CHAPTER 12 SHIP MORTGAGE AND MARITIME LIENS

JANINE LATOSA & KENNETH PENUS

1. GENERAL CONCEPTS
01. Mortgage and other encumbrance are governed by the provisions of P.D. 1521,
otherwise known as the Ship Mortgage Decree of 1978.

02. The provisions of P.D. 1521 with respect to preferred mortgage prevail over the
Civil Code provisions on mortgage as well as the provisions of the Code of
Commerce.

03. Any citizen of the Philippines, or any association or corporation organized under
the laws of the Philippines, at least sixty per cent of the capital of which is owned
by citizens of the Philippines may constitute a ship mortgage or any other lien or
encumbrance.

2. PREFERRED MORTGAGES
01. Sec. 4, PD 1521
a. A valid mortgage which at the time it is made includes the whole of any
vessel of domestic ownership shall have, in respect to such vessel and as
of the date of recordation, the preferred status given by the provisions of
Section 17 hereof, if
1. The mortgage is recorded as provided in Sec. 3 hereof;
2. An affidavit is filed with the record of such mortgage to the effect
that the mortgage is made in good faith and without any design
to hinder, delay, or defraud any existing or future creditor of the
mortgagor or any lien or of the mortgaged vessel;
3. The mortgage does not stipulate that the mortgagee waives the
preferred status thereof;

b. Any mortgage which complies with the above conditions is hereafter

called a "preferred mortgage".

c. There shall be endorsed upon the documents of a vessel covered by a

preferred mortgage
1. The names of the mortgagor and mortgagee;
2. The time and date the endorsement is made;
3. The amount and date of maturity of the mortgage; and
4. Any amount required to be endorsed by the provisions of
paragraphs (e) or (f) of this Section.
 d.Such endorsement shall be made
1. by the Coast Guard District or Station Commander of the port of
documentation of the mortgaged vessel,or
2. by the Coast Guard District or Station Commander of any port in
which the vessel is found

In the case of a vessel holding a provincial certificate of Philippine Registry, the

endorsement shall be made by the Philippine consul abroad upon direction by
wire or letter from the Maritime Industry Authority at the Request of the
mortgagee and upon tender of the cost of communication of such direction.
02. Additional Requirements
a. The mortgage should cover the whole vessel; and
b.The vessel must be of domestic ownership.

03. Sec. 10, PD 1521

Lien of preferred Mortgage; foreclosure; jurisdiction; procedure A preferred
mortgage shall constitute a lien upon the mortgaged vessel in the amount of the
outstanding mortgage indebtedness secured by such vessel. Upon the default of any
term or condition of the mortgage such lien may be enforced by the mortgagee by
suit in remaining admiralty, wherein the vessel itself may be made a partly
defendant and be arrested in the manner as provided in Section 11 hereof.

3. MARTIME LIEN
01. Maritime lien is a privileged claim on a vessel for some service rendered to it to
facilitate its use in navigation.

02. Characteristics of Maritime Lien

a. Maritime property
b.Travel with the property, the lien is not extinguished.
c. Enforceable action in rem

03. Sec. 17, PD 1521

Preferred Maritime Lien, Priorities, Other Liens
The preferred mortgage lien shall have priority over all claims against the vessel,
except the following claims in the order stated:
1. expenses and fees allowed and costs taxed by the court and taxes
due to the Government;
2. crew's wages;
3. general average;
4. salvage; including contract salvage;

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 5. maritime liens arising prior in time to the recording of the preferred
mortgage;
6. damages arising out of tort; and
7. preferred mortgage registered prior in time.

04. Executory Contract Doctrine - A lien does not attach for breach of an executory
contract even though the contract is the type which normally gives rise to a lien.
Liability arises in admiralty for breach of contact but if the parties have performed
his obligation, his remedy against the other is only for breach in an action in
personam.

05. Furnishers of repairs, supplies, towage, use of dry or marine railway, or other
necessaries, or the mortgagee, are not prevented from waiving their right to a lien,
or in the case of preferred mortgage lien, to the preferred status of such lien, at any
time by agreement or otherwise.

06. Enforcement of a maritime lien prescribes in ten years.

07. Sec. 21, PD 1521

Requirements for a maritime lien for necessaries which is enforceable by suit in
rem:
1. The necessaries must have been furnished to and for the benefit
of the vessel;
2. The necessaries must have been necessary for the continuation of
the voyage of the vessel;
3. The credit must have been extended to the vessel;
4. There must be necessity for the extension of the credit; and
5. The necessaries must be ordered by persons authorized to contract
on behalf of the vessel.

08. Sec. 22, PD 1521

Persons Authorized to Procure Repairs, Supplies, and Necessaries
1. The managing owner,
2. Ships husband,
3. Master, or
4. Any person to whom the management of the vessel at the port of
supply is entrusted.
09. Upon default of the obligor, the preferred ship mortgaged may be foreclosed in a
suit in admiralty.
a. Upon filing a petition for foreclosure, the court may order the arrest of the
vessel upon ex parte application duly supported by an affidavit of a person
who knows the facts and upon filing of a bond.

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b.The mortgagee may likewise avail of the alternative remedy of specific
performance in a suit in personam in almiralty.

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CHAPTER 13 PERSONS WHO TAKE PART IN MARITIME COMMERCE

KATHERINE LOPEZ & ALEXIA MELEGRITO

1. Ship Owner
- Person who has possession, control, and management of the vessel
- Primary liable for damages in the operation of the vessel
2. Ship Agent
- Person entrusted with provisioning of the vessel and represents the vessel in the port in
which it may be found
- Solidarily liable with Ship Owner
o Powers and functions of Ship Agent:
Enter into contracts to provision the ship
Purchase necessary supplies and fuel necessary for voyage
Represent the vessel in any action in court or tribunal
Discharge duties of captain, subject to Art. 609
Contract in the name of the owners with respect to the repairs, details of
equipment, armament, provisions of food and fuel and freight and the
vessel, and all that relate to the requirements of navigation.
Order new voyage, new charter, insure the vessel
o Liabilities of Ship Owner and Ship Agent:
Liable for the acts of the captain and for all contracts entered by the latter
to repair, equip and provision the vessel (Art. 586)
Provided that: The amounts claimed were invested for the benefit of the
vessel.
indemnities in favor of 3rd persons arising from the loss and damage to the
goods loaded on the vessel without prejudice to their right (Art. 587)
Art. 587. May be exempted by abandoning the vessel and all equipments
earned during the voyage to the creditor.

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3. Part Owners
- Person sharing ownership over the vessel
- Presumption of Co- Ownership; two or more are part owners of a merchant vessel. They
are governed by the resolutions of the majority.
- If not more than two owners vote of member having the large interest.
- If equal decided by lot.
- Part Owners hall elect the manager to represent them in the capacity of SA. It is revocable
at the will of members.
o Liabilities:
Civilly liable in proportion of their interests in the common fund for the
result of the act of the captain.
Exempt: abandonment of the part of the vessel belonging to him,
before a notary.
Expense for repair and other necessary for navigation in proportion to their
respective ownership.
o Sale of the vessel
Made through public auction UNLESS owners unanimously agree saying
always the right of repurchase and redemption.
In case there is a resolution of majority in relation to the sale of vessel, it
shall also be binding to the minority.
o Discharge of Captain and Crew
BEFORE the vessel sets out the sea: pay the salary earned without
indemnity. Except: express and specific agreement. (Art. 603)
DURING voyage: salaries until return to the port where contract is made.
Except: Just cause for the discharge (Art. 604)
Contract for definite period: no discharge except for subordination in
serious matters, robbery, theft, habitual drunkenness, damage to ship caused
by malice or proven negligence (Art. 605)
Captain is co - owner: no discharge except when ship agent return the
amount of interest. (Art. 606)

4. Captains and Masters of Vessel

- Qualifications:
o Filipino citizen
o Legal capacity to contract
o Skills, capacity, and qualifications necessary to command and direct the vessel
o Not disqualified.
(Art. 609)

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- Roles:
o General agent of the ship owner
o Commander and technical director of the vessel
o Representative of the country under whose flag he navigates

- Powers of Captain/ Master of Vessel:

o Appoint or make new contracts with the crew in the absence of the ship agent
o Command the crew and direct the vessel to port of its destination
o Impose punishment upon those who fail to comply with his orders or are wanting
in discipline subsequent holding of a preliminary hearing.
o Make contract for the charter of the vessel
o Adopt all proper measures to keep the vessel well supplied and equipped
o Order repairs on the vessel in urgent case while on a voyage. (Art. 610)

- Obligations:
o Have on board (a) an inventory of vessel parts and equipment, (b) a roll of the crew
and their contracts, (c) royal/ navigation certificate, (d) list of passengers, (e) bill of
health, (f) certificate of registry, etc.
o Have a three folioed and stamped books: logbook, accounting book and freight
book.
o Have a copy of the code of commerce on board
o Before receiving cargoes, if required by the shippers and passengers; to examine
the vessel, in order to ascertain whether it is waterlight.
o Remain constantly on board while cargo is being taken on board and watch
stowage thereof and not allow loading of dangerous cargo without precautions and
which may endanger the safety of the vessel
o Demand a pilot when required by the voyage
o Be on deck and to take command on entering and leaving ports, canal, roadsteads
and rivers.
o Present himself when making a port in distress before 24 hours have elapsed to the
Maritime Authority or consul of the Republic of the Philippines
o Place under good care and custody all papers and belongings of any members of
the crew who might die on the vessel.
o Take necessary steps before competent authority to record in the certificate of the
vessel in the registry of vessels which he may contract
o Observe the rules with respect to situation, lights and maneuvers in order to avoid
collisions.

- Liabilities:
o Liable to the ship agent, in case of:
Damage suffered by the vessel due to negligence on his part.
Thefts committed by the crew

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 Losses, fines, and confiscations imposed due to violation of customs, police,
health, and navigation laws and regulations
Losses and damages caused by mutinies
Caused by misuse of the powers and the non-fulfilment of the obligations
Those arising by reason of his going out of his course or taking course which
he should not have taken without sufficient cause.
Those arising by reason of his voluntary entering a port other than that of
his destination
Non observance of the provisions contained in the regulations on situation
of lights and maneuvers for purpose of preventing collisions. (Art. 618)
o Liable for the cargo from the time it is delivered to him at the dock or at the port of
loading, until he delivers it on the shore or on the discharging wharf
o Liable for the principal, interests and costs for the money borrowed on the hull,
engine, rigging or tackle of the vessel, and shall indemnify for the damages he may
cause

- Discretion of Captain or Master

o Discretionary authority to decide what safety of the ship and its crew and cargo
specifically requires on a stipulated ocean voyage
o Right and duty of the captain to exercise his discretion and in good faith to do all
things with respect to the vessel and its equipment necessary for the protection and
preservation of interest.

- Pilotage
o Pilot a person duly qualified, and licensed, to conduct a vessel into or out of ports,
or in certain waters.

o Compulsory Pilotage States possessing harbors have enacted laws or promulgated

rules requiring vessels approaching their ports to take on board pilots licensed under
the local law.

- Pilot and Association

o Not jointly and severally liable
o No employer- employee relationship

o PPA Administrative Order No. 03-85

Pilotage Association set up and maintain reserved fund for any liability of
member.
Only 75% of the reserve fund shall be use in payment of damages. The
excess shall be paid from the personal funds of the member concerned.
Reimburse as soon as practicable. Not less than 25% of his dividends shall
be retained each month until full amount has been returned.

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 o Liability of Pilot Association:
There being NO ER-EE Relationship, Article 2180 of the Civil Code is
not applicable since there is no vicarious liability of an employer to speak
of.
It is stated in American law, the well-established rule that pilot associations
are immune to vicarious liability for the tort of their members.
Not liable for negligently assuring the competence of their members
because as professional associations they made no guarantee of the
professional conduct of their members.
They have been not held liable for damages caused by the default of a
member pilot. The liabilities between PA and an individual member depend
largely upon the constitution, articles or by-laws of the association, subject
to appropriate government regulations.

o Officers and Crew of Vessels

Article 648 of the Code of Commerce provides that the competent of a
vessel shall be understood as all the persons on board, from the captain to
the cabin boy, necessary for the management, maneuvers and service sailing
mates, engineers, stokers and other employees on board not having specific
designations; but it shall not include the passengers or the persons whom
the vessel is transporting.
R.A 8544, otherwise known as the "Philippine Merchant Marine Officers
Act of 1998 refers to either a marine deck engineer.
R.A 10635 defines the term seafarer as any person who employed,
engaged or works in onboard ships, whether or not such ships are engaged
in domestic or overseas trade.
Officers:
1. Master person having command of a ship
2. Deck Officer an officer qualified in accordance with the
provisions of the International Convention on Standards of Training,
certification and Watchkeeping for Seafarers (STCW)
3. Chief Engineer senior licensed marine engineer officer
responsible for mechanical propulsion and the operation.
4. Engineer Officer- another qualified officer in accordance of
(STCW)
5. Radio Officer- person holding an appropriate certificate issued
and recognize by the administration under the provisions of the
Radio Regulations.
6. Ratings man- member of the ships crew

- Regulation of Merchant Marine Profession:

o Governed by special laws and pertinent rules of Maritime Industry Authority and
the Board of Marine Deck officers and Board of Marine Engineer in Officers;

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 Philippine Merchant Marine Officers Act of 1998 was passed in order to regulate
Merchant Marine Profession in the Philippines.
o The policy of the State to promote and insure the safety of life and property at sea,
protect and serve the marine environment ecology, and prevent marine pollution
and accident at sea.
o To institutionalize radical changes as required by international and national
standards to insure that only qualified, competent and globally competitive Marine
Deck/Engineer officers as determined through licensed examinations shall be
allowed entry to practice the Merchant Marine Profession.

- Minimum Safe Manning

o It is required that there is sufficient number of officers and crew serving in the
vessel.
o Under the law and rules, the MARINA is the single and central maritime
administration for all compliance with STCW.
o R.A 10635 declares the following state policies of the state to ensure compliance
with the 1978 International Convention on (STCW Convention), as amended; all
international agreements implementing or applying the STCW Convention; and
other international maritime safety conventions or agreements that the STCW
Convention seeks to promote compliance therewith

o The following certificates are issued under MARINE STCW Administration

Act of 2014
1. Certificate of competency- a certificate issued to masters, officers and
Global Maritime Distress and Safety System.
2. Certificate of endorsement an attestation of the maritime
administration as to the authenticity and validity of the certificates issued to
masters and officers, stating that the issuance of the relevant certificate is in
compliance with the issuance of the relevant certificate is in compliance
with the requirements of the STCW Convention have been met.
3. Certificate of proficiency- a certificate other than a certificate of
competency issued to a seafarer, stating that the relevant requirements of
training a competencies or seagoing service.

- Security of Tenure
o The Labor Code provisions apply to officers and crew of merchant vessels
engaged in domestic trade or coastwise shipping. Hence, matters concerning
their dismissal or disciplinary action must be in accordance with the provisions of
the Labor Code.
o For officers and crew working in Foreign vessels, there must be compliance with
the applicable laws on overseas employment as well as regulations issued by the
POEA such as those embodied in the Standard Contract for Seafarers Employed
abroad.

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 o The seafarers who are deployed overseas are considered contractual
employees and their employment is governed by the contract that they sign every
time that they are rehired.
- Termination of Employment
o employment of the seafarer shall cease when the seafarer completes his period of
contractual service aboard the vessel, signs- off from the vessel and arrives at the
point hire

- Repatriation
o If the vessel is outside the Philippines upon the expiration of the contract, the
seafarer shall continue his service on board until the vessels arrival at a convenient
port and/or after arrival of the replacement crew provided that in any case, the
continuance of such service shall not exceed three months. The seafarer shall be
entitled to earned wages and benefits as provided in the contract.
o If the vessel arrives at a convenient port before the expiration of the contract, the
master/employer may terminate the seafarer from such port, provided the unserved
portion of his contract is not more than one (1) month. The seafarer shall be entitled
only to his earned wages and earned leave pay and to his basic wages corresponding
to the unserved portion of rehired at the same rate and position in which case the
seafarer shall be entitled only to his earned wages and earned leave pay
o If the vessel arrives at a convenient port within a period of 3 months before the
expiration of his contract, the master/employer may repatriate the seafarer from
such port provided that the seafarer shall paid earned wages.

- Termination due to Shipwreck

o the seafarer be entitled to earned wages, medical examination at employers
expenses to determine his fitness to work, repatriation at employers cost one month
basic wage as termination pay

- Termination due to vessel sale, lay-up or discontinuance of voyage

o seafarer shall be entitled to earned wages, repatriation at employers cost and one
(1) month basic wage as termination pay, unless arrangements have been made for
the seafarer to join another vessel belonging to the same principal to complete his
contract in which case the seafarer shall be entitled to basic wages until the date of
joining the other vessel.

- Termination due to unseaworthiness

o If the vessel is declared unseaworthy by a classification society, port state or flag
state, the seafarer shall not be forced to sail with the vessel.
o If the vessels unseaworthiness necessitates the termination of employment before
the date indicated in the contract, the seafarer shall be entitled to earned wages,

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repatriation at cost to the employer and termination pay equivalent to one (1) month
basic wages.

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 CHAPTER 14 CHARTER PARTIES

DENZEL EDWARD V. CARIAGA

1. PORTS OF UNLOADING
01. The port of destination where the cargoes will be unloaded must be stipulated in
the Charter Party. The parties may also provide that the charterer is given the option
of discharge at one or more ports within a geographic range. The option may be
necessary in some cases based on sound commercial reason that the charterer may
not know at the time charter is fixed the best market for his goods.

02. Safe-ports clause

a. When an option is given to the charterer, the shipowner may protect himself
by including a safe-ports clause in the charter party whereby he reserves the
right to decline the risk his vessel in an unsafe port.

2. DEMURRAGE
01. In strict sense of the term, it means a sum of money due by express contract for the
detention of the vessel in loading or unloading. Beyond the time allowed for that
purpose in the charter party.

If the vessel is detained beyond the number of days agreed upon in the charter
contract for the loading and unloading of cargo, or for eventual sail, the charterer
shall answer for the demurrage incurred thereby, the sum of which is usually fixed
by the parties in the charter party. (National Food Authority vs. Court of Appeals,
311 SCRA 700)

02. Lay days

It refers to Article 652 paragraph 10 of the Code of commerce which provides that
the time for loading and unloading shall be provided for in the charter party. The
period stipulated is known as LAY DAYS.

a. Article 656, Code of Commerce

It provides that if in the charter party the time in which the loading and
unloading are to take place is not stated, the usage of the port where these
acts take place shall be observed. After the stipulated or the customary
period has passed, and there is no express proviso in the charter party fixing
the indemnity for the delay, the captain shall be entitled to demand
demurrage for the lay days and extra lay days which have elapsed in
loading and unloading

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 b. Computation of Lay Days
If no lay day is provided for in the charter party, it is understood that the
charterer will unload and discharge the cargoes within a reasonable time or
with reasonable diligence.

03. Deadfreight
a. Where the charterer failed to occupy the leased portion of the vessel, he may
thereby be made liable by the ship owner for the deadfreight that
occurred.
b. It means the amount paid by or recoverable from a charterer of a ship for
such part of the ship's capacity as the charterer has contracted for but fails
to occupy.

3. RIGHTS AND OBLIGATIONS OF THE CHARTER PARTIES

01. The parties in a charter party are bound to comply with their respective obligations
imposed by law. As in any ordinary contract, the parties in the charter agreement
have corresponding rights and obligations. Apart from those accruing from the
stipulations of the parties, the statutory rights and obligations of the charter parties
are to be found in the Code of Commerce. (National Food Authority vs. Court of
Appeals, 311 SCRA 700)

02. The evident failure or refusal on the part of the ship owner or of his agents to receive
cargo which had been contracted to be transported under the charter party
constitutes a sure breach of the charter party, as to warrant a suit for damages by
the charterer for such breach. (Behn, Meyer & Co. vs. Banco Espanol Filipino,
11 Phil 253)

03. The ship owner is bound to observe, relative to the charter party, the capacity of
the vessel or that which is indicated expressly in the registry, a margin greater than
two percent between that represented and her actual capacity which is not allowable
(Article 669, Code of Commerce)

04. Generally, any loss incurred by a shipper whose cargo is refused on account of the
receipt by the shipowner of a greater amount of cargo belonging to other persons
shall be for the account of the shipowner in the form of indemnity. If there is only
one shipper and there was apparent fraud or error in the vessels capacity, the
charterer may opt to have freight reduced if he does not choose to rescind the
charter, with a further right to be indemnified therefor. (Article 679. Code of
Commerce)

05. If there should be several charter parties, and due to lack space, not all could be
accommodated although not one would want to rescind the charter, preference shall
be given to the person who is first in loading his cargo, and the others shall have

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 preference in the order of the dates of their charter. In the absence of priority, the
charterers may choose to load in proportion to the amounts of weight or space that
they may have contracted, with a right to indemnified for the loss. (Article 649,
Code of Commerce)

06. The ship owner, under certain conditions, may effect a substitution in respect of the
vessel which had been initially chartered with that of another, so long as the
substitute vessel had been duly inspected and is seaworthy. (Article 670, Code of
Commerce)

07. Furthermore, after three-fifths (3/5) of the vessel is loaded the ship owner may not
substitute the chartered vessel with another one unless he procures the consent of
the charterers or shippers. Otherwise, he runs the risk of answering for all damages
suffered during the voyage by those who did not give their consent. (Article 670,
Code of Commerce)

08. The captain may not, if the vessel has been chartered in whole, accept cargo from
any other person unless the consent of the charterer is obtained. Otherwise, the
captain may be compelled by the charterer to unload the said cargo and pay to the
charterer any damage that he may suffer on account thereof. (Article 672, Code of
Commerce)

09. The ship owner may also be generally held liable for damages incurred by the
charterer due to the voluntary delay of the captain in putting to sea, provided he
was requested, by way of a notarial or judicial notice, to put to sea at the proper
time. (Article 672, Code of Commerce)

10. The charterer shall have the right to subcharter the vessel to a third person only if
he is so authorized by the shipowner. Otherwise, he shall be liable to the shipowner
for any damage caused to the latter by virtue of the subcharter. (Article 679, Code
of Commerce)

11. A charterer who loads goods different from that contracted upon, without the
knowledge of the shipowner or captain, and which results to damage due to
confiscation, embargo, detention, and other causes, to the said shipowner, shall be
liable to indemnify the parties injured thereby. (Article 681, Code of Commerce)

12. Should illicit cargo be shipped by the charterer in the chartered vessel with the
knowledge of the shipowner or of the captain, said charterer shall be jointly liable
with the shipowner for all damages caused to the other shippers. (Article 682, Code
of Commerce)

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13. The charterers and shippers may not, for the payment of freight and other expenses
incurred, abandon the goods damaged due to inherent defects or by reason of
fortuitous event. Abandonment may be proper however if the cargo, if consisting
of liquid, may have leaked out and none remains except one-fourth (1/4) of their
contents. (Article 687, Code of Commerce)

14. Liability of charterer to ship owner in case of bareboat charter

a. The complete and exclusive relinquishment of possession, command and
navigation of the vessel, the charterer and later the sub-charterer became the
vessels owner pro hac vice. In the absence of any showing that the vessel
or any part thereof was commercially offered for use to the public, the
agreements/charter parties are that of a private carriage where the rights of
the contracting parties are primarily defined and governed by the
stipulations in their contract. (De La Torre vs. Court of Appeals, G.R. no.
160088 and 160565, July 13, 2011)

b.Although certain statutory rights and obligations of charter parties are found
in the Code of Commerce, these provisions will not always apply to the case
against the Charterer.

c. None of the provisions found in the Code of Commerce deals with the
specific rights and obligations between the real ship owner and the charterer
obtaining in this case. New Civil Code supplies the deficiency.

d.The Charterer may likewise be made liable under Article 1665 and 1667 of
the New Civil Code because the charterer or lessee under the bareboat
charter is contract-bound to return the thing leased and it was liable for the
deterioration or loss of the same. The sub-charterer or sub-lessee is liable
under Article 1651 of the New Civil Code. Although the sub-charterer is
not a privy to the contract between the charterer and the owner, the sub-
charterer remained bound to preserve the chartered vessel for the latter. (De
La Torre vs. Court of Appeals, G.R. no. 160088 and 160565, July 13, 2011)
1. Article 1665. The lessee shall return the thing leased, upon the
termination of the lease, as he received it, save what has been lost or
impaired by the lapse of time, or by ordinary wear and tear, or from
an inevitable cause. (1561a)

2. Article 1667. The lessee is responsible for the deterioration or loss

of the thing leased, unless he proves that it took place without his
fault. This burden of proof on the lessee does not apply when the
destruction is due to earthquake, flood, storm or other natural
calamity. (1563a)

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 e. The person who had been entrusted when it was dry-pocked for repairs was
made liable under Article 1189 of the New Civil Code because before the
vessel could be returned, it was lost due to the negligence of the sub-
charterer to whom charterer chose to sub-charterer or sublet the vessel. (De
La Torre vs. Court of Appeals, G.R. no. 160088 and 160565, July 13, 2011)
Article 1189. When the conditions have been imposed with the
intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of the improvement, loss
or deterioration of the thing during the pendency of the condition:
1. If the thing is lost without the fault of the debtor, the obligation shall
be extinguished;
2. If the thing is lost through the fault of the debtor, he shall be obliged
to pay damages; it is understood that the thing is lost when it
perishes, or goes out of commerce, or disappears in such a way that
its existence is unknown or it cannot be recovered;
3. When the thing deteriorates without the fault of the debtor, the
impairment is to be borne by the creditor;
4. If it deteriorates through the fault of the debtor, the creditor may
choose between the rescission of the obligation and its fulfillment,
with indemnity for damages in either case;
5. If the thing is improved by its nature, or by time, the improvement
shall inure to the benefit of the creditor;
6. If it is improved at the expense of the debtor, he shall have no other
right than that granted to the usufructuary.

4. REPLACEMENT OF VESSEL
01. The shipowner may replace the chartered vessel in the following instances:
a. If, after receiving a part of the freight, should not find sufficient to make up
at least three-fifths (3/5) of the amount which the vessel may hold, at the
price he may have fixed, he may substitute for the transportation another
vessel inspected and declared suitable for the same voyage. The expenses
of transfer and the increase in the price of the charter, should there be any,
being for the ship owners account.

b.Substitution with the consent of the charters or shippers.

02. After three-fifths (3/5) of the vessel has been loaded, the person from who she is
chartered may not, without the consent of the charterers or shippers, substitute the
vessel designated in the charter party by another one. The Ship owner is under the
penalty of making himself thereby liable for all the losses and damages occurring
during the voyage to the cargo of those who did not consent to the change.

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5. EFFECT OF BILLING OF LADING
01. If a bill of lading was issued by the ship owner to the charterer, the charter party
still governs their rights and the bill of lading may be used as proof of receipt of the
goods. As between the parties, the bill of lading is still proof of receipt of the goods
but the terms and conditions of the contract are in the charter party.

02. The bill of lading does not operate as a new contract or modify the charter party as
between the ship owner and the charterer, the bill of lading does constitute a
contract between the vessel and the consignee, and neither he nor his endorsee is
bound by the terms of the charter party of which he has no notice or knowledge.

03. If the bill of lading (together with a charter party) that is issued by the ship owner
is a negotiable document of title, the bill of lading is binding in favor of a
subsequent holder for value. As this third person, there is no other contract but the
bill of lading.

04. The code of commerce provides that if the cargo should be received without the
charter party having been signed, the contract shall be understood as executed in
accordance with what appears in the bill of lading, the sole evidence of title with
regard to the cargo for determining the rights and obligations of the ship agent, of
the captain, and of the charterer.

05. In bareboat charter, the charterer himself controls the master, and bills of lading are
issued just as they would be if the ship were under the hand of her general owner;
the personal liability however, is that of the demise charterer.

6. FREIGHT
01. The charterer must pay the ship owner the amount agreed upon.

02. Article 667 provides that the goods loaded shall be liable in the first place for the
freight and expenses during 30 days to be counted from the date of delivery or
deposit.

03. Any natural increase in weight or size of the merchandise loaded on the vessel shall
accrue to the benefit of the owner, and shall pay the proper freightage fixed in the
contract for the same.

04. Lien on the cargoes

a. Article 665 provides that the cargo shall be especially liable for the payment
of:
1. The Freightage
2. Expenses and duties arising therefrom, which must be reimbursed
by the shippers

17
 3. For the part of the general average which may correspond to it.

b.It shall not be legal for the captain to delay unloading on account of
suspicion that this obligation may not be complied with. Should there be
reasons for distrust, the judge or court, at the instance of the captain, may
order the deposit of the merchandise until he has been paid in full.

c. The freight was already included in the purchase price paid by it did not free
the cargo from the carriers lien provided for in Article 665 of the Code of
Commerce, if the freight has not yet been fully paid by the charterer.
(National Rice and Corn Corporation vs. Macadaeg)

d.In connection with the carriers lien, the law allows the sale of the cargo
under the conditions prescribed under Articles 666-668 of the Code of
Commerce which are quoted hereunder. However, the right to sell the cargo
is subject to the right of third persons who received the goods without
malice and for a valuable consideration.

e. The court may likewise order the deposit of the goods at the instance of the
captain in the case mentioned in Article 665 of the Code of Commerce when
there is a reason for distrust and the two cases mentioned in Article 668
particularly if:
1. The consignee refuses to receive the goods
2. The consignee cannot be found.

18
 CHAPTER 15 LOANS ON BOTTOMRY AND RESPONDENTIA

ELIZABETH JOY D. CORTEZ

1. DEFINITION
01. Bottomry
a contract whereby the shipowner borrows for use, equipment or repair of the
vessel, for a definite term, and pledges the ship as security, with the stipulation
that if the ship is lost during the voyage or during the limited time on account of
the perils enumerated, the lender shall lose his money

02. Loan on respondentia

The goods or some part thereof, are hypothecated as security for a loan wherein
the repayment of which is dependent upon maritime risks

2. CONCEPTS
01. There must be a marine risk upon which the loan is predicated such that if the
vessel or cargo is lost by virtue of that risk, the lender loses the capital.
There is neither bottomry nor respondentia if the money borrowed is
subject to repayment

02. Upon the termination of a safe journey, the lender is entitled to receive a greater
return on his principal than he would ordinarily receive by a lender in an ordinary
or simple loan

3. LOAN ON RESPONDENTIA
01. The lender does not lose his capital should the ship perish due to marine peril so
long as the goods subject of the loan are saved but if the ship or cargo should
disappear due to perils of the sea, the lender shall suffer loss of his capital

02. Form
That of a bond
It is the borrowers personal responsibility which is deemed to be the
principal security for the performance of the contract

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 4. LONS ON BOTTOMRY AND RESPONDENTIA AS DISTINGUISHED FROM
SIMPLE LOAN
BOTTOMRY OR RESPONDENTIA SIMPLE LOAN
The rate of inters is not subject to the Usury
Rate of interest must not exceed the ceiling
Law on account of the extraordinary risks
fixed by the usury law (12% per annum)
involved
Existence of a marine risk is necessary and
Such risks need not be involved
must be duly established
Must be executed in accordance with form
Formal requisites regarding contracts in
and manner required in the Code of
general would apply
Commerce
Must be recorded in the registry of vessels in No such registration is required
order to bind third persons
Preference is extended to the last lender if Generally, the first lender enjoys preference
there be several lenders over subsequent ones

5. WHEN SIMPLE LOAN APPLIES

01. If the lender loaned an amount which is larger than the value of the object liable
for, the bottomry loan due to fraudulent means employed by the borrower, becomes
a simple loan as to the surplus while the bottomry loan shall only be valid for the
amount at which the object is appraised by experts

02. If the full amount of the loan which is contracted in order to load the vessel is not
used for cargo, or given on the goods if not all of them could have been loaded, the
balance will be considered as a simple loan which should be returned prior to the
commencement of the voyage

03. If the effects on which the money is taken is not subject to any risk, it is a simple
loan

6. WHO MAY CONSTITUTE LOANS ON BOTTOMRY

01. Shipowner
He may secure a loan on bottomry upon his own ship
If he is only a part owner, it is limited to the extent of his interest in the
vessel

02. Ship captain

Ship captain who is a part owner may secure such loan but it is limited to
the extent of his interest as well.
Even if he has no interest in the ship, he may enter into such loan on account
of extreme necessity in order to comply with the obligations under Articles
583 and 611 of the Code of Commerce.

20
 03. No loans on bottomry may be made on the salaries of the crew nor the profits which
may be expected

7. WHO MAY CONSTITUTE LOANS ON RESPONDENTIA

01. Cargo owner
He has the right to enter into such loan involving his cargo
02. The captain may not enter into such contract being a mere agent of the shipowner
and if he does so, the loan would be void and the principal, interest and costs of the
contract shall be chargeable to his private account and he may even be discharged
altogether as ship captain.

8. FORM OF THE LOANS

01. Generally, it must be in writing

02. They must be executed in accordance with the form and manner prescribed in
Article 720 of the Code of Commerce
By means of a public instrument
By means of a policy signed by the contracting parties and the broker taking
part therein; they must also conform to the registry of the broker who took
part therein
By means of a private instrument; with the acknowledgment signatures of
the parties required
03. It shall be entered in the certificate of registry of the vessel and shall be recorded in
the registry of vessels in order to have preference over the credits of such loan

04. The contracts made during a voyage shall be governed by the provisions of Articles
583 and 611, and shall be effective with regard to third persons from the date of
their execution, if they should be recorded in the registry of vessels of the port of
registry of the vessel before the lapse of 8 days from the date of her arrival
Should 8 days lapse without record, it shall produce no legal effect on third
persons except from the day of their inscription

9. CONSEQUENCES OF LOSS OF EFFECTS OF THE LOANS

01. Effects are lost due to an accident of the sea during the time, and on the occasion
of the voyage which has been designated in the contract and it is proven that the
cargo was on board, the lender loses the right to institute the action.

02. The lender retains such right of action of the loss was caused by the inherent defect
of the thing, or through the fault or malice of the borrower or through barratry on
the part of the captain, or if it was caused by damages suffered by the vessel as a
consequence of being engaged in a contraband, of if it arose from having loaded

21
 the goods on a vessel different from that designated in the contract, unless in this
latter instance, the changed was due to force majure.

03. The lenders on bottomry or respondentia shall suffer in proportion to their

respective interest, the general average which may take place in the things upon
which the loans were made.

04. If there is no agreement between the parties, the lender on bottomry or respondentia
is obligated to contribute in proportion to his respective interest, should it not
belong the kind of risks excepted in Article 731.

05. If what transpires is a shipwreck, the amount for the payment of the loan shall be
reduced to the proceeds of the effects which have been saved but only after
deducting the costs of the salvage

06. If the loan is on the vessel or any of her parts, the freight earned during the voyage
for which the loan was contracted shall also be liable for its payment, as far as it
may reach.

07. If the same vessel or cargo should be the object of a loan on bottomry or
respondentia and marine insurance, the value of what may be saved in case of
shipwreck shall be divided between the lender and the insurer, in proportion to the
legitimate interest of each one, taking into consideration for this purpose only, the
principal with respect to the loan, and without prejudice to the right of preference
of other creditors in accordance to Article 580.

10. PREFERENCE
01. Preference is given to the loans for the last voyage on the theory that were it not
for the last lender, the prior lenders would not have benefited from the
preservation of the security.

02. Article 730 of the Code of Commerce

Loans made during the voyage shall have preference over those made
before the clearing of the vessel, and they shall be graduated in the inverse
order of their dates
The loans for the last voyage shall have preference over prior ones
Should several loans have been made at the same port of arrival under
stress and for the same purpose, all of them shall be paid pro rata

22
 CHAPTER 16 AVERAGES

ANGELICA MENDOZA & JUAN GABRIEL MIGUEL

1. AVERAGES
It includes:
01. All extraordinary or accidental expenses which may be incurred during the voyage
in order to preserve the vessel, the cargo, or both; and
02. Any damages or deteriorations which the vessel may suffer from the time it puts to
sea from the port of departure until it casts anchor in the port of destination, and
those suffered by the merchandise from the time they are loaded in the port of
shipment until they are loaded in the port their consignment.
Classification
01. General or Gross Average; or
02. Simple or Particular Average

2. PARTICULAR AVERAGE AS DISTINGUSHED FROM GENERAL AVERAGE

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3. GROSS GENERAL AVERAGE
01. Requisites
a. Common Danger
1. That both the ship and the cargo, after it has been loaded, are subject
to the same danger, whether during the voyage, or in the port of
loading or unloading.

b.Deliberate Sacrifice
1. General Rule: Sacrifice is made through the jettison of the cargo or
part of the ship is thrown overboard during the voyage. (DURING
THE VOYAGE)
2. Exceptions (EVEN NOT DURING THE VOYAGE):
i. Where the sinking of a vessel is necessary to extinguish a
fire in a port, roadsteads, creek, or bay.
ii. Where the cargo is transferred to lighten the ship on account
of a storm to facilitate entry into a port.

c. Successful saving of the vessel or the cargo

Purpose: To be able to demand general contribution.

d.Proper formalities and legal steps

(ART. 813-814 OF THE COC)
1. Procedure for recovery;
2. Assembly and deliberation
3. Resolution of the captain
4. Entry of the resolution in the logbook;
5. Detailed minutes;
6. Delivery of the minutes to the maritime judicial authority of the first
port, within 24 hours from arrival; and
7. Ratification by captain under oath.

02. Expenses incurred to refloat a vessel, which accidentally ran aground, in order to
continue its voyage, DO NOT CONSTITUTE GENERAL AVERAGE. Not only
is there absence of a marine peril, common safety factor, and deliberateness. It is
the safety of the property, and not the voyage, which constitutes the true
foundation of general average.

03. The person whose property has been saved must contribute to reimburse the
damage caused or expense incurred if the situation constitutes general average.

4. GOODS NOT COVERED BY GENERAL AVERAGE EVEN IF SACRIFICED

01. Goods carried on deck;
02. Goods not recorded in the books or records of the vessel; and

24
 03. Fuel for the vessel if there is more than sufficient fuel for the voyage.

5. EFFECT OF NEGLIGENCE
Provisions on Averages under the Code of Commerce cannot be applied if there is
negligence. Thus, the issue on negligence must first be resolved before applying the law
on averages under the Code on Commerce with regard to liability.

6. JETTISON
Act of throwing cargo overboard in order to lighten the vessel.

7. ORDER OF GOODS TO BE CAST OVERBOARD

Article 815 Code of Commerce
01. Those, which are on the deck, preferring the heaviest one with the least utility and
value.
02. Those, which are below the upper deck, beginning with the one with greatest
weight and smallest value.
Jettisoned goods are neither res nullius nor deemed abandoned within the meaning of
civil law so as to be the object of occupation by salvage.

8. YORK-ANTWERP (Y-A) RULES ON DETERMINING LIABILITY FOR

AVERAGES WITH REGARD TO DECK CARGO
01. Deck cargo is allowed only in domestic/coastwise/inter-island shipping, and is
prohibited in international/overseas/foreign shipping.

02. If deck cargo is loaded with the consent of the shipper on overseas trade, it must
always contribute to general average, but should the same be jettisoned, it would
not be entitled to reimbursement because there is violation of the Y-A Rules.

03. If deck cargo is loaded with the consent of the shipper on coastwise shipping, it
must always contribute to general average, and if jettisoned would be entitled to
reimbursement.

9. DISTINCTIONS BETWEEN DOMESTIC AND INTERNATIONAL SHIPPING

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 CHAPTER 17 COLLISIONS

MARC ALFRED GARCIA

1. DEFINITION
01. An impact or sudden contact of a moving body with an obstruction in its line of
motion, whether both are in motion or one stationary

02. Collision per se includes allusion for purposes of the Code of Commerce

03. ALLISION - the striking of a moving vessel against one that is stationary.

2. ZONES IN COLLISION
01. Time up to the moment when the risk of collision may be said to have begun

02. Time between the moment the risk of collision begins and the moment when it has
become practical certainty

03. Time of actual contact (A. Urrutia & Co. v Baco River Plantation Co. 2013)

Note:
if a vessel, having a right of way, suddenly changes its course during the third zone, in
an effort to avoid an imminent collision due to the fault of another vessel, such act may
be said to be done in extremis, and even if wrong, cannot create responsibility on
the part of said vessel with the right of way
the defense of diligence in the selection of employees is not available to ship
owner in maritime tort

3. ERROR IN EXTREMIS
where a navigator, suddenly realizing that a collision is imminent by no fault of his own,
in confusion and excitement of the moment, does something which contributes to the
collision or omits to do something by which the collision might be avoided, such act or
omission is ordinarily considered to be in extremis and the ordinary rules of strict
accountability does not apply.

4. APPLICABLE LAWS
01. Liability for negligence Article 2176, NCC
Art. 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this
Chapter. (1902a)

26
 02. Liability of ship-owners and ship agents as well as captain or crew in collision
Governed by Code of Commerce (NDC vs CA, 164 SCRA 593)

5. INTERNATIONAL AGREEMENT
01. International regulations for Preventing Collisions at Sea (COLREGS) formulated
by International Maritime Organizations (IMO) previously known as
Intergovernmental Maritime Consultative Organization

02. Rule 7 (Risk of collision)

(a) Every vessel shall use all available means appropriate to the prevailing
circumstances and conditions to determine if risk of collision exists. If there
is any doubt such risk shall be deemed to exist.

6. ALL AVAILABLE MEANS WHICH COULD BE USED TO DETERMINE RISK

OF COLLISION ON BOARD ARE:
01. Observing compass bearing of approaching vessel,
02. Observing relative bearing of approaching vessel,
03. Observing bearing and range of approaching vessel using radar,
04. Observing data plotted by ARPA radar (CPA and TCPA).

7. RULE 8 (ACTION TO AVOID A COLLISION)

Article 829: In the cases above mentioned the civil action of the owner against the person
causing the injury as well as the criminal liabilities, which may be proper are reserved.

8. IS CONTRIBUTORY NEGLIGENCE AND LAST CLEAR CHANCE

APPLICABLE IN COLLISION CASES?
No. Because of the provisions of Art. 827, under which, the evidence disclosing that both
vessels are blameworthy, the owners of neither can successfully maintain an action against
the other for the loss of or injury to his vessels. The Government of the Phil Islands v Phil
Steamship Co. Inc. GR 18957

9. CASES COVERED BY COLLISION AND ALLISION

ARTICLE 826. If a vessel should collide with another, through or the fault, negligence, or
lack of skill of the captain, sailing mate, or any other member of the complement, the owner
of the vessel at fault shall indemnify the losses and damages suffered, after an expert
appraisal.

10. ONE VESSEL AT FAULT - ART 826

01. 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)
02. City of Manila vs. The Atlantic Gulf and Pacific Co GR 4510, December 19 1908
Lack of rudder which deprived the captain of the control to the vessels own
movement

27
 The Marine Trading Co Inc. vs The Govt of the Phil Islands GR 56294
1991
Collision between vessel Active and vessel Bohol
Negligence was vested solely on part of vessel Bohol

03. Smith bell and Co Inc. (Phil) vs CA

Collision between MV Don Carlos and MS Yota Aru
MV Don Carlos was declared solely at fault

04. ARTICLE 827. If the collision is imputable to both vessels, each one shall
suffer its own damages, and both shall be solidarily responsible for the losses
and damages occasioned to their cargoes.

11. BOTH VESSELS AT FAULT ART 827

01. Each vessel must bear its own loss, but the shippers of both vessels may go against
the ship-owners who will be solidarity liable. (Art. 827)
02. Govt of the Phil Islands vs Phil Steamship Co. Inc. GR 18957 January 1923
Only the owner of one vessel was made liable for the loss of the cargoes
belonging to the government
One vessel was totally lost and therefore subject to limited liability doctrine

12. WHEN PARTY AT FAULT CANNOT BE DETERMINED ART 828

01. Each vessel must bear its own loss, but the shippers of both vessels may go against
the ship-owners who will be solidarily liable. (Art. 828)
02. 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.
03. ARTICLE 830. If a vessel should collide with another, through fortuitous event or
force majeure, each vessel and its cargo shall bear its own damages.
04. ARTICLE 832. If by reason of a storm or other cause of force majeure, a
vessel which is properly anchored and moored should collide with those nearby,
causing them damages, the injury occasioned shall be considered as particular
average of the vessel run into.

13. WHEN CAUSE IS FORTUITOUS EVENT OR FORCE MAJEURE ART 832

01. No liability. Each bears its own loss. (Art. 830)
02. 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)

14. THIRD PERSON AT FAULT ARTICLE 831

01. The third vessel will be liable for losses and damages. (Art. 831)

28
 02. ARTICLE 831. If a vessel should be forced by a third vessel to collide with
another, the owner of the third vessel shall indemnify the losses and damages
caused, the captain thereof being civilly liable to said owner.

15. SINKING ON THE WAY PORT - ARTICLE 833

01. ARTICLE 833. A vessel which, upon being run into, sinks immediately, as
well as that which, having been obliged to make a port to repair the damages
caused by the collision, is lost during the voyage or is obliged to be stranded in
order to be saved, shall be presumed as lost by reason of collision.

16. PRESENCE OF PILOTS ART 834

01. ARTICLE 834. If the vessels colliding with each other should have pilots on board
discharging their duties at the time of the collision, their presence shall not exempt
the captains from the liabilities they incur, but the latter shall have the right to be
indemnified by the pilots, without prejudice to the criminal liability which the latter
may incur.

17. EXTEND OF LIABILITY ARTICLE 838

01. ARTICLE 838. When the value of the vessel and her appurtenances should not
be sufficient to cover all the liabilities, the indemnity due by reason of the death
or injury of persons shall have preference.
02. Rule of limited liability
in case of collisions, the liability of the vessel owner is limited to the
value of the vessel and the freightage earned during the voyage;
consequently, his property, other than such vessel and freightage earned
during the voyage cannot be made to answer for his liability arising from
collision with other vessels.

18. COLLISION IN FOREIGN WATERS ART. 839

ARTICLE 839. If the collision should take place between Philippine vessels in foreign
waters, or if having taken place in the open seas, and the vessels should make a
foreign port, the Consul of the Republic of the Philippines in said port shall hold a
summary investigation of the accident, forwarding the proceedings to the Secretary
of the Department of Foreign Affairs for continuation and conclusion.
19. MANDATORY REQUIREMENT FOR PROTEST ART 835 AND 836
ARTICLE 835. The action for the recovery of losses and damages arising from collisions
cannot be admitted if a protest or declaration is not presented within twenty-four
hours before the competent authority of the point where the collision took place, or that
of the first port of arrival of the vessel, if in Philippine territory, and to the consul
of the Republic of the Philippines if it occurred in a foreign country.

29
20. MARITIME PROTEST
01. Condition precedent or prerequisite to recovery of damages arising from
collisions and other maritime accidents.

02. 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.

03. Excuses for not filing protest:

where the interested person is not on board the vessel; and
On collision time, need not be protested. (Art. 836)

04. Cases applicable:

Collision (Art. 835);
Arrival under stress (Art. 612(8));
Shipwrecks (Arts. 612(15), 843);
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)

21. LIMITED LIABILITY RULE ART. 837

01. ARTICLE 837. The civil liability incurred by the ship-owners in the case prescribed
in this section, shall be understood as limited to the value of the vessel with all
its appurtenances and freightage earned during the voyage.

02. In case of illegal or tortious acts of the captain the liability of the ship owner and
agent is subsidiary. In such instance the ship owner or agent may avail of the
provisions of Article 837 of the Code by abandoning the vessel. However, if
the injury or damage is caused by the ship owners fault as where he engages
the services of an inexperienced and unlicensed captain or engineer, he cannot
avail of the provisions of Article 837 of the Code by abandoning the vessel. He is
personally liable for the damages arising thereby. (Luzon Stevedoring v. CA)

03. in case of collision there should be such abandonment to enjoy such limited
liability, said article on collision of vessels is a mere amplification of the provisions

30
 of Articles 587 and 590 of same code where abandonment of the vessel is a pre-
condition.

04. ARTICLE 838. When the value of the vessel and her appurtenances should not be
sufficient to cover all the liabilities, the indemnity due by reason of the death or
injury of persons shall have preference.

05. Rule of limited liability in case of collisions, the liability of the vessel owner is
limited to the value of the vessel and the freightage earned during the voyage;
consequently, his property, other than such vessel and freightage earned during the
voyage cannot be made to answer for his liability arising from collision with other
vessels.

22. COLLISION SHOULD TAKE PLACE BETWEEN PHILIPPINE VESSELS IN

FOREIGN WATERS
ARTICLE 839. If the collision should take place between Philippine vessels in foreign
waters, or if having taken place in the open seas, and the vessels should make a foreign
port, the Consul of the Republic of the Philippines in said port shall hold a summary
investigation of the accident, forwarding the proceedings to the Secretary of the
Department of Foreign Affairs for continuation and conclusion.

31
 CHAPTER 18 ARRIVAL UNDER STRESS AND SHIPWRECKS

RICHARD E. ILAGAN

1. ARRIVAL UNDER STRESS

Under Article 819 of the Code of Commerce, arrival under stress is the arrival of a vessel
at the nearest and most convenient port which was decided upon after determining that
there is well-founded fear of seizure, privateers, or pirates or by any reason of any accident
by sea disabling it to navigate.

01. Determination of Propriety of Arrival under Stress

a. Captain should determine during the voyage if there is well founded fear of
seizure, privateers and other valid grounds;
b.Captain shall assemble the officers and summon the persons interested in
the cargo who may attend the meeting but without a right to vote;
c. The officers shall determine and agree if there is well-founded reason after
examining the circumstances. The captain shall have the deciding vote;
d.The agreement shall be drafted and the proper minutes shall be signed and
entered in the log book,
e. Objections and protests shall likewise be entered in the minutes.

02. When Arrival under Stress is Improper

a. Lack of provisions due to negligence to carry necessary provisions
according to usage and customs, or provisions should have been rendered
useless or lost through bad stowage or negligence in their care;
b.Risk of enemies, privateers, or pirates should not have been well known,
manifest and based on positive and probable facts;
c. Defect of the vessel due to improper repair, rigging, equipping preparation
in the manner suitable for the voyage; or due to erroneous order of the
captain; and,
d.Damage due to acts with malice, negligence, lack of foresight or skill of
captain. (Art. 820, Code of Commerce).

2. LIABILITIES
01. The lawfulness of the arrival under stress determines is damages if damages will be
shouldered by the ship owner and the ship agent. If the arrival under stress is proper,
the ship owner and the ship agent will only be liable for the expenses for the same
arrival. On the other hand, the ship owner and ship agent, will be liable for the same
expenses and in addition, they shall be solidarily liable with the captain for damages
caused to the cargoes by such arrival under stress. (Art. 821, Code of Commerce)

32
 02. When the voyage is diverted to another port not due to fortuitous event or disability
of the vessel but upon the management's instruction to the captain, both the ship
owner and the ship agent are liable for the damage caused.

03. It is the duty of the captain to continue the voyage without delay after the cause of
arrival under stress has ceased failing in such duty renders him liable. However, in
case the cause was risk of enemies, there must be an assembly before departure
(Art. 825, Code of Commerce).

3. SHIPWRECK
Shipwreck has been defined as the demolition or shattering of a vessel caused by her
driving ashore or on rocks and shoals in the midseas, or by the violence of winds and waves
in tempests. 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.

4. SHIPWRECK LIABILITIES
01. The losses and deteriorations suffered by a vessel and her cargo by reason of
shipwreck or stranding shall be individually for the account of the owners, the part
that which may be saved belonging to them in the same proportions (Article 840).

02. If the wreck or stranding should be caused by malice, negligence, or lack skill of
the captain, or because the vessel put to seas was insufficiently repaired and
equipped, the ship agent or the shippers may demand indemnity of the captain for
the damages caused to the vessel or to the cargo by accident (Article 841).

5. PROTEST
Maritime protest is a condition precedent or prerequisite to recovery of damages arising
from collisions and other maritime accidents. It is 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.

6. CHARTER PARTIES
01. Neither merchandise lost by reason of shipwreck or stranding nor those seized by
pirates or enemies, shall pay freightage.

02. If freightage should have been paid in advance, it shall be returned, unless there is
an agreement to the contrary (Article 661).

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7. LOAN
01. In case of shipwreck, the amount liable for the payment of the loan shall be reduced
to the proceeds of the goods saved, after deducing the costs of salvage.

02. If the loan should be on the vessel or any of its parts, the freightage earned during
the voyage for which said loan was contracted shall also be liable for its payment,
as far may reach (Article 734).

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 CHAPTER 19 SALVAGE

JENIFFER S. NAVARRO
1. GENERAL CONCEPTS
01. Salvage is a service which one person renders to the owner of the ship or goods, by
his own labor, preserving the goods or the ship which the owner or those entrusted
with care of them have either abandoned in distress at sea, or are unable to protect
and secure.

02. It is governed by the provisions of Act No. 2616 or the Salvage Law which was
enacted on February 4, 1916.

2. KINDS OF SALVAGE SERVICES

01. Voluntary
a. The compensation is dependent upon success of salving;
b.Rendered under a contract for a per diem or per horam wage, payable at all
events;
c. Under a contract for a compensation payable only in case of success of upto
50%.

3. CLAIM FOR VALID SALVAGE

01. Sec. 1
When in case of shipwreck, the vessel or its cargo shall be beyond the control of
the crew, or shall have been abandoned by them, and picked up and conveyed to a
safe place by other persons, the latter shall be entitled to a reward for the salvage.

Those who, not being included in the above paragraph, assist in saving a vessel or
its cargo from shipwreck, shall be entitled to a like reward.

02. Requisites for a valid salvage claim

a. There must be a marine peril;
b.The service is voluntarily rendered and is not required as an existing duty or
from a special contract;
c. There must be success in whole or in part or that the service rendered contributed
to such success;
d.The vessel is shipwrecked beyond the control of the crew or shall have been
abandoned. (present when the vessel is considered a derelict)

03. Derelict
A ship or cargo which is abandoned and deserted at sea by those who were in charge
of it, without any hope of recovering it, or without any intention of returning to it.

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 04. Persons not entitled to salvage compensation
a. The crew of the vessel shipwrecked or which was in danger of shipwrecked;
b.He who shall have commenced the salvage in spite of opposition of the captain
or of his representatives;
c. He who shall have failed to comply with the provisions of Sec. 3.

05. Other concepts

a. Jetsam are the goods that were thrown off a ship which was in danger.
b.Flotsam are the goods that have floated off the ship while the ship was in danger
or when it sank.
c. Ligan are goods left at sea on the wreck or tied to a buoy so that they can be
recovered later on.

4. BASIS OF SALVAGE FEE

01. The RTC shall fix the reward for salvage or assistance:
a. If an agreement was entered into during danger as regards the salvage fee and
the amount is excessive, the RTC may reduce the amount proportionate to the
circumstances.
b.The RTC shall also fix the salvage fee in the absence of an agreement on salvage
fee.

5. LIMIT OF SALVAGE FEE

01. The limit of the reward is 50% of the net amount of the proceeds of the sale of the
things saved.

02. In case there is a public auction, the net amount is determined by deducting from
the proceeds first the expenses of custody, conservation, advertisement, auction,
taxes and duties, and there shall be deduction of the expenses of salvage.

6. QUANTUM MERUIT
01. Determines the amount to be paid for services:
a. When no contract exists;
b.When there is doubt as to the amount due for the work performed but done
under such circumstance when payment could be expected

7. CIRCUMSTANCES TO CONSIDER IN THE SALVAGE COMPENSATION:

01. The labor expended by the salvors in rendering salvage service;

02. The promptitude, skill, and energy displayed in rendering the service and saving
the property;

03. The value of the property employed by the salvors in rendering the service and the
danger to which such property was exposed;

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 04. The risk incurred by the salvors in rescuing the property from the impending peril;

05. Value of the property saved; and

06. The degree of danger from which the property was rescued.

8. RIGHTS AND OBLIGATIONS OF SALVORS AND OWNERS

01. Salvor
a. He is entitled to compensation for services rendered.
b.He has a lien upon the property salvaged whereby he is not bound to part with
the possession of the vessel salvaged or of the cargo saved until he is paid his
due compensation
c. He has a right of possession of a derelict for purposes of salvage claim.
d.He is bound to accept additional assistance from other salvors who may offer
their services in cases where the salvor has inadequate means of salving
e. He is bound to preserve the property in good faith.
f. He is bound to bring the salvaged ship to a safe place.
g.He shall convey and deliver the vessel or merchandise ASAP to the collector of
customs (if the part has a collector) or to the provincial treasurer or municipal
mayer when he saves a vessel/merchandise at sea in the absence of the ship
captain, ship owner, or a representative of any of them.

02. Owner
a. There is no presumption of an intention to abandon such property right. What
he abandons is his right of possession.
b.He shall have the right to the delivery of the vessel or the things saved after the
salvage is accomplished, provided that he pays or gives a bond to secure the
expenses and the proper reward
c. The owner salving the vessel is also entitled to the salvage reward for the use
of his vessel in rendering salvage services.

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 CHAPTER 20 CARRIAGE OF GOODS BY SEA

MA. JENNELYN MILAGROS F. EBAJAN

1. HISTORY OF CARRIAGE OF GOODS BY SEA
01. Originally passed by the US Congress

02. US Congress gave the Philippine Commonwealth to decide whether or not to adopt
it

03. COGSA was later on adopted through Commonwealth Act No. 65

2. LAWS APPLICABLE TO INTERNATIONAL SHIPPING TO THE PHILIPPINES

01. August 30, 1950, the NEW CIVIL CODE took effect
a. Became the PRIMARY LAW on carriage of goods by sea
b.Among its provisions was the law of destination (Art.1753, New Civil
Code)

02. COGSA remains suppletory for international shipping

3. DEFINITION OF GOODS
Section 1(c), & 1(a) COGSA

4. PARTIES

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5. DUTIES OF THE CARRIER

01. COGSA SECTION 3

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to
a. Make the ship seaworthy;
b.Properly man, equip, and supply the ship;
c. Make the holds, refrigerating and cooling chambers, and all other parts of
the ship in which goods are carried, fit and safe for their reception, carriage,
and preservation.

(2) The carrier shall properly and carefully load, handle, stow, carry, keep, care
for, and discharge the goods carried.

(3) After receiving the goods into his carrier, or the master or agent of the carrier,
shall, on demand of the shipper, issue to the shipper a bill of lading showing among
other things
a. The loading marks necessary for identification of the goods as the same
are furnished in writing by the shipper before the loading of such goods
starts, provided such marks are stamped or otherwise shown clearly upon
the goods if uncovered, in such a manner as should ordinarily remain
legible until the end of the voyage.
b. Either the number of packages or pieces, or the quantity or weight, as the
case may be, as furnished in writing by the shipper.
c. The apparent order and conditions of the goods: Provided, that no carrier,
master, or agent of the carrier, shall be bound to state or show in the bill
of lading any marks, number, quantity, or weight which he has reasonable
ground for suspecting not accurately to represent the good actually
received or which he has had no reasonable means of checking.

(4) The shipper shall be deemed to have guaranteed to the carrier the accuracy at
the time of shipment of the marks, number, quantity, and weight, as furnished by
him; and the shipper shall indemnify the carrier against all loss, damages, and
expenses arising or resulting from inaccuracies in such particulars. The right of the
carrier to such indemnity shall in no way limit his responsibility and liability under
the contract of carriage to any person other than the shipper.

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 6. DOCUMENT OF TITLE REQUIRED
Contracts of goods covered by COGSA are evidenced by Bills of Lading

7. NOTICE OF CLAIM AND PRESCRIPTIVE PERIOD

1 year prescriptive period does not apply to cases of misdelivery or conversion

Basis: Definition of loss which contemplates non-delivery and not delivery to a wrong person, or
a misdelivery

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8. DEFENSES AND IMMUNITIES
01. Section 4 of COGSA provides the common carrier with defenses and immunities
02. NOTE: These defenses are subject to amendatory provisions of the NCC
03. COGSA Sec. 4.
(1) Neither the carrier nor the ship shall be liable for loss or damage arising
or resulting from unseaworthiness unless caused by want of due diligence
on the part of the carrier to make the ship seaworthy and to secure that the
ship is properly manned, equipped, and supplied, and to make the holds,
refrigerating and cooling chambers, and all other parts of the ship in which
goods are carried fit and safe for their reception, carriage, and preservation,
in accordance with the provisions of paragraph (1) of Section (3).
Whenever loss or damage has resulted from unseaworthiness, the burden of
proving the exercise of due diligence shall be on the carrier or other person
claiming exemption under this section.
(2) Neither the carrier nor the ship shall be responsible for loss or damage
arising or resulting from
(a) Act, neglect, or default of the master, mariner, pilot, or the servants of
the carrier in the navigation or in the management of the ship;
(b) Fire, unless caused by the actual fault or privity of the carrier;
(c) Perils, dangers, and accidents of the sea or other navigable water;
(d) Act of God;
(e) Act of war;
(f) Act of public enemies;
(g) Arrest or restraint of princes, rulers, or people, or seizure under legal
process;
(h) Quarantine restrictions;
(i) Act or omission of the shipper or owner of the goods, his agent or
representative;
(j) Strikes or lockouts or stoppage or restraint of labor from whatever cause,
whether partial or general: Provided, that nothing herein contained shall be
construed to relieve a carrier from responsibility for the carrier's own acts;
(k) Riots and civil commotions;
(l) Saving or attempting to save life or property at sea;
(m) Wastage in bulk or weight or any other loss or damage arising from
inherent defect, quality, or vice of the goods;
(n) Insufficiency or packing;
(o) Insufficiency or inadequacy of marks;
(p) Latent defects not discoverable by due diligence; and
(q) Any other cause arising without the actual fault and privity of the carrier
and without the fault or neglect of the agents or servants of the carrier, but
the burden of proof shall be on the person claiming the benefit of this
exception to show that neither the actual fault or privity of the carrier nor

41
 the fault or neglect of the agents or servants of the carrier contributed to the
loss or damage.
(3) The shipper shall not be responsible for loss or damage sustained by the
carrier or the ship arising or resulting from any cause without the act, or
neglect of the shipper, his agents, or his servants.
(4) Any deviation in saving or attempting to save life or property at sea, or
any reasonable deviation shall not be deemed to be an infringement or
breach or this Act or of the contract of carriage, and carrier shall not be
liable for any loss or damage resulting therefrom: Provided, however, that
if the deviation is for the purpose of loading or unloading cargo or
passengers it shall, prima facie, be regarded as unreasonable.

9. WAIVER
01. Shipowner and ship agent may waive the benefit of any of the defenses in its favor
provided not only in COGSA but also under other laws.

02. COGSA Section 5

Sec. 5. A carrier shall be at liberty to surrender in whole or in part all or
any of his rights and immunities or to increase any of his responsibilities
and liabilities under this Act, provided such surrender or increase shall be
embodied in the bill of lading issued to the shipper.

The provisions of this Act shall not be applicable to charter parties; but if
bills of lading are issued in the case of a ship under a charter party, they
shall comply with the terms of this Act. Nothing in this Act shall be held to
prevent the insertion in a bill of lading of any lawful provisions regarding
general average

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10. LIMITING PROVISIONS

11. RIGHT TO DISCHARGE DANGEROUS CARGO

01. Subject to the condition that carrier did not give consent to the carriage of cargoes
of such nature

02. COGSA Section 4(6)

Goods of an inflammable, explosive, or dangerous nature to the shipment whereof,
the carrier, master or agent of the carrier, has not consented with knowledge of their
nature and character, may at any time before discharge be landed at any place or
destroyed or rendered innocuous by the carrier without compensation, and the
shipper of such goods shall be liable for all damages and expenses directly or
indirectly arising out of or resulting from such shipment. If any such goods shipped
with such knowledge and consent shall become a danger to the ship or cargo, they
may in like manner be landed at any place, or destroyed or rendered innocuous by
the carrier without liability on the part of the carrier except to general average if
any.

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