interests
involved involved
AVERAGE Share in the damage or expense
An extraordinary or accidental expense incurred 100% share In proportion to the
during the voyage in order to preserve the cargo, value of the owners
vessel or both, and all damages or deterioration property saved
suffered by the vessel from departure to the port of Right to recover
destination, and to the cargo from the port of loading No reimbursement There may be
to the port of consignment. (Art. 806) reimbursement
 Kinds (not exclusive) contribute to general average and if jettisoned would
Art. 809 Art. 811 be entitled to reimbursement.
Procedure for recovery Reason: In domestic shipping, voyages are
1. Assembly and usually short and the seas are generally not
deliberation rough. In overseas shipping, the vessel is
2. Resolution of the
captain
exposed for many days to perils of the sea.
3. Entry of the
resolution in the DOMESTIC INTERNATIONAL
logbook Deck cargo is allowed Deck cargo is not
4. Detailed minutes allowed
5. Delivery of the With shippers consent
minutes to the maritime General average Particular average
judicial authority of the Without shippers consent
first port, within 24 Captain is liable Captain is liable
hours from arrival,
6. Ratification by ARRIVAL UNDER STRESS (ARRIBADA)
captain under oath. The arrival of a vessel at the nearest and most
(Arts. 813-814) convenient port instead of the port of destination, if
during the voyage the vessel cannot continue the trip
GOODS NOT COVERED BY GENERAL AVERAGE to the port of destination.
EVEN IF SACRIFICED
1. Goods carried on deck. (ART.855) When lawful When Who bears
2. Goods not recorded in the books or records unlawful expenses:
of the vessel. (ART.855 (2))
3. Fuel for the vessel if there is more than The inability to 1. Lack of The shipowner
sufficient fuel for the voyage. (Rule IX, continue provisions due or ship agent is
York-Antwerp Rule) voyage is due to negligence to liable in case of
to lack of carry according unlawful arrival
Jettison provisions, to usage and under stress.
Act of throwing cargo overboard in order to lighten well-founded customs; But they shall
the vessel. fear of seizure, 2. Risk of not be liable
Order of goods to be cast overboard: privateers, enemy not well for the
1. Those which are on the deck, preferring the pirates, or known or damages
heaviest one with the least utility and value; accidents of manifest caused by
2. Those which are below the upper deck, the sea 3. Defect of reason of a
beginning with the one with greatest weight disabling it to vessel due to lawful arrival.
and smallest value. (Art. 815) navigate. (Art. improper (Art. 821)
819) repair; and
Jettisoned goods are not res nullius nor deemed 4. Malice,
abandoned within the meaning of civil law so as to negligence, lack
be the object of occupation by salvage. (Pandect of of foresight or
Commercial Law and Jurisprudence, Justice Jose skill of captain.
Vitug, 1997 ed.) (Art. 820)
In order that the jettisoned goods may be included
in the gross or general average, the existence of the It is the duty of the captain to continue the voyage
cargo on board should be proven by means of the bill without delay after the cause of the arrival under
of lading. (Art. 816) stress has ceased failing in such duty renders him
liable. However, in case the cause has been risk of
York-Antwerp (Y-A) Rules on Determining enemies, there must first be an assembly before
Liability for Averages With Regard To Deck departure. (Art. 825)
Cargo Steps:
1. Deck cargo is allowed only in 1. Captain should determine during the voyage
domestic/coastwise/inter-island shipping, and is if there is well founded fear of seizure,
prohibited in international/overseas/foreign shipping. privateers and other valid grounds;
2. If deck cargo is loaded with the consent of the 2. Captain shall assemble the officers and
shipper on overseas trade, it must always contribute summon the persons interested in the cargo
to general average, but should the same be jettisoned, who may attend the meeting but without a
it would not be entitled to reimbursement because right to vote;
there is violation of the Y-A Rules. 3. The officers shall determine and agree if
3. If deck cargo is loaded with the consent of the there is well-founded reason after examining
shipper on coastwise shipping, it must always
 the circumstances. The captain shall have
the deciding vote;
4. The agreement shall be drafted and the
proper minutes shall be signed and entered
in the log book;
5. Objections and protests shall likewise be
entered in the minutes.
COLLISION
Impact of two vessels both of which are moving.
Allision
Impact between a moving vessel and a stationary
one.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a port, the
farther one must allow the nearer to enter first; if
they collide, the fault is presumed to be
imputable to the one who arrived later, unless it
can be proved that there was no fault on its part.
2. When two vessels meet, the smaller should 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.)
CONTAINERIZATION/ SAID-TO-CONTAIN/
SHIPPERS LOAD AND COUNT SYSTEM
System whereby the shipper loads his cargoes in a
specially designed container, seals the container and
delivers it to the carrier for transportation. The carrier
does not participate in the counting of the
merchandise for loading into the container, the actual
loading, and the sealing of the container. (US Lines v.
Comm. Of Customs, ICTSI v. Prudential Guarantee)
The matter of quantity, description and conditions
of the cargo inside the container is the sole
responsibility of the shipper, unless there is stipulation
to the contrary. (US Lines vs. Comm. Of Customs,
Reyma Brokerage v. Phil. Home Assurance)
Note: In order to attribute to the carrier any damage
to the shipment that may be found, inspection of the
goods should be done at 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/inter-
island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a. Patent damage: shipper should file a claim with
the carrier immediately upon delivery
b. Latent damage: shipper should file a claim with
the carrier within three days from delivery.
Note: The filing of a notice of claim is not a condition
precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo should be
brought within one year after:
a. Delivery of the goods (delivered but
damaged goods); or
b. The date when the goods should have been
delivered (non-delivery). (Sec. 3[6])
Loss or Damage as applied to the COGSA
contemplates a situation where no delivery at all was
made by the shipper of the goods because the same
had perished, gone out of commerce, or disappeared
in such a way that their existence is unknown or they
cannot be recovered. Thus, it is inapplicable in case of
misdelivery or conversion. (Ang vs. American
Steamship Agencies Inc.) and damage arising from
delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA).
In such instance the, Civil Code rules on prescription
shall apply.
The one-year prescriptive period is suspended by:
1. The express agreement of the parties
(Universal Shipping Lines, Inc. vs. IAC, 188
SCRA 170)
2. The filing of an action in court until it is
dismissed. (Stevens & Co. vs. Nordeutscher
Lloyd, 6 SCRA 180)
The one-year period shall run from delivery of the
last package and is not suspended by extrajudicial
demand. (Dole Phils.,Inc. vs. Maritime Co.,148 SCRA
118)
The one-year period shall run from delivery to the
arrastre operator and not to the consignee. (Union
Carbide Phils, Inc. vs. Manila Railroad Co.,SCRA 359)
The insurer exercising its right of subrogation is
bound by the one-year prescriptive period. However,
it does not apply to the claim against the insurer for
the insurance proceeds. (Fil. Merchants Ins. Co. vs.
Alejandro; Mayer Steel Pipe Corp. vs. CA)
IV. WARSAW CONVENTION OF 1929 (WC)
PURPOSE: To protect the emerging air transportation
industry and to secure the uniformity of recovery by
the passengers.
APPLICABILITY
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or goods.
The WC shall also apply to fortuitous transportation
by aircraft performed by an air transportation
enterprise.
International transportation - any transportation in
which the place of departure and the place of
destination are situated either:
1. Within the territories of two High Contracting
Parties regardless of whether or not there be a
break in the transportation or transshipment, or
2. Within the territory of a single High
Contracting Party, if there is an agreed stopping
place within a territory subject to the sovereignty,
mandate or authority of another power, even
though that power is not a party to the
Convention. (round trip, Am. Jur.)
Transportation to be performed by several
successive air carriers shall be deemed to be one
undivided transportation, if it has been regarded by
the parties as a single operation, whether it has been
agreed upon under the form of a single contract or of
a series of contracts, and it shall not lose its
international character merely because one contract or
a series of contracts is to be performed entirely within
a territory subject to the sovereignty, suzerainty,
mandate, or authority of the same High Contracting
Party. (Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the Convention
are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSENGER BAGGAGE AIR WAYBILL
TICKET CHECK
Passenger Checked-in Goods to be
baggage shipped
LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the accident
causing it took place on board the aircraft or in the
course of its operations of embarking or disembarking;
(Art. 17)
2. Destruction, loss or damage to any baggage or
goods, if it took place during the transportation by
air; (Art. 18) and
Transportation by air The period during which the
baggage or goods are in the charge of the carrier,
whether in an airport or on board an aircraft, or, in
case of a landing outside an airport, in any place
whatsoever.
It includes any transportation by land or water
outside an airport if such takes place in the
performance of a contract for transportation by air, for
the purpose of loading, delivery, or transshipment.
3. Delay in the transportation of passengers, baggage
or goods. (Art. 19)
Note: The Hague Protocol amended the WC by
removing the provision that if the airline took all
necessary steps to avoid the damage, it could
exculpate itself completely (Art. 20(1)). (Alitalia vs.
IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended by
Guatemala Protocol, 1971; Alitalia vs. IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of value
and payment of a supplementary sum by consignor,
carrier is liable to not more than the declared sum
unless it proves the sum is greater than actual value.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of value
and payment of a supplementary sum by consignor,
carrier is liable to not more than the declared sum
unless it proves the sum is greater than actual value.
An agreement relieving the carrier from liability or
fixing a lower limit is null and void. (Art. 23)
Carrier is not entitled to the foregoing limit if the
damage is caused by willful misconduct or default on
its part. (Art. 25)
Thus, the WC does not operate as an exclusive
enumeration of the instances of an absolute limit of
the extent of liability. It does not preclude the
application of the Civil Code and other pertinent local
laws. It does not regulate or exclude liability for other
breaches of contract by the carrier, or misconduct of
its employees, or for some particular or exceptional
type of damage. (Alitalia vs. CA)
In PanAm v. IAC, the WC was applied as regards
the limitation on the carriers liability, there being a
simple loss of baggage without any improper conduct
on the part of the officials or employees of the airline
or other special injury sustained by the passenger.
In KLM Royal v. Tuller, the WC has invariably been
held inapplicable, or as not restrictive of the carriers
liability, where there was satisfactory evidence of
malice or bad faith attributable to its officers and
employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES
1. Notice of claim
A written complaint must me made within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from receipt of
baggage/goods
The complaint is a condition precedent. Without the
complaint, the action is barred except in case of fraud
on the part of the carrier. (Art. 26)
2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation stopped.
(Art. 29)
In United Airlines vs. Uy the two-year prescriptive
period was not applied where the airline employed
delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against the
carrier in which the accident or delay occurred.
EXCEPTION: Agreement or contract whereby the
first carrier assumed liability for the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an action
against the first carrier and the carrier in
which the damage occurred
b. Passenger or consignee can file an action
against the last carrier and the carrier in
which the damage occurred.
These carriers are jointly and severally liable.
(Art. 30)
A contract of international carriage by air, although
performed by different carriers under a series of airline
tickets constitutes a single operation. Members of the
International Air Transportation Association (IATA) are
under a general pool partnership agreement wherein
they act as agent of each other in the issuance of
tickets to contracted passengers to boost ticket sales
worldwide and at the same time provide passengers
easy access to airlines which are otherwise
inaccessible in some parts of the world. (American 2. Person who commenced Salvage in spite of
Airlines vs. CA) opposition of the Captain or his representative;
3. In accordance with Sec. 3 of the Salvage Law, a
Under a general pool partnership agreement, the person who fails to deliver a salvaged vessel or cargo
ticket-issuing airline is the principal in a contract of to the Collector of Customs.
carriage while the endorsee-airline is the agent. The
obligation of the former remained and did not cease Derelict a ship or her cargo which is abandoned
even when the breach occurred not on its own flight and deserted at sea by those who are in charge of it,
but on that of another airline which had undertaken to without any hope of recovering it, or without any
carry the passengers to one of their destinations. intention of returning to it.
(China Airlines vs. Chiok)
The intention of those in charge must be
JURISDICTION ascertained. If those in charge left with the intention
At the option of the plaintiff, the action for of returning, or of procuring assistance, the property is
damages may be filed in the: not derelict, but if they quitted the property with the
a. Court of domicile of the carrier; intention of finally leaving it, it is derelict and a change
b. Court of its principal place of business; of their intention and an attempt to return will not
c. Court where it has a place of business change its nature (Erlanger & Galinger vs. Swedish
through which the contract has been made; East Asiatic Co. Ltd.).
or
d. Court of the place of destination. (Art. 28(1)) If it is clear that the intention to return is slight, the
NOTE: It is the passengers ultimate destination not salvage which was done thereafter is considered valid.
an agreed stopping place that determines the (Notes and Cases on the Law on Transportation and
country where suit is to be filed. Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed.
The forum of action provided in Art. 28(1) is a p. 616)
matter of jurisdiction rather than of venue. (Santos III
vs. Northwest; 2A C.J.S.) CONTRACT OF TOWAGE
A contract whereby one vessel, usually motorized,
V. SALVAGE LAW (Act No. 2616) pulls another, whether loaded or not with
merchandise, from one place to another, for a
SALVAGE compensation. It is a contract for services rather than
Two concepts: a contract of carriage.
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 SALVAGE TOWAGE
the care of them have either abandoned in distress at
Governed by special Governed by Civil Code
sea, or are unable to protect or secure.
law (Act No. 2616) on contract of lease
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 Requires success, Success is not required
sea peril, or such property recovered from actual peril otherwise no payment
or loss, as in cases of shipwreck, derelict or recapture.
Requisites: Must be done with the Only the consent of the
1. Valid object of salvage; consent of the tugboat owner is
2. Object must have been exposed to marine captain/crewmen needed
peril (not perils of the ship); Vessel must be Vessel need not be
3. Services rendered voluntarily (neither an involved in an accident involved in an accident
existing duty nor out of a pre-existing
contract); Fees distributed Fees belong to the
4. Services are successful, total or partial. among crewmen tugboat owner
Subjects of Salvage:
1. Ship itself;
RULES ON SALVAGE REWARD
2. Jetsam goods which are cast into the sea, and
1. The reward is fixed by the RTC judge in the
there sink and remain under water;
absence of agreement or where the latter is
3. Floatsam or Flotsam goods which float upon the
excessive. (Sec. 9)
sea when cast overboard;
2. The reward should constitute a sufficient
4. Ligan or Lagan goods cast into the sea tied to a
compensation for the outlay and effort of the
buoy, so that they may be found again by the owners
salvors and should be liberal enough to offer an
(p.173, Judge Diaz).
inducement to others to render services in similar
Persons who have no right to a reward for
emergencies in the future.
salvage:
3. If sold (no claim being made within 3 months
1. Crew of the vessel saved;
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
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.

c. 25% to the officers and crew in proportion CERTIFICATE OF CERTIFICATE OF

to their salaries. (Sec. 13) PUBLIC PUBLIC
CONVENIENCE CONVENIENCE AND
Taking passengers from a sinking ship, without (CPC) NECESSITY (CPCN)
rendering any service in rescuing the vessel, is not a
salvage service, being a duty of humanity and not for
reward. An authorization An authorization
issued by the issued by the
VI. PUBLIC SERVICE ACT appropriate appropriate
(C.A. No. 146) government agency for government agency for
the operation of public the operation of public
PURPOSES: services for which no service for which a
1. To secure adequate, sustained service for franchise, either prior franchise is
the public at the least possible cost; municipal or required by law; e.g.
2. To protect the public against unreasonable legislative, is required telephone and other
charges and poor, inefficient service; by law, e.g., common services.
3. To protect and secure investments in public carriers.
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.
A CPC or a CPCN constitutes neither a franchise nor
a contract, confers no property right, and is a mere
license or a privilege. The holder of said certificate
does not acquire a property right in the route covered
thereby. Nor does it confer upon the holder any
proprietary right or interest or franchise in the public
highways. Revocation of this certificate deprives him
of no vested right. New and additional burdens,
alteration of the certificate, or even revocation or
annulment thereof is reserved to the State. (Luque vs.
Villegas, 30 SCRA 408)
It is a property and has a considerable value and
can be the subject of sale or attachment. (Cogeo-
Cubao Operators and Drivers Assn. vs. CA, 207 SCRA
343, Raymundo vs. Luneta Motor Co.)

PUBLIC SERVICE REQUREMENTS FOR GRANTING CPC OR CPCN

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
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.
 5. Capitalize any franchise in excess of the amount
POWERS POWERS actually paid to the Government;
REQUIRING PRIOR EXERCISABLE 6. Sell, alienate, mortgage or lease property,
NOTICE AND WITHOUT PRIOR certificates or franchise.
HEARING NOTICE AND
HEARING Under Sec. 20(g) of C.A. No. 146, the sale, etc.
may be negotiated and completed before the approval
1. Issuance of CPC 1. Investigation any by the proper authority. Its approval is not a condition
or CPCN; matter concerning precedent to the validity of the contract. The approval
2. Fixing of rates, public service; is necessary only to protect public interest.
tolls, and charges; 2. Requiring
3. Setting up of operators to furnish PRIOR OPERATOR/OLD OPERATOR RULE
standards and safe, adequate, and The rule allowing an existing franchised operator to
classifications; proper service; invoke a preferential right within the authorized
4. Establishment of 3. Requiring public territory as long as he renders satisfactory and
rules to secure services to pay economical service.
accuracy of all meters expenses of The policy is not to issue a certificate to a second
and all measuring investigation; operator to cover the same field and in competition
appliances; 4. Valuation of with a first operator who is rendering sufficient,
5. Issuance of properties of public adequate and satisfactory service. The prior operator
orders requiring utilities; must first be given an opportunity to improve its
establishment or 5. Examination and service, if inadequate or deficient.
maintenance of test of measuring Purpose: To prevent ruinous and wasteful
extension of facilities; appliances; competition in order that the interests of the public
6. Revocation, or 6. Grant of special would be conserved and preserved.
modification of CPC or permits to make extra
CPCN; or special trips in It subordinates the prior applicant rule which gives
7. Suspension of CPC territories specified in the first applicant priority only if things and
or CPCN, except when the certificate; circumstances are equal.
it is necessary to 7. Uniform
avoid serious and accounting system and Where the operator either fails or neglects to make
irreparable damage or furnishing of annual the improvement or effect the increase in services,
inconvenience to the reports; especially when given the opportunity, new operators
public or private 8. Compelling should be given the chance to give the services
interest, in which compliance with the needed by the public.
case, a suspension laws and regulations.
not more than 30 PRIOR APPLICANT RULE
days may be ordered, Presupposes a situation when two interested
prior to the hearing. persons apply for a certificate to operate a public
(Soriano v. Medina, utility in the same community over which no person
164 SCRA 36) 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
UNLAWFUL ACTS OF PUBLIC UTILITY
who applied ahead of the other, will be granted the
COMPANIES
certificate.
1. Engagement in public service business without
first securing the proper certificate;
RATE-FIXING POWER
2. Providing or maintaining unsafe, improper or
The rate to be fixed must be just, founded upon
inadequate service as determined by the proper
conditions which are fair and reasonable to both the
authority;
owner and the public.
3. Committing any act of unreasonable and unjust
A rate is just and reasonable if it conforms to the
preferential treatment to any particular person,
following requirements:
corporation or entity as determined by the proper
1. One which yields to the carrier a fair return
authority;
upon the value of the property employed in
4. Refusing or neglecting to carry public mail upon
performing the service; and
request. (Secs. 18 and 19)
2. One which is fair to the public for the
service rendered.
ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint rates;
REGISTERED OWNER RULE
2. Establish and operate new units;
The registered owner of a certificate of public
3. Issue free tickets;
convenience is liable to the public for the injuries or
4. Issue any stock or stock certificates representing
damages suffered by third persons caused by the
an increase of capital;
operation of said vehicle, even though the same had
been transferred to a third person.
The registered owner is not allowed to escape
responsibility by proving that a third person is the
actual and real owner Reason: It would be easy for
him, by collusion with others or otherwise, to transfer
the responsibility to an indefinite person, or to one
who possesses no property with which to respond
financially for the damage or injury done. (Erezo, et al.
vs. Jepte 102 Phil 103).

KABIT SYSTEM
A system whereby a person who has been granted
a certificate of public convenience allows other
persons who own motor vehicles to operate under
such license, for a fee or percentage of such earnings.
It is void and inexistent under Art. 1409, Civil Code.
Effects:
1. The transfer, sale, lease or assignment of the
privilege granted is valid between the contracting
parties but not upon the public or third persons.
(Gelisan vs. Alday, 154 SCRA 388)

2. The registered owner is primarily liable for all the

consequences flowing from the operations of the
carrier.
The public has the right to assume that the
registered owner is the actual or lawful owner
thereof. It would be very difficult and often
impossible, as a practical matter, for the public to
enforce their rights of action that they may have
for injuries inflicted by the vehicle if they should
be required to prove who the actual owner is.
(Benedicto vs. IAC, 187 SCRA 547)
3. The thrust of the law in enjoining the kabit
system is to identify the person upon whom
responsibility may be fixed with the end in view
of protecting the riding public (Lim vs. CA 373
SCRA 394).
4. The registered owner cannot recover from the
actual owner and the latter cannot obtain
transfer of the vehicle to himself, both being in
pari delicto. (Teja Marketing vs. IAC)
5. For the better protection of the public, both the
registered owner and the actual owner are jointly
and severally liable with the driver. (Zamboanga
Transportation Co. vs. CA)