TRANSPORTATION LAW

MARCH 9 QUIZ COVERAGE

Page 1 of 27
Code of Commerce & Civil
Sources: April Lynn Ursal’s

Code Reviewer

CHAPTER 5 - BILL OF LADING AND OTHER FORMALITIES

2. DEFINITION
1. CONCEPTS
Bill of Lading (BOL)
*Contract of carriage - not a formal contract

I. CONCEPTS, DEFINITION AND KINDS

1.a written acknowledgement, signed by the master of a vessel

A BOL is not necessary for the perfection of a contract of
or other authorized agent of the carrier, that he has received
carriage. Thus, the obligation to exercise extraordinary diligence
the described goods from the shipper, to be transported on
by the carrier is still required even if there is no bill of lading.

the expressed terms to be described the place of

destination, and to be delivered to the designated
ARTICLE 354.      In the absence of a bill of lading, disputes shall be
consignees of the parties.

determined by the legal proofs which the parties may present in

support of their respective claims, according to the general
2.It operates as a (1) RECEIPT (2) as a CONTRACT (3) as a
provisions established in this Code for commercial contracts.

DOCUMENT OF TITLE.

-> Article 354, Code of Commerce ~ subject to the modification that

the primary governing law is the New Civil Code. Hence, in the ACE NAVIGATION CO., INC., petitioner,  vs. FGU INSURANCE
absence of any bill of lading, disputes shall be determined on the CORPORATION and PIONEER INSURANCE AND SURETY
basis of the provisions of the New Civil Code and suppletorily by the CORPORATION, Respondents. [G.R. No. 171591. 25 June 2012] ->
Code of Commerce.
A bill of lading is defined as "an instrument in writing, signed by a
carrier or his agent, describing the freight so as to identify it, stating
the name of the consignor, the terms of the contract for carriage, and
*Republic Act No. 8792 (Electronic Commerce Act) ~ governs
agreeing or directing that the freight to be delivered to the order or
electronic commerce. Sections 25 & 26 of this RA allows data
assigns of a specified person at a specified place.” It operates both
messages or electronic documents to be used in lieu of transport
as a receipt and as a contract. As a receipt, it recites the date and
documents in writing or paper documents.

place of shipment, describes the goods as to quantity, weight,

dimensions, identification marks and condition, quality, and value. As
*Conditions for the Issuance of a Certificate of Public Convenience a contract, it names the contracting parties, which include the
for Public Utility Vehicles ~ imposed by the Land Transportation consignee, fixes the route, destination, and freight rates or charges,
Franchising Regulatory Board (LTFRB) includes the requirement that and stipulates the rights and obligations assumed by the parties. As
all “PUB and Taxi operators shall issue tickets/receipts” ~ required by such, it shall only be binding upon the parties who make them, their
the Bureau of Internal Revenue (BIR). Ticket/receipts includes: exact assigns and heirs.

amount of fare collected, point of embarkation and destination.

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Code of Commerce & Civil
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Code Reviewer
INTERPROVINCIAL AUTOBUS CO., INC., Petitioner, vs.
COLLECTOR OF INTERNAL REVENUE, Respondent. [G.R. No.
L-6741.  January 31, 1956.] -> Bills of lading, in modern
jurisprudence, are not those issued by masters of vessels alone; they
now comprehend all forms of transportation, whether by sea or land,
and includes bus receipts for cargo transported. “The term ‘bill of
lading’ is frequently defined, especially by the order authorities, as a
writing signed by the master of a vessel acknowledging the receipt of
goods on board to be transported to a certain part and there
delivered to a designated person or on his order. This definition was
formulated at a time when goods were principally transported by sea
and, while adequate in view of the conditions existing at that early
day, is too narrow to suit present conditions. As comprehending all
methods of transportation, a bill of lading may be defined as a written
acknowledgment of the receipt of goods and an agreement to
transport and to deliver them at a specified place to a person named
or on his order. Such instruments are sometimes called ‘shipping
receipts,’ ‘forwarders’ receipts’ and ‘receipts for transportation.’ The
designation, however, is not material, and neither is the form of the
instrument. If it contains an acknowledgment by the carrier of the
receipt of goods for transportation, it is, in legal effect, a bill of
lading.” (9 Am. Jur. 662, Italics supplied.)
the vessel.
3. KINDS OF BILLS OF LADING
A bill of lading may be either: (1) negotiable or non-negotiable; (2)
clean bill of lading or foul bill of lading; (3) “on board bill” or “received
for shipment bill:; (4) spent bill of lading; (5) through bill of lading; (6)
custody bill of lading; or (7) port bill of lading.
transport the goods is already in the port.
> Clean Bill of Lading ~ Does not contain any notation indicating any
defect in the goods.
> Foul Bill of Lading ~ it contains any notation indicating any defect
in the goods.
> Spent Bill of Lading ~ The goods are already delivered but the bill
of lading was not yet returned (upon delivery, the carrier is supposed
to retrieve the covering bill of the goods).
> Through Bill of Lading ~ Issued by a carrier who is obliged to use
the facilities of other carriers as well as his own facilities for the
purpose of transporting the goods from the city of the seller to the
city of the buyer, which BOL is honored by the second and other
interested carriers who don’t issue their own BOL.
> On Board Bill vs Received for Shipment Bill
~ On Board: states that the goods have been received on board the
vessel which is to carry the goods. It apparently guarantees the
certainty of shipping as well as the seaworthiness of the vessel to
carry the goods. It basically means that the goods are already inside
~ Received for Shipment: States that the goods have been received
for shipment with or without specifying the vessel by which the
goods are to be shipped. It is issued when conditions are not normal
and there is insufficiency of shipping space.
> Custody Bill of Lading ~ The goods are already receied by the
carrier but the vessel indicated therein has not yet arrived in the port.
> Port Bill of Lading ~ The vessel indicated in the BOL that will

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Note: A party to a maritime contract would require an on board bill
of lading because of its apparent guaranty of certainty of shipping
as well as the seaworthiness of the vessel which is to carry the
goods.
Reviewer
ART. 24 (NCC). In all contractual property or other relations, when
one of the parties is at a disadvanatge on account of his moral
dependence, ignorance indigence, mental weakness, tender age and
other handicap, the court must be vigilant for his protection.

4. NATURE OF BILL OF LADING

THE 3-FOLD NATURE OF THE BILL OF LADING 6.01 PARTIES
Parties in a bill of lading are the shipper and carrier.

1. The three fold nature of a bill of lading is obviously applicable

only to carriage of goods
MOF COMPANY, INC., Petitioner, vs. SHIN YANG BROKERAGE
2. As receipt and document of title: issued for goods
CORPORATION Respondent. [G.R. No. 172822. December 18, 2009] -
3. As contract: applies to tickets issued to passengers
> In sum, a consignee, although not a signatory to the contract of
carriage between the shipper and the carrier, becomes a party to the
contract by reason of either a) the relationship of agency between the
5. WHEN EFFECTIVE consignee and the shipper/ consignor; b) the unequivocal acceptance
of the bill of lading delivered to the consignee, with full knowledge of
1. Upon its delivery to and acceptance by the shipper.
its contents or c) availment of the stipulation pour autrui, i.e., when the
consignee, a third person, demands before the carrier the fulfillment of
2. The acceptance of the bill without dissent raises the the stipulation made by the consignor/shipper in the consignees favor,
presumption that all the terms therein were brought to the specifically the delivery of the goods/cargoes shipped.

knowledge of the shipper and agreed to by him, and in the

absence of fraud or mistake, he is stopped thereafter from
denying that he assented to such claims (whether he reads
the bill or not)

6.02 CONTRACT OF ADHESION

6. BILL OF LADING AS CONTRACT 1. It is to be construed liberally in favor of the shipper who

1. It expresses the terms and conditions of the agreement adhered to such bill as it is a contract of adhesion. The only
between the parties; names the parties; includes consignees participation of the party is the signing of his signature or his
etc. It is the law between the parties bound by its terms and adhesion thereto.

conditions.

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Code Reviewer
2. The shipper or passenger is bound by the terms and 1. In a contractual obligation, the bill of lading can be categorized
conditions if there is no occasion to speak of ambiguities or as an actionable document under the Rules of Court. Hence, the
obscurities
bill of lading must be properly pleaded either as causes of action
or defenses.

3. If the words appear to be contrary to the evident intention of 2. ART 1507 (NCC). A document of title in which it is stated that the
the parties, the latter shall prevail over the former
goods referred to therein will be delivered to the bearer or to the
order of any person named in such document is a negotiable
document of title.
6.03 PAROL EVIDENCE RULE 3. If the document of title contains the required words of
negotiability to make the instrument negotiable under Article
1. BOL is covered by the parol evidence rule, that the terms of 1507 of the NCC, the document remains to be negotiable even if
the contract are conclusive upon the parties and evidence the words “not negotiable” or non negotiable are places thereon:

aliunde is not admissible to vary or contradict a complete a. Bearer document- negotiated by delivery

enforceable agreement, subject to well defined exceptions

b. Order document- negotiated by indorsement of the specified
person so named

2. The mistake contemplated as an exception to the parol

evidence rule is one which is a mistake of fact mutual to the 4. Effects of negotiation. Negotiation of the document has the effect
parties.
of manual delivery so as to constitute the transferee the owner of
the goods.

3. Note that if such is not raised inceptively in the complaint or in

the answer, a party cannot later on be permitted to introduce
parol evidence thereon
6.06 SHIPMENT TERMS
The inadequacy of contract and property law caused merchants to
develop shipment terms that are designed to regulate the rights of
6.04 BILL OF LADING AS EVIDENCE the parties whenever one ships goods to another. These terms
include F.O.B., F.A.S, and C.I.F., which serve the following functions:

1. The BOL is the legal evidence of the contract and the entries (a) They determine the point at which the risk of loss passes from
thereof constitutes prima facie evidence of the contract.
seller to buyer;

(b) They determine what performance by the seller amounts to a

2. All the essential elements of a valid contract (cause, consent, tender which will put the buyer, if he thereafter refuses to accept
object) are present when such bill are issued.
delivery, in breach; and

(c) They are used for quoting the price.

6.05 BILL OF LADING AS ACTIONABLE DOCUMENT > F.O.B ~ Free On Board

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Code Reviewer
~ risk passes to buyer at the F.O.B. Point of Destination, the seller 2. The name, surname and residence of the carrier.

still assumes the risk until the goods reach the point of destination.
3. The name, surname and residence of the person to whom or to
whose order the goods are to be sent or whether they are to be
> F.A.S ~ Free Alongside
delivered to the bearer of said bill.

~ variant of FOB and used for carriage by water, the seller 4. The description of the goods, with a statement of their kind, of their
relinquishes the risk the moment the goods are delivered alongside weight, and of the external marks or signs of the packages in which
the vessel.
they are contained.

> F.O.B Vessel vs F.A.S Vessel

5. The cost of transportation.

~ FAS Vessel -> seller is under no obligation to see to the loading

and all that is required is delivery to the wharf.
6. The date on which shipment is made.

~ FOB Vessel -> seller must see to it that the goods are loaded and
his responsibility does not cease until the loading is complete. Only 7. The place of delivery to the carrier.

an “On Board” bill of lading signifies the completion of the loading of

goods.
8. The place and the time at which delivery to the consignee shall
be made.

> C.I.F ~ Cost, Insurance, Freight

~ indicates that the price quoted by the seller includes the invoice
9. The indemnity to be paid by the carrier in case of delay, if there
price plus insurance and freight.

should be any agreement on this matter.


ARTICLE 351. In transportation made by railroads or other enterprises

7. BASIC STIPULATIONS
subject to regulation rate and time schedules, it shall be
1. Provided for in the Code of Commerce

sufficient for the bills of lading or the declaration of shipment

furnished by the shipper to refer, with respect to the cost, time
2. (for overland transportation, maritime commerce and
and special conditions of the carriage, to the schedules and
electronic documents, please refer to the textbook for the
regulations the application of which he requests; and if the
codal pp. 203-210)

shipper does not determine the schedule, the carrier must

apply the rate of those which appear to be the lowest, with the
conditions inherent thereto, always including a statement or
7.01 OVERLAND TRANSPORTATION
reference to in the bill of lading which he delivers to the shipper.

ARTICLE 350. The shipper as well as the carrier of merchandise or
goods may mutually demand that a bill of lading be made, stating:

1. The name, surname and residence of the shipper.

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ARTICLE 352. The bills of lading, or tickets in cases of transportation
of passengers, may be diverse, some for persons and others
for baggage; but all of them shall bear the name of the carrier,
the date of shipment, the points of departure and arrival, the
cost, and, with respect to the baggage, the number and weight
of the packages, with such other manifestations which may be
considered necessary for their easy identification.
 demand the unloading at the expense of the captain should the latter
Reviewer
7. The freightage and the primage stipulated. 

The bill of lading may be issued to bearer, to order, or in the name of a
specified person, and must be signed within twenty-four hours after
the cargo has been received on board, the shipper being entitled to
not sign it, and, in every case, the losses and damages suffered
thereby.



7.02 MARITIME COMMERCE ARTICLE 707. Four true copies of the original bill of lading shall be
Article 706 -> Stipulations that must be included in a Bill of Lading
made, and all of them shall be signed by the captain and the shipper.
Articles 707-718 -> other rules that apply to a Bill of Lading in the Of these, the shipper shall keep one and send another to the
absence of Civil Code provisions
consignee; the captain shall take two, one for himself and another for
the ship agent.

ARTICLE 706. The captain of the vessel and the shipper shall have the There may also be drawn up as many copies of the bill of lading as
obligation of drawing up the bill of lading in which shall be stated:
may be considered necessary by the person interested; but when they
are issued to order or to bearer, they shall be stated in all the copies,
1. The name, registry, and tonnage of the vessel.
be they the first four or the subsequent ones, the destination of each
one, stating whether it is for the agent, for the captain, for the shipper,
2. The name of the captain and his domicile.
or for the consignee. If the copy sent to the latter should have a
duplicate, this circumstance and the fact that it is not valid except in
3. The port of loading and that of unloading.
default of the first one must be stated therein.



4. The name of the shipper.

ARTICLE 708. Bills of lading issued to bearer and sent to the

consignee shall be transferable by actual delivery of the instrument;
5. The name of the consignee, if the bill of lading is issued in the and those issued to order, by virtue of an indorsement.

name of a specified person.
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
6. The quantity, quality, number of packages and marks of the regard to the merchandise mentioned in the same.

merchandise.

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ARTICLE 709. 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.
previously issued be presented or returned to him, and it should
ARTICLE 710. If the bills of lading do not agree, and no change or
erasure can be observed in any of them, 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.


ARTICLE 711. 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 thereby to unload it and place it in deposit, shall be responsible
for the expenses of warehousing and other expenses arising therefrom.
to bearer or to order, indorsed in their favor, demanding the same
ARTICLE 712. The captain may not by himself change the destination
of the merchandise. In admitting this change at the instance of the
shipper, he must first take up the bill of lading which he may have
issued, under pain of being liable for the cargo to the legitimate holder
of the same. ARTICLE 713. 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, under penalty, should he not so state, of
being held liable for said cargo if improperly delivered through his fault.
cancellation of all the provisional receipts of prior date given by the
Reviewer
ARTICLE 714. If before the vessel puts to sea the captain should die or
should cease to hold his position through 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
appear from all 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 the right of action of
the latter against the first captain if he ceased to be such through his
own fault. Should said examination not be made, it shall be
understood that the new captain accepts the cargo as it appears from
the bills of lading issued.
ARTICLE 715. Bills of lading will give rise to a most summary action or
to judicial, compulsion ("accion sumarisima o de apremios"), according
to the case, for the delivery of the cargo and the payment of the
freightage and the expenses thereby incurred.

ARTICLE 716. If several persons should present bills of lading issued
merchandise, the captain shall prefer, in making delivery the person
who presents the copy first issued, except when the latter one was
issued on proof of the loss of the first, and both are presented by
different persons.
In such case, as well as when only second subsequent copies, issued
without this proof, are presented, the captain shall apply to the judge
or court, so that he may order the deposit of the merchandise and their
delivery, through him, to the proper person.

ARTICLE 717. The delivery of the bill of lading shall effect the
captain or his subordinates for partial deliveries of the cargo which
may have been made.

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ARTICLE 718. After the cargo has been delivered the bill of lading
which the captain signed, or at least the copy by reason of which the (e) undertaking to deliver goods to a named person or a person

delivery is made, shall be returned to him, with the receipt for the
merchandise mentioned therein.
 (f) granting, acquiring, renouncing, surrendering, transferring or
The delay on the part of the consignee shall make him liable for the negotiating rights in goods;

damages which such delay may cause the captain.

(g) acquiring or transferring rights and obligations under the contract.

chanrobles law firm

7.03 ELECTRONIC DOCUMENTS
SEC. 25. Actions Related to Contracts of Carriage of Goods. -
Without derogating from the provisions of part two of this law, this
SEC. 26. Transport Documents. - (1) Where the law requires that any
action referred to contract of carriage of goods be carried out in
writing or by using a paper document, that requirement is met if the
action is carried out by using one or more data messages or
electronic documents.

chapter applies to any action in connection with, or in pursuance of, (2) Paragraph (1) applies whether the requirement therein is in the
a contract of carriage of goods, including but not limited to:
form of an obligation or whether the law simply provides
consequences for failing either to carry out the action in writing or to
(a) (i) furnishing the marks, number, quantity or weight of goods;
use a paper document.

(ii) stating or declaring the nature or value of goods;

(iii) issuing a receipt for goods;

(3) If a right is to be granted to, or an obligation is to be acquired by,
(iv) confirming that goods have been loaded;
one person and no other person, and if the law requires that, in order
to effect this, the right or obligation must be conveyed to that person
(b) (i) notifying a person of terms and conditions of the contract;
by the transfer, or use of, a paper document, that requirement is met
if the right or obligation is conveyed by using one or more electronic
(ii) giving instructions to a carrier; chanrobles law firm
data messages or electronic documents unique;

(c) (i) claiming delivery of goods;

(4) For the purposes of paragraph (3), the standard of reliability
required shall be assessed in the light of the purpose for which the
(ii) authorizing release of goods;
right or obligation was conveyed and in the light of all the
circumstances, including any relevant agreement.

(iii) giving notice of loss of, or damage to, goods;

(5) Where one or more data messages are used to effect any action in
(d) giving any other notice or statement in connection with the subparagraphs (f) and (g) of Section 25, no paper document used to
performance of the contract;
effect any such action is valid unless the use of electronic data
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message or electronic document has been terminated and replaced 3. Providing an unqualified limitation of such liability to an
by the use of paper documents. A paper document issued in these agreed valuation - INVALID

circumstances shall contain a statement of such termination. The

replacement of electronic data messages or electronic documents by 4. Limiting the liability of the carrier to an agreed valuation
paper documents shall not affect the rights or obligations of the unless the shipper declares a higher value and pays a higher
parties involved.
rate of freight -VALID and ENFORCEABLE.

(6) If a rule of law is compulsorily applicable to a contract of carriage

of goods which is in, or is evidenced by, a paper document, that rule Remember:

shall not be inapplicable to such a contract of carriage of goods

which is evidenced by one or more electronic data messages or 1. The parties cannot stipulate so as to totally exempt the carrier
electronic documents by reason of the fact that the contract is from exercising any degree of diligence whatsoever

evidenced by such electronic data messages or electronic

documents instead of by a paper document.
2. The parties cannot stipulate that the common carrier shall
exercise diligence less than the diligence of a good father of a
8. PROHIBITED AND LIMITING STIPULATIONS family

1. Exempting the carrier from any and all liability for loss or
damage occasioned by its own negligence - INVALID as it is
contrary to public policy, also known as exculpatory 8.01 PROHIBITED STIPULATIONS
contracts.
-> Stipulations exempting the carrier from any and all liability for loss
or damage occasioned by its own negligence or providing for an
2. Parties may stipulate that the diligence to be exercised by the unqualified limitation of such liability to an agreed valuation are not
carrier for the carriage of goods be less than extraordinary valid for being contrary to public policy.

diligence if it is:

-> Article 1745, Civil Code:

1. in writing and signed by both parties

Article 1745.  Any of the following or similar stipulations shall be

2. supported by a valuable consideration other than the considered unreasonable, unjust and contrary to public policy:

service rendered by the common carrier

(1) That the goods are transported at the risk of the owner or shipper;

3. the stipulation is just, reasonable and not contrary to

law.
(2) That the common carrier will not be liable for any loss, destruction,
or deterioration of the goods;

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(3) That the common carrier need not observe any diligence in the Article 1749. A stipulation that the common carrier's liability is limited
custody of the goods;
to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.

(4) That the common carrier shall exercise a degree of diligence less
than that of a good father of a family, or of a man of ordinary prudence Article 1750. A contract fixing the sum that may be recovered. by the
in the vigilance over the movables transported;
owner or shipper for the loss, destruction, or deterioration of the goods
is valid, if it is reasonable and just under the circumstances, and has
(5) That the common carrier shall not be responsible for the acts or been fairly and freely agreed upon.

omission of his or its employees;

(6) That the common carrier's liability for acts committed by thieves, or
of robbers who do not act with grave or irresistible threat, violence or
force, is dispensed with or diminished;
8.03 PURPOSE OF LIMITING STIPULATIONS
-> It is to protect the common carrier. Such stipulation obliges the
(7) That the common carrier is not responsible for the loss, destruction, shipper/consignee to notify the common carrier of the amount that
or deterioration of goods on account of the defective condition of the the latter may be liable for in case of loss of the goods.

car, vehicle, ship, airplane or other equipment used in the contract of -> EDGAR COKALIONG SHIPPING LINES, INC.,  Petitioner,  vs.
carriage.
UCPB GENERAL INSURANCE COMPANY, INC.,  Respondent.
[G.R. No. 146018. June 25, 2003] ~ Concededly, the purpose of the
limiting stipulation in the Bill of Lading is to protect the common
carrier. Such stipulation obliges the shipper/consignee to notify the
8.02 LIMITING STIPULATIONS common carrier of the amount that the latter may be liable for in case
Article 1746. An agreement limiting the common carrier's liability may of loss of the goods. The common carrier can then take appropriate
be annulled by the shipper or owner if the common carrier refused to measures -- getting insurance, if needed, to cover or protect itself.
carry the goods unless the former agreed to such stipulation.
This precaution on the part of the carrier is reasonable and prudent.
Hence, a shipper/consignee that undervalues the real worth of the
Article 1747.  If the common carrier, without just cause, delays the goods it seeks to transport does not only violate a valid contractual
transportation of the goods or changes the stipulated or usual route, stipulation, but commits a fraudulent act when it seeks to make the
the contract limiting the common carrier's liability cannot be availed of common carrier liable for more than the amount it declared in the bill
in case of the loss, destruction, or deterioration of the goods.
of lading.

Article 1748.  An agreement limiting the common carrier's liability for

delay on account of strikes or riots is valid.

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8.04 PRESUMPTION OF NEGLIGENCE
-> The presence of a limiting stipulation does not remove the duty to
exercise extraordinary diligence in the transportation of goods.
statements on tickets, or otherwise.
Reviewer
Article 1757.  The responsibility of a common carrier for the safety of
passengers as required in articles 1733 and 1755 cannot be dispensed
with or lessened by stipulation, by the posting of notices, by

-> In addition, by express provision of Article 1752, the presumption

of negligence still applies despite the presence of a limiting Article 1733. Common carriers, from the nature of their business and
stipulation.
for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of
Article 1752.  Even when there is an agreement limiting the liability of each case.

the common carrier in the vigilance over the goods, the common
carrier is disputably presumed to have been negligent in case of their Such extraordinary diligence in the vigilance over the goods is further
loss, destruction or deterioration.
expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set
forth in articles 1755 and 1756.

8.05 STIPULATIONS REDUCING DILIGENCE Article 1755.  A common carrier is bound to carry the passengers
-> Subject to Article 1744, Civil Code:
safely as far as human care and foresight can provide, using the
Article 1744.  A stipulation between the common carrier and the utmost diligence of very cautious persons, with a due regard for all the
shipper or owner limiting the liability of the former for the loss, circumstances.

destruction, or deterioration of the goods to a degree less than

extraordinary diligence shall be valid, provided it be:

8.06 STIPULATIONS FIXING THE LIMIT OF RECOVERY

(1) In writing, signed by the shipper or owner;
-> Article 1750, Civil Code:

Article 1750. A contract fixing the sum that may be recovered. by the
(2) Supported by a valuable consideration other than the service owner or shipper for the loss, destruction, or deterioration of the goods
rendered by the common carrier; and
is valid, if it is reasonable and just under the circumstances, and has
been fairly and freely agreed upon.

(3) Reasonable, just and not contrary to public policy.

-> PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE

-> Reduction of diligence not allowed for passenger ~ in accordance AIR LINES, INC., defendant and appellant. [G.R. No. L-20099. July 7,
with Article 1757, Civil Code:
1966] ~ This Court had laid down the rule that the carrier can not limit
its liability for injury to or loss of goods shipped where such injury or
loss was caused by its own negligence.

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Corpus Juris, volume 10, p. 154, says:
"Par. 197. cc.  Application and Extent of Rule  — (aa)  Negligence of
"Par. 194, 6.  Reasonableness of Limitations. — The validity of
stipulations limiting the carrier's liability is to be determined by their
reasonableness and their conformity to the sound public policy, in
accordance with which the obligations of the carrier to the public are
settled. It cannot lawfully stipulate for exemption from liability, unless
such exemption is just and reasonable, and unless the contract is
freely and fairly made. No contractual limitation is reasonable which is
subversive of public policy.
"Par. 195. 7. What Limitations of Liability Permissible. — a. Negligence
— (1) Rule in America — (a) In Absence of Organic or Statutory
Provisions Regulating Subject — aa. Majority Rule. — In the absence
of statute, it is settled by the weight of authority in the United States,
that whatever limitations against its common-law liability are
permissible to a carrier, it cannot limit its liability for injury to or loss of
goods shipped, where such injury or loss is caused by its own
negligence. This is the common law doctrine and it makes no
difference that there is no statutory prohibition against contracts of this
character.
"Par. 196. bb.  Considerations on which Rule Based. — The rule, it is
said, rests on considerations of public policy. The undertaking is to
carry the goods, and to relieve the shipper from all liability for loss or
damage arising from negligence in performing its contract is to ignore
the contract itself. The natural effect of a limitation of liability against
negligence is to induce want of care on the part of the carrier in the
performance of its duty. The shipper and the common carrier are not
on equal terms; the shipper must send his freight by the common
carrier, or not at all; he is therefore entirely at the mercy of the carrier
unless protected by the higher power of the law against being forced
into contracts limiting the carrier's liability. Such contracts are wanting
in the element of voluntary assent.
APPEALS and PHILIPPINE AIR LINES, INC., respondents. [G.R. No.
Reviewer
Servants. — The rule prohibiting limitation of liability for negligence is
often stated as a prohibition of any contract relieving the carrier from
loss or damage caused by its own negligence or misfeasance, or that
of its servants; and it has been specifically decided in many cases that
no contract limitation will relieve the carrier from responsibility for the
negligence, unskillfulness, or carelessness of its employer." (Cited in
Ysmael and Co. vs. Barreto, 51 Phil. 90, 98, 99)
-> Factors to consider:
> subject to Article 1751, Civil Code:
Article 1751.  The fact that the common carrier has no competitor
along the line or route, or a part thereof, to which the contract refers
shall be taken into consideration on the question of whether or not a
stipulation limiting the common carrier's liability is reasonable, just and
in consonance with public policy.
> PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE
AIR LINES, INC., defendant and appellant. [G.R. No. L-20099. July 7,
1966] ~ The requirements provided in Article 1750 of the New Civil
Code must be complied with before a common carrier can claim a
limitation of its pecuniary liability in case of loss, destruction or
deterioration of the goods it has undertaken to transport. 
> Article 1749.  A stipulation that the common carrier's liability is
limited to the value of the goods appearing in the bill of lading, unless
the shipper or owner declares a greater value, is binding.
> AGUSTINO B. ONG YIU, petitioner, vs. HONORABLE COURT OF
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L-40597 June 29, 1979] ~ As a general proposition, the plaintiff's
maleta having been pilfered while in the custody of the defendant, it is
presumed that the defendant had been negligent. The liability,
however, of PAL for the loss, in accordance with the stipulation written
on the back of the ticket, Exhibit 12, is limited to P100.00 per baggage,
plaintiff not having declared a greater value, and not having called the
attention of the defendant on its true value and paid the tariff therefor.
The validity of this stipulation is not questioned by the plaintiff. They
are printed in reasonably and fairly big letters, and are easily readable.
Moreover, plaintiff had been a frequent passenger of PAL from Cebu to
Butuan City and back, and he, being a lawyer and businessman, must
be fully aware of these conditions. 4
the absence of a shipper’s declaration of a higher value in the bill of
We agree with the foregoing finding. The pertinent Condition of
Carriage printed at the back of the plane ticket reads: 8. BAGGAGE
LIABILITY ... The total liability of the Carrier for lost or damaged
baggage of the passenger is LIMITED TO P100.00 for each ticket
unless a passenger declares a higher valuation in excess of P100.00,
but not in excess, however, of a total valuation of P1,000.00 and
additional charges are paid pursuant to Carrier's tariffs.
other currency, unless the nature and value of such goods have been
There is no dispute that petitioner did not declare any higher value for
his luggage, much less did he pay any additional transportation
charge.
8.07 RIOTS AND STRIKES
Article 1748. An agreement limiting the common carrier's liability for
delay on account of strikes or riots is valid.
Neither the carrier nor the ship shall be responsible in any event for
-> Implicit from this provision is the rule that the carrier is still liable
even if the delay is caused by strikes or riots. The provision does not
provide from escape from liability; it merely allows limitation of liability.
Reviewer
However, it is a usual provision in contracts that relieves the obligor of
liability if there is delay by reason of strikes or riots. It is believed that
this provision relieving liability of the carrier is valid provided that
extraordinary diligence is exercised in preventing or the aggravation of
damage or injury.
8.08 CARRIAGE OF GOODS BY SEA ACT
-> Applies suppletorily to the Civil Code if the goods are to be
shipped from a foreign port to the Philippines
-> Liability under COGS: Carrier’s liability is US$500 per package in
lading.
-> Section 4(5), COGSA:
(5) Neither the carrier nor the ship shall in any event be or become
liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package of
lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in
declared by the shipper before shipment and inserted in the bill of
lading. This declaration, if embodied in the bill of lading, shall be
prima facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and
the shipper another maximum amount than that mentioned in this
paragraph may be fixed: Provided, that such maximum shall not be
less than the figure above named. In no event shall the carrier be
liable for more than the amount of damage actually sustained.
loss damage to or in connection with the transportation of the goods
if the nature or value thereof has been knowingly and fraudulently
misstated by the shipper in the bill of lading.

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-> Meaning of package in COGSA:

9. BILL OF LADING AS RECEIPT
*EASTERN SHIPPING LINES, INC.,  petitioner,  vs. INTERMEDIATE
APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY I. RECEIPT

CORPORATION, respondents. [G.R. No. L-69044 May 29, 1987] ~

"When what would ordinarily be considered packages are shipped in - As comprehending all methods of transportation, a BOL may
a container supplied by the carrier and the number of such units is be defined as a written acknowledgement of the receipt of goods
disclosed in the shipping documents, each of those units and not the and an agreement to transport and to deliver them at a specified
container constitutes the 'package' referred to in the liability place to a person named or on his order.

limitation provision of Carriage of Goods by Sea Act.”

1. Other terms, “shipping receipts”, “forwarders receipts”, and

*BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and “receipts for transportation”.

JARDINE DAVIES TRANSPORT SERVICES, INC.,  petitioners,  vs.

PHILIPPINE FIRST INSURANCE CO., INC., respondents. [G.R. No. 2. (SC) the designation however is not material, and neither is
143133. June 5, 2002] ~ Considering, therefore, the ruling in Eastern the form of the instrument. If it contains an acknowledgement
Shipping Lines  and the fact that the Bill of Lading clearly disclosed by the carrier of the receipt of goods for transportation it is, in
the contents of the containers, the number of units, as well as the legal effect a BOL.

nature of the steel sheets, the four damaged coils should be

considered as the shipping unit subject to the US$500 limitation.
3. The issuance of a bill of lading carries the presumption that
the goods were delivered to the carrier issuing the bill, for
immediate shipment, and it is nowhere questioned that a bill
of lading is prima facie evidence of the receipt of the goods by
the carrier

8.09 WHEN LIMITING STIPULATIONS CANNOT BE INVOKED

-> Articles 1746 and 1747, Civil Code provides:

Article 1746. An agreement limiting the common carrier's liability may 10. BILL OF LADING AS DOCUMENT OF TITLE
be annulled by the shipper or owner if the common carrier refused to Bill of lading is a document of title under the Civil Code. It can be a
carry the goods unless the former agreed to such stipulation.
negotiable document of title.

Article 1747.  If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual route, 10.01 NEGOTIABILITY
the contract limiting the common carrier's liability cannot be availed of If the document of title contains the required words of
in case of the loss, destruction, or deterioration of the goods.
negotiability to make the instrument negotiable under Article
1507 of the NCC, the document remains to be negotiable
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even if the words “not negotiable” or non negotiable are (1) Such title to the goods as the person negotiating the document to
places thereon.
him had or had ability to convey to a purchaser in good faith for value
and also such title to the goods as the person to whose order the
Effect of Stamp or Notation “Non-Negotiable” the document goods were to be delivered by the terms of the document had or had
remains to be negotiable even if the words “not-negotiable” or ability to convey to a purchaser in good faith for value; and

“non-negotiable” are placed thereon. - Art. 1510 (Civil Code)

(2) The direct obligation of the bailee issuing the document to hold
10.02 HOW NEGOTIATED possession of the goods for him according to the terms of the
a. Bearer document- negotiated by delivery
document as fully as if such bailee had contracted directly with him. (n)

b. Order document- negotiated by indorsement of the specified

person so named

-*> Order document (Sec. 38, NIL and Art. 1509, NCC)

~ It can only be negotiated through the indorsement of the specified

person so named.

~ Such indorsement may be in blank, to bearer or to a specified

person.

~ Where a negotiable document of title is transferred for value by

delivery, and the endorsement of the transferor is essential for
negotiation, the transferee acquires a right against the transferor to
compel him to endorse the document. xxx (Art. 1515, Civil Code)

10.03 EFFECTS OF NEGOTIATION

-> Negotiation of the document has the effect of manual delivery so
as to constitute the transferee the owner of the goods.

- has the effect of manual delivery so as to constitute the transferee

the owner of the goods

- results in the transfer of ownership because transfer of document

likewise transfers control over the goods

- refer to Art. 1513, CC:

Article 1513.  A person to whom a negotiable document of title has

been duly negotiated acquires thereby:

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2. The same act that breaches the contract may also be tort

CHAPTER 6 - ACTIONS AND DAMAGES IN CASE OF BREACH
1. DISTINCTIONS
-> JOSE CANGCO, plaintiff-appellant, vs. MANILA RAILROAD
CO., defendant-appellee. [G.R. No. L-12191. October 14, 1918] ~ It
is important to note that the foundation of the legal liability of the
Note: The cause of action of a passenger or shipper against the
common carrier can be culpa contractual or culpa aquiliana while the
basis of liability on the part of the driver is either culpa delictual or
culpa aquiliana. The driver of the carrier is not liable based on
contract because there is NO PRIVITY of contract between him and
the passenger or shipper.

defendant is the contract of carriage, and that the obligation to

respond for the damage which plaintiff has suffered arises, if at all,
from the breach of that contract by reason of the failure of defendant
to exercise due care in its performance. That is to say, its liability is
direct and immediate, differing essentially, in legal viewpoint from that
presumptive responsibility for the negligence of its servants, imposed
by article 1903 of the Civil Code, which can be rebutted by proof of the
exercise of due care in their selection and supervision. Article 1903 of
the Civil Code is not applicable to obligations arising ex contractu, but
2.01 CONCURRENCE WITH THIRD PERSONS
If the negligence of third persons concurs with the breach, the liability
of the third person who was driving the vehicle and/or his employer
may be based on quasi delict. The driver alone may be held criminally
liable and civil liability may be imposed upon him based on delict. In
the latter case, the employer is subsidiarily liable.

only to extra-contractual obligations — or to use the technical form of

expression, that article relates only to culpa aquiliana and not to culpa Remember: It does not make any difference that the liability of one
contractual.
springs from the contract while that of the other arises from quasi-
delict. If the owner and driver of the other vehicle are not impleaded,
1.01 DISTINCTIONS BETWEEN CULPA CONTRACTUAL AND the carrier may implead them by filing a third party complaint.

CULPA AQUILIANA
In Culpa Contractual -> The source of its obligation is a contract,
there is no employee’s liability since there is no privity of a contract, 2.02 SOLIDARY LIABILITY
the defense of due diligence is not available and they shall be liable 1.Solidary liability

in the capacity of a contracting party.

In Culpa Aquiliana -> The source of its obligation is a quasi-delict, 1. In case the negligence of the carrier’s driver and a third
employee is solidarity liable with the employer, the defense of due person concurs, the liability of the parties – carrier and his
diligence in the selection and supervision of an employee is available driver, third person – is joint and several.

and they shall be liable in the capacity of an employer.

2.03 ALTERNATIVE COMPENSATION SCHEME

2. CONCURRENT CAUSES OF ACTIONS -> In order to provide the commuting public with an easier way of
1. There is one action but several causes of action
recovering damages for the injuries sustained due to the operation of
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common carriers, special laws provides for mandatory insurance SEC. 15.  Other Insurance Coverage.  - the MARINA shall have the
coverage for passengers and cargoes.
power to require every ship operator to obtain such other compulsory
-> Sections 14 & 15, Domestic Shipping Development Act of 2004:
insurance coverage necessary to adequately cover claims for
SEC. 14.  Compulsory Insurance Coverage for Passenger and damages.

Cargo.  - To meet its financial responsibility for any liability which a

domestic ship operator may incur for any breach of the contract of -> Sections 374-389, Compulsory Motor Vehicle Liability Insurance:

carriage, every domestic ship operator shall be required to submit

annually the following;
SECTION 374.       It shall be unlawful for any land transportation
operator or owner of a motor vehicle to operate the same in the public
(1) Adequate insurance coverage for each passenger in an amount to highways unless there is in force in relation thereto a policy of
be computer in accordance with existing laws, rules and regulations, insurance or guaranty in cash or surety bond issued in accordance w/
and the total amount of such coverage shall be equivalent to the total the provisions of this chapter to indemnify the death, bodily injury, &/or
number of passenger accommodations being offered by the vessel;
damage to property of a third‑party or passenger, as the case may be,
arising fr. the use thereof. (As amended by Presidential Decree No.
(2) Adequate insurance coverage for cargo in an amount to be 1455 & 1814)

computed in accordance with existing laws, rules and regulations, and

the total amount of such coverage shall be equivalent to the total SECTION 375.       The Commissioner shall furnish the Land
cargo capacity being offered by the vessel; and
Transportation Commissioner w/ a list of insurance companies
authorized to issue the policy of insurance or surety bond required by
(3) If a domestic ship operator should offer both passenger and cargo this chapter. (As amended by Presidential Decree No. 1814)

service, then the total insurance coverage shall be in the total sum
equivalent to that stipulated in paragraphs (1) and (2) of this section.
Provided, That if a domestic ship operator should operate more than
one (1) vessels, the amount of insurance coverage required under this
section, for purposes of providing financial capacity, shall be the
amount equivalent to the total number of passenger accommodations,
or total cargo capacity, or both, of the largest operating vessel which
the domestic ship operator may have: Provided, further, That the total
insurance coverage which may be required of any domestic ship
SECTION 376.       The Land Transportation Commission shall not
allow the registration or renewal of registration of any motor vehicle
without first requiring fr. the land transportation operator or motor
vehicle owner concerned the presentation & filing of a substantiating
documentation in a form approved by the Commissioner evidencing
that the policy of insurance or guaranty in cash or surety bond required
by this chapter is in effect. (As amended by Presidential Decree No.
1455)

operator shall not exceed the value of such vessel: Provided, finally,
that adequate insurance coverage shall be obtained from any duly SECTION 377.       Every land transportation operator & every owner of
licensed insurance company or international protection and indemnity a motor vehicle shall, before applying for the registration or renewal of
association.
registration of any motor vehicle, at his option, either secure an
insurance policy or surety bond issued by any insurance company
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authorized by the Commissioner or make a cash deposit in such (2)            In the case of an owner of a motor vehicle, the insurance or
amount as herein required as limit of liability for purposes specified in guaranty in cash or surety bond shall cover liability for death or injury
section three hundred seventy‑four.
to third parties in an amount not less than that set forth in the following
scale in any one accident:

(1)            In the case of a land transportation operator the insurance

guaranty in cash or surety bond shall cover liability for death or bodily I.              Private Cars

injuries of third‑parties &/or passengers arising out of the use of such

vehicle in the amount not less than twelve thousand pesos per (a)           Bantam   :               Twenty thousand pesos;

passenger or third party & an amount, for each of such categories, in

any one accident of not less than that set forth in the following scale —
(b)           Light       :               Twenty thousand pesos;

(a)            Motor vehicles w/ an authorized capacity of twenty‑six or (c)            Heavy     :               Thirty thousand pesos;

more passengers: Fifty thousand pesos;

II.            Other Private Vehicles

(b)           Motor vehicles w/ an authorized capacity of fr. twelve to

twenty‑five passengers: Forty thousand pesos;
(a)            Tricycles, motorcycles, & scooters  :  Twelve thousand pesos;

(c)            Motor vehicles w/ an authorized capacity of fr. six to eleven (b)           Vehicles w/ an unladen weight of 2,600 kilos or less : Twenty
passengers: Thirty thousand pesos;
thousand pesos;

(d)           Motor vehicles w/ an authorized capacity of five or less (c)            Vehicles w/ an unladen weight of between 2,601 kilos &
passengers: Five thousand pesos multiplied by the authorized 3,930 kilos : Thirty thousand pesos;

capacity.

(d)           Vehicles w/ an unladen weight over 3,930 kilos : Fifty

Provided, however, That such cash deposit made to, or surety bond thousand pesos.

posted w/, the Commissioner shall be resorted to by him in cases of

accidents the indemnities for w/c to third‑parties &/or passengers are The Commissioner may, if warranted, set forth schedule of indemnities
not settled accordingly by the land transportation operator &, in that for the payment of claims for death or bodily injuries w/ the coverages
event, the said cash deposit shall be replenished or such surety bond set forth herein. (As amended by Presidential Decree No. 1455 & 1814)

shall be restored w/ sixty days after impairment or expiry, as the case

may be, by such land transportation operator, otherwise, he shall SECTION 378.       Any claim for death or injury to any passenger or
secure the insurance policy required by this chapter. The aforesaid third party pursuant to the provisions of this chapter shall be paid
cash deposit may be invested by the Commissioner in readily without the necessity of proving fault or negligence of any kind;
marketable government bonds &/or securities.
Provided, That for purposes of this section —

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(a)            The total indemnity in respect of any person shall not exceed No insurance company may issue the policy of insurance or surety
five thousand pesos;
bond required under this chapter unless so authorized under existing
laws.

(ii)            The following proofs of loss, when submitted under oath,

shall be sufficient evidence to substantiate the claim:
The authority to engage in the casualty &/or surety lines of business of
an insurance company that refuses to issue or renew, without just
(a)            Police report of accident; &
cause, the insurance policy or surety bond therein required shall be
withdrawn immediately. (As amended by Presidential Decree No. 1455
(b)           Death certificate & evidence sufficient to establish the proper & 1814)

payee; or

SECTION 380.       No cancellation of the policy shall be valid unless

(c)            Medical report & evidence of medical or hospital written notice thereof is given to the land transportation operator or
disbursement in respect of w/c refund is claimed.
owner of the vehicle & to the Land Transportation Commission at least
fifteen days prior to the intended effective date thereof.

(iii)           Claim may be made against one motor vehicle only. In the
case of an occupant of a vehicle, claim shall lie against the insurer of
the vehicle in w/c the occupant is riding, mounting or dismounting fr..
In any other case, claim shall lie against the insurer of the directly
offending vehicle. In all cases, the right of the party paying the claim to
recover against the owner of the vehicle responsible for the accident
shall be maintained.
The same may be re‑issued only upon presentation of a new insurance
SECTION 379.       No land transportation operator or owner of motor
vehicle shall be unreasonably denied the policy of insurance or surety
bond required by this chapter by the insurance companies authorized
Upon receipt of such notice, the Land Transportation Commission,
unless it receives evidence of a new valid insurance or guaranty in
cash or surety bond as prescribed in this chapter, or an endorsement
of revival of the cancelled one, shall order the immediate confiscation
of the plates of the motor vehicle covered by such cancelled policy.
policy or that a guaranty in cash or surety band has been made or
posted w/ the Commissioner & w/c meets the requirements of this
chapter, or an endorsement or revival of the cancelled one. (As
amended by Presidential Decree No. 1455)

to issue the same, otherwise, the Land Transportation Commission

shall require fr. said land transportation operator or owner of the SECTION 381.       If the cancellation of the policy or surety bond is
vehicle, in lieu of a policy of insurance or surety bond, a certificate that contemplated by the land transportation operator or owner of the
a cash deposit has been made w/ the Commissioner in such amount vehicle, he shall, before the policy or surety bond ceases to be
required as limits of indemnity in section three hundred seventy‑seven effective, secure a similar policy of insurance or surety bond to replace
to answer for the passenger &/or third‑party liability of such land the policy or surety bond to be cancelled or make a cash deposit in
transportation operator or owner of the vehicle.
sufficient amount w/ the Commissioner & without any gap, file the
required documentation w/ the Land Transportation Commission, &
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notify the insurance company concerned of the cancellation of its provided in section three hundred seventy‑eight without prejudice to
policy or surety bond. (As amended by Presidential Decree No. 1455)
the claimant fr. pursuing his claim further, in w/c case, he shall not be
required or compelled by the insurance company to execute any quit
SECTION 382.       In case of change of ownership of a motor vehicle, claim or document releasing it fr. liability under the policy of insurance
or change of the engine of an insured vehicle, there shall be no need of or surety bond issued. (As amended by Presidential Decree No. 1455)

issuing a new policy until the next date of registration or renewal of

registration of such vehicle, & provided that the insurance company In case of any dispute in the enforcement of the provisions of any
shall agree to continue the policy, such change of ownership or such policy issued pursuant to this chapter, the adjudication of such dispute
change of the engine shall be indicated in a corresponding shall be within the original & exclusive jurisdiction of the Commissioner,
endorsement by the insurance company concerned, & a signed subject to the limitations provided in section four hundred sixteen.

duplicate of such endorsement shall, within a reasonable time, be filed

w/ the Land Transportation Commission.
SECTION 386.       It shall be unlawful for a land transportation
operator or owner of motor vehicle to require his or its drivers or other
SECTION 383.       In the settlement & payment of claims, the employees to contribute in the payment of premiums.

indemnity shall not be availed of by any accident victim or claimant as

an instrument of enrichment by reason of an accident, but as an
assistance or restitution insofar as can fairly be ascertained.
implementing the provisions of this chapter nor any official or
SECTION 384.       Any person having any claim upon the policy
issued pursuant to this Chapter shall, without any unnecessary delay,
present to the insurance company concerned a written notice of claim
SECTION 387.       No government office or agency having the duty of
employee thereof shall act as agent in procuring the insurance policy
or surety bond provided for herein. The commission of an agent
procuring the said policy or bond shall in no case exceed ten per
centum of the amount of the premiums therefor.

setting forth the nature, extent & duration of the injuries sustained as
certified by a duly licensed physician. Notice of claim must be filed
within six months fr. date of accident, otherwise, the claim shall be
deemed waived. Action or suit for recovery of damage due to loss or
injury must be brought, in proper cases, w/ the Commissioner or the
Courts within one year fr. denial of the claim, otherwise, the claimant’s
right of action shall prescribe. (As amended by Presidential Decree
1814 & Batasang Pambansa Blg. 874)
a sufficient cause for the revocation of the certificate of public
SECTION 385.       The insurance company concerned shall forthwith
SECTION 388.       Any land transportation operator or owner of motor
vehicle or any other person violating any of the provisions of the
preceding sections shall be punished by a fine of not less than five
hundred pesos but not more than one thousand pesos &/or
imprisonment for not more than six months. The violation of section
three hundred seventy‑seven by a land transportation operator shall be
convenience issued by the Board of Transportation covering the
vehicle concerned.

ascertain the truth & extent of the claim & make payment within five
working days after reaching an agreement. If no agreement is reached, SECTION 389.       Whenever any violation of the provisions of this
the insurance company shall pay only the “no‑fault” indemnity chapter is committed by a corporation or association, or by a
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government office or entity, the executive officer or officers of said b. if damage is not apparent, claim should be filled within 3 days from
corporation, association or government office or entity who shall have delivery.

knowingly permitted, or failed to prevent, said violation shall be held

liable as principals.
Filing of claim is not a condition precedent, but an action must be
filed against the carrier within a period of 1 year from discharge; if
there is no delivery, the one-year period starts to run from the day the
vessel left port (in case of undelivered or lost cargo), or from delivery
to the arrastre (in case of damaged cargo).

3. ELEMENTS OF CAUSE OF ACTION AGAINST THE CARRIER

4. RECOVERABLE DAMAGES

1. Inter-island - if goods arrived in damaged condition (Art. 366):

a. If damage is apparent, the shipper must file a claim immediately (it

may be oral or written);

b. If damage is not apparent, he should file a claim within 24 hours

from delivery.

The filing of claim under either (1) or (2) is a condition precedent for
recovery. If the claim is filed, but the carrier refuses to pay: enforce
carrier’s liability in

court by filing a case:

a. within 6 year, if no bill of lading has been issued;

or b. within 10 years, if a bill of lading has been
issued.

1.Overseas –where goods arrived in a damaged condition from a

foreign port to a Philippine port of entry: (COGSA)

a. upon discharge of goods, if the damage is apparent, claim should

be filled immediately;

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Where there was delivery to the wrong person, the prescriptive period 1. only for the pecuniary loss suffered by him as he has duly
is 10 years because there is a violation of contract, and the carriage proved

of goods by sea act does not apply to misdelivery. (Ang v. American

SS Agencies (19 SCRA 631) 2. not only the value of the loss suffered, but also that of the
profits which the obligee failed to obtain

4.01 EXTENT OF RECOVERY Damages may be recovered: Art. 2205 (Civil Code)

Carrier in good faith – is liable only to pay for the damages that are
the natural and probable consequences of the breach of the 1.For loss or impairment of earning capacity in cases of temporary or
obligation and which the parties have foreseen or could have permanent personal injury;

reasonably foreseen at the time the obligation was constituted.

2.For injury to the plaintiff’s business standing or commercial credit.

Carrier in bad faith or guilty of gross negligence – liable for all

damages, whether the same can be foreseen or not. Those which > Damages cannot be presumed. The burden of proof rests on the
may be reasonably attributed to the non-performance of the plaintiff who is claiming actual damages against the carrier.

obligation.

1. In case of goods – the plaintiff is entitled to their value at the

Note: The carrier who may be compelled to pay has the right of time of destruction. The award is the sum of money which
recourse against the employee who committed the negligent, willful or plaintiff would have to pay in the market for identical or
fraudulent act.
essentially similar goods

2. For personal injury and even death – the claimant is entitled to

4.02 KINDS OF DAMAGES all medical expenses as well as other reasonable expenses that
Article 2216 provides that no proof of pecuniary loss is necessary in he incurred to treat his or her relative’s injuries.

order that moral, nominal, temperate, liquidated or exemplary

damages may be adjudicated. The assessment of such damages,
except liquidated ones, is left to the discretion of the court, according
to the circumstances of each case. However, proof of pecuniary loss is
necessary if actual or compensatory damages are being claimed.
5.01 KINDS OF ACTUAL DAMAGES

1. the loss of what a person already possesses (daňo emergente);

5. ACTUAL OR COMPENSATORY DAMAGES 2. the failure to receive as a benefit that would have pertained to
him (lucro cesante).

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b. Net earnings – based on the gross income of the victim minus
the necessary incidental living expenses which the victim would
5.02 PROOF have incurred if he were alive.

1. It should be proven: cannot be decided based on the c. Amount of living expenses must be established. In the absence of
consideration of the judge; not to be based on the perception, proof, it is fixed at fifty (50%) of the gross income.

observation and consideration of the judge

d. Rules on loss of earning apply when the breach of the carrier
resulted in the plaintiff’s permanent incapacity.

2. With respect to restorative medical procedure: to be entitled to

actual damage, you need to have an EXPERT TESTIMONY.
Without such, you cannot recover.

6. ATTORNEY’S FEES
> refer to Art. 2208 of the Civil Code

5.03 DAMAGES IN CASE OF DEATH -> attorney’s fees may be awarded in an action for breach of contract
In case of death – the plaintiff is entitled to the amount that he spent of carriage under par. 1,2,4,5,10 and 11 of Art. 2208.

during the wake and funeral of the deceased. But, expenses after the > If awarded exemplary, one is entitled to attorney’s fees

burial are not compensable.

1.Read Art. 2206 (Civil Code):

2. 2 kinds: ordinary (compensation to the lawyer); extraordinary
a. death caused by a crime or quasi-delict shall be at least (indemnity as a form of damages suffered due to the breach
P3,000; [The amount of fixed damages is now P50,000.00]
of contract)

b. the defendant shall be liable for the loss of the earning

capacity of the deceased;
3. You can be awarded if you show that you were forced to
c. If deceased is obliged to give support, recipient may litigate and when you are entitled to exemplary damage.

demand support from the person causing the death for a

period not exceeding five years
4. But this award is subject to the discretion of the court (you
d. Spouse, legitimate and illegitimate descendant and cannot dictate – usually 10%-15%)

descendants may demand moral damages for mental

anguish by reason of the death of the deceased

7. INTERESTS
2) Loss of earning capacity a. 12% per annum – if it constitutes a loan or forbearance of money

b. 6% per annum – if it does not constitute loan or forbearance of

Net Earning Capacity = Life Expectancy x [Gross Annual Income less money

Necessary Living Expenses]

c. 12% - for final judgment

a. Life expectancy – (2/3 x 80 – age at death)

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Note: No interest, however, shall be adjudged on unliquidated claims
for damages except when or until the demand can be established with 8.02 WHEN MORAL DAMAGES WERE AWARDED
reasonably certainty, the interest shall begin to run form the time the Moral damages may be awarded if the contractual negligence is
claim is made judicially or extrajudicially.
considered gross negligence.

> Subject to three conditions in transportation law:

1. Death

8. MORAL DAMAGES
> Includes physical suffering, mental anguish, fright, serious anxiety, 1. Malice or bad faith (must be done in the performance of
besmirched reputation, wounded feelings, moral shock, social the contract of carriage)

humiliation and similar injury.

2. Physical Injuries

> Though incapable of pecuniary computation, moral damages may

be recovered if they were the proximate result of the defendant’s
wrongful act or omission.
8.03 CASES WHEN THERE IS NO AWARDED MORAL DAMAGES
> Moral damages are not awarded to punish the defendant but to Generally, no moral damages may be awarded where the breach of
compensate the victim
contract is not malicious.

> May be recovered when there is death or there is malice or bad

faith. (in transportation of passengers)
8.04 SPECIFIC CASES WHEN RECOVERABLE
> Refer to Art. 2219 and 2220 (enumerates cases when moral Article 2219.  Moral damages may be recovered in the following and
damages may be awarded)
analogous cases:

8.01 REQUISITES (1) A criminal offense resulting in physical injuries;

Requisites:

1. There must be an injury, whether physical, mental or

(2) Quasi-delicts causing physical injuries;

psychological, clearly sustained by the claimant

(3) Seduction, abduction, rape, or other lascivious acts;

1. There must be a culpable act or omission factually (4) Adultery or concubinage;

established

2. The wrongful act or omission of the defendant is the

(5) Illegal or arbitrary detention or arrest;

proximate cause of the injury sustained by the claimant

(6) Illegal search;

1. The award of damages is predicated on any of the

cases stated in Art. 2219.
(7) Libel, slander or any other form of defamation;

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(8) Malicious prosecution;
1. Official, political, social and financial standing of the
offended party and the business and financial position
(9) Acts mentioned in article 309;
of

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, the offender affect the amount of damages

34, and 35.

1. The age of the claimant.

The parents of the female seduced, abducted, raped, or abused,

referred to in No. 3 of this article, may also recover moral damages.
9. NOMINAL DAMAGES
> Refer to Art. 2221-2223 (Civil Code)

The spouse, descendants, ascendants, and brothers and sisters may
bring the action mentioned in No. 9 of this article, in the order named.
the plaintiff, which has been violated or invaded by the defendant, may
Article 2220.  Willful injury to property may be a legal ground for
Article 2221. Nominal damages are adjudicated in order that a right of
be vindicated or recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him.

awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule applies to Article 2222.  The court may award nominal damages in every
breaches of contract where the defendant acted fraudulently or in bad obligation arising from any source enumerated in article 1157, or in
faith.
every case where any property right has been invaded.

Article 2223.  The adjudication of nominal damages shall preclude

further contest upon the right involved and all accessory questions, as
8.05 FACTORS TO CONSIDER between the parties to the suit, or their respective heirs and assigns.

1. Factors to consider that could affect the amount to be

recovered:
> It is adjudicated in order that the right of plaintiff may be vindicated
2. The extent of humiliation may also determine the or recognized, and not for the purpose of indemnifying the plaintiff for
amount
any loss suffered by him.

of moral damages that can be awarded

> The assessment of nominal damages is left to the discretion of the
1. The extent of pain and suffering likewise determines the
court according to the circumstances of the case.

award
> The award of nominal damages is also justified in the absence of
competent proof of the specific amounts of actual damages suffered.

> Cannot co-exist with actual damages.

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> There is no loss in nominal damages, unlike in actual and temperate
damages, loss is present which is proven and not proven but rather
ascertained by the court, respectively.
unconscionable.
Reviewer
Article 2227.  Liquidated damages, whether intended as an indemnity
or a penalty, shall be equitably reduced if they are iniquitous or

Article 2228.  When the breach of the contract committed by the

Case: Japan Airlines vs. CA defendant is not the one contemplated by the parties in agreeing upon
the liquidated damages, the law shall determine the measure of
1. The award of moral damages was justified because JAL failed damages, and not the stipulation.

to make necessary arrangement to transport the plaintiffs on

the first available connecting flight to Manila.

2. Only Nominal damages were awarded in the absence of proof 12. EXEMPLARY OF CORRECTIVE DAMAGES
of actual damages
3. Requisites for the award of exemplary damages:

1. They may be imposed by way of example in addition to

compensatory damages, and only after the claimant’s right to
10. TEMPERATE OR MODERATE DAMAGES them has been established.

Article 2224.  Temperate or moderate damages, which are more than

nominal but less than compensatory damages, may be recovered 2. They cannot be recovered as a matter of right, their
when the court finds that some pecuniary loss has been suffered but determination depending upon the amount of compensatory
its amount can not, from the nature of the case, be provided with damages that may be awarded to the claimant.

certainty.

3. The act must be accompanied by bad faith or done in wanton,

Article 2225.  Temperate damages must be reasonable under the fraudulent, oppressive or malevolent manner.

circumstances.

Note: If gross negligence warrants the award of exemplary damages,

with more reason is its imposition justified when the act performed is
deliberate, malicious and tainted with bad faith. The rationale behind
exemplary or corrective damage is to provide an example or correction
from public good.

11. LIQUIDATED DAMAGES

Article 2226.  Liquidated damages are those agreed upon by the Article 2229.  Exemplary or corrective damages are imposed, by way
parties to a contract, to be paid in case of breach thereof.
of example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages.

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Article 2230. In criminal offenses, exemplary damages as a part of the 1. The inference of bad faith is there; it may be drawn from the
civil liability may be imposed when the crime was committed with one facts and circumstances set forth therein. The contract was
or more aggravating circumstances. Such damages are separate and averred to establish the relation between the parties.

distinct from fines and shall be paid to the offended party.

2. Deficiency in the complaint in stating that there was bad faith, if

Article 2231.  In quasi-delicts, exemplary damages may be granted if any, was cured by the evidence.

the defendant acted with gross negligence.

Case: Philippine Airlines Inc. vs. CA

Article 2232.  In contracts and quasi-contracts, the court may award
exemplary damages if the defendant acted in a wanton, fraudulent, 1. Moral damages are recoverable in a breach of contract of
reckless, oppressive, or malevolent manner.
carriage where the air carrier thought its agents acted
fraudulently or in bad faith.

Article 2233. Exemplary damages cannot be recovered as a matter of

right; the court will decide whether or not they should be adjudicated.
2. The contract of air carriage generates a relation attended
with a public duty. Neglect or malfeasance of the carrier’s
Article 2234. While the amount of the exemplary damages need not be employees naturally could give ground for an action for
proved, the plaintiff must show that he is entitled to moral, temperate damages.
or compensatory damages before the court may consider the question
of whether or not exemplary damages should be awarded. In case
liquidated damages have been agreed upon, although no proof of loss
is necessary in order that such liquidated damages may be recovered,
nevertheless, before the court may consider the question of granting
exemplary in addition to the liquidated damages, the plaintiff must
show that he would be entitled to moral, temperate or compensatory
damages were it not for the stipulation for liquidated damages.

Article 2235.  A stipulation whereby exemplary damages are

renounced in advance shall be null and void.

Case: Air France vs. Rafael Carrascoso and CA