MARITIME COMMERCE

Title I

VESSELS

Q. What is a vessel or ship?

A. The words “ship” and “vessel” designate every craft, large or small so long as it be not an
accessory of another, such as the small boat of a vessel, of greater or less tonnage. This
definition comprises both craft intended for ocean or for coastwise navigation, as well as the
floating docks, mud lighters, dredges, dumpscows or any other floating apparatus used in the
service of an industry or in that of maritime commerce (Yu Con vs. Ipil, 41 Phil. 770, 780).

Under the mercantile code, vessels refer solely and exclusively to merchant ships and to those
which are engaged in the transportation of passengers and freight from one port to another
or from one place to another (Lopez vs. Duruelo, 52 Phil. 232). It includes every description of
water craft, large or small, used or capable of being used as a means of transportation on
water (Roldan vs. Arca, 65 SCRA 350).

A banca then must also be considered as a “vessel” within the meaning of the word as
understood in the Code of Commerce (Yu Con vs. Ipil, supra).

Q. What vessels are eligible for bay and river license?

A. To be eligible for the bay and river license, a vessel must be built in the Philippines, and the
ownership of such vessel must be vested in: (a) citizens of the Philippines; (b) domestic
corporations or companies seventy-five per centum of whose corporate capital belongs to
citizens of the Philippines (Sec. 911, R.A. No. 1937).

Q. What crafts are exempted from bay and river license? -

A. No bay and river license shall be required of any of the following vessels:

(1) Vessels of three tons net or less;

(2) Yachts, launches and other crafts used exclusively for pleasure and recreation;

(3) Ship’s boats and launches bearing the name and home port of the vessel plainly marked
thereon; and

(4) Vessels owned by the Government of the Philippines.

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However, the exemption of any vessel shall at once cease if it engages in the business of
transporting cargo or passengers (Sec. 912, R.A. No. 1937).

Q. How may ownership of merchant vessels be acquired? (Asked, 1962 Bar Exams.)

A. Merchant vessels constitute property which may be acquired and transferred by any of the
means recognized by law. The acquisition of a vessel must appear in a written instrument
which shall not produce any effect with regard to third persons if not recorded in the registry
of vessels.

The ownership of a vessel shall also be acquired by possession thereof in good faith for three
years, with a good title duly recorded.

In the absence of any of these requisites, continuous possession for ten years shall be
necessary in order to acquire ownership.

A captain cannot acquire by prescription the ship of which he is in command (Art. 573, Code
of Commerce).

Thus, in accordance with the foregoing provision, ownership of a vessel may be acquired in
the following manner:

(a) By any of the means recognized by law, such as sale, dacion en pago, or any other contract
by which ownership of a property is acquired. It must however, be in writing and to bind third
persons, must be recorded in the registry of vessels.

(b) By possession of the vessel in good faith for three years, with a good title duly recorded.

(c) In the absence of the foregoing requisites, by continuous possession for ten years.

Q. What right do part owners of the vessel have upon the sale of the vessel?

A. Part owners of the vessels shall enjoy the right of preemption and redemption in sales
made to strangers; but they can only exercise it within the nine days following the registration
of the sale in the registry and by delivering the price at once (Art. 575, Code of Commerce).

Q. What are understood as included and excluded from the sale of the vessel?

A. The rigging, tackle, stores, and engine if a steamer, of the vessel, shall always be
understood as included in the sale thereof if, at the time of the sale, they are owned by the
vendor.

The arms, munitions of war, provisions, and fuel shall not be considered as included in the
sale (Art. 576, Code of Commerce).

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Q. Who has the right to freightage of the vessel sold?

A. If the sale of the vessel should take place while she is on a voyage, all the freightage she
earns from the time she received her last cargo shall belong to the buyer, and the latter shall
pay the crew and other persons who go to make up her complement for the said voyage.

If the sale should take place after the arrival of the vessel at the port of her destination, the
freightage shall belong to the seller and the latter shall pay the crew and other persons who
go to make up her complement, unless there is an agreement to the contrary in either case
(Art. 577, Code of Commerce).

Q. X was the owner of the vessel “Malvarosa.” On July 22, 1999, “Malvarosa” transported
goods from Manila to San Francisco, for which it had uncollected freightage amounting to
$100,000. Upon arrival in San Francisco, “Malvarosa” received cargo bound for Brussels, for
which it had uncollected freightage amounting to $80,000. While “Malvarosa” was midway
between San Francisco and Brussels, it was sold to Y. Who is entitled to the uncollected
freightage?

A. The freightage from Manila to San Francisco amounting to $100,000 should belong to X,
the seller because the sale of the vessel was made after the arrival of the vessel in San
Francisco. On the other hand, the freightage from San Francisco to Brussels amounting to
$80,000 should belong to Y, the buyer, because the sale was made while the vessel was still
on its voyage to Brussels. However, if there is an agreement to the contrary; the agreement
shall be binding on the parties (See Art. 577, Code of Commerce).

Q. How should the voluntary sale of the vessel be made if done while on a voyage or in a
foreign port?

A. If, the vessel while on a voyage or in a foreign port, her owner or owners should voluntarily
sell her either to Filipinos or to foreigners domiciled in the capital or in a port of another
country, the bill of sale shall be executed before the consul of the Philippines of the port
where she terminates her voyage, and said instrument shall have no effect with regard to
third persons if it is not registered in the registry of the consulate. The consul shall
immediately forward a true copy of the bill of purchase of the vessel to the registry of vessels
of the port where said vessel is entered and registered.

In every case the sale of the vessel must be made to appear with a statement whether the
seller receives the full price or part thereof, or whether he retains any interest in said vessel in
full or in part. In case the sale is made to a Filipino, this fact shall be stated in the certificate of
navigation (Art. 578, pars. 1 and 2, Code of Commerce).

Q. What must the captain of the vessel do if the vessel became useless for navigation while
on a voyage?

A. When a vessel, while on a voyage, should become useless for navigation, the captain shall
report the matter to the judge or court of competent jurisdiction of the port of arrival, should
she be in the Philippines; and should she be in foreign port, to the Filipino consul should there
be one; or to the judge, or court, or local authority in the absence of the former, and the
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consul, or judge, or court, or, in their absence, the local authority shall order an examination
of the vessel to be made.

If the consignee or the insurer should reside at said port, or should have representatives
there, they must be cited in order to part in the proceedings for the account of whom it may
concern (Art. 578, pars. 3 and 4, Code of Commerce).

Q. What are the rules to be followed for the sale of the vessel after being damaged irreparably during
the voyage?

A. After the damage of the vessel and the impossibility of her being repaired, in order to continue the
voyage, having been proven, her sale at public auction shall be ordered, subject to the following rules:

1. The hull of the vessel, her rigging, engines, stores, and other articles shall be appraised by means of an
inventory, said proceedings being brought to the notice of the persons who may wish to take part in the
auction.

2. The order or decree ordering the public auction shall be posted in the usual places, and shall be
advertised in the newspapers, of the port where the auction is to be held, should there be any, and in
other newspapers which the court may determine;

The period which may be fixed for the auction shall not be less than twenty days.

3. These advertisements shall be repeated every ten days, and their publication shall be recorded in the
proceedings.

4. The auction shall be held on the day fixed, with the formalities prescribed in the common law for
judicial sales.

5. If the sale should take place when the vessel is in a foreign country, the special provisions governing
such cases shall be observed (Art. 579, Code of Commerce).

Q. What must the captain of the vessel do in case of necessity of contracting one or more obligations for
the repair and equipment of the vessel during the voyage, or obtaining bottomry loans during the
voyage? What is the effect of failure to comply therewith? (Asked, 1962 Bar Exams.)

A. If the ship being on a voyage, the captain should find it necessary to contract one or more obligations
for the repair and equipment of the vessel and her provisioning with victuals and fuel, or obtaining
bottomry loans, he shall apply to the judge or court if he is in Philippine territory, and otherwise to the
Filipino consul, should there be one and in his absence, to the judge or court or to the proper local
authority, presenting the certificate of the registry of the vessel treated of in Article 612, and the
instruments proving the obligation contracted.

The judge or court, the consul or the local authority as the case may be, in view of the result of the
proceedings instituted, shall make a temporary memorandum in the certificate of their result, in order
that it may be recorded in the registry when the vessel returns to the port of her registry, or so that it
can be admitted as a legal and preferred obligation in case of sale before the return, by reason of the
sale of the vessel by virtue of a declaration of unseaworthiness.

The omission of this formality shall make the captain personally liable for the credits which may be
prejudiced through his fault (Art, 583, Code of Commerce).

Q. Are vessels personal or real properties?

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A. For all purposes of law, vessels shall continue to be considered personal property (Art. 585, Code of
Commerce).

However, although vessels are personal properties, the ownership thereof is evidenced by a certificate of
ownership and the transfer thereof to be binding on third persons, must be registered in their proper
registry.

Title II

PERSONS WHO TAKE PART IN MARITIME COMMERCE

Section 1 — Shipowners and Ship Agents

Q. What is a ship agent?

A. By ship agent is understood the person intrusted with the provisioning of a vessel, or who represents
her in the port in which she may be found (Art. 586, par. 2, Code of Commerce).

The original Spanish text of Article 586 refers to propietario translated in English as “shipowner,” and
naviero translated as “ship agent.” Fundamentally, naviero must be understood to refer to the person
undertaking the voyage who in one case may be the owner and in another the charterer (Standard Oil
Co. vs. Lopez Castelo, 42 Phil. 256).

Q. Who is a “husbanding agent” in maritime transportation?

A. A “husbanding agent” is the general agent of the owner in relation to the ship, with powers,
among others, to engage the vessel for general freight and the usual conditions, settles freight
and adjusts averages with the merchant (Commissioner of Internal Revenue vs. United States
Lines Co., 5 SCRA 175).

Q. What is the liability of the shipowner and ship agent for the acts of, and obligations
contracted by the captain?

A. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip, and provision the vessel, provided the
creditor proves that the amount claimed was invested therein (Art. 586, par. 1, Code of
Commerce).

Q. Give instances or examples when the shipowner and ship agent are liable for culpa
contractual arising from the acts of the captain.

A. (a) The owner of the property which has been jettisoned or cast overboard by order of the
captain should have a right of action directly against the shipowner for the breach of any
duty which the law may have imposed on the captain with respect to such cargo
(Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256).

(b) In case the captain, without any valid cause or reason and without any unforeseen
accident or stress of weather, wilfully abandoned the lorcha under a contract of towage

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 resulting in the loss thereof, the shipowner and ship agent are liable for the acts of the
captain (Guzman vs. Behn, Meyer & Co., 9 Phil. 112).

(c) The shipowner and ship agent are liable for negligence of the captain in unloading the
cargo on the pier on account of which the cargo accumulated thereon sank (Ohta
Development Co. vs. Steamship Pompey, 49 Phil. 117).

Q. Plaintiffs purchased tickets for the voyage from Cebu to Catbalogan. Instead of docking at
Catbalogan which was the first port of call, the vessel proceeded to Tacloban. Plaintiffs
disembarked and took a ferryboat to Catbalogan, and then filed an action against the
shipowner for damages for breach of contract of carriage. Is the shipowner liable for
damages?

A. The shipowner is liable for damages. The voyage to Catbalogan was interrupted by the
captain not due to fortuitous event or force majeure nor due to disability of the vessel. Having
been caused by the captain, the passengers’ right to indemnity is evident. The owner of a vessel
and the ship agent are civilly liable for the acts of the captain (Sweet Lines, Inc. vs. Court of
Appeals, 121 SCRA 769).

Q. May the shipowner raise the defense that he exercised due diligence in the selection and
supervision of the captain? (Asked, 1986 Bar Exams.)

A. Where the action is premised on culpa aquiliana or quasi- delict, the defense that the ship
owner exercised the care and diligence of a good father of a family in selecting and supervising
the captain is an appropriate defense (Arts. 2176 and 2180, Civil Code; Walter A. Smith & Co.,
Inc. vs. Cadwallader Gibson Lumber Co., 55 Phil. 517). Such defense however, cannot be raised
where the action is premised on culpa contractual (Art. 1759, Civil Code; del Prado vs. Manila
Electric Co., 52 Phil. 900).

Q. Are the shipowner and ship agent liable to third persons for damages arising from the
conduct of the captain?

A. The owners of the vessel are civilly liable, in the proportion of their contribution to the
common fund, for the results of the acts of the captain referred to in Article 587 (Art. 590, Code
of Commerce).

The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise
from the conduct of the captain in the vigilance over the goods which the vessel carried; but he
may exempt himself therefrom by abandoning the vessel with all her equipment and the freight
he may have earned during the voyage (Art. 587, Code of Commerce; Asked, 1964 and 1982 Bar
Exams.).

However, such right of abandonment speaks only of situations where fault or negligence is
committed solely by the captain. In cases where the shipowner is likewise to be blamed, the
provisions of the Civil Code on common carrier apply. And under the Civil Code, whenever death
or injury to a passenger occurs, common carriers are presumed to have been at fault or to have
acted negligently unless they prove that they observed extraordinary diligence (Heirs of Amparo
de los Santos vs. Court of Appeals, 186 SCRA 649).
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Q. What is the nature of the liability of the ship agent for the acts and conduct of the captain,
and obligations of the shipowner?

A. The ship agent is solidarily liable with the shipowner for the acts of the captain and for the
obligations contracted by the latter in accordance with Art. 586 of the Code of Commerce.
Aside therefrom, the ship agent is also solidarily liable with the shipowner for the damages
caused to the cargo by reason of the conduct of the captain (Art. 587, Code of Commerce;
Switzerland General Insurance Co., Ltd. vs. Ramirez, 96 SCRA 297; Asked, 1984 Bar Exams.).

The ship agent even has the obligation to pay the taxes due from the shipowner. Thus a shipping
company that holds itself to the public and to the Government as the shipowner’s local agent,
and in fact renders services as such, is under obligation to pay, for and in behalf of its principal,
whatever tax is due from the latter, especially where the principal is a non-resident corporation
beyond the jurisdiction of the Philippines.

Q. What is the difference between the liability of the ship agent for the unlawful acts of the
captain and his liability for the lawful acts of the said captain?

A. There is a difference which exists between the lawful acts and the lawful obligations of the
captain and the liability which he incurs on account of any unlawful act committed by him. In
the first case, the lawful acts and obligations of the captain beneficial to the vessel may be
enforced against the agent for the reason that such obligations arise from the contract of
agency (provided, however, that the captain does not exceed his authority), while as to any
liability incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily
civilly liable. This liability of the agent is limited to the vessel and it does not extend further. For
this reason, the Code of Commerce makes the agent liable to the extent of the value of the
vessel, as the codes of the principal maritime nations provide, with the vessel, and not
individually. Such is also the spirit of our code (Philippine Shipping Co. vs. Garcia, 6 Phil. 281,
284; Asked, 1989 Bar Exams.).

Q. The vessel S/S St. Lourdes was owned by Oyama Shipping Company of which, Citadel Lines
was the ship agent. Oyama was declared insolvent. Goods loaded on board the said vessel
were damaged and the insurer of the cargo paid the amount of the damage. (a) May the
insurer of the cargo hold the ship agent liable? (b) What course of action may the ship agent
take?

A. (a) Being solidarily liable with the principal, the ship agent cannot evade liability for the
damage caused on the cargo. Insolvency of the principal has no bearing on the liability
of the ship agent (Switzerland General Insurance Co., Ltd. vs. Ramirez, supra).

(b) The ship agent may exempt himself from liability by abandoning the vessel with all her
equipment and the freight he may have earned during the voyage (Ibid.; Art. 587, Code
of Commerce; Asked, 1964, 1982 and 1984 Bar Exams.).

Q. Who can make an abandonment in maritime transportation?

A. Only the shipowner and the ship agent can make an abandonment (Art. 587, Code of
Commerce; Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256). However, in cases of co-ownership
7
of a vessel, its part owner may exempt himself from liability by the abandonment of the part of
the vessel belonging to him (Art. 590, Code of Commerce). A charterer cannot make an
abandonment of the ship as the charterer cannot be regarded as being in the place of the
owners or agents in matters relating to the responsibility pertaining to ownership and
possession of the vessel (Yueng Sheng Exchange & Trade Co. vs. Urrutia & Co., 12 Phil. 747).

Q. When may abandonment in maritime transportation be made?

A. Abandonment may be made so as to be exempted from liability in the following cases:

(1) For civil liability to third persons arising from the conduct of the captain in the vigilance over
the goods which the vessel carried (Art. 587, Code of Commerce);

(2) For the proportionate contribution of co-owners of the vessel to a common fund for the
results of the acts of the captain referred to in Art. 587 of the Code of Commerce (Art. 590,
Code of Commerce); and

(3) For the civil liability incurred by the shipowner in case of collision (Art. 837, Code of
Commerce).

Q. What are the effects of abandonment in maritime transportation?

A. Abandonment is equivalent to an offer of the value of the vessel, her equipment and
freight earned in return for an exemption from liability. The owner of the vessel can escape
from his civil liability in the cases mentioned by law by abandoning his property in the ship
and any freight earned on the voyage (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256). When
made in the instances provided by law, abandonment cannot be refused (Philippine Shipping
Co. vs. Garcia, 6 Phil. 281).

It means therefore, that the shipowner’s (and ship agent’s) liability is coextensive with his
interest in the vessel and its freight, and ceases by abandonment and surrender of these to
the parties sustaining the loss (Yangco vs. Laserna, 40 O.G. 4296). However, if no abandonment
is made, the liability of the shipowner or ship agent is not limited to the value of the vessel and
freight, nor extinguished (Ohta Development Co. vs. Steamship “Pompey”, 49 Phil. 177).

Q. What is the reason for giving the shipowner and ship agent the right of abandonment in
the cases provided by law?

A. By abandoning the vessel and freight money, the agent or owner exempts himself from
liability, thus avoiding the possibility of risking his whole fortune in the business (Philippine
Shipping Co. vs. Garcia, 6 Phil. 281, 285).

To offset against the innumerable hazards and perils in sea voyages and to encourage ship
building and marine commerce, it was deemed necessary to confine the liability of the owner
or agent arising from the operation of a ship to the vessel, equipment, and freight, or

8
insurance, if any, so that if the shipowner or agent abandon the ship, equipment, and freight,
his liability would be extinguished (Abueg, et al. vs. San Diego, 44 O.G. 80).

Q. What is the meaning of limited liability of the shipowner and ship agent in maritime
transportation? (Asked, 1964, 1982, 1985, 1988, 1994, 1997, 1999 and 2000 Bar Exams.)

A. In the instances the law accords a shipowner or agent the right of abandonment, by
necessary implication, his liability is confined to that to which he is entitled as a right to
abandon — “the vessel with all her equipments and the freight it may have earned during the
voyage,” — and if they are lost, it suffices for his discharge, to surrender all claims in respect
of the ship and its freight, such as insurance, etc., and any act of abandonment would be an
idle ceremony, since whether the abandonment of the vessel was in accordance with law or
not, is immaterial in such a case (Yangco vs. Laserna, 40 O.G. 4296).

That which distinguishes the maritime from the civil law and even from the mercantile law in
general is the real and hypothecary nature of the former, and the many securities of the real
nature that maritime customs from time immemorial, the laws, the codes, and the later
jurisprudence, have provided for the protection of the various and conflicting interest which
are ventured and risked in maritime expeditions, such as the interests of the vessel and of the
agent, those of the owners of the cargo and consignees, those who salvage the ship, those
who make loans upon the cargo, those of the sailors and members of the crew as to their
wages, and those of a constructor as to repairs made to the vessel (Philippine Shipping Co. vs.
Garcia, 6 Phil. 281, 284). Consequently, the total destruction of the vessel extinguishes a
maritime lien as there is no longer any res to which it can attach (Gov’t. of the Philippine
Islands vs. Insular Maritime Co., 45 Phil. 805).

Q. What are the exceptions to the limited liability of the shipowner and ship agent? (Asked,
1994 Bar Exams.)

A. The exceptions to the limited liability of the shipowner and ship agent are:

(1) In case the voyage is not maritime, but only in river, bay, or gulf;

(2) In case of the expenses for equipping, repairing or provisioning the vessel (Asked, 2000
Bar Exams.);

(3) In case the vessel is not a common carrier but a private carrier; and

(4) In case the vessel totally sunk or became a total loss due to the fault of the shipowner or
ship agent (Manila Steamship Co., Inc. vs. Abduiraman, L-9534, Sept. 29, 1956; Home
Ins. Co. vs. American Steamship Agencies, Inc., 23 SCRA 25; Vasquez vs. Court of
Appeals, 139 SCRA 25; Heirs of Amparo de los Santos vs. Court of Appeals, 186 SCRA
649; Asked, 1991 Bar Exams.).

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Q. M/V Mindoro, a vessel owned by Compania Maritima (Maritima) left Manila for Aklan
crowded with passengers and heavy with cargo. Although the vessel was cleared for
departure by the Coast Guard at 2:00 a.m., its departure was delayed for four hours. During
the delay, unmanifested cargo and passengers were loaded resulting to overloading of the
vessel. The vessel met a typhoon on the Sibuyan area and due to the strong waves, the vessel
sank causing the drowning of several passengers. The Board of Marine inquiry found that the
captain and officers were negligent in operating the vessel. The captain of the vessel perished
with the vessel. The heirs of the victims sued Maritima. The court ruled that since the vessel
sank, Maritima cannot be made liable on the principle of limited liability of the shipowner or
ship agent. Was such ruling correct?

A. The ruling of the court was not correct. While the limited liability doctrine applies to cases
wherein the shipowner or ship agent may properly be held liable for the negligent or illicit acts
of the captain, however, Article 587 of the Code of Commerce speaks only of situations where
fault or negligence is committed solely by the captain. Maritima shares equally in the captain’s
negligence. While the vessel’s departure was delayed for four hours notwithstanding the
clearance from the Coast Guard, Maritima could not be excused for the delay because it did not
check from the captain the reason for the delay. It was due to this interim that unmanifested
cargo and passengers were loaded during the four- hour interval. A closer supervision could
have prevented the overloading. If it were not for the delay, the vessel could have avoided the
effects of the typhoon and reached its destination safely (Heirs of Amparo de los Santos vs.
Court of Appeals, 186 SCRA 649; Asked, 2000 Bar Exams.).

Q. Coca-Cola Bottlers loaded on board MV Asilda, a vessel owned and operated by Felman,
7,500 cases of 1-liter Coca-Cola bottles to be transported from Zamboanga City to Cebu City.
The vessel left Zamboanga City in fine weather but it sank the following morning, bringing
down her entire cargo. It turned out that the vessel top-heavy as 2,500 cases of Coca-Cola
bottles were improperly stowed on deck. The inordinate loading of cargo on deck resulted in
the decrease of the vessel’s metacentric height thus making it unstable. After the loss, Felman
abandoned all its rights, interest and ownership over the vessel for the purpose of limiting
and extinguishing its liability under Article 587 of the Code of Commerce. Did the
abandonment of the vessel relieve Felman of its liability?

A. No. There are exceptional circumstances wherein the ship agent or ship owner could still be
held answerable despite the abandonment, as where the loss or injury was due to the fault of
the ship owner or the captain. The international rule is to the effect that the right of
abandonment of vessels as a legal limitation of the ship owner’s liability does not apply to cases
where the injury or average was occasioned by the ship owner’s fault. It must be stressed that
Article 587 of the Code of Commerce speaks only of situations where the fault or negligence is
committed solely by the captain. Where the shipowner is likewise to be blamed, Article 587 will
not apply, and such situation will be covered by the provisions of the Civil Code on common
carriers. In the event of loss of goods, common carriers are presumed to have acted negligently

Q. Miranda purchased four special cabin tickets from Negros Navigation for his family. The
tickets were for the Manila-Bacolod trip of the M/V Don Juan. The vessel sank when it collided
off the Tablas Straight in Mindoro with M/T Tacloban City, an oil tanker owned by PNOC. The
collision was due to the negligence of the crew of M/T Tacloban City although the crew of M/V
Don Juan were likewise guilty of negligence. The incident resulted in the loss of numerous
10
passengers including the relatives of Miranda, whose bodies were never found. Miranda sued
Negros Navigation which raised the defense that it could not be liable because its liability was
limited to the value of the vessel which was totally lost and hence, its liability, if any, was
extinguished. Was the contention of Negros Navigation correct?

A. The defense of Negros Navigation was not correct. A shipowner may be held liable for injuries
to or death of passengers notwithstanding the exclusively real and hypothecary nature of its
liability under maritime law if fault can be attributed to the shipowner. Although the proximate
cause of the mishap was the negligence of the crew of M/T Tacloban City, the crew of M/V Don
Juan were equally negligent as they failed to take steps to prevent the collision or at least delay
the sinking of the ship and supervise the abandonment of the ship (Negros Navigation Co., Inc.
vs. Court of Appeals, 88 SCAD 876, 281 SCRA 532 [1997]; Asked, 1998 Bar Exams.).

Q. When MV “Pioneer Cebu” left Manila for Cebu, it was overloaded with passengers as it
was authorized to carry only 260 passengers but carried 322 passengers. It lacked safety
devices for 322 passengers. When the vessel left Manila, its officers were already aware of a
typhoon building up in Mindanao. During the voyage, the vessel encountered the typhoon
and struck a reef, and subsequently sunk. The vessel was covered by insurance. Some
passengers died. (a) Was the death of the passengers caused by a fortuitous event? (b) Did
the loss of the vessel extinguish the liability of the shipowner and ship agent?

A. (a) To constitute fortuitous event, it must be impossible to foresee, or if it could be

foreseen, must have been impossible to avoid. There must be an entire exclusion of human
agency from the cause of injury or loss. In this case, the officers of the vessel were negligent
not only in proceeding with the voyage with an impending typhoon but also in overloading
the vessel and failing to provide the vessel with safety devices (Vasquez vs. Court of Appeals,
138 SCRA 553; Asked, 1999 and 2000 Bar Exams.).

(b) Since the vessel was insured, the liability of the shipowner and ship agent could be
extended to the proceeds of the insurance. Despite the total loss of the vessel therefore,
its insurance answers for the damages that a shipowner or agent may be held liable for
by reason of the death of its passengers (Vasquez vs. Court of Appeals, supra; Asked,
1999 Bar Exams.).

Q. When are the shipowner and ship agent not liable for the obligations contracted by the
captain?

A. Neither the shipowner nor the ship agent shall be liable for the obligations contracted by
the captain if the latter exceeded his powers and privileges pertaining to him by reason of his
position or conferred upon him by the former.

However, if the amounts claimed were used for the benefit of the vessel, the owner or agent
shall be liable (Art. 588, Code of Commerce; Asked, 1989 Bar Exams.).

Q. What relation is presumed to be established among co-owners of a vessel?

A. If two or more persons should be co-owners of a merchant vessel, a partnership shall be

presumed as established by the co-owners.
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This partnership shall be governed by the resolutions of majority of the co-owners.

A majority shall be the relative majority of the voting co-owners.

If there should be only two co-owners, in case of disagreement the vote of the co-owner
having the largest (sic) interest shall be decisive. If the interests are equal, it shall be decided
by lot.

The co-owner having the smallest share in the vessel shall have one vote; and the other co-
owners proportionately shall have as many votes as they have parts equal to the smallest
one.

The vessel cannot be detained, attached, or levied upon execution in her entirety for the
private debts of a co-owner, but the proceedings limited to the interest which the debtor may
have in the vessel may be made, without interfering with her navigation (Art. 589, Code of
Commerce).

Q. (a) What is the extent of the liability of co-owners to third persons for the acts or conduct
of the captain in the vigilance over the goods which the vessel carried? (b) How may the co-
owner exempt himself from such liability?

A. (a) The co-owners of the vessel shall be civilly liable in the proportion of their contribution
to the common fund for the results of the acts of the captain in the vigilance over the goods
which the vessel carried, referred to in Article 587.

(b) Each co-owner may exempt himself from this liability by the abandonment, before a
notary, of that part of the vessel belonging to him (Art. 590, Code of Commerce).

Q. What is the liability of the co-owners of the vessel for the expenses of the vessel?

A. All the co-owners shall be liable, in proportion to their respective ownership, for the
expenses of the repairs of the vessel and for other expenses which are incurred by virtue of
the resolution of the majority.

They shall likewise be liable in the same proportion for the expenses of maintenance,
equipment, and provisioning of the vessel, necessary for navigation (Art. 591, Code of
Commerce).

Q. May the co-owners exempt themselves from liability for the expenses of repairs of the
vessel and other expenses by the abandonment or loss of the vessel?

A. Unlike in Art. 590, the co-owners are not expressly given by Article 591 the right of
abandonment for expenses for the repair of the vessel and other expenses which were
incurred by virtue of the resolution of the majority of the co-owners. “As to the applicability
of Article 591 of the Code of Commerce, there is nothing in the language to denote that the
liability of the owners of a vessel is wiped out by the loss of that vessel.” (Government of the
12
P.I. vs. Insular Maritime Co., 45 Phil. 805-806) While total destruction of the vessel
extinguishes a maritime lien for expenses for the repair of the vessel, as there is no longer any
res to which it can attach, however, the “total destruction of the vessel does not affect the
liability of the owners for repairs on the vessel completed before its loss.” (Ibid., p. 807)

Q. Distinguish the liability of the shipowner from that of the ship agent for contractual
obligations and for collision of the vessel?

A. The owners and agents of the vessel causing the loss of another vessel by collision are liable
therefor, but they “are not liable beyond the vessel itself causing the collision,” and therefore, in
case of loss of the vessel, they “are not required to pay such indemnification for the reason that
the obligation thus incurred has been extinguished on account of the loss of the thing bound for
the payment thereof.” On the other hand, contractual obligations remain unaffected by the loss
of the thing concerned in the contract and which is governed principally by the provisions of the
Civil Code (Government of the P. I. vs. Insular Maritime Co., 45 Phil. 805-807).

Q. What is the effect of the resolution of the majority of the co-owners on the minority?

A. The resolutions of the majority with regard to the repair, equipment, and provisioning of
the vessel in the port of departure shall bind the minority unless the co-owners in the
minority renounce their participation therein, which must be acquired by the other co-owners
after a judicial appraisement of the value of the portion or portions assigned.

The resolution of the majority relating to the dissolution of the partnership and sale of the
vessel shall also be binding on the minority.

The sale of the vessel must be made at public auction, subject o the provisions of the law of
civil procedure, unless the co-owners unanimously agree otherwise, the right of pre-emption
and redemption mentioned in Article 575 being always reserved in favor of said co-owners
(Art. 592, Code of Commerce).

Thus, although the resolution of the majority in the sale of the vessel is binding on the
minority, all co-owners have the right of preemption or redemption in proportion to their
respective interest whenever the vessel is sold.

Q. Who shall be preferred in the charter of the vessel?

A. The owners of a vessel shall have preference in her charter over other persons, offering
equal conditions and price. If two or more of the former should claim said right, the one
having greater interest shall be preferred, and should they have an equal interest shall be
decided by lot (Art. 593, Code of Commerce).

Hence, even if the owners of the vessel are common carriers who should accept the public
indiscriminately, in case one of the owners should desire to charter the vessel, he shall be
preferred over other persons offering equal conditions and price.

13
Q. How is the ship agent chosen?

A. The co-owners shall elect the manager who is to represent them in the capacity of ship agent.

The appointment of director or ship agent shall be revocable at the will of the co-owners (Art. 594, Code
of Commerce).

Q. What are necessary so that the duly elected ship agent may act as such?

A. The ship agent, whether he is at the same time the owner of the vessel, or a manager for an owner or
for an association of co-owners, must have the capacity to engage in commerce and must be recorded in
the merchant’s registry of the province (Art. 595, par. 1, Code of Commerce).

Q. What are the powers and duties of a ship agent?

A. The following are the powers and duties of a ship agent:

(1) The ship agent shall represent the ownership of the vessel and may in his own name and in such
capacity take judicial and extra-judicial steps in matters relating to commerce (Art. 595, par. 2, Code of
Commerce).

(2) The ship agent may occupy the duties of captain of the vessel, subject in every case, to the
qualifications of the captain provided in Article 609 (Art. 596, par. 1, Code of Commerce).

(3) The ship agent shall select and come to an agreement with the captain, and shall contract in the
name of the owners who shall be bound in all that refers to repairs, details of equipment, armament,
provisions, fuel, and freight of the vessel, and, in general, in all that pertains to the requirements of
navigation (Art. 597, Code of Commerce).

(4) The ship agent shall indemnify the captain for all the expenses he may have incurred from his own
funds or from those of other persons for the benefit of the vessel (Art. 602, Code of Commerce).

Q. Who shall be preferred for the position of captain among the applying co-owners?

A. If two or more co-owners apply for the position of captain, the disagreement shall be decided by a
vote of the co-owners, and if the vote should result in a tie, the position shall be given to the owner
having the larger interest in the vessel.

If the interest of the applicants should be the same, and there should be a tie, the matter shall be
decided by lot (Art. 596, pars. 2 and 3, Code of Commerce).

It is however understood that the captain to be designated must have the qualifications of a captain (Art.
609, Code of Commerce).

Q. What are the obligations of the managing agent in relation to his co-owners?

A. The following are the obligations of the managing agent:

(1) The managing agent of an association shall render to his co-owners an account of the results of each
voyage of the vessel, without prejudice to always having the books and correspondence relating to the
vessel and to her voyage at their disposal (Art. 599, Code of Commerce).

(2) Should there be any profits, the co-owners may demand of the managing the amount due them, by
means of an executory action without further requisite than the acknowledgment of the signatures in
the instrument approving the account (Art. 601, Code of Commerce).
14
The executory action (accion ejecutiva), however has been rendered obsolete by the Rules of Court.

Q. What are the rights of the managing agent in relation to his co-owners?

A. After the account of the managing agent has been approved by a relative majority, the co-owners shall
pay the expenses in proportion to their interest, without prejudice to the civil or criminal actions which
the minority may deem fit to institute afterwards.

In order to enforce the payment, the managing agents shall be entitled to an executory action which
shall be instituted by virtue of a resolution of the majority, and without further proceedings other than
the acknowledgment of the signatures of the persons who voted the resolution (Art. 600, Code of
Commerce).

Again, the executory action (accion ejecutiva), has been rendered obsolete by the Rules of Court.

Q. What is the obligation of the ship agent for the expenses incurred for the benefit of the
vessel?

A. The ship agent shall indemnify the captain for all the expenses he may have incurred from
his own funds or from those of other persons for the benefit of the vessel (Art. 602, Code of
Commerce).

Q. May the ship agent discharge the captain and the crew? What are the consequences
thereof?

A. Before the vessel goes out to sea, the ship agent may, at his discretion, discharge the
captain and members of the crew whose contract did not state a fixed period or voyage,
paying them the salaries earned according to their contracts, and without any indemnity
whatsoever, unless there is an expressed and specific agreement in respect thereto (Art. 603,
Code of Commerce).

If the captain or any other member of the crew should be discharged during the voyage, they
shall continue to receive their salary until their return to the port where the contract was
made, unless there should be just motive for the discharge, all in accordance with Article 636,
et seq. of this Code (Art. 604, Code of Commerce).

The foregoing provisions apply where the captain is not co-owner of the vessel or one who
being a co-owner of the vessel, obtained a command of the vessel by virtue of an agreement
contained in the articles of partnership. In such cases, the provisions of Articles 606 and 607
of the Code of Commerce shall apply.

Q. While the vessel “MV Montenegro” was anchored at Batangas port, the ship agent
discharged the captain and the crew without cause, and replaced them with a new set of
captain and crew. The discharged captain and crew protested and demanded payment of
damages. Their contract did not state a fixed period nor a specific voyage covered by their
contract. (a) May the captain and the crew members recover damages? (b) Would your
answer be the same if the captain and members of the crew were discharged during the

15
voyage? (c) May such discharge be effected where the contracts of the captain and members
of the crew were for a fixed period or voyage?

A. (a) There is no right to recover damages unless there is an expressed and specific
agreement in respect thereto because the contract of the captain and the crew did not
state a fixed period or voyage and therefore, the ship agent may discharge the captain
and members of the crew at any time before the vessel goes out to sea.

(b) On the other hand, where the captain or the members of the crew were discharged during
the voyage, they shall continue to receive their salary until their return to the port where
the contract was made, unless there should be a just motive for the discharge (Art. 604,
Code of Commerce).

(c) If the contracts of the captain and members of the crew with the agent should be for a fixed
period or voyage, they may not be discharged until after the fulfillment of their
contracts, except by reason of insubordination in serious matters, robbery; theft,
habitual drunkenness or damage caused to the vessel or to her cargo by malice, or
manifest or proven negligence (Art. 605, Code of Commerce).

Q. Four members of the crew were contracted by a shipping company to be part of the crew
of a vessel bound from Japan to Manila. Under the contract, the same was to expire on the
arrival thereof at the port of Manila. They left Japan and upon reaching Hongkong, said crew
members were dismissed and replaced on March 16. They were not paid their salaries for the
period from March 17 and until September 30 when the vessel arrived at the port of Manila.
May the dismissed crew members recover damages?

A. Yes, they may recover damages. Their contract was for a definite voyage and therefore,
they cannot be discharged until after the fulfillment of their contract, except for reasons of
insubordination in serious matters, robbery, theft, habitual drunkenness or damage caused to
the vessel or to her cargo for malice, or manifest or proven negligence. There being no
showing that they were discharged for any of the foregoing causes, they are entitled to
salaries up to September 30 (Madrigal Shipping Co., Inc. vs. Ogilvie, L-8431, Oct. 1958).

Q. Wallem, a shipping company hired the respondents as seamen for a period of ten (10)
months. For instigating the International Transport Federation w demand higher seamen’s
rates to the crew, respondents were dismissed. Was the dismissal correct?

A. The dismissal was not correct. The respondents as seamen cannot be dismissed without
legal cause. What the respondents did was not a legal cause for dismissal under Art. 605 of
the Code of Commerce but an exercise of the basic right of all workmen to seek greater
benefits and employ some means of pressing their demands (Wallem Phils. Shipping, Inc. vs.
Minister of Labor, 102 SCRA 835).

Q. May a ship captain who is a co-owner of the vessel be discharged?

A. If the captain should be a co-owner of the vessel, he may not be discharged without the
ship agent returning to him the amount of his interest therein, which, in the absence of an

16
agreement between the parties, shall be appraised by experts appointed in the manner
established in the law of civil procedure (now Rules of Court) (Art. 606, Code of Commerce).

And if the captain who is a co-owner should have obtained the command of the vessel by
virtue of special agreement contained in the articles of co-partnership, he cannot be deprived
of this office except for insubordination in serious matters, robbery, theft, habitual
drunkenness or damage caused to the vessel or to her cargo by malice, or manifest or proven
negligence (Art. 607 in relation to Art. 605, Code of Commerce).

Q. What is the effect of the voluntary sale of the vessel on the contracts between the ship
agent and the captain?

A. In case of the voluntary sale of the vessel, all contracts between the ship agent and captain
shall terminate, the right to proper indemnity being reserved in favor of the captain,
according to the agreements made with the ship agent.

The vessel sold shall remain subject to the security of the payment of said indemnity if, after
the action against the seller has been instituted, the latter should be insolvent (Art. 608, Code
of Commerce; Philippine Shipping Co. vs. Garcia, 6 Phil. 281).

Section II — Captains and Master of Vessels

Q. Distinguish a captain from a master of a vessel?

A. Technically, the name of captain or master is given, according to the kind of vessel, to the
person in charge of it. The first denomination is applied to those who govern vessels that
navigate the high seas or ships of large dimensions and importance, although they be
engaged in coastwise trade. “Masters” are those who command smaller ships engaged
exclusively in the coastwise trade. But for purposes of maritime commerce, the words
“captain” and “master” have the same meaning; both being the chiefs or commanders of
vessels (Yu Con vs. Ipil, 41 Phil. 770, 781, citing General Review of Legislation and
Jurisprudence, Vol. 2, p. 168).

Q. What are the qualifications of the master, mate or patron of a vessel?

A. An applicant for certificate or license as master, mate or patron shall be: citizen of the
Philippines, must be physically fit and must be examined physically, undergo examination into
moral and technical qualifications and shall have the other prescribed requirements (Sees.
829, 1187, 1188, 1189, 1189 1/2, 1190 and 1191, R.A. No. 1937, repealing Art. 609, Code of
Commerce).

Q. What are the inherent powers of the captain or master of a vessel?

A. The following are the powers inherent in the position of captain or master of a vessel:
17
1. To appoint or make contracts with the crew in the absence of the ship agent, and to
propose said crew, should the said agent be present; but the ship agent shall not be permitted
to employ any member against the captain’s express refusal.

2. To command the crew and direct the vessel to the port of her destination, in accordance
with the instructions he may have received from the ship agent.

3. To impose, in accordance with the contracts and the laws and regulations of the merchant
marine, on board the vessel, correctional punishment upon those who do not comply with his
orders or who conduct themselves against discipline, holding a preliminary investigation on
the crimes committed on board the vessel on the high seas, which he shall turn over to the
authorities who are to take cognizance thereof, at the first port touched.

4. To make contracts for the charter of the vessel in the absence of her ship agent or
consignee, acting in accordance with the instructions received and protecting with utmost
care the interests of the owner.

5. To adopt proper measures in order to keep the vessel well provisioned and equipped,
purchasing all that may be necessary for the purpose, provided there is no time to request
instructions from the ship agent.

6. To make disposition, in similar urgent cases while on a voyage, for the repairs of the hull
and engines of the vessel and of her rigging and equipment which are absolutely necessary so
that she may be able to continue and conclude her voyage; but If she should arrive at a point
where there is a consignee of the vessel, he shall act in concurrence with the latter (Sec. 610,
Code of Commerce).

Q. What are the general functions of the captain of a vessel?

A. In general, a captain of a vessel has the following functions:

(a) he is a general agent of the shipowner;

(b) he is a technical director of the vessel; and

(c) he is a representative of the Government in the country under whose flag he navigates
(1 Blanco, 490).

Q. To comply with his obligations, how may the captain raise funds?

A. In order to comply with the obligations mentioned in the preceding article, the captain,
when he has no funds and does not expect to receive any from the ship agent, shall obtain
the same in the successive order stated below:

18
1. By requesting said funds from the consignees of the vessel or correspondents of the ship
agent.

2. By applying to the consignees of the cargo or to the persons interested therein.

3. By drawing on the ship agent.

4. By borrowing the amount required by means of a loan on bottomry.

5. By selling a sufficient quantity of the cargo to cover the amount absolutely necessary to
repair the vessel and equip her to pursue the voyage.

In the latter cases he must apply to the judicial authority of the port if in the Philippines, and to
the Filipino consul if in a foreign country; and where there should be none to the local
authority, proceeding in accordance with the provisions of Article 583, and with
provisions of the law of civil procedure (now Rules of Court) (Sec. 611, Code of
Commerce).

Q What duties are inherent in the office of the captain?

A. The following duties are inherent in the office of the captain:

1. To have on board, before starting on a voyage, a detailed inventory of the hull, engines,
rigging, tackle, stores and other equipment of the vessel; the navigation certificate; the roll of
the persons who make up the crew of the vessel, and the contracts entered into with the crew;
the list of passengers; the health certificate; the certificate of registry proving the ownership of
the vessel, and all the obligations which encumber the same up to that date; the charter parties
or authenticated copies thereof; the invoices or manifests of the cargo and the instrument of
the visit or inspection of the expert, should it have made at the port of departure.

2. To have a copy of this Code on board.

3. To have three folioed and stamped books, placing at the beginning of each one a note of the
number of folios it contains, signed by the marine official, and, in his absence, by the competent
authority.

4. To make, before receiving the cargo, with the officers of the crew and two experts, if required
by the shippers and passengers, an examination of the vessel, iii order to ascertain whether she
is watertight, with the rigging and engines in good condition, and with equipment required for
good navigation, preserving a certificate of the memorandum of this inspection, signed by all
the persons who may have taken part therein, under their responsibility.

The experts shall be appointed, one by the captain of the vessel and the other by those who
request the examination, and in case of disagreement a third shall be appointed by the marine
authority of the port.

19
5. To remain constantly on board the vessel with the crew while receiving the cargo on board, and watch
carefully the stowage thereof; not to consent to the loading of any merchandise or goods of a dangerous
character, such as inflammable or explosive substances, without the precautions which are
recommended for their packing, handling, and isolation; not to permit any cargo to be carried on deck
which, by reason of its arrangement, volume, or weight, makes the work of the sailors difficult, and
which might endanger the safety of the vessel; and in case the nature of the merchandise, the special
character of the shipment and principally the favorable season when it takes place, would allow the
merchandise to be carried on deck, he must hear the opinion of the officers of the vessel, and have the
consent of the shippers and of the ship agent.

6. To demand a pilot at the expense of the vessel whenever required by navigation, and principally when
a port, canal, or river, or a roadstead or anchoring place is to be entered with which neither he, nor the
officers and the crew are acquainted.

7. To be on deck at the time of sighting land and to take command on entering and leaving the ports,
can1s, roadsteads, and rivers, unless there is a pilot on board discharging his duties. He shall not spend
his night away from the vessel except for serious cause or by reason of official business.

8. To present himself, when making a port in distress, to the maritime authority if in the Philippines and
to the Filipino consul if in a foreign country, before twenty-four hours have elapsed, and make a
statement of the name, registry, and port, of departure of the vessel, of her cargo, and cause of arrival,
which declaration shall be vised by the authority or by the consul if after examining the same it is found
to be ecceptable, giving the captain the proper certificate in order to show his arrival under stress and
the cause therefor. In the absence of marine officials or of the consul, the declaration must be made
before the local authority.

9. To take the necessary steps before the competent authority in order to enter in the certificate of the
vessel in the registry of vessels, the obligations which he may contract in accordance with Art. 583.

10. To place under good care and custody all the papers and belongings of any member of the crew who
might die on the vessel, making a detailed inventory in the presence of passengers as witnesses, and, in
their absence, of members of the crew.

11. To conduct himself according to the rules and precepts contained in the instructions of the ship
agent, being liable for all that he may do in violation thereof.

12. To give account to the ship agent, from the port where the vessel arrives, of the cause of his arrival,
taking advantage of the semaphore, telegraph, mail, etc., as the case may be; notify the said ship agent
of the cargo he may have received, stating the names and domiciles of the shippers, freight earned, and
amounts borrowed on bottomry loan; advise him of his departure, and give him any information and
data which may be of interest to him.

13. To observe the rules on the situation of lights and maneuvers to prevent collisions.

14. To remain on board, in case the vessel is in danger, until the last hope to save her is lost, and before
abandoning her, to hear the officers of the crew, abiding by the decision of the majority; and if he should
have to take a boat he shall take with him, before anything else, the books and papers and then the
articles of most value, being obliged to prove, in case of the loss of the books and papers, that he did all
he could to save them.

15. In case of shipwreck, to make the proper protest in due form at the first port reached before the
competent authority or Filipino consul within twenty-four hours, specifying therein all the incidents of
the wreck in accordance with subdivision 8 of this Article.

20
16. To comply with the obligations imposed by the laws and regulations of navigation, customs, health,
and others (Art. 612, Code of Commerce).

Q. What books must be carried by the captain on board the vessel?

A. The captain must carry on the vessel three folioed and stamped books, as follows:

(1) In the first book which shall be called “logbook,” he shall enter every day the condition of the
atmosphere, the prevailing winds, the course taken, the rigging carried, the horsepower of the
engines, the distance covered, the maneuvers executed, and other incidents of navigation; he
shall also enter the damage suffered by the vessel in her hull, engines, rigging, and tackle, no
matter what is its cause, as well as the imperfections and averages of the cargo, and the
effects and consequences of the jettison, should there be any; and in cases of grave
resolutions which required the advice or a meeting of the officers of the vessel or even of the
passengers and crew, he shall record the decisions adopted. For the information indicated he
shall make use of the binnacle book, and the steam or engine book kept by the engineer.

(2) In the second book, called the “accounting book,” he shall enter all the amounts collected
and paid for the account of the vessel, entering specifically article by article, the sources of
the collection and the amounts paid for the provisions, repairs, rigging or goods, fuel, outfits,
wages, and all other expenses. He shall further enter therein a list of all the members of the
crew, stating their domiciles, their wages and salaries, and the amounts they may have
received of their accounts, either directly or by delivery to their families.

(3) In the third book called “freight book,” he shall record the entry and exit of all the goods,
stating their marks and packages, names of the shippers and of the consignees, ports of
loading and unloading and the freight earned. In the same book he shall record the names
and places of sailing of the passengers, the number of packages of which their baggage
consists, and the price of their passage (Art. 612, no. 3, Code of Commerce).

Q. What is the probative value of entries in the log book?

A. The vessel’s log book is an official record and entries made by a person in the performance
of a duty required by law are prima facie evidence of the facts stated therein (Haverton
Shipping Ltd. vs. NLRC, 135 SCRA 685).

Q. Haverton Shipping hired Benitez as boatswain on board a ship for one year. About two
months later, Benitez had a fight with two other crewmembers. The ship authorities
conducted an investigation, entered the incident in the ship’s log book and repatriated
Benitez. Benitez filed a complaint for illegal dismissal. The National Seamen Board dismissed
the entry in the log book as not legally binding and hearsay. The decision was affirmed by
NLRC. Was the entry in the log book concerning the cause of dismissal of Benitez legally
binding?

A. In declaring that the entry in the ship’s log book was not binding for being hearsay, NLRC
overlooked the fact that under our laws the ship’s captain is obligated to keep a “log book”
where, among others, he records the decisions he has adopted. Even according to the law of
the vessel’s registry, that book is also “required by law” as disclosed by the entry itself. Entries
made in the log book are prima facie evidence of the facts stated therein (Haverton Shipping
Ltd. vs. NLRC, supra).
21
Q. What is the liability of the ship agent for non-fulfillment by the captain of his inherent
duties?

A. Although the duties enumerated in Article 612 of the Code of Commerce are inherent in
the master, the civil liability arising from the non-fulfillment thereof is not limited to him.
While the master is responsible to the ship agent, the latter, in turn, is liable to third persons,
as clearly provided in Article 618 of the said Code (Sontua & Co. vs. Miguel J. Ossorio, 43 Phil.
511).

Q. What is the effect if the captain makes any separate transaction for his own account?

A. A captain who navigates for freight in common or on shares, may not make any separate
transaction for his account, and should he do so, the profits shall belong to the other persons
interested, and the losses shall be borne by him alone (Art. 613, Code of Commerce).

Q. What is the liability of the captain for failure to make the agreed voyage?

A. A captain who, having agreed to make a voyage, fails to fulfill his undertaking, without being
prevented by fortuitous event or force majeure, shall indemnify all the losses which his failure
may cause, without prejudice to criminal penalties which may be proper (Art. 614, Code of
Commerce).

Q. May the captain have himself substituted by another?

A. Without the consent of the ship agent, the captain may not have himself substituted by
another person; and should he do so, besides being liable for all the acts of the substitute and
bound to pay the indemnities mentioned in the foregoing article, the captain as well as the
substitute may be discharged by the ship agent (Art. 615, Code of Commerce).

Q. What must the captain do in case the provisions and fuel of the vessel are consumed before
arriving at the port of destination?

A. If the provisions and fuel of the vessel are consumed before arriving at the port of
destination, the captain shall order, with the consent of the officers of the same, to make the
nearest port to get a supply of either; but if there are persons on board who have provisions of
their own, he may compel them to turn over said provisions for the common consumption of all
persons on board, paying the price thereof at the same time, or, at the latest, at the first port
where the vessel may arrive (Art. 616, Code of Commerce).

Q. Can the captain contract loans on bottomry or respondentia?

A. The captain cannot contract loans on respondentia secured by the cargo, and should he do
so, the contract shall be void.

Neither can he borrow money on bottomry for his own transactions, except on the portion of
the vessel he owns, provided, no money has been previously borrowed on the whole vessel, nor
22
exists any other kind of lien or obligation chargeable against her. When he is permitted to do so,
he must necessarily state what interest he has in the vessel.

In case of violation of this article, the principal, interest, and costs shall be charged to the
private account of the captain, and the agent shall further have the right to discharge him (Art.
617, Code of Commerce; Asked, 1962, 1974 and 1975 Bar Exams.).

The reason for this rule is obviously due to the fact that the captain is not the owner of the
cargo.

Q. When is the captain civilly liable to the ship agent, and the latter to third persons?

A. The captain shall be civilly liable to the ship agent, and the latter to the third persons who
may have made contracts with the former:

1. For all the damages suffered by the vessel and her cargo by reason of want of skill and
negligence on his part. If a misdemeanor or crime has been committed he shall be liable in
accordance with the Penal Code.

2. For all thefts and robberies committed by the crew, reserving his right of action against the
guilty parties.

3. For the losses, fines and confiscations imposed on account of violation of laws and
regulations of customs, police, health, and navigation.

4. For the damage caused by the mutinies on board the vessel, or by reason of faults
committed by the crew in the service and defense of the same, if he does not prove that he
opportunely made full use of his authority to prevent or avoid them.

5. For those arising by reason of a misuse of powers and non-fulfillment of duties

corresponding to him in accordance with Articles 610 and 612.

6. For those arising by reason of his going out of his course or taking a course which, in the
opinion of the officers of the vessel at a meeting attended by the shippers and supercargoes
who may be on board, he should not have taken without sufficient cause.

No exception whatsoever shall exempt him from this liability.

7. For those arising by reason of his voluntarily entering a port other than his destination,
outside of the cases or without formalities referred to in Article 612.

8. For those arising by reason of the non-observance of the provisions contained in the
regulations for the situation of lights and maneuvers for the purpose of preventing collisions
(Art. 618, Code of Commerce).

23
Q. In the foregoing instances, may a third party prejudiced or damaged due to any of the causes
mentioned in Article 618 of the Code of Commerce, directly hold the ship agent liable?

A. Yes, the ship agent is directly liable to a third party prejudiced or damaged for any loss or injury
occasioned by any of the causes mentioned in Article 618 of the Code of Commerce, or due to the lack of
skill, negligence or fault either of the captain or of the crew (Young Sheng Exchange & Trading v. Urrutia
& Co., 12 Phil. 747).

Q. What is the rationale for holding the shipowner and/or ship agent liable for the acts of the captain in
the foregoing cases?

A. In maritime commerce, the shippers and passengers in making contracts with the captain do so
through the confidence they have in the shipowner who appointed him; they presume that the owner
made a most careful investigation before appointing him, and, above all, they themselves are unable to
make such an investigation, and even though they should do so, they could not obtain complete security,
inasmuch as the shipowner can, whenever he sees fit, appoint another captain instead. The ship- owner
is in the same case with respect to the me4mbers of the crew, for though he does not appoint directly,
yet, expressly or tacitly, he contributes to their appointment (Yu Con vs. Ipil, 41 Phil. 770; Asked, 1989
Bar Exams.).

Q. When does the responsibility of the captain/carrier for the cargo begin and when does it end?

A. The captain shall be liable for the cargo from the time it is turned over to him at the dock or afloat
alongside the vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at
the port of unloading, unless otherwise expressly agreed upon (Art. 619, Code of Commerce).

Such responsibility of the captain or common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has a right to receive
them (Art. 1736, Civil Code).

Q. When is the captain exempted from liability?

A. The captain shall not be liable for the damage caused to the vessel or to the cargo by reason of force
majeure; but he shall always be so — no agreement to the contrary being valid — for those arising
through his own fault.

Neither shall he be personally liable for the obligation he may have contracted for the repair, equipment,
and provisioning of the vessel, which shall be incurred by the ship agent, unless the former has expressly
bound himself personally or signed a bill of exchange or promissory note in his name (Art. 620, Code of
Commerce).

Q. When is the captain personally liable for loans on the hull, engine, rigging or tackle of the vessel?

A. A captain who borrows money on the hull, engine, rigging or tackle of the vessel, or who pledges or
sells merchandise or provisions outside of the cases without formalities prescribed in this Code, shall be
liable for the principal, interest, and costs, and shall indemnify for the damages he may cause.

He, who commits fraud in his accounts, shall reimburse the amount defrauded, and shall be subject to
the provisions of the Revised Penal Code (Art. 621, Code of Commerce; Asked, 1989 Bar Exams.).

Q. What is the duty of the captain if he should receive news of the appearance of corsairs or men of war
against his flag while on a voyage?

A. If, when on a voyage, the captain should receive news of the appearance of corsairs or men of war
against his flag, he shall be obliged to make the nearest neutral port, inform his ship agent or shippers,
24
and await an occasion to sail under convoy or until the danger is over, or to final orders from the ship
agent or shippers (Art. 622, Code of Commerce).

Q. What are: (a) corsairs, and (b) men of war?

A. (a) A corsair is a pirate ship or a privateer; and (b) men of war or men o’ war are battleships or war
ships used by the navy of a government.

Q. What must the captain do should the vessel or her cargo should be forcibly taken by a corsair?

A. If he should be attacked by a corsair and after having tried to avoid the encounter and having
resisted the delivery of the effects of the vessel or of her cargo, they should be forcibly taken away
from him, or he should be obliged to deliver them, he shall make an entry of that fact in his freight
book and shall prove it before the competent authority at the first port he touches.

After the force majeure has been proven, he shall be exempted from liability (Art. 623, Code of
Commerce).

Q. What are the duties of captain of a vessel which has gone through a hurricane or whose cargo has
suffered damage or averages?

A. A captain whose vessel has gone through a hurricane or who believes that the cargo has suffered
damage or averages, shall make a protest thereon before the competent authority at the first port he
touches within twenty-four hours following his arrival, and shall ratify it within the same period when
he arrives at the place of his destination, proceeding immediately with the proof of the facts, without
opening the hatches not until after this has been done.

The captain shall proceed in the same manner if, the vessel having been wrecked, he is saved alone or
with part of his crew, in which case he shall appear before the nearest authority, and make a sworn
statement of the facts.

The authority or the consul abroad shall verify the said facts, receiving sworn statements of the
members of the crew and passengers who may have been saved; and taking such other steps as may
help in arriving at the facts, he shall make a statement of what may be the result of the proceedings in
the logbook and in that of the sailing mate, and shall deliver the original records of the proceedings to
the captain, stamped and folioed, with a memorandum of the folios, which he must rubricate, for their
presentation to the judge or court of the port of destination.

The statement of the captain shall be believed if it is in accordance with those of the crew and
passengers; if they disagree, the latter shall be accepted, always saving proof to the contrary (Art. 624,
Code of Commerce).

Q. What is maritime protest?

A. Maritime protest is a written statement under oath, made by the master of a vessel, after the
occurrence of an accident or disaster in which the vessel or cargo is lost or injured, with respect to the
circumstances attending such occurrence. It is usually intended to show that the loss or damage resulted
from a peril of the sea, or from some other cause for which neither the master nor the owner was
responsible, and concludes with the protestation against any liability of the owner for such loss or
damage (Goro vs. William Lines, Inc., 59 O.G. 6486; Asked, 1977 and 1988 Bar Exams.).

25
Q. When and where should maritime protest be filed? (Asked, 1988 Bar Exams.)

A. (a) Maritime protest should be made when a vessel has gone through a hurricane or the captain
believes that the cargo has suffered damage or averages. It shall likewise be done if the vessel
having been wrecked, the captain is saved alone or with part of his crew, in which case he shall
appear before the nearest authority, and make a sworn statement of the facts (Art. 624, Code of
Commerce).

(b) Maritime protest should be made within twenty-four (24) hours following the arrival of the
vessel at the first port. Upon arrival at the place of destination, the captain shall ratify the
protest within twenty-four (24) hours (Ibid.).

Q. What is the duty of the captain upon arrival at the port of destination regarding the delivery of the
cargo?

A. The captain, under his personal responsibility, as soon as he should have arrived at the port of his
destination, obtained the necessary permission from the offices of health and customs, and
complied with the other formalities required by the regulations of the administration, shall make
the delivery of the cargo without any defalcation to the consignees, and, in proper case, the
vessel, rigging, and freights to ship agent (Par. 1, Art. 625, Code of Commerce; Note: Par. 2 has
been repealed by the Rules of Court).

Section III — Officers and Crew of Vessels

Q. Who shall take the place of the captain in case of absence, sickness or death of the latter?

A. The sailing mate, as the second chief of the vessel and unless the ship agent does not order otherwise,
shall take the place of the captain in case of absence, sickness or death, and shall then assume
all his powers, obligations, and liabilities (Art. 627, Code of Commerce).

Q. What are the obligations of the sailing mate?

A. The sailing mate has the following obligations:

(1) He must provide himself with charts of the seas on which he will navigate, with the maps and
quadrants or sextants which are in use and necessary for the discharge of his duties, being liable
for the accidents which may arise by reason of his omission in this matter (Art. 628, Code of
Commerce).

(2) He must personally keep a book folioed and stamped on all its pages, denominated “Binnacle Book,”
and shall enter therein daily the distance and course traveled, the variations of the needle, the
leeway, the direction and force of the wind and other matters pertaining to the voyage, and
under the “Incidents,” the maneuvers made, the meetings with other vessels, and all the
particular events and accidents which may occur during the navigation (Art. 629, Code of
Commerce).

(3) He must come to an agreement with the captain as to the course which is most convenient for the
good voyage of the vessel, in order to change the course. Should the captain oppose, the sailing
mate must explain to him his proper observations in the presence of the other sea officers.
26
 Should the captain still insist in his negative decision, the sailing mate shall make the proper
protest, signed by him and by other one of the officers in the Log Book, and shall obey the
captain who alone shall be liable for the consequences of his decision (Art. 630, Code of
Commerce).

Q. For what damages shall the sailing mate be liable?

A. The sailing mate shall be liable for all the damages caused to the vessel and cargo by reason of his
negligence or want of skill, without prejudice to the criminal liability which may arise, if a felony
or misdemeanor has been committed (Art. 631, Code of Commerce).

Q. What are the duties of the second mate?

A. The following shall be the duties of the second mate:

1. To watch over the preservation of the hull and rigging of the vessel;

2. To take care that the cargo is well arranged;

3. To preserve order, discipline, and good service among the crew;

4. To assign to each sailor the work he must do on board and to see to it that it is carried out;

5. To charge of the inventory of the rigging and equipment of the vessel if she should be laid up (Art.
632, Code of Commerce).

Q. Who shall take command of the vessel in case of inability of the captain and sailing mate?

A. The second mate shall take the command of the vessel in case of the inability or disqualification of the
captain and sailing mate, assuming therefore their powers and responsibilities (Art. 633, Code of
Commerce).

Q. Who may enlist the crew?

A. The captain may make up the crew of his vessel with such number as he may deem proper, and in the
absence of Filipino sailors, he may enlist foreigners residing in the Philippines, the number thereof not to
exceed one-fifth of the total crew. If in foreign ports the captain could not find a sufficient number of
Filipino sailors, he may make up the crew with foreigners, with the consent of the consul or marine
authorities (Art. 634, Code of Commerce).

In case however, of Philippine vessels operating in the coast- wise trade or on the high seas, no officer or
member of the crew may be hired who is not a citizen of the Philippines (Sec. 829, Tariff and Customs
Code).

Q. May a sailor contracted to serve a vessel rescind his contract?

27
A. A sailor who has been contracted to serve on a vessel cannot rescind his contract nor fail to comply
therewith, except by reason of a legitimate impediment which may have occurred to him.

Neither can he pass from the service of one vessel to another without obtaining the written permission
of the captain of the vessel on which he may be.

If, without obtaining said permission, the sailor who has signed for one vessel should sign for another
one, the second contract shall be void, and the captain may choose between forcing him to fulfill the
service to which he first bound himself or to look for a person to substitute him at his expense.

Said sailor shall furthermore lose the wages on his first contract to the benefit of the vessel for which he
has formerly signed.

A captain who, knowing that the sailor is in the service of another vessel, should have made a new
agreement with him, without requiring of him the permission referred to in the preceding paragraphs,
shall be subsidiarily liable to the captain of the vessel to which the sailor first belonged for that part of
the indemnity, which the sailor could not pay (Art. 635, Code of Commerce).

Q. What is the duration of the sailors’ contract?

A. If there is no fixed period for which a sailor has been contracted, he may not be discharged until the
termination of the return voyage to the port where he enlisted (Art. 636, Code of Commerce).

Q. What are the grounds for which a sailor may be discharged by the captain?

A. The captain cannot discharge a sailor during the time of this contract except for just cause, which may
be:

1. The perpetration of a crime which disturbs order on the vessel.

2. Repeated offenses of insubordination, or want of discipline, or of non-fulfillment of the service.

3. Incapacity and repeated negligence in the fulfillment of the service he should render.

4. Habitual drunkenness.

5. Any occurrence which incapacitates the sailor to perform the work under his charge, with the
exception of the provisions contained in Article 644.

6. Desertion.

The captain may, however, before setting out on a voyage and without giving reason whatsoever, refuse
to permit a sailor he may have engaged to go on board, and he may leave him on land, in which case his
wages have to be paid as if he had rendered services.

28
After the voyage has begun, and during the same and until the conclusion thereof, the captain may not
abandon any member of his crew on land or on the sea, unless, by reason of some crime, his
imprisonment and delivery to the competent authority in the first port of arrival should be proper, which
shall be obligatory to the captain (Article 637, Code of Commerce).

Q. What is the effect on the crew of the revocation of the voyage or change of destination?

A. If, after the crew has been engaged, the voyage is revoked by the will of the ship agent or of the
charterers, before or after the vessel has put to sea, or if the vessel by the same cause, is given a
different destination from that fixed in the agreement with the crew, the latter shall be indemnified by
reason of the rescission of the contract in accordance with rate provided in Art. 638 (Art. 638, Code of
Commerce).

However, if the revocation of the voyage should arise from a just cause beyond the control of the ship
agent and the charterers and the vessel should not have left the port, the members of the crew shall
have no other right than to collect the wages earned up to the day the revocation was made (Art. 639,
Code of Commerce).

Q. What are just causes for the revocation of the voyage? (Asked, 1952 Bar Exams.)

A. The following shall be just causes for the revocation of the voyage:

1. A declaration of war or interdiction of commerce with the Power to whose territory the vessel
was bound.

2. The blockade of the port of her destination or the breaking out of an epidemic after the
agreement.

3. The prohibition to receive in said port the goods which make up the cargo of the vessel.

4. The detention or embargo of the same by order of the Government, or for any other cause
beyond the control of the ship agent.

5. The inability of the vessel to navigate (Art. 640, Code of Commerce).

Q. What are: (a) interdiction of commerce; (b) blockade; and (c) embargo?

A. (a) “Interdiction of commerce” between two countries is a governmental prohibition of commercial

intercourse, intended to bring about an entire cessation for the time being of all trade whatever
(Black’s Law Dictionary citing The Edward, 1 Wheat. 272, 4 L.Ed. 86).

(b) “Blockade” is a circumvallation round a place by which all foreign connection and
correspondence is, as far as human power can effect it, to be cut off (Black’s Law Dictionary
citing 1 C. Rob. Adm. 151). It is the actual investment of a port or place by a hostile force fully
competent, under ordinary circumstances, to cut off all communication therewith, so arranged
or disposed as to be able to apply its force to every point of practicable access or approach to
the port or place so invested (Ibid., citing The Olinde Rodriguez, D.C.S.C., 91 Fed.274).

29
(c) “Embargo” is a proclamation or order of state, usually issued in time of war or threatened
hostilities, prohibiting the departure of ships or goods from some or all the ports of such state
until further order (Black’s Law Dictionary, citing The William King, 2 Wheat. 148, 4 L.Ed. 206).

Q. In case the voyage is revoked for a just cause, do sailors have a right to be paid, if so, how much?

A. If, after the voyage has been begun, any of the first three causes expressed in the foregoing article
should occur, the sailors shall be paid, at the port which the captain may deem proper to make for the
benefit of the vessel and cargo, according to the time they may have served thereon; but if the vessel
is to continue her voyage, the captain and the crew may mutually demand the enforcement of the
contract.

In case of the occurrence of the fourth cause, the crew shall continue to be paid half wages if the
agreement is by month; but if the detention should exceed three months, the contract shall be
rescinded and the crew shall be paid what they should have earned according to the contract as if the
voyage had been made. And if the agreement should have been made for a fixed sum for the voyage,
the contract must be complied with in the term agreed upon.

If the fifth case, the crew shall have no other right than to collect the wages earned; but if the
disability of the vessel should have been caused by the negligence or want of skill of the captain,
engineer, or sailing mate, they shall indemnify the crew for damages suffered, without prejudice
always to the criminal liability which may arise (Art. 641, Code of Commerce).

Q. When are sailors not entitled to be paid whenever the voyage is revoked?

A. If the crew have been engaged to work on shares, they shall not be entitled, by reason of
revocation, delay or greater extension of the voyage, to anything but proportionate part of the
indemnity which may be paid to the common funds of the vessel by the persons responsible for said
occurrences (Art. 642).

In the foregoing case, a form of a partnership is formed between the shipowner and the sailors for
which both of them should share in the profits and losses, and therefore, in case the voyage is revoked
or delayed, the sailors are not entitled to anything other than a proportionate part of the indemnity
which may be paid to the common funds of the vessel (See Del Viso, p. 540).

Q. What is the effect of total or partial loss of the vessel on the rights of the crew to wages, and ship
agent for advances made?

A. If the vessel and her cargo should be totally lost, by reason of capture or shipwreck, all rights shall
be extinguished, both as regards the right of the crew to demand wages and the right of the ship agent
to recover the advances made.

If the portion of the vessel or of the cargo, or of both, should be saved, the crew engaged on wages,
including the captain, shall retain their rights on the salvage, as far as possible, on the remainder of
the vessel as well as on the value of the freight or cargo saved; but sailors who are engaged on shares
shall have no right of the salvage of the hull, but only on the portion of the freight saved. [lf they
should have worked to recover the remainder of the shipwrecked vessel, they shall be given from the
value of the salvage an award in proportion to the efforts made and to the risks encountered in order
to accomplish the salvage.] (Art. 643, Code of Commerce; Note: last sentence which is bracketed has
been repealed by Salvage Law, Sec. 8, Act No. 2616).

30
The aforesaid provision however, has no effect on the right of the crew under the Employees’
Compensation provision of the Labor Code of the Philippines (P.D. 412, as amended). Thus, the
widows of the captain, machinists and patron of a vessel who perished as a result of the sinking of the
vessel where they were working, are entitled to compensation under the said law (Enciso vs. Dy-Liaco,
57 Phil. 446; Abueg, et al. vs. San Diego, 44 O.G. 80).

Q. Is a sailor who falls sick during the voyage entitled to wages and costs of medical attention?

A. A sailor who falls sick shall not lose his right to wages during the voyage, unless his sickness is the
result of his own fault. At any rate, the cost of medical attendance and treatment shall be defrayed
from the common funds, in the form of a loan.

If the sickness should be caused by an injury received in the service or defense of the vessel, the sailor
shall be attended and treated at the expense of the common funds, deducting, before anything else,
from the proceeds of the freight, the costs of the attendance and treatment (Art. 644, Code of
Commerce).

The sailor shall be entitled to the benefits provided for by the Labor Code of the Philippines (Abueg, et
al. vs. San Diego, supra).

Q. What is the effect of the death of the sailor during the voyage on his right to wages not yet
received?

A. If a sailor should die during the voyage, his heirs shall be given the wages earned and not yet
received, according to his contract and cause of his death, namely:

If he died a natural death and was contracted on wages, what may have been earned up to the date of
his death shall be paid.

If the contract was for a fixed sum for the whole voyage, half the amount earned shall be paid if the
sailor died on the voyage out, and the whole amount if he died on the return voyage.

And if the contract was on shares and his death occurred after the voyage was begun, the heirs shall
be paid the entire participation due to sailor; but if the sailor died before the departure of the vessel
from the port, the heirs shall not be entitled to claim anything.

If death occurred in defense of the vessel, the sailor shall be considered as living, and his heirs shall be
paid, at the end of the voyage, the full amount of wages or the full participation on the profits which
may be due him, as others of his class.

Likewise, the sailor who was captured while defending the vessel shall be considered as present, in
order to enjoy the benefits as the rest; but should he have been captured by reason of negligence or
other accident having no relation with the service, he shall only receive the wages due up to the day of
his capture (Art. 645, Code of Commerce).

Q. Upon what assets do the crew have a lien for unpaid wages?

31
A. The vessel with her engines, rigging, equipment and freight shall be liable for the wages earned by
the crew engaged per month or for the trip, the liquidation and payment to take place between one
voyage and the other.

After a new voyage has been begun, credits of such kind pertaining to the preceding voyage shall lose
their preference (Art. 646, Code of Commerce).

Q. Which is more superior lien, that in favor of the crew for unpaid wages or that created in favor of a
mortgagee?

A. The lien created in favor of the crew for their wages take preference over a lien created by giving
the ship as security for money borrowed. The crew, therefore, have a prior lien upon a ship over the
lien created by a chattel mortgage (McMicking vs. El Banco Espanol-Filipino, 13 Phil. 429), and the
purchaser of the vessel would be obliged to respect the liens created by unpaid wages of the crew
(Philippine Shipping Co. vs. Garcia, 6 Phil. 281).

Q. When are the officers and crew free from all obligations they contracted?

A. The officers and the crew of the vessel shall be free from all obligations contracted, if they deem it
proper, in the following cases:

1. If, before commencing the voyage, the captain attempts to change it, or if there occurs a naval
war with the nation to which the vessel was destined.

2. If a disease should break out and be officially declared an epidemic in the port of destination.

3. If the vessel should change owner or captain (Art. 647, Code of Commerce).

Q. What is the meaning of “complement of the vessel?”

A. By the complement of a vessel shall be understood all the persons embarked, from the captain to the
cabin boy, necessary for the management, maneuvers, and service, and therefore, in the complement
shall be included the crew, sailing mates, engineers, stockers, and others working on hoard not having
specific names; but it shall not include the passengers or the persons whom the vessel is only
transporting (Art. 648, Code of Commerce).

Section IV - Supercargoes

Q. Who is a supercargo?

A. Supercargo is a person specially employed by the owner of a cargo to take charge of and sell to the
best advantage merchandise which has been shipped, and to purchase returning cargoes and to receive
freight, as he may be authorized (Black’s Law Dictionary).

Q. What are the duties of a supercargo? What is the effect of the designation of a supercargo on the
powers and responsibilities of the captain?

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A. The supercargoes shall discharge on board the vessel the administrative duties which the ship agent
or shippers may have assigned to them; they shall keep an account and record of their transactions in a
book which shall have the same conditions and requisites as those required for the accounting book of
the captain, and shall respect the latter in his duties as chief of the vessel.

The powers and responsibilities of the captain shall cease, when there is a supercargo, with regard to
that part of the administration legitimately conferred upon the latter, but they shall continue in force for
all acts which are inseparable from his authority and office (Art. 649).

Q. What transactions are not allowed to be entered into by supercargoes?

A. Supercargoes cannot, without authorization or express agreement, make any transaction for their
own account during the voyage, with the exception of the ventures which, in accordance with the
custom of the port of destination, they are permitted to do.

Neither can they invest in the return voyage more than the profit from the ventures, unless there is an
express authorization from the principals (Art. 651, Code of Commerce).

Title III

SPECIAL CONTRACTS OF MARITIME COMMERCE

Q. What are the special contracts of maritime commerce?

A. The special contracts of maritime commerce are:

(a) Charter parties, bills of lading, and contracts of transportation of passengers on sea voyages;

(b) Loans on bottomry and respondentia; and

(c) Marine insurance.

Section I — Charter Parties

1. Forms and Effects of Charter Parties

Q. What is a charter party?

A. A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner
to another person for a specified time or use; a contract of affreightment by which the owner of a ship
or other vessel lets the whole or a part of her to a merchant or other person for the conveyance of
goods, on a particular voyage or a specified time, in consideration of the payment of the fee (Tabacalera
Insurance Co. vs. North Front Shipping Services Inc., 82 SCAD 682, 272 SCRA 527 [1997]; Caltex [Phils.],
Inc. vs. Sulpicio Lines, Inc., G. R. No. 131166, Sept. 30, 1999, 113 SCAD 471).

Q. What are the general categories or kinds of charter party?

33
A. The following are the general categories or kinds of charter party (Maritime Agencies and Services,
Inc. vs. Court of Appeals, 187 SCRA 346; Caltex [Phils.], Inc. vs Court of Appeals, supra):

1. Bareboat or demise charter — It involves the transfer of full possession and control of the vessel
for the period covered by the contract, the charterer obtaining the right to use the vessel and
carry whatever cargo it chooses, while man- fling and supplying the vessel as well.

2. Time charter — It is a contract to use the vessel for a particular period of time, the charterer
obtaining the right to direct the movements of the vessel during the chartering period, although
the owner retains possession.

3. Voyage charter — It is a contract for the hire of a vessel for one or a series of voyages usually for
the purpose of transporting goods for the charterer. The voyage charter is a contract of
affreightment and is considered a private carriage.

Q. What is the meaning of “owner pro hay vice” of the vessel? In what kind of charter party does this
obtain? (Asked, 1991 Bar Exams.)

A. An “owner pro hac vice” is a demise charterer to whom the owner of the vessel has completely and
exclusively relinquished possession, command, and navigation of the vessel (Gilmore and Black, pp. 171,
216). In this kind of charter, the charterer mans and equips the vessel and assumes all responsibility for
its navigation, management and operation. He thus acts as the owner of the vessel in all important
aspects during the duration of the charter (Guzman v. Pichirilo, 389 U. S. 698; Asked, 1989 Bar Exams.).

Q. Does the charter party agreement turn the Common carrier into a private one?

A. The public carrier shall remain as such, notwithstanding the charter of the whole portion of a vessel of
one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or
the voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least insofar as the particular voyage covering the
charter party is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and
control of the ship, although her holds may, for the moment, be the property of the charterer (Caltex
[Phils.], Inc. vs. Court of Appeals, G. R. No. 131166, Sept. 30, 1999, 113 SCAB 471).

Q. In case the charter party is considered as a private carriage, may the parties stipulate on the liability
for the damage to the cargo shipped?

A. In case a charter party is considered as a private carriage, the parties may freely contract respecting
liability for damage to the goods and other matters. The basic principle is that the “responsibility for
cargo loss falls on the one who agreed to perform the duty involved.” When so agreed therefore, the
charterer could be responsible for the care of the cargo during the voyage (Maritime Agencies and
Services, Inc. vs. Court of Appeals, 187 SCRA 346).

Q. What are the formal requirements of a charter party?

A. A charter party must be drawn in duplicate and signed by the contracting parties, and when either
does not know how or is not able to do so, by two witnesses at his request. The charter party shall
contain, besides the conditions freely stipulated, the following circumstances:

34
1. The kind, name, and tonnage of the vessel.

2. Her flag and port of registry.

3. The name, surname, and domicile of the captain.

4. The name, surname, and domicile of the ship agent, if the latter should make the charter party.

5. The name, surname, and domicile of the charterer, and, if he states that he is acting by commission,
that of the person for whose account he makes the contract.

6. The port of loading and unloading.

7. The capacity, number of tons or weight, or measurement which they respectively bind themselves to
load and transport, or whether the charter party is total.

8. The freight to be paid, stating whether it is to be a fixed amount for the voyage or so much per month,
or for the space to be occupied, or for the weight or measurement of the goods making up the cargo, or
in any other manner whatsoever agreed upon.

9. The amount of primage to be paid the captain.

10. The days agreed upon for the loading and unloading.

11. The lay days and extra lay days to be allowed and the demurrage for each of them to be paid (Art.
652, Code of Commerce).

Q. What is primage?

A. Primage is a small allowance or compensation payable to the master or owner of the vessel for the
use of his cables and ropes to discharge the goods, and to the mariners for lading and unlading in any
port (Black’s Law Dictionary).

Q. What is demurrage?

A. Demurrage is an amount stipulated in the charter party to be paid by the charterer or shipper to the
shipowner for any delay in the sailing of his ship (Plumelet vs. Morales Shipping Co., Inc., L-7767, Oct.
1955).

Q. Is a contract of towage a charter party, a contract for the carriage of goods, or a contract for lease of
service?

The reason for this is that what is towed is not shipped or placed on board the towing vessel (Guzman vs.
William X and Behn, Meyer & Co. 9 Phil. 112). However, if the barge towed and its tugboat belong to the
same owner and the barge is used continuously in the business of transporting another’s goods, then
the contract is either one for the carriage of goods or a charter party depending on the agreement of the
35
parties (Standard Vacuum Oil Co. vs. Luzon Stevedoring Co., Inc., L-5203, April 18, 1956). The reason for
this is that what is towed is not shipped or placed on board the towing vessel (Guzman vs. William X and
Behn, Meyer & Co. 9 Phil. 112). However, if the barge towed and its tugboat belong to the same owner
and the barge is used continuously in the business of transporting another’s goods, then the contract is
either one for the carriage of goods or a charter party depending on the agreement of the parties
(Standard Vacuum Oil Co. vs. Luzon Stevedoring Co., Inc., L-5203, April 18, 1956).

Q. What is the effect of receipt of a cargo without the charter party being signed?

A. Should the cargo be received without the charter party having been signed, the contract shall be
understood as executed in accordance with what appears in the bill of lading which shall be the sole
evidence of title with regard to the cargo, for determining the rights and obligations of the ship agent,
of the captain, and of the charterer (Art. 653, Code of Commerce).

Q. What is the probative value of a charter party whether duly certified by a broker or not? (Asked,
1965 Bar Exams.)

A. The charter parties executed with the intervention of a broker who certifies to the authenticity of
the signatures of the contracting parties as having been signed in his presence, shall be full evidence in
court; and if they should be in discrepancy that which agrees with the copy which the broker must
keep in his registry; if kept in accordance with law, shall govern.

The charter parties shall also be admitted as evidence, even though a broker has not intervened, if the
contracting parties acknowledge the signatures in the contracts to be their own.

Should no broker have intervened in the charter party and the signatures be not acknowledged,
doubts shall be decided by what is provided for in the bill of lading, and in the absence thereof, by the
proofs submitted by the parties (Art. 654, Code of Commerce).

Q. What is the effect of charter parties executed by the captain in the absence of the ship agent and in
violation of the instructions of the latter?

A. Charter parties executed by the captain in the absence of the ship agent shall be valid and effective,
even though in executing them he should have acted in contravention of the orders and instructions of
the ship agent or shipowner; but the latter shall have a right of action against the captain for damages
(Art. 655, Code of Commerce).

Q. What is the date of loading and unloading when the charter party fails to state the same?

A. Should in the charter party the time in which the loading and unloading are to take place but not
stated, the usages of the port where these acts take place shall be observed. After the stipulated or
customary period has passed, and there is no express provision in the charter party fixing the indemnity
for the delay, the captain shall have the right to demand demurrage for the lay days and extra lay days
which have elapsed in loading and unloading (Art. 656, Code of Commerce).

Q. What is the obligation of the captain should the vessel become unseaworthy during the voyage? What
is the consequence of failure to fulfill such obligation on the part of the captain?

36
A. If during the voyage the vessel should become unseaworthy, the captain shall be obliged to charter at
his expense another one in good condition to carry the cargo to its destination, for which purpose he
shall be obliged to look for a vessel not only at the port of arrival but also in the nearby ports within the
distance of 150 kilometers.

If the captain should not furnish, through indolence or malice, a vessel to take the cargo to its
destination, the shippers, after requesting the captain to charter a vessel within an inextendible period,
may charter one and apply to the judicial authority for the summary approval of the charter party which
they may have made.

The same authority shall judicially compel the captain to carry out, for his account and under his
responsibility, the charter made by the shippers.

If the captain, in spite of his diligence, should not find a vessel to charter, he shall deposit the cargo at
the disposal of the shippers, to whom he shall communicate the facts on the first opportunity, the freight
being adjusted in such cases by the distance covered by the vessel, with no right to any indemnity
whatsoever (Art. 657, Code of Commerce).

Q. From what time should freight accrue?

A. The freight shall accrue according to the conditions stipulated in the contract, and should they not be
expressed, or should they be ambiguous, the following rules shall be observed:

1. Should the vessel have been chartered by months or by days, the freight shall begin to run from the
day the loading of the vessel is begun.

2. In charters made for a fixed period, the freight shall begin from that very day.

3. If the freight is charged according to weight, the payment shall be made according to gross weight,
including the containers, such as barrels or any other objects in which the cargo is contained (Art. 658,
Code of Commerce).

Q. In case goods are sold by the captain to pay for the necessary repairs of the vessel, is freight thereon
still payable? How should the price of the goods be fixed?

A. The goods sold by the captain to pay for the necessary repairs to the hull, machinery or equipment, or
for unavoidable and urgent needs, shall pay freight.

The price of these goods shall be fixed according to the result of the voyage, namely:

1. Should the vessel arrive safely at the port of destination, the captain shall pay the price which the sale
of goods of the same kind brings at that port.

2. Should the vessel be lost, the captain shall pay the price said goods would have brought in the sale.

37
The same rule shall be observed in the payment of the freight which shall be in full if the vessel should
reach her port of destination, and in proportion to the distance covered if she should be lost before
arrival (Art. 659, Code of Commerce).

Q. What is jettison?

A. Jettison is the act of throwing overboard from a vessel part of the cargo, in case of extreme danger, to
lighten the ship (Black’s Law Dictionary). And the things so cast out are called “jetsam” (Ibid.).

Q. What goods are not liable for the payment of freight?

A. The following goods are not liable for the payment of freight:

1. Goods jettisoned for the common safety, shall not pay freight; but its latter amount (freight lost)
shall be considered as general average, computing the same in proportion to the distance
covered when they (goods) were jettisoned (Art. 660, Code of Commerce).

2. Goods lost by reason of shipwreck or stranding (Art. 661, Code of Commerce).

3. Those seized by pirates or enemies (ibid.).

If the freight should have been paid in advance, it shall be returned, unless there is an agreement to the
contrary (Last par., Art. 661, Code of Commerce).

Q. In case the goods are recovered or the vessel shipwrecked is salvaged, what is the extent of the
freight that must be collected?

A. Should the vessel or the goods be recovered or the effects of the shipwreck be salvaged, the freight
corresponding to the distance covered by the vessel transporting the cargo shall be paid; and if the
vessel, after being repaired, should transport the said cargo to the port of destination, the full freight
shall be paid, without prejudice to what may be due by reason of the average (Art. 662, Code of
Commerce).

Q. What is the freight to be paid by goods that deteriorated or was damaged due to inherent defects
or condition of packing or fortuitous event?

A. The goods which suffer deterioration or damage caused by inherent defects or bad quality and
condition of the packing, or fortuitous event, shall pay freight in full and as stipulated in the charter party
(Art. 663, Code of Commerce).

Q. For whose benefit should the natural increase in the weight or size of the goods loaded on the
vessel accrue?

A. The natural increase in weight or in size of the goods loaded on the vessel, shall accrue to the
benefit of the owner and shall pay the corresponding freight fixed in the contract for the same (Art.
664, Code of Commerce).

38
Q. What is the liability of the goods for general average?

A. The cargo shall be especially liable for the payment of freight, for expenses and duties arising
therefrom, which must be reimbursed by the shippers, as well as for the part of the general average
which may correspond to it; but it shall not be legal for the captain to delay the unloading by reason of
fear that the said obligation may not be complied with (Par. 1, Art. 665, Code of Commerce; Asked,
1957 and 2000 Bar Exams.).

If there be reasons for distrust, the judge or court, at the instance of the captain, may order the
deposit of the goods until he has been paid in full (Par. 2, Art. 665, Code of Commerce).

Q. The shipper imported rice from Thailand. The agreement with the shipper was the freight was to be
paid upon discharge of the cargo in Manila. Upon arrival in Manila, the shipper was unable to pay the
freight but offered to post a bond to answer for the amount of the freight. The carrier refused to
deliver the rice despite the bond posted by the shipper. May the carrier be compelled to deliver the
rice?

A. The carrier cannot be compelled to deliver the rice notwithstanding the posting of the bond to answer
for the amount of the freight. The fact that bond has been given for the payment of such freight does
not make it compulsory for the carrier to deliver the cargo before freight has actually been paid
(National Rice and Corn Corp. vs. Macadaeg, L-9025, Sept. 27, 1957). After all, a bond does not produce
the effect of payment until it is cashed.

Q. When may the captain request for the sale of the cargo?

A. The captain may request the sale of the cargo to the amount necessary to pay the freight, expenses,
and averages due him, reserving the right to demand the balance due him therefor, if the proceeds of
the sale should not be enough to cover his credit (Art. 666, Code of Commerce).

Q. Upon what claims shall the cargo be liable?

A. The goods loaded shall be liable in the first place for the freight and expenses thereof during twenty
days, to be counted from the date of their delivery or deposit. During this period, the sale of the same
may be requested, even though there should be other creditors and the case of insolvency of the shipper
or consignee should occur.

This right, however, cannot be made use of on the goods which, after being delivered, were turned over
to a third person without malice on the part of the latter and by onerous title (Art. 667, Code of
Commerce).

The period of “twenty days” hereinabove mentioned has been amended by the Civil Code. Now, the lien
is as follows: “Credits for transportation upon the goods carried, for the price of the contract and
incidental expenses, until their delivery and for thirty days thereafter.” (Art. 1766, Civil Code)

Q. What must be done to the cargo should the consignee be not found or should refuse to receive the
cargo?

39
A. Should the consignee be not found or should refuse to receive the cargo, the judge or court, at the
instance of the captain, must order its deposit and the sale of what may be necessary to pay the
freight and other expenses on the same.

The sale should likewise take place when the goods deposited run the risk of deteriorating, or, on
account of their condition or for other reasons, the expenses of preservation and custody should be
disproportionate to the value thereof (Art. 668, Code of Commerce).

Thus, the cargo or goods carried may be ordered to be sold by the court at the instance of the captain, in
the following cases:

1. Where the consignee cannot be found or refuses to receive the cargo;

2. Where the sale of the goods is necessary to pay the freight and other expenses;

3. Where the goods run the risk of deteriorating or on account of their condition or for other
reasons, the expenses of preservation and custody should be disproportionate to the value
thereof (Ibid.).

2. Rights and Obligations of Owners

Q. What are the obligations of the shipowner or the captain in charter parties?

A. The shipowner or the captain shall observe in charter parties the capacity of the vessel or that
expressly designated in her registry, a difference greater than two percent (2%) between the
registered and her true capacity not being permissible.

Should the shipowner or the captain contract to carry a greater amount of cargo that vessel can hold, in
view of her tonnage they shall indemnify the shippers whose contract they do not fulfill for the
losses they may have caused them by reason of their default, according to the cases viz.:

Should the vessel have been chartered by one shipper only, and there should appear to be an error or
fraud in her capacity, and the charterer should not wish to rescind the contract, when he has a
right to do so, the freight shall be reduced in proportion to the cargo the vessel cannot receive,
the person from whom the vessel is chartered being obliged furthermore to indemnify the
charterer for the losses he may have caused him.

Should there be, on the contrary, several charter parties, and by reason of want of space all the cargo
contracted for cannot be loaded, and none of the charterers desires to rescind the contract,
preference shall be given to the person who has already loaded and arranged the cargo in the
vessel, and the rest shall take the place corresponding to them in the order of the dates of their
contracts.

Should there be no priority, the charterers may load, if they deem proper, in proportion to the amounts
of weight or space they may have contracted, and the person, from whom the vessel was
chartered, shall be obliged to indemnify them for damages (Art. 669, Code of Commerce).

Q. When may another vessel be substituted for the one chartered?

40
A. If the person from whom the vessel is chartered, after receiving a part of the cargo, should not find
sufficient to make up at least three-fifths of the amount the vessel can hold, at the price he may
have fixed, he may substitute for the transportation another vessel inspected and declared
suitable for the same voyage, the expenses of transfer and the increase, should there be any, in
the price of the charter, being for his account. Should he not be able to make this substitution,
the voyage shall be undertaken at the time agreed upon; and if no time has been fixed, within
fifteen days from the time the loading began, should nothing otherwise have been stipulated.

If the owner of the part of the cargo already loaded should procure some more at the same
transportation charges and under similar or proportionate conditions to those accepted for the
cargo received, the person from whom the vessel is chartered or the captain cannot refuse to
accept the rest of the cargo; and should he do so, the charterer shall have a right to demand that
the vessel be put to sea with the cargo she may have on board (Art. 670, Code of Commerce).

Q. When is substitution of vessels not allowed in charter party?

A. After three-fifth of the vessel is loaded, the person from whom she is chartered may not, without the
consent of the charterers or shippers, substitute the vessel designated in the charter party with another
one, under the penalty of making himself thereby liable for all the damages occurring during the voyage
to the cargo of those who did not consent to the substitution (Art. 671, Code of Commerce).

Q. When the whole vessel has been chartered, may the captain accept cargo from other persons?

A. If the vessel has been chartered in whole, the captain may not, without the consent of the charterer,
accept cargo from any other person; and should he do so, said charterer may compel him to unload it
and pay the damages suffered thereby (Art. 672, Code of Commerce).

Q. What is the liability of the person from whom the vessel is chartered for voluntary delay caused by
the captain?

A. The person from whom the vessel is chartered shall be liable for all the damages caused to the
charterer by the voluntary delay of the captain in putting to sea according to the rules prescribed,
provided he has been requested, notarially or judicially, to put to sea at the proper time (Art. 673, Code
of Commerce).

Q. What is the consequence should the charterer carry more cargo than that contracted for?

A. Should the charterer carry to the vessel more cargo than that contracted for, the excess may be
admitted in accordance with the charge stipulated in the contract if it can be well stowed without
injuring the other shippers; but, if to load it will throw the vessel out of trim, the captain must refuse it
or unload it at the expense of its owner.

The captain may likewise, before leaving the port, unload the goods placed on board clandestinely, or
transport them, if he can do so and keep the vessel in trim, demanding by way of freight the highest
price which may have been stipulated for said voyage (Art. 674, Code of Commerce).

Q. What should be done in case the vessel has been chartered to receive cargo in another port?

41
A. Should the vessel have been chartered to receive the cargo in another port, the captain shall appear
before the consignee designated in the charter party; and, should the latter not deliver the cargo to
him, he shall inform the charterer and wait for his instructions, the lay days agreed upon or those
allowed by custom in the port, shall, in the meantime, begin to run, unless otherwise expressly
stipulated.

Should the captain not receive an answer within the time necessary therefor, he shall make efforts to
find cargo; and should he not find any after the lay days and extra lay days have elapsed, he shall make
a protest and return to the port where the charter was made.

The charterer shall pay the freight in full, discounting that which may have been earned on the goods
which may have been carried on the voyage out and on the return trip, if carried for the account of
third persons.

The same shall be done if a vessel, having been chartered for the round trip, should not be given any
cargo for her return (Art. 675, Code of Commerce).

Q. When will the captain lose the freight?

A. The captain shall lose the freight and shall indemnify the charterers if the latter should prove, even
against the certificate of inspection, if one has been made at the port of departure that the vessel was
not in a condition to navigate at the time of receiving the cargo (Art. 676, Code of Commerce).

Q. What is the effect of a declaration of war or blockade on the charter party?

A. The charter party shall remain in force even though, a declaration of war or a blockade should take
place during the voyage if the captain should not have any instruction from the charterer.

In such case, the captain must proceed to the nearest safe and neutral port, requesting and awaiting
orders from the shippers; and the expenses and salaries accruing during the detention shall be paid as
general average.

If, by order of the shipper, the cargo should be discharged at the port of arrival, the freight for the voyage
out shall be paid in full (Art. 677, Code of Commerce).

Q. A German vessel undertook to carry merchandise, the property of an American corporation from
Hamburg to Vladivostok. War broke out between Germany and Russia and the ship went to the port of
Manila where it was interned. Are the goods subject of general average to satisfy the payment of
freight and expenses by reason of the delay?

A. No. The goods on board a merchant vessel carrying the flag of a belligerent nation, and belonging to a
neutral power, are not subject of general average to satisfy the costs and expenses, incident to the
internment of the ship in a neutral port. In such case there is no common danger to vessel and cargo,
and hence no case for general average (International Harvester in Russia vs. Hamburg American Line, 42
Phil. 845. Note: the case arose before war broke out between Germany and the United States).

Q. What should be done should the captain fail to receive instruction from the shipper despite the lapse
of time?

42
A. If the time necessary, in the opinion of the judge or court, to receive orders from the shipper should
have elapsed, without the captain having received any instruction, the cargo shall be deposited, and it
shall be liable for the payment of the freight and expenses incurred by reason of the delay which shall be
paid from the proceeds of the part first sold (Art. 678, Code of Commerce).

3. Obligations of Charterers

Q. May the charterer, as a matter of right sub-charter the whole or part of the vessel?

A. The charterer of an entire vessel may sub-charter the whole or part thereof on such terms more
convenient to him, the captain not being allowed to refuse to receive on board the cargo delivered by
the second charterers, provided that the conditions of the first charter are not altered, and that the
consideration agreed upon is paid in full to the person from whom the vessel is chartered, even though
the full cargo is not loaded, subject to the limitation established in the next article (Art. 679, Code of
Commerce).

Q. What is the liability of the charterer who does not complete the full cargo he bound himself to ship?

A. A charterer who does not complete the full cargo he bound himself to ship shall pay the freight of the
amount he fails to load if the captain does not take other cargo to complete the load of the vessel, in
which case, the first charterer shall pay the differences, should there be any (Art. 680, Code of
Commerce).

Q. What is the liability of the charterer for loading goods different from those mentioned at the time of
the execution of the charter party?

A. Should the charterer load goods different from those mentioned at the time of executing the charter
party, without the knowledge of the person from whom the vessel was chartered or of the captain, and
should thereby give rise to damage, by reason of confiscation, embargo, detention, or other causes, to
the person from whom the vessel was chartered or to the shippers, the person giving rise thereto shall
be liable with the value of his shipment and furthermore with his property, for the full indemnity to all
those injured through his fault (Art. 681, Code of Commerce).

Q. What is the liability of the parties for carrying goods for illicit commerce?

A. If the goods should have been shipped for the purpose of illicit commerce, and were carried on board
with the knowledge of the person from whom the vessel was chartered or of the captain, the latter,
jointly with the owner of the goods, shall be liable for all the damage which may be caused to other
shippers; and even though it may have been agreed upon, they cannot demand any indemnity
whatsoever from the charterer for the damage caused to the vessel (Art. 682, Code of Commerce).

Q. In case the vessel is being repaired, may the shipper be required to wait until the vessel is repaired?
Who bear the expenses of unloading the cargo?

A. In case of making a port to repair the hull, machinery, or equipment of the vessel, the shippers must
wait until the vessel is repaired, being permitted to unload her at their own expense should they deem it
proper.

43
If, for the benefit of the cargo subject to the deterioration, the shippers or the court, or the consul, or
the competent authority in a foreign land, should order the unloading of the goods, the expenses of the
unloading and of the reloading shall be for the account of the shippers (Art. 683, Code of Commerce).

Q. What is the responsibility of the charterer for freight should he unload the vessel before arriving at
the port of destination?

A. If the charterer, without the occurrence of any of the cases of force majeure expressed in the
foregoing articles, should decide to unload his goods before arriving at the port of destination, he shall
pay the full freight, the expenses of making a port at his request, and the damages caused the other
shippers, should there be any (Art. 684, Code of Commerce).

Q. What must be paid by the shipper should he unload the goods before starting the voyage?

A. In charters for transportation of general cargo, any of the shippers may unload the goods before
starting the voyage, by paying one half the freight, the expense of stowing and restowing the cargo, and
any other damage which may be caused by the other shippers (Art. 685, Code of Commerce).

Q. When is the captain entitled to the payment of the freight and other expenses from the consignee?

A. After the vessel has been unloaded and the cargo placed at the disposal of the consignee, the latter
must immediately pay the captain the freight due and the other expenses for which said cargo may be
liable.

The primage must be paid in the same proportion and at the same time as the freight, all the changes
and modifications to which the latter should be subject also governing the former (Art. 686, Code of
Commerce).

Q. When may not the charterers and shippers abandon the goods for the payment of freight and other
expenses? When can they make such abandonment?

A. The charterers and shippers may not, for the payment of freight and other expenses, abandon the
goods damaged on account of their own inherent defect or of fortuitous event.

The abandonment, however, may be done, should the cargo consist of liquids which may be leased out,
nothing remaining in the containers but one-fourth part of their contents (Art. 687, Code of Commerce).

4. Total or Partial Rescissions of Charter Parties

Q. When may the charter party be rescinded upon request of the charterer?

A. A charter party may be rescinded at the request of the charterer:

1. If, before loading the vessel, he should abandon the charter, paying half of the freight agreed
upon.

44
2. If the capacity of the vessel should be found not to be in conformity with that stated in the
certificate of the tonnage, or should there be an error in the statement of the flag under which
she navigates.

3. If the vessel should not be placed at the disposal of the charterer within the period and in the
manner agreed upon.

4. If, after the vessel has put to sea, she should return to the port of departure on account of the
risk from pirates, enemies or inclement weather, and the shippers should agree to unload her.

In the second and third cases, the person from whom the vessel was chartered, shall indemnify the
charterer for the damage he may suffer.

In the fourth case, the person from whom the vessel was chartered shall have a right to the freight in full
for the voyage out.

If the charter should have been made by the months, the shall pay the full freight for one month if the
voyage is to a port in the same waters, and for two months, if the voyage is to a port in different
waters.

From one port to another in the Philippines, the freight from one month only shall be paid.

5. if, in order to make urgent repairs, the vessel, during the voyage, should make a port, and the
charterer should prefer to dispose of the goods.

When the delay does not exceed thirty days, the shippers shall pay the full freight for the voyage out.

If the delay should exceed thirty days, they shall pay only the freight in proportion to the distance
covered by the vessel (Art. 688, Code of Commerce).

Q. When may a charter party be rescinded upon request of the person from whom the vessel is
chartered?

A. At the request of the person from whom the vessel is chartered, the charter party may be rescinded:

1. If the charterer, at the termination of the extra lay days, does not place the cargo alongside the
vessel.

In such case, the charterer must pay half of the freight stipulated, besides the demurrage due for the lay
days and extra lay days.

2. If the person from whom the vessel was chartered should sell her before the charterer has
begun to load her and the purchaser should load her for his own account.

In such case, the seller shall indemnify the charterer for the damage he may suffer.

45
If the new owner of the vessel should not load her for his own account, the charter party shall be
respected, and the seller shall indemnify the purchaser if the former did not notify him of the charter
pending at the time of making the sale (Art. 689, Code of Commerce; Asked, 1991 Bar Exams.).

Q. Upon what grounds may a charter party be rescinded?

A. The charter party shall be rescinded and all action arising therefrom shall be extinguished if, before
the vessel puts to seal from the port of departure, any of the following cases should occur:

1. The declaration of war or interdiction of commerce with the Power to whose ports the vessel
was going to make her voyage.

2. The condition of blockade of the port of destination of said vessel, or the breaking out of an
epidemic after the execution of the contract.

3. The prohibition to receive at that port the goods constituting the cargo of the vessel.

4. The indefinite detention, by reason of an embargo of the vessel by order of the government, or
for other cause beyond the control of the ship agent.

5. The inability of the vessel to navigate, without fault of the captain or ship agent.

The unloading shall be made for the account of the charterer (Art. 690, Code of Commerce).

Q. Who shall be liable for damages should the vessel fail to put to sea by reason of closing of the port
of departure or other temporary cause?

A. If the vessel may not put to sea by reason of the closing of the port of departure or other temporary
cause, the charter shall remain in force, with none of the contracting parties having right to claim
damages.

The subsistence and wages of the crew shall be considered as general average.

During the interruption, the charterer may, for his own account, unload or reload at the proper time
the goods, paying demurrage if he delays the reloading after the cause of the detention has ceased
(Art. 691, Code of Commerce).

Q. When is a charter party partially rescinded? What are the consequences thereof?

A. A charter party shall be partially rescinded, unless there is an agreement to the contrary and the
captain shall only be entitled to the freight for the voyage out, if, during the trip, by reason of a
declaration of war, closing of ports, or interdiction of commercial relations, the vessel should make the
port designated for such case in the instructions of the charterer (Art. 692, Code of Commerce).

5. Passengers on Sea Voyages

46
Q. What is the fare to be paid by the passenger?

A. The fare to be paid by the passenger is as follows:

1. The fare agreed upon.

2. Should the passage fare have not been agreed upon, the judge or court shall summarily fix it, after a
declaration of experts (Art. 693, Code of Commerce).

3. Should the passenger not arrive on board at the time previously fixed, or should leave the vessel
without permission from the captain when she is ready to leave the port, the captain may continue
the voyage and demand the full passage fare (Art. 694, Code of Commerce).

4. If, before starting the voyage, the passenger should die, his heirs shall be obliged only to pay half of
the fare agreed upon.

If, in the fare stipulated, the expenses of subsistence should be included, the judge or court, after
hearing the experts if he considers it necessary, shall fix the amount to be left for the benefit of the
vessels.

Should another passenger be received in the place of the deceased, no payment shall be made by the
said heirs (Art. 696, Code of Commerce).

/Q. May the right of passage be transferred?

A. The right to passage, if issued to a specified person, may not be transferred without the consent of
the captain or of the consignee (Art. 695, Code of Commerce).

Q. When is the passenger entitled to a refund of the fare and/or damages?

A. The passenger is entitled to a refund of the fare and/or damages in the following cases:

1. If before starting the voyage it should be suspended through the exclusive fault of the captain or
ship agent, the passengers shall have the right to a refund of their fares and to recover damages; but if
the suspension is due to fortuitous event, or to force majeure, or to any other cause beyond the
control of the captain or ship agent, the passengers shall only be entitled to the return of the passage
fare (Art. 697, Code of Commerce).

2. In case of interruption of a voyage already begun, the passengers shall only be obliged to pay the
fare in proportion to the distance covered, without right to recover damages if the interruption is due
to fortuitous event or force majeure, but with a right to indemnity, if the interruption should be
caused by the disability of the vessel, and the passenger should agree to wait for her repairs, he may
not be required to pay any increased fare of passage, but his living expenses during the delay shall be
for his own account (Par. 1, Art. 698, Code of Commerce).

Q. In case of delay in the departure of the vessel, what rights do passengers have?

47
A. In case of delay in the departure of the vessel, the passengers have the right to remain on board
and to be furnished with food for the account of the vessel, unless the delay is due to fortuitous event
or to force majeure. If the delay should exceed ten days, the passengers have the right to request the
return of the fare, and if it is due to the captain or ship agent exclusively, they may also demand
indemnity for damages (Par. 2, Art. 698, Code of Commerce).

Q. What is the function of a vessel exclusively devoted to transportation of passengers?

A. A vessel exclusively devoted to the transportation of passengers must carry them directly to the
port or ports of destination, no matter what the number of passengers may be, making all the stops
indicated in her itinerary (Par. 3, Art. 698, Code of Commerce).

Q. What may the captain claim from the passengers should the contract be rescinded before or after
starting the voyage?

A. Should the contract be rescinded before or after starting the voyage, the captain shall have a right
to claim payment for what he may have furnished to the passengers (Art. 699, Code of Commerce).

Q What power does a captain have over the passengers?

A. In all that relates to the preservation of order and discipline on board the vessel, the passengers
shall be under the control of the captain, without any distinction whatsoever (Art. 700, Code of
Commerce).

Q. To what extent may the passengers obligate the captain for their convenience or interest?

A. The convenience or the interest of the passengers shall no obligate or empower the captain to
stand in shore or enter places which may take the vessel out of her course, or to remain in ports which
he must or is under necessity to touch for a period longer than that required by the needs of
navigation (Art. 701, Code of Commerce).

Q. Who bears the cost of subsistence of the passengers during the voyage?

A. In the absence of agreement to the contrary, the subsistence of the passengers during the voyage
shall be considered included in the transportation fare; but should it be for the account of the
passengers, the captain shall be under obligation, in case of necessity, to supply the food necessary for
their sustenance at a reasonable price (Art. 702, Code of Commerce).

Q. Who shall be responsible for the passenger’s baggage?

A. The provisions of Articles 1733 to 1753 of the Civil Code shall apply to the passenger’s baggage which
is not in his personal custody or in that of his employees. As to other baggages, the rules in Articles 1889
and 2000 to 2003 of the Civil Code concerning the responsibility of hotel-keepers shall be applicable (Art.
1754, Civil Code, amending Art. 703 of the Code of Commerce; Asked, 1983 and 1986 Bar Exams.).

Q. How may the captain enforce his right to collect transportation fares and expenses of sustenance?

48
A. The captain, in order to collect the transportation fares and expenses of sustenance, may retain the
effects belonging to the passenger, and in case of their sale, he shall be given preference over the other
creditors, acting in the same way as in the collection of freight (Art. 704, Code of Commerce).

Q. What are the duties of the captain in case of death of a passenger during the voyage?

A. In case of the death of a passenger during the voyage, the captain shall be authorized, with regard
to the body, to take the steps required by the circumstances, and shall carefully take care of the papers
and effects which may be found on board belonging to the deceased, observing the provisions of case
No. 10 of Article 612 with regard to members of the crew (Art. 705, Code of Commerce).

6. Bills of Lading

Note: The first portion of the discussion on bills of lading, is found at the beginning of Part III — Code
of Commerce.

Q. To whom may a bill of lading be issued and within what time should it be issued?

A. The bill of lading may be issued to bearer, to order or in the name of specified person, and must be
signed within twenty-four hours after the cargo has been received on board, the shipper being entitled
to demand the unloading thereof at the expense of the captain if the latter should not sign it, and, in
every case, an indemnity for the damage suffered thereby (Last sentence, Art. 706, Code of
Commerce).

Q. How many copies of the bill of lading should be prepared and how should the same be distributed?

A. Four true copies of the original bill of lading shall be made, all of them shall be signed by the
captain and by the shipper. Of these copies, the shipper shall keep one and send another to the
consignee; the captain shall take two, one for himself and another for the ship agent.

There may also be issued as many copies of the bill of lading as may be considered necessary by the
parties; but, when they are issued to order or to bearer, there shall be stated in all the copies, be they
of the first four or of the subsequent ones, the destination of each one stating whether it is for the
agent, for the captain, for the shipper, or for the consignee. If the copy sent to the consignee should
have a duplicate, this circumstance and the fact that it is not valid except in default of the first one,
must be so stated therein (Art. 707, Code of Commerce).

Q. How may a bill of lading be transferred?

A. Bills of lading issued to bearer and sent to the consignee shall be transferable by actual delivery of
the instrument; and those issued to order, by virtue of an indorsement.

In either case, the person to whom the bill of lading is transferred shall acquire all the rights and
actions of the transferor or indorser with regard to the goods mentioned in the same (Art. 708, Code
of Commerce).

Q What is the probative value of a bill of lading?

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A. A bill of lading drawn up in accordance with the provisions of this title shall be proof as between all
those interested in the cargo and between the latter and the insurers, proof to the contrary being
reserved for the latter (Art. 709, Code of Commerce).

Q. In case of discrepancy in the bills of lading, which copy prevails?

A. If there should be discrepancy in the bills of lading and no alteration or erasure in any of them can
be observed, those possessed by the shipper or consignee signed by the captain shall be proof against
the captain or ship agent in favor of the consignee or shipper, and those possessed by the captain or
ship agent signed by the shipper shall be proof against the shipper or consignee in favor of the captain
or ship agent (Art. 710, Code of Commerce).

Q. What is the responsibility of the legitimate holder of a bill of lading who fails to present the same to
the captain before unloading?

A. The legitimate holder of a bill of lading, who fails to present it to the captain of the vessel before
the unloading, obliging the latter by such omission to unload the cargo and place it in deposit, shall be
responsible for the expenses of the warehousing and other expenses arising therefrom (Art. 711, Code
of Commerce).

Q. May the captain change the destination of the goods?

A. The captain may not himself change the destination of the goods. In admitting this change at the
instance of the shipper he must first take up the bills of lading he may have issued, under penalty of
being liable for the cargo to the legitimate holder of the same (Art. 712, Code of Commerce).

Q. What should the captain do should there be a demand for the issuance of a new bill of lading on
the ground that the previous one was lost or for any other just cause?

A. If before the delivery of the cargo a new bill of lading should be demanded of the captain, on the
allegation that the failure to present the previous ones is due to their loss or to any other just cause,
he shall be obliged to issue it, provided that security for the value of the cargo is given to his
satisfaction; but, without changing the consignment and stating therein the circumstances prescribed
in the last paragraph of Article 707, when dealing with the bills of lading referred to therein, under
penalty, should he fail to do so, of being liable for the said cargo if improperly delivered through his
fault (Art. 713, Code of Commerce).

Q. What is the right of the shipper to demand from the new captain in case the previous one dies or
ceases to hold his position before the vessel puts to sea?

A. If before the vessel puts to sea the captain should die or should cease to hold its position due to any
cause, the shippers shall have the right to demand of the new captain the ratification of the first bills
of lading, and the latter must do so, provided that all the copies previously issued be presented or
returned to him, and it should appear, from an examination of the cargo, that they are correct.

The expenses arising from the examination of the cargo shall be defrayed by the ship agent, without
prejudice to his right of action against the first captain, if the latter ceases to be such through his own
fault. If the said examination should not be made, it shall be understood that the new captain accepts
the cargo as it appears from the issued bills of lading (Art. 714, Code of Commerce).

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Q. What right arises from the issuance of a bill of lading?

A. Bills of lading will give rise to a most summary action or judicial compulsion, according to the case,
for the delivery of the cargo and the payment of the freight and the expenses thereby incurred (Art.
715, Code of Commerce).

Q. To whom should the captain deliver the goods should several persons present bills of lading issued
to bearer or to order?

A. If several persons should present bills of lading issued to bearer or to order, indorsed in their favor,
demanding the same goods, the captain shall prefer, in making delivery, the person presenting the
copy first issued, except when the subsequent one was issued on proof of the loss of the first one, and
both are presented by different persons.

In such case, as well as when only second or subsequent copies, issued without that proof, are
presented, the captain shall apply to the judge or court, so that he may order the deposit of the goods,
and their delivery; through his mediation, to the proper person (Art. 716, Code of Commerce).

Q. What is the effect of the issuance of a bill of lading on all provisional receipts previously issued?

A. The delivery of the bill of lading shall produce the cancellation of all the provisional receipts of prior
date issued by the captain or his subordinates for partial deliveries of the cargo which may have been
made (Art. 717, Code of Commerce).

Q. What must be done by the consignee to the bill of lading upon delivery of the cargo?

A. After the cargo has been delivered, the bills of lading signed by the captain, or at least the copy
under which the delivery is made, shall be returned to him with the receipt for the goods mentioned
therein.

The delay on the part of the consignee shall make him liable for the damages which such delay may
cause the captain (Art. 718, Code of Commerce).

Section II — Loans on Bottomry and Respondentia

Q. What is a loan on bottomry or respondentia?

A. A loan in which, under any condition whatsoever, the repayment of the sum loaned and of the
premium stipulated depends upon the safe arrival in port of the effects (“efectos”) oh which it is
made, or of the value in case of accident, shall be considered a loan on bottomry or respondentia (Art.
719, Code of Commerce).

It is also defined as a loan with things exposed to maritime risks as collateral to be paid if the collateral
are safely transported and the lender shall lose his money if the latter are lost. It is a loan on bottomry
where the security is a vessel, and respondentia where the security is cargo (Perez, Insurance Code and
Insolvency Law, 1999 Ed., p. 207, citing Black’s Law Dictionary; Asked, 1961 and 1966 Bar Exams.)

51
Q. Is the Usury Law applicable to loans on bottomry or respondentia? (Asked, 1967 and 1980 Bar
Exams.)

A. No. To apply usury law, the principal sum should be absolutely and in all events repayable and
therefore, the usury statute has no application to those instances where the repayment of the amount
borrowed is contingent upon conditions beyond the control of the parties (Laughlin v. Irwin, 262 III. App.
40) such as a loan on bottomry or respondentia since the lender is, to the extent of his loan, insurer of
the vessel (or cargo) for the voyage (Cole v. White, 26 Wend. 511).

Q. What are the formal requirements of loans on bottomry or respondentia?

A. Loans on bottomry or respondentia may be executed:

1. By means of a public instrument.

2. By means of a policy signed by the contracting parties and the broker taking part therein.

3. By means of a private instrument.

Under whichever of these forms the contract is executed, it shall be entered in the certificate of the
registry of the vessel and shall be recorded in the registry of vessels, without which requisites, the
credits of this kind shall not have, with regard to other credits, the preference which, according to
their nature, they should have although the obligation shall be valid between the contradicting
parties.

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

In order that the policy of the contracts executed in accordance with No. 2 may have binding force,
they must conform to the registry of the broker who took part therein. With respect to those executed
in accordance with No. 3, the acknowledgment of the signature shall be required.

Contracts which are not reduced to writing shall not give rise to judicial action (Art. 720, Code of
Commerce).

Q. What are the distinctions between an ordinary loan and a loan on bottomry or respondentia?

A. The following are the distinctions between an ordinary loan and a loan on bottomry or respondentia:

1. An ordinary loan may or may not have a collateral, while a loan on bottomry or respondentia
must have a collateral (Art. 721[61, Code of Commerce).

52
2. The collateral of an ordinary loan may be any property, real or personal, while the collateral of a
loan on bottomry or respondentia must be a vessel or cargo subject to maritime risks.

3. An ordinary loan is absolutely repayable, while payment of a loan on bottomry or respondentia

depends upon the safe arrival at the port of the collateral of the loan.

4. An ordinary loan is subject to usury law, while a loan on bottomry or respondentia is not subject
to usury law.

5. An ordinary loan need not be in writing but interest shall not be due unless expressly stipulated
in writing (Art. 1956, Civil Code), while a loan on bottomry or respondentia must be in writing
(Art. 720, Code of Commerce).

6. To be binding on third persons, an ordinary loan need not be registered, while a loan on
bottomry or respondentia must be recorded in the registry of vessels of the port of registry of
the vessel (Art. 720, Code of Commerce).

7. The loss of the collateral if any, in an ordinary loan does not extinguish the same, while the loss
of the collateral in loan on bottomry or respondentia extinguishes the same (Art. 731, Code of
Commerce).

Q. What must be stated in a contract on bottomry or respondentia?

A. In a contract on bottomry or respondentia, the following must be stated:

1. The kind, name, and registry of the vessel.

2. The name, surname, and domicile of the captain.

3. The names, surnames, and domiciles of the person giving and the person receiving the loan.

4. The amount of the loan and the premium stipulated.

5. The time for repayment.

6. The objects pledged to secure repayment.

7. The voyage during which the risk is run (Art. 721, Code of Commerce).

Q. How may contracts on bottomry or respondentia which are made to order, be transferable?

A. The contracts may be made to order, in which case they shall be transferable by indorsement, and
the indorsee shall acquire all the rights and shall incur all the risks corresponding to the indorser (Art.
722, Code of Commerce).

53
However, a bottomry obligation, payable to order on arrival at the port of destination, is not such a
negotiable instrument as to give the indorsee any better rights than those of the payee (The Lykus,
D.C.N.Y., 36 F. 919). Nonetheless, the bottomry obligation is assignable (Burke v. The M. P. Rich.,
C.C.Mass., 4 F.Cas. No.2, 161, 1 Cliff. 308).

Q. What may constitute as security for a loan on bottomry or respondentia?

A. Loans may be made in effects and in goods by fixing their value in order to determine the principal
of the loan.

The loans may be constituted jointly or separately:

1. On the hull of the vessel,

2. On the rigging.

3. On the equipment, provisions, and fuel.

4. On the engine, if the vessel is a steamer.

5. On the goods loaded.

If the loan is constituted on the hull of the vessel, it shall also be considered that the rigging,
equipment and other effects, provisions, fuel steam engines, and the freight earned during the voyage
on which the loan is made, are included in the liability for the loan.

If the loan is made on the cargo, all that which constitutes the same shall be subject to the repayment;
and if on a particular object of the vessel or of the cargo, only the object concretely and specifically
mentioned shall be liable (Art. 724, Code of Commerce).

Q. May loans on bottomry be made on the salaries of the crew or on profits?

A. No loans on bottomry may be made on the salaries of the crew, or on the profits which may be
expected (Art. 725, Code of Commerce).

The reason for this rule is that the salaries of the crew are not part of the capital of the shipowner, nor
are future profits or commercial effects that could be given as collateral (Del Viso, p. 593).

Q. What is the consequence if the lender should prove that the amount of the loan is larger than the
value of the collateral?

A. If the lender should prove that the loaned an amount larger than the value of the object liable for the
bottomry loan on account of fraudulent means employed by the borrower, the loan shall be valid only
for the amount at which said object is appraised by experts.

54
The surplus principal shall be returned with legal interest for the entire time required for the repayment
(Art. 726, Code of Commerce).

Q. What is the consequence if the full amount of the loan contracted is more than what is necessary to
load the vessel?

A. If the full amount of the loan contracted in order to load the vessel should not be used for the cargo,
the balance shall be returned before starting the voyage.

The same procedure shall be observed with regard to the goods taken as a loan if all of them could not
have been loaded (Art. 727, Code of Commerce).

Q. Who shall be bound by the loan obtained by the captain at the place of residence of the owners of
the vessel? (Asked, 1962 Bar Exams.)

A. The loan which the captain takes at the point of residence of the owners of the vessel shall only affect
that part of the vessel which belongs to the captain, if the other owners or their agents should not have
given their express authorization therefor or should not have taken part in the transaction.

If one or more of the owners should be requested to furnish the amount necessary to repair or provision
the vessel and they should not do so within twenty-four hours, the interest which the parties in default
may have in the vessel shall be liable for the loan in the proper proportion.

Outside the residence of the owners the captain may contract loans in accordance with the provisions of
Articles 583 and 611 (Art. 728, Code of Commerce).

Q. What are the instances when the contract is considered a simple loan and not a loan on bottomry
or respondentia?

A. In the following instances, the contract is considered a simple loan and not a loan on bottomry or
respondentia:

1. When the loan on bottomry is larger than the value of the object liable for the loan on bottomry
on account of fraudulent means employed by the borrower, the loan on the amount in excess of
the value of the object as appraised by experts is a simple loan (Art. 726, Code of Commerce).

2. If the amount of the loan contracted in order to load the vessel should be used for the cargo, the
balance shall be considered as a simple loan (Art. 727, Code of Commerce).

3. Should the effects on which money is taken is not subjected to risk, the contract shall be
considered a simple loan, with the obligation on the part of the borrower to return the principal
and interest at the legal rate, if that agreed upon should not be lower (Art. 729, Code of
Commerce).

Q. What is the order of preference of loans on bottomry?

55
A. Loans made during the voyage shall have preference over those made before the clearing of the
vessel, and they shall be graduated in the inverse order of their dates.

The loans for the last voyage shall have preference over the prior ones.

Should several loans have been made at the same port of arrival under stress and for the same purpose,
all of them shall be paid pro rata (Art. 730, Code of Commerce).

Q. What is the reason why loans on bottomry are preferred in the inverse order they were incurred?

A. The reason for the law in giving preference to later loans is that without the said loans, the prior loans
would have gone into the bottom of the sea together with the vessel. Thus, by virtue of the subsequent
loans, the vessel is saved and the previous loans are able to exist and subsist (The Mary, C.C.Conn., 16 F.
Cas. No. 9, 187, 1 Paine 671; Del Viso, p. 596).

Q. What is the effect of the absolute loss of the collateral of the loan on bottomry or respondentia?

A. The actions pertaining to the lender shall be extinguished by the absolute loss of the effects on which
the loan was made, if it arose from an accident of the sea at the time and during the voyage designated
in the contract, and it is proven that the cargo was on board; but this shall take place if the loss was
caused by the inherent defect of the thing, or through the fault or malice of the borrower, or through
barratry on the part of the captain, or if it was caused by damages suffered by the vessel as a
consequence of being engaged in contraband, or if it arose from having loaded the goods on a vessel
different from that designated in the contract, unless this change should have been made by reason of
force majeure.

Proof of the loss as well as of the existence in the vessel of the effects declared to the lender as the
object of the loan, is incumbent upon him who received the loan (Art. 731, Code of Commerce).

Q. Explain the effects of the total loss of the collateral on the loan on respondentia? Give the
exceptions.

A. As stated in the foregoing provision, the total loss of the collateral of the loan on respondentia
extinguishes the same if it arose from an accident of the sea at the time and during the voyage
designated in the contract, and it is proven that the cargo was on board (Art. 731, Code of Commerce).

The exceptions are:

(1) If the loss was caused by the inherent defect of the thing;

(2) If the loss was caused by the fault or malice of the borrower;

(3) If the loss was caused by barratry of the captain;

(4) If it was caused by damages suffered by the vessel as a consequence of being engaged in
contraband;

56
(5) If it arose from having loaded the goods on a vessel different from that designated in the
contract, unless the change should have been made by reason of force majeure (Art. 731, Code
of Commerce).

Q. What is barratry?

A. Barratry is any willful misconduct on the part of the master or crew in pursuance of some unlawful or
fraudulent purpose without the consent of the owners, and to the prejudice of the owner’s interest
(Perez, Insurance Code and Insolvency Law, 1999 Ed., p. 202).

Q. What is the liability of lenders on bottomry or respondentia for a general average or particular
average in the things on which the loan was made?

A. Lenders on bottomry or respondentia shall suffer in proportion to their respective interest, the
general average which may take place in the things on which the loan was made.

In particular averages, in the absence of an express agreement between the contracting parties, the
lender on bottomry or respondentia shall also contribute in proportion to his respective interest, should
it not belong to the kind of risks excepted in the preceding article (Art. 732, Code of Commerce).

Q. A obtained a loan on respondentia amounting to P100,000 from B and hypothecated to the latter
his cargo worth P150,000, to secure the payment of the loan. Later, the vessel on which the cargo was
loaded met a typhoon. To lighten the load of the vessel, other cargoes were thrown overboard. As a
consequence, the vessel and other cargoes were saved. Upon determination of the value of the
cargoes jettisoned, it turned out that A’s contribution for the general average amounts to P30,000. (a)
From whom shall the contribution to the general average be collected? (b) Suppose A’s cargo had a
damage which did not redound to the benefit of anyone, to the extent of P120,000, how should the
amount of the damage be apportioned?

A. (a) The general average contribution of A’s cargo that was saved, to the owners of the other cargoes
that were thrown overboard to lighten the load of the vessel, shall be shared between A, as
owner and B, as lender on respondentia, in proportion to their respective interests. Since the
loan amounts to 2/3 of the value of the cargo, the lender, B must share the general average in
the same proportion, while A shall bear 1/3 of the general average. Thus, A shall share P10,000
while B shall share P20,000.

(b) For the particular average, the owner of the cargo and the lender on respondentia shall likewise
share the damage to the extent of their respective interests unless otherwise agreed upon by
the parties. Thus, A’s share is 1/3 of the damage or P40,000 while B’s share is 2/3 of the
particular average or P80,000.

Q. What is the duration of the assumption of risk by the lender on bottomry or respondentia?

A. Should the period during which the lender shall run the risk not have been started in the contract, it
shall last, with regard to the vessel, engines, rigging, and equipment, from the moment said
vessel puts to sea until she drops anchor in the port of destination; and with regard to the goods,
from the time they are loaded on the shore or wharf of the port of shipment until they are
unloaded in the port of consignment (Art. 733, Code of Commerce).

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Q. In case of a shipwreck and part of the collateral for the loan on bottomry or respondentia has been
saved, how should the amount to be paid to the lender be computed?

A. In case of shipwreck, the amount for the payment of the loan shall be reduced to the proceeds of the
effects saved, after deducting the costs of the salvage.

If the loan should be on the vessel or any of her parts, the freight earned during the voyage for which
said loan was contracted shall also be liable for its payment, as far as it may reach (Art. 734,
Code of Commerce).

Q. In case the same vessel or cargo should be the object of a loan on bottomry or respondentia and
marine insurance, how shall the value of what may be saved be divided?

A. If the same vessel or cargo should be the object of a loan on bottomry or respondentia and marine,
insurance, the value of what may be saved in case of shipwreck shall be divided between the
lender and the insurer, in proportion to the legitimate interest of each one, taking into
consideration, for this purpose, only the principal with respect to the loan, and without
prejudice to the right of preference of other creditors in accordance with Article 580 (Art. 735,
Code of Commerce).

Q. In case of delay in repayment, will the premiums or interest of the loan bear interest?

A. If there should be delay in the repayment of the principal and premiums of the loan, only the former
shall bear legal interest (Art. 736, Code of Commerce).

Section III — Marine Insurance

This portion is now governed by the Insurance Code.

TITLE IV

RISKS, DAMAGES, AND ACCIDENTS OF MARITIME COMMERCE

Section I — Averages

Q. What are considered as averages?

A. For the purpose of this Code the following shall be considered averages:

1. All extraordinary or accidental expenses which may be incurred during the voyage for the
preservation of the vessel or cargo, or both.

2. All damages or deterioration which the vessel may suffer from the time she puts to sea at the
port of departure until she casts anchor at the port of destination, and those suffered by the
goods from the time they are loaded in the port of shipment until they are unloaded in the port
of their consignment (Art. 806, Code of Commerce; Asked, 1961 Bar Exams.).

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Q. What are considered as ordinary expenses?

A. The petty and ordinary expenses incident to navigation, such as those of pilotage of coast and ports,
lighterage and towage, anchorage, inspection, health, quarantine, lazaretto, and other so- called port
expenses, costs of barges, and unloading, until the goods are placed on the wharf, and other usual
expenses of navigation shall be considered ordinary expenses to be defrayed by the shipowner, unless
there is an express agreement to the contrary (Art. 807, Code of Commerce).

Q. What are the kinds of averages?

A. Averages shall be:

1. Simple or particular.

2. General or gross (Art. 808, Code of Commerce).

Q. What are simple or particular averages?

A. As a general rule, simple or particular averages include all the expenses and damage caused to the
vessel or to her cargo which have not inured to the common benefit and profit of all the persons
interested in the vessel and her cargo, especially the following:

1. The damage suffered by the cargo from the time of its embarkation until it is unloaded, either on
account of the inherent defect of the goods or by reason of a marine accident or force majeure,
and the expenses incurred to avoid and repair the same.

2. The damage and expenses suffered by the vessel in her hull, rigging, arms, and equipment, for
the same causes and reasons, from the time she puts to sea from the port of departure until she
anchors in the port of destination.

3. The damage suffered by the goods loaded on deck, except in coastwise navigation, if the marine
ordinances allow it.

4. The wages and victuals of the crew when the vessel is detained or embargoed by a legitimate
order or force majeure, if the charter has been contracted for a fixed sum for the voyage.

5. The necessary expenses on arrival at a port, in order to make repairs or secure provisions.

6. The lowest value of the goods sold by the captain in arrivals under stress for the payment of
provisions and to save the crew, or to meet any other need of the vessel against which the
proper amount shall be charged.

7. The victuals and wages of the crew while the vessel is in quarantine.

59
8. The damage inflicted upon the vessel or cargo by reason of an impact or collision with another, if
it is accidental and inevitable. If the accident should occur through the fault or negligence of the
captain, the latter shall be liable for all the damage caused.

9. Any damage suffered by the cargo through the fault, negligence, or barratry of the captain or of
the crew, without prejudice to the right of the owner to recover the corresponding indemnity
from the captain, the vessel, and the freight (Art. 809, Code of Commerce).

Q. Who should bear the simple or particular averages?

A. The owner of the things which gave rise to the expenses or suffered the damage shall bear the simple
or particular averages (Art. 810, Code of Commerce).

Q. What are general or gross averages?

A. General or gross averages shall, as a general rule, include all the damages and expenses which are
deliberately caused in order to save the vessel, her cargo, or both at the same time, from a real known
risk, and particularly the following:

1. The effects or cash invested in the redemption of the vessel or the cargo captured by enemies,
privateers, or pirates, and the provisions, wages, and expenses of the vessels detained during
the time the settlement or redemption is being made.

2. The effects jettisoned to lighten the vessel, whether they belong to the cargo, to the vessel, or to
the crew, and the damage suffered through said act by the effects which are kept on board.

3. The cables and masts which are cut or rendered useless, the anchors and the chains which are
abandoned, in order to save the cargo, the vessel, or both.

4. The expenses of removing or transferring a portion of the cargo in order to lighten the vessel
and place it in condition to enter a port or roadstead, and the damage resulting therefrom to the
effects removed or transferred.

5. The damage suffered by the effects loaded as cargo by the opening made in the vessel in order
to drain her and prevent her from sinking.

6. The expenses caused in order to float a vessel intentionally stranded for the purpose of saving
her.

7. The damage caused to the vessel which had to be opened, scuttled or broken in order to save
the cargo.

8. The expenses for the treatment and subsistence of the members of the crew who may have
been wounded or crippled in defending or saving the vessel.

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9. The wages of any member of the crew held as hostage by enemies, privateers, or pirates, and
the necessary expenses which he may incur in his imprisonment, until he is returned to the
vessel or to his domicile, should he prefer it.

10. The wages and victuals of the crew of a vessel chartered by the month, during the time that she
is embargoed or detained by force majeure or by order of the Government, or in order to repair
the damage caused for the common benefit.

11. The depreciation resulting in the value of the goods sold at arrivals under stress in order to
repair the vessel by reason of gross average.

12. The expenses of the liquidation of the average (Art. 811, Code of Commerce; Asked, 1955 Bar
Exams.).

Q. Who should bear general or gross averages?

A. In order to satisfy the amount of the gross or general averages, all the persons having an interest in
the vessel and cargo therein at the time of the occurrence of the average shall contribute (Art. 812, Code
of Commerce).

Q. Distinguish particular or simple averages from general or gross averages.

A. The following are the distinctions between particular or simple averages and general or gross
averages:

1. Particular or simple averages have not inured to the common benefit and profit of all persons
interested in the vessel and her cargo, while general or gross averages are caused for the benefit
of those interested in the vessel and her cargo (Art. 809 and Art. 811, Code of Commerce).

2. General or gross averages are deliberately caused in order to save the vessel and/or her cargo,
while particular or simple averages may be due to causes other than a deliberate act (Ibid.).

3. Particular or simple averages are borne by the owner of the things damaged, while general or
gross averages shall be shared and contributed by all persons having an interest in the vessel and
cargo (Art. 810 and Art. 812, Code of Commerce).

Q. What are the formalities to be followed before incurring a general or gross average?

A. In order to incur the expenses and cause the damage corresponding to gross average, the following
formalities must be followed:

1. There must be a resolution of the captain, adopted after deliberation with the sailing mate and
other officers of the vessel, and after hearing the persons interested in the cargo who may be present.

If the latter should object, and the captain and officers of a majority of them, or the captain, if
opposed to the majority, should consider certain measures necessary, they may be executed under his

61
responsibility, without prejudice to the right of the shippers to proceed against the captain before the
competent judge or court, if they can prove that he acted with malice, lack of skill, or negligence.

If the persons interested in the cargo, being on board the vessel, have not been heard, they shall not
contribute to the gross average, their share being chargeable against the captain, unless the urgency of
the case should be such that the time necessary for previous deliberation was wanting (Art. 813, Code
of Commerce).

2. The resolution adopted to cause the damage which constitutes general average must necessarily be
entered in the log books, stating the motives and reasons on which it is based, the votes against it and
the reason for the dissent, should there be any, and the irresistible and urgent causes which impelled
the captain, if he acted of his own accord (Par. 1, Art. 814, Code of Commerce).

3. In the first case mentioned above, the minutes shall be signed by all the persons present who could
do so before taking action, if possible, and if not, at the first opportunity. In the second case, it shall be
signed by the captain and officers of the vessel (Par. 2, Art. 814, Code of Commerce).

4. In the minutes, and after the resolution, shall be stated in detail all the objects jettisoned, and
mention shall be made of the injuries caused to those kept on board. The captain shall be obliged to
deliver one copy of these minutes to the maritime or judicial authority of the first port he may make,
within twenty-four hours after his arrival, and to ratify it immediately under oath (Par. 3, Art. 814,
Code of Commerce).

Q. In what order should effects be jettisoned?

A. The captain shall direct the jettison, and shall order the effects cast overboard in the following
order:

1. Those which are on deck, beginning with those which embarrass the maneuver or damage the
vessel, preferring, if possible, the heaviest ones with the least utility and value.

2. Those which are below the upper deck, always beginning with those of the greatest weight and
smallest value, to the amount and number absolutely indispensable (Art. 815, Code of Commerce).

Q. What is necessary to enable the owners of the effects jettisoned to claim general average? (Asked,
1966 Bar Exams.)

A. In order that the effects jettisoned may be included in the gross average and the owners thereof be
entitled to indemnity, it shall be necessary in so far as the cargo is concerned that their existence on
board be proven by means of the bill of lading; and, with regard to those belonging to the vessel, by
means of the inventory prepared before the departure, in accordance with the first paragraph of Article
612 (Art. 816, Code of Commerce).

Q. What is the effect of the loss of cargo while transferring the same to lighters or barges to lighten the
load of the vessel on account of a storm?

A. If in lightening a vessel on account of storm, in order to facilitate her entry into a port or roadstead,
part of her cargo should be transferred to lighters or barges and be lost, the owner of said part shall be

62
entitled to indemnity, as if the loss had originated from a gross average, the amount thereof being
distributed between the vessel and cargo from which it came.

If, on the contrary, the goods transferred should be saved and the vessel should be lost, no liability may
be demanded of the salvage (Art. 817, Code of Commerce).

Q. What kind of average is caused to a vessel that was sunk to extinguish fire in a port, roadstead or bay?

A. If, as a necessary measure to extinguish a fire in a port, roadstead, creek, or bay, it should be decided
to sink any vessel, this loss shall be considered gross average, to which the vessels saved shall contribute
(Art. 808, Code of Commerce).

Section II — Arrivals Under Stress

Q. What is arrival under stress?

A. Arrival under stress means the arrival of the vessel at the nearest and most convenient port because
the vessel cannot continue the trip to the port of destination on account of the lack of provisions, well-
founded fear of seizure, privateers, or pirates, or by reason of any accident of the sea disabling her to
navigate (Art. 819, Code of Commerce).

Q. What are the valid grounds for arrival of the vessel under stress?

A. Arrival under stress may be made if the captain should believe that the vessel cannot continue the trip
to the port of destination on account of any of the following reasons:

1 Lack of provisions;

2. Well-founded fear of seizure, privateers, or pirates; or

3. Accident of the sea disabling the vessel to navigate (Art. 819, Code of Commerce).

Q. What must the captain do before performing an arrival under stress?

A. The captain shall assemble the officers and shall summon the persons interested in the cargo who
may be present, and who may attend the meeting without the right to vote; and if, after examining the
circumstances of the case, the reason should be considered well-founded, the arrival at the nearest and
most convenient port shall be agreed upon, drafting and entering in the log book the proper minutes,
which shall be signed by all.

The captain shall have the deciding vote, and the persons interested in the cargo may make the
objections and protests they may deem proper, which shall be entered in the minutes in order that they
may make use thereof in the manner they may consider advisable (Art. 819, Code of Commerce).

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Q. When is arrival under stress not lawful?

A. An arrival shall not be considered lawful in the following cases:

1. If the lack of provisions should arise from the failure to take the necessary provisions for the
voyage according to usage and custom, or if they should have been rendered useless or lost
through bad stowage or negligence in their care.

2. If the risk of enemies, privateers, or pirates should not have been well-known, manifest, and
based on positive and provable acts.

3. If the defect of the vessel should have arisen from the fact that she wants not repaired, rigged,
equipped, and prepared in a manner suitable for the voyage, or from some erroneous orders of
the captain.

4. Whenever malice, negligence, lack of foresight, or want of skill on the part of the captain exists
in the act causing the damage (Art. 820, Code of Commerce).

Q. Who shall bear the expenses of an arrival under stress?

A. The expenses of an arrival under stress shall always be for the account of the shipowner or ship agent,
but they shall not be liable for the damage which may be caused the shippers by reason of the arrival,
provided the latter is lawful.

Otherwise, the ship agent and the captains shall be jointly liable (Art. 821, Code of Commerce).

Q. Who may authorize the captain to unload the cargo in order to make repairs to the vessel, or
because there is danger that the cargo may suffer damages?

A. If in order to make repairs to the vessel or because there is danger that the cargo may suffer
damage, it should be necessary to unload, the captain must request authorization from the competent
judge or court for the removal, and carry it out with the knowledge of the person interested in the
cargo, or his representative, if there be any.

In a foreign port, it shall be the duty of the Filipino consul, where there is one, to give the
authorization.

In the first case, the expenses shall be for the account of the ship agent or owner and in the second,
they shall be chargeable against the owners of the goods for whose benefit the act was performed.

If the unloading should take place for both reasons, the expenses shall be divided proportionately
between the value of the vessel and that of the cargo (Art. 822, Code of Commerce).

Q. To whom should the custody and preservation of the unloaded cargo be entrusted?

64
A. The custody and preservation of the cargo which has been unloaded shall be entrusted to the
captain, who shall be responsible for the same, except in cases of force majeure (Art. 823, Code of
Commerce).

Q. When may the captain request the court of competent jurisdiction or the proper consul to
authorize the sale of the cargo?

A. If the entire cargo or part thereof should appear to be damaged, or there should be imminent
danger of its being damaged, the captain may request of the competent judge or court, or of the
consul in a proper case, the sale of all or of part of the former, and the person taking cognizance of the
matter shall authorize it, after an examination and declaration of experts, advertisements, and other
formalities required by the case, and an entry in the book, in accordance with the provisions of Article
624.

The captain shall, in proper case, justify; the legality of his conduct, under the penalty of answering to
the shipper for the price the goods would have brought if they had arrived in good condition at the
port of destination (Art. 824, Code of Commerce).

Q. When is the captain liable for the damage caused by his delay?

A. The captain shall be liable for the damage caused by his delay, if after the cause of the arrival under
stress has ceased, he should not continue the voyage.

If the cause of the arrival should have been the fear of enemies, privateers, or pirates, a deliberation
and resolution in a meeting of the officers of the vessel and persons interested in the cargo who may
be present, in accordance with the provisions contained in Article 819, shall precede the departure
(Art. 825, Code of Commerce).

Section III — Collisions

Q. What is collision? How is it distinguished from allision?

A. In the strict sense, collision means the impact of two vessels both moving, and is distinguished from
allision, which designates the striking of a moving vessel against one that is stationary. But collision is
used in a broad sense to include allision, and perhaps another species of encounters between vessels,
or a vessel and other floating, though non-navigable, objects (Blacks Law Dictionary, citing Wright v.
Brown, 4 Ind. 97, 58 Am. Dec. 622).

Q. In collisions between vessels at sea, explain the divisions or zones of time? (1958 Bar Exams.)

A. In collisions between vessels, there exist three divisions of time or zones:

The first division covers all the time up to the moment when the risk of collision may be said to have
begun. Within this zone, no rule is applicable because none is necessary. Each vessel is free to direct its
course as it deems best, without reference to the movement of the other vessel.

The second division covers the time between the moment when the risk of collision begins and the
moment when it has became a practical certainty.
65
The third division covers the time between the moment when collision had become a practical certainty
and the moment of actual contact (Urrutia & Co. vs. Baco River Plantation, 26 Phil. 632, 636).

Q. Give the rules to be observed where the steamship and a sailing vessel are approaching each other
from opposite directions or in intersecting lines. (Asked, 1958 Bar Exams.)

A. The fundamental principle is to keep out of the way by a prudent and safe margin, having reference
to all the contingencies of navigation (The Yuma, 132 Fed. 964, 66 CCA 74). The specific rules are as
follows:

(a) Crossing Ahead — The rules direct that the vessel required to keep out of the way shall, if the
circumstances of the case admit, avoid coming ahead of the other. A crossing vessel on the starboard
side is privileged but waives her privilege by assenting to the crossing of the other vessel across her
bows (International Rules Art. 22, 26 U.S. St. at L. 327, p. 802; The Albatross, 184 Fed. 363). However,
where the burdened vessel attempts to cross the other’s bows, she assumes the risk of the maneuver,
and the privileged vessel will not be held at fault for not stopping, unless danger is apparent (The
Captain Bennett, 171 Fed. 973; The Zouave, 90 Fed. 440).

(b) Duty of privileged vessel — It is the duty of the vessel having the right of way, when approaching
another vessel charged with the obligation of avoiding her, to keep her course, to enable the other
vessel to keep out of the way (International Rules Art. 21, 26 US. St. at L. 327, p. 802).

Q. What is the meaning of: (a) starboard; (b) port; and (c) bow in maritime law?

A. (a) Starboard is the right-hand side of a vessel when the observer faces forward. “Starboard tack” is
the course of vessel when she has the wind on her starboard bow (Black’s Law Dictionary, citing
Burrows v. Gower, D.C.Mass., 119 F. 617).

(b) Port is the left-hand side of a ship or airplane as one faces forward, toward the bow. Port is the
opposite of starboard.

(c) Bow is the front part of the ship or airplane.

Q. In collision, explain the term “error in extremis” (Asked, 1958 Bar Exams.).

A. Where a navigator, suddenly realizing that a collision is imminent by no fault of his own, in confusion
and excitement of the moment does something which contributes to the collision or omits to do
something by which the collision might be avoided, such act or omission is ordinarily considered to be in
extremis and the ordinary rules of strict accountability do not apply (The Norne, C.C.A.La., 59 F. 2d 145
— Royal Mall Steam Packet Co. v. Cornapnhia De Navegacao Lloyd Brasileiro, D.C.N.Y., 50 F.2d 207).

Q. When will the rule of “error in extremis” apply?

A. Before the rule of “error in extremis” can be allowed it must appear that there was an imminent
danger, for the error of judgment is excusable only if it was committed during such peril (The William
A. Paine, C.C.A. Ohio, 39 F.2d 586). Furthermore, it is the actual risk of danger and not apprehension
merely that determines the question whether the error is one in extremis (The Pangussett, D.C.N.Y., 9
F. 109). What the rule does mean is that a navigator handling a ship in extremis is not to be held to the
exercise of that cool and deliberate judgment which facts developing later indicate to have been the
66
proper or better course (A. H. Bull S.S. Co. v. U.S., C.C.A.N.Y., 34 F.2d 614). It should not be overlooked
that in case of an imminent peril it is proper for a navigator to disregard regulations in order to avert
disaster (The Wyomissing, D.C.N.J., 2 F.Supp. 954).

Q. Who shall bear the damage in case a vessel should collide with another, through the fault,
negligence, or want of skill of the captain, sailing mate, or any other member of the complement?

A. If a vessel should collide with another, through the fault, negligence, or want of skill of the captain,
sailing mate, or any other member of the complement, the owner of the vessel at fault shall indemnify
the damages suffered, after an expert appraisal (Art. 826, Code of Commerce).

Q. At a distance of about 4 miles M/V Don Sulpicio, owned by Don Sulpicio Lines had sighted 2 fishing
boats, namely: F/B Aquarius “C” and F/B Aquarius “G”. The two fishing boats had a speed of about 7.5
to 8 knots per hour while M/V Don Sulpicio was running at about 15.5 knots per hour. The weather
was clear and visibility was good. M/V Don Sulpicio was overtaking F/B Aquarius “G” and in the
process, rammed F/B Aquarius “G” causing said vessel to sink. Don Sulpicio Lines claimed that the
collision was due to the negligence of the men manning F/B Aquarius “G” considering that it did not
have a lookout and that being ahead, it should have given way to M/V Don Sulpicio to avoid being
rammed. Which vessel was responsible for the collision?

A. M/V Don Sulpicio must assume responsibility as it was in a better position to avoid the collision. It
should have blown its horn or given signs to warn the other vessel that it was to overtake it. Assuming
argumenti ex gratia that F/B Aquarius “G” had no lookout during the collision, the omission does not
suffice to exculpate Sulpicio Lines from liability. M/V Don Sulpicio cannot claim that it was a privileged
vessel being in the portside which can maintain its course and speed during the collision. When it
overtook F/B Aquarius “G”, it was duty bound to slacken its speed and keep away from other vessels,
which it failed to do (Sulpicio Lines, Inc. vs. Court of Appeals, G. R. No. 93291, March 29, 1999, 105 SCAD
259).

Q. Who shall bear the damage in case the collision is imputable to both vessels?

A. If the collision is imputable to both vessels, each one shall suffer her own damage, and both shall be
solidarily liable for the damages occasioned to their cargoes (Art. 827, Code of Commerce; Asked, 1980,
1987, 1991 and 1995 Bar Exams.).

Q. What is the doctrine of “Inscrutable Fault?” (Asked, 1997 Bar Exams.)

A. The doctrine of “Inscrutable Fault” means that the court can see that a fault has been committed, but
is unable, from the conflict of testimony, or otherwise to locate it. Hence, when it is impossible to
determine to what direct and specific acts the collision is attributable, it is a case of damage arising from
a cause that is inscrutable (The Fern and The Swann, Fed, Cas. #8,588).

Q. Who shall bear the damage in case it cannot be determined which of the two vessels caused the
collision?

A. In case it cannot be determined which of the two vessels has caused the Collision, each one shall
suffer her own damage and both shall be solidarily liable for the damages occasioned to their Cargoes
(Art. 828, Code of Commerce; Asked, 1980 and 1995 Bar Exams.).

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In other words, the same rule shall apply in case the collision is imputable to both vessels or it cannot be
determined which of the two vessels has caused the collision, i.e., each one shall suffer her own damage.

Q. Who shall bear the damage in case the collision is through a fortuitous event?

A. If a vessel should collide with another through fortuitous event or force majeure, each vessel and her
cargo shall suffer their own respective damage (Art. 830, Code of Commerce; Asked, 1966, 1987 and
1995 Bar Exams.).

Q. If a vessel should be forced by a third vessel to collide with another, what is the responsibility of the
third vessel?

A. If a vessel should be forced by a third vessel to collide with another, the shipowner of the third vessel
shall indemnify the damages caused, the captain thereof being civilly liable to said owner (Art. 831, Code
of Commerce).

Q. Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered
vessel and a passenger ship caused by unseaworthiness of the chartered vessel?

A. No. The carrier, not the charterer warrants impliedly the seaworthiness of the ship. The failure of the
carrier to maintain the vessel in a seaworthy condition is a breach of its obligation. The charterer of a
vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied
with all legal requirements. The duty rests upon the common carrier simply for being engaged in “public
service.” Shippers of goods when transacting with common carriers, are not expected to inquire into the
vessel’s seaworthiness, genuineness of its licenses and compliance with all maritime laws (Caltex [Phils.],
Inc. vs. Sulpicio Lines, Inc., G. R. No. 131166, Sept. 30, 1999, 113 SCAD 471).

Q. What kind of average is a damage caused by a collision due to a storm or a force majeure?

A. If, by reason of a storm or other cause of force majeure, a vessel which is properly anchored and
moored should collide with those nearby, causing them damage, the injury occasioned shall be
considered as particular average of the vessel run into (Art. 832, Code of Commerce).

Q. When is loss by collision presumed?

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

Q. Will the presence of a pilot at the time of the collision exempt the captain from liability?

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

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Q. What formal requirement must be fulfilled to be able to recover damages caused by collision? What
is the effect of failure to comply therewith?

A. The action for the recovery of damages arising from collisions cannot be admitted if a protest or
declaration is not presented within twenty-four hours before the competent authority of the point
where the collision took place, or that of the first port of arrival of the vessel, if in Philippine territory,
and to the Filipino consul if it occurred in a foreign country (Art. 835, Code of Commerce; Asked, 1969
Bar Exams.).

However, with respect to the damage caused to persons to the cargo, the absence of a protest may not
prejudice the persons interested who were not on board or were not in a condition to make known their
wishes (Art. 836, Code of Commerce).

Q What are the instances when protest after a collision is not necessary?

A. Protest after a collision shall not be necessary in the following instances:

1. In case the basis of the action is quasi-delicts (Lopez vs. Duruelo, 52 Phil. 229).

2. In case of collision of a motor boat engaged in conveying passengers between the ship and the
shore, and a larger vessel, since the provision on collision is intended to cover collisions of sea-
going vessels (Lopez vs. Duruelo, supra).

3. In case the person interested in the damage was not on board or was not in a condition to make
known his wishes (Art. 836, Code of Commerce; Asked, 1977 Bar Exams.).

Q. What is the limit of the liability of the shipowners in cases of collisions?

A. The civil liability incurred by the shipowners in the cases prescribed in this section, shall be
understood as limited to the value of the vessel with all her appurtenances and freight earned during the
voyage (Art. 837, Code of Commerce; Asked, 1978 and 1991 Bar Exams.).

Thus, the shipowner or ship agent of a vessel causing the loss of another vessel by collision is not liable
beyond the vessel itself causing the collision and other things appertaining thereto (Philippine Shipping
Co. vs. Vergara, 6 Phil. 281). The loss of the vessel extinguishes the liability of the shipowner or ship
agent of a vessel for the damage caused by collision. However, where such vessel is insured and the
insurance is collected by the shipowner, the insurance substitutes the vessel and the shipowner becomes
liable to the extent of the insurance collected (Urrutia & Co. vs. Baco River Plantation Co., 26 Phil. 362),
and if the vessel was not insured, then the freights earned shall answer for the civil liability of the
shipowner (Guan vs. Compania Maritima, 38 O.G. 2536).

Q. M/V Romblon collided with M/V Mindoro due to the negligence of the captain of the former. M/V
Romblon sunk, resulting in the death of several passengers. The heirs of the passengers filed an action
for damages against the shipowner on the ground that the latter was guilty of breach of contract of
carriage. The shipowner, on the other hand, raised the defense that since the vessel sunk, he is no
longer liable for damages. Is the defense tenable?

A. The defense is tenable. Assuming that the shipowner is liable for a breach of contract of carriage, the
exclusively “real and hypothecary nature” of maritime law operates to limit such liability to the value of
69
the vessel, or to the insurance thereon. The liability of the shipowner or ship agent for injury to or death
of passengers arising from the negligence of the captain in cases of collisions or shipwrecks, is merely co-
existent with his interest in the vessel such that a total loss thereof results in its extinction (Yangco vs.
Laserna, 40 O.G. 4296; Asked, 1991 Bar Exams.).

Q. What claim shall be preferred when the value of the vessel and her appurtenances should not be
sufficient to cover all the liabilities?

A. When the value of the vessel and her appurtenances should not be sufficient to cover all the
liabilities, the indemnity due by reason of the death or injury of persons shall have preference (Art.
838, Code of Commerce).

Q. What must the Philippine consul do in case a Philippine vessel should have a collision in foreign
waters or open seas?

A. If the collision should take place between Philippine vessels in foreign waters, or if having taken place
in the open seas, and the vessels should make a foreign port the Filipino consul in said port shall hold a
summary investigation of the accident, forwarding the proceedings to the Secretary of the Department
of Foreign Affairs for continuation and conclusion (Art. 839, Code of Commerce).

Section IV - Shipwrecks

Q. What is shipwreck?

A. Shipwreck is the demolition or shattering of a vessel, caused by her driving ashore or on rocks and
shoals in the midseas, or by the violence of winds and waves in tempest (Black’s Law Dictionary, citing 2
Am. Ins., p. 734).

Q. Who shall bear the damage suffered by the vessel and her cargo due to shipwreck or stranding?

A. The damage and deteriorations suffered by a vessel and her cargo by reason of shipwreck or stranding
shall be individually for the account of the owners, the part which may be saved belonging to them in
the same proportion (Art. 840, Code of Commerce).

Q. What is the liability of the ship captain in case the wreck or stranding of the vessel is caused by
malice, negligence or lack of skill of the captain?

A. If the wreck or stranding should be caused by the malice, negligence, or lack of skill of the captain,
or because the vessel put to sea was insufficiently repaired and equipped, the ship agent or the
shippers may demand indemnity of the captain for the damage caused to the vessel or to the cargo by
the accident, in accordance with the provisions contained in Articles 610, 612, 614, and 621 (Art. 841,
Code of Commerce).

The general rule is that the damage due to shipwreck or stranding shall be borne by the respective
owners (Art. 840, Code of Commerce), except in case of malice, negligence or lack of skill of the captain
or because the vessel put to sea was insufficiently repaired and equipped, in which case the captain shall
be liable for the damage caused to the vessel or the cargo (Art. 841, Code of Commerce).

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Q. Who shall bear the expenses of the salvage?

A. The goods saved from the wreck shall be especially bound for the payment of the expenses of the
respective salvage, and the amount thereof must be paid by the owners of the former before they are
delivered to them, and with preference over any other obligation if the goods should be sold (Art. 842,
Code of Commerce).

Q. In case the shipwreck occurs while the vessel is in a convoy, how should the saved cargo be
distributed?

A. If several vessels sail under convoy, and any of them should be wrecked, the cargo saved shall be
distributed among the rest in proportion to the amount which each one is able to take.

If any captain should refuse, without sufficient cause, to receive what may correspond to him, the
captain of the wrecked vessel shall enter a protest against him, before two sea officials, of the losses and
damages resulting therefrom ratifying the protest within twenty-four hours after arrival at the first port,
and including it in the proceedings he must institute in accordance with the provisions contained in
Article 612.

If it is not possible to transfer to the other vessels the entire cargo of the vessel wrecked, the goods of
the highest value and the smallest volume shall be saved first, the designation thereof to be made by the
captain with the concurrence of the officers of his vessel (Art. 843, Code of Commerce).

Q. What must the captain do with the goods saved from the wreck which he has taken on board?

A. A captain who may have taken on board the goods saved from the wreck shall continue his course to
the port of destination, and on arrival shall deposit the same, with judicial intervention, at the disposal
of their legitimate owners.

In case he changes his course, if he can unload them at the port to which they were consigned, the
captain may make said port if the shippers or supercargoes present and the officers and passengers of
the vessel consent thereto; but he may not do so, even with the said consent, in time of war or when the
port is difficult and dangerous to make.

The owners of the cargo shall defray all the expenses of this arrival as well as the payment of the freight
which, after taking into consideration the circumstances of the case, may be filed by agreement or by a
judicial decision (Art. 844, Code of Commerce).

Q. How should the expenses of the salvage be met in case there is no person in the vessel who is
interested on the cargo who can pay the same?

A. If on the vessel there should be no person interested in the cargo who can pay the expenses and
freight corresponding to the salvage, the competent judge or court may order the sale of the part
necessary to cover the same. This shall also be done when its preservation is dangerous, or when in a
period of one year it should not have been possible to ascertain who are its legitimate owners.

In both cases, the proceedings shall be with the publicity and formalities prescribed in Article 579, and
the net proceeds of the sale shall be safely deposited, in the discretion of the judge or court, so that they
may be delivered to the legitimate owners thereof (Art. 845, Code of Commerce).
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 Title V

PROVISIONS COMMON TO ALL KINIS OF AVERAGES

Section I - Proof and Liquidation of Averages

Q. How should averages be proven and liquidated?

A. Those interested in the proof and liquidation of averages may mutually agree and bind themselves
at any time with regard to the liability, liquidation and payment thereof.

In the absence of agreements, the following rules shall be observed:

1. The proof of the average shall take place in the port where the repairs are made, should any be
necessary, or in the port of unloading.

2. The liquidation shall be made in the port of unloading, if it is a port in the Philippines.

3. If the average occurred outside of the jurisdictional waters of the Philippines, or the cargo has been
sold in a foreign port by reason of an arrival under stress, the liquidation shall be made in the port of
arrival.

4. If the average has occurred near the port of destination, so that said port can be made, the
proceedings mentioned in Rules 1 and 2 shall be held there (Art. 846, Code of Commerce).

Q. What is the procedure in the liquidation of averages?

A. In the case where the liquidation of the averages is made privately by virtue of agreement, as well
as when a judicial authority intervenes at the request of any of the parties interested who do not
agree thereto, all of them shall be cited and heard, should they not have renounced this right.

Should they not be present or should they have no legal representative, the liquidation shall be made
by the consul in a foreign port, and where there is none, by the competent judge or court, according to
the laws of the country and for the account of the proper party.

When the representative is a person well-known in the place where the liquidation is made, his
intervention shall be admitted and shall produce legal effects, even though he be authorized only by a
letter of the ship agent, the shipper, or the insurer (Art. 847, Code of Commerce).

Q. What claims for averages are not admissible?

A. Claims for averages shall not be admitted if they do not exceed 5 per cent of the interest which the
claimant may have in the vessel or in the cargo if it be gross average, and 1 per cent of the goods
damaged if particular average, deducting in both cases the expenses of appraisal, unless there is an
agreement to the contrary (Art. 848, Code of Commerce).

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Q. When shall interest on damages, averages, loans on bottomry or respondentia and their premiums
and other losses, due to delay commence to run?

A. The damages, averages, loans on bottomry and respondentia and their premiums, and any other
losses, shall not earn interest by reason of delay until after the lapse of the period of three days, to be
counted from the day on which the liquidation may have been concluded and communicated to the
persons interested in the vessel, in the cargo, or in both at the same time (Art. 849, Code of
Commerce).

Q. How shall the expenses of particular and gross averages of the vessel be determined in case of one
or more accidents of the sea on the same voyage?

A. If by reason of one or more accidents of the sea, particular and gross average of the vessel, of the
cargo, or of both, should take place on the same voyage, the expenses and damages corresponding to
each average shall be determined separately in the port where the repairs are made, or where the
goods are discharged, sold, or utilized.

For this purpose the captains shall be obliged to demand of the expert appraisers and of the
contractors making the repairs, as well as of those appraising and taking part in the unloading, repairs,
sale, or utilization of the goods, that in their appraisements or estimates and accounts they set down
separately and accurately the expenses and damages pertaining to each average, and in those of each
average those corresponding to the vessels and to the cargo, also stating separately whether or not
there are damages proceeding from inherent defect of the thing and not from accident of the sea; and
in case there should be expenses common to the different averages and to the vessel and her cargo,
the amount corresponding to each must be estimated and stated distinctly (Art. 850, Code of
Commerce).

Section II— Liquidation of Gross Averages

Q. How shall the adjustment, liquidation and distribution of gross averages be done?

A. At the instance of the captain, the adjustment, liquidation, and distribution of gross averages shall
be held privately, with the consent of all the parties in interest.

For this purpose, within forty-eight hours following the arrival of the vessel at the port, the captain
shall convene all the persons interested in order that they may decide as to whether the adjustment or
liquidation of the gross average is to be made by experts and liquidators appointed by themselves, in
which case it shall be so done if the interested parties agree.

If an agreement is not possible, the captain shall apply to the competent judge or court, who shall be
the one in the port where these proceedings are to be held in accordance with the provisions of this
Code, or to the Filipino consul should there be one, and should there be none, to the local authority
when they are to be held in a foreign port (Art. 851, Code of Commerce).

In view of the foregoing provision, the captain is required to initiate the proceedings for the
adjustment, liquidation, and distribution of any gross average, and it is therefore his duty to take the
proper steps to protect any shipper whose goods may have been jettisoned for the general safety. In
ordinary practice, this would primarily be accomplished by requiring the consignees of other cargoes,
as a condition precedent to the delivery of their goods to them, to give a sufficient bond to respond

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for their proportion of the general average (Standard Oil Co. of New York vs. Lopez Castelo, 42 Phil.
256).

Q. What is the consequence should the captain fail to fulfill his duty regarding the adjustment,
liquidation and distribution of general averages?

A. If the captain does not comply with the provisions of the preceding article, the ship agent or the
shippers shall demand the liquidation, without prejudice to the action they may bring to demand
indemnity from him (Art. 852, Code of Commerce).

Thus, in case of failure of the captain to fulfill his obligation regarding the liquidation of general averages,
the shipper of the cargo that suffered general average may proceed against the captain for indemnity or
seek indemnity from the shipowner. The shipowner in turn, may hold the captain liable (Standard Oil Co.
of New York vs. Lopez Castelo, supra).

Q. What are the duties of the experts who may have been appointed by persons interested or by the
court?

A. After the experts have been appointed by the persons interested, or by the court, and after the
acceptance, they shall proceed to the examination of the vessel and of the repairs required and to the
appraisal of their cost, separating these damages from those arising from the inherent defect of the
things.

The experts shall also declare whether the repairs may be made immediately, or whether it is
necessary to unload the vessel in order to examine and repair her.

With regard to the goods, if the average should be visible at a mere glance, the examination thereof
must be made before they are delivered. Should it not be visible at the time of unloading, said
examination may be made after the delivery; provided that it is done within forty-eight hours from the
unloading, and without prejudice to the other proofs which the experts may deem proper (Art. 853,
Code of Commerce).

Q. What are the rules to be followed in the valuation of the objects which are to contribute to the
gross average?

A. The valuation of the objects which are to contribute to the gross average, and that of those which
constitute the average, shall be subject to the following rules:

1. The goods saved which are to contribute to the payment of the gross average shall be valued at the
current price at the port of unloading, deducting the freight, customs duties, and expenses of
unloading, as may appear from a material inspection of the same, without taking the bills of lading
into consideration, unless there is an agreement to the contrary.

2. If the liquidation is to be made in the port of departure, the value of the goods loaded shall be
determined by the purchase price, including the expenses until they are placed on board, the
insurance premium excluded.

3. If the goods should be damaged, they shall be appraised at their true value.

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4. If the voyage having been interrupted, the goods should have been sold in a foreign port, and the
average cannot be estimated, the value of the goods in the port of arrival, or the net proceeds
obtained at the sale thereof, shall be taken as the contributing capital.

5. Goods lost, which constitute the gross average, shall be appraised at the value which goods of their
kind may have in the port of unloading, provided that their kind and quality appear in the bill of
lading; and should they not appear, the value shall be that stated in the invoices of the purchase
issued in the port of shipment, adding thereto the expenses and freight subsequently arising.

6. The masts cut down, the sails, cables, and other equipment of the vessel rendered useless for the
purpose of saving her, shall be appraised at the current value, deducting one-third by reason of the
difference between new and old.

This deduction shall not be made with respect to anchors and chains.

7. The vessel shall be appraised at her true value in the condition in which she is found.

8. The freight shall represent 50 per cent by way of contributing capital (Art. 854, Code of Commerce).

Q. Are goods loaded on the upper deck liable for or entitled to general or gross average?

A. The goods loaded on the upper deck of the vessel shall contribute the gross average should they be
saved; but there shall be no right to indemnity if they should be lost by reason of having been jettisoned
for common safety, except when the marine ordinances allow their shipment in this manner in coastwise
navigation.

The same shall take place with that which are on board and are not included in the bills of lading or
inventories, according to the cases.

In any case, the shipowner and the captain shall be liable to the shippers for the damages from the
jettison, if the storage on the upper deck was made without the consent of the latter (Art. 855, Code of
Commerce).

Q. Who shall bear the damage to or loss of goods loaded on the upper deck of sea-going vessels?

A. The damage to or loss of the goods loaded on the upper deck of a sea-going vessel shall be borne in
accordance with the following rules:

1. In case the goods are loaded on the upper deck without the consent of the shipper, the captain
of the vessel does so at his own risk and hence, should the goods be damaged or lost in
consequence of being thus exposed, the captain cannot protect himself from responsibility by
showing that they are damaged or lost by the dangers of the sea.

2. When the shipper consents to his goods being carried on deck, he takes the risk upon himself of
these peculiar perils and thus, any damage such as those caused by rain or splashing aboard of
sea water, or where said goods were jettisoned or lost during storm at sea, will be borne by the
owner of the goods and will be considered as particular average (G. Martini, Ltd. vs. Macondry &
Co., 39 Phil. 934).
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Q. Should the foregoing rules apply to coastwise or inter-island navigation?

A. The first rule mentioned above as to storage of goods on the upper deck without the consent of the
shipper also applies to coastwise or inter-island navigation. However, the rule differs in case the shipper
consents thereto, in that if the marine ordinances allow the cargo to be laden on deck in coastwise or
inter-island navigation, then the loss or damage suffered by such goods will be dealt with as general
average, and if otherwise, said loss or damage will be considered as particular average only (Standard Oil
Co. of New York vs. Lopez Castelo, 42 Phil. 256; Asked, 1958 Bar Exams.).

Q. What effects are not liable for contribution to general or gross average loss?

A. The following are not liable for contribution to general or gross average:

1. Provisions and ammunitions of war which the vessel may have on board, and the clothing used
by the captain, officers, and crew;

2. The clothing used by the shippers, supercargoes, and passengers who may be on board at the
time of the jettison; and

3. The goods jettisoned with respect to the gross averages which may occur to the goods saved in a
different and subsequent risk (Art. 856, Code of Commerce).

Q. When shall the entire record be turned over to the liquidator?

A. Alter the appraisement of the goods saved and of those lost which constitute the gross average, has
been concluded by the experts, the repairs, if any, made on the vessel, and, in this case, the
accounts of the same approved by the persons interested or by the judge or court, the entire
record shall be turned over to the liquidator appointed, in order that he may proceed with the
distribution of the average (Art. 857, Code of Commerce).

Q. What are the rights and obligations of the liquidator?

A. In order to effect the liquidation, the liquidator shall examine the protest of the captain, comparing it,
if necessary, with the log book, and all the contracts which may have been made among the
persons interested in the average, the appraisement, expert examinations, and account of
repairs made. If, as a result of this examination, he should find any defect in the procedure which
might injure the rights of the persons interested or affect the liability of the captain, he shall call
attention thereto in order that it may be corrected, if possible, and otherwise he shall include it
in the exordial of the liquidation.

Immediately thereafter, he shall proceed with the distribution of the amount of the average, for which
purpose he shall fix:

1. The contributing capital, which he shall determine by the value of the cargo, in accordance with the
rules established in Article 854.

2. That of the vessel in her actual condition, according to a statement of experts.

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3. The 50 per cent of the amount of the freight, deducting the remaining 50 per cent of wages and
maintenance of the crew.

After the amount of the gross average has been determined in accordance with the provisions of this
Code, it shall be distributed pro rata among the goods which are to cover the same (Art. 858,
Code of Commerce).

Q. What is the obligation of the insurers of the vessel, the freight and the cargo with respect to the
indemnification of the gross or general average?

A. The insurers of the vessel, of the freight, and of the cargo shall be obliged to pay for the
indemnification of the gross average, in so far as is required of each one of these objects
respectively (Art. 859, Code of Commerce).

Q. What is the effect of Unsuccessful attempt to save the vessel on the goods jettisoned?

A. If, notwithstanding the jettison of goods, breakage of masts, ropes, and equipment, the vessels should
be lost running the same risk, no contribution whatsoever by reason of gross average shall be proper.
However, the owners of the goods saved shall be liable for the indemnification of those jettisoned, lost,
or damaged (Art. 860, Code of Commerce).

If, in spite of having saved the vessel and the cargo in consequence of the cutting down of masts or of
any other damage deliberately done to the vessel for said purpose, the goods should subsequently be
lost or stolen, the captain cannot demand of the shippers or consignees that they contribute to the
indemnity for the average, unless the loss should occur by reason of an act of the owner or consignee
himself (Art. 862, Code of Commerce).

Q. A vessel has been saved from a risk which gave rise to jettison. However, the vessel was
subsequently lost due to another accident during the voyage. Will the goods saved from the first risk
be still liable to contribution by reason of the gross average?

A. If, after the vessel has been saved from the risk which gave rise to the jettison, she should be lost
through another accident taking place during the voyage, the good saved and existing from the first risk
shall continue to be liable to contribution by reason of the gross average according to their value in the
condition in which they may be found, deducting the expense incurred in saving them (Art. 861, Code of
Commerce).

Q. What is the effect if the owner of the jettisoned goods should recover them after having received
indemnity for gross average?

A. If the owner of the jettisoned goods should recover them after having received the indemnity for
gross average, he shall be obliged to return to the captain and to the other persons interested in the
cargo the amount he may have received, deducting the amount of the damage caused by the jettison
and of the expenses incurred in their recovery.

In this case, the amount returned shall be distributed among the vessel and the persons interested in the
cargo, in the same proportion in which they contributed to the payment of the average (Art. 863, Code
of Commerce).

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If the owner of the goods jettisoned should recover them without having demanded any indemnity, he
shall not be obliged to contribute to the payment of the gross average which may have been suffered by
the rest of the cargo after the jettison (Art. 864, Code of Commerce).

Q. When does the distribution of gross average become final?

A. The distribution of the gross average shall not be final until it has been agreed to, or in the absence
thereof, until it has been approved by the judge or court, after an examination of the liquidation and a
hearing of the persons interested who may be present or of their representatives (Art. 865, Code of
Commerce).

Q. Who has the obligation to collect the contribution to a gross average?

A. After the liquidation has been approved, it shall be the duty of the captain to collect the amount of
the contribution, and he shall be liable to the owners of the goods averaged for the damage they may
suffer through his delay or negligence (Art. 866, Code of Commerce).

Q. What is the remedy if the persons required to give contribution to the gross average should fail to do
so?

A. If the persons contributing should not pay the amount of the contribution at the end of the third day
after having been required to do so, the goods saved shall be proceeded against at the request of the
captain, until payment has been made from their proceeds (Art. 867, Code of Commerce).

Q. What is the right of the captain should the person interested in receiving the goods saved should not
give security sufficient to answer for the contribution to the gross average?

A. If the person interested in receiving the goods saved should not give security sufficient to the answer
for the amount corresponding to the gross average, the captain may defer the delivery thereof until
payment has been made (Art. 868, Code of Commerce).

Section III — Liquidation of Ordinary Averages

Q. How shall the examination and appraisal of the averages be done?

A. The experts whom the court or persons interested may appoint, as the case may be, shall proceed
with the examination and appraisement of the average in the manner prescribed in Articles 853 and 854,
Rules 2 to 7, insofar as they are applicable (Art. 869, Code of Commerce).

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