A.

MARITIME COMMERCE
(Arts. 573-869)
R.A. 6106 P.D. 1521
IMPORTANT CONCEPTS:
1. Merchant vessel Effectivity date
2. Maritime lien and Preference of Credit
3. Doctrine of limited liability 1969 1978
4. Causes of revocation of voyage
Applicability
5. Participants in maritime commerce
6. Charter party
Overseas shipping only Both domestic and overseas
7. Loans on bottomry and respondentia
shipping
8. Accidents in maritime commerce
Kind of sale
MARITIME/ADMIRALTY LAW
☞ It is the system of laws which particularly relates to the affairs and
Judicial Judicial and extrajudicial
business of the sea, to ships, their crews and navigation, and to maritime
conveyance of persons and property. (Notes and Cases on the Law on
Order of Preference
Transportation and Public Utilities, Aquino & Hernando, citing Francisco,
p.254)
A preferred mortgage shall have The preferred mortgage lien shall
priority over all claims against the have priority over all claims against
✍ Maritime laws apply only to maritime trade and sea voyages. (Pandect
vessel, except the following the vessel, except the following
of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997 ed.)
preferences in the order stated: preferences in the order stated:
1. Judicial costs of the proceedings; 1. Expenses and fees allowed and
✍ Arrastre service is not maritime in character. It refers to a contract for
2. Taxes due the Philippine costs taxed by the court and taxes
the unloading of goods from a vessel. (ICTSI vs. Prudential Guarantee,
Government; due to the Government;
320 SCRA 244)
3. Salaries and wages of the 2. Crew’s wages;
Captain and Crew of the vessel 3. General average;
CHARACTERISTICS OF MARITIME TRANSACTION
during its last voyage; 4. Salvage, including contract
1. Real - similar to transactions over real property with respect to
4. General average or salvage salvage;
effectivity against third persons which is done through registration. including contract salvage, 5. Maritime liens arising prior in
(Rubiso vs. Rivera, 37 Phil. 72). The evidence of real nature is shown
bottomry loans, and indemnity due time to the recording of the
by: 1) the limitation of the liability of the agents to the actual value of shippers for the value of goods preferred mortgage;
the vessel and the freight money; and 2) the right to retain the cargo
transported but which were not 6. Damages arising out of tort; and
and embargo and detention of the vessel (Luzon Stevedoring Corp v. delivered to the consignee; 7. Preferred mortgage registered
CA, 156 SCRA 169);
5. Costs of repair and equipment of prior in time.
2. Hypothecary - the liability of the owner of the value of the vessel is
the vessel, and provisioning of
limited to the vessel itself (Doctrine of Limited Liability).
food, supplies and fuel during its
last voyage; and
✍ The real and hypothecary nature of maritime law simply means that
6. Preferred mortgages registered
the liability of the carrier in connection with losses related to maritime prior in time.
contracts is confined to the vessel, which stands as the guaranty for
their settlement. (Aboitiz Shipping Corp. vs. General Accident Fire and
Life Assurance Corp. 217 SCRA 359).

MERCHANT VESSEL
☞ Vessel engaged in maritime commerce, whether foreign or otherwise.
(Bar Review Materials in Commercial Law, Jorge Miravite, 2002 ed.)
☞ Constitutes property which may be acquired and transferred by any
of the means recognized by law. They shall continue to be considered
as personal property. (Arts. 573, 585)
☞ They are susceptible to maritime liens such as for the repair,
equipping and provisioning of the vessel in the preparation of a voyage,
as well as mortgage liabilities, in satisfaction of which a vessel may be
validly arrested and sold. (Ship Mortgage Decree of 1978)
MARITIME LIEN
☞ It constitutes a present right of property in the ship, a jus in re, to be
afterward enforced in admiralty by process in rem. (PNB vs. CA, 337
SCRA 381)
☞ If the maritime lien arose prior to the recording of a preferred
mortgage, it shall have priority over the said mortgage lien. (PNB vs.
CA, 337 SCRA 381)
ORDER OF PREFERENCE IN CASE OF SALE OF VESSEL
✍ Effect of sale: All pre-existing claims in the vessel are terminated.
They will then be satisfied from the proceeds of the sale subject to the
order of preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
☞ Cases where applicable:
1. Art. 587 – civil liability for indemnities to third persons
2. Art. 590 – indemnities from negligent acts of the captain (not
the shipowner or ship agent)
3. Art. 837 – collision
4. Art. 643 – liability for wages of the captain and the crew and
for advances made by the ship agent if the vessel is lost by
shipwreck or capture
☑GENERAL RULE: The liability of shipowner and ship agent is limited to
the amount of interest in said vessel such that where vessel is entirely
lost, the obligation is extinguished. (Luzon Stevedoring v. Escano, 156
SCRA 169) The interest extends to: 1) the vessel itself; 2) equipments;
3) freightage; and 4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)
☑EXCEPTIONS:
1. Claims under Workmen’s Compensation (Abueg vs. San Diego 77
Phil 730);
2. Injury or damage due to shipowner or to the concurring negligence
of the shipowner and the captain;
3. The vessel is insured (Vasquez vs. CA 138 SCRA 553).
4. Expenses for repair on vessel completed before loss; PARTICIPANTS IN MARITIME COMMERCE
5. In case there is no total loss and the vessel is not 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 liability of the D. Supercargoes
shipowner. The only instance were abandonment is dispensed with is E. Pilot
when the vessel is entirely lost (Luzon Stevedoring vs. CA 156 SCRA
169). A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON VESSEL ☞ Person who has possession, control and management of the vessel
☞ Instances: and the consequent right to direct her navigation and receive freight
1. In case of civil liability from indemnities to third persons (Art. 587); earned and paid, while his possession continues.
2. In case of leakage of at least ¾ of the contents of a cargo containing
liquids (Art. 687); and Ship agent (naviero)
3. In case of constructive loss of the vessel (Sec. 138, Insurance Code). ☞ Person entrusted with provisioning and representing the vessel in the
port in which it may be found; also includes the shipowner.
☞ Not a mere agent under civil law; he is solidarily liable with the ship
owner.
RIGHT OF ABANDONMENT ☞ Powers and functions:
1. Capacity to trade;
SHIPOWNER OR SHIP AGENT CONSIGNEE 2. Discharge duties of the captain, subject to Art.609;
3. Contract in the name of the owners with respect to repairs, details
What may be abandoned of equipment, armament, provisions of food and fuel, and freight
of the vessel, and all that relate to the requirements of navigation;
Vessel Goods shipped 4. Order a new voyage, make a new charter or insure the vessel after
obtaining authorization from the shipowner or if granted in
Instances certificate of appointment.

1. In case of civil liability from 1. Partial non-delivery, where the Civil Liabilities of the Shipowner And Ship Agent
indemnities to third persons (Art. goods are useless without the 1. All contracts of the captain, whether authorized or not, to repair,
587); others (Art. 363); equip and provision the vessel; (Art. 586)
2. Sec. 138, Insurance Code; 2. Goods are rendered useless for 2. Loss and damage to the goods loaded on the vessel without
3. In case of leakage of at least ¾ sale or consumption for the prejudice to their right to free themselves from liability by
of the contents of a cargo containing purposes for which they are abandoning the vessel to the creditors. (Art. 587)
liquids (Art. 687) properly destined (Art. 365); and
3. In case of delay through the Duty of Ship Agent to Discharge the Captain and Members of
fault of the carrier (Art. 371). the Crew
☞ If the seamen contract is not for a definite period or voyage, he may
discharge them at his discretion. (Art. 603)
☞ If for a definite period, he may not discharge them until after the
Effects
fulfillment of their contracts, except on the following grounds:
a. Insubordination in serious matters;
1. Transfer of ownership of the 1. Transfer of ownership on the
b. Robbery;
vessel from the shipowner to the goods from the shipper to the
c. Theft;
shippers or insurer. carrier.
d. Habitual drunkenness;
2. In case of (2), the insurer must 2. Carrier should pay the shipper
e. Damage caused to the vessel or to its cargo through malice
pay the insured as if there was the market value of the goods
or manifest or proven negligence. (Art. 605)
actual total loss of the vessel. at the point of destination.
B. CAPTAINS AND MASTERS
☞ They are the chiefs or commanders of ships.
☞ The terms have the same meaning, but are particularly used in
CAUSES OF REVOCATION OF VOYAGE accordance with the size of the vessel governed and the scope of
1. War or interdiction of commerce; transportation, i.e., large and overseas, and small and coastwise,
2. Blockade; respectively.
3. Prohibition to receive cargo at destination; ☞ Nature of position (3-fold character):
4. Embargo; 1. General agent of the shipowner;
5. Inability of the vessel to navigate. (Art. 640) 2. Technical director of the vessel;
3. Representative of the government of the country under whose
Terms: flag he navigates.
1. Interdiction of commerce – A governmental prohibition of ☞ Qualifications:
commercial intercourse intended to bring about an entire cessation 1. Filipino citizen;
for the time being of all trade whatever. 2. Legal capacity to contract;
2. Blockade – A sort of circumvallation of a place by which all foreign 3. Must have passed the required physical and mental
connection and correspondence is, as far as human power can examinations required for licensing him as such. (Art. 609)
effect it, to be cut off.
3. Embargo – A proclamation or order of a state, usually issued in ☞ Inherent powers:
time of war or threatened hostilities, prohibiting the departure of 1. Appoint crew in the absence of ship agent;
ships or goods from some or all the ports of such state until further 2. Command the crew and direct the vessel to its port of
order. destination;
 3. Impose correctional punishment on those who, while on
board vessel, fail to comply with his orders or are wanting in
discipline;
4. Make contracts for the charter of vessel in the absence of ship
agent.
5. Supply, equip, and provision the vessel; and
6. Order repair of vessel to enable it to continue its voyage. (Art.
610)
☞ Sources of funds to comply with the inherent powers of the captain
(in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
☞ Duties:
1. Bring on board the proper certificate and documents and a
copy of the Code of Commerce;
2. Keep a Log Book, Accounting Book and Freight Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and unloading of the cargo;
5. Be on deck while leaving or entering the port;
6. Protest arrivals under stress and in case of shipwreck;
7. Follow instructions of and render an accounting to the ship
agent;
8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by deceased passengers and
crew members;
10. Comply with the requirements of customs, health, etc. at the
port of arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or leaving a port. (Art. 612)
✍ A ship’s captain must be accorded a reasonable measure of
discretionary authority to decide what the safety of the ship and of its
crew and cargo specifically requires on a stipulated ocean voyage (Inter-
Orient Maritime Enterprises Inc. vs. CA).
☞ No liability for the following:
1. Damages caused to the vessel or to the cargo by force
majeure;
2. Obligations contracted for the repair, equipment, and
provisioning of the vessel unless he has expressly bound
himself personally or has signed a bill of exchange or
promissory note in his name. (Art. 620)
Solidary Liabilities of the Ship Agent/Shipowner for Acts Done
by the Captain towards Passengers and Cargoes
1. Damages to vessel and to cargo due to lack of skill and
negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of marine regulations. (Art.
618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
☞ No liability under the following circumstances:
1. If, before beginning voyage, captain attempts to change it, or a
naval war with the power to which the vessel was destined occurs;
2. If a disease breaks out and be officially declared an epidemic in the
port of destination;
3. If the vessel should change owner or captain. (Art. 647)
Sailing Mate/First Mate
☞ Second chief of the vessel who takes the place of the captain in case
of absence, sickness, or death and shall assume all of his duties, powers
and responsibilities. (Art. 627)
☞ Duties:
1. Provide himself with maps and charts with astronomical tables
necessary for the discharge of his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on consultation with the
captain and the officers of the boat, following the decision of
the captain in case of disagreement;
4. Responsible for all the damages caused to the vessel and the
cargo by reason of his negligence. (Arts. 628 - 631)
Second Mate
☞ Takes command of the vessel in case of the inability or disqualification
of the captain and the sailing mate, assuming in such case their powers
and responsibilities.
☞ Third in command
☞ Duties:
1. Preserve the hull and rigging of the vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment of the vessel, if laid up.
(Art. 632)
Engineers
☞ Officers of the vessel but have no authority except in matters referring
to the motor apparatus. When two or more are hired, one of them shall
be the chief engineer.
☞ Duties:
1. In charge of the motor apparatus, spare parts, and other
instruments pertaining to the engines;
2. Keep the engines and boilers in good condition;
3. Not to change or repair the engine without authority of the
captain;
4. Inform the captain of any damage to the motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining the engine. (Art. 632)
Crew
☞ The aggregate of seamen who man a ship, or the ship’s company.
☞ Hired by the ship agent, where he is present and in his absence, the
captain hires them, preferring Filipinos, and in their absence, he may
take in foreigners, but not exceeding 1/5 of the crew. (Art. 634)
Classes of Seaman’s Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman While Contract
Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
☞ The seaman’s heirs are entitled to payment as follows:
1. If death is natural:
a. compensation up to time of death if engaged on wage
b. if by voyage - half of amount if death occurs on voyage out;
and full, if on voyage in
c. if by shares - none, if before departure; full, if after departure
2. if death is due to defense of vessel - full payment;
3. if captured in defense of vessel - full payment;
4. if captured due to carelessness - wages up to the date of the
capture. (Art. 645)
Complement of the Vessel
☞ All persons on board, from the captain to the cabin boy, necessary for
the management, maneuvers, and service, thus including the crew, the
sailing mates, engineers, stokers and other employees on board not
having specific designations.
☞ Does not include the passengers or the persons whom the vessel is
transporting.
D. SUPERCARGOES
☞ Persons who discharges administrative duties assigned to him by ship
agent or shippers, keeping an account and record of transaction as
required in the accounting book of the captain. (Art. 649)
E. PILOT
☞ A person duly qualified, and licensed, to conduct a vessel into or out
of ports, or in certain waters.
☞ The term generally connotes a person taken on board at a particular
place for the purpose of conducting a ship through a river, road or
channel, or from a port.
☞ Master pro hac vice for the time being in the command and navigation
of the ship.
☞ While in exercising his functions a pilot is in sole command of the ship
and supersedes the master for the time being in the command and
navigation of the ship, the master does not surrender his vessel to the
pilot and the pilot is not the master. There are occasions when the
master may and should interfere and even displace the pilot, as when
the pilot is obviously incompetent or intoxicated (Far Eastern Shipping
Company vs. CA).
✍ Compulsory Pilotage – States possessing harbors have enacted laws
or promulgated rules requiring vessels approaching their ports to take
on board pilots licensed under the local laws. (Notes and Cases on the
Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p. 518)
charterer the whole vessel, transferring to the latter the entire
command, possession and consequent control over the vessel’s
navigation, including the master and the crew, who thereby become the
charter’s servants. It transforms a common carrier into a private carrier.
✍ The charterer becomes the owner of the vessel pro hac vice, just
for that one particular purpose only. Because the charterer is
treated as owner pro hac vice, the charterer assumes the
customary rights and liabilities of the shipowner to third persons
and is held liable for the expense of the voyage and the wages of
the seamen.
2. Contract of Affreightment – A contract whereby the owner of the
vessel leases part or all of its space to haul goods for others.
✍ The shipowner retains the possession, command and navigation
of the ship, the charterer merely having use of the space in the
vessel in return for his payment of the charter hired.
☞ Kinds:
a. Time charter – vessel is chartered for a fixed period of time
or duration of voyage.
b. Voyage or trip charter – the vessel is leased for one or series
of voyages usually for purposes of transporting goods for
charterer.
LEASE CHARTER PARTY
If for a definite period, lessee Charterer may rescind charter
cannot give up the lease by paying party by paying half of the
a portion of the amount agreed freightage agreed upon.
upon.
If the leased property is sold to one The new owner is not compelled to
who knows of the existence of the respect the charter party so long as
lease, the new owner must respect he can load the vessel with his own
the lease. cargo. (Art. 689)
Civil law concept Commercial law concept

Liablity of Pilot
☑GENERAL RULE: On compulsory pilotage grounds, the Harbor Pilot is
responsible for damage to a vessel or to life or property due to his
negligence.
☑EXCEPT: CHARTER PARTY BILL OF LADING
1. Accident caused by force majeure or natural calamity provided the
pilot exercised prudence and extra diligence to prevent or minimize An entire or complete contract. More like a private receipt which
damages. the captain gives to accredit goods
2. Countermand or overrule by the master of the vessel in which case received from persons
the registered owner of the vessel is liable. (Sec.11, Art.III PPA Admin
Order 03-85) Consensual contract Real contract

SPECIAL CONTRACTS OF MARITIME COMMERCE

1. Charter party BAREBOAT OR DEMISE CONTRACT OF
2. Bill of lading CHARTER AFFREIGHTMENT (TIME OR
3. Contract of transportation of passengers on sea voyages VOYAGE CHARTER)
4. Loan on bottomry
5. Loan on respondentia Charterer becomes liable to others Owner remains liable as carrier and
6. Marine insurance caused by its negligence must answer for any breach of duty

CHARTER PARTY Charterer regarded as owner pro Charterer is not regarded as

☞ A contract by virtue of which the owner or agent binds himself to hac vice for the voyage owner.
transport merchandise or persons for a fixed price.
☞ A contract by which an entire ship, or some principal part thereof is Owner of vessel relinquishes The vessel owner retains
let/leased by the owner to another person for a specified time or use. possession, command and possession, command and
(Planters Products, Inc. vs. CA, 226 SCRA 476) navigation to charterer navigation of the ship
☞ Parties:
1. Ship owner or ship agent
2. Charterer
☞ Classes: Common carrier is converted to Common carrier is not converted to
1. Bareboat or demise – The charterer provides crew, food and fuel. The private carrier. a private carrier.
charterer is liable as if he were the owner, except when the cause arises
from the unworthiness of the vessel. The shipowner leases to the
 1. If the vessel is chartered 1. To pay the agreed charter
wholly, not to accept cargo price;
PERSONS WHO MAY MAKE A CHARTER
from others; 2. To pay freightage on
1. Owner or owners of the vessel, either in whole or in majority
2. To observe represented unboarded cargo;
part, who have legal control and possession of the vessel
capacity; 3. To pay losses to others for
2. Charterer may subcharter entire vessel to 3rd person only if
3. To unload cargo clandestinely loading uncontracted cargo
not prohibited in original charter. (Art.679)
placed and illicit cargo;
3. Ship agent if authorized by the owner/s or given such power
4. To substitute another vessel if 4. To wait if the vessel needs
in the certificate of appointment. (Art.598)
load is less than 3/5 of repair;
4. Captain in the absence of the ship agent or consignee and
capacity; 5. To pay expenses for
only if he acts in accordance with the instructions of the agent
5. To leave the port if the deviation. (Arts. 679-687)
or owner and protects the latter’s interests. (Art.609)
charterer does not bring the
cargo within the lay days and
REQUISITES OF A VALID CHARTER PARTY
extra lay days allowed;
1. Consent of the contracting parties
6. To place in a vessel in a
2. Existing vessel which should be placed at the disposition of
condition to navigate;
the shipper
7. to bring cargo to nearest
3. Freight
neutral port in case of war or
4. Compliance with Art. 652 of the Code of Commerce
blockade. (Arts. 669-678)

Clauses Which May Be Included In a Charter Party

Jason clause Clause paramount or

paramount clause
Rescission of a Charter Party
A stipulation in a charter party that A clause in a charter party
At charterer’s At shipowner’s Fortuitous causes
in case of a maritime accident for providing that the COGSA shall
request request (Art. 690)
which the shipowner is not apply, even though the
(Art 688) (Art. 689)
responsible by law, contract or transportation is domestic, subject
otherwise, the cargo shippers, to the extent that any term of the
consignees or owners shall bill of lading is repugnant to the
contribute with the shipowner in COGSA or applicable law, then to 1. By abandoning the 1. If the extra lay days 1. War or interdiction
general average. (Pandect of the extent thereof the provision of charter and paying terminate without the of commerce;
Commercial Law and the bill of lading is void. (Pandect half of the freightage; cargo being placed 2. Blockade;
Jurisprudence, Justice Jose Vitug, of Commercial Law and 2. Error in tonnage or alongside the vessel; 3. Prohibition to
1997 ed.) Jurisprudence, Justice Jose Vitug, flag; 2. Sale by the owner of receive cargo;
1997 ed.) 3. Failure to place the the vessel before 4. Embargo; and
vessel at the loading by the 5. Inability of the
charterer’s disposal; charterer; vessel to navigate.
4. Return of the vessel
due to pirates,
enemies or bad
weather;
5. Arrival at a port for
repairs.

Terms:
1. Primage - bonus to be paid to the captain after the successful
voyage.
2. Demurrage – the sum fixed in the charter party as a remuneration
to the owner of the ship for the detention of his vessel beyond the
number of days allowed by the charter party for loading or
unloading or for sailing.
3. Deadfreight – the amount paid by or recoverable from a charterer
of a ship for the portion of the ship’s capacity the latter contracted
for but failed to occupy.
4. Lay Days - days allowed to charter parties for loading and
Rights and Obligations of Parties unloading the cargo.
5. Extra Lay Days – days which follow after the lay days have elapsed.

SHIPOWNER OR SHIP AGENT CHARTERER

USUAL FORMS OF CONSUMMATING CONTRACTS

1. C.I.F. – cost, insurance and freight;
2. F.O.B. - free on board;
3. F.A.S. - free alongside ship; and
4. C. & F. - cost and freight.
TRANSSHIPMENT OF GOODS
☞ The act of taking cargo out of one ship and loading it in another, or
the transfer of goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of destination named
in the contract has been reached, or the transfer for further
transportation from one ship or conveyance to another.
✍ It is not dependent on the ownership of the transporting ships or in
the change of carriers, but rather on the fact of actual physical transfer
of cargo from one vessel to another.
✍ If done without legal excuse, however competent and safe the vessel
into which the transfer is made, is a violation of contract and
infringement of right of shipper and subjects carrier to liability if freight
is lost event by cause otherwise excepted. (Magellan Manufacturing vs.
CA, 201 SCRA 102)
LOAN ON BOTTOMRY AND RESPONDENTIA
☞ A real, unilateral, aleatory contract, by virtue of which one person
lends to another a certain amount of money or goods on things exposed
to maritime risks, which amount, with its earnings, is to be returned if
the things are safely transported, and which is lost if the latter are lost.
Not subject to Usury Law Subject to Usury Law
Liability of the borrower is Not subject to any contingency
contingent on the safe arrival of the (absolute liability)
vessel or cargo at destination
The last lender is a preferred The first lender is a preferred
creditor creditor
WHEN LOAN ON BOTTOMRY OR RESPONDENTIA REGARDED AS
SIMPLE LOAN
1. Lender loaned an amount larger than the value of the object
due to fraudulent means employed by the borrower.
(ART.726)
2. Full amount of the loan is not used for the cargo or given on
the goods if all of them could not have been loaded, the
balance will be considered a simple loan. (ART.727)
3. If the effects on which the money is taken is not subjected to
any risk. (ART.729)
Note: Under existing laws, the parties to a loan, whether ordinary or
maritime, may agree on any rate of interest. (CB Circular 905)

LOAN ON BOTTOMRY LOAN ON RESPONDENTIA

MARINE INSURANCE LOAN ON BOTTOMRY OR
Definition RESPONDENTIA

Loan made by shipowner or ship Loan taken on security of the cargo
agent guaranteed by vessel itself laden on a vessel, and repayable
and repayable upon arrival of upon safe arrival of cargo at
vessel at destination. (Art. 719) destination. (Art. 719)
Who may contract
Indemnity is paid after the loss has Indemnity is paid in advance
occurred by way of a loan
In case of loss of the vessel due to a risk In case of loss of the vessel
insured against, the obligation of the due to a marine peril, the
insurer becomes absolute obligation of the borrower to
pay is extinguished

Shipowner or ship agent. Outside Only the owner of the cargo. Consensual contract Real contract
of the residence of the owners - the
captain.

Hypothecary Nature of Bottomry/ Respondentia

Common elements: ☑GENERAL RULE: The obligation of the borrower to pay the loan is
1. Exposure of security to marine peril; extinguished if the goods given as security are absolutely lost by reason
2. Obligation of the debtor conditioned only upon safe arrival of the of an accident of the sea, during the voyage designated, and if it is
security at the point of destination. proven that the goods were on board.
☑EXCEPTIONS:
Forms: 1. Loss due to inherent defect;
1. Public instrument 2. Loss due to the barratry on the part of the captain;
2. Policy signed by the contracting parties and the broker taking 3. Loss due to the fault or malice of the borrower;
part therein 4. The vessel was engaged in contraband; and
3. Private instrument (Art. 720) 5. The cargo loaded on the vessel be different in from that agreed
upon.
Contents:
1. Kind, name and registry of the vessel; Concurrence of Marine Insurance and Loan on
2. Name, surname and domicile of the captain; Bottomry/Respondentia
3. Names, surnames and domiciles of the borrower and the lender; 1. The insurable interest of the owner of a ship hypothecated by
4. Amount of the loan and the premium stipulated; bottomry is only the excess of the value over the amount
5. Time for repayment; secured by bottomry. (Sec. 101, Insurance Code)
6. Goods pledged to secure repayment; 2. The value of what may be saved in case of shipwreck shall be
7. Voyage during which the risk is run (Art.721) divided between the lender and the insurer in proportion to
the interest of each one. (Art. 735)

Note: If a vessel is hypothecated by bottomry only the excess is

BOTTOMRY/ RESPONDENTIA
ORDINARY LOAN (MUTUUM)
insurable, since a loan on bottomry partakes of the nature likewise of
an insurance coverage to the extent of the loan accommodation. The
same rule would apply to the hypothecation of the cargo by
respondentia. (Pandect of Commercial Law and Jurisprudence, Justice
Jose Vitug, 1997 ed.)
 Right to recover
ACCIDENTS IN MARITIME COMMERCE
1. Averages
No reimbursement There may be reimbursement
2. Arrival Under Stress
3. Collision Kinds (not exclusive)
4. Shipwreck
Art. 809 Art. 811
AVERAGE
☞ An extraordinary or accidental expense incurred during the voyage in Procedure for recovery
order to preserve the cargo, vessel or both, and all damages or
deterioration suffered by the vessel from departure to the port of 1. Assembly and deliberation
destination, and to the cargo from the port of loading to the port of 2. Resolution of the captain
consignment. (Art. 806) 3. Entry of the resolution in the
✍ The person whose property has been saved must contribute to logbook
reimburse the damage caused or expense incurred if the situation 4. Detailed minutes
constitutes general average. 5. Delivery of the minutes to the
☞ Classes: maritime judicial authority of
1. Particular or Simple Average the first port, within 24 hours
2. Gross or General Average from arrival,
✍ Where both vessel and cargo are saved, it is general average; where 6. Ratification by captain under
only the vessel or only the cargo is saved, it is particular average. oath. (Arts. 813-814)
✍ Expenses incurred to refloat a vessel, which accidentally ran aground,
in order to continue its voyage, do not constitute general average. Not
only is there absence of a marine peril, common safety factor, and
deliberateness. It is the safety of the property, and not the voyage, GOODS NOT COVERED BY GENERAL AVERAGE EVEN IF
which constitutes the true foundation of general average. (A. SACRIFICED
Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955) 1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or records of the vessel.
(ART.855 (2))
PARTICULAR OR SIMPLE GROSS OR GENERAL 3. Fuel for the vessel if there is more than sufficient fuel for the
voyage. (Rule IX, York-Antwerp Rule)
Definition
Jettison
Damages or expenses caused to the Damages or expenses deliberately ☞ Act of throwing cargo overboard in order to lighten the vessel.
vessel or cargo that did not inure to caused in order to save the vessel, ☞ Order of goods to be cast overboard:
the common benefit, and borne by its cargo or both from real and 1. Those which are on the deck, preferring the heaviest one with
respective owners. (Art. 809) known risk. (Art. 811) the least utility and value;
2. Those which are below the upper deck, beginning with the
one with greatest weight and smallest value. (Art. 815)
Requisites
✍ Jettisoned goods are not res nullius nor deemed “abandoned” within
1. common danger; the meaning of civil law so as to be the object of occupation by salvage.
2. deliberate sacrifice; (Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug, 1997
3. success; ed.)
4. proper formalities and legal ✍ In order that the jettisoned goods may be included in the gross or
steps. general average, the existence of the cargo on board should be proven
by means of the bill of lading. (Art. 816)
Liability
York-Antwerp (Y-A) Rules on Determining Liability for
The owner of the goods which gave All the persons having an interest Averages With Regard To Deck Cargo
rise to the expense or suffered the in the vessel and the cargo therein 1. Deck cargo is allowed only in domestic/coastwise/inter-island
damage shall bear this average. at the time of the occurrence of shipping, and is prohibited in international/overseas/foreign
(Art. 810) the average shall contribute to shipping.
satisfy this average. (Art. 812) 2. If deck cargo is loaded with the consent of the shipper on overseas
 The insurers (Art.859) and trade, it must always contribute to general average, but should the
lenders on bottomry and same be jettisoned, it would not be entitled to reimbursement
respondentia shall likewise because there is violation of the Y-A Rules.
contribute. (Art.732). 3. If deck cargo is loaded with the consent of the shipper on coastwise
shipping, it must always contribute to general average and if
jettisoned would be entitled to reimbursement.
✍ Reason: In domestic shipping, voyages are usually short and the seas
Number of interests involved are generally not rough. In overseas shipping, the vessel is exposed for
many days to perils of the sea.
Only one interest involved Several interests involved

Share in the damage or expense

DOMESTIC INTERNATIONAL
100% share In proportion to the value of the
owner’s property saved Deck cargo is allowed Deck cargo is not allowed

With shipper’s consent

 4. The vessel which leaves later is presumed to have collided against
General average Particular average
one which has left earlier.
5. There is a presumption against the vessel which sets sail in the
Without shipper’s consent
night.
Captain is liable Captain is liable 6. There is a presumption against the vessel with spread sails which
collides with another which is at anchor and cannot move, even
when the crew of the latter has received word to lift anchor, when
there was not sufficient time to do so or there was fear of a greater
ARRIVAL UNDER STRESS (ARRIBADA) damage or other legitimate reason.
☞ The arrival of a vessel at the nearest and most convenient port instead 7. There is a presumption against an improperly moored vessel.
of the port of destination, if during the voyage the vessel cannot 8. There is a presumption against a vessel which has no buoys to
continue the trip to the port of destination. indicate the location of its anchors to prevent damage to vessels
which may approach it.
9. Vessels must have “proper look-outs” or persons trained as such
When lawful When unlawful Who bears and who have no other duty aside therefrom. (Smith Bell v. CA)
expenses:
Nautical Rules as to Sailing Vessel and Steamship
1. Where a steamship and a sailing vessel are approaching each other
The inability to 1. Lack of provisions The shipowner or ship from opposite directions, or on intersecting lines, the steamship
continue voyage is due to negligence agent is liable in case from the moment the sailing vessel is seen, shall watch with the
due to lack of to carry according of unlawful arrival highest diligence her course and movements so as to be able to
provisions, well- to usage and under stress. But they adopt such timely means of precaution as will necessarily prevent
founded fear of customs; shall not be liable for the two boats from coming in contact.
seizure, privateers, 2. Risk of enemy not the damages caused 2. The sailing vessel is required to keep her course unless the
pirates, or accidents well known or by reason of a lawful circumstances require otherwise.
of the sea disabling it manifest arrival. (Art. 821)
to navigate. (Art. 819) 3. Defect of vessel Zones of Time in the Collision of Vessels
due to improper 1. First zone – covers all time up to the moment when risk of collision
repair; and begins.
4. Malice, ☞ No rule is as yet applicable for none is necessary. Each vessel is free
negligence, lack of to direct its course as it deems best without reference to the movements
foresight or skill of of the other vessel.
captain. (Art. 820) 2. Second zone – time between moment when risk of collision begins
and moment it becomes a practical certainty.
☞ It is in this period where the vessel is required to keep away and avoid
the danger
3. Third zone – time when collision is certain and time of impact.
☞ An error in this zone would no longer be legally consequential.
✍ It is the duty of the captain to continue the voyage without delay after The vessel which has forced the privileged vessel into danger is
the cause of the arrival under stress has ceased failing in such duty responsible even if the p.vessel committed an error within that zone.
renders him liable. However, in case the cause has been risk of enemies, ✍ Error in Extremis - sudden movement made by a faultless vessel
there must first be an assembly before departure. (Art. 825) during the third zone of collision with another vessel which is at fault
☞ Steps: during the 2nd zone. Even if such sudden movement is wrong, no
1. Captain should determine during the voyage if there is well responsibility will fall on said faultless vessel. (Urrutia and Co. v. Baco
founded fear of seizure, privateers and other valid grounds; River Plantation Co., 26 PHIL 632)
2. Captain shall assemble the officers and summon the persons
interested in the cargo who may attend the meeting but Cases Covered By Collision and Allision
without a right to vote; 1. One vessel at fault
3. The officers shall determine and agree if there is well-founded ☞ Vessel at fault is liable for damage caused to innocent vessel as well
reason after examining the circumstances. The captain shall as damages suffered by the owners of cargo of both vessels. (Art. 826)
have the deciding vote; 2. Both vessels at fault
4. The agreement shall be drafted and the proper minutes shall ☞ Each vessel must bear its own loss, but the shippers of both vessels
be signed and entered in the log book; may go against the shipowners who will be solidarily liable. (Art. 827)
5. Objections and protests shall likewise be entered in the 3. Vessel at fault not known
minutes. ☞ Each vessel must bear its own loss, but the shippers of both vessels
may go against the shipowners who will be solidarily liable. (Art. 828)
COLLISION ✍ Doctrine of Inscrutable Fault – In case of collision where it cannot
☞ Impact of two vessels both of which are moving. be determined which between the two vessels was at fault, both
vessels bear their respective damage, but both should be solidarily
Allision liable for damage to the cargo of both vessels.
☞ Impact between a moving vessel and a stationary one. 4. Third vessel at fault
☞ The third vessel will be liable for losses and damages. (Art. 831)
Nautical Rules to Determine Negligence 5. Fortuitous event/force majeure
1. When two vessels are about to enter a port, the farther one must ☞ No liability. Each bears its own loss. (Art. 830)
allow the nearer to enter first; if they collide, the fault is presumed
to be imputable to the one who arrived later, unless it can be ✍ The doctrine of res ipsa loquitur applies in case a moving vessel strikes
proved that there was no fault on its part. a stationary object, such as a bridge post, dock, or navigational aid. (Far
2. When two vessels meet, the smaller should give the right of way Eastern Shipping v. CA, Luzon Stevedoring vs. CA)
to the larger one.
3. A vessel leaving port should leave the way clear for another which ✍ Even if the cause of action against the common carrier is based on
may be entering the same port. quasi-delict, the defense of due diligence in the selection and
supervision of employees is unavailing in case of a maritime tort
resulting in collision. It is not a civil tort governed by the Civil Code but
a maritime one governed by Arts. 826-839 of the Code of Commerce.
(Manila Steamship vs. Insa Abdulhaman)
✍ Doctrine of Last Clear Chance and Rule on Contributory Negligence
cannot be applied in collision cases because of Art.827 of the Code of
Commerce. (Notes and Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed.)
MARITIME PROTEST
☞ Condition precedent or prerequisite to recovery of damages arising
from collisions and other maritime accidents.
☞ It is a written statement made under oath by the captain of a vessel
after the occurrence of an accident or disaster in which the vessel or
cargo is lost or damaged, with respect to the circumstances attending
such occurrence, for the purpose of recovering losses and damages.
✍ Excuses for not filing protest: 1) where the interested person is not
on board the vessel; and 2) on collision time, need not be protested.
(Art. 836)
☞ Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a hurricane or when the
captain believes that the cargo has suffered damages or
averages (Art. 624).
☞ Who makes: Captain
☞ When made: within 24 hours from the time the collision took place.
☞ Before whom made: competent authority at the point of collision or
at the first port of arrival, if in the Philippines and to the Philippine
consul, if the collision took place abroad. (Art. 835)
SHIPWRECK
☞ It is the loss of the vessel at sea as a consequence of its grounding,
or running against an object in sea or on the coast. It occurs when the
vessel sustains injuries due to a marine peril rendering her incapable of
navigation.
✍ If the wreck was due to malice, negligence or lack of skill of the
captain, the owner of the vessel may demand indemnity from said
captain. (Art. 841)
✍ The rules on collision or allision, as may be pertinent, can equally
apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
☞ A contract for the unloading of goods from a vessel.
☞ Applicability: Overseas trade only. (Commercial Law Review, C.
Villanueva, 2004 ed.)
☞ Significance: When a person brings in cargo from abroad, he cannot
unload and deliver the cargo by himself. The unloading must be done
by the arrastre operator, which will then deliver the cargo to the
importer. (Commercial Law Review, C. Villanueva, 2004 ed.)
☞ Nature of business: It is a public utility, discharging functions which
are heavily invested with public interest.
☞ Liability:
1. Similar to a warehouseman (Lua Kian v. Manila Railroad)
2. Similar to a common carrier (Northern Motors v. Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may be held liable, the
consignee must prove that the damage was due to the negligence and
while the goods are in the custody of the arrastre operator. (Hartford
Fire Insurance v. E. Razon, Inc.)
STEVEDORING SERVICE
☞ The carriage of goods from the warehouse or pier to the holds of the
vessel. (Chief of Staff vs. CIR)
☞ As understood in the port business, the term consists of the handling
of cargo from the hold of the ship to the dock, in case of pier-side
unloading; or to a barge, in case of unloading at sea. (Anglo-Fil Trading
Corp. vs. Lazaro)
✍ The loading on the ship of outgoing cargo is also part of stevedoring
work. (Ibid.)
CONTAINERIZATION/ “SAID-TO-CONTAIN”/ “SHIPPER’S
LOAD AND COUNT” SYSTEM
☞ System whereby the shipper loads his cargoes in a specially designed
container, seals the container and delivers it to the carrier for
transportation. The carrier does not participate in the counting of the
merchandise for loading into the container, the actual loading, and the
sealing of the container. (US Lines v. Comm. Of Customs, ICTSI v.
Prudential Guarantee)
✍ The matter of quantity, description and conditions of the cargo inside
the container is the sole responsibility of the shipper, unless there is
stipulation to the contrary. (US Lines vs. Comm. Of Customs, Reyma
Brokerage v. Phil. Home Assurance)
Note: In order to attribute to the carrier any damage to the shipment
that may be found, inspection of the goods should be done at pier-side.
(Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA (C.A. No. 65)
APPLICABILITY
☞ The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from foreign port to
Philippine port).
✍ It can be applied in domestic sea transportation if agreed upon by the
parties. (Clause paramount or paramount clause)
IMPORTANT FEATURES:
1. Amount of carrier’s liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIER’S LIABILITY
☞ Under the Sec. 4(5), the liability limit is set at $500 per package or
customary freight unit unless the nature and value of such goods is
declared by the shipper. This is deemed incorporated in the bill of lading
even if not mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA 463)
✍ Note that Art. 1749, NCC applies to domestic/inter-island/coastwise
trade.
NOTICE OF DAMAGE (SEC. 3(6))
☞ Rules:
a. Patent damage: shipper should file a claim with the carrier
immediately upon delivery
b. Latent damage: shipper should file a claim with the carrier within
three days from delivery.
Note: The filing of a notice of claim is not a condition precedent.
PRESCRIPTIVE PERIOD
☞ Action for loss or damage to the cargo should be brought within one
year after:
a. Delivery of the goods (delivered but damaged goods); or
b. The date when the goods should have been delivered (non-
delivery). (Sec. 3[6])
 “Loss or Damage” as applied to the COGSA contemplates a situation
where no delivery at all was made by the shipper of the goods because
the same had perished, gone out of commerce, or disappeared in such
a way that their existence is unknown or they cannot be recovered.
Thus, it is inapplicable in case of misdelivery or conversion. (Ang vs.
American Steamship Agencies Inc.) and damage arising from delay or
late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). In such instance the, Civil
Code rules on prescription shall apply.
✍ The one-year prescriptive period is suspended by:
1. The express agreement of the parties (Universal Shipping
Lines, Inc. vs. IAC, 188 SCRA 170)
2. The filing of an action in court until it is dismissed. (Stevens
& Co. vs. Nordeutscher Lloyd, 6 SCRA 180)

✍ The one-year period shall run from delivery of the last package and
is not suspended by extrajudicial demand. (Dole Phils.,Inc. vs. Maritime
Co.,148 SCRA 118)

✍ The one-year period shall run from delivery to the arrastre operator
and not to the consignee. (Union Carbide Phils, Inc. vs. Manila Railroad
Co.,SCRA 359)

✍ The insurer exercising its right of subrogation is bound by the one-

year prescriptive period. However, it does not apply to the claim against
the insurer for the insurance proceeds. (Fil. Merchants Ins. Co. vs.
Alejandro; Mayer Steel Pipe Corp. vs. CA)