Transportation Law Reviewer SAN BEDA

San Beda College of Law 1
MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS goods for others as a public employment and
must hold itself out as ready to engage in the
transportation of goods generally as a
CONTRACT OF TRANSPORTATION/ CARRIAGE business and not as a casual occupation;
 A contract whereby a person, natural or juridical, 2. It must undertake to carry goods of the kind to
obligates to transport persons, goods, or both, from which its business in confined;
one place to another, by land, air or water, for a price 3. It must undertake to carry by the method by
or compensation. which his business is conducted and over its
 Classifications: established roads; and
1. Common or Private 4. The transportation must be for hire.
2. Goods or Passengers  In National Steel Corp. vs. CA (1997) the SC held
3. For a fee (for hire) or Gratuitous that the true test of a common carrier is the carriage
4. Land, Water/maritime, or Air of goods or passengers provided it has space for all
5. Domestic/inter-island/coastwise or who opt to avail themselves of its transportation for a
International/foreign fee.
 It is a relationship which is imbued with the public
interest.
COMMON CARRIER PRIVATE
COMMON CARRIER CARRIER
 Persons, corporations, firms or associations 1. As to availability
engaged in the business of carrying or transporting Holds himself out Contracts with
passengers or goods or both, by land, water, or air, for for all people particular
compensation, offering their services to the public indiscriminately individuals or
(Art. 1732, Civil Code). groups only
 Art. 1732 of the New Civil Code avoids any 2. As to required diligence
distinction between one whose principal business Extraordinary Ordinary
activity is the carrying of persons or goods or both diligence is diligence is
and one who does such carrying only as an ancillary required required
activity (sideline). It also avoids a distinction between 3. As to regulation
a person or enterprise offering transportation service
Subject to State Not subject to
on a regular or scheduled basis and one offering such regulation State regulation
service on an occasional, episodic or unscheduled
4. Stipulation limiting liability
basis.
Parties may not Parties may limit
Neither does the law distinguish between a carrier
agree on limiting the carrier’s
offering its services to the general public that is the
the carrier’s liability, provided
general community or population and one who offers
liability except it is not contrary
services or solicits business only from a narrow
when provided by to law, morals or
segment of the general population.
law good customs
A person or entity is a common carrier even if he
did not secure a Certificate of Public Convenience (De 5. Exempting circumstance
Guzman vs. CA, 168 SCRA 612). Prove caso fortuito, Art.
 It makes no distinction as to the means of extraordinary 1174 NCC
transporting, as long as it is by land, water or air. It diligence and Art.
does not provide that the transportation should be by 1733, NCC
motor vehicle. (First Philippine Industrial Corporation 6.Presumption of negligence
vs. CA) There is a No presumption
 One is a common carrier even if he has no fixed presumption of of fault or
and publicly known route, maintains no terminals, fault or negligence
and issues no tickets (Asia Lighterage Shipping, Inc. negligence
vs. CA). 7.Governing law
 Characteristics: Law on common Law on
1. Undertakes to carry for all people indifferently carriers obligations and
and thus is liable for refusal without sufficient contracts
reason (Lastimoso vs. Doliente, October 20,
1961); GOVERNING LAWS
2. Cannot lawfully decline to accept a particular A. Domestic/inter-island/coastwise
class of goods for carriage to the prejudice of  Applicable to Land, Water, and Air transportation
the traffic in these goods; 1. Civil Code - primary
3. No monopoly is favored (Batangas Trans. vs. 2. Code of Commerce (Arts. 349, 379, 573-734,
Orlanes, 52 PHIL 455); 580, 806-845) - suppletory
4. Provides public convenience.
B. International/foreign/overseas (Foreign
PRIVATE CARRIER country to Philippines)
 One which, without being engaged in the business  Applicable to Water/maritime and Air
of carrying as a public employment, undertakes to transportation
deliver goods or passengers for compensation. (Home  The law of the country of destination generally
Insurance Co. vs. American Steamship Agency, 23 applies.
SCRA 24) 1. Civil Code - primary
2. Code of Commerce - suppletory
 TESTS WHETHER CARRIER IS COMMON OR 3. Others - suppletory
PRIVATE: a. Water/maritime: Carriage of Goods by Sea
 The SC in First Philippine Industrial Corporation Act (COGSA)
vs. CA (1995) reiterated the following tests: b. Air: Warsaw Convention
1. It must be engaged in the business of carrying
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)
I. NEW CIVIL CODE Transportation and Public Utilities, Aquino, T. &
(Arts. 1732-1766) Hernando, R.P. 2004 ed. p.120-122)
REQUIREMENT OF EXTRAORDINARY DILIGENCE 2. ACTS OF PUBLIC ENEMY

 Rendition of service with the greatest skill and  Requisites:
utmost foresight. (Davao Stevedore Co. v. Fernandez) a. Must be the proximate and only cause of the
 Rationale: loss
1. From the nature of the business and for b. Exercise of due diligence to prevent or
reasons of public policy (Art. 1733) minimize the loss before, during or after the act
2. Relationship of trust causing the loss, deterioration or destruction of
3. Business is impressed with a special public the goods (Art. 1739)
duty
4. Possession of the goods 3. NEGLIGENCE OF THE SHIPPER OR OWNER
5. Preciousness of human life a. Sole and proximate cause: absolute defense
 A common carrier is not an absolute insurer of all b. Contributory: partial defense. (Art. 1741)
risks of travel.
4. CHARACTER OF THE GOODS OR DEFECTS IN
COVERAGE THE PACKING OR IN THE CONTAINER
1. Vigilance over goods (Arts. 1734-1754); and  Even if the damage should be caused by the
2. Safety of passengers (Arts. 1755-1763). inherent defect/character of the goods, the common
carrier must exercise due diligence to forestall or
PASSENGER lessen the loss. (Art. 1742)
 A person who has entered into a contract of  The carrier which, knowing the fact of improper
carriage, express or implied, with the carrier. They are packing of the goods upon ordinary observation, still
entitled to extraordinary diligence from the common accepts the goods notwithstanding such condition, is
carrier. not relieved of liability or loss or injury resulting
 The following are not considered passengers, and therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)
are entitled to ordinary diligence only:
a. One who has not yet boarded any part of a 5. ORDER OR ACT OF PUBLIC AUTHORITY
vehicle regardless of whether or not he has  Said public authority must have the power to issue
purchased a ticket; the order (Art. 1743). Consequently, where the officer
b. One who remains on a carrier for an acts without legal process, the common carrier will be
unreasonable length of time after he has been held liable. (Ganzon v. CA 161 SCRA 646)
afforded every safe opportunity to alight;  Diligence in the selection and supervision of
c. One who has boarded by fraud, stealth, or employees under Article 2180 of the Civil Code cannot
deceit; be interposed as a defense by the common carrier
d. One who attempts to board a moving vehicle, because the liability of the carriers arises from the
although he has a ticket, unless the attempt breach of the contract of carriage. The defense under
be with the knowledge and consent of the said articles is applicable to negligence in quasi-
carrier; delicts under Art. 2176. (Del Prado v. Manila Electric
e. One who has boarded a wrong vehicle, has Co., 52 Phil 900)
been properly informed of such fact, and on
alighting, is injured by the carrier; LIABILITY OF A COMMON CARRIER FOR
f. Invited guests and accommodation DEATH OR INJURIES TO PASSENGERS DUE TO
passengers. (Lara vs. Valencia) ACTS OF ITS EMPLOYEES AND OTHER
g. One who rides any part of the vehicle which is PASSENGERS OR STRANGERS
unsuitable or dangerous or which 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
Required diligence and defense
1. CASO FORTUITO/FORCE MAJEURE
Extraordinary Ordinary diligence
 Requisites:
diligence
a. Must be the proximate and only cause of the
loss Nature of liability
b. Exercise of due diligence to prevent or Tort; however, Not absolute; limited by
minimize the loss before, during or after the The employee must Art. 1763
occurrence of the disaster (Art. 1739) be on duty at the
c. Carrier has not negligently incurred in delay in time of the act.
transporting the goods (Art. 1740) (Maranan v. Perez)
 Fire is not considered a natural disaster or calamity
as it arises almost invariably from some act of man.  The carrier is liable when its personnel allowed
(Eastern Shipping Lines Inc. vs. IAC) a passenger to drive the vehicle causing it to
 Mechanical defects are not force majeure if the collide with another vehicle resulting to the
same was discoverable by regular and adequate injuries suffered by the other passengers. (MRR vs.
inspections. (Notes and Cases on the Law on Ballesteros, 16 SCRA 641)
CARRIAGE OF GOODS CARRIAGE OF

PASSENGERS
Parties
1. Common carrier 1. Common
2. Shipper carrier
3. Consignee 2. Passenger

Cause of liability
Delay in delivery, loss, Death or injury to the
destruction, or deterioration passengers
of the goods
Duration of liability
From the time the goods are The duty of a

unconditionally placed in common carrier to
the possession of, and provide safety to its
received by the carrier for passengers so
transportation until the obligates it not only
same are delivered actually during the course of
or constructively by the the trip, but for so
carrier to the consignee or to long as the
the person who has the right passengers are within
to receive them. (Art. 1736) its premises and
 It remains in full force where they ought to
and effect even when they be in pursuance to
are temporarily unloaded or the contract of
stored in transit unless the carriage. (LRTA v.
shipper or owner has made Navidad, [2003])
use of the right of stoppage  All persons who
in transitu. (Art. 1737) remain on the
 It continues to be premises within a
operative even during the reasonable time after
time the goods are stored in leaving the
a warehouse of the carrier at conveyance are to be
the place of destination until deemed passengers,
the consignee has bee and what is a
advised of the arrival of the reasonable time or a
goods and has had reasonable delay
reasonable opportunity within this rule is to
thereafter to remove them or be determined from
otherwise dispose of them. all the
(Art. 1738) circumstances, and
 Delivery of goods to the includes a reasonable
custom authorities is not time to see after his
delivery to the consignee. baggage and prepare
(Lu Do v. Binamira, 101 Phil for his departure. (La
120) Mallorca v. CA, 17
SCRA 739 ; Abiotiz
Shipping Corporation
v. CA, 179 SCRA 95)
 It is the duty of
common carriers of
passengers to stop
their conveyances a
reasonable length of
time in order to afford
passengers an
opportunity to enter,
and they are liable for
injuries suffered from
the sudden starting
up or jerking of their
conveyances while
doing so. The duty
which the carrier of
passengers owes to
its patrons extends to
persons boarding the
cars as well as to
those alighting
therefrom (Dangwa
Trans Co., Inc. vs. CA
202 SCRA 574).
Presumption of negligence
Art.1735 Civil Code Art.1755 Civil Code

Reason: As to when and how Reason: The contract
goods were damaged in between the
transit is a matter peculiarly passenger and the
within the knowledge of the carrier imposes on

carrier and its employees. the latter the duty to
(Mirasol v. Dollar, 53 PHIL transport the
124) passenger safely;
Mere proof of delivery of hence the burden of
goods to a carrier in good explaining should fall
order and the subsequent on the carrier.
arrival of the same goods at
the place of destination in
bad order makes for a prima
facie case against the
carrier. (Coastwise
Lighterage Corp. v. CA, 245
SCRA 796)
Defenses
1. Ordinary 1. Exercise of
circumstance: extraordina
Exercise of ry diligence
extraordinary (Art. 1756)
diligence (Art. 1735) 2. Caso fortuito
2. Special
circumstances:
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 Stipulation limiting

diligence to ordinary liability when a
diligence, provided it be: passenger is carried
a) In writing, signed by gratuitously, but not
the shipper or owner; for willful acts or
b) Supported by a gross negligence. (Art.
valuable 1758)
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
2. That carrier will not be
liable for any loss, Dispensing with or
destruction or deterioration lessening the
of the goods; extraordinary
3. That the carrier need responsibility of a
not observe any diligence in common carrier for
the custody of the goods; the safety of
4. That the carrier shall passengers imposed
exercise a degree of by law by stipulation,
diligence less than that of a by posting of notices,
good father of a family over by statements on
the movable transported; tickets or otherwise.
5. That the carrier shall (Art. 1757)
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
other equipment used in
the contract of carriage.
(Art. 1745)

Rules on Passengers’ Baggage of destination and has left the carrier’s premises. The
IN THE CUSTODY OF IN THE CUSTODY OF carrier should necessarily exercise extraordinary
THE PASSENGERS THE COMMON diligence in safeguarding the comfort, convenience
(HAND-CARRIED) CARRIER and safety of its stranded passengers until they have
(CHECKED-IN) reached their final destination. (Philippine Airlines vs.
Legal nature of the baggage CA, 226 SCRA 423)
Necessary deposit Considered as “goods” 2. Even where overbooking of passengers is allowed as
Required diligence by the common carrier a commercial practice, the airline company would still
Diligence of a depositary Extraordinary diligence be guilty of bad faith and still be liable for damages if
(ordinary diligence) it did not properly inform passenger that it could
Applicable rules breach the contract of carriage even if they were
Arts. 1998 and 2000- Arts. 1733-1753 confirmed passengers. (Zalamea vs. CA, 228 SCRA
2003 23)
3. An open-dated ticket constitutes a complete
contract between the carrier and passenger. Hence,
CONCURRING CAUSES OF ACTION ARISING FROM
the airline company is liable if it refused to confirm a
THE NEGLIGENT ACT OF THE COMMON CARRIER
passenger’s flight reservation. (Singson vs. CA, 282
1. Culpa contractual (breach of contract)
SCRA 149)
 Only the carrier is primarily liable and not the
4. An airline company which issued a confirmed ticket
driver, because there is no privity between the driver
to a passenger covering successive trips on different
and the passenger.
airlines can be held liable for damages occasioned by
 Basis: Art.1759, NCC.
“bumping off” by one of the successive airlines.
 No defense of due diligence in the selection and
(Lufthansa German Airlines vs. CA, 238 SCRA 290)
supervision of employees.
5. An airline ticket providing that carriage by
successive air carriers is to be regarded as a “single
2. Culpa aquiliana (quasi-delict)
operation” is to make the issuing carrier liable for the
 The carrier and driver are solidarily liable as joint
tortuous conduct of the other carrier. A printed
tortfeasors.
provision in the ticket limiting liability only to its own
 Basis: Art. 2180, NCC.
conduct is not enough to rebut that liability. (KLM
 Defense of due diligence in the selection and
Royal Dutch Airlines vs. CA, 65 SCRA 237)
supervision of employees is available. Exception:
maritime tort resulting in collision. (See notes on
II. CODE OF COMMERCE
Collision)
3. Culpa criminal (criminal negligence) A. OVERLAND TRANSPORTATION

 The driver is primarily liable. The carrier is (Arts. 349-379)
subsidiarily liable only if the driver is convicted and
declared insolvent. Applicability
 Basis: Art. 100, RPC. 1. Domestic land and water/maritime transportation.
(Pandect of Commercial Law and Jurisprudence,
 In case of injury to a passenger due to the Justice Jose Vitug, 1997 ed.)
negligence of the driver of the bus on which he is 2. Domestic Air Transportation. (Commercial Law
riding and of the driver of another vehicle, the drivers Review, Cesar Villanueva, 2004 ed.)
as well as the owners of the two vehicles are jointly
and severally liable for damages. It makes no IMPORTANT CONCEPTS:
difference that the liability of the bus driver and 1. Bill of lading
owner springs from contract while that of the owner 2. Obligations of the carrier
and driver of the other vehicle arises from quasi- 3. Right of abandonment
delict. (Fabre vs. CA) 4. Notice of damage
5. Combined carrier agreement
LIMITATIONS AS TO CARRIER’S LIABILITY
BILL OF LADING
INVALID AS VALID & ENFORCEABLE
 The written acknowledgment of receipt of goods
BEING
and agreement to transport them to a specific place to
CONTRARY TO
a person named or to his order.
PUBLIC POLICY
 Rules:
1. One exempting 1. One limiting the liability of the
1. It is not indispensable for the creation of a
the carrier from carrier to an agreed valuation,
contract of carriage. (Compania Maritima vs.
any and all unless the shipper declares a
Insurance Company of North America, 12 SCRA 213)
liability for loss or higher value and pays a higher
damage rate of freight
2. Ambiguity is construed against the carrier, the
occasioned by its (H.E. Heacock Company vs.
contract being one of adhesion.
own negligence. Macondray & Company Inc.)
2. An unqualified
3. The consignee, although the instrument is
limitation of
oftentimes drawn up only by the consignor and
liability to an
carrier, becomes bound by all the stipulations
agreed valuation.
contained therein by making a claim for loss on the
basis of said bill of lading. (Sea-Land Services Inc. vs.
IAC)
 However, the carrier cannot limit its liability for
injury to, or loss of, goods shipped where such injury 4. The right of a party to recover for loss of shipment
or loss was caused by its own negligence. consigned to him under a bill of lading drawn up only
(Shewaram vs. PAL, 17 SCRA 606) by and between the shipper and the carrier, springs
from either a relation of agency between him and the
SPECIAL RULES ON LIABILITES OF AIRLINE shipper, or his status as stranger in whose favor some
CARRIERS stipulation is made in said contract, and who
1. In case of flight diversion due to bad weather or becomes a party thereto when he demands fulfillment
other circumstances beyond the pilot’s control, the of that stipulation. (Art. 1311 (2), (Mendoza vs. PAL
relation between the carrier and the passenger Inc.)
continues until the latter has been landed at the port
7.) Goods like livestock will be exposed to disease
5. Acceptance of the bill of lading without dissent 8.) Strike
raises the presumption that all the terms therein 9.) Failure to tender goods on time. (Notes and Cases
where brought to the knowledge of the shipper and on the Law on Transportation and Public Utilities,
agreed to by him and, in the absence of fraud or Aquino, T. & Hernando, R.P. 2004 ed. p.68)
mistake; he is estopped from thereafter denying that  In case of carriage by railway, the carrier is
he assented to such terms. (Notes and Cases on the exempted from liability if carriage is insisted upon by
Law on Transportation and Public Utilities, Aquino, T. the shipper, provided its objections are stated in the
& Hernando, R.P. 2004 ed. p.261) bill of lading.
 However, when a common carrier accepts cargo for
 Kinds: shipment for valuable consideration, it takes the risk
1. On board - issued when the goods have been of delivering it in good condition as when it was
actually placed aboard the ship with very loaded. (PAL vs. CA)
reasonable expectation that the shipment is as
good as on its way. B. Duty to deliver the goods
2. Received - one in which it is stated that the  Not only to transport the goods safely but to the
goods have been received for shipment with or person indicated in the bill of lading. The goods
without specifying the vessel by which the goods should be delivered to the consignee or any other
are to be shipped. person to whom the bill of lading was validly
3. Negotiable - one in which it is stated that the transferred or negotiated.
goods referred to therein will be delivered to the
bearer or to the order of any person named Time of delivery
therein. Stipulated in No stipulation
4. Non-negotiable - One in which it is stated that Contract/Bill of
the goods referred to therein will be delivered to Lading
a specified person. 1. Carrier is 1. Within a reasonable time.
5. Clean – One which does not indicate any defect bound to fulfill 2. Carrier is bound to forward
in the goods. the contract and them in the 1st shipment of the
6. Foul – One which contains a notation thereon is liable for any same or similar goods which he
indicating that the goods covered by it are in delay; no matter may make to the point of
bad condition. from what cause delivery. (ART. 358 Code of
it may have Commerce)
7. Spent – One which covers goods that already arisen.
have been delivered by the carrier without a
surrender of a signed copy of the bill.
8. Through – One issued by the carrier who is Effects of delay
obliged to use the facilities of other carriers as a. Merely suspends and generally does not terminate
well as his own facilities for the purpose of the contract of carriage
transporting the goods from the city of the seller b. Carrier remains duty bound to exercise
to the city of the buyer, which bill of lading is extraordinary diligence
honored by the second and other interested c. Natural disaster shall not free the carrier from
carriers who do not issue their own bills. responsibility (Art.1740)
9. Custody – One wherein the goods are already d. If delay is without just cause, the contract limiting
received by the carrier but the vessel indicated the common carrier’s liability cannot be availed of in
therein has not yet arrived in the port. case of loss or deterioration of the goods (Art.1747)
10. Port – One which is issued by the carrier to
whom the goods have been delivered, and the RIGHT OF CONSIGNEE TO ABANDON GOODS
vessel indicated in the bill of lading by which the  Instances:
goods are to be shipped is already in the port 1. Partial non-delivery, where the goods are useless
where the goods are held for shipment. without the others (Art. 363);
 Functions: 2. Goods are rendered useless for sale or
1. Best evidence of the existence of the contract of consumption for the purposes for which they are
carriage of cargo (Art. 353) properly destined (Art. 365); and
2. Document of title 3. In case of delay through the fault of the carrier
3. Receipt of cargo (Art. 371).
4. Contract to transport and deliver goods as
stipulated NOTICE OF DAMAGE (ART. 366)
5. Symbol of the goods  Requisites for applicability:
1. Domestic/inter-island/coastwise transportation
OBLIGATIONS OF THE CARRIER 2. Land/water/air transportation
A. Duty to accept the goods 3. Carriage of goods
GENERAL RULE: A common carrier cannot 4. Goods shipped are damaged
ordinarily refuse to carry a particular class of goods.  Rules:
EXCEPTION: For some sufficient reason the a. Patent damage: shipper must file a claim against
discrimination against the traffic in such goods is the carrier immediately upon delivery (it may be
reasonable and necessary. (Fisher vs. Yangco oral or written)
Steamship Co. 31 Phil 1). b. Latent damage: shipper should file a claim against
 Instances when the carrier may validly refuse to the carrier within 24 hours from delivery.
accept the goods include the ff: Note: These rules does not apply to misdelivery of
1.) Goods sought to be transported are dangerous goods. (Roldan vs. Lim Ponzo)
objects, or substances including dynamite and other Purpose of notice: To inform the carrier that the
explosives shipment has been damaged, and it is charged with
2.) Goods are unfit for transportation liability therefore, and to give it an opportunity to
3.) Acceptance would result in overloading make an investigation and fix responsibility while the
4.) Contrabands or illegal goods matter is fresh.
5.) Goods are injurious to health  The filing of notice of claim is a condition precedent
6.) Goods will be exposed to untoward danger like for recovery.
flood, capture by enemies and the like  Shorter period may be stipulated by the parties
because it merely affects the shipper’s remedy and
does not affect the liability of the carrier. CHARACTERISTICS OF MARITIME TRANSACTION
(PHILAMGEN vs. Sweetlines, Inc.) 1. Real - similar to transactions over real property
Prescriptive Period with respect to effectivity against third persons which
 Not provided by Article 366. Thus, in such absence, is done through registration. (Rubiso vs. Rivera, 37
Civil Code rules on prescription apply. Phil. 72). The evidence of real nature is shown by: 1)
 If despite the notice of claim, the carrier refuses to the limitation of the liability of the agents to the
pay, action must be filed in court. actual value of the vessel and the freight money; and
1. No bill of lading was issued: within 6 2) the right to retain the cargo and embargo and
years detention of the vessel (Luzon Stevedoring Corp v. CA,
2. Bill of lading was issued: within 10 156 SCRA 169);
years. 2. Hypothecary - the liability of the owner of the value
ARTICLE 366 COGSA Sec.3 (6) of the vessel is limited to the vessel itself (Doctrine of
Applicability Limited Liability).
1. Dome 1. International/
stic/inter- overseas/foreign (from  The real and hypothecary nature of maritime law
island/coastwise foreign country to Phils.) simply means that the liability of the carrier in
transportation Note: subject to the rule on connection with losses related to maritime contracts
2. Land, Paramount Clause is confined to the vessel, which stands as the
water, air 2. Water/maritime guaranty for their settlement. (Aboitiz Shipping Corp.
transportation transportation vs. General Accident Fire and Life Assurance Corp.
3. Carria 3. Carriage of goods 217 SCRA 359).
ge of goods
Notice of damage MERCHANT VESSEL
1. 1. Not a condition  Vessel engaged in maritime commerce, whether
Condition precedent foreign or otherwise. (Bar Review Materials in
precedent 2. 3-day period for Commercial Law, Jorge Miravite, 2002 ed.)
2. claiming latent damage  Constitutes property which may be acquired and
24-hour period transferred by any of the means recognized by law.
for claiming They shall continue to be considered as personal
latent damage property. (Arts. 573, 585)
Prescriptive period  They are susceptible to maritime liens such as for
None provided; One year from the date of the repair, equipping and provisioning of the vessel in
Civil Code delivery (delivered but the preparation of a voyage, as well as mortgage
applies. damaged goods), or date liabilities, in satisfaction of which a vessel may be
when the vessel left port or validly arrested and sold. (Ship Mortgage Decree of
from the date of delivery to 1978)
the arrastre (non-delivery
or loss). MARITIME LIEN
 It constitutes a present right of property in the
ship, a jus in re, to be afterward enforced in admiralty
COMBINED CARRIER AGREEMENT (ART. 373)
by process in rem. (PNB vs. CA, 337 SCRA 381)
GENERAL RULE: In case of a contract of
 If the maritime lien arose prior to the recording of a
transportation of several legs, each carrier is
preferred mortgage, it shall have priority over the said
responsible for its particular leg in the contract.
mortgage lien. (PNB vs. CA, 337 SCRA 381)
EXCEPTION: A combined carrier agreement where a
carrier makes itself liable assuming the obligations
and acquiring as well the rights and causes of action ORDER OF PREFERENCE IN CASE OF SALE OF VESSEL
of those which preceded it.
R.A. 6106 P.D. 1521
B. MARITIME COMMERCE Effectivity date
(Arts. 573-869) 1969 1978
Applicability
IMPORTANT CONCEPTS: Overseas Both domestic and overseas
1. Merchant vessel shipping only shipping
2. Maritime lien and Preference of Credit Kind of sale
3. Doctrine of limited liability Judicial Judicial and extrajudicial
4. Causes of revocation of voyage Order of Preference
5. Participants in maritime commerce A preferred The preferred mortgage lien
6. Charter party mortgage shall shall have priority over all
7. Loans on bottomry and respondentia have priority claims against the vessel,
8. Accidents in maritime commerce over all claims except the following preferences
against the in the order stated:
MARITIME/ADMIRALTY LAW vessel, except 1. Expenses and fees allowed
 It is the system of laws which particularly relates to the following and costs taxed by the court
the affairs and business of the sea, to ships, their preferences in and taxes due to the
crews and navigation, and to maritime conveyance of the order stated: Government;
persons and property. (Notes and Cases on the Law 1. Judicial costs 2. Crew’s wages;
on Transportation and Public Utilities, Aquino & of the 3. General average;
Hernando, citing Francisco, p.254) proceedings; 4. Salvage, including contract
2. Taxes due the salvage;
 Maritime laws apply only to maritime trade and sea Philippine 5. Maritime liens arising prior
voyages. (Pandect of Commercial Law and Government; in time to the recording of the
Jurisprudence, Justice Jose Vitug, 1997 ed.) 3. Salaries and preferred mortgage;
wages of the 6. Damages arising out of tort;
 Arrastre service is not maritime in character. It Captain and and
refers to a contract for the unloading of goods from a Crew of the 7. Preferred mortgage registered
vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA vessel during its prior in time.
244)
last voyage; 3. In case of constructive loss of the vessel (Sec.
4. General 138, Insurance Code).
average or
salvage including RIGHT OF ABANDONMENT
contract salvage,
bottomry loans, SHIPOWNER OR CONSIGNEE
and indemnity SHIP AGENT
due shippers for What may be abandoned
the value of Vessel Goods shipped
goods Instances
transported but 1. In case of civil 1. Partial non-delivery,
which were not liability from where the goods are useless
delivered to the indemnities to without the others (Art.
consignee; third persons 363);
5. Costs of repair (Art. 587); 2. Goods are rendered
and equipment 2. Sec. 138, useless for sale or
of the vessel, Insurance Code; consumption for the
and provisioning 3. In case of purposes for which they are
of food, supplies leakage of at least properly destined (Art. 365);
and fuel during ¾ of the contents and
its last voyage; of a cargo 3. In case of delay through
and containing liquids the fault of the carrier (Art.
6. Preferred (Art. 687) 371).
mortgages
registered prior Effects
in time. 1. Transfer 1. Transfer of ownership on
of ownership of the goods from the shipper
 Effect of sale: All pre-existing claims in the vessel the vessel from to the carrier.
are terminated. They will then be satisfied from the the shipowner to 2. Carrier should pay the
proceeds of the sale subject to the order of preference. the shippers or shipper the market value of
insurer. the goods at the point of
DOCTRINE OF LIMITED LIABILITY 2. In case of destination.
(HYPOTHECARY RULE) (2), the insurer
 Cases where applicable: must pay the
1. Art. 587 – civil liability for indemnities to third insured as if
persons there was actual
2. Art. 590 – indemnities from negligent acts of total loss of the
the captain (not the shipowner or ship agent) vessel.
3. Art. 837 – collision
4. Art. 643 – liability for wages of the captain and CAUSES OF REVOCATION OF VOYAGE
the crew and for advances made by the ship 1. War or interdiction of commerce;
agent if the vessel is lost by shipwreck or 2. Blockade;
capture 3. Prohibition to receive cargo at destination;
4. Embargo;
GENERAL RULE: The liability of shipowner and ship 5. Inability of the vessel to navigate. (Art. 640)
agent is limited to the amount of interest in said
vessel such that where vessel is entirely lost, the Terms:
obligation is extinguished. (Luzon Stevedoring v. 1. Interdiction of commerce – A governmental
Escano, 156 SCRA 169) The interest extends to: 1) the prohibition of commercial intercourse intended to
vessel itself; 2) equipments; 3) freightage; and 4) bring about an entire cessation for the time being
insurance proceeds. (Chua v. IAC, 166 SCRA 183) of all trade whatever.
EXCEPTIONS: 2. Blockade – A sort of circumvallation of a place by
1. Claims under Workmen’s Compensation (Abueg which all foreign connection and correspondence
vs. San Diego 77 Phil 730); is, as far as human power can effect it, to be cut
2. Injury or damage due to shipowner or to the off.
concurring negligence of the shipowner and the 3. Embargo – A proclamation or order of a state,
captain; usually issued in time of war or threatened
3. The vessel is insured (Vasquez vs. CA 138 SCRA hostilities, prohibiting the departure of ships or
553). goods from some or all the ports of such state
4. Expenses for repair on vessel completed before until further order.
loss;
5. In case there is no total loss and the vessel is not PARTICIPANTS IN MARITIME COMMERCE
abandoned; A. Shipowners and ship agents
6. Collision between two negligent vessels; B. Captains and masters of the vessel
C. Officers and crew of the vessel
 Abandonment of the vessel is necessary to limit the D. Supercargoes
liability of the shipowner. The only instance were E. Pilot
abandonment is dispensed with is when the vessel is
entirely lost (Luzon Stevedoring vs. CA 156 SCRA A. SHIPOWNERS AND SHIP AGENTS
169). Shipowner (proprietario)
 Person who has possession, control and
RIGHT OF SHIPOWNER OR SHIP AGENT TO management of the vessel and the consequent right to
ABANDON VESSEL direct her navigation and receive freight earned and
 Instances: paid, while his possession continues.
1. In case of civil liability from indemnities to
third persons (Art. 587); Ship agent (naviero)
2. In case of leakage of at least ¾ of the contents  Person entrusted with provisioning and
of a cargo containing liquids (Art. 687); and representing the vessel in the port in which it may be
found; also includes the shipowner. 5. By sale of part of the cargo. (Art. 611)
 Not a mere agent under civil law; he is solidarily  Duties:
liable with the ship owner. 1. Bring on board the proper certificate and
 Powers and functions: documents and a copy of the Code of
1. Capacity to trade; Commerce;
2. Discharge duties of the captain, subject to 2. Keep a Log Book, Accounting Book and Freight
Art.609; Book;
3. Contract in the name of the owners with respect 3. Examine the ship before the voyage;
to repairs, details of equipment, armament, 4. Stay on board during the loading and
provisions of food and fuel, and freight of the unloading of the cargo;
vessel, and all that relate to the requirements of 5. Be on deck while leaving or entering the port;
navigation; 6. Protest arrivals under stress and in case of
4. Order a new voyage, make a new charter or insure shipwreck;
the vessel after obtaining authorization from the 7. Follow instructions of and render an
shipowner or if granted in certificate of accounting to the ship agent;
appointment. 8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by deceased
Civil Liabilities of the Shipowner And Ship Agent passengers and crew members;
1. All contracts of the captain, whether authorized or 10. Comply with the requirements of customs,
not, to repair, equip and provision the vessel; (Art. health, etc. at the port of arrival;
586) 11. Observe rules to avoid collision;
2. Loss and damage to the goods loaded on the 12. Demand a pilot while entering or leaving a
vessel without prejudice to their right to free port. (Art. 612)
themselves from liability by abandoning the vessel
to the creditors. (Art. 587)  A ship’s captain must be accorded a reasonable
measure of discretionary authority to decide what the
Duty of Ship Agent to Discharge the Captain and safety of the ship and of its crew and cargo specifically
Members of the Crew requires on a stipulated ocean voyage (Inter-Orient
 If the seamen contract is not for a definite period or Maritime Enterprises Inc. vs. CA).
voyage, he may discharge them at his discretion. (Art.
603)  No liability for the following:
 If for a definite period, he may not discharge them 1. Damages caused to the vessel or to the cargo
until after the fulfillment of their contracts, except on by force majeure;
the following grounds: 2. Obligations contracted for the repair,
a. Insubordination in serious matters; equipment, and provisioning of the vessel
b. Robbery; unless he has expressly bound himself
c. Theft; personally or has signed a bill of exchange or
d. Habitual drunkenness; promissory note in his name. (Art. 620)
e. Damage caused to the vessel or to its cargo
through malice or manifest or proven negligence. Solidary Liabilities of the Ship Agent/Shipowner
(Art. 605) for Acts Done by the Captain towards Passengers
and Cargoes
B. CAPTAINS AND MASTERS 1. Damages to vessel and to cargo due to lack of
 They are the chiefs or commanders of ships. skill and negligence;
 The terms have the same meaning, but are 2. Thefts and robberies of the crew;
particularly used in accordance with the size of the 3. Losses and fines for violation of laws;
vessel governed and the scope of transportation, i.e., 4. Damages due to mutinies;
large and overseas, and small and coastwise, 5. Damages due to misuse of power;
respectively. 6. For deviations;
 Nature of position (3-fold character): 7. For arrivals under stress;
1. General agent of the shipowner; 8. Damages due to non-observance of marine
2. Technical director of the vessel; regulations. (Art. 618)
3. Representative of the government of the
country under whose flag he navigates. C. OFFICERS AND CREW
 Qualifications: 1. Sailing Mate/First Mate
1. Filipino citizen; 2. Second Mate
2. Legal capacity to contract; 3. Engineers
3. Must have passed the required physical and 4. Crew
mental examinations required for licensing  No liability under the following circumstances:
him as such. (Art. 609) 1. If, before beginning voyage, captain attempts to
 Inherent powers: change it, or a naval war with the power to which
1. Appoint crew in the absence of ship agent; the vessel was destined occurs;
2. Command the crew and direct the vessel to its 2. If a disease breaks out and be officially declared
port of destination; an epidemic in the port of destination;
3. Impose correctional punishment on those who, 3. If the vessel should change owner or captain.
while on board vessel, fail to comply with his (Art. 647)
orders or are wanting in discipline;
4. Make contracts for the charter of vessel in the Sailing Mate/First Mate
absence of ship agent.  Second chief of the vessel who takes the place of
5. Supply, equip, and provision the vessel; and the captain in case of absence, sickness, or death and
6. Order repair of vessel to enable it to continue shall assume all of his duties, powers and
its voyage. (Art. 610) responsibilities. (Art. 627)
 Sources of funds to comply with the inherent  Duties:
powers of the captain (in successive order): 1. Provide himself with maps and charts with
1. From the consignee of the vessel; astronomical tables necessary for the
2. From the consignee of the cargo; discharge of his duties;
3. By drawing on the ship agent; 2. Keep the Binnacle Book;
4. By a loan on bottomry;
3. Change the course of the voyage on
consultation with the captain and the officers Complement of the Vessel
of the boat, following the decision of the  All persons on board, from the captain to the cabin
captain in case of disagreement; boy, necessary for the management, maneuvers, and
4. Responsible for all the damages caused to the service, thus including the crew, the sailing mates,
vessel and the cargo by reason of his engineers, stokers and other employees on board not
negligence. (Arts. 628 - 631) having specific designations.
 Does not include the passengers or the persons
Second Mate whom the vessel is transporting.
 Takes command of the vessel in case of the
inability or disqualification of the captain and the D. SUPERCARGOES
sailing mate, assuming in such case their powers and  Persons who discharges administrative duties
responsibilities. assigned to him by ship agent or shippers, keeping an
 Third in command account and record of transaction as required in the
 Duties: accounting book of the captain. (Art. 649)
1. Preserve the hull and rigging of the vessel;
2. Arrange well the cargo; E. PILOT
3. Discipline the crew;  A person duly qualified, and licensed, to conduct a
4. Assign work to crew members; vessel into or out of ports, or in certain waters.
5. Inventory the rigging and equipment of the  The term generally connotes a person taken on
vessel, if laid up. (Art. 632) board at a particular place for the purpose of
conducting a ship through a river, road or channel, or
Engineers from a port.
 Officers of the vessel but have no authority except  Master pro hac vice for the time being in the
in matters referring to the motor apparatus. When command and navigation of the ship.
two or more are hired, one of them shall be the chief  While in exercising his functions a pilot is in sole
engineer. command of the ship and supersedes the master for
 Duties: the time being in the command and navigation of the
1. In charge of the motor apparatus, spare parts, ship, the master does not surrender his vessel to the
and other instruments pertaining to the pilot and the pilot is not the master. There are
engines; occasions when the master may and should interfere
2. Keep the engines and boilers in good and even displace the pilot, as when the pilot is
condition; obviously incompetent or intoxicated (Far Eastern
3. Not to change or repair the engine without Shipping Company vs. CA).
authority of the captain;  Compulsory Pilotage – States possessing harbors
4. Inform the captain of any damage to the motor have enacted laws or promulgated rules requiring
apparatus; vessels approaching their ports to take on board pilots
5. Keep an Engine Book; licensed under the local laws. (Notes and Cases on the
6. Supervise all personnel maintaining the Law on Transportation and Public Utilities, Aquino, T.
engine. (Art. 632) & Hernando, R.P. 2004 ed. p. 518)
Crew Liablity of Pilot

 The aggregate of seamen who man a ship, or the GENERAL RULE: On compulsory pilotage grounds,
ship’s company. the Harbor Pilot is responsible for damage to a vessel
 Hired by the ship agent, where he is present and in or to life or property due to his negligence.
his absence, the captain hires them, preferring EXCEPT:
Filipinos, and in their absence, he may take in 1. Accident caused by force majeure or natural
foreigners, but not exceeding 1/5 of the crew. (Art. calamity provided the pilot exercised prudence and
634) extra diligence to prevent or minimize damages.
2. Countermand or overrule by the master of the
Classes of Seaman’s Contracts vessel in which case the registered owner of the vessel
1. By the voyage; is liable. (Sec.11, Art.III PPA Admin Order 03-85)
2. By the month; and
3. By share of profits or freightage. SPECIAL CONTRACTS OF MARITIME COMMERCE
1. Charter party
Just Causes for the Discharge of Seaman While 2. Bill of lading
Contract Subsists 3. Contract of transportation of passengers on
1. Perpetration of a crime; sea voyages
2. Repeated insubordination, want of discipline; 4. Loan on bottomry
3. Repeated incapacity and negligence; 5. Loan on respondentia
4. Habitual drunkenness; 6. Marine insurance
5. Physical incapacity;
6. Desertion. (Art. 637) CHARTER PARTY
 A contract by virtue of which the owner or agent
Rules in case of Death of a Seaman binds himself to transport merchandise or persons for
 The seaman’s heirs are entitled to payment as a fixed price.
follows:  A contract by which an entire ship, or some
1. If death is natural: principal part thereof is let/leased by the owner to
a. compensation up to time of death if engaged another person for a specified time or use. (Planters
on wage Products, Inc. vs. CA, 226 SCRA 476)
b. if by voyage - half of amount if death occurs on  Parties:
voyage out; and full, if on voyage in 1. Ship owner or ship agent
c. if by shares - none, if before departure; full, if 2. Charterer
after departure  Classes:
2. if death is due to defense of vessel - full payment; 1. Bareboat or demise – The charterer provides crew,
3. if captured in defense of vessel - full payment; food and fuel. The charterer is liable as if he were the
4. if captured due to carelessness - wages up to the owner, except when the cause arises from the
date of the capture. (Art. 645) unworthiness of the vessel. The shipowner leases to
the charterer the whole vessel, transferring to the Common carrier Common carrier is not
latter the entire command, possession and is converted to converted to a private carrier.
consequent control over the vessel’s navigation, private carrier.
including the master and the crew, who thereby
become the charter’s servants. It transforms a
common carrier into a private carrier. PERSONS WHO MAY MAKE A CHARTER
 The charterer becomes the owner of the vessel 1. Owner or owners of the vessel, either in whole
pro hac vice, just for that one particular purpose or in majority part, who have legal control and
only. Because the charterer is treated as owner possession of the vessel
pro hac vice, the charterer assumes the customary 2. Charterer may subcharter entire vessel to 3 rd
rights and liabilities of the shipowner to third person only if not prohibited in original
persons and is held liable for the expense of the charter. (Art.679)
voyage and the wages of the seamen. 3. Ship agent if authorized by the owner/s or
2. Contract of Affreightment – A contract whereby the given such power in the certificate of
owner of the vessel leases part or all of its space to appointment. (Art.598)
haul goods for others. 4. Captain in the absence of the ship agent or
 The shipowner retains the possession, consignee and only if he acts in accordance
command and navigation of the ship, the with the instructions of the agent or owner
charterer merely having use of the space in the and protects the latter’s interests. (Art.609)
vessel in return for his payment of the charter
hired. REQUISITES OF A VALID CHARTER PARTY
 Kinds: 1. Consent of the contracting parties
a. Time charter – vessel is chartered for a fixed 2. Existing vessel which should be placed at the
period of time or duration of voyage. disposition of the shipper
b. Voyage or trip charter – the vessel is leased for 3. Freight
one or series of voyages usually for purposes 4. Compliance with Art. 652 of the Code of
of transporting goods for charterer. Commerce
LEASE CHARTER PARTY
If for a definite Charterer may rescind charter
period, lessee party by paying half of the Clauses Which May Be Included In a Charter Party
cannot give up freightage agreed upon.
the lease by Jason clause Clause paramount or
paying a portion paramount clause
of the amount A stipulation in a A clause in a charter party
agreed upon. charter party that providing that the COGSA
If the leased The new owner is not compelled in case of a shall apply, even though the
property is sold to respect the charter party so maritime transportation is domestic,
to one who long as he can load the vessel accident for subject to the extent that
knows of the with his own cargo. (Art. 689) which the any term of the bill of lading
existence of the shipowner is not is repugnant to the COGSA
lease, the new responsible by or applicable law, then to
owner must law, contract or the extent thereof the
respect the lease. otherwise, the provision of the bill of lading
Civil law concept Commercial law concept cargo shippers, is void. (Pandect of
consignees or Commercial Law and
owners shall Jurisprudence, Justice Jose
contribute with Vitug, 1997 ed.)
CHARTER BILL OF LADING the shipowner in
PARTY general average.
An entire or More like a private receipt (Pandect of
complete which the captain gives to Commercial Law
contract. accredit goods received from and
persons Jurisprudence,
Consensual Real contract Justice Jose
contract Vitug, 1997 ed.)
BAREBOAT OR CONTRACT OF
DEMISE AFFREIGHTMENT (TIME OR Rights and Obligations of Parties
CHARTER VOYAGE CHARTER)
Charterer Owner remains liable as SHIPOWNER OR CHARTERER
becomes liable to carrier and must answer for SHIP AGENT
others caused by any breach of duty 1. If the vessel is 1. To pay the agreed charter
its negligence chartered wholly, price;
Charterer Charterer is not regarded as not to accept 2. To pay freightage on
regarded as owner. cargo from unboarded cargo;
owner pro hac others; 3. To pay losses to others for
vice for the 2. To observe loading uncontracted cargo
voyage represented and illicit cargo;
Owner of vessel The vessel owner retains capacity; 4. To wait if the vessel needs
relinquishes possession, command and 3. To unload repair;
possession, navigation of the ship cargo 5. To pay expenses for
command and clandestinely deviation. (Arts. 679-687)
navigation to placed
charterer 4. To substitute
another vessel if
load is less than
3/5 of capacity;
5. To leave the stipulated in the contract of affreightment to another
port if the vessel before the place of destination named in the
charterer does contract has been reached, or the transfer for further
not bring the transportation from one ship or conveyance to
cargo within the another.
lay days and  It is not dependent on the ownership of the
extra lay days transporting ships or in the change of carriers, but
allowed; rather on the fact of actual physical transfer of cargo
6. To place in a from one vessel to another.
vessel in a  If done without legal excuse, however competent
condition to and safe the vessel into which the transfer is made, is
navigate; a violation of contract and infringement of right of
7. to bring cargo shipper and subjects carrier to liability if freight is lost
to nearest neutral event by cause otherwise excepted. (Magellan
port in case of Manufacturing vs. CA, 201 SCRA 102)
war or blockade.
(Arts. 669-678) LOAN ON BOTTOMRY AND RESPONDENTIA
 A real, unilateral, aleatory contract, by virtue of
which one person lends to another a certain amount
Rescission of a Charter Party of money or goods on things exposed to maritime
At At Fortuitous causes risks, which amount, with its earnings, is to be
charterer’ shipowner (Art. 690) returned if the things are safely transported, and
s request ’s request which is lost if the latter are lost.
(Art 688) (Art. 689)
1. By 1. If the 1. War or interdiction LOAN ON LOAN ON RESPONDENTIA

abandonin extra lay of commerce; BOTTOMRY
g the days 2. Blockade; Definition
charter terminate 3. Prohibition to Loan made by Loan taken on security of the
and paying without receive cargo; shipowner or cargo laden on a vessel, and
half of the the cargo 4. Embargo; and ship agent repayable upon safe arrival of
freightage; being 5. Inability of the guaranteed by cargo at destination. (Art. 719)
2. Error in placed vessel to navigate. vessel itself and
tonnage or alongside repayable upon
flag; the vessel; arrival of vessel
3. Failure 2. Sale by at destination.
to place the owner (Art. 719)
the vessel of the Who may contract
at the vessel Shipowner or Only the owner of the cargo.
charterer’s before ship agent.
disposal; loading by Outside of the
4. Return the residence of the
of the charterer; owners - the
vessel due captain.
to pirates, Common elements:
enemies or 1. Exposure of security to marine peril;
bad 2. Obligation of the debtor conditioned only upon
weather; safe arrival of the security at the point of
5. Arrival destination.
at a port Forms:
for repairs. 1. Public instrument
2. Policy signed by the contracting parties and the
Terms: broker taking part therein
1. Primage - bonus to be paid to the captain after the 3. Private instrument (Art. 720)
successful voyage. Contents:
2. Demurrage – the sum fixed in the charter party as 1. Kind, name and registry of the vessel;
a remuneration to the owner of the ship for the 2. Name, surname and domicile of the captain;
detention of his vessel beyond the number of days 3. Names, surnames and domiciles of the borrower
allowed by the charter party for loading or and the lender;
unloading or for sailing. 4. Amount of the loan and the premium stipulated;
3. Deadfreight – the amount paid by or recoverable 5. Time for repayment;
from a charterer of a ship for the portion of the 6. Goods pledged to secure repayment;
ship’s capacity the latter contracted for but failed 7. Voyage during which the risk is run (Art.721)
to occupy.
4. Lay Days - days allowed to charter parties for
loading and unloading the cargo.
5. Extra Lay Days – days which follow after the lay BOTTOMRY/ ORDINARY
days have elapsed. RESPONDENTI LOAN
A (MUTUUM)
USUAL FORMS OF CONSUMMATING CONTRACTS Not subject to Subject to Usury
1. C.I.F. – cost, insurance and freight; Usury Law Law
2. F.O.B. - free on board;
3. F.A.S. - free alongside ship; and Liability of the Not subject to
4. C. & F. - cost and freight. borrower is any contingency
contingent on (absolute
TRANSSHIPMENT OF GOODS the safe arrival liability)
 The act of taking cargo out of one ship and loading of the vessel or
it in another, or the transfer of goods from the vessel cargo at
destination 2. Arrival Under Stress
3. Collision
4. Shipwreck
AVERAGE
The last lender The first lender  An extraordinary or accidental expense incurred
is a preferred is a preferred during the voyage in order to preserve the cargo,
creditor creditor vessel or both, and all damages or deterioration
suffered by the vessel from departure to the port of
destination, and to the cargo from the port of loading
WHEN LOAN ON BOTTOMRY OR RESPONDENTIA to the port of consignment. (Art. 806)
REGARDED AS SIMPLE LOAN  The person whose property has been saved must
1. Lender loaned an amount larger than the contribute to reimburse the damage caused or
value of the object due to fraudulent means expense incurred if the situation constitutes general
employed by the borrower. (ART.726) average.
2. Full amount of the loan is not used for the  Classes:
cargo or given on the goods if all of them could 1. Particular or Simple Average
not have been loaded, the balance will be 2. Gross or General Average
considered a simple loan. (ART.727)  Where both vessel and cargo are saved, it is general
3. If the effects on which the money is taken is average; where only the vessel or only the cargo is
not subjected to any risk. (ART.729) saved, it is particular average.
 Expenses incurred to refloat a vessel, which
Note: Under existing laws, the parties to a loan, accidentally ran aground, in order to continue its
whether ordinary or maritime, may agree on any rate voyage, do not constitute general average. Not only is
of interest. (CB Circular 905) there absence of a marine peril, common safety factor,
and deliberateness. It is the safety of the property,
and not the voyage, which constitutes the true
MARINE LOAN ON BOTTOMRY OR foundation of general average. (A. Magsaysay, Inc. vs.
INSURANCE RESPONDENTIA Agan, G.R.No. L-6393, Jan. 31, 1955)
Indemnity is paid Indemnity is paid in advance
after the loss has by way of a loan
occurred PARTICULAR OR GROSS OR
In case of loss of In case of loss of the vessel SIMPLE GENERAL
the vessel due to a due to a marine peril, the Definition
risk insured obligation of the borrower to Damages or Damages or
against, the pay is extinguished expenses caused expenses
obligation of the to the vessel or deliberately
insurer becomes cargo that did not caused in order
absolute inure to the to save the
Consensual Real contract common benefit, vessel, its cargo
contract and borne by or both from real
respective and known risk.
Hypothecary Nature of Bottomry/ Respondentia owners. (Art. (Art. 811)
GENERAL RULE: The obligation of the borrower to 809)
pay the loan is extinguished if the goods given as Requisites
security are absolutely lost by reason of an accident of 1. common
the sea, during the voyage designated, and if it is danger;
proven that the goods were on board. 2. deliberate
EXCEPTIONS: sacrifice;
1. Loss due to inherent defect; 3. success;
2. Loss due to the barratry on the part of the 4. proper
captain; formalities
3. Loss due to the fault or malice of the borrower; and legal
4. The vessel was engaged in contraband; and steps.
5. The cargo loaded on the vessel be different in from Liability
that agreed upon. The owner of the All the persons
goods which gave having an
Concurrence of Marine Insurance and Loan on rise to the interest in the
Bottomry/Respondentia expense or vessel and the
1. The insurable interest of the owner of a ship suffered the cargo therein at
hypothecated by bottomry is only the excess of damage shall the time of the
the value over the amount secured by bear this average. occurrence of the
bottomry. (Sec. 101, Insurance Code) (Art. 810) average shall
2. The value of what may be saved in case of contribute to
shipwreck shall be divided between the lender satisfy this
and the insurer in proportion to the interest of average. (Art.
each one. (Art. 735) 812)
 The insurers
Note: If a vessel is hypothecated by bottomry only the (Art.859) and
excess is insurable, since a loan on bottomry partakes lenders on
of the nature likewise of an insurance coverage to the bottomry and
extent of the loan accommodation. The same rule respondentia
would apply to the hypothecation of the cargo by shall likewise
respondentia. (Pandect of Commercial Law and contribute.
Jurisprudence, Justice Jose Vitug, 1997 ed.) (Art.732).
Number of interests involved
ACCIDENTS IN MARITIME COMMERCE Only one interest Several interests
1. Averages involved involved
Share in the damage or expense
100% share In proportion to DOMESTIC INTERNATIONA
the value of the L
owner’s property Deck cargo is Deck cargo is not
saved allowed allowed
Right to recover With shipper’s consent
No There may be General average Particular
reimbursement reimbursement average
Kinds (not exclusive) Without shipper’s consent
Art. 809 Art. 811 Captain is liable Captain is liable
Procedure for recovery
1. Assembly and ARRIVAL UNDER STRESS (ARRIBADA)
deliberation  The arrival of a vessel at the nearest and most
2. Resolution of convenient port instead of the port of destination, if
the captain during the voyage the vessel cannot continue the trip
3. Entry of the to the port of destination.
resolution in the
logbook When When Who bears
4. Detailed lawful unlawful expenses:
minutes
5. Delivery of the The 1. Lack of The
minutes to the inability to provisions shipowner
maritime judicial continue due to or ship
authority of the voyage is negligence agent is
first port, within due to to carry liable in
24 hours from lack of according case of
arrival, provisions, to usage unlawful
6. Ratification by well- and arrival
captain under founded customs; under
oath. (Arts. 813- fear of 2. Risk of stress. But
814) seizure, enemy not they shall
privateers, well known not be
GOODS NOT COVERED BY GENERAL AVERAGE pirates, or or manifest liable for
EVEN IF SACRIFICED accidents 3. Defect the
1. Goods carried on deck. (ART.855) of the sea of vessel damages
2. Goods not recorded in the books or records of disabling due to caused by
the vessel. (ART.855 (2)) it to improper reason of a
3. Fuel for the vessel if there is more than navigate. repair; and lawful
sufficient fuel for the voyage. (Rule IX, York- (Art. 819) 4. Malice, arrival.
Antwerp Rule) negligence, (Art. 821)
lack of
Jettison foresight or
 Act of throwing cargo overboard in order to lighten skill of
the vessel. captain.
 Order of goods to be cast overboard: (Art. 820)
1. Those which are on the deck, preferring the
heaviest one with the least utility and value;  It is the duty of the captain to continue the voyage
2. Those which are below the upper deck, without delay after the cause of the arrival under
beginning with the one with greatest weight stress has ceased failing in such duty renders him
and smallest value. (Art. 815) liable. However, in case the cause has been risk of
enemies, there must first be an assembly before
 Jettisoned goods are not res nullius nor deemed departure. (Art. 825)
“abandoned” within the meaning of civil law so as to  Steps:
be the object of occupation by salvage. (Pandect of 1. Captain should determine during the voyage if
Commercial Law and Jurisprudence, Justice Jose there is well founded fear of seizure, privateers
Vitug, 1997 ed.) and other valid grounds;
 In order that the jettisoned goods may be included 2. Captain shall assemble the officers and
in the gross or general average, the existence of the summon the persons interested in the cargo
cargo on board should be proven by means of the bill who may attend the meeting but without a
of lading. (Art. 816) right to vote;
3. The officers shall determine and agree if there
York-Antwerp (Y-A) Rules on Determining Liability is well-founded reason after examining the
for Averages With Regard To Deck Cargo circumstances. The captain shall have the
1. Deck cargo is allowed only in deciding vote;
domestic/coastwise/inter-island shipping, and is 4. The agreement shall be drafted and the proper
prohibited in international/overseas/foreign shipping. minutes shall be signed and entered in the log
2. If deck cargo is loaded with the consent of the book;
shipper on overseas trade, it must always contribute 5. Objections and protests shall likewise be
to general average, but should the same be jettisoned, entered in the minutes.
it would not be entitled to reimbursement because
there is violation of the Y-A Rules. COLLISION
3. If deck cargo is loaded with the consent of the  Impact of two vessels both of which are moving.
shipper on coastwise shipping, it must always
contribute to general average and if jettisoned would Allision
be entitled to reimbursement.  Impact between a moving vessel and a stationary
 Reason: In domestic shipping, voyages are usually short and one.
the seas are generally not rough. In overseas shipping, the vessel
is exposed for many days to perils of the sea. Nautical Rules to Determine Negligence
1. When two vessels are about to enter a port, the between the two vessels was at fault, both vessels
farther one must allow the nearer to enter first; if bear their respective damage, but both should be
they collide, the fault is presumed to be imputable solidarily liable for damage to the cargo of both
to the one who arrived later, unless it can be vessels.
proved that there was no fault on its part. 4. Third vessel at fault
2. When two vessels meet, the smaller should give  The third vessel will be liable for losses and
the right of way to the larger one. damages. (Art. 831)
3. A vessel leaving port should leave the way clear for 5. Fortuitous event/force majeure
another which may be entering the same port.  No liability. Each bears its own loss. (Art. 830)
4. The vessel which leaves later is presumed to have
collided against one which has left earlier.  The doctrine of res ipsa loquitur applies in case a
5. There is a presumption against the vessel which moving vessel strikes a stationary object, such as a
sets sail in the night. bridge post, dock, or navigational aid. (Far Eastern
6. There is a presumption against the vessel with Shipping v. CA, Luzon Stevedoring vs. CA)
spread sails which collides with another which is
at anchor and cannot move, even when the crew  Even if the cause of action against the common
of the latter has received word to lift anchor, when carrier is based on quasi-delict, the defense of due
there was not sufficient time to do so or there was diligence in the selection and supervision of
fear of a greater damage or other legitimate employees is unavailing in case of a maritime tort
reason. resulting in collision. It is not a civil tort governed by
7. There is a presumption against an improperly the Civil Code but a maritime one governed by Arts.
moored vessel. 826-839 of the Code of Commerce. (Manila Steamship
8. There is a presumption against a vessel which has vs. Insa Abdulhaman)
no buoys to indicate the location of its anchors to
prevent damage to vessels which may approach it.  Doctrine of Last Clear Chance and Rule on
9. Vessels must have “proper look-outs” or persons Contributory Negligence cannot be applied in collision
trained as such and who have no other duty aside cases because of Art.827 of the Code of Commerce.
therefrom. (Smith Bell v. CA) (Notes and Cases on the Law on Transportation and
Public Utilities, Aquino, T. & Hernando, R.P. 2004 ed.)
Nautical Rules as to Sailing Vessel and Steamship
1. Where a steamship and a sailing vessel are MARITIME PROTEST
approaching each other from opposite directions,  Condition precedent or prerequisite to recovery of
or on intersecting lines, the steamship from the damages arising from collisions and other maritime
moment the sailing vessel is seen, shall watch accidents.
with the highest diligence her course and  It is a written statement made under oath by the
movements so as to be able to adopt such timely captain of a vessel after the occurrence of an accident
means of precaution as will necessarily prevent or disaster in which the vessel or cargo is lost or
the two boats from coming in contact. damaged, with respect to the circumstances attending
2. The sailing vessel is required to keep her course such occurrence, for the purpose of recovering losses
unless the circumstances require otherwise. and damages.
 Excuses for not filing protest: 1) where the
Zones of Time in the Collision of Vessels interested person is not on board the vessel; and 2) on
1. First zone – all time up to the moment when risk collision time, need not be protested. (Art. 836)
of collision begins.  Cases applicable:
 No rule is as yet applicable for none is necessary. 1. Collision (Art. 835);
2. Second zone – time between moment when risk of 2. Arrival under stress (Art. 612(8));
collision begins and moment it becomes a practical 3. Shipwrecks (Arts. 612(15), 843);
certainty. 4. Where the vessel has gone through a
 It is in this period where conduct of the vessels is hurricane or when the captain believes that
primordial. It is in this zone that vessels must strictly the cargo has suffered damages or averages
observe nautical rules, unless a departure therefrom (Art. 624).
becomes necessary to avoid imminent danger.  Who makes: Captain
3. Third zone – time when collision is certain and  When made: within 24 hours from the time the
time of impact. collision took place.
 An error in this zone would no longer be legally  Before whom made: competent authority at the
consequential. point of collision or at the first port of arrival, if in the
 Error in Extremis - sudden movement made by a Philippines and to the Philippine consul, if the
faultless vessel during the third zone of collision with collision took place abroad. (Art. 835)
another vessel which is at fault during the 2nd zone.
Even if such sudden movement is wrong, no SHIPWRECK
responsibility will fall on said faultless vessel. (Urrutia  It is the loss of the vessel at sea as a consequence
and Co. v. Baco River Plantation Co., 26 PHIL 632) of its grounding, or running against an object in sea
or on the coast. It occurs when the vessel sustains
Cases Covered By Collision and Allision injuries due to a marine peril rendering her incapable
1. One vessel at fault of navigation.
 Vessel at fault is liable for damage caused to  If the wreck was due to malice, negligence or lack of
innocent vessel as well as damages suffered by the skill of the captain, the owner of the vessel may
owners of cargo of both vessels. (Art. 826) demand indemnity from said captain. (Art. 841)
2. Both vessels at fault  The rules on collision or allision, as may be
 Each vessel must bear its own loss, but the pertinent, can equally apply to shipwrecks.
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art. 827) SPECIAL CONCEPTS
3. Vessel at fault not known ARRASTRE SERVICE
 Each vessel must bear its own loss, but the  A contract for the unloading of goods from a vessel.
shippers of both vessels may go against the  Applicability: Overseas trade only. (Commercial
shipowners who will be solidarily liable. (Art. 828) Law Review, C. Villanueva, 2004 ed.)
 Doctrine of Inscrutable Fault – In case of  Significance: When a person brings in cargo from
collision where it cannot be determined which abroad, he cannot unload and deliver the cargo by
himself. The unloading must be done by the arrastre NOTICE OF DAMAGE (SEC. 3(6))
operator, which will then deliver the cargo to the  Rules:
importer. (Commercial Law Review, C. Villanueva, a. Patent damage: shipper should file a claim with
2004 ed.) the carrier immediately upon delivery
 Nature of business: It is a public utility, b. Latent damage: shipper should file a claim with
discharging functions which are heavily invested with the carrier within three days from delivery.
public interest.
 Liability: Note: The filing of a notice of claim is not a condition
1. Similar to a warehouseman (Lua Kian v. Manila precedent.
Railroad)
2. Similar to a common carrier (Northern Motors v. PRESCRIPTIVE PERIOD
Prince Line)  Action for loss or damage to the cargo should be
3. Solidary liability with the common carrier brought within one year after:
a. Delivery of the goods (delivered but damaged
Note: In order that the arrastre operator may be held goods); or
liable, the consignee must prove that the damage was b. The date when the goods should have been
due to the negligence and while the goods are in the delivered (non-delivery). (Sec. 3[6])
custody of the arrastre operator. (Hartford Fire
Insurance v. E. Razon, Inc.)  “Loss or Damage” as applied to the COGSA
contemplates a situation where no delivery at all was
STEVEDORING SERVICE made by the shipper of the goods because the same
 The carriage of goods from the warehouse or pier to had perished, gone out of commerce, or disappeared
the holds of the vessel. (Chief of Staff vs. CIR) in such a way that their existence is unknown or they
 As understood in the port business, the term cannot be recovered. Thus, it is inapplicable in case of
consists of the handling of cargo from the hold of the misdelivery or conversion. (Ang vs. American
ship to the dock, in case of pier-side unloading; or to Steamship Agencies Inc.) and damage arising from
a barge, in case of unloading at sea. (Anglo-Fil delay or late delivery (Mitsui O.S.K. Lines Ltd. vs. CA).
Trading Corp. vs. Lazaro) In such instance the, Civil Code rules on prescription
 The loading on the ship of outgoing cargo is also shall apply.
part of stevedoring work. (Ibid.)
 The one-year prescriptive period is suspended by:
CONTAINERIZATION/ “SAID-TO-CONTAIN”/ 1. The express agreement of the parties
“SHIPPER’S LOAD AND COUNT” SYSTEM (Universal Shipping Lines, Inc. vs. IAC, 188
 System whereby the shipper loads his cargoes in a SCRA 170)
specially designed container, seals the container and 2. The filing of an action in court until it is
delivers it to the carrier for transportation. The carrier dismissed. (Stevens & Co. vs. Nordeutscher
does not participate in the counting of the Lloyd, 6 SCRA 180)
merchandise for loading into the container, the actual
loading, and the sealing of the container. (US Lines v.  The one-year period shall run from delivery of the
Comm. Of Customs, ICTSI v. Prudential Guarantee) last package and is not suspended by extrajudicial
 The matter of quantity, description and conditions demand. (Dole Phils.,Inc. vs. Maritime Co.,148 SCRA
of the cargo inside the container is the sole 118)
responsibility of the shipper, unless there is
stipulation to the contrary. (US Lines vs. Comm. Of  The one-year period shall run from delivery to the
Customs, Reyma Brokerage v. Phil. Home Assurance) arrastre operator and not to the consignee. (Union
Carbide Phils, Inc. vs. Manila Railroad Co.,SCRA 359)
Note: In order to attribute to the carrier any damage
to the shipment that may be found, inspection of the  The insurer exercising its right of subrogation is
goods should be done at pier-side. (Bankers vs. CA) bound by the one-year prescriptive period. However,
it does not apply to the claim against the insurer for
III. CARRIAGE OF GOODS BY SEA ACT/COGSA the insurance proceeds. (Fil. Merchants Ins. Co. vs.
(C.A. No. 65) Alejandro; Mayer Steel Pipe Corp. vs. CA)
APPLICABILITY IV. WARSAW CONVENTION OF 1929 (WC)

 The transportation must be:
1. Water/maritime transportation; PURPOSE: To protect the emerging air transportation
2. for the carriage of goods; and industry and to secure the uniformity of recovery by
3. overseas/international/foreign (from foreign the passengers.
port to Philippine port). APPLICABILITY
 It can be applied in domestic sea transportation if  The transportation must be:
agreed upon by the parties. (Clause paramount or 1. International transportation;
paramount clause) 2. Air transportation; and
3. Carriage of passengers, baggage or goods.
IMPORTANT FEATURES:  The WC shall also apply to fortuitous
1. Amount of carrier’s liability transportation by aircraft performed by an air
2. Notice of damage transportation enterprise.
3. Prescriptive period
 International transportation - any transportation in
AMOUNT OF CARRIER’S LIABILITY which the place of departure and the place of
 Under the Sec. 4(5), the liability limit is set at $500 destination are situated either:
per package or customary freight unit unless the 1. Within the territories of two High Contracting
nature and value of such goods is declared by the Parties regardless of whether or not there be a
shipper. This is deemed incorporated in the bill of break in the transportation or transshipment, or
lading even if not mentioned in it. (Eastern Shipping 2. Within the territory of a single High Contracting
vs. IAC, 150 SCRA 463) Party, if there is an agreed stopping place within a
 Note that Art. 1749, NCC applies to domestic/inter- territory subject to the sovereignty, mandate or
island/coastwise trade. authority of another power, even though that
power is not a party to the Convention. (“round
trip”, Am. Jur.) 3. Hand-carried baggage
 $1000/passenger
 Transportation to be performed by several 4. Goods to be shipped
successive air carriers shall be deemed to be one GENERAL RULE: $20 per kilogram
undivided transportation, if it has been regarded by EXCEPTION: In case of special declaration of value
the parties as a single operation, whether it has been and payment of a supplementary sum by consignor,
agreed upon under the form of a single contract or of carrier is liable to not more than the declared sum
a series of contracts, and it shall not lose its unless it proves the sum is greater than actual value.
international character merely because one contract
or a series of contracts is to be performed entirely  An agreement relieving the carrier from liability or
within a territory subject to the sovereignty, fixing a lower limit is null and void. (Art. 23)
suzerainty, mandate, or authority of the same High  Carrier is not entitled to the foregoing limit if the
Contracting Party. (Art. 1 Sec.3) damage is caused by willful misconduct or default on
its part. (Art. 25)
WHEN INAPPLICABLE
1. When public policy is contradicted;  Thus, the WC does not operate as an exclusive
2. If the requirements under the Convention are enumeration of the instances of an absolute limit of
not complied with. the extent of liability. It does not preclude the
application of the Civil Code and other pertinent local
IMPORTANT CONCEPTS: laws. It does not regulate or exclude liability for other
1. Transportation documents breaches of contract by the carrier, or misconduct of
a. Passenger ticket its employees, or for some particular or exceptional
b. Baggage check type of damage. (Alitalia vs. CA)
c. Air way bill
2. Liability of the carrier for damages  In PanAm v. IAC, the WC was applied as regards
a. Death or injury to passengers the limitation on the carrier’s liability, there being a
b. Loss or damage to baggage or goods simple loss of baggage without any improper conduct
c. Delay on the part of the officials or employees of the airline
3. Successive carrier agreement or other special injury sustained by the passenger.
4. Jurisdiction
5. Combined transportation agreement  In KLM Royal v. Tuller, the WC has invariably been
held inapplicable, or as not restrictive of the carrier’s
PASSENG BAGGAGE AIR liability, where there was satisfactory evidence of
ER CHECK WAYBILL malice or bad faith attributable to its officers and
TICKET employees. (Alitalia vs. IAC)
Passenger Checked- Goods to
in baggage be shipped ACTION FOR DAMAGES
1. Notice of claim
LIABILITY OF CARRIER FOR DAMAGES  A written complaint must me made within:
1. Death or injury of a passenger if the accident a. 3 days from receipt of baggage
causing it took place on board the aircraft or in the b. 7 days from receipt of goods
course of its operations of embarking or c. In case of delay, 14 days from receipt of
disembarking; (Art. 17) baggage/goods
2. Destruction, loss or damage to any baggage or  The complaint is a condition precedent. Without
goods, if it took place during the “transportation by the complaint, the action is barred except in case of
air”; (Art. 18) and fraud on the part of the carrier. (Art. 26)
 Transportation by air – The period during which the
baggage or goods are in the charge of the carrier, 2. Prescriptive period
whether in an airport or on board an aircraft, or, in  Action must be filed within 2 years from:
case of a landing outside an airport, in any place a. date of arrival at the destination
whatsoever. b. date of expected arrival
It includes any transportation by land or water c. date on which the transportation stopped.
outside an airport if such takes place in the (Art. 29)
performance of a contract for transportation by air,
for the purpose of loading, delivery, or transshipment.  In United Airlines vs. Uy the two-year prescriptive
3. Delay in the transportation of passengers, baggage period was not applied where the airline employed
or goods. (Art. 19) delaying tactics.
Note: The Hague Protocol amended the WC by RULE IN CASE OF VARIOUS SUCCESSIVE
removing the provision that if the airline took all CARRIERS
necessary steps to avoid the damage, it could 1. Carriage of passengers
exculpate itself completely (Art. 20(1)). (Alitalia vs. GENERAL RULE: Action is filed only against the
IAC, 192 SCRA 9) carrier in which the accident or delay occurred.
EXCEPTION: Agreement or contract whereby the
LIMIT OF LIABILITY (Art. 22, as amended by first carrier assumed liability for the whole journey.
Guatemala Protocol, 1971; Alitalia vs. IAC) 2. Carriage of baggage or goods
1. Passengers a. Passenger or consignor can file an action
GENERAL RULE: $100,000 per passenger against the first carrier and the carrier in
EXCEPTION: Agreement to a higher limit which the damage occurred
b. Passenger or consignee can file an action
against the last carrier and the carrier in
which the damage occurred.
2. Checked-in baggage  These carriers are jointly and severally liable.
GENERAL RULE: $20 per kilogram (Art. 30)
EXCEPTION: In case of special declaration of value
and payment of a supplementary sum by consignor,  A contract of international carriage by air, although
carrier is liable to not more than the declared sum performed by different carriers under a series of
unless it proves the sum is greater than actual value. airline tickets constitutes a single operation. Members
of the International Air Transportation Association
(IATA) are under a general pool partnership agreement  The intention of those in charge must be
wherein they act as agent of each other in the ascertained. If those in charge left with the intention
issuance of tickets to contracted passengers to boost of returning, or of procuring assistance, the property
ticket sales worldwide and at the same time provide is not derelict, but if they quitted the property with
passengers easy access to airlines which are the intention of finally leaving it, it is derelict and a
otherwise inaccessible in some parts of the world. change of their intention and an attempt to return will
(American Airlines vs. CA) not change its nature (Erlanger & Galinger vs.
Swedish East Asiatic Co. Ltd.).
 Under a general pool partnership agreement, the
ticket-issuing airline is the principal in a contract of  If it is clear that the intention to return is slight,
carriage while the endorsee-airline is the agent. The the salvage which was done thereafter is considered
obligation of the former remained and did not cease valid. (Notes and Cases on the Law on Transportation
even when the breach occurred not on its own flight and Public Utilities, Aquino, T. & Hernando, R.P. 2004
but on that of another airline which had undertaken ed. p. 616)
to carry the passengers to one of their destinations.
(China Airlines vs. Chiok) CONTRACT OF TOWAGE
 A contract whereby one vessel, usually motorized,
JURISDICTION pulls another, whether loaded or not with
 At the option of the plaintiff, the action for damages merchandise, from one place to another, for a
may be filed in the: compensation. It is a contract for services rather
a. Court of domicile of the carrier; than a contract of carriage.
b. Court of its principal place of business;
c. Court where it has a place of business through
which the contract has been made; or SALVAGE TOWAGE
d. Court of the place of destination. (Art. 28(1)) Governed by Governed by
NOTE: It is the passenger’s “ultimate destination” not special law (Act Civil Code on
“an agreed stopping place” that determines the No. 2616) contract of lease
country where suit is to be filed. Requires Success is not
 The forum of action provided in Art. 28(1) is a success, required
matter of jurisdiction rather than of venue. (Santos III otherwise no
vs. Northwest; 2A C.J.S.) payment
Must be done Only the
V. SALVAGE LAW (Act No. 2616) with the consent consent of the
of the tugboat owner is
SALVAGE captain/crewme needed
 Two concepts: n
1. Services one person renders to the owner of a ship Vessel must be Vessel need not
or goods, by his own labor, preserving the goods or involved in an be involved in an
the ship which the owner or those entrusted with the accident accident
care of them have either abandoned in distress at sea, Fees distributed Fees belong to
or are unable to protect or secure. among crewmen the tugboat
2. Compensation allowed to persons by whose owner
voluntary assistance a ship at sea or her cargo or
both have been saved in whole or in part from
RULES ON SALVAGE REWARD
impending sea peril, or such property recovered from
1. The reward is fixed by the RTC judge in the
actual peril or loss, as in cases of shipwreck, derelict
absence of agreement or where the latter is
or recapture.
excessive. (Sec. 9)
 Requisites:
2. The reward should constitute a sufficient
1. Valid object of salvage;
compensation for the outlay and effort of the
2. Object must have been exposed to marine peril
salvors and should be liberal enough to offer an
(not perils of the ship);
inducement to others to render services in similar
3. Services rendered voluntarily (neither an
emergencies in the future.
existing duty nor out of a pre-existing
3. If sold (no claim being made within 3 months from
contract);
publication), the proceeds, after deducting
4. Services are successful, total or partial.
expenses and the salvage claim, shall go to the
 Subjects of Salvage:
owner; if the latter does not claim it within 3
1. Ship itself;
years, 50% of the said proceeds shall go to the
2. Jetsam – goods which are cast into the sea, and
salvors, who shall divide it equitably, and the
there sink and remain under water;
other half to the government. (Secs. 11-12)
3. Floatsam or Flotsam – goods which float upon the
4. If a vessel is the salvor, the reward shall be
sea when cast overboard;
distributed as follows:
4. Ligan or Lagan – goods cast into the sea tied to a
a. 50% to the shipowner;
buoy, so that they may be found again by the owners
b. 25% to the captain; and
(p.173, Judge Diaz).
 Persons who have no right to a reward for
salvage:
c. 25% to the officers and crew in proportion to
1. Crew of the vessel saved;
their salaries. (Sec. 13)
2. Person who commenced Salvage in spite of
opposition of the Captain or his representative;
 Taking passengers from a sinking ship, without
3. In accordance with Sec. 3 of the Salvage Law, a
rendering any service in rescuing the vessel, is not a
person who fails to deliver a salvaged vessel or cargo
salvage service, being a duty of humanity and not for
to the Collector of Customs.
reward.
 Derelict – a ship or her cargo which is abandoned
VI. PUBLIC SERVICE ACT
and deserted at sea by those who are in charge of it,
(C.A. No. 146)
without any hope of recovering it, or without any
intention of returning to it.
PURPOSES:
1. To secure adequate, sustained service for the the public highways. Revocation of this certificate
public at the least possible cost; deprives him of no vested right. New and additional
2. To protect the public against unreasonable burdens, alteration of the certificate, or even
charges and poor, inefficient service; revocation or annulment thereof is reserved to the
3. To protect and secure investments in public State. (Luque vs. Villegas, 30 SCRA 408)
services;
4. To prevent ruinous competition.  It is a “property” and has a considerable value and
can be the subject of sale or attachment. (Cogeo-
AUTHORITY TO OPERATE PUBLIC SERVICES Cubao Operators and Drivers Assn. vs. CA, 207 SCRA
GENERAL RULE: No public service shall operate 343, Raymundo vs. Luneta Motor Co.)
without having been issued a certificate of public
convenience or a certificate of public convenience and REQUREMENTS FOR GRANTING CPC OR CPCN
necessity. 1. Applicant must be a citizen of the Philippines or a
EXCEPTIONS: corporation or entity 60% of the capital of which is
1. Warehouses; owned by such citizens;
2. Animal drawn vehicles and bancas moved by 2. Applicant must prove public necessity;
oar or sail; 3. Applicant must prove that the operation of the
3. Airships, except for the fixing of maximum public service proposed and the authorization to
rates for fare and freight; do business will promote the public interest on a
4. Radio companies, except for rates fixing; proper and suitable manner;
5. Public services owned or operated by the 4. Applicant must have sufficient financial capability
government, except as to rates fixing; to undertake the proposed services and meeting
6. Ice plants; and the responsibilities incident to its operation.
7. Public markets.
PUBLIC SERVICE POWERS POWERS EXERCISABLE

 A person who owns, operates, manages or controls REQUIRING WITHOUT PRIOR
in the Philippines for hire or compensation, with PRIOR NOTICE NOTICE AND HEARING
general or limited clientele, whether permanent, AND HEARING
occasional or accidental, and done for general
business purposes, any common carrier or public
utility, ice plants, power and water supplies, 1. Issuance of 1. Investigation any
communication and similar public services. (Sec. 13b, CPC or CPCN; matter concerning public
CA 146) 2. Fixing of rates, service;
 A casual or incidental service devoid of public tolls, and charges; 2. Requiring operators
character and interest is not brought within the 3. Setting up of to furnish safe, adequate,
category. The question depends on such factors as the standards and and proper service;
extent of services, whether such person or company classifications; 3. Requiring public
has held himself or itself out as ready to serve the 4. Establishment services to pay expenses
public or a portion of the public generally. (Luzon of rules to secure of investigation;
Stevedoring vs. PSC) accuracy of all 4. Valuation of
meters and all properties of public
NOTE: The Public Service Commission created under measuring utilities;
the Public Service Law has already been abolished appliances; 5. Examination and test
under P.D. No. 1 and other issuances. It has been 5. Issuance of of measuring appliances;
replaced by the following government agencies: LTO; orders requiring 6. Grant of special
LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and establishment or permits to make extra or
MIA. maintenance of special trips in territories
extension of specified in the
facilities; certificate;
CERTIFICATE CERTIFICATE 6. Revocation, or 7. Uniform accounting
OF PUBLIC OF PUBLIC modification of CPC system and furnishing of
CONVENIENCE CONVENIENCE or CPCN; annual reports;
(CPC) AND 7. Suspension of 8. Compelling
NECESSITY CPC or CPCN, compliance with the laws
(CPCN) except when it is and regulations.
An An necessary to avoid
authorization authorization serious and
issued by the issued by the irreparable damage
appropriate appropriate or inconvenience to
government government the public or
agency for the agency for the private interest, in
operation of operation of which case, a
public services public service suspension not
for which no for which a prior more than 30 days
franchise, either franchise is may be ordered,
municipal or required by law; prior to the
legislative, is e.g. telephone hearing. (Soriano v.
required by law, and other Medina, 164 SCRA
e.g., common services. 36)
carriers.
UNLAWFUL ACTS OF PUBLIC UTILITY COMPANIES
 A CPC or a CPCN constitutes neither a franchise 1. Engagement in public service business without
nor a contract, confers no property right, and is a first securing the proper certificate;
mere license or a privilege. The holder of said 2. Providing or maintaining unsafe, improper or
certificate does not acquire a property right in the inadequate service as determined by the proper
route covered thereby. Nor does it confer upon the authority;
holder any proprietary right or interest or franchise in
3. Committing any act of unreasonable and unjust responsibility by proving that a third person is the
preferential treatment to any particular person, actual and real owner Reason: It would be easy for
corporation or entity as determined by the proper him, by collusion with others or otherwise, to transfer
authority; the responsibility to an indefinite person, or to one
4. Refusing or neglecting to carry public mail upon who possesses no property with which to respond
request. (Secs. 18 and 19) financially for the damage or injury done. (Erezo, et al.
vs. Jepte 102 Phil 103).
ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint rates; KABIT SYSTEM
2. Establish and operate new units;  A system whereby a person who has been granted a
3. Issue free tickets; certificate of public convenience allows other persons
4. Issue any stock or stock certificates representing who own motor vehicles to operate under such
an increase of capital; license, for a fee or percentage of such earnings. It is
5. Capitalize any franchise in excess of the amount void and inexistent under Art. 1409, Civil Code.
actually paid to the Government;  Effects:
6. Sell, alienate, mortgage or lease property, 1. The transfer, sale, lease or assignment of the
certificates or franchise. privilege granted is valid between the contracting
parties but not upon the public or third persons.
 Under Sec. 20(g) of C.A. No. 146, the sale, etc. may (Gelisan vs. Alday, 154 SCRA 388)
be negotiated and completed before the approval by
the proper authority. Its approval is not a condition 2. The registered owner is primarily liable for all the
precedent to the validity of the contract. The approval consequences flowing from the operations of the
is necessary only to protect public interest. carrier.
 The public has the right to assume that the
PRIOR OPERATOR/OLD OPERATOR RULE registered owner is the actual or lawful owner
 The rule allowing an existing franchised operator to thereof. It would be very difficult and often
invoke a preferential right within the authorized impossible, as a practical matter, for the public to
territory as long as he renders satisfactory and enforce their rights of action that they may have
economical service. for injuries inflicted by the vehicle if they should
 The policy is not to issue a certificate to a second be required to prove who the actual owner is.
operator to cover the same field and in competition (Benedicto vs. IAC, 187 SCRA 547)
with a first operator who is rendering sufficient, 3. The thrust of the law in enjoining the kabit system
adequate and satisfactory service. The prior operator is to identify the person upon whom responsibility
must first be given an opportunity to improve its may be fixed with the end in view of protecting the
service, if inadequate or deficient. riding public (Lim vs. CA 373 SCRA 394).
 Purpose: To prevent ruinous and wasteful 4. The registered owner cannot recover from the
competition in order that the interests of the public actual owner and the latter cannot obtain transfer
would be conserved and preserved. of the vehicle to himself, both being in pari delicto.
(Teja Marketing vs. IAC)
 It subordinates the prior applicant rule which gives 5. For the better protection of the public, both the
the first applicant priority only if things and registered owner and the actual owner are jointly
circumstances are equal. and severally liable with the driver. (Zamboanga
Transportation Co. vs. CA)
 Where the operator either fails or neglects to make
the improvement or effect the increase in services,
especially when given the opportunity, new operators
should be given the chance to give the services needed
by the public.
PRIOR APPLICANT RULE

 Presupposes a situation when two interested
persons apply for a certificate to operate a public
utility in the same community over which no person
has as yet granted any certificate. If it turns out, after
the hearing, that the circumstances between the two
applicants are more or less equal, then the applicant
who applied ahead of the other, will be granted the
certificate.
RATE-FIXING POWER
 The rate to be fixed must be just, founded upon
conditions which are fair and reasonable to both the
owner and the public.
 A rate is just and reasonable if it conforms to the
following requirements:
1. One which yields to the carrier a fair return
upon the value of the property employed in
performing the service; and
2. One which is fair to the public for the service
rendered.
REGISTERED OWNER RULE

 The registered owner of a certificate of public
convenience is liable to the public for the injuries or
damages suffered by third persons caused by the
operation of said vehicle, even though the same had
been transferred to a third person.
 The registered owner is not allowed to escape

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San Beda College of Law 1

MEMORY AID IN COMMERCIAL LAW

REQUIREMENT OF EXTRAORDINARY DILIGENCE 2. ACTS OF PUBLIC ENEMY

CARRIAGE OF GOODS CARRIAGE OF

COMMERCIAL LAW COMMITTEE

From the time the goods are The duty of a

Art.1735 Civil Code Art.1755 Civil Code

COMMERCIAL LAW COMMITTEE

COMMERCIAL LAW COMMITTEE

1. Reduction of degree of Stipulation limiting

 The diligence required in

COMMERCIAL LAW COMMITTEE

3. Culpa criminal (criminal negligence) A. OVERLAND TRANSPORTATION

Crew Liablity of Pilot

1. By 1. If the 1. War or interdiction LOAN ON LOAN ON RESPONDENTIA

APPLICABILITY IV. WARSAW CONVENTION OF 1929 (WC)

PUBLIC SERVICE POWERS POWERS EXERCISABLE

PRIOR APPLICANT RULE

REGISTERED OWNER RULE

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