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San Beda College of Law

54
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ CARRIAGE Steamship Agency, 23 SCRA 24)


 A contract whereby a person, natural or juridical,
obligates to transport persons, goods, or both, from  TESTS WHETHER CARRIER IS COMMON OR
one place to another, by land, air or water, for a PRIVATE:
price or compensation.  The SC in First Philippine Industrial Corporation
 Classifications: vs. CA (1995) reiterated the following tests:
1. Common or Private 1. It must be engaged in the business of
2. Goods or Passengers carrying goods for others as a public
3. For a fee (for hire) or Gratuitous employment and must hold itself out as
4. Land, Water/maritime, or Air ready to engage in the transportation of
5. Domestic/inter-island/coastwise or goods generally as a business and not as
International/foreign a casual occupation;
 It is a relationship which is imbued with the 2. It must undertake to carry goods of the
public interest. kind to which its business in confined;
3. It must undertake to carry by the method
COMMON CARRIER by which his business is conducted and
 Persons, corporations, firms or associations over its established roads; and
engaged in the business of carrying or transporting 4. The transportation must be for hire.
passengers or goods or both, by land, water, or air,  In National Steel Corp. vs. CA (1997) the SC held
for compensation, offering their services to the that the true test of a common carrier is the
public (Art. 1732, Civil Code). carriage of goods or passengers provided it has
 Art. 1732 of the New Civil Code avoids any space for all who opt to avail themselves of its
distinction between one whose principal business transportation for a fee.
activity is the carrying of persons or goods or both
and one who does such carrying only as an ancillary
activity (sideline). It also avoids a distinction COMMON CARRIER PRIVATE
between a person or enterprise offering CARRIER
transportation service on a regular or scheduled 1. As to availability
basis and one offering such service on an
Holds himself out for all Contracts with particular
occasional, episodic or unscheduled basis. people indiscriminately individuals or groups
Neither does the law distinguish between a
only
carrier offering its services to the general public that
2. As to required diligence
is the general community or population and one
Extraordinary diligence is Ordinary diligence is
who offers services or solicits business only from a
required required
narrow segment of the general population.
A person or entity is a common carrier even if 3. As to regulation
he did not secure a Certificate of Public Convenience Subject to State Not subject to State
(De Guzman vs. CA, 168 SCRA 612). regulation regulation
 It makes no distinction as to the means of 4. Stipulation limiting liability
transporting, as long as it is by land, water or air. It Parties may not agree on Parties may limit the
does not provide that the transportation should be limiting the carrier’s carrier’s liability,
by motor vehicle. (First Philippine Industrial liability except when provided it is not
Corporation vs. CA) provided by law contrary to law, morals
 One is a common carrier even if he has no fixed or good customs
and publicly known route, maintains no terminals, 5. Exempting circumstance
and issues no tickets (Asia Lighterage Shipping, Inc. Prove extraordinary caso fortuito, Art. 1174
vs. CA). diligence and Art. 1733, NCC
 Characteristics: NCC
1. Undertakes to carry for all people indifferently 6.Presumption of negligence
and thus is liable for refusal without
There is a presumption No presumption of fault
sufficient reason (Lastimoso vs. Doliente,
of fault or negligence or negligence
October 20, 1961);
2. Cannot lawfully decline to accept a particular 7.Governing law
class of goods for carriage to the prejudice Law on common carriers Law on obligations and
of the traffic in these goods; contracts
3. No monopoly is favored (Batangas Trans.
vs. Orlanes, 52 PHIL 455); GOVERNING LAWS
4. Provides public convenience. A. Domestic/inter-island/coastwise
 Applicable to Land, Water, and Air transportation
PRIVATE CARRIER 1. Civil Code - primary
 One which, without being engaged in the 2. Code of Commerce (Arts. 349, 379, 573-
business of carrying as a public employment, 734, 580, 806-845) - suppletory
undertakes to deliver goods or passengers for
compensation. (Home Insurance Co. vs. American B. International/foreign/overseas (Foreign

COMMERCIAL LAW COMMITTEE


 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT
HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
San Beda College of Law
55
MEMORY AID IN COMMERCIAL LAW

country to Philippines) 1. CASO FORTUITO/FORCE MAJEURE


 Applicable to Water/maritime and Air  Requisites:
transportation a. Must be the proximate and only cause of
 The law of the country of destination generally the loss
applies. b. Exercise of due diligence to prevent or
1. Civil Code - primary minimize the loss before, during or after the
2. Code of Commerce - suppletory occurrence of the disaster (Art. 1739)
3. Others - suppletory c. Carrier has not negligently incurred in
a. Water/maritime: Carriage of Goods by delay in transporting the goods (Art. 1740)
Sea Act (COGSA)  Fire is not considered a natural disaster or
b. Air: Warsaw Convention calamity as it arises almost invariably from some act
of man. (Eastern Shipping Lines Inc. vs. IAC)
I. NEW CIVIL CODE  Mechanical defects are not force majeure if the
(Arts. 1732-1766) same was discoverable by regular and adequate
inspections. (Notes and Cases on the Law on
REQUIREMENT OF EXTRAORDINARY Transportation and Public Utilities, Aquino, T. &
DILIGENCE Hernando, R.P. 2004 ed. p.120-122)
 Rendition of service with the greatest skill and
utmost foresight. (Davao Stevedore Co. v. 2. ACTS OF PUBLIC ENEMY
Fernandez)  Requisites:
 Rationale: a. Must be the proximate and only cause of
1. From the nature of the business and for the loss
reasons of public policy (Art. 1733) b. Exercise of due diligence to prevent or
2. Relationship of trust minimize the loss before, during or after the
3. Business is impressed with a special act causing the loss, deterioration or
public duty destruction of the goods (Art. 1739)
4. Possession of the goods
5. Preciousness of human life 3. NEGLIGENCE OF THE SHIPPER OR OWNER
 A common carrier is not an absolute insurer of all a. Sole and proximate cause: absolute defense
risks of travel. b. Contributory: partial defense. (Art. 1741)

COVERAGE 4. CHARACTER OF THE GOODS OR DEFECTS IN


1. Vigilance over goods (Arts. 1734-1754); and THE PACKING OR IN THE CONTAINER
2. Safety of passengers (Arts. 1755-1763).  Even if the damage should be caused by the
inherent defect/character of the goods, the common
PASSENGER carrier must exercise due diligence to forestall or
 A person who has entered into a contract of lessen the loss. (Art. 1742)
carriage, express or implied, with the carrier. They  The carrier which, knowing the fact of improper
are entitled to extraordinary diligence from the packing of the goods upon ordinary observation, still
common carrier. accepts the goods notwithstanding such condition,
 The following are not considered passengers, and is not relieved of liability or loss or injury resulting
are entitled to ordinary diligence only: therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)
a. One who has not yet boarded any part of
a vehicle regardless of whether or not he 5. ORDER OR ACT OF PUBLIC AUTHORITY
has purchased a ticket;  Said public authority must have the power to
b. One who remains on a carrier for an issue the order (Art. 1743). Consequently, where
unreasonable length of time after he has the officer acts without legal process, the common
been afforded every safe opportunity to carrier will be held liable. (Ganzon v. CA 161 SCRA
alight; 646)
c. One who has boarded by fraud, stealth,  Diligence in the selection and supervision of
or deceit; employees under Article 2180 of the Civil Code
d. One who attempts to board a moving cannot be interposed as a defense by the common
vehicle, although he has a ticket, unless carrier because the liability of the carriers arises
the attempt be with the knowledge and from the breach of the contract of carriage. The
consent of the carrier; defense under said articles is applicable to
e. One who has boarded a wrong vehicle, negligence in quasi-delicts under Art. 2176. (Del
has been properly informed of such fact, Prado v. Manila Electric Co., 52 Phil 900)
and on alighting, is injured by the carrier;
f. Invited guests and accommodation LIABILITY OF A COMMON CARRIER FOR
passengers. (Lara vs. Valencia) DEATH OR INJURIES TO PASSENGERS DUE TO
g. One who rides any part of the vehicle ACTS OF ITS EMPLOYEES AND OTHER
which is unsuitable or dangerous or which PASSENGERS OR STRANGERS
he knows is not designed or intended for
passengers. FOR ACTS OF OTHER
FOR ACTS OF ITS PASSENGERS OR
DEFENSES OF A COMMON CARRIER IN THE EMPLOYEES STRANGERS
CARRIAGE OF GOODS

COMMERCIAL LAW COMMITTEE


 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT
HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
San Beda College of Law
56
MEMORY AID IN COMMERCIAL LAW

Required diligence and defense Perez)


Extraordinary diligence Ordinary diligence
Nature of liability  The carrier is liable when its personnel
Tort; however, Not absolute; limited allowed a passenger to drive the vehicle
The employee must be by Art. 1763 causing it to collide with another vehicle
on duty at the time of resulting to the injuries suffered by the other
the act. (Maranan v. passengers. (MRR vs. Ballesteros, 16 SCRA
641)

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

Parties
1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or deterioration of Death or injury to the passengers
the goods
Duration of liability

From the time the goods are unconditionally placed in The duty of a common carrier to provide safety to its
the possession of, and received by the carrier for passengers so obligates it not only during the course
transportation until the same are delivered actually orof the trip, but for so long as the passengers are
constructively by the carrier to the consignee or to the
within its premises and where they ought to be in
person who has the right to receive them. (Art. 1736) pursuance to the contract of carriage. (LRTA v.
 It remains in full force and effect even when they Navidad, [2003])
 All persons who remain on the premises within a
are temporarily unloaded or stored in transit unless the
shipper or owner has made use of the right of reasonable time after leaving the conveyance are to
stoppage in transitu. (Art. 1737) be deemed passengers, and what is a reasonable time
 It continues to be operative even during the time or a reasonable delay within this rule is to be
the goods are stored in a warehouse of the carrier at determined from all the circumstances, and includes a
the place of destination until the consignee has bee reasonable time to see after his baggage and prepare
advised of the arrival of the goods and has had for his departure. (La Mallorca v. CA, 17 SCRA 739 ;
reasonable opportunity thereafter to remove them or Abiotiz Shipping Corporation v. CA, 179 SCRA 95)
otherwise dispose of them. (Art. 1738)  It is the duty of common carriers of passengers to
 Delivery of goods to the custom authorities is not stop their conveyances a reasonable length of time in
delivery to the consignee. (Lu Do v. Binamira, 101 Philorder to afford passengers an opportunity to enter,
120) and they are liable for injuries suffered from the
sudden starting up or jerking of their conveyances
while doing so. The duty which the carrier of
passengers owes to its patrons extends to persons
boarding the cars as well as to those alighting
therefrom (Dangwa Trans Co., Inc. vs. CA 202 SCRA
574).
Presumption of negligence

Art.1735 Civil Code 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)

COMMERCIAL LAW COMMITTEE


 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT
HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
San Beda College of Law
57
MEMORY AID IN COMMERCIAL LAW

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 carrier’s 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)

Void stipulations
1. That the goods are transported at the risk of the
owner or shipper; Dispensing with or lessening the extraordinary
2. That carrier will not be liable for any loss, responsibility of a common carrier for the safety of
destruction or deterioration of the goods; passengers imposed by law by stipulation, by posting
3. That the carrier need not observe any diligence of notices, by statements on tickets or otherwise. (Art.
in the custody of the goods; 1757)
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 carrier’s 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

COMMERCIAL LAW COMMITTEE


 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT
HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
San Beda College of Law
58
MEMORY AID IN COMMERCIAL LAW

other equipment used in the contract of carriage.


(Art. 1745)

COMMERCIAL LAW COMMITTEE


 CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos  EDP: Beatrix I. Ramos  SUBJECT
HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
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 pilot’s 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 carrier’s 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 passenger’s 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 CARRIER’S 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 7. Spent – One which covers goods that already
5. Combined carrier agreement have been delivered by the carrier without a
surrender of a signed copy of the bill.
BILL OF LADING 8. Through – One issued by the carrier who is
 The written acknowledgment of receipt of goods obliged to use the facilities of other carriers as
and agreement to transport them to a specific place to well as his own facilities for the purpose of
a person named or to his order. transporting the goods from the city of the
 Rules: seller to the city of the buyer, which bill of
1. It is not indispensable for the creation of a contract lading is honored by the second and other
of carriage. (Compania Maritima vs. Insurance interested carriers who do not issue their own
Company of North America, 12 SCRA 213) bills.
9. Custody – One wherein the goods are already
2. Ambiguity is construed against the carrier, the received by the carrier but the vessel indicated
contract being one of adhesion. therein has not yet arrived in the port.
10. Port – One which is issued by the carrier to
3. The consignee, although the instrument is whom the goods have been delivered, and the
oftentimes drawn up only by the consignor and vessel indicated in the bill of lading by which
carrier, becomes bound by all the stipulations the goods are to be shipped is already in the
contained therein by making a claim for loss on the port where the goods are held for shipment.
basis of said bill of lading. (Sea-Land Services Inc. vs.  Functions:
IAC) 1. Best evidence of the existence of the contract
of carriage of cargo (Art. 353)
4. The right of a party to recover for loss of shipment 2. Document of title
consigned to him under a bill of lading drawn up only 3. Receipt of cargo
by and between the shipper and the carrier, springs 4. Contract to transport and deliver goods as
from either a relation of agency between him and the stipulated
shipper, or his status as stranger in whose favor some 5. Symbol of the goods
stipulation is made in said contract, and who becomes
a party thereto when he demands fulfillment of that OBLIGATIONS OF THE CARRIER
stipulation. (Art. 1311 (2), (Mendoza vs. PAL Inc.) A. Duty to accept the goods
GENERAL RULE: A common carrier cannot ordinarily
5. Acceptance of the bill of lading without dissent refuse to carry a particular class of goods.
raises the presumption that all the terms therein EXCEPTION: For some sufficient reason the
where brought to the knowledge of the shipper and discrimination against the traffic in such goods is
agreed to by him and, in the absence of fraud or reasonable and necessary. (Fisher vs. Yangco
mistake; he is estopped from thereafter denying that Steamship Co. 31 Phil 1).
he assented to such terms. (Notes and Cases on the  Instances when the carrier may validly refuse to
Law on Transportation and Public Utilities, Aquino, T. accept the goods include the ff:
& Hernando, R.P. 2004 ed. p.261) 1.) Goods sought to be transported are dangerous
objects, or substances including dynamite and other
 Kinds: explosives
1. On board - issued when the goods have been 2.) Goods are unfit for transportation
actually placed aboard the ship with very 3.) Acceptance would result in overloading
reasonable expectation that the shipment is as 4.) Contrabands or illegal goods
good as on its way. 5.) Goods are injurious to health
2. Received - one in which it is stated that the 6.) Goods will be exposed to untoward danger like
goods have been received for shipment with or flood, capture by enemies and the like
without specifying the vessel by which the 7.) Goods like livestock will be exposed to disease
goods are to be shipped. 8.) Strike
3. Negotiable - one in which it is stated that the 9.) Failure to tender goods on time. (Notes and Cases
goods referred to therein will be delivered to on the Law on Transportation and Public Utilities,
the bearer or to the order of any person Aquino, T. & Hernando, R.P. 2004 ed. p.68)
named therein.  In case of carriage by railway, the carrier is
4. Non-negotiable - One in which it is stated that exempted from liability if carriage is insisted upon by
the goods referred to therein will be delivered the shipper, provided its objections are stated in the
to a specified person. bill of lading.
5. Clean – One which does not indicate any  However, when a common carrier accepts cargo for
defect in the goods. shipment for valuable consideration, it takes the risk of
6. Foul – One which contains a notation thereon delivering it in good condition as when it was loaded.
indicating that the goods covered by it are in (PAL vs. CA)
bad condition.
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 shipper’s 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 carrier’s 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
the affairs and business of the sea, to ships, their ORDER OF PREFERENCE IN CASE OF
crews and navigation, and to maritime conveyance of SALE OF VESSEL
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. Crew’s 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
the preparation of a voyage, as well as mortgage proceeds of the sale subject to the order of
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
a jus in re, to be afterward enforced in admiralty by third persons
2. Art. 590 – indemnities from negligent acts of 687) (Art. 365); and
the captain (not the shipowner or ship 3. In case of delay
agent) through the fault of the
3. Art. 837 – collision carrier (Art. 371).
4. Art. 643 – liability for wages of the captain Effects
and the crew and for advances made by the 1. Transfer of ownership 1. Transfer of
ship agent if the vessel is lost by shipwreck of the vessel from the ownership on the goods
or capture shipowner to the from the shipper to the
shippers or insurer. carrier.
GENERAL RULE: The liability of shipowner and ship 2. In case of (2), the 2. Carrier should pay
agent is limited to the amount of interest in said vessel insurer must pay the the shipper the market
such that where vessel is entirely lost, the obligation is insured as if there was value of the goods at
extinguished. (Luzon Stevedoring v. Escano, 156 SCRA actual total loss of the the point of destination.
169) The interest extends to: 1) the vessel itself; 2) vessel.
equipments; 3) freightage; and 4) insurance proceeds.
(Chua v. IAC, 166 SCRA 183) CAUSES OF REVOCATION OF VOYAGE
EXCEPTIONS: 1. War or interdiction of commerce;
1. Claims under Workmen’s Compensation (Abueg 2. Blockade;
vs. San Diego 77 Phil 730); 3. Prohibition to receive cargo at destination;
2. Injury or damage due to shipowner or to the 4. Embargo;
concurring negligence of the shipowner and the 5. Inability of the vessel to navigate. (Art. 640)
captain;
3. The vessel is insured (Vasquez vs. CA 138 SCRA Terms:
553). 1. Interdiction of commerce – A governmental
4. Expenses for repair on vessel completed before prohibition of commercial intercourse intended to
loss; bring about an entire cessation for the time being
5. In case there is no total loss and the vessel is not of all trade whatever.
abandoned; 2. Blockade – A sort of circumvallation of a place by
6. Collision between two negligent vessels; which all foreign connection and correspondence
is, as far as human power can effect it, to be cut
 Abandonment of the vessel is necessary to limit the off.
liability of the shipowner. The only instance were 3. Embargo – A proclamation or order of a state,
abandonment is dispensed with is when the vessel is usually issued in time of war or threatened
entirely lost (Luzon Stevedoring vs. CA 156 SCRA hostilities, prohibiting the departure of ships or
169). goods from some or all the ports of such state
until further order.
RIGHT OF SHIPOWNER OR SHIP AGENT TO
ABANDON VESSEL PARTICIPANTS IN MARITIME COMMERCE
 Instances: A. Shipowners and ship agents
1. In case of civil liability from indemnities to third B. Captains and masters of the vessel
persons (Art. 587); C. Officers and crew of the vessel
2. In case of leakage of at least ¾ of the contents of D. Supercargoes
a cargo containing liquids (Art. 687); and E. Pilot
3. In case of constructive loss of the vessel (Sec. 138,
Insurance Code). A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
RIGHT OF ABANDONMENT  Person who has possession, control and
management of the vessel and the consequent right to
SHIPOWNER OR SHIP CONSIGNEE direct her navigation and receive freight earned and
AGENT paid, while his possession continues.
What may be abandoned
Vessel Goods shipped Ship agent (naviero)
Instances  Person entrusted with provisioning and
1. In case of civil liability 1. Partial non-delivery, representing the vessel in the port in which it may be
from indemnities to third where the goods are found; also includes the shipowner.
persons (Art. 587); useless without the  Not a mere agent under civil law; he is solidarily
2. Sec. 138, Insurance others (Art. 363); liable with the ship owner.
Code; 2. Goods are rendered  Powers and functions:
3. In case of leakage of useless for sale or 1. Capacity to trade;
at least ¾ of the consumption for the 2. Discharge duties of the captain, subject to
contents of a cargo purposes for which they Art.609;
containing liquids (Art. are properly destined
3. Contract in the name of the owners with respect 5. Supply, equip, and provision the vessel; and
to repairs, details of equipment, armament, 6. Order repair of vessel to enable it to
provisions of food and fuel, and freight of the continue its voyage. (Art. 610)
vessel, and all that relate to the requirements of  Sources of funds to comply with the inherent
navigation; powers of the captain (in successive order):
4. Order a new voyage, make a new charter or 1. From the consignee of the vessel;
insure the vessel after obtaining authorization 2. From the consignee of the cargo;
from the shipowner or if granted in certificate of 3. By drawing on the ship agent;
appointment. 4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
Civil Liabilities of the Shipowner And Ship Agent  Duties:
1. All contracts of the captain, whether authorized 1. Bring on board the proper certificate and
or not, to repair, equip and provision the vessel; documents and a copy of the Code of
(Art. 586) Commerce;
2. Loss and damage to the goods loaded on the 2. Keep a Log Book, Accounting Book and
vessel without prejudice to their right to free Freight Book;
themselves from liability by abandoning the 3. Examine the ship before the voyage;
vessel to the creditors. (Art. 587) 4. Stay on board during the loading and
unloading of the cargo;
Duty of Ship Agent to Discharge the Captain 5. Be on deck while leaving or entering the
and Members of the Crew port;
 If the seamen contract is not for a definite period or 6. Protest arrivals under stress and in case of
voyage, he may discharge them at his discretion. (Art. shipwreck;
603) 7. Follow instructions of and render an
 If for a definite period, he may not discharge them accounting to the ship agent;
until after the fulfillment of their contracts, except on 8. Leave the vessel last in case of wreck;
the following grounds: 9. Hold in custody properties left by deceased
a. Insubordination in serious matters; passengers and crew members;
b. Robbery; 10. Comply with the requirements of customs,
c. Theft; health, etc. at the port of arrival;
d. Habitual drunkenness; 11. Observe rules to avoid collision;
e. Damage caused to the vessel or to its cargo 12. Demand a pilot while entering or leaving a
through malice or manifest or proven negligence. port. (Art. 612)
(Art. 605)
 A ship’s captain must be accorded a reasonable
B. CAPTAINS AND MASTERS measure of discretionary authority to decide what the
 They are the chiefs or commanders of ships. safety of the ship and of its crew and cargo specifically
 The terms have the same meaning, but are requires on a stipulated ocean voyage (Inter-Orient
particularly used in accordance with the size of the Maritime Enterprises Inc. vs. CA).
vessel governed and the scope of transportation, i.e.,
large and overseas, and small and coastwise,  No liability for the following:
respectively. 1. Damages caused to the vessel or to the
 Nature of position (3-fold character): cargo by force majeure;
1. General agent of the shipowner; 2. Obligations contracted for the repair,
2. Technical director of the vessel; equipment, and provisioning of the vessel
3. Representative of the government of the unless he has expressly bound himself
country under whose flag he navigates. personally or has signed a bill of exchange
 Qualifications: or promissory note in his name. (Art. 620)
1. Filipino citizen;
2. Legal capacity to contract; Solidary Liabilities of the Ship Agent/Shipowner
3. Must have passed the required physical and for Acts Done by the Captain towards
mental examinations required for licensing Passengers and Cargoes
him as such. (Art. 609) 1. Damages to vessel and to cargo due to lack
 Inherent powers: of skill and negligence;
1. Appoint crew in the absence of ship agent; 2. Thefts and robberies of the crew;
2. Command the crew and direct the vessel to 3. Losses and fines for violation of laws;
its port of destination; 4. Damages due to mutinies;
3. Impose correctional punishment on those 5. Damages due to misuse of power;
who, while on board vessel, fail to comply 6. For deviations;
with his orders or are wanting in discipline; 7. For arrivals under stress;
4. Make contracts for the charter of vessel in 8. Damages due to non-observance of marine
the absence of ship agent. regulations. (Art. 618)
5. Keep an Engine Book;
C. OFFICERS AND CREW 6. Supervise all personnel maintaining the
1. Sailing Mate/First Mate engine. (Art. 632)
2. Second Mate
3. Engineers Crew
4. Crew  The aggregate of seamen who man a ship, or the
 No liability under the following circumstances: ship’s company.
1. If, before beginning voyage, captain attempts to  Hired by the ship agent, where he is present and in
change it, or a naval war with the power to which his absence, the captain hires them, preferring
the vessel was destined occurs; Filipinos, and in their absence, he may take in
2. If a disease breaks out and be officially declared foreigners, but not exceeding 1/5 of the crew. (Art.
an epidemic in the port of destination; 634)
3. If the vessel should change owner or captain.
(Art. 647) Classes of Seaman’s Contracts
1. By the voyage;
Sailing Mate/First Mate 2. By the month; and
 Second chief of the vessel who takes the place of 3. By share of profits or freightage.
the captain in case of absence, sickness, or death and
shall assume all of his duties, powers and Just Causes for the Discharge of Seaman While
responsibilities. (Art. 627) Contract Subsists
 Duties: 1. Perpetration of a crime;
1. Provide himself with maps and charts with 2. Repeated insubordination, want of discipline;
astronomical tables necessary for the 3. Repeated incapacity and negligence;
discharge of his duties; 4. Habitual drunkenness;
2. Keep the Binnacle Book; 5. Physical incapacity;
3. Change the course of the voyage on 6. Desertion. (Art. 637)
consultation with the captain and the
officers of the boat, following the decision of Rules in case of Death of a Seaman
the captain in case of disagreement;  The seaman’s heirs are entitled to payment as
4. Responsible for all the damages caused to follows:
the vessel and the cargo by reason of his 1. If death is natural:
negligence. (Arts. 628 - 631) a. compensation up to time of death if
engaged on wage
Second Mate b. if by voyage - half of amount if death occurs
 Takes command of the vessel in case of the on voyage out; and full, if on voyage in
inability or disqualification of the captain and the c. if by shares - none, if before departure; full,
sailing mate, assuming in such case their powers and if after departure
responsibilities. 2. if death is due to defense of vessel - full
 Third in command payment;
 Duties: 3. if captured in defense of vessel - full payment;
1. Preserve the hull and rigging of the vessel; 4. if captured due to carelessness - wages up to the
2. Arrange well the cargo; date of the capture. (Art. 645)
3. Discipline the crew;
4. Assign work to crew members; Complement of the Vessel
5. Inventory the rigging and equipment of the  All persons on board, from the captain to the cabin
vessel, if laid up. (Art. 632) boy, necessary for the management, maneuvers, and
service, thus including the crew, the sailing mates,
Engineers engineers, stokers and other employees on board not
 Officers of the vessel but have no authority except having specific designations.
in matters referring to the motor apparatus. When two  Does not include the passengers or the persons
or more are hired, one of them shall be the chief whom the vessel is transporting.
engineer.
 Duties: D. SUPERCARGOES
1. In charge of the motor apparatus, spare  Persons who discharges administrative duties
parts, and other instruments pertaining to assigned to him by ship agent or shippers, keeping an
the engines; account and record of transaction as required in the
2. Keep the engines and boilers in good accounting book of the captain. (Art. 649)
condition;
3. Not to change or repair the engine without E. PILOT
authority of the captain;  A person duly qualified, and licensed, to conduct a
4. Inform the captain of any damage to the vessel into or out of ports, or in certain waters.
motor apparatus;  The term generally connotes a person taken on
board at a particular place for the purpose of charter’s 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 vessel’s navigation, including the
master and the crew, who thereby become the
Owner of vessel The vessel owner retains A stipulation in a charter A clause in a charter
relinquishes possession, possession, command party that in case of a party providing that the
command and and navigation of the maritime accident for COGSA shall apply, even
navigation to charterer ship which the shipowner is though the
not responsible by law, transportation is
contract or otherwise, domestic, subject to the
Common carrier is Common carrier is not the cargo shippers, extent that any term of
converted to private converted to a private consignees or owners the bill of lading is
carrier. carrier. shall contribute with the repugnant to the COGSA
shipowner in general or applicable law, then
average. (Pandect of to the extent thereof the
Commercial Law and provision of the bill of
PERSONS WHO MAY MAKE A CHARTER Jurisprudence, Justice lading is void. (Pandect
1. Owner or owners of the vessel, either in Jose Vitug, 1997 ed.) of Commercial Law and
whole or in majority part, who have legal Jurisprudence, Justice
control and possession of the vessel Jose Vitug, 1997 ed.)
2. Charterer may subcharter entire vessel to 3rd
person only if not prohibited in original
charter. (Art.679)
3. Ship agent if authorized by the owner/s or
given such power in the certificate of
appointment. (Art.598)
4. Captain in the absence of the ship agent or
Rights and Obligations of Parties
consignee and only if he acts in accordance
with the instructions of the agent or owner
SHIPOWNER OR CHARTERER
and protects the latter’s interests. (Art.609)
SHIP AGENT
REQUISITES OF A VALID CHARTER PARTY 1. If the vessel is 1. To pay the agreed
1. Consent of the contracting parties chartered wholly, not to charter price;
2. Existing vessel which should be placed at accept cargo from 2. To pay freightage
the disposition of the shipper others; on unboarded cargo;
3. Freight 2. To observe 3. To pay losses to
4. Compliance with Art. 652 of the Code of represented capacity; others for loading
Commerce 3. To unload cargo uncontracted cargo and
clandestinely placed illicit cargo;
4. To substitute 4. To wait if the
another vessel if load is vessel needs repair;
less than 3/5 of 5. To pay expenses
Clauses Which May Be Included In a Charter capacity; for deviation. (Arts.
Party 5. To leave the port if 679-687)
the charterer does not
bring the cargo within
Jason clause Clause paramount or
the lay days and extra
paramount clause
lay days allowed;
6. To place in a vessel
in a condition to
navigate;
7. to bring cargo to
nearest neutral port in
case of war or blockade.
(Arts. 669-678)

Rescission of a Charter Party


At charterer’s At Fortuitous
request shipowner’s causes
(Art 688) request (Art. 690)
(Art. 689)
1. By 1. If the extra 1. War or
abandoning lay days interdiction of
the charter and terminate commerce;
paying half of without the 2. Blockade;
the freightage; cargo being 3. Prohibition  A real, unilateral, aleatory contract, by virtue of
2. Error in placed to receive which one person lends to another a certain amount of
tonnage or alongside the cargo; money or goods on things exposed to maritime risks,
flag; vessel; 4. Embargo; which amount, with its earnings, is to be returned if
3. Failure to 2. Sale by the and the things are safely transported, and which is lost if
place the owner of the 5. Inability of the latter are lost.
vessel at the vessel before the vessel to
charterer’s loading by the navigate.
disposal; charterer; LOAN ON LOAN ON
4. Return of BOTTOMRY RESPONDENTIA
the vessel due Definition
to pirates, Loan made by Loan taken on security
enemies or bad shipowner or ship of the cargo laden on a
weather; agent guaranteed by vessel, and repayable
5. Arrival at a vessel itself and upon safe arrival of
port for repayable upon arrival cargo at destination.
repairs. of vessel at (Art. 719)
destination. (Art. 719)
Terms:
1. Primage - bonus to be paid to the captain after
Who may contract
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
ship’s 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 Not subject to Usury Subject to Usury Law
rather on the fact of actual physical transfer of cargo Law
from one vessel to another.
 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)
The last lender is a The first lender is a
LOAN ON BOTTOMRY AND RESPONDENTIA preferred creditor preferred creditor
would apply to the hypothecation of the cargo by
WHEN LOAN ON BOTTOMRY OR respondentia. (Pandect of Commercial Law and
RESPONDENTIA REGARDED AS SIMPLE LOAN Jurisprudence, Justice Jose Vitug, 1997 ed.)
1. Lender loaned an amount larger than the
value of the object due to fraudulent means ACCIDENTS IN MARITIME COMMERCE
employed by the borrower. (ART.726) 1. Averages
2. Full amount of the loan is not used for the 2. Arrival Under Stress
cargo or given on the goods if all of them 3. Collision
could not have been loaded, the balance will 4. Shipwreck
be considered a simple loan. (ART.727)
3. If the effects on which the money is taken is AVERAGE
not subjected to any risk. (ART.729)  An extraordinary or accidental expense incurred
during the voyage in order to preserve the cargo,
Note: Under existing laws, the parties to a loan, vessel or both, and all damages or deterioration
whether ordinary or maritime, may agree on any rate suffered by the vessel from departure to the port of
of interest. (CB Circular 905) destination, and to the cargo from the port of loading
to the port of consignment. (Art. 806)
 The person whose property has been saved must
MARINE INSURANCE LOAN ON contribute to reimburse the damage caused or
BOTTOMRY OR expense incurred if the situation constitutes general
RESPONDENTIA average.
Indemnity is paid after the Indemnity is paid in  Classes:
loss has occurred advance by way of 1. Particular or Simple Average
a loan 2. Gross or General Average
In case of loss of the vessel In case of loss of  Where both vessel and cargo are saved, it is
due to a risk insured the vessel due to a general average; where only the vessel or only the
against, the obligation of marine peril, the cargo is saved, it is particular average.
the insurer becomes obligation of the  Expenses incurred to refloat a vessel, which
absolute borrower to pay is accidentally ran aground, in order to continue its
extinguished voyage, do not constitute general average. Not only is
Consensual contract Real contract there absence of a marine peril, common safety factor,
and deliberateness. It is the safety of the property,
Hypothecary Nature of Bottomry/ Respondentia and not the voyage, which constitutes the true
GENERAL RULE: The obligation of the borrower to foundation of general average. (A. Magsaysay, Inc. vs.
pay the loan is extinguished if the goods given as Agan, G.R.No. L-6393, Jan. 31, 1955)
security are absolutely lost by reason of an accident of
the sea, during the voyage designated, and if it is
proven that the goods were on board. PARTICULAR OR GROSS OR GENERAL
EXCEPTIONS: SIMPLE
1. Loss due to inherent defect; Definition
2. Loss due to the barratry on the part of the Damages or expenses Damages or expenses
captain; caused to the vessel or deliberately caused in
3. Loss due to the fault or malice of the borrower; cargo that did not inure order to save the
4. The vessel was engaged in contraband; and to the common benefit, vessel, its cargo or both
5. The cargo loaded on the vessel be different in and borne by respective from real and known
from that agreed upon. owners. (Art. 809) risk. (Art. 811)
Requisites
Concurrence of Marine Insurance and Loan on 1. common danger;
Bottomry/Respondentia 2. deliberate
1. The insurable interest of the owner of a ship sacrifice;
hypothecated by bottomry is only the excess 3. success;
of the value over the amount secured by 4. proper formalities
bottomry. (Sec. 101, Insurance Code) and legal steps.
2. The value of what may be saved in case of Liability
shipwreck shall be divided between the The owner of the goods All the persons having
lender and the insurer in proportion to the which gave rise to the an interest in the vessel
interest of each one. (Art. 735) expense or suffered the and the cargo therein
damage shall bear this at the time of the
Note: If a vessel is hypothecated by bottomry only the average. (Art. 810) occurrence of the
excess is insurable, since a loan on bottomry partakes average shall contribute
of the nature likewise of an insurance coverage to the to satisfy this average.
extent of the loan accommodation. The same rule (Art. 812)
 The insurers in the gross or general average, the existence of the
(Art.859) and lenders cargo on board should be proven by means of the bill
on bottomry and of lading. (Art. 816)
respondentia shall
likewise contribute. York-Antwerp (Y-A) Rules on Determining
(Art.732). Liability for Averages With Regard To Deck
Number of interests involved Cargo
Only one interest Several interests 1. Deck cargo is allowed only in
involved involved domestic/coastwise/inter-island shipping, and is
Share in the damage or expense prohibited in international/overseas/foreign shipping.
100% share In proportion to the 2. If deck cargo is loaded with the consent of the
value of the owner’s shipper on overseas trade, it must always contribute
property saved to general average, but should the same be jettisoned,
Right to recover it would not be entitled to reimbursement because
No reimbursement There may be there is violation of the Y-A Rules.
reimbursement 3. If deck cargo is loaded with the consent of the
shipper on coastwise shipping, it must always
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
deliberation usually short and the seas are generally not
2. Resolution of the rough. In overseas shipping, the vessel is
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 shipper’s consent
minutes to the maritime
General average Particular average
judicial authority of the
Without shipper’s consent
first port, within 24
hours from arrival, Captain is liable Captain is liable
6. Ratification by
captain under oath. ARRIVAL UNDER STRESS (ARRIBADA)
(Arts. 813-814)  The arrival of a vessel at the nearest and most
convenient port instead of the port of destination, if
GOODS NOT COVERED BY GENERAL AVERAGE during the voyage the vessel cannot continue the trip
EVEN IF SACRIFICED to the port of destination.
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or records When lawful When Who bears
of the vessel. (ART.855 (2)) unlawful expenses:
3. Fuel for the vessel if there is more than
sufficient fuel for the voyage. (Rule IX, The inability to 1. Lack of The shipowner
York-Antwerp Rule) continue provisions due or ship agent is
voyage is due to negligence to liable in case of
Jettison to lack of carry according unlawful arrival
 Act of throwing cargo overboard in order to lighten provisions, to usage and under stress.
the vessel. well-founded customs; But they shall
 Order of goods to be cast overboard: fear of seizure, 2. Risk of not be liable
1. Those which are on the deck, preferring the privateers, enemy not well for the
heaviest one with the least utility and value; pirates, or known or damages
2. Those which are below the upper deck, accidents of manifest caused by
beginning with the one with greatest weight the sea 3. Defect of reason of a
and smallest value. (Art. 815) disabling it to vessel due to lawful arrival.
navigate. (Art. improper (Art. 821)
 Jettisoned goods are not res nullius nor deemed 819) repair; and
“abandoned” within the meaning of civil law so as to 4. Malice,
be the object of occupation by salvage. (Pandect of negligence, lack
Commercial Law and Jurisprudence, Justice Jose of foresight or
Vitug, 1997 ed.) skill of captain.
 In order that the jettisoned goods may be included (Art. 820)
aside therefrom. (Smith Bell v. CA)
 It is the duty of the captain to continue the voyage
without delay after the cause of the arrival under Nautical Rules as to Sailing Vessel and
stress has ceased failing in such duty renders him Steamship
liable. However, in case the cause has been risk of 1. Where a steamship and a sailing vessel are
enemies, there must first be an assembly before approaching each other from opposite directions,
departure. (Art. 825) or on intersecting lines, the steamship from the
 Steps: moment the sailing vessel is seen, shall watch
1. Captain should determine during the voyage with the highest diligence her course and
if there is well founded fear of seizure, movements so as to be able to adopt such timely
privateers and other valid grounds; means of precaution as will necessarily prevent
2. Captain shall assemble the officers and the two boats from coming in contact.
summon the persons interested in the cargo 2. The sailing vessel is required to keep her course
who may attend the meeting but without a unless the circumstances require otherwise.
right to vote;
3. The officers shall determine and agree if Zones of Time in the Collision of Vessels
there is well-founded reason after examining 1. First zone – all time up to the moment when risk of
the circumstances. The captain shall have collision begins.
the deciding vote;  No rule is as yet applicable for none is necessary.
4. The agreement shall be drafted and the 2. Second zone – time between moment when risk of
proper minutes shall be signed and entered collision begins and moment it becomes a practical
in the log book; certainty.
5. Objections and protests shall likewise be  It is in this period where conduct of the vessels is
entered in the minutes. primordial. It is in this zone that vessels must strictly
observe nautical rules, unless a departure therefrom
COLLISION becomes necessary to avoid imminent danger.
 Impact of two vessels both of which are moving. 3. Third zone – time when collision is certain and time
of impact.
Allision  An error in this zone would no longer be legally
 Impact between a moving vessel and a stationary consequential.
one.  Error in Extremis - sudden movement made by a
faultless vessel during the third zone of collision with
Nautical Rules to Determine Negligence another vessel which is at fault during the 2nd zone.
1. When two vessels are about to enter a port, the Even if such sudden movement is wrong, no
farther one must allow the nearer to enter first; if responsibility will fall on said faultless vessel. (Urrutia
they collide, the fault is presumed to be and Co. v. Baco River Plantation Co., 26 PHIL 632)
imputable to the one who arrived later, unless it
can be proved that there was no fault on its part. Cases Covered By Collision and Allision
2. When two vessels meet, the smaller should give 1. One vessel at fault
the right of way to the larger one.  Vessel at fault is liable for damage caused to
3. A vessel leaving port should leave the way clear innocent vessel as well as damages suffered by the
for another which may be entering the same owners of cargo of both vessels. (Art. 826)
port. 2. Both vessels at fault
4. The vessel which leaves later is presumed to  Each vessel must bear its own loss, but the
have collided against one which has left earlier. shippers of both vessels may go against the
5. There is a presumption against the vessel which shipowners who will be solidarily liable. (Art. 827)
sets sail in the night. 3. Vessel at fault not known
6. There is a presumption against the vessel with  Each vessel must bear its own loss, but the
spread sails which collides with another which is shippers of both vessels may go against the
at anchor and cannot move, even when the crew shipowners who will be solidarily liable. (Art. 828)
of the latter has received word to lift anchor,  Doctrine of Inscrutable Fault – In case of
when there was not sufficient time to do so or collision where it cannot be determined which
there was fear of a greater damage or other between the two vessels was at fault, both
legitimate reason. vessels bear their respective damage, but both
7. There is a presumption against an improperly should be solidarily liable for damage to the
moored vessel. cargo of both vessels.
8. There is a presumption against a vessel which 4. Third vessel at fault
has no buoys to indicate the location of its  The third vessel will be liable for losses and
anchors to prevent damage to vessels which may damages. (Art. 831)
approach it. 5. Fortuitous event/force majeure
9. Vessels must have “proper look-outs” or persons  No liability. Each bears its own loss. (Art. 830)
trained as such and who have no other duty
 The doctrine of res ipsa loquitur applies in case a ARRASTRE SERVICE
moving vessel strikes a stationary object, such as a  A contract for the unloading of goods from a vessel.
bridge post, dock, or navigational aid. (Far Eastern  Applicability: Overseas trade only. (Commercial
Shipping v. CA, Luzon Stevedoring vs. CA) Law Review, C. Villanueva, 2004 ed.)
 Significance: When a person brings in cargo from
 Even if the cause of action against the common abroad, he cannot unload and deliver the cargo by
carrier is based on quasi-delict, the defense of due himself. The unloading must be done by the arrastre
diligence in the selection and supervision of employees operator, which will then deliver the cargo to the
is unavailing in case of a maritime tort resulting in importer. (Commercial Law Review, C. Villanueva,
collision. It is not a civil tort governed by the Civil 2004 ed.)
Code but a maritime one governed by Arts. 826-839 of  Nature of business: It is a public utility,
the Code of Commerce. (Manila Steamship vs. Insa discharging functions which are heavily invested with
Abdulhaman) public interest.
 Liability:
 Doctrine of Last Clear Chance and Rule on 1. Similar to a warehouseman (Lua Kian v. Manila
Contributory Negligence cannot be applied in collision Railroad)
cases because of Art.827 of the Code of Commerce. 2. Similar to a common carrier (Northern Motors v.
(Notes and Cases on the Law on Transportation and Prince Line)
Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed.) 3. Solidary liability with the common carrier

MARITIME PROTEST Note: In order that the arrastre operator may be held
 Condition precedent or prerequisite to recovery of liable, the consignee must prove that the damage was
damages arising from collisions and other maritime due to the negligence and while the goods are in the
accidents. custody of the arrastre operator. (Hartford Fire
 It is a written statement made under oath by the Insurance v. E. Razon, Inc.)
captain of a vessel after the occurrence of an accident
or disaster in which the vessel or cargo is lost or STEVEDORING SERVICE
damaged, with respect to the circumstances attending  The carriage of goods from the warehouse or pier
such occurrence, for the purpose of recovering losses to the holds of the vessel. (Chief of Staff vs. CIR)
and damages.  As understood in the port business, the term
 Excuses for not filing protest: 1) where the consists of the handling of cargo from the hold of the
interested person is not on board the vessel; and 2) ship to the dock, in case of pier-side unloading; or to a
on collision time, need not be protested. (Art. 836) barge, in case of unloading at sea. (Anglo-Fil Trading
 Cases applicable: Corp. vs. Lazaro)
1. Collision (Art. 835);  The loading on the ship of outgoing cargo is also
2. Arrival under stress (Art. 612(8)); part of stevedoring work. (Ibid.)
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a CONTAINERIZATION/ “SAID-TO-CONTAIN”/
hurricane or when the captain believes that “SHIPPER’S LOAD AND COUNT” SYSTEM
the cargo has suffered damages or averages  System whereby the shipper loads his cargoes in a
(Art. 624). specially designed container, seals the container and
 Who makes: Captain delivers it to the carrier for transportation. The carrier
 When made: within 24 hours from the time the does not participate in the counting of the
collision took place. merchandise for loading into the container, the actual
 Before whom made: competent authority at the loading, and the sealing of the container. (US Lines v.
point of collision or at the first port of arrival, if in the Comm. Of Customs, ICTSI v. Prudential Guarantee)
Philippines and to the Philippine consul, if the collision  The matter of quantity, description and conditions
took place abroad. (Art. 835) of the cargo inside the container is the sole
responsibility of the shipper, unless there is stipulation
SHIPWRECK to the contrary. (US Lines vs. Comm. Of Customs,
 It is the loss of the vessel at sea as a consequence Reyma Brokerage v. Phil. Home Assurance)
of its grounding, or running against an object in sea or
on the coast. It occurs when the vessel sustains Note: In order to attribute to the carrier any damage
injuries due to a marine peril rendering her incapable to the shipment that may be found, inspection of the
of navigation. goods should be done at pier-side. (Bankers vs. CA)
 If the wreck was due to malice, negligence or lack
of skill of the captain, the owner of the vessel may III. CARRIAGE OF GOODS BY SEA ACT/COGSA
demand indemnity from said captain. (Art. 841) (C.A. No. 65)
 The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks. APPLICABILITY
 The transportation must be:
SPECIAL CONCEPTS 1. Water/maritime transportation;
2. for the carriage of goods; and demand. (Dole Phils.,Inc. vs. Maritime Co.,148 SCRA
3. overseas/international/foreign (from foreign 118)
port to Philippine port).
 It can be applied in domestic sea transportation if  The one-year period shall run from delivery to the
agreed upon by the parties. (Clause paramount or arrastre operator and not to the consignee. (Union
paramount clause) Carbide Phils, Inc. vs. Manila Railroad Co.,SCRA 359)

IMPORTANT FEATURES:  The insurer exercising its right of subrogation is


1. Amount of carrier’s liability bound by the one-year prescriptive period. However,
2. Notice of damage it does not apply to the claim against the insurer for
3. Prescriptive period the insurance proceeds. (Fil. Merchants Ins. Co. vs.
Alejandro; Mayer Steel Pipe Corp. vs. CA)
AMOUNT OF CARRIER’S LIABILITY
 Under the Sec. 4(5), the liability limit is set at $500 IV. WARSAW CONVENTION OF 1929 (WC)
per package or customary freight unit unless the
nature and value of such goods is declared by the PURPOSE: To protect the emerging air transportation
shipper. This is deemed incorporated in the bill of industry and to secure the uniformity of recovery by
lading even if not mentioned in it. (Eastern Shipping the passengers.
vs. IAC, 150 SCRA 463) APPLICABILITY
 Note that Art. 1749, NCC applies to domestic/inter-  The transportation must be:
island/coastwise trade. 1. International transportation;
2. Air transportation; and
NOTICE OF DAMAGE (SEC. 3(6)) 3. Carriage of passengers, baggage or goods.
 Rules:  The WC shall also apply to fortuitous transportation
a. Patent damage: shipper should file a claim with by aircraft performed by an air transportation
the carrier immediately upon delivery enterprise.
b. Latent damage: shipper should file a claim with
the carrier within three days from delivery.  International transportation - any transportation in
which the place of departure and the place of
Note: The filing of a notice of claim is not a condition destination are situated either:
precedent. 1. Within the territories of two High Contracting
Parties regardless of whether or not there be a
PRESCRIPTIVE PERIOD break in the transportation or transshipment, or
 Action for loss or damage to the cargo should be 2. Within the territory of a single High
brought within one year after: Contracting Party, if there is an agreed stopping
a. Delivery of the goods (delivered but place within a territory subject to the sovereignty,
damaged goods); or mandate or authority of another power, even
b. The date when the goods should have been though that power is not a party to the
delivered (non-delivery). (Sec. 3[6]) Convention. (“round trip”, Am. Jur.)

 “Loss or Damage” as applied to the COGSA  Transportation to be performed by several


contemplates a situation where no delivery at all was successive air carriers shall be deemed to be one
made by the shipper of the goods because the same undivided transportation, if it has been regarded by
had perished, gone out of commerce, or disappeared the parties as a single operation, whether it has been
in such a way that their existence is unknown or they agreed upon under the form of a single contract or of
cannot be recovered. Thus, it is inapplicable in case of a series of contracts, and it shall not lose its
misdelivery or conversion. (Ang vs. American international character merely because one contract or
Steamship Agencies Inc.) and damage arising from a series of contracts is to be performed entirely within
delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). a territory subject to the sovereignty, suzerainty,
In such instance the, Civil Code rules on prescription mandate, or authority of the same High Contracting
shall apply. Party. (Art. 1 Sec.3)

 The one-year prescriptive period is suspended by: WHEN INAPPLICABLE


1. The express agreement of the parties 1. When public policy is contradicted;
(Universal Shipping Lines, Inc. vs. IAC, 188 2. If the requirements under the Convention
SCRA 170) are not complied with.
2. The filing of an action in court until it is
dismissed. (Stevens & Co. vs. Nordeutscher IMPORTANT CONCEPTS:
Lloyd, 6 SCRA 180) 1. Transportation documents
a. Passenger ticket
 The one-year period shall run from delivery of the b. Baggage check
last package and is not suspended by extrajudicial c. Air way bill
2. Liability of the carrier for damages  An agreement relieving the carrier from liability or
a. Death or injury to passengers fixing a lower limit is null and void. (Art. 23)
b. Loss or damage to baggage or goods  Carrier is not entitled to the foregoing limit if the
c. Delay damage is caused by willful misconduct or default on
3. Successive carrier agreement its part. (Art. 25)
4. Jurisdiction
5. Combined transportation agreement  Thus, the WC does not operate as an exclusive
enumeration of the instances of an absolute limit of
PASSENGER BAGGAGE AIR WAYBILL the extent of liability. It does not preclude the
TICKET CHECK application of the Civil Code and other pertinent local
Passenger Checked-in Goods to be laws. It does not regulate or exclude liability for other
baggage shipped breaches of contract by the carrier, or misconduct of
its employees, or for some particular or exceptional
LIABILITY OF CARRIER FOR DAMAGES type of damage. (Alitalia vs. CA)
1. Death or injury of a passenger if the accident
causing it took place on board the aircraft or in the  In PanAm v. IAC, the WC was applied as regards
course of its operations of embarking or disembarking; the limitation on the carrier’s liability, there being a
(Art. 17) simple loss of baggage without any improper conduct
2. Destruction, loss or damage to any baggage or on the part of the officials or employees of the airline
goods, if it took place during the “transportation by or other special injury sustained by the passenger.
air”; (Art. 18) and
 Transportation by air – The period during which the  In KLM Royal v. Tuller, the WC has invariably been
baggage or goods are in the charge of the carrier, held inapplicable, or as not restrictive of the carrier’s
whether in an airport or on board an aircraft, or, in liability, where there was satisfactory evidence of
case of a landing outside an airport, in any place malice or bad faith attributable to its officers and
whatsoever. employees. (Alitalia vs. IAC)
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. ACTION FOR DAMAGES
3. Delay in the transportation of passengers, baggage 1. Notice of claim
or goods. (Art. 19)  A written complaint must me made within:
a. 3 days from receipt of baggage
Note: The Hague Protocol amended the WC by b. 7 days from receipt of goods
removing the provision that if the airline took all c. In case of delay, 14 days from receipt of
necessary steps to avoid the damage, it could baggage/goods
exculpate itself completely (Art. 20(1)). (Alitalia vs.  The complaint is a condition precedent. Without the
IAC, 192 SCRA 9) complaint, the action is barred except in case of fraud
on the part of the carrier. (Art. 26)
LIMIT OF LIABILITY (Art. 22, as amended by
Guatemala Protocol, 1971; Alitalia vs. IAC) 2. Prescriptive period
1. Passengers  Action must be filed within 2 years from:
GENERAL RULE: $100,000 per passenger a. date of arrival at the destination
EXCEPTION: Agreement to a higher limit b. date of expected arrival
c. date on which the transportation stopped.
(Art. 29)

2. Checked-in baggage  In United Airlines vs. Uy the two-year prescriptive


GENERAL RULE: $20 per kilogram period was not applied where the airline employed
EXCEPTION: In case of special declaration of value delaying tactics.
and payment of a supplementary sum by consignor,
carrier is liable to not more than the declared sum RULE IN CASE OF VARIOUS SUCCESSIVE
unless it proves the sum is greater than actual value. CARRIERS
3. Hand-carried baggage 1. Carriage of passengers
 $1000/passenger GENERAL RULE: Action is filed only against the
4. Goods to be shipped carrier in which the accident or delay occurred.
GENERAL RULE: $20 per kilogram EXCEPTION: Agreement or contract whereby the
EXCEPTION: In case of special declaration of value first carrier assumed liability for the whole journey.
and payment of a supplementary sum by consignor, 2. Carriage of baggage or goods
carrier is liable to not more than the declared sum a. Passenger or consignor can file an action
unless it proves the sum is greater than actual value. against the first carrier and the carrier in
which the damage occurred
b. Passenger or consignee can file an action 3. Services rendered voluntarily (neither an
against the last carrier and the carrier in existing duty nor out of a pre-existing
which the damage occurred. contract);
 These carriers are jointly and severally liable. 4. Services are successful, total or partial.
(Art. 30)  Subjects of Salvage:
1. Ship itself;
 A contract of international carriage by air, although 2. Jetsam – goods which are cast into the sea, and
performed by different carriers under a series of airline there sink and remain under water;
tickets constitutes a single operation. Members of the 3. Floatsam or Flotsam – goods which float upon the
International Air Transportation Association (IATA) are sea when cast overboard;
under a general pool partnership agreement wherein 4. Ligan or Lagan – goods cast into the sea tied to a
they act as agent of each other in the issuance of buoy, so that they may be found again by the owners
tickets to contracted passengers to boost ticket sales (p.173, Judge Diaz).
worldwide and at the same time provide passengers  Persons who have no right to a reward for
easy access to airlines which are otherwise salvage:
inaccessible in some parts of the world. (American 1. Crew of the vessel saved;
Airlines vs. CA) 2. Person who commenced Salvage in spite of
opposition of the Captain or his representative;
 Under a general pool partnership agreement, the 3. In accordance with Sec. 3 of the Salvage Law, a
ticket-issuing airline is the principal in a contract of person who fails to deliver a salvaged vessel or cargo
carriage while the endorsee-airline is the agent. The to the Collector of Customs.
obligation of the former remained and did not cease
even when the breach occurred not on its own flight  Derelict – a ship or her cargo which is abandoned
but on that of another airline which had undertaken to and deserted at sea by those who are in charge of it,
carry the passengers to one of their destinations. without any hope of recovering it, or without any
(China Airlines vs. Chiok) intention of returning to it.

JURISDICTION  The intention of those in charge must be


 At the option of the plaintiff, the action for ascertained. If those in charge left with the intention
damages may be filed in the: of returning, or of procuring assistance, the property is
a. Court of domicile of the carrier; not derelict, but if they quitted the property with the
b. Court of its principal place of business; intention of finally leaving it, it is derelict and a change
c. Court where it has a place of business of their intention and an attempt to return will not
through which the contract has been made; change its nature (Erlanger & Galinger vs. Swedish
or East Asiatic Co. Ltd.).
d. Court of the place of destination. (Art. 28(1))
NOTE: It is the passenger’s “ultimate destination” not  If it is clear that the intention to return is slight, the
“an agreed stopping place” that determines the salvage which was done thereafter is considered valid.
country where suit is to be filed. (Notes and Cases on the Law on Transportation and
 The forum of action provided in Art. 28(1) is a Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed.
matter of jurisdiction rather than of venue. (Santos III p. 616)
vs. Northwest; 2A C.J.S.)
CONTRACT OF TOWAGE
V. SALVAGE LAW (Act No. 2616)  A contract whereby one vessel, usually motorized,
pulls another, whether loaded or not with
SALVAGE merchandise, from one place to another, for a
 Two concepts: compensation. It is a contract for services rather than
1. Services one person renders to the owner of a a contract of carriage.
ship or goods, by his own labor, preserving the goods
or the ship which the owner or those entrusted with
the care of them have either abandoned in distress at SALVAGE TOWAGE
sea, or are unable to protect or secure.
Governed by special Governed by Civil Code
2. Compensation allowed to persons by whose
law (Act No. 2616) on contract of lease
voluntary assistance a ship at sea or her cargo or both
have been saved in whole or in part from impending
sea peril, or such property recovered from actual peril Requires success, Success is not required
or loss, as in cases of shipwreck, derelict or recapture. otherwise no payment
 Requisites:
1. Valid object of salvage; Must be done with the Only the consent of the
2. Object must have been exposed to marine consent of the tugboat owner is
peril (not perils of the ship); captain/crewmen needed
Vessel must be Vessel need not be 6. Ice plants; and
involved in an accident involved in an accident 7. Public markets.

Fees distributed Fees belong to the PUBLIC SERVICE


among crewmen tugboat owner  A person who owns, operates, manages or controls
in the Philippines for hire or compensation, with
general or limited clientele, whether permanent,
RULES ON SALVAGE REWARD
occasional or accidental, and done for general
1. The reward is fixed by the RTC judge in the
business purposes, any common carrier or public
absence of agreement or where the latter is
utility, ice plants, power and water supplies,
excessive. (Sec. 9)
communication and similar public services. (Sec. 13b,
2. The reward should constitute a sufficient
CA 146)
compensation for the outlay and effort of the
 A casual or incidental service devoid of public
salvors and should be liberal enough to offer an
character and interest is not brought within the
inducement to others to render services in similar
category. The question depends on such factors as the
emergencies in the future.
extent of services, whether such person or company
3. If sold (no claim being made within 3 months
has held himself or itself out as ready to serve the
from publication), the proceeds, after deducting
public or a portion of the public generally. (Luzon
expenses and the salvage claim, shall go to the
Stevedoring vs. PSC)
owner; if the latter does not claim it within 3
years, 50% of the said proceeds shall go to the
NOTE: The Public Service Commission created under
salvors, who shall divide it equitably, and the
the Public Service Law has already been abolished
other half to the government. (Secs. 11-12)
under P.D. No. 1 and other issuances. It has been
4. If a vessel is the salvor, the reward shall be
replaced by the following government agencies: LTO;
distributed as follows:
LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
a. 50% to the shipowner;
MIA.
b. 25% to the captain; and

CERTIFICATE OF CERTIFICATE OF
c. 25% to the officers and crew in proportion
PUBLIC PUBLIC
to their salaries. (Sec. 13)
CONVENIENCE CONVENIENCE AND
(CPC) NECESSITY (CPCN)
 Taking passengers from a sinking ship, without
rendering any service in rescuing the vessel, is not a
salvage service, being a duty of humanity and not for
An authorization An authorization
reward.
issued by the issued by the
appropriate appropriate
VI. PUBLIC SERVICE ACT
government agency for government agency for
(C.A. No. 146)
the operation of public the operation of public
services for which no service for which a
PURPOSES:
franchise, either prior franchise is
1. To secure adequate, sustained service for
municipal or required by law; e.g.
the public at the least possible cost;
legislative, is required telephone and other
2. To protect the public against unreasonable
by law, e.g., common services.
charges and poor, inefficient service;
carriers.
3. To protect and secure investments in public
services;
4. To prevent ruinous competition.
 A CPC or a CPCN constitutes neither a franchise nor
AUTHORITY TO OPERATE PUBLIC SERVICES
a contract, confers no property right, and is a mere
GENERAL RULE: No public service shall operate
license or a privilege. The holder of said certificate
without having been issued a certificate of public
does not acquire a property right in the route covered
convenience or a certificate of public convenience and
thereby. Nor does it confer upon the holder any
necessity.
proprietary right or interest or franchise in the public
EXCEPTIONS:
highways. Revocation of this certificate deprives him
1. Warehouses;
of no vested right. New and additional burdens,
2. Animal drawn vehicles and bancas moved by
alteration of the certificate, or even revocation or
oar or sail;
annulment thereof is reserved to the State. (Luque vs.
3. Airships, except for the fixing of maximum
Villegas, 30 SCRA 408)
rates for fare and freight;
4. Radio companies, except for rates fixing;
 It is a “property” and has a considerable value and
5. Public services owned or operated by the
can be the subject of sale or attachment. (Cogeo-
government, except as to rates fixing;
Cubao Operators and Drivers Assn. vs. CA, 207 SCRA 2. Providing or maintaining unsafe, improper or
343, Raymundo vs. Luneta Motor Co.) inadequate service as determined by the proper
authority;
REQUREMENTS FOR GRANTING CPC OR CPCN 3. Committing any act of unreasonable and unjust
1. Applicant must be a citizen of the Philippines or a preferential treatment to any particular person,
corporation or entity 60% of the capital of which corporation or entity as determined by the proper
is owned by such citizens; authority;
2. Applicant must prove public necessity; 4. Refusing or neglecting to carry public mail upon
3. Applicant must prove that the operation of the request. (Secs. 18 and 19)
public service proposed and the authorization to
do business will promote the public interest on a ACTS REQUIRING PRIOR APPROVAL
proper and suitable manner; 1. Establish and maintain individual or joint rates;
4. Applicant must have sufficient financial capability 2. Establish and operate new units;
to undertake the proposed services and meeting 3. Issue free tickets;
the responsibilities incident to its operation. 4. Issue any stock or stock certificates representing
an increase of capital;
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
 The rate to be fixed must be just, founded upon
conditions which are fair and reasonable to both the 2. The registered owner is primarily liable for all the
owner and the public. consequences flowing from the operations of the
 A rate is just and reasonable if it conforms to the carrier.
following requirements:  The public has the right to assume that the
1. One which yields to the carrier a fair return registered owner is the actual or lawful owner
upon the value of the property employed in thereof. It would be very difficult and often
performing the service; and impossible, as a practical matter, for the public to
2. One which is fair to the public for the enforce their rights of action that they may have
service rendered. for injuries inflicted by the vehicle if they should
be required to prove who the actual owner is.
REGISTERED OWNER RULE (Benedicto vs. IAC, 187 SCRA 547)
 The registered owner of a certificate of public 3. The thrust of the law in enjoining the kabit
convenience is liable to the public for the injuries or system is to identify the person upon whom
damages suffered by third persons caused by the responsibility may be fixed with the end in view
operation of said vehicle, even though the same had of protecting the riding public (Lim vs. CA 373
been transferred to a third person. SCRA 394).
 The registered owner is not allowed to escape 4. The registered owner cannot recover from the
responsibility by proving that a third person is the actual owner and the latter cannot obtain
actual and real owner Reason: It would be easy for transfer of the vehicle to himself, both being in
him, by collusion with others or otherwise, to transfer pari delicto. (Teja Marketing vs. IAC)
the responsibility to an indefinite person, or to one 5. For the better protection of the public, both the
who possesses no property with which to respond registered owner and the actual owner are jointly
financially for the damage or injury done. (Erezo, et al. and severally liable with the driver. (Zamboanga
vs. Jepte 102 Phil 103). Transportation Co. vs. CA)

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)