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Transportation Law Cruz v. Sun Holidays, Inc., (2010). Art.

Holidays, Inc., (2010). Art. 1732, CC defining "common (b) Standard diligence required of the carrier; and
carriers" has deliberately refrained from making distinctions on (c) Burden of proof applicable to the case
whether the carrying of persons or goods is the carrier’s principal
I. Introduction
business, whether it is offered on a regular basis, or whether it is Loadmaster Customs Services v. Glodel Brokerage Corp., (2011).
offered to the general public. From the nature of their business One engaged in the business of transporting goods by land,
1. Governing Laws and public policy, common carriers are bound to observe through its trucking service, is a common carrier, as distinguished
extraordinary diligence for the safety of the passengers from agreement and it does not hold itself out to carry out goods
(a) Art. 1732 to 1763, CC transported by them according to all the circumstances of each for the general public. Also, a customs broker where the
(b) Sec. 349-379, 573 to 736 and 806-869, Code of Commerce case. transportation of goods is an integral part of its business is also
regarded as a common carrier.
 In case of conflict between the two (2) sets of laws, the Civil Crisostomo v. CA, (2003). Travel Agent Not a Common Carrier -
Code, being the later law, generally prevails. By definition, a contract of carriage or transportation is one Loadstar Shipping Co. v. Pioneer Asia Insurance, (2006). Where a
 There are special laws that also govern particular cases such whereby a certain person or association of persons obligate company is engaged in the business of transporting cargo by
as: themselves to transport persons, things, or news from one place water and for compensation, offering its services indiscriminately
to another for a fixed price. Such person or association of persons to the public, it is, without doubt, a common carrier. The voyage-
(a) Public Service Act are regarded as carriers and are classified as private or special charter agreement in this case did not in any way convert the
(b) COGSA carriers and common or public carriers. common carrier into a private carrier. We have already resolved
(c) Land Transportation and Traffic Code this issue with finality in Planters Products, Inc. v. CA where we
A travel agent is not a common carrier since he does not ruled that:
2. Concept of “Common Carrier” undertake to transport a person from one place to another, but
simply to make travel arrangements in their behalf, which “A public carrier shall remain as such, notwithstanding the charter
Art. 1732. Common carriers are persons, corporations, firms or includes the procuring of tickets and facilitating travel permits or of the whole or portion of a vessel by one or more persons,
associations engaged in the business of carrying or transporting visas as well as booking customers for tours. A travel agent is provided the charter is limited to the ship only, as in the case of a
passengers or goods or both, by land, water, or air, for bound to observe the due diligence of a good father of a family time-charter or voyage-charter. It is only when the charter
compensation, offering their services to the public. and not the extraordinary diligence imposed on common carriers. includes both the vessel and its crew, as in a bareboat or demise
that a common carrier becomes private, at least insofar as the
Caltex (Phil.), Inc. v. Sulpicio Lines, Inc., (1999). A common carrier First Phil. Industrial v. CA, (1998). The test for determining particular voyage covering the charter-party is concerned.
is a person or corporation who may choose to employ and to whether a party is a common carrier of goods is: Indubitably, a shipowner in a time or voyage charter retains
remunerate him. possession and control of the ship, although her holds may, for
(1) He must be engaged in the business of carrying goods for the moment, be the property of the charterer.”
First Philippine Industrial Corp. v. CA, (1998). A common carrier is others as a public employment, and must hold himself out as
one who holds himself out to the public as engaged in the ready to engage in the transportation of goods for person PHILAMGEN v. PKS Shipping Co., (2003). Common Carrier as
business of transporting persons or property from place to place, generally as a business and not as a casual occupation; Public Service – The definition of “common carrier” can best be
for compensation, offering his services to the public generally. (2) He must undertake to carry goods of the kind to which his shown by looking at the provision of Art. 1732, CC and Sec. 13(b)
business is confined; of the Public Service Act.
Perena v. Zarate, (2012), BERSAMIN. A carrier is a person or (3) He must undertake to carry by the method by which his
corporation who undertakes to transport or convey goods or business is conducted and over his established roads; and Much of the distinction between a "common or public carrier"
persons from one place to another, gratuitously or for hire. (4) The transportation must be for hire. and a "private or special carrier" lies in the character of the
business, such that if the undertaking is an isolated transaction,
The true test for a common carrier is not the quantity or extent of An entity engaged in carrying of petroleum products over its not a part of the business or occupation, and the carrier does not
the business actually transacted, or the number and character of pipeline network for hire as a public employment is deemed to be hold itself out to carry the goods for the general public or to a
the conveyances used in the activity, but whether the undertaking a common carrier, because it undertakes to carry for all persons limited clientele, although involving the carriage of goods for a
is a part of the activity engaged in by the carrier that he has held indifferently, that is, to all persons who choose to employ its fee,3 the person or corporation providing such service could very
out to the general public as his business or occupation. services, and transports the goods by land and for compensation. well be just a private carrier. The fact that a person or corporation
The fact that it has limited clientele does not exclude it from the engaged itself in the business of carrying of goods for others,
Despite catering to a limited clientèle, the Pereñas operated as a definition of a common carrier. although for a limited clientele, undertaking to carry such for a
common carrier because they held themselves out as a ready fee, then the regularity of its activities indicates more than just
transportation indiscriminately to the students of a particular (a) Common Carrier v. Private Carrier casual activity on its part, and make it a common carrier.
school living within or near where they operated the service and
for a fee. As such, there were bound to observe extraordinary NASECO v. CA, (1997). At the outset, it is essential to establish Neither can the concept of a common carrier change merely
diligence in the vigilance over the goods and for the safety of the whether the contract of carriage was entered into as a common because individual contracts are executed or entered into with
passengers transported by them, according to all the carrier or as a private carrier, since the resolution of this patrons of the carrier. Such restrictive interpretation would make
circumstances of each case. preliminary question determines: it easy for a common carrier to escape liability by the simple
expedient of entering into those distinct agreements with clients.
(a) The law applicable to the case;
Asia Lighterage v. CA, (2003). Petitioner is clearly a common who offers the services to the “general public” or a narrow carrier regardless if it owns the vehicle used or has to hire
carrier because its principal business is that of lighterage, offering segment of the general population. Therefore, one who “back- one. The fact of loss of the cargo therefore made Schmitz
its barges to the public for carrying or transporting goods by water hauled” goods for other merchants from Manila to Pangasinan, liable to the consignee
for compensation, done on an irregular rather than scheduled even when such activity was only periodical or occasional and was 2. Consignee’s claim against TVI cannot be based on the breach
manner, albeit with an old limited clientele. A common carrier not its principal line of business would be subject to the of contract of carriage. While TVI acted as private carrier for
need not have fixed and publicly known routes, nor does it have responsibilities and obligations of a common carrier. Schmitz, for which it was under no duty to observe
to maintain terminals or issue tickets. extraordinary diligence, it was still required to observe
Malayan Insurance Co. v. Phil. First Insurance Co., (2012). A ordinary diligence to ensure the proper and careful handling,
NASECO v. CA, (1997). The true nature of a common carrier is the common carrier becomes a private carrier when it undertakes to care and discharge of the carried goods.
carriage of passengers or goods, provided it has space, for all who carry a special cargo or chartered to a special person only. In such 3. The gross negligence of TVI is discharging the cargo outside
opt to avail themselves of its transportation service for a fee. A case, the Civil Code provisions on common carriers should not be of the breakwaters under a storm signal constituted
carrier which does not qualify under the above test is deemed a applied where the carrier is not acting as such but as a private negligence for which it can be held liable to consignee
private carrier. “Generally, private carriage, such as the rendering carrier.
of tramping service, is undertaken by special agreement and the A.F. Sanchez Brokerage v. CA, (2005)
carrier does not hold himself out to carry goods for the general Mindanao Terminal and Brokerage Services v. Phoenix
public. The most typical, although not the only form of private Assurance Co. of New York, (2009). Stevedoring Not a Common Facts:
carriage, is the charter party, a maritime contract by which the Carrier – Mindanao Terminal, a stevedoring company which was
charterer, a party other than the shipowner, obtains the use and charged with the loading and stowing the cargoes, does not 1. Brokerage firm was engaged as customs broker but with
service of all or some part of a ship for a period of time or a operate a business that is classified as a common carrier. duties to pay the customs duties, taxes and storage fees for
voyage or voyages." Consequently, it had duly exercised the required degree of the cargo and to deliver the merchandise to the client’s
diligence in loading and stowing the cargoes, which is the ordinary premises.
In private carriage, the rights and obligations of parties, including diligence of a good father of a family. There is no specific 2. Evidence showed that the merchandise was in good
liabilities for damage to cargo, are determined primarily by provision of law that imposes a higher degree of diligence than condition when delivered to the brokerage firm at the NAIA,
stipulations in their contract of carriage or charter party. In such ordinary diligence for a stevedoring company or one who is but were damaged when delivered to the client.
case, the burden of proof is on the other party to show that the charged only with the loading and stowing of cargoes. 3. Brokerage firm contends that it was the defect in the
private carrier was responsible for the loss of, or injury to, the packaging of the merchandise which it raised at the NAIA
cargo. (b) Customs Broker as Common Carrier that was the main cause for the damage, and therefore its
negligence cannot be presumed, and was not liable for the
CLV: SC decision was more in conformity with the findings of both Schmitz Transport v. Transport Venture, Inc., (2005) obligations of a common carrier
lower court and CA that petitioner was a private carrier and is not
in agreement with bulk of SC Decision on the matter. Facts: Issue: WON the Brokerage firm may be held liable as a common
carrier
Planters Products v. CA, (1993). When carrier in the ordinary 1. Schmitz Transport, as custom broker, undertook to transport
course of business transports goods as a common carrier and the cargoes from vessel’s shipside to consignee’s warehouse Held:
thereby bound by law to observe extraordinary diligence, the at Cainta.
entering into charter party, where the ship captain, its officers and 2. It then retained TVI to send a barge and tugboat at shipside. 1. Brokerage firm is also considered a common carrier, and for
compliment are under the employ of shipowner and therefore 3. The operation was done outside of the breakwaters and which the delivery of the merchandise in bad condition
continues to be under its direct supervision and control, does not while a storm signal was raised, and cargo was lost due to raises the presumption of negligence.
transform carrier into private carrier for such purpose. This is the rough waves. 2. Art. 1732 does not distinguish between one whose principal
because the charterer, a stranger to the crew and to the ship, business activity is the carrying of goods and one who does
cannot be charged with duty to care for his cargo when charterer Issue: such carrying only as an ancillary activity.
does not have any control of the means of doing so. 3. The rule is that if the improper packing is known to the
(1) WON Schmitz can be liable for the obligations of a carrier, carrier or his employees or is apparent upon ordinary
A common carrier shall remain as such, notwithstanding the and that any negligence committed by it was deemed the observation, but the common carrier nevertheless accepts
charter of the whole or portion of a vessel, provided the charter is negligence of its principal the same without protest or exception, he is not relieved of
limited to the ship only, as in the case of time charter or voyage (2) WON TVI’s contract was with Schmitz and had no contract liability for the resulting damage.
charter. It is only when the charter includes both the vessel and its of carriage with the consignee, and therefore cannot be
crew, as in a bareboat or demise charter, that a common carrier liable to the consignee Calvo v. UCPB General Insurance Co. Inc., (2002). When
becomes private, at least insofar as the particular voyage covering transportation of goods is an integral part of a customs broker’s
the charter party is concerned. Held: functions, it is also a common carrier, for to declare otherwise
would be to deprive those with whom it contracts the protection
De Guzman v. CA, (1998). Art. 1732, CC makes no distinction 1. Schmitz is liable as a common carrier. As long as a person which the law affords them notwithstanding the fact that the
between one whose principal business activity is the carrying of holds itself to the public for the purpose of transporting obligation to carry goods for its customers, is part and parcel of its
persons or goods or both, and one who does such carrying only as goods as a business, it is already considered a common business.
an ancillary activity, nor does it make distinctions between one
Singapore Airlines Ltd. v. Fernandez, (2003). The contract of air goods have been lodged for shipment. The responsibility of two or
(c) Lack of Certificate of Public Convenience carriage is a peculiar one. Imbued with public interest, the law more persons who are liable for a quasi-delict is solidary.
requires common carriers to carry the passengers safely as far as
Loadstar Shipping v. CA, (1999). A certificate of public human care and foresight can provide, using the utmost diligence Whenever an employee’s negligence causes damage or injury to
convenience is not a requisite for the incurring of liability under of very cautious persons with due regard for all the circumstances. another, there instantly arises a presumption juris tantum that the
the Civil Code provisions governing common carriers. That liability In an action for breach of contract of carriage, the aggrieved party employer failed to exercise diligentissimi patris families in the
arises the moment a person or firm acts as a common carrier, does not have to prove that the common carrier was at fault or selection (culpa in eligiendo) or supervision (culpa in vigilando) of
without regard to whether or not such carrier has also complied was negligent. All that is necessary to prove is the existence of the its employees.
with the requirements of the applicable regulatory statute and contract and the fact of its non-performance by the carrier.
implementing regulations and has been granted a certificate of (b) Defenses Available to the Common Carrier
public convenience or other franchise. Delsan Transport Lines v. CA, (2001). From the nature of their
business and for reasons of public policy, common carriers are Lea Mer Industries, Inc. v. Malayan Insurance, (2005). This
(d) Liability of the Registered Owner of Motor Vehicle bound to observe extraordinary diligence in the vigilance over the presumption can be rebutted only by proof that:
goods and for the safety of passengers transported by them,
Villanueva v. Domingo, (2004). The registered owner of any according to all the circumstance of each case. In the event of (1) They observed extraordinary diligence, or
vehicle is directly and primarily responsible to the public and third loss, destruction or deterioration of the insured goods, common (2) That the loss or damage was occasioned by any of the
persons while it is being operated; and whether the driver is carriers shall be responsible unless the same is brought about, following causes:
authorized or not by the actual owner is irrelevant to determining among others, by flood, storm, earthquake, lightning or other
the liability of the registered owner whom the law holds primarily natural disaster or calamity. In all other cases, if the goods are (a) Flood, storm, earthquake, lightning, or other natural disaster
and directly responsible for any accident, injury or death caused lost, destroyed or deteriorated, common carriers are presumed to or calamity;
by the operation of the vehicle in the streets and highways. The have been at fault or to have acted negligently, unless they prove (b) Act of the public enemy in war, whether international or
main purpose of vehicle registration is the easy identification of that they observed extraordinary diligence. civil;
the owner who can be held responsible for any accident, damage (c) Act or omission of the shipper or owner of the goods;
or injury caused by the vehicle. Loadstar Shipping v. CA, (1999). The business of a common (d) The character of the goods or defects in the packing or in the
carrier impinges directly and intimately upon the safety and well- containers;
Equitable Leasing Corp. v. Suyong, (2002). Registered Owner of being and property of those members of the general community (e) Order or act of competent public authority.
Vehicle Liable for the Death and Injuries – Regardless of sale of who happen to deal with such carrier. The law imposes duties and
motor vehicle, the registered owner is the lawful operator insofar liabilities upon common carriers for the safety and protection of 4. Distinctions in Carriages of Cargo and Passengers
as he public and third persons are concerned. In contemplation of those who utilize their services and the law cannot allow a
law, the owner operator of record is the employer of the driver, common carrier to render such duties and liabilities merely  Although the Civil Code and Code of Commerce in contracts
the actual operator and employer being considered as merely its facultative by simply failing to obtain the necessary permits and of carriage are concerned with the same cause of action,
agent. authorizations. particularly culpa contractual, nevertheless, both Codes
provide for clear-cut divisions between contracts of carriage
3. Nature of Business and Degree of Diligence of Common (a) Degree of Diligence Required; Presumption of Fault of cargo and contracts of carriage of passengers, because
Carriers the rights and defenses in each kind of contract are different
Victory Liner, Inc. v. Gammad, (2004). In a contract of carriage, it from the other
China Airlines v. Chiok, (2003). The business of common carriers is presumed that the common carrier was at fault/negligent when  There are also special rules that pertain to air
is imbued with public interest and duty, and the law governing a passenger dies or is injured. Unless presumption is rebutted, the transportation.
them imposes an exacting standard. courts need not even make an express finding at fault or
negligence on the part of the common carrier.
II. Contract of Carriage of Passengers
Japan Airlines v. Simangan, (2008). In an action for breach of
contract of carriage, all that is required of plaintiff is to prove the Lea Mer Industries, Inc. v. Malayan Insurance Co. Inc., (2005).
Extraordinary diligence requires rendering service with the 1. Nature of Contract of Carriage of Passengers
existence of such contract and its non-performance by the carrier
through the latter’s failure to carry the passenger safely to his greatest skill and foresight to avoid damage and destruction to the
destination. goods entrusted for carriage and delivery. Common carriers are Baritua v. Mercader, (2001). A common carrier, from the nature
presumed to have been at fault or to have acted negligently for of its business and for reasons of public policy, is bound to
Northwest Airlines, Inc. v. Chiong, (2008). Although initially, the loss of or damage to the goods that they have transported. observe extraordinary diligence for the safety of the passenger it
burden of proof was with the passenger to prove that there was a transports.
breach of contract of carriage, the burden of evidence shifted to Loadmaster Customs Services v. Glodel Brokerage Corp., (2011).
the airline when the former adduced sufficient evidence to prove Extraordinary diligence is that extreme measure of care and LRTA v. Navidad, (2003). The law requires common carriers to
the facts he had alleged – at that point, the airline had the burden caution which persons of unusual prudence and circumspection carry passengers safely using the utmost diligence of very cautious
of going forward to controvert (passenger’s) prima facie case, the observe for securing and preserving their own property or rights. persons with due regard for all circumstances. In case of death or
burden of evidence to establish its claim. This exacting standard imposed on common carriers in a contract injury to a passenger, a common carrier is presumed to have been
of carriage of goods is intended to tilt the scales in favor of the at fault or negligent.
shipper who is at the mercy of the common carrier once the
Northwest Airlines v. Catapang, (2009). Passengers have the right Illustration:  The case will be entitled “Passenger Z v. X, Inc. and Driver Y”
to be treated by a carrier’s employees with kindness, respect, and the defendants will be solidarily liable as joint
courtesy and due consideration. They are entitled to be protected X, Inc. – public utility company tortfeasors
against personal misconduct, injurious language, indignities and Y – bus driver, recklessly driving
abuses from such employees. So it is that any discourteous Z – passenger injured. Tiu v. Arriesgado, (2004). In case of injury to a passenger due to
conduct on the part of these employees toward a passenger gives the negligence of the driver of the bus on which he was riding and
the latter an action for damages against the carrier. Z as injured passenger can avail of any of three (3) causes of of the driver of another vehicle, both drivers as well as the owners
action: of the two vehicles are jointly and severally liable.
Japan Airlines v. CA, (1998). A contract to transport passengers is
quite different in kind, and degree from any other contractual (a) Culpa contractual – negligence based on contract; (c) Culpa Criminal
relation. It is safe to conclude that it is a relationship imbued with (b) Culpa aquilina – negligence based on tort;
public interest. Failure on the part of the common carrier to live (c) Culpa criminal – negligence based on a crime  The driver’s act may amount to a crime: reckless imprudence
up to the exacting standards of care and diligence renders it liable resulting in physical injuries.
for any damages that may be sustained by its passengers. (a) Culpa Contractual  The case will be entitled “People v. Driver Y”, and if the
However, this is not to say that common carriers are absolutely latter is convicted but is insolvent, an action can be pursued
responsible for all injuries or damages even if the same were  In the contract of carriage of passengers, it is the obligation by Passenger Z against X, Inc. to enforce the latter’s
caused by a fortuitous event. To rule otherwise would render the of carrier to convey the passengers safely to the point of subsidiary liability.
defense of "force majeure," as an exception from any liability, destination.
illusory and ineffective.  In case a passenger is not bought safely thereto, there will Pajarito v. Seneris, (1978). Conviction of employee is conclusive
be a breach of contract. upon employer as to his subsidiary liability, although the latter
Fabre v. CA, (1996)  Any case brought based on culpa contractual will be may not in the strict sense be a party to the criminal case brought
captioned “Passenger Z v. X, Inc.” because the contract is against the employee. The enforcement of the employer’s
Facts: between them. subsidiary liability may be conveniently litigated within the same
 The driver is not included as a party to the action, because criminal proceedings because the execution of the judgment is a
1. A group contracted the bus for a particular trip, which met he is not a party to the contract, there is no privity as to him. logical and integral part of the criminal case. The employer will
an accident due to the driver’s fault. have the right to present evidence of the employee’s solvency to
2. The employer alleged non-liability for injuries caused since Mariano, Jr. v. Callejas, (2009). Presumption of Negligence in avoid liability.
the group that hired the bus was directly responsible for the Common Carriers of Passengers – The death of the wife of the
trip, and that the employer is not a common carrier bound petitioner in the course of transporting her to her destination The weakest cause of action is culpa acquilina where the
to extraordinary diligence. gave rise to the presumption of negligence of the carrier. To employer may raise the defense of due diligence in the selection
overcome the presumption, respondents have to show that they and supervision of the driver. Culpa criminal is a stronger cause of
Issue: WON the employer is liable as common carrier observed extraordinary diligence in the discharge of their duty to action because as to the company’s subsidiary liability the latter’s
that the accident was caused by a fortuitous event. defense are limited; however, the quantum of evidence needed to
Held: convict the employee would have to be guilt beyond reasonable
Cruz v. Sun Holidays, Inc., (2010). From the nature of their doubt.
1. The contract, even if only for a particular trip, still involves a business and for reasons of public policy, are bound to observe
contract of carriage. Bus owner need not be engaged in the extraordinary diligence for the safety of the passengers In Transportation Law, culpa contractual is the cause of action. In
business of public transportation of the Civil Code provisions transported by them, according to all the circumstances of each a contract of carriage of passengers, it is the obligation of the
on common carriers to apply. case. When a passenger dies or is injured in the discharge of a common carrier to bring the passengers safely to the point of
2. Art. 1732, CC thereof as it defines common carriers, does contract of carriage, it is presumed that the common carrier is at destination. If injured, or death occurs, the presumption of
not make distinctions between one whose principal business fault or negligent negligence automatically arises, and the common carrier can be
activity is the carrying of persons or goods or both, and one held liable if he fails to prove the extraordinary diligence for the
who does such carrying only as an ancillary activity. Villoria v. Continental Airlines, (2012). An airline company is not duration of the carriage.
3. It also avoids making any distinction between a person or completely exonerated from any liability for the tort committed
enterprise offering transportation service on a regular or by its agent’s employees. In an action based on a breach of (d) Nature of Liability Incurred
scheduled basis and one offering such service on an contract of carriage, the aggrieved party does not have to prove
occasional, episodic or unscheduled basis. that the common carrier was at fault or was negligent – all that he Perena v. Zarate, (2012), BERSAMIN. Although the basis of the
4. Neither does it distinguish between a carrier offering its has to prove is the existence of the contract and the fact of its right to relief of the Zarates – breach of contract of carriage –
services to the “general public”, and one who offers services non-performance by the carrier. against the Perenas was distinct from the basis of the Zarates right
or solicits business only from a narrow segment of the to relief against PNR – quasi-delict under Art. 2176, CC, they
general population. (b) Culpa Acquilina nonetheless could be held jointly and severally liable by virtue of
their respective negligence combining to cause the death of
2. Causes of Action Arising from Same Negligent Act  Damage caused to another due to negligence. Aaron.
Loadmaster Customs Services v. Glodel Brokerage Corp., (2011). the carrier is actually used can the carrier be said to have a reasonable time or a reasonable delay within this rule is to be
Where several causes producing an injury are concurrent and already assumed the obligation of a carrier determined from all the circumstances, and includes a reasonable
each is an efficient cause without which the injury would not have time to see after his baggage and prepare for his departure.
happened, the injury may be attributed to all or any of the causes A carrier can be held liable for damages for failure to comply with
and recovery may be had against any or all of the responsible the contract to carry which is consensual in nature. La Mallorca v. CA, (1966)
persons although under the circumstances of the case, it may
appear that one of them was more culpable, and that the duty Dangwa Transpo Co. v. CA, (1991). The victim herein, by stepping Facts:
owed by them to the injured person was not the same. and standing on the platform of the bus, is already considered a
passenger and is entitled to all the rights and protection 1. A married couple, with their little child, were passengers in a
(e) Particular Aspects of Responsibility and Liability of pertaining to a contract of carriage. La Mallorca bus which was proceeding to the bus terminal.
Common Carriers 2. The bus reached the terminal safely. The couple with their
San Diego v. Transit MD, (CA). There was a perfected contract of child went down the bus safely.
LRTA v. Navidad, (2003). Under Culpa-Contractual – A common carriage, as soon as the old man placed his foot on the platform, 3. While waiting for their baggage, the child went in front of
carrier becomes liable for the death or injury to passenger when: he was already a passenger. another bus, and was run over and killed.
4. The couple sought to recover damages from the carrier
(a) Through the negligence or willful acts of its employees; Del Prado v. Manila Electric Co., (1929). Although there is no based on culpa contractual.
(b) On account of willful acts or negligence of other passengers obligation on the part of a street railway company to stop its care
or of strangers if the common carrier’s employees through to take on intending passengers at other points than those Issue: WON the La Mallorca bus was liable
the exercise of due diligence could have prevented or appointed for stoppage, nevertheless when the motorman sees a
stopped the act or omission person attempting to board the car while in motion, and at the Held:
place not appointed for stopping, he should not do any act to
Philtranco Service Enterprises v. CA, (1998). Under Quasi-Delict – increase the peril of such person; and if, in violation of this duty, 1. The couple can recover from the carrier under culpa
Liability of registered owner of a public service vehicle for the motorman accelerates speed while the intending passenger is contractual.
damages arising from the tortious act of driver is primary, direct in the act of boarding the care, with the result that he slips and 2. The child was still a passenger at the time of the accident
and joint and several or solidary with the driver, pursuant to Art. gets his food crushed under the wheel of the moving car, the and hence, the carrier was still liable.
2194, CC. The only recourse of such owner if the judgment is company is civilly liable in damages. 3. The contract of carriage ends only after a reasonable time
satisfied by him is to recover what it has paid from its employee within which to get out of the bus terminal
who committed the fault or negligence which gave rise to the Tamayo v. Pascua, (1985). A bus need not come to a dead stop to
action based on quasi-delict pursuant to Art. 2181. allow passengers to board; it is enough that the bus slows down
5. Statutory Obligations of Carrier
to a negligible speed, allowing people to board it without danger
3. When Does Contract of Carriage Begin? to their lives and limbs. Indeed, it has been held that the duty of
the carrier of passengers owes to its patrons extends to persons Art. 1755. A common carrier is bound to carry the passengers
boarding the cars as well as those alighting therefrom. Under such safely as far as human care and foresight can provide, using the
 The best evidence of a contract of carriage of passenger
circumstance it is the driver’s duty to see to it that every person utmost diligence of very cautious persons, with a due regard for
who wants to board the bus is safe inside before picking up speed all the circumstances.
Q: May there be a contract of carriage even without a ticket?
and moving forward.
(a) In General
A: Yes. The Statute of Frauds covers six (6) contracts, none of
which is a contract of transportation, which means that a contract Sweet Lines v. Teves, (1978). Stipulation in the ticket providing
that any action arising from the contract of carriage must be Baritua v. Mercader, (2001). A common carrier, by the nature of
of carriage may be oral.
prosecuted in Cebu only, is void for being against public policy its business and for reasons of public policy, is bound to carry
since it operated to unduly molest the passengers and effectively passengers safely as far as human care and foresight can provide.
PAN-AM v. IAC, (1988). GR: The defense that a ticket is a
discourage them from brining suits against the common carrier. It is supposed to do so by using the utmost diligence of very
“contract of adhesion” is not acceptable, since “one who adheres
cautious persons, with due regard for all the circumstances. In
to the contract is in reality free to reject it entirely; if he adheres,
4. When Does Contract of Carriage End? case of death or injuries to passengers, it is presumed to have
he gives his consent.
been at fault or to have acted negligently, unless it proves that it
Aboitiz Shipping v. CA, (1989). The relation of carrier and observed extraordinary diligence as prescribed in Art. 1733 and
British Airways v. CA, (1993). A contract of common of passenger
passenger continues until the passenger has been landed at the 1755, CC.
consists of two (2) aspects, namely:
port of destination and has left the vessel owner's dock or
premises. Once created, the relationship will not ordinarily Yobido v. CA, (1997). As a rule, when a passenger boards a
(a) The contract "to carry (at some future time)," which contract
terminate until the passenger has, after reaching his destination, common carrier, he takes the risks incidental to the mode of
is consensual and is necessarily perfected by mere consent
safely alighted from the carrier's conveyance or had a travel he has taken. After all, a carrier is not an insurer of the
(Art. 1356, CC), and
reasonable opportunity to leave the carrier's premises. All safety of its passengers and is not bound absolutely and at all
(b) The contract "of carriage" or "of common carriage" itself
persons who remain on the premises a reasonable time after events to carry them safely and without injury. However, when a
which should be considered as a real contract for not until
leaving the conveyance are to be deemed passengers, and what is passenger is injured or dies while travelling, the law presumes
that the common carrier is negligent, and therefore the burden of
proof is upon such common carrier that it has exercised the remiss in the supervision of its employees and in the proper care Facts:
extraordinary diligence required under the law to avoid damages of its vehicles. Under Art. 2180 and 2176, CC, the owners and
or injury to the passengers. managers are responsible for damages caused by their 1. While the Phil. Rabbit bus was traveling fast, its driver
employees, as well as in the defects of equipment used. sensed that the wheels did not respond to the movement of
Baliwag Transit, Inc. v. CA, (1996). A common carrier is bound to the steering wheel.
carry its passengers safely as far as human care and foresight can Yobido v. CA, (1997). The explosion of a new tire cannot by itself 2. The bus hit a rut and it turn-turtled, killing a passenger.
provide, using the utmost diligence of a very cautious person, with be considered a fortuitous event to exempt the common carrier 3. Mechanics of the bus company discovered that the worn-out
due regard for all the circumstances. In a contract of carriage, it is from liability in the absence of showing on the part of the carrier gear of the steering wheel had a crack, which could not be
presumed that the common carrier was at fault or was negligent that other human factors that could have intervened to cause the seen by the naked eye from outside.
when a passenger dies or is injured. Unless the presumption is blowout of the new tire did not in fact occur. A common carrier 4. Phil. Rabbit proved that the defect was attributed to GM
rebutted, the court need not even make an express finding of may not be absolved from liability in case of force majeure or USA and that defect was a factory defect which could not
fault or negligence on the part of the common carrier. This fortuitous event alone; it must still prove that it was not negligent have been discovered by expert mechanics.
statutory presumption may only be overcome by evidence that in causing the death or injury resulting from an accident.
the carrier exercised extraordinary diligence as prescribed in Art. Issue: WON the bus company liable
1733 and 1755, CC. Trans-Asia Shipping Lines v. CA, (1996). Before commencing the
contracted voyage, the petitioner undertook some repairs on the Held:
Tiu v. Arriesgado, (2004). Upon the happening of the accident, cylinder head of one of the vessel's engines. But even before it
the presumption of negligence at once arises, and it becomes the could finish these repairs, it allowed the vessel to leave the port of 1. Yes. When a bus company places its bus for the use of the
duty of a common carrier to prove that he observed extraordinary origin on only one functioning engine, instead of two. Moreover, riding public it must be in good condition.
diligence in the care of his passengers. To overcome such even the lone functioning engine was not in perfect condition as 2. If it was really the fault of GM, then the bus company’s
presumption of negligence, the carrier must show: sometime after it had run its course, it conked out. remedy would be to go after GM.
3. While the carrier is not an insurer of the safety of the
(a) The carrier must show the utmost diligence of very cautious Plainly, the vessel was unseaworthy even before the voyage passengers, it should nevertheless be held to answer for the
persons as far as human care and foresight can provide, or began. For a vessel to be seaworthy, it must be adequately flaws of its equipment, if such flaws were discoverable.
(b) That the accident was caused by fortuitous event. equipped for the voyage and manned with a sufficient number of 4. In such case, the manufacturer of the defective applicant is
competent officers and crew. The failure of a common carrier to considered in law the agent of the carrier, and
It is such a firmly established principle, as to have virtually formed maintain in seaworthy condition its vessel involved in a contract manufacturer’s good repute will not relieve the carrier from
part of the law itself, that the negligence of the employee gives of carriage is a clear breach of its duty prescribed in Art. 1755, CC. liability.
rise to the presumption of negligence on the part of the employer.
Its nature is such that it is primarily intended to provide Sps. Landingan v. Pantranco, (1970) (c) Circumstances at Time of Accident
compensation for the death or bodily injuries suffered by innocent
third parties or passengers as a result of the negligent operation Facts: (1) When Vehicle Improperly Parked
and use of motor vehicles.
1. A married couple with two (2) children were passengers in a Batangas Trans. v. Caguimbal, (1967)
(b) As to Equipment and Facilities bus going to Baguio. Upon reaching an uphill point at the
Kennon Road, the motor suddenly stopped and the bus Facts:
PNR v. CA, (2007). Railroad companies owe to the public a duty of backed down.
exercising a reasonable degree of care to avoid injury to persons 2. The driver expertly guided the bus to rest on the 1. A Batangas Trans. bus going north stopped on the highway
and property at railroad crossings, which duties pertain both to mountainside of the road. when a passenger wanted to alight.
the operation of trains and to the maintenance of the crossings. 3. But because of the noise, the two children became 2. Another bus was going South fast and recklessly, trying to
frightened and they jumped out of the bus and were killed. pass a carretela.
It is true that one driving an automobile must use his faculties of 3. In trying to overtake the carretela, the driver of the
seeing and hearing when nearing a railroad crossing. However, Issue: WON the bus company may be held liable for their death approaching bus miscalculated and hit the Batangas Trans.
the obligation to bring to a full stop vehicles moving in public bus, causing the alighting passenger to be thrown out and
highways before traversing any "through street" only accrues Held: killed.
from the time the said "through street" or crossing is so 4. The heirs of the victim sought recovery from Batangas
designated and sign-posted. 1. Yes. The bus, when it stopped, was not in perfect running Trans., which raised the defense of fortuitous event
condition.
The authority in this jurisdiction is that the failure of a railroad 2. It is the carrier’s duty to ensure that the bus is always in Issue: WON Batangas Trans. may be held liable
company to install a semaphore or at the very least, to post a perfect condition.
flagman or watchman to warn the public of the passing train 3. Here, the defect was not latent Held:
amounts to negligence.
Necesito v. Paras, (1958) 1. Batangas Trans. is still liable.
Pestano v. Sumayang, (2000). The fact that the driver was able to
use a bus with a faulty speedometer shows that the employer was
2. In civil law, where a fortuitous event concurs with utmost diligence of very cautious persons, with a due regard for
negligence, liability is not thereby extinguished. all the circumstances. Issue: WON the carrier can be held liable for acts of employees
3. Although the bus was then in a “stop” position it did not beyond the scope of their authority
stop on road’s shoulder at the time the passenger was Art. 1756. In case of death of or injuries to passengers, common
alighting. carriers are presumed to have been at fault or to have acted Held:
4. That is considered negligence that concurred with fortuitous negligently, unless they prove that they observed extraordinary
even and did not operate to extinguish the liability. diligence as prescribed in articles 1733 and 1755. 1. It may true that the taxi driver was acting beyond the scope
of his authority, but Art. 1759, CC expressly provides that the
Note: However, since Batangas Trans. and the company of the owner is liable for negligence of the employees even if such
other bus were made alternative defendants, both were held Art. 1759. Common carriers are liable for the death of or injuries acts are beyond the scope of his authority.
liable: Batangas Bus for culpa contractual and the other company to passengers through the negligence or willful acts of the 2. The taxi company was held liable on culpa contractual
for culpa acquilina. former's employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of Note: Maranan v. Perez, (1967) repealed the doctrine of De
(2) When Vehicle Bumped from Behind the common carriers. Gallico v. Manila Railroad, (1955), wherein a security guard rode
on one of the trains to go to his place of duty. While en route, he
Raynera v. Hiceta, (1999). Drivers of vehicles who bump the rear This liability of the common carriers does not cease upon proof killed a passenger riding in the same train. Manila Railroad was
of another vehicle must be presumed to be the cause of the that they exercised all the diligence of a good father of a family in absolved from any liability on the ground that the guard was not
accident, unless contradicted by other evidence, since the rear the selection and supervision of their employees. on duty at that time and therefore not acting within the scope of
driver is deemed to have the last clear chance of avoiding the his authority.
accident, and therefore deemed negligent. R Transport Corp. v. Pante, (2009). Common carriers are liable for
the death or injury to passengers through the negligence or willful (e) As to Injuries Caused by Other Passengers
(3) When Driver Violating Rules at Time of Accident acts of the former’s employees, although such employees may
have acted beyond the scope of their authority in violation of the (1) The Liability of Carrier is Expressly Covered by Art. 1763, CC
Mallari, Sr. v. CA, (2000). Under Art. 2185, CC, unless there is orders of the common carriers.
contrary proof, it is presumed that a person driving a motor Art. 1763. A common carrier is responsible for injuries suffered by
vehicle had been negligent if at the time of mishap, he was Mallari, Sr. v. CA, (2000). The negligence and recklessness of the a passenger on account of the willful acts or negligence of other
violating a traffic regulation, such as when he was driving at the driver of the passenger jeepney is binding against petitioner passengers or of strangers, if the common carrier's employees
wrong side of the road. Mallari Sr., who admittedly was the owner of the passenger through the exercise of the diligence of a good father of a family
jeepney engaged as a common carrier, considering the fact that in could have prevented or stopped the act or omission.
(4) Rules on Overtaking an action based on contract of carriage, the court need not make
an express finding of fault or negligence on the part of the carrier
in order to hold it responsible for the payment of damages sought Manila Railroad v. Ballesteros, (1966)
Mallari, Sr. v. CA, (2000). The rule is settled that a driver
abandoning his proper lane for the purpose of overtaking another by the passenger.
vehicle in an ordinary situation has the duty to see to it that the Facts:
road is clear and not to proceed if he cannot do so in safety. When (a) Under Art. 1755, CC, a common carrier is bound to carry the
a motor vehicle is approaching or rounding a curve, there is passengers safely as far as human care and foresight can 1. When a Manila Railroad bus reached one of the
special necessity for keeping to the right side of the road and the provide using the utmost diligence of very cautious persons municipalities along its route, the driver stopped the bus and
driver does not have the right to drive on the left hand side relying with due regard for all the circumstances. went down to answer a call of nature.
upon having time to turn to the right if a car approaching from the (b) Moreover, under Art. 1756, CC, in case of death or injuries to 2. While the driver was thus outside the bus, one of the
opposite direction comes into view. Non-compliance with such passengers, a common carrier is presumed to have been at passengers went into the driver’s seat and drove off the bus.
rules constitute negligence. fault or to have acted negligently, unless it proves that it 3. The bus met an accident, causing injury to another
observed extraordinary diligence. passenger.
(5) Hit and Run Driver (c) Further, pursuant to Art. 1759, CC, it is liable for the death of
or injuries to passengers through the negligence or willful Issue: WON Manila Railroad is liable for the act of the passenger
Abueva v. People, (2002). A bus driver could not be considered a acts of the former's employees.
hit-a-run driver where he exerted efforts to see to it that the Held:
victim had been attended to, such as when there were several Maranan v. Perez, (1967)
people assisting the victim, including his co-employer working for 1. Manila Railroad is liable for the injuries suffered by some
the bus company. passengers because its driver was guilty of negligence in
Facts:
leaving the key on the ignition.
(d) Injuries Caused Employees 2. Had the driver taken the key with himself, the passenger
1. A taxi driver tried to hold-up his passenger, who resisted and
could not have driven off with the bus.
was killed.
3. The carrier is therefore liable for injuries when the carrier’s
Art. 1755. A common carrier is bound to carry the passengers 2. His heirs sued based on culpa contractual against the taxi
employees could have prevented the injuries through the
safely as far as human care and foresight can provide, using the company, which denied liability on the ground that the
exercise of the diligence of a good father of a family.
driver acted beyond the scope of his authority
RCJ Bus Lines, Inc. v. Standard Insurance Co., (2011). In a bus
(f) Obligation of Common Carriers for Baggage company, when the employee causes damage due to his own (c) Coverage of Fortuitous Event
negligence while performing his own duties, there arises the juris
Sarkies Tours Phil. v. CA, (1997). Where a common carrier accepts tantum presumption that the employer is negligent, rebuttable  A fortuitous event covers not only acts of God (lightning,
its passenger’s baggage for transportation and even had it placed only by proof of observance of the diligence of a good father of a earthquakes, shipwreck, etc.) but also acts of man (war,
in the vehicle by its own employee, its failure to collect freight family. For failure to rebut such legal presumption of negligence in strikes, homicide, recklessness of other driver, latent
charges is the common carrier’s own lookout, and cannot be used the selection and supervision of employees, the employer is mechanical defect, etc.)
to exempt the common carrier from liability for the consequent likewise responsible for damages, the basis of the liability being  If a fortuitous event is proved, the carrier is absolved from
loss of the baggage. the relationship of pater familias or on the employer’s own liability.
negligence.  But the fortuitous event must not concur with negligence,
PAL v. IAC, (1992). Although the baggage of a passenger was otherwise, it is no longer a defense. In other words, the
eventually delivered to him, that did not constitute a case of mere Heirs of Ochoa v. G&S Transport Corp., (2011). G&S as a common fortuitous event must be the sole element relied upon.
delay in delivery “since the baggage was not delivered at all to the carrier is “bound to carry (a passenger) safely as far as human care
passenger for the purpose of the trip in contravention of a and foresight can provide, using the utmost diligence of very Yobido v. CA, (1997). A fortuitous event is possessed of the
common carrier’s undertaking to transport the goods from the cautious persons, with due regard for all circumstances”. When following characteristics:
place of embarkation to the ultimate point of destination”. The the passenger dies during the course of the travel, then the rules
non-delivery of luggage during the entire length of passenger’s prevails: "In a contract of carriage, it is presumed that the (a) The cause of the unforeseen and unexpected occurrence, or
stay abroad, is a breach of carrier’s obligation. common carrier is at fault or is negligent when a passenger dies or the failure of the debtor to comply with his obligations, must
is injured. In fact, there is even no need for the court to make an be independent of human will;
5. Defense Available in Culpa Contractual express finding of fault or negligence on the part of the common (b) It must be impossible to foresee the event which constitutes
carrier.” the caso fortuito, or if it can be foreseen, it must be
(a) Proof of Negligence; Presumption impossible to avoid;
Unfortunately, G&S miserably failed to overcome the (c) The occurrence must be such as to render it impossible for
presumption. Both the courts below found that the accident the debtor to fulfill his obligation in a normal manner; and
Art. 1756. In case of death of or injuries to passengers, common
which led to the passenger’s death was due to the reckless driving (d) The obliger must be free from any participation in the
carriers are presumed to have been at fault or to have acted
and gross negligence of the taxi driver, thereby holding G&S liable aggravation of the injury resulting to the creditor.
negligently, unless they prove that they observed extraordinary
to the heirs of the deceased passenger for breach of contract of
diligence as prescribed in articles 1733 and 1755.
carriage. The acquittal of the driver in the criminal case is Based on the foregoing a bus company cannot be exempted from
immaterial to the determination of the breach of contract. liability from a tire blowout which cannot be classified simply as a
 The carrier is presumed negligent as soon as the injury or
fortuitous event, in the absence of showing that it has exercised
death is proven. Fabre v. CA, (1996). For a bus company, due diligence in selection the extraordinary diligence required of common carriers under
 The carrier must rebut this presumption; otherwise it will be of employees is not satisfied by finding that the applicant the law.
liable for damages. possessed a professional driver's license. The employer should
also examine the applicant for his qualifications, experience and Cruz v. Sun Holidays, Inc., (2010). In addition to the requisites
LTB v. Tiongson, (O.G.). If a passenger is injured or dies, there record of service. Due diligence in supervision, on the other hand, provided in Yobido v. CA, to fully free a common carrier from any
immediately arises the presumption that the common carrier is requires the formulation of rules and regulations for the guidance liability, the fortuitous event must have been the proximate and
negligent. The injured passenger or the heirs of the dead of employees and issuance of proper instructions as well as actual only cause of the loss.
passenger do not have to prove the carrier’s negligence; all they implementation and monitoring of consistent compliance with the
have to prove is the fact of injury or death in the course of the rules. New World International Dev. Inc. v. NYK-Fil Japan Shipping
passenger’s carriage, and the law automatically raises the
Corp., (2011). That the loss was occasioned by a typhoon, an
presumption of negligence. Metro Manila Transit Corp. v. CA, (2002). The mere formulation exempting cause under Art. 1734, CC, does not automatically
of various company policies on safety without showing that they relieve the common carrier of liability. The latter has the burden
Zamboanga Transit v. CA, (1969). The presumption may be were being complied with is not sufficient to exempt the of proving that the typhoon was the proximate and only causes of
rebutted by evidence on any of the following: employer from liability arising from negligence of its employees. It loss and that it exercised due diligence to prevent or minimize
is incumbent upon the employer to show that in recruiting and such loss before, during and after the disastrous typhoon.
(a) Exercise of extraordinary due diligence; employing the errant driver the recruitment procedures and
(b) Fortuitous event; company policies on efficiency and safety were followed. Singapore Airlines, Ltd. v. Fernandez, (2003)
(c) Contributory negligence of the passenger under Art. 1762
and 2179, CC The act of driver in bringing the victim to the nearest medical
Facts: Airline company assails the award of damages for delay in
facility does not show adequate supervision by the employer over
Only evidence on one of these points is admissible. If the the transport of the passenger which it attributed to inclement
its employees; for one, the act was after the fact of negligence on
presumption is not rebutted, the carrier is automatically liable. weather beyond its control, and the longer route that had to be
the driver’s part; for another, the evidence on record shows that
taken to avoid the airspace where the Gulf War was then being
the driver’s act was neither voluntary nor spontaneous as he had
(b) Due Diligence in Selection and Supervision of Employees fought.
to be prevailed upon by the victim’s companions to render such
assistance.
Issue: WON the Airline company may be held liable for damages. 4. This illustrates an example when an “act of man” would principles on quasi-delict may then be assimilated as also
exempt the carrier from liability. forming part of the governing law.
Held: 4. Airline company is not thus entirely off-track when it has
(d) Contributory Negligence of Passengers likewise raised in its defense the tort doctrine of proximate
1. Airline company is still liable, since it was not without cause. Unfortunately, the doctrine cannot in this particular
recourse in meeting the bad weather’s consequences to Art. 1762. The contributory negligence of the passenger does not instance support its defense
enable to fulfill its obligations to transport the passengers bar recovery of damages for his death or injuries, if the proximate 5. Proximate cause is that which, in the natural and continuous
safely as scheduled as far as human care and foresight can cause thereof is the negligence of the common carrier, but the sequence, unbroken by any efficient intervening cause,
provide to their destination. amount of damages shall be equitably reduced. produces injury and without which the result would not
2. Tagged as a premiere airline as it claims to be able to have occurred.
foresee and deal with such situation. Estacion v. Bernardo, (2006). Contributory negligence is conduct 6. It remains undisputed that the passenger’s luggage was lost
3. It likewise showed indifference and negligence by its on the part of the injured party, contributing as a legal cause to while it was in the custody of the airline company.
absence and insensitivity and as well as lack of diligence in the harm he has suffered, which falls below the standard to which 7. The facts showed that when the luggage was first reported
communicating to its passengers the consequences of the he is required to conform for his own protection. missing it was subsequently found and again lost in the
delay in their flights. custody of the airline company.
But even in a situation where a person has contributed to his own 8. The loss of said luggage not only once but twice
Gatchalian v. Delim, (1991). The death or injury to a passenger injuries, it must nevertheless be shown that he performed an act “underscores the wanton negligence and lack of care on the
raises the statutory presumption that the common carrier was at that brought about his injuries in disregard of warnings or signs of part of the carrier”
fault or had acted negligently. To exempt a common carrier from an impending danger to health and body. The passenger’s act of 9. The proven negligence of the airline company foreclosed
liability for death or physical injuries to passengers upon the hanging on the vehicle is definitely dangerous to his life and limb. whatever rights it might have had to the possible limitation
ground of force majeure, the carrier must clearly show not only Nonetheless, the underlying precept of the article on contributory of liabilities enjoyed by international air carriers under the
the efficient cause of the casualty was entirely independent of negligence is that the plaintiff who is partly responsible for his Warsaw Convention.
human will but also that it was impossible to avoid. own injury should not be entitled to recover damages in full but
must bear part of the consequences of his own negligence. Calalas v. CA, (2000). The agreement by the passenger to taking
Bachelor Express, Inc. v. CA, (1990). The act of passenger stabbing an “extension seat” in a bus is not an implied assumption of risk
another passenger in the bus is considered as force majeure. on his part as to exempt the transport company from liability for
Sebena Belgian World Airlines v. CA, (1996)
However, to be absolved from liability in the case of force injuries sustained.
majeure, the common carrier must still prove that it was not
negligent in causing the injuries resulting from such accident; Facts:
Isaac v. Ammen Transportation, (1957)
otherwise, it would still be held liable.
1. Passenger was on board flight originating from Casablanca
to Brussels, although she was on her way back to Manila. Facts:
Nocum v. LTD, (1969)
She had valuables in her luggage, and while she stayed
overnight in Brussels her luggage was left on board. 1. The road on which the bus was passing was wide enough for
Facts: 2. When she arrived in Manila, her luggage was missing, and two buses only.
she demanded the money value thereof and its contents. 2. A passenger placed his elbow outside the window railing of
1. One of the bus passengers had firecrackers inside his 3. Airline company refused the liability on the ground that the the bus. An incoming bus hit the passenger’s elbow, injuring
baggage, which ignited when another passenger smoked loss was due to the passenger’s contributory negligence by it in such a manner that it had to be amputated.
cigarettes, causing injuries to another passenger. failing to declare the valuables and not heeding the warning
2. The injured passenger sought to recover damages from the to all passengers not to place valuables in their luggage, and Issue: WON the bus is liable for the injury
carrier not retrieving her undeclared valuables from her luggage at
Brussels Airport since her flight from Brussels to Manila Held:
Issue: WON the carrier is liable would still have to be confirmed.
1. Carrier is not liable because the proximate cause of the
Held: Issue: WON the Airline company is liable injury was the passenger’s own contributory negligence.
2. This is a complete defense to the carrier, and absolves it
1. Carrier is not liable for the injuries caused to a passenger by Held: from liability.
exploding firecrackers in the baggage of another passenger. 3. When the injured passenger is guilty of contributory
2. The reason is that the carrier cannot be expected to examine 1. The Airline company is liable. negligence, his contributory negligence will only serve to
and search each and every piece of baggage of passengers, 2. Art. 1733, CC requires a common carrier in carriage of goods diminish the liability of the carrier and not extinguish it,
otherwise the bus may not all together be able to leave to observe extraordinary care in the vigilance over the except if it is the proximate cause of the injury, in which case
3. But this is only true so long as the cause of the accident goods. it serves to absolve the carrier from any liability.
(presence of firecrackers) was not apparent and the carrier 3. The rule remains basically unchanged even when the
or its employees are not guilty of negligence. contract is breached by tort although non-contradictory 1983 Bar, Q. IX: A and his classmates take a bus from UP to
Quiapo. On the way, another Quiapo-bound bus tries to
overtake them. A and his classmates dare the bus driver to run 2. PNR insisted that the sole and proximate cause of the Lim v. CA, (2002). Although the parties to such an agreement are
faster and race with the other bus. The driver takes their dare, to accident was the negligence and recklessness of the plaintiff not outrightly penalized by law, the kabit system is invariably
the delight of A and his friends who cheered him. On rounding when they did not approach the cross with due care. recognized as being contrary to public policy and therefore void
the curve, the bus driver fails to slow down and the bus turns and inexistent under Art. 1409, CC.
turtle, resulting in the death of A and injuries to the other Issue: WON the doctrine of last clear chance apply
passengers. Tamayo v. Aquino, (1959). Under a kabit system, the registered
Held: owner is liable for culpa contractual or culpa acquilina, as the case
The bus carried the following sign: “Do not talk to driver while may be.
bus is on motion, otherwise the company will not assume 1. No. It was determined that the safety measures installed by
liability for any accident.” PNR at the railroad crossing were not merely inadequate, Jereos v. CA, (1982). Although the registered owner is always
they in fact did not satisfy the well-settled safety standards liable, nevertheless the actual operator can be held solidarily
Explain briefly the extent of the liability, if any, of the bus in transportation. liable with the owners as joint tortfeasors.
company, giving the legal provisions and principles involved. 2. The plaintiffs could not have foreseen the harm that would
befall them under the prevailing circumstances, and thus Lita Enterprises v. IAC, (1984). A person with a certificate of
A: The bus company is liable for damages to A’s heirs and to all could not be guilty of contributory negligence. public convenience for five (5) jeepneys has only four (4)
the injured passengers. Under the Civil Code, a common carrier is 3. The proximate cause of the injury having been established, jeepneys. An associate attaches his jeepney to the certificate
duty bound to exercise extraordinary diligence in carrying its the doctrine of last clear chance could not apply. holder. The rule in case of injury to passengers of bus or jeepney
passengers through the negligence or willful acts of its employees so attached is: the person in whose name the certificate of public
even if the latter have aced beyond the scope of their authority or Tiu v. Arriesgado, (2004). The principle of last clear chance is convenience was issued is the one liable to the general public,
in violation of their orders. This liability cannot be eliminated or applicable only in a suit between the owners and drivers of without prejudice to his right to recovery.
limited by stipulation or by posting notices. colliding vehicles. It does not arise where a passenger demands
responsibility from the carrier to enforce its contractual First Malayan Leasing v. CA, (1992). Regardless of who is the
Although it may be urged that A was guilty of contributory obligations, for it would be inequitable to exempt the negligent actual owner of a motor vehicle, the registered owner is the
negligence, such an argument loses its force in the face of the driver and its owner on the ground that the other driver was operator of the same with respect to the public and third persons,
driver’s recklessness in taking the dare. And even if such argument likewise guilty of negligence. and as such, directly and primarily responsible for the
would be accepted, at most it can only mitigate the amount of consequences of its operation. Legally, the owner/operator of
damages, since the proximate cause of the accident was the The common law notion of last clear chance permitted courts to record is the employer of the driver, with the actual/employer
driver’s willful and reckless act in running a race with the other grant recovery to a plaintiff who has also been negligent provided being considered merely as his agent.
bus. that the defendant had the last clear chance to avoid the casualty
and failed to do so. Accordingly, it is difficult to see what role, if Lim v. CA, (2002). The kabit system undermines the primary
(e) Doctrine of “Last Clear Chance” any, the common law of last clear chance doctrine has to play in a factors considered in the granting of a certificate of public
jurisdiction where the common law concept of contributory convenience for the business of public transportation is the
PNR v. Brunty, (2006). The doctrine of last clear chance states negligence as an absolute bar to recovery by the plaintiff, has financial capacity of the holder of the license, so that liabilities
that where both parties are negligent but the negligent act of one itself been rejected, as it has been in Art. 2179, CC. arising from accidents may be duly compensated. It renders
is appreciably later than that of the other, or where it is illusory such purpose and, worse, may still be availed of by the
impossible to determine whose fault or negligence caused the 7. Kabit System grantee to escape civil liability caused by a negligent use of a
loss, the one who had the last clear opportunity to avoid the loss vehicle owned by another and operated under his license.
but failed to do so, is chargeable with the loss. Stated differently, “Kabit system” is an arrangement whereby a person who has
the antecedent negligence of plaintiff does not preclude him from been granted a certificate of public convenience allows other Thus, for the safety of passengers and the public who may have
recovering damages caused by the supervening negligence of persons who own motor vehicles to operate them under his been wronged and deceived through the baneful kabit system,
defendant, who had the last fair chance to prevent the impending license, sometimes for a fee or percentage of the earnings. the registered owner of the vehicle is not allowed to prove that
harm by the exercise of due diligence. another person has become the owner so that he may be thereby
relieved of responsibility.
2005 Bar, Q. XIII: Discuss the “kabit system” in land
PNR v. Brunty, (2006) transportation and its legal consequences.
When a passenger jeepney covered by a certificate of public
convenience is sold to another who continues to operate it under
Facts: A: The “kabit system” is an arrangement whereby a person who
the same certificate of public convenience under the so-called
has been granted a certificate of public convenience allows
kabit system, and in the course thereof the vehicle meets an
1. In a situation where the car collided at the train intersection, another who owns a motor vehicle to operate under his certificate
accident through the fault of another vehicle, the new owner may
the injured party sued PNR on the grounds that they failed for a fee for a percentage of the earnings (Lim v. CA, 2002). The
sue for damages against the erring vehicle despite the existence
to provide the proper equipment necessary for the crossing owner of the certificate of public convenience and the actual
of the kabit system because:
and have not exercised due care in the selection and owner of the motor vehicle should be held jointly and severally
supervision of its employees. liable for damages to third persons as a consequence of the
(a) Neither parties to the kabit system is being held liable for
negligent operation of the motor vehicle (Vargas v. Langcay, 1962)
damages;
(b) The case arose from the negligence of another vehicle using (b) The gasoline consumed by the jeep is for the account of the
the public road to whom no representation, or Procopio is a real party in interest who stands to be benefited or driver.
misrepresentation, as regards the ownership and operation injured by the result of the action. Even if not the registered
of the passenger jeepney was made to whom such owner of the jeepney, it was he who was wronged and was are not sufficient to withdraw the relationship between them
representation or misrepresentation, was necessary seeking compensation for the damage to his vehicle. Moreover, from that of employer and employee. Consequently, the jeepney-
the case arose from the admitted negligence of Emmanuel’s owner is subsidiarily liable as employer under Art. 103, RPC.
2012 Bar, Q. 46: X owns a passenger jeepney covered by driver where representation with respect to the ownership and
Certificate of Public Convenience. He allowed Y to use its operation of the passenger jeepney was not necessary. Besides 2005 Bar, Q. XIII(3): Baldo is a driver of Yellow Cab Company
Certificate of Convenience for a consideration. Y therefore was the riding public was not inconvenienced by the illegal under the boundary system. While cruising along the South
operating the passenger jeepney under the same Certificate of arrangement between Procopio and Enteng (Lim v. CA, 2002) Expressway, Baldo’s cab figured in a collision, killing his
Public Convenience (Kabit System) under the name of X. The passenger, Pietro. The heirs of Pietro sued Yellow Cab Company
passenger jeepney met an accident. Who will be liable? 8. Boundary System for damages, but the latter refused to pay the heirs, insisting
that it is not liable because Baldo is not its employee. Resolve
(a) Y, the one actually operating the jeepney, will be liable to Boundary system is an arrangement whereby the registered with reasons.
the injured party. owner of a vehicle allows another person to operate it as a
(b) X will be the one liable to the injured party despite the fact common carrier under a lease agreement between, and thereby A: Yellow Cab Company is liable because there exists an e-e
that it is Y who is actually operating the jeepney, because advoiding the establishment of either an employer-employee relationship between a jeepney owner and a driver under the
while the Kabit System is tolerated, the public should not relationship or that of a principal-agent relation. boundary system arrangement in accordance with Art. 103, RPC
be inconvenienced by the arrangement. (Magboo v. Bernardo, 1963). Indeed to exempt from liability the
(c) X will not be held liable if he can prove that he is not the  The “boundary system” essentially seeks to exempt the owner of a public vehicle who operates it under the “boundary
owner anymore. purported owner-lessor from the solidary liable rule system” on the ground that he is a mere lessor would be not only
(d) Public Policy dictates that the real owner, even not the mandated of an employer for the negligent act of his to abet flagrant violations of the Public Service Act Law but also to
registered one, will be held liable. employee under quasi-delict provisions of the Civil Code. place the riding public at the mercy of reckless and irresponsible
 Likewise, the “boundary system” would exempt the drivers reckless because the measure of their earnings depends
2005 Bar, Q. XIII(2): Procopio purchased an Isuzu passenger registered owner of a vehicle, as a mere lessor of largely on the number of trips they make and, hence, the speed at
jeepney from Enteng, a holder of a certificate of public equipment, from being considered as a party in the common which they drive; and irresponsible because most, if not all of
convenience for the operation of public utility vehicle plying the carrier operations of the purported lessee who is deemed to them, are in no position to pay the damages they might cause.
Calamba-Los Baños route. While Procopio continued offering the be the principal operator of the common carrier operations
jeepney for public transport services, he did not have the to which the vehicle is being devoted to. 2012 Bar, Q. 47: X owns a fleet of taxicabs. He operates it
registration of the vehicle transferred in his name. Neither did through what is known as boundary system. Y drives one of such
he secure for himself a certificate of public convenience for its Hernandez v. Dolor, (2004). To exempt from liability the owner of taxicabs and pays X a fixed amount of Php1 ,000 daily under the
operation. Thus, per the records of the Land Transportation a public vehicle who operates it under the "boundary system" on boundary system. This means that anything above Php 1,000
Franchising and Regulatory Board, Enteng remained its the ground that he is a mere lessor would be not only to abet would be the earnings of Y. Y, driving recklessly, hit an old lady
registered owner and operator. One day, while the jeepney was flagrant violations of the Public Service Law, but also to place the crossing the street. Which statement is most accurate?
traveling southbound, it collided with a ten-wheeler truck riding public at the mercy of reckless and irresponsible drivers —
owned by Emmanuel. The driver of the truck admitted reckless because the measure of their earnings depends largely (a) X as the owner is exempt from liability because he was not
responsibility for the accident, explaining that the truck lost its upon the number of trips they make and, hence, the speed at the one driving.
brakes. which they drive; and irresponsible because most if not all of (b) X as the owner is exempt from liability because precisely the
them are in no position to pay the damages they might cause. arrangement is one under the "boundary system".
Procopio sued Emmanuel for damages, but the latter moved to (c) X will not be exempt from liability because he remains to
dismiss the case on the ground that Procopio is not the real Y Transit Co., Inc. v. NLRC, (1994). Transferee of vehicles cannot be the registered owner and the boundary system will not
party in interest since he is not the registered owner of the prevent levy by asserting ownership because as far as the law is allow the circumvention of the law to avoid liability.
jeepney. Resolve the motion with reasons. concerned the one in whose name the vehicle is registered (d) Y is the only one liable because he drove recklessly.
remains to be the owner and the transferee merely holds as agent
A: The motion to dismiss should be denied. the vehicle for the registered owner. 9. Air Transportation

The rule enjoining the registered owner of the motor vehicle Magboo v. Bernardo, (1963). An employer-employee relationship Mendoza v. PAL, (1951). Although Art. 349, Code of Commerce
under the “kabit system” from proving another person is the shall be deemed to exist between a jeepney-owner and a driver only covers transportation on land and water, it has been held to
owner is intended to protect third parties. Since this case does not under a “boundary system arrangement. The features which also cover transportation through the air.
involve liability of the registered owner to third parties, and it is characterizes the “boundary system”:
the owner of the motor vehicle who is seeking compensation for
 Under Art. 1732, CC, carrying or transporting passengers or
damages, the rule is not applicable (Lim v. CA, 2002) (a) The driver does not receive a fixed wage but gets only the
goods or both by “air” has been expressly included in the
excess of the amount of fares collected by him over the
definition of a common carrier.
Alternative: The motion to dismiss is misplaced. amount he pays to the jeep-owner; and
(a) Nature of Airline’s Business wishes does not necessarily translate into damages in the absence
of bad faith, and the fact that no demand letter was sent earlier to 1. JAL is not liable.
PAL v. CA, (1993). A contract of carriage is imbued with public the airline renders suspect the motive of the passenger in suing 2. When an airline issues a ticket to a passenger, confirmed for
interest and requires common carriers to carry passengers safely the airline. a particular flight on a certain date, a contract of carriage
as far as human care and foresight can provide, using the utmost arises under Art. 1755, CC, and the passenger has every right
diligence of very cautious persons, with due regard for all the (d) Liabilities of Airline Companies to expect that he be transported on that flight and on the
circumstances. date and it becomes the carrier’s obligation to carry him and
(1) For Employees’ Malfeasance his luggage safely to the agreed destination.
Thus, PAL's diversion of its flight due to inclement weather was a 3. Although it may be true that JAL had the duty to inspect
fortuitous event. Nonetheless, such occurrence did not terminate Morris v. CA, (2001). Neglect or malfeasance of the carrier’s whether its passengers have the necessary travel
PAL's contract with its passengers, since the relation of carrier and employees naturally give ground for an action for damages documents, however, such duty does not extend to checking
passenger continues until the latter has been landed at the port of against the common carrier. Moral damages are recoverable in a the veracity of every entry in those documents, and has no
destination and has left the carrier’s premises. Hence, until the damage suit predicated upon a breach of contract of carriage only duty to vouch for the authenticity of a passport and the
passenger has left its premises, PAL was obliged to exercise where: correctness of the entries therein.
extraordinary diligence in safeguarding the comfort, convenience, 4. The power to admit or not an alien into the country is a
and safety of its stranded passengers, and for the unnecessary (a) The mishap results in the death of a passenger; and sovereign act which cannot be interfered with even by JAL,
inconvenience suffered by such passenger and the lack of care (b) It is proven that the carrier was guilty of fraud bad faith even and is not within the ambit of their contract of carriage.
and concern of its representatives, PAL could be held liable for if death does not result
damages. Japan Airlines v. Simangan, (2008). Where a passenger, despite
Air France v. Gillego, (2011). In repeatedly ignoring respondent’s his protestation and valid travel documents, was unceremoniously
PAL v. CA, (1997). A contract to transport passengers is quite inquiries, petitioner’s employees exhibited an indifferent attitude bumped off by the airline, damage was already done when he was
different in kind and degree from any other contractual relation, without due regard for the inconvenience and anxiety he offered to fly the next day, which offer did not cure the airline’s
and this is because of the relation which an air carrier sustains experienced after realizing that his luggage was missing. default. A common carrier ought to know the kind of valid
with the public. Its business is mainly with the travelling public. It Inattention to and lack of care for the interest of its passengers documents a passenger carries.
invites people to avail of the comforts and advantages it offers. who are entitled to its utmost consideration, particularly as to
The contract of air carriage, therefore, generates a relation their convenience, amount to bad faith which entitles the (3) Accommodations for Stranded Passengers
attended with a public duty. Neglect or malfeasance of the passenger to an award of moral damages. What the law considers
carrier's employees naturally could give ground for an action for as bad faith which may furnish the ground for an award of moral Japan Airlines v. CA, (1998)
damages. damages would be bad faith in securing the contract and in the
execution thereof, as well as in the enforcement of its terms, or Facts:
British Airways v. CA, (1998). The nature of an airline’s contract of any other kind of deceit.
carriage partakes of two contracts: 1. Passengers of JAL headed for the Philippines were stranded
(2) Entries in Passenger’s Travel Documents in Tokyo due to the Mt. Pinatubo eruption.
(a) One to deliver a cargo or merchandise to its destination; and 2. The passengers sought recovery from JAL for the hotel and
(b) To transport passengers to their destination. Art. 1755. A common carrier is bound to carry the passengers meal expenses incurred by them for being stranded up to
safely as far as human care and foresight can provide, using the the time they actually reached their final destination, even
A business intended to serve the travelling public primarily is utmost diligence of very cautious persons, with a due regard for when delay was caused by force majeure, since airlines have
imbued with public interest, hence, the law governing common all the circumstances. the obligation to ensure the comfort and convenience of its
carriers imposes an exacting standard; neglect or malfeasance by passengers.
the carrier’s employees could predictably furnish bases for an
Japan Airlines v. Asuncion, (2005)
action for damages Issue: WON the passengers may recover the hotel and meal
Facts: expenses incurred by them for being stranded
Singapore Airlines Ltd. v. Fernandez, (2003). When an airline
company issues a ticket to a passenger, confirmed for a particular Held:
flight on a certain date, a contract of carriage arises. The 1. A passenger of Japan Airlines was detained for several days
passenger then has every right to expect that he be transported at Narita airport by Japanese immigration officials when
entries in his passport did not conform to his actual physical 1. No. There is no dispute that the Mt. Pinatubo eruption was
on that flight and on that date. If he does not, then the carrier force majeure not imputable to JAL and which prevented JAL
opens itself to a suit for a breach of contract of carriage. attributes, which delayed him immensely from reaching Los
Angeles as previously confirmed in his tickets. from proceeding to Manila on schedule.
2. He now sues the airline for recovery of damage incurred, for 2. There is no question that when JAL was unable to fulfill its
(c) Warning Against Abuse of Claims Against Airlines obligation because of force majeure, it cannot be held liable
breach of contract.
for damages for non-performance, and whatever losses or
Yu Eng Cho v. Pan American Airways, (2000). SC will not tolerate damages in the form of hotel and meal expenses the
an abuse of the judicial process by passengers in order to pry on Issue: WON JAL is liable for damages
stranded passengers incurred, cannot be charged to JAL.
international airlines for damage awards, like “trophies in safari”.
The mere refusal by the airline to accede to the passenger’s Held:
Airline passengers must take such risks incident to the mode 2. Although Sps. Vazquez had priority to be upgraded when the
of travel. opportunity arises, they had every right to waive such (8) Liability for Damage Cause by Hijacking
3. In this regard, adverse weather conditions or extreme opportunity, and there was breach of contract on the part of
climatic changes are some of the perils involved in air travel, the airline to have done so against their wishes. Fortune Express v. CA, (1999). A common carrier can be held
the consequences of which the passenger must assure or 3. Nevertheless, the breach cannot be considered to have been liable for failing to prevent a hijacking by frisking passengers and
expect. After all, common carriers are not the insurer of all done in fraud or bad faith, no harsh words were used nor inspecting their baggage, especially when it had received prior
risks. evil intent proven. notice of such threat.
4. Needless to state, an upgrading is for the better condition
PAL v. CA, (1997). Even assuming arguendo that airline and, definitely, for the benefit of the passengers. In addition, (9) Security Measures Against Terrorism
passengers have no vested right to hotel accommodation from commercial practice, overbooking that does not exceed
allowances in case a flight is cancelled due to force majeure, 10% is not considered deliberate and therefore does not Northwest Airlines v. Laya, (2002)
nevertheless the airline company would be liable for damages amount to bad faith.
when its employees blatantly refused to accord the so-called Facts:
amenities equally to its stranded passengers, and there was no (6) Non-Liability for Transporting Bags in Another Airline
compelling or justifying reason was advanced for such 1. Dr. Laya, unlike other passengers who were allowed to carry
discriminatory and prejudicial conduct. Tan v. Northwest Airlines, (2000). Passenger filed suit against the their attache case after inspection, was made to transfer the
airline because his luggage which were transported through contents to envelopes.
(4) Overbooking another airline were delated in arrival. There is no willful 2. He was treated in a very rude manner in the process
misconduct on airline company in transporting baggage through because he took exception to the varying treatment in his
Zalamea v. CA, (1993). Even where overbooking of passengers is another airline, especially when it was done due to weight and case.
allowed as a commercial practice, the airline company would still balance restrictions and was therefore motivated by safety
be guilty of bad faith and still be liable for damages if it did not measures. For willful misconduct to exist, there must be showing Issue: WON Dr. Laya may recover damages
properly inform passengers that it could breach the contract of that the acts complained of were impelled by an intention to
carriage even if they were confirmed passengers. violate the law, or were in persistent disregard of one’s right. Held:

Cathay Pacific Airways, Ltd. v. Vasquez, (2003). It is clear from (7) Substituting Aircrafts/Carriers Without Notice 1. Yes, but only for a reasonable amount.
Sec. 3 of Economic Regulation No. 7 of the Civil Aeronautics 2. The tragic even that unfolded on Sept. 11, 2001
Board, that overbooking does not exceed 10% of aircraft’s seating Northwest Airlines v. Savellano, (2003) underscored, more than ever, that airport and airline
capacity is not considered deliberate and therefore does not personnel could not afford any lapse in the implementation
amount to bad faith. Facts: The airline ticket provided that “carrier may without notice of security measures meant to secure the safety of airline
substitute alternate carriers or aircraft, and may alter or omit crew and passengers.
(5) Bumping Off Passengers to Higher Accommodations stopping places shown on the ticket in case of necessity” 3. While the protection of passengers must take precedent
over convenience, the implementation of security measures
Cathay Pacific Airways v. Sps. Vazquez, (2003) Issue: WON the clause authorize the airline company to change must be attended by basic courtesies.
the route without the consent of the suing passengers
Facts: (d) Matters Relating to Tickets
Held:
1. Sps. Vasquez who held premium club membership were (1) Binding Terms of Ticket
upgraded to first class from business class and were thereby 1. No. The ticket clause did not authorize the airline to decide
separated from their companions who remained in business unilaterally, even after the distressed flight landed in Seattle, Sarreal, Sr. v. Japan Airlines, (1992). Purchase of tickets from an
class. to substitute an alternate carrier without so much as a by- airline company instantaneously binds purchaser to the conditions
2. It turned out that business class was overbooked, which your-leave. of the contract of carriage particularly the check-in time
prompted the airline crew to upgrade the spouses, with no 2. Substituting aircrafts or carrier without notice is entirely requirement. Therefore, airline company cannot be held at fault
extra cost different from changing stopping places or connecting cities and the passenger is deemed to be guilty of omission or
without notice. negligence for his failure to take the standard procedure for any
Issue: WON the airline be liable for such an act as constituting 3. More importantly, the clause only allows the change by passenger with a two-day stopover in a foreign city to confirm the
breach of contract showing of necessity, and the airline company has not been validity of his ticket and the availability of a seat on his next flight
able to demonstrate there was a necessity to change flight out of that city
Held: itinerary.
4. However, no moral damages can be adjudged against the (2) Open-Dated Tickets
1. Yes. In previous cases, the breach of contract of carriage airline company since the evidence show that the staff of the
consisted in either the bumping off of a passenger with airline company was motivated to have the plaintiffs reach Singson v. CA, (1997). The contention of airline company in
confirmed reservation or the downgrading of a passenger’s their final destination by any means, and there is no showing refusing to confirm a passenger’s flight reservation back to the
seat accommodation from one class to a lower class. that there was motivation for profit, malice or self-interest. Philippines on the ground that there was no contract of carriage
that could be breached because the client’s ticket was open-dated 3. Under a general pool partnership agreement, ticket-issuing nationals of the forum and the tickets is issued in such State by
is untenable. To begin with, he round trip ticket issued by the airline is the principal in a contract of carriage, while the the defendant airline.
carrier to the passenger was in itself a complete written contract endorsee-airline is the agent.
by and between the carrier and the passenger and had all the 4. Consequently, when the breach of contract occurs not on its Zalamea v. CA, (1993). In a suit for recovery of damages for
elements of a complete written contract, to wit: consent, cause or flight, but on that to another airline, the principal ticket- breach of contract of carriage by a foreign airline company, the
consideration and object; and more importantly, it was already issuing airline is liable. law of the place where the airline ticket was issued (lex loci
partially executed. 5. The liability of the ticket-issuing airline remained and does contractus) shall be applied by the court when the passengers are
not cease, regardless of the fact that another airline had residents and nationals of the forum and the ticket is issued in
(3) Rules of Liability on Airline Pooling Agreements undertaken to carry the passengers to one of their such state by the defendant airline. Therefore, in case the tickets
destinations. were sold and issued by a foreign airline in the Philippines to
American Airlines v. CA, (2000). Nature of IATA – A contract of Filipinos, the applicable law would be Philippine law.
international carriage by air although performed by different Lufthansa v. German Airlines v. CA, (1994). An airline company
carriers under a series of airline tickets constitutes a single which issued a confirmed ticket to a passenger covering a five-leg 10. Damages Recoverable (Subject to Limitation of Liability
operation. Members of the IATA are under a general pool trip abroad different airlines can be held liable for damages Clause)
partnership agreement wherein they act as agents of each other occasioned by the “bumping-off” by one of the airlines contracted
in the issuance of tickets to contracted passengers to boost ticket to carry him to a particular designation of the five-leg trip. Sec. 2 In an action based on culpa contractual, the damage recoverable
sales worldwide and at the same time provide passengers easy of Art. 30 of the Warsaw Convention which expressly stipulates are as follows:
access to airlines which are otherwise inaccessible in some parts that in cases where the transportation of passengers or goods is
of the world. performed by various successive carriers, the passenger can take (a) Actual damages (dano emergente) – are expenses for
action only against the carrier which performed the medicine, hospitalization, etc.
A member airline which enters into a contract of carriage transportation, during which the accident or delay occurred, (b) Unrealized profits (lucro cesante) – are always recoverable
consisting of a series of trips to be performed by different carriers cannot apply to a situation of “bumping-off” of a passenger. as compensatory damages which shall be fixed by
is authorized to receive the fare for the whole trip and through determining the net yearly income of the injured or
the required process of interline settlement of accounts by way of The issuance of a ticket by the main airline company covering the deceased passenger and multiplying the same by the
IATA Clearing House an airline which undertook to transport over entire five-leg trip abroad successive carriers clearly shows that number of years that he was expected to live or lead a
the route covered by the unused portion of the conjunction the issuing airline is the principal in the contract of carriage, and gainful existence as determined by mortality tables of life
tickets, such airline is deemed to have tacitly recognized its IATA should be taken as a guarantee that the successive carriers, would insurance companies of the Philippines
commitment to act as agent of the principal contracting airline honor the ticket, assurance of a space therein and transport for (c) Moral damages – awarded in culpa contractual in the
and thereby assumed the obligation to take the place of the him on each of the particular segments of the trip. following:
carrier originally designated in the original conjunction ticket.
KLM v. CA, (1975). An airline ticket providing that carriage by (1) Where mishap resulted in the death of a passenger (Art.
China Airlines v. Chiok, (2003) successive air carriers is to be regarded as a “single operation” 1764 in relation to Art. 2206, CC; Japan Airlines v Simangan,
makes the issuing carrier liable for the tort conduct of the other 2008)
Facts: carriers as provided in Art. 373 of the Code of Commerce; and (2) When carrier was guilty of fraud or bad faith, even if death
that a provision at the back of the ticket limiting liable to one’s did not result (Art. 2220, CC; Sabena Belgian World Airlines
1. CAL issued an airline ticket to suing passengers, and own conduct does not rebut the liability. v. CA, 1989)
thereafter endorsed to PAL the Hong Kong-to-Manila
segment (4) Principle of Lex Loci Contractus  If the cause of action is culpa acquilina where passenger
2. Because of breach committed during that segment, suffered physical injuries, there is no need to prove that the
passenger sues CAL for recovery of damages. United Airlines v. CA, (2001). The general under doctrine of lex carrier acted fraudulently or in bad faith.
3. CAL pointed to PAL as the airline liable for the breach loci contractus is that the law of the place where a contract is
made or entered into governs with respect to its nature and Lufthansa German Airlines v. IAC, (1992). The inability of the
Issue: WON CAL may be held liable validity, obligation and interpretation; and this is true even private respondents to prove fraud and bad faith on the part of
though the place where the contract was made is different from the airlines does not entitle them to moral damages.
Held: the place where it is to be performed, and particularly so, if the
place of the making and the place of performance are the same. PAL v. CA, (2008). In breach of a contract of carriage, moral
1. CAL cannot evade liability for the incident even though it damages may be recovered when:
may have been only a ticket issuer for the Hong Kong-Manila In this case, although the contract of carriage is performed in the
segment. U.S., the tickets were purchased in the Philippines, and therefore (1) The mishap results in the death of a passenger; or
2. The jurisprudential rule is that the contract of carriage has Philippine law must apply. Even when the tickets were “rewritten (2) Where the carrier is guilty of fraud or bad faith; or
always been treated as a single operation, which rule is in Washington D.C., such fact did not change the nature of the (3) Where the negligence of the carrier is so gross and reckless
supported by the Warsaw Convention and the existing original contract of carriage entered into in the Philippines. Hence, as to virtually amount to bad faith
practice of IATA the court should apply the law of the place where the airline
tickets were issued, when the passengers are residents and
The award of exemplary damages is warranted where the air Facts: (c) Moral damages
carrier acted recklessly and malevolently in transporting the
passengers, and its gross negligence amounting to bad faith 1. Zulueta was a passenger on a PAN-AM flight with his wife Damages for loss of earning capacity may be awarded despite the
entitled the latter to moral damages. and children from San Francisco to Manila. On a stopover at absence of documentary evidence when:
Wake Island, the passengers were told that the plane would
PAL v. Miano, (1995) leave in 30 minutes (a) The deceased is self-employed earning less than the
2. After 30 minutes, Zulueta failed to show up, the crew had to minimum wage under current labor laws, and judicial notice
Facts: look for him. When he was found, the plane captain called may be taken of the fact that in the deceased’s line of work
Zulueta a “brown monkey”. no documentary evidence is available; or
1. Miano took PAL’s Mabuhay Class, bound for Frankfurt, 3. Zulueta answered back and a bitter exchange followed. (b) The deceased is employed as a daily wage worker earning
Germany, with immediate onward connecting flight via 4. The captain got angry and ordered the crew to unload less than the minimum wage under current labor laws.
Lufthasa flight to Vienna. Zulueta’s baggage, and he was left behind.
2. When Miano arrived in Vienna, his baggage was missing and 5. Upon being able to reach Manila, Zulueta filed an action to Moral damages cannot be lumped with exemplary damages
was only delivered to him 11 days afterwards, with a camera recover moral damages. because they are based on different jural foundations. For actual
missing. damages, only substantiated and proven expenses of those that
3. Miano filed a suit for recovery of the cost of the camera, the Issue: WON Zulueta is entitled to moral damages appear to have been genuinely incurred in connection with the
cost of transporting luggage and for moral and exemplary death, wake or burial of the victim will be recognized.
damages, plus attorney’s fees. Held: Yes. The SC awarded P500,000 as moral damages and
4. The trial court found that PAL’s actuation was not attended P50,000 as attorney’s fees for the harsh treatment of Zulueta. (1) Statutory Value of Life Lost
by bad faith, but it awarded damages and attorney’s fees.
Lopez v. PAN-AM, (1966) Sulpicio Lines, Inc. v. CA, (1995). In case of death of a passenger,
Issue: WON PAL may be held liable for breach of contract of although under Art. 2206, CC only deaths caused by a crime as
carriage Facts: quasi-delict are entitled to actual and compensatory damages
without the need of proof of said damages, however, Art. 1764
Held: 1. VP Lopez with his wife, daughter and son-in-law had tickets expressly makes Art. 2206 applicable to “the death of a passenger
for first class seats on PAN-AM bound for San Francisco. caused by the breach of contract by a common carrier”.
1. In breach of contract of carriage by air, moral damages are 2. When they arrived in Tokyo, the plane’s crew found out that Accordingly, a common carrier is liable for actual or compensatory
awarded only if the defendant acted fraudulently or in bad the first class tickets had been oversold, and Lopez and his damages for the death of its passengers caused by breach of
faith. family were compelled to take the economy seats. contract of transportation. The award of damages under Art. 2206
2. On the other hand, exemplary damages can only be awarded 3. When the plane arrived at San Francisco, Filipino officials for death of a passenger has been increased to P50,000.
if the defendant acted in wanton, fraudulent, reckless, and the Filipino community with a band waited for Lopez to
oppressive or malevolent manner. appear from the first class section, but he did not as he was (2) Loss of Earning Capacity (presented in the order of
3. The findings of the lower court clearly showed that PAL was in the economy section. jurisprudential development)
never in bad faith and took proper remedies to locate the 4. Lopez was humiliated; thus he filed this suit to recover moral
luggage. damages. Davila v. PAL, (1973)
4. The award of attorney’s fees must be deleted where the
award of moral and exemplary damages are eliminated. Issue: WON VP Lopez is entitled to moral damages Facts:
5. The further delay in tracing the baggage was also attributed
to Miano since there was not tracer telex. Held: 1. Davila was a passenger in a PAL plane bound from Iloilo to
6. “A tracer telex, an airline lingo, is an action of any station Manila, and which was supposed to follow the amber route
that the airlines operate from whom a passenger may 1. PAN-AM should have informed Lopez of the possible which required it to curve from the Mindoro mountains.
complaint or have not received his baggage upon his arrival. downgrading to prevent humiliation. 2. Pilot did not follow said route and the plane crashed, with all
The tracer telex, which contained information of the 2. The Court awarded Lopez large amounts (P300,000 in moral crew and passengers perishing.
luggage, is matched with tagless luggage for identification” damages and P150,000 as attorney’s fees), in view of the 3. Lower court granted Davila’s heirs P6,000 as compensatory
importance of the person of the passenger. damages.
PAL v. Lao Lim, (2012). Although exemplary damages are not 4. PAL appealed.
recoverable as a matter of right, nonetheless the grant of (d) Liability for Death of Passengers
exemplary damages was in order since the respondent has been Issue: WON the award of damages to Davila’s heir
found entitled to temperate damages, especially so when the Victory Liner, Inc. v. Gammad, (2004). The common carrier, in
airline acted in bad faith by not informing the passengers of the breach of its contract of carriage that results in the death of a Held: Since Davila was earning P7,000 at the time of his death and
erroneous cancellation of their bookings on the flight. passenger, is liable to pay the following amounts: a life expectancy of 25 years more, the SC increased the
compensatory damages from P6,000 to P175,000 by multiplying
Zulueta v. PAN-AM, (1972) (a) Indemnity for death; the deceased’s yearly income with his life expectancy based on
(b) Indemnity for loss of earning capacity; and mortality tables of life insurance companies in the Philippines.
11. Warsaw Convention When contract of air carriage is a contract of international
MD Transit v. CA, (1979). Modified the Villa Rey Transit and Davila transportation, provisions of the Convention automatically apply
rulings by holding that instead of taking the gross earning only the GSIS v. Pacific Airways Corp., (2010). To ascertain who among the and exclusively govern rights and liabilities of airline and its
net earnings per year was multiplied by the number of years of aircraft pilots involved in an accident is liable for negligence, passengers.
life expectancy. reference must be made to the applicable rules governing the
specific traffic management of aircrafts at an airport. The Rules of Mapa v. CA, (1997). There are two (2) categories of “international
People v. More, (1999). SC reiterated the long-established the Air Transportation Office (ATO) apply to all aircrafts registered transportations”:
formula to determine lost earnings, to wit: in the Philippines, which, among others, provide that the aircraft
on take-off roll undisputedly has the right of way. (a) Where the place of departure and place of destination are
Net Earning Capacity = Life Expectancy x Gross Annual Income – situated within the territories of two High Contracting
Living Expenses For disregarding PAL’s right of way, Pacific Airways Corp.’s pilots Parties regardless of whether or not there be a break in the
were grossly negligent. Also, since the pilots-in-command have transportation or a transshipment; and
“Life Expectancy” – accepted formula for determining life the final authority as to the disposition of the aircraft, they (b) Where the place of departure and the place of destination
expectancy is 2/3 multiplied by (80 minus age of the deceased) cannot, in case of collision occurs, pass the blame to Air are within the territory of a single High Contracting Party if
per Negros Aviation Co., Inc. v. CA, (1997). Transportation Office (ATO) for issuing clearance that turn out to there is agreed stopping place within territory subject to the
be unsuitable. sovereignty, mandate, or authority of another power, even
“Gross Annual Income” – deceased’s annual income before though the power is not a party to the Convention.
deduction of living expense (50% of gross annual income), per South African Airways v. CIR, (2010). Off-line carriers having
Davila v. PAL, (1973) and Villa Rey Transit, Inc. v. CA, (1970) general sales agents in the Philippines, are engaged in business in When the airline tickets evidencing the contract of transportation
the Philippines and their income from sales of passage documents between Mapa and TWA, which were purchased in Bangkok, show
“Living Expenses” – computed at 50% of gross annual income, per here is income from within the Philippines. In other words, as long the place of departure and the place of destination to be within
People v. Panida, (1999) and People v. Verde, (1999) as the uplifts of passengers and cargo occur to or from the U.S., the contract cannot come within the purview of the first
Philippines, income is included in Gross Philippine Billings. category of “international transportation”
Tugade, Sr. v. CA, (2003). In determining the indemnity for loss of
earning capacity, the SC uses the following formula: PAL v. CA, (2008). When an airline issues a ticket to a passenger, The linkage of the contract to the Manila-Los Angeles travel
confirmed for a particular flight on a certain date, a contract of tickets obtained by the Mapas from PAL cannot bring the
Loss of Earning Capacity = Life Expectancy x (Gross Annual carriage arises – the passenger has every right to expect that he arrangements within the second category, where the same were
Income – Living Expenses) be transported on that flight and on that date, and it becomes the filled-up only by the Mapas in response to the query “Your
airline’s obligation to carry him and his luggage safely to the Complete Itinerary” at the time they claimed for their lost pieces
Life Expectancy = 2/3 (80 – age at time of death) agreed destination without delay. of baggage
Living Expenses = 50% of gross annual income
(a) Nature and Scope of Warsaw Convention Lhuillier v. British Airways, (2010). “International carriage”
Perena v. Zarate, (2012). The basis for the computation of the means any carriage in which, according to the contract made by
dead passenger’s earning capacity was not what he would have Santos III v. Northwest Orient Airlines, (1992). The Warsaw the parties, the place of departure and the place of destination,
become or what he would have wanted to be if not for its Convention is a treaty commitment voluntarily assumed by whether or not there be a break in the carriage or a
untimely death, but the minimum wage in effect at the time of his Philippine government and, as such, has the force and effect of transshipment, are situated either within the territories of two
death. Our law itself states that the loss of the earning capacity of law in this country. High Contracting Parties, or within the territory of a single High
the deceased shall be the liability of the guilty party in favor of the Contracting Party, if there is an agreed stopping place within a
heirs of the deceased, and shall in every case be assessed and PAL v. Savillo, (2008). The Warsaw Convention applies to “all territory subject to the sovereignty, suzerainty, mandate, or
awarded by the court “unless the deceased on account of international transportation of person, baggage of goods authority of another Power, even though that Power is not a party
permanent physical disability not caused by the defendant, had performed by any aircraft for hire”. It seeks to accommodate or to the Warsaw Convention. Tortious conduct as ground of
no earning capacity at the time of his death” balance the interests of passengers seeking recovery for personal complaint arising from an international carriage are well within
injuries and the interests of air carriers seeking to limit potential the purview of the Warsaw Convention.
(3) Moral Damages in Event of Death of Passenger liability. It employs a scheme of strict liability favoring passengers
and imposing damage caps to benefit air carriers. Under Art. 28(1) of the Warsaw Convention, which is jurisdictional
Trans World Air Lines v. CA, (1998). GR: Moral damages are not in character, the plaintiff may bring the action for damages
recoverable in culpa contractual American Airlines v. CA, (2000). The Warsaw Convention, to before:
which the Philippines is a party and which has the force and effect
XPN: When the presence of bad faith was proven. of law in this country, applies to all international transportation (a) The court where the carrier is domiciled;
of persons, baggage or goods performed by an aircraft (b) The court where the carrier has its principal place of
However: Phil. Rabbit Bus Lines v. Esguerra, (1982). In breach of gratuitously or for hire. As enumerated in its Preamble, one of the business;
contract of carriage, moral damages may be recovered when it objectives is “to regulate in a uniform manner the conditions of (c) The court where the carrier has an establishment by which
results in the death of a passenger. international transportation by air” the contract has been made; or
(d) The court of the place of destination
(b) Salient Aspects of the Warsaw Convention application of the forum’s rules on interruption of prescriptive 2. The baggage was eventually delivered to Cebu City after
periods, as Art. 29(2) was intended only to let local laws much delay.
(1) Provision on Valuation of Cargo determine whether an action had been commenced within the 3. PAL avers that the express provisions on the tickets
two-year period. stipulating that liability for delay in delivery of baggage shall
British Airways v. CA, (1998). Under Art. 22(1) of the Warsaw be limited to US$20.00 per kilo of baggage delayed, unless
Convention, a contract of air carriage requires declaration by (c) Proper Coverage of Warsaw Convention the passenger declares a higher valuation, constitutes a
passenger of a higher value to recover a greater amount, and that contract of carriage between PAL and the passenger-spouses
air carrier is not liable for loss of baggage in an amount in excess PAL v. CA, (1996). While the Warsaw Convention has the force in compliance with the provisions of the Warsaw
of the limits specified in the tariff which was filed with the proper and effect of law, it does not operate as an exclusive enumeration Convention.
authorities, such tariff being binding on the passenger regardless of instances when carrier shall be liable for breach of contract or 4. It was shown from the facts that PAL was guilty of bad faith
of the passenger’s lack of knowledge thereof or assent thereto. as an absolute limit of the extent of liability, nor does it preclude through inattention to and lack of care for the interests of its
operation of the Civil Code or other pertinent laws. passengers, who were not accorded proper
Nevertheless, there can be no blind reliance on adhesion of accommodations, nor adequate transportation facilities, and
contracts where: PAL v. Savillo, (2008). The cardinal purpose of the Warsaw who had to fend for themselves.
Convention is to provide uniformity of rules governing claims
(a) The fact and circumstances justify that they should be arising from international air travel. This, it precludes a passenger Issue: WON PAL may be held liable for the amount of baggage
disregarded; and from maintaining an action for personal injury damages under stipulated
(b) When the benefits of limited liability have been waived local law when his or her claim does not satisfy the condition of
when the air carrier failed to raise timely objections during liability under the Warsaaw Convention. Held:
the trial when questions and answer regarding the actual
claims and damages sustained by the passenger were asked Jurisprudence in the Philippines and the U.S. also recognize that 1. PAL liable beyond the limited amount stipulated.
the Warsaw Convention does not “exclusively regulate” the 2. Although the Warsaw Convention has the force and effect of
(2) Provision on Limiting Liability relationship between passenger and carrier on an international law in the Philippines, being a treaty commitment assumed
flight, since there are claims that are considered to be outside the by the Philippine Government, said convention does not
Northwest Airlines v. CA, (1998). Sec. 22(2) of the Warsaw coverage of the Warsaw Convention. operate as an exclusive enumeration of the instances for
Convention does not operate as an exclusive enumeration of the declaring a carrier liable for breach of contract of carriage or
instances of an airline’s liability, or as an absolute limit of the Art. 19 of the Warsaw Convention provides for liability on the part as an absolute limit of the extent of that liability.
extent of that liability. The Convention’s provisions do not of a carrier for “damages occasioned by delay in the 3. The Warsaw Convention declares carrier liable in the
regulate or exclude the following areas: transportation by air of passengers, baggage or goods” Art. 24 enumerate cases and under certain limitations.
excludes other remedies by further providing that (1) in the cases 4. However, it must not be construed to preclude the
(a) Liability for other breaches of contract by the carrier; covered by Art. 18 and 19, any action for damages, however, operation of the Civil Code and pertinent laws.
(b) Misconduct of its officers and employees; and founded, can only be brought subject to the conditions and limits 5. It does not regulate, much less exempt, carrier from liability
(c) For some peculiar or exceptional type of damage set out in the convention”. Therefore, a claim covered by the for damages for violating the rights of its passengers under
Warsaw Convention can no longer be recovered under local law if the contract of carriage, especially if willful misconduct on
Sabena Belgian World Airlines v. CA, (1996). The Warsaw the statute of limitations of two years has already lapsed. the part of the carrier’s employees is found or established,
Convention denies to the carrier availment of the provisions which is the case here.
which exclude or limit the carrier’s liability if the damage is caused (1) Treatment of Airline Passengers
by his willful misconduct or by such default on his part as, in (3) Distinction Between Damages to Baggage and Humiliation
accordance with the law of the court seized of the case, is United Airlines v. Uy, (1999). A cause of action arising from Suffered by Passenger
considered to be equivalent to willful misconduct, or if the slashing and loss of personal effects by an airline passenger is well
damage is similarly caused by any agent of the carrier acting within coverage of the Warsaw Convention; while a cause of PAL v. Savillo, (2008). In United Airlines v. Uy, this Court
within the scope of his employment action arising from the shabby and humiliating treatment received distinguished between the (1) damage to the passenger’s baggage
from airline employees is not. and (2) humiliation he suffered at the hands of the airline’s
Under domestic law and jurisprudence, the attendance of gross employees. The first cause of action was covered by the Warsaw
negligence (given the equivalent of fraud or bad faith) holds the (2) Off-Loading of Baggage Convention which prescribes in two (2) years, while the second
common carrier liable for all damages which can be reasonably was covered by the provisions of the Civil Code on torts, which
attributed, although unforeseen, to the non-performance of the PAL v. CA, (1996) prescribes in four (4) years
obligation, including moral and exemplary damages.
Facts: (4) Recovery of Moral Damages for Death of Passenger: Art.
(3) On Limitation to Time to File Action 1764 in Relation to Art. 2206(3), CC
1. The baggage of spouses, who were passengers in PAL Flight
United Airlines v. Uy, (1999). The two (2)-year limitation to file an PR 101 from San Francisco to Manilla were off-loaded during Sulpicio Lines, Inc. v. Curso, (2010). GR: Moral damages are not
action for recovery in Art. 29 of Warsaw Convention is an absolute the stop-over at Honolulu due to weight limitations. recoverable in actions for damages predicated on a breach of
bar to suit and not to be made subject to the various tolling contract, unless there is fraud or bad faith.
provisions of the laws of the forum – it therefore forecloses the
XPN: Moral damages may be awarded in case of breach of passenger with Singapore Airlines in Manila, and cannot be Eastern Shipping, Inc. v. IAC, (1978). The law of the country to
contract of carriage that results in death of a passenger, under considered as contract of carriage separate and distinct from which goods are to be transported governs the liability of the
Art. 1764, in relation to art. 2206(3), CC that entered into with Singapore Airlines. common carrier in case of their loss, destruction or deterioration.
2. This position is supported by Art. 1(3) of the Convention
The surviving brothers and sisters of a passenger of a vessel that which provides that “transportation to be performed by 2. No Obligation to Accept Cargo
sinks during a voyage are not entitled to recover moral damages several successive carriers shall be deemed, for the purposes
from the vessel owner as a common carrier. The omission from of this convention, to be one undivided transportation, PAL v. CA, (1996). There is no absolute obligation on the part of
Art. 2206(3), CC of brothers and sisters of the deceased passenger whether it has been agreed upon under the form of a single carrier to accept a cargo. It is only when a common carrier accepts
reveals the legislative intent to exclude them from the recovery of contract or a series of contracts, and it shall not lose its cargo for shipment for valuable consideration does it assume the
moral damages for mental anguish by reason of the death of the international character merely because one contract or risk of delivering it in good condition as when it was loaded.
deceased – the solemn power and duty of the courts to interpret series of contracts is to be performed entirely within the
and apply the law do not include the power to correct the law by territory subject of the sovereignty, suzerainty, mandate or
3. No Obligation to Deliver Cargo Immediately in Absence of
reading into it what is not written. authority of the same High Contracting Party”
Stipulation
(5) Use of Delaying Tactics by Airline III. Contract of Carriage of Cargo
Maersk Line v. CA, (1993). While it is true that common carriers
United Airlines v. Uy, (1999). The mandate under Art. 29 of the are not obligated by law to carry and to deliver merchandise, and
1. Applicable Law Based on Destination persons are not vested with the right to prompt delivery, unless
Warsaw Convention that an action for damages should be filed
within two (2) years from the arrival at the place of destination so specifically stated and agreed upon, delivery of shipment of
does not apply where the airline company employed delaying (a) Where Destination is Philippine Port (Art. 1753) cargo should at least be made within a reasonable time and
tactics. cannot be left to the sole will of the carrier.
Art. 1753. The law of the country to which the goods are to be
(d) Jurisdiction of Local Courts under Warsaw Convention transported shall govern the liability of the common carrier for 4. When Contract of Carriage of Goods Begin?
their loss, destruction or deterioration.
American Airlines v. CA, (2000) Cia. Maritima v. Insurance Co. of North America, (1964). In
NDC v. CA, (1988). Philippine laws will still apply even when the general, the best evidence of the contract of carriage of cargo is
Facts: collision actually occurred in foreign waters, so long as the port of the bill of lading, or in case of an airplane, a waybill. But: Cargo
destination was in the Philippines. can be transported even without it. It is possible to have a
1. Passenger purchased from Singapore Airlines in Manila contract of carriage of cargo even without a bill of lading being
conjunction tickets for a 9-leg international destination that Philippine Charter Insurance v. Neptune Orient Lines, (2008). issued.
would end in Geneva-Copenhagen-New York. Since the subject cargoes were lost while being transported by
2. In Geneva, the passenger decided to forego his trip to respondent common carrier from Hong Kong to the Philippines, Asian Terminals, Inc. v. Philam Insurance Co. Inc., (2013). Under
Copenhagen and go straight to New York. Philippine law applies pursuant to the Civil Code which provides: Art. 1736, CC, from the time cargo is unconditionally delivered to
3. He exchanged the unused portion of the conjunction ticket the carrier and received by the carrier for transportation, the
with American Airlines which issued its own one-way ticket Art. 1753. The law of the country to which the goods are to be liability of the carrier arises.
from Geneva to New York. transported shall govern the liability of the common carrier for
4. At Geneva airport, the passenger was treated with such their loss, destruction or deterioration. Saludo, Jr. v. CA, (1992). The extraordinary responsibility of a
indignity that upon his return to the Philippines he filed an common carrier begins from the time the goods are delivered to
action to recover damages against American Airlines, which Art. 1766. In all matters not regulated by this Code, the rights and the carrier.
pleaded lack of jurisdiction by the local courts under Art. obligations of common carriers shall be governed by the Code of
28(1) of Warsaw Convention. Commerce and by special laws. 5. Bill of Lading

Issue: WON the local trial courts can take cognizance of an action The rights and obligations of respondent common carrier are thus (a) Nature and Function of Bill of Lading
for damages filed by a passenger against an international airline governed by the provisions of the Civil Code, and the COGSA,
company in view of Art. 28(1) of the Warsaw Convention which is a special law, applies suppletorily.  The Code of Commerce mentions the contents of a bill of
lading twice: Art. 350 and 706.
Held: (b) Where Destination is a Foreign Port – law of such foreign  This is because of the three (3) important roles that a bull of
country will apply, per Art. 1753, CC lading plays:
1. Yes. Although the Philippines is neither the domicile nor the
principal place of business of American Airlines, nor is the Santos III v. Northwest Orient Airlines, (1992). A passenger’s (1) Best evidence of existence of contract of carriage of cargo;
place of destination under the facts given, because the “ultimate destination” and not “an agreed stopping place” (2) Important role it plays as commercial document whereby, if
issuance by American Airlines of a new ticket in Geneva to determines the laws of the country applicable in a suit against negotiable, ownership may be transferred by negotiation.
cover a one-way trip to New York should be considered as international carrier. Under Art. 1636, CC, bill of lading is mentioned as a
part of the contract of transportation entered into by the document of title.
(3) Receipt of the cargo (per COGSA) (2) It has been fairly and freely agreed upon by the parties.
Third, it is the evidence of the existence of the contract of carriage
Provident Insurance Corp. v. CA, (2004). A bill of lading, which is providing for its terms and conditions thereof (Kung Hua Paper The rationale for this rule is to bind the shippers by their
in the nature of a contract of adhesion, defines the rights and Products Co. Inc. v. CA, G.R. No. 11683, February 12, 1998) agreement to the value (maximum valuation) of their goods.
liabilities of the parties in reference to the contract of carriage
Belgian Overseas Chartering v. Phil. First Insurance, (2002). In a However, COGSA establishes a statutory provision limiting the
Maersk Line v. CA, (1993). Bills of lading, although contracts of nutshell, the acceptance of the bill of lading by the shipper and carrier's liability in the absence of a shipper's declaration of a
adhesion, are not prohibited and the terms thereof binding, since the consignee, with full knowledge of its contents, give rise to the higher value in the bill of lading. The provisions on limited liability
the party is free to reject it, and yet has accepted the terms presumption that it constituted a perfected and binding contract. are as much a part of the bill of lading as though physically in it
thereof. But the terms of a bill of lading which create an absurd and as though placed there by agreement of the parties.
situation as having the effect of practically leaving the date of Saludo, Jr. v. CA, (1992). A bill of lading is a written
arrival of the shipment to the sole determination and will of the acknowledgement of the receipt of the goods and an agreement Belgian Overseas Chartering v. Phil. First Insurance, (2002)
carrier cannot be enforced. to transport and deliver them at a specific place to a person
named or on his order; acceptance thereof without dissent raises Facts:
Unsworth Transport International (Phil.) v. CA, (2011). A bill of the presumption that all terms therein were brought to the
lading is a written acknowledgement of the receipt of goods and knowledge of the shipper and agreed to by him and estops him 1. The bill of lading contained no stipulation limiting the
an agreement to transport and to deliver them at a specified place thereafter from denying the same. carrier’s liability and neither did the shipper declare a higher
to a person named or on his or her order. It operates both as a valuation of the goods to be shipped.
receipt and as a contract. (b) Binding Effect of Provisions of Bill of Lading 2. There was however an insertion of the phrase “L/C
90/0244”.
Malayan Insurance Co. v. Jardine Davies Transport, (2009). The Telengtan Brothers v. CA, (1994). A bill of lading operates both as
presumption that the bill of lading, which may be relied upon to a receipt and a contract. As a contract, its terms and conditions Issue: WON if the goods are lost, can the shipper claim a higher
support a claim for restitution, constitutes prima facie evidence of are conclusive on the parties, including the consignee, as to the value than the $500 limited provided in the COGSA on the basis
the goods therein described may be rebutted by evidence casting route, destination, freight rates or charges, and stipulates the of the value appearing in the L/C
doubts on its veracity. Thus, in the absence of clear, convincing rights and obligations assumed by the parties.
and competent evidence to prove that the cargo indeed weighed, Held:
albeit the bill of lading qualified it by the phrase “said to weight”, MOF Company v. Shin Yang Brokerage Corp., (2009). The bill of
6,599.23 MT at the port of origin when it was loaded onto the lading is oftentimes drawn up by the shipper/consignor and the 1. No. The inserted reference to the L/C does not amount to a
ship, the fact of loss or shortage in the cargo upon its arrival in carrier without the intervention of the consignee. However, the declaration of the value of the goods as required by the bill.
Manila cannot be definitively established. latter can be bound by the stipulations of the bill of lading when: 2. The notation was made only for the convenience of shipper
and the bank possessing the letter of credit.
Lorenzo Shipping v. Chubb and Sons, Inc., (2004). A bill of lading, (a) There is a relation of agency between the shipper or 3. The bill of lading is entirely separate from the L/C
aside from being a contract and a receipt, is also a symbol of the consignor and the consignee or arrangement
goods covered by it. A bill of lading which has no notation of any (b) When the consignee demands fulfillment of the stipulation
defect or damage in the goods is called a “clean bill of lading”. A of the bill of lading which was drawn up in its favor. Federal Express v. American Home Assurance, (2004). Stipulated
clean bill of lading constitutes prima facie evidence of the receipt (c) The availment of the stipulation pour autrui, i.e. when the Period of Claim – The filing of a claim with the carrier within the
by the carrier of the goods as therein descried. consignee demands before the carrier the fulfillment of the limitation therefor actually constitutes a condition precedent to
stipulation of the bill of lading which is drawn up in its favor. the accrual of a right of action against a carrier for loss of or
Keng Hua Paper Products v. CA, (1998). A bill of lading serves two damage to the goods.
(2) functions: Phil. Charter Insurance Corp. v. Owner of M/V “National Honor”,
(2005). The statement in the bill of lading, that the shipment was (c) Types of Bills of Lading
(a) It is a receipt for the goods shipped; and in apparent good condition, is sufficient to sustain a finding of
(b) It is a contract by which three (3) parties – namely: the absence of defects in the merchandise, but such statement will Magellan Manufacturing Corp. v. CA, (1991). An “on board” bill of
shipper, the carrier, and the consignee – undertake specific create a prima facie presumption only as to the external condition lading is one where it is stated that the goods have been received
responsibilities and assume stipulated obligations. and not to that not open to inspection. on board the vessel which is to carry the goods.

2015 Bar, Q. III(a): Discuss the three-fold character of a bill of Belgian Overseas Chartering v. Phil. First Insurance, (2002). A “receiver shipment” bill of lading is one in which it is stated that
lading? Limitation of Value of Goods Recoverable – a stipulation in the the goods have been received for shipment with or without
bill of lading limiting to a certain sum the common carrier's specifying the vessel by which the goods are to be shipped.
A: A bill of lading is considered a receipt for the goods shipped to liability for loss or destruction of a cargo -- unless the shipper or
the common carrier. owner declares a greater value -- is sanctioned by law. There are, (d) Parties Bound by Terms of Bill
however, two conditions to be satisfied:
It also serves as the contract by which three parties, namely, the (1) On Consignee
shipper, the carrier, and the consignee undertake specific (1) The contract is reasonable and just under the circumstances,
responsibilities and assumed stipulated obligations. and
Everett Steamship v. CA, (1998). Even when the consignee is not arrangement are to be maintained in a state of perpetual Bankers & Manufacturers v. CA, (1992)
a signatory to the contract of carriage between the shipper and separation."
the carrier, which among others limited the liability of the carrier Facts: Cases of copper tubings are imported by placement in
for loss or destruction of the cargo to a certain sum, unless the 2. A transaction involving the purchase of goods may also containers, with the recital of the bill of lading as “said to
shipper or the owner declares a higher value, the consignee can require, apart from a letter of credit, a contract of contain”, or “shipper’s load and count”, and the containers were
still be bound by the contract. When a consignee formally claims transportation specially when the seller and the buyer are accepted at pier-side in good condition, and one of the containers
reimbursement for the missing goods from the carrier and not in the same locale or country, and the goods purchased was stripped in the presence of the petitioner’s surveyors, while
subsequently filed a case against the latter based on the same bill have to be transported to the latter. the other two (2) were not moved from the container yard and
of lading containing the limiting stipulation, then the consignee 3. Hence, the contract of carriage, as stipulated in the bill of were not stripped; but later it was found that the shipment
has effectively accepted the provisions of the bill of lading and lading in the present case, must be treated independently of sustained losses by way of theft and pilferage.
thereby made itself a party thereto. the contract of sale between the seller and the buyer, and
the contract for the issuance of a letter of credit between Issue: WON the carrier is liable
Keng Hua Paper Products v. CA, (1998). A "bill of lading delivered the buyer and the issuing bank.
and accepted constitutes the contract of carriage even though not 4. Any discrepancy between the amount of the goods Held:
signed," because the "(a)cceptance of a paper containing the described in the commercial invoice in the contract of sale
terms of a proposed contract generally constitutes an acceptance and the amount allowed in the letter of credit will not affect 1. No. If any inspection of goods was to be done in order to
of the contract and of all of its terms and conditions of which the the validity and enforceability of the contract of carriage as determine the condition thereof, the same should have
acceptor has actual or constructive notice.” In a nutshell, the embodied in the bill of lading. been done at pier-side.
acceptance of a bill of lading by the shipper and the consignee, 5. As the bank cannot be expected to look beyond the 2. The shipment was accepted by petitioner in good order, and
with full knowledge of its contents, gives rise to the presumption documents presented to it by the seller pursuant to the therefore has no cause of action against the carrier.
that the same was a perfected and binding contract. letter of credit, neither can the carrier be expected to go
beyond the representations of the shipper in the bill of
6. When Does Contract of Carriage of Goods End?
When consignee received the bill of lading immediately after lading
shipment’s arrival, having been given an opportunity to examine
the document, its objection six (6) months later is unavailing. (f) Containerization System of Cargo Macam v. CA, (1999). The extraordinary responsibility if the
common carriers lasts from the time the goods are
(2) On Insurer-Subrogee United States Lines v. Commissioner of Customs, (1987). The unconditionally placed in the possession of, and received by the
containerization system was devised to facilitate the expeditious common carrier until the same are delivered, actually or
Philamgen v. Sweet Lines, (1992). An insurer who is subrogated and economical loading, carriage and unloading of cargoes. Under constructively, by the carrier to the consignee, or to the person
to the rights of the insured-consignee is bound by the terms of the this system, the shipper loads his cargoes in a specially designed who has a right to receive them, as provided in Art. 1736, CC.
bill of lading entered into by the consignee, including the container, seals the container and delivers it to the carrier for Thus, delivery of the goods to the acknowledged importer,
stipulated period to file a claim for damage to goods shipped. transportation. The carrier does not participate in the counting of although it is not the person indicated in the bill of lading, would
the merchandise for loading into the container, the actual loading be proper delivery.
(e) Over-Shipment Does NOT Adversely Affect Terms of Bill of thereof nor the sealing of the container. Having no actual
Lading knowledge of the kind, quantity or condition of the contents of Asian Terminals, Inc. v. Philam Insurance Co., (2013). It is settled
the container, the carrier issues the corresponding bill of lading in maritime law jurisprudence that cargoes while being unloaded
based on the declaration of the shipper. The bill of lading generally remain under the custody of the carrier. In this case,
Keng Hua Paper Products v. CA, (1998)
describes the cargo as a container simply and it states the since damage to the goods were caused by stevedores
contents of the container either as advised by the shipper or overtightening of cable sling hold during the discharge from the
Issue: WON the consignee refuse bill of lading on the ground vessel’s hatch to the pier, then the damage to the cargo was
that there was over-shipment of goods than the quantity prefaced by the phrase "said to contain." Clearly then, the matter
quantity, description and conditions of the cargo is the sole incurred during the discharge of the shipment and while under
covered by the L/C? the supervision of the carrier, and the latter is liable for the
responsibility of the shipper.
damage caused to the cargo.
Held:
Reyma Brokerage v. Phil. Home Assurance, (1991). Even in a
“said-to-contain” bill of lading covering containers, when it is Samar Mining Co. v. Nordeutcher Lloyd, (1984)
1. In a letter of credit, there are three distinct and independent
contracts: additionally stated therein by the carrier that “it is a receipt for
the number of packages shown above”, such phrase explicitly Facts:
(1) The contract of sale between the buyer and the seller; admitted that the containerized shipments had actually the
(2) The contract of the buyer with the issuing bank, and number of packages declared by the shipper in the bill of lading, 1. The bill of lading provided that it was effective only for the
(3) The letter of credit proper in which the bank promises to pay and the carrier is liable for the shortage of cargo actually transport of the goods from Germany to Manila.
the seller pursuant to the terms and conditions stated delivered. Such express acknowledgement by the carrier makes 2. From Manila, the goods were to be further transported to
therein. "Few things are more clearly settled in law than that the case an exception to the doctrine enunciated in United States Davao.
the three contracts which make up the letter of credit Lines. 3. The carrier had unloaded and delivered the goods in the
bonded warehouse in Manila. The never reached Davao.
Issue: WON the carrier is liable for the loss of the goods Central Shipping Co. v. Insurance Company of North America, the deterioration, loss, or destruction of the goods happened, the
(2004). The rules for the liability of a common carrier for lost or transporter shall be held responsible.
Held: damaged cargo as follows:
Calvo v. UCPB General Insurance Co., (2002). The extraordinary
1. No. When the carrier under the terms of the bill of lading (a) From the nature of their business and for reasons of public diligence in the vigilance over the goods tendered for shipment
had delivered the goods at the port of destination, at that policy, common carriers are bound to observe extraordinary requires the common carrier to know and to follow the required
point he merely becomes the agent of the consignee and diligence over the goods they transport, according to all the precaution for avoiding damage to, or destruction of the goods
ceases to be liable as carrier for loss or damage of the goods circumstances of each case. entrusted to it for sale, carriage and delivery. To prove the
transported. (b) In the event of loss, destruction or deterioration of the exercise of extraordinary diligence, the common carrier must do
2. Thereafter, loss of goods in its hand for causes beyond its insured goods, common carriers are responsible; that is, more than merely show the possibility that some other party
control and without negligence being proved, cannot sustain unless they can prove that such loss, destruction or could be responsible for the damage. It must prove that it used
a claim for damage against the carrier. deterioration was brought about -- among others -- by “all reasonable means to ascertain the nature and characteristics
"flood, storm, earthquake, lightning or other natural disaster of goods tendered for transport and that it exercised due care in
Lu Do & Lu Ym Corp. v. Binamira, (1957). While delivery of cargo or calamity." the handling thereof. If the improper packaging or, the defects in
to customs authorities is not delivery to consignee as provided in (c) In all other cases not specified under Art. 1734, CC, common the container is known to the carrier or its employees or the
Art. 1736, CC because such goods are still in the hands of the carriers are presumed to have been at fault or to have acted apparent upon ordinary observation, but nevertheless were
Government and the owner has no dominion over them, however negligently, unless they prove that they observed accepted without protest or exception, the carrier is not relieved
the parties may agree to limit the liability of the carrier extraordinary diligence. of liability for damage resulting therefrom.
considering the goods have still to go through inspection of the
customs authorities before they are actually turned over to the Phil. First Insurance Co. v. Wallem Phil. Shipping, (2009). The Republic v. Lorenzo Shipping Corp., (2005). Art. 1733, CC
consignee, and such stipulation is valid because in that situation extraordinary responsibility of the common carrier lasts from the demands that a common carrier observe extraordinary diligence
the carrier loses control of the goods because of a customs time the goods are unconditionally placed in the possession of, over the goods transported by it. Extraordinary diligence is that
regulation. and received by the carrier for transportation until the same are extreme measure of care and caution which persons of unusual
delivered, actually or constructively, by the carrier to the prudence and circumspection use for securing and preserving
(a) Surrender of Bill of Lading Not Always Necessary to consignee, or to the person who has a right to receive them. their own property or rights. This exacting standard imposed on
Establish End of Responsibility and Liability common carriers in a contract of carriage of goods is intended to
Regioinal Container Lines (RCL) of Singapore v. Netherlands tilt the scales in favor of the shipper who is at the mercy of the
Republic v. Lorenzo Shipping Corp., (2005). Under Art. 353 of the Insurance Co. (Phil.), (2009). While there is sufficient evidence common carrier once the goods have been lodged for shipment.
Code of Commerce, the surrender of the original bill of lading is showing that the fluctuation of the temperature in the Hence, in case of loss of goods in transit, the common carrier is
not a condition precedent for a common carrier to be discharged refrigerated container van, as recorded in the temperature chart, presumed under the law to have been at fault or negligent.
of its contractual obligation. If surrender of the original bill of occurred after the cargo had been discharged from the vessel and However, the presumption of fault or negligence, may be
ladings is not possible, acknowledgement of the delivery by was already under the custody of the arrastre operator; overturned by competent evidence showing that the common
signing the delivery receipt suffices. nevertheless, such evidence does not disprove that the condenser carrier has observed extraordinary diligence over the goods.
fan – which caused the fluctuation of the temperature in the
7. Obligation and Liability of Common Carriers refrigerated container – was not damaged while the cargo was Phil. Charter Insurance Corp. v. Owner of M.V “National Honor”,
being unloaded from the ship. It is settled in maritime law (2005). The extraordinary diligence in the vigilance over the goods
(a) Obligation of Carrier – the obligation of the carrier is to take jurisprudence that cargoes while being unloaded generally remain tendered for shipment requires the common carrier to know and
the cargo to the point of destination safely and if the cargo is under the custody of the carrier. to follow the required precaution for avoiding damage to, or
damaged or lost before delivery there is a breach of contract destruction of the goods entrusted to it for sale, carriage and
Unsworth Transport International (Phil.) v. CA, (2011). When a delivery. It requires common carriers to render service with the
freight forwarded undertakes to deliver the goods to the point of greatest skill and foresight and "to use all reasonable means to
Art. 1752. Even when there is an agreement limiting the liability of
destination, it becomes liable as a common carrier, even when the ascertain the nature and characteristic of goods tendered for
the common carrier in the vigilance over the goods, the common
goods are carried by a common carrier contracted by it. shipment, and to exercise due care in the handling and stowage,
carrier is disputably presumed to have been negligent in case of
including such methods as their nature requires."
their loss, destruction or deterioration.
Common carriers, as a general rule, are presumed to have been at
fault or negligent if the goods they transported deteriorated or Delsan Transport Lines v. CA, (2001). Administrative Exoneration
 All that the shipper proves is that the goods arrived in a got lost or destroyed. That is, unless they prove that they Does NOT Necessarily Extinguish Civil Liability – Exoneration of
damaged condition or that they did not arrive at all. exercised extraordinary diligence in transporting the goods. In the vessel’s officers and crew by the Board of Marine Inquiry
order to avoid responsibility for any loss or damage, therefore, merely concerns their respective administrative liabilities. It does
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, they have the burden of proving that they observed such not in any way operate to absolve the common carrier from its
4, and 5 of the preceding article, if the goods are lost, destroyed diligence. Mere proof of delivery of the goods in good order to a civil liability arising from its failure to observe extraordinary
or deteriorated, common carriers are presumed to have been at common carrier and of their arrival in bad order at their diligence in the vigilance over the goods it was transporting and
fault or to have acted negligently, unless they prove that they destination constitutes a prima facie case of fault or negligence for the negligent acts or omission of its employees, the
observed extraordinary diligence as required in article 1733. against the carrier. If no adequate explanation is given as to how determination of which properly belongs to the courts.
Asian Terminals, Inc. v. Simon Enterprise, (2013). Claimant Must simply places on the defendant the burden of going forward with before, during and after the occurrence of flood, storm or other
Still Prove the Damage Sustained – Though it is true that common the proof. Resort to the doctrine, however, may be allowed only natural disaster in order that the common carrier may be
carriers are presumed to have been at fault or to have acted when: exempted from liability for the loss, destruction, or deterioration
negligently if the goods transported by them are lost, destroyed, of the goods. The same duty is incumbent upon the common
or deteriorated, and that the common carrier must prove that it (a) The event is of a kind which does not ordinarily occur in the carrier in case of an act of the public enemy referred to in article
exercised extraordinary diligence in order to overcome the absence of negligence; 1734, No. 2.
presumption, the plaintiff must still, before the burden is shifted (b) Other responsible causes, including the conduct of the
to the defendant, prove that the subject shipment suffered actual plaintiff and third persons, are sufficiently eliminated by the (2) Defect in cargo; and
shortage. evidence; and (3) Defect in packaging or crating of cargo;
(c) The indicated negligence is within the scope of the (4) Act of another party, such as shipper or owner of goods (Art.
(b) Presumption of Negligence defendant's duty to the plaintiff. 1734 and 1743, CC)

Eastern Shipping Lines v. CA, (1994). When goods are lost or Thus, it is not applicable when an unexplained accident may be Art. 1734. Common carriers are responsible for the loss,
arrive in damaged condition, immediately there arises a attributable to one of several causes, for some of which the destruction, or deterioration of the goods, unless the same is due
presumption of failure to observe due diligence on the part of the defendant could not be responsible. to any of the following causes only:
carrier, and there need not be an express finding of negligence to
sustain such liability. Res ipsa loquitur generally finds relevance whether or not a (1) Flood, storm, earthquake, lightning, or other natural disaster
contractual relationship exists between the plaintiff and the or calamity;
Belgian Overseas Chartering v. Phil. First Insurance, (2002). Mere defendant, for the inference of negligence arises from the (2) Act of the public enemy in war, whether international
proof of delivery of goods in good order to a common carrier and circumstances and nature of the occurrence and not from the (3) Act or omission of the shipper or owner of the goods;
of their arrival in bad order at their destination constitutes prima nature of the relation of the parties. (4) The character of the goods or defects in the packing or in the
facie fault or negligence on the part of the carrier. If no adequate containers;
explanation is given as to how the loss, the destruction or the Tabacalera Insurance v. North Front Shipping, (1997). Although (5) Order or act of competent public authority.
deterioration of the goods happened, the carrier shall be held carrier is able to prove that vessel was inspected prior to actual
liable therefore. loading by shipper and found fit to take a load of corn grains; was
issued a permit to sail by the Coast Guard; and the master of the Art. 1743. If through the order of public authority the goods are
Regioinal Container Lines (RCL) of Singapore v. Netherlands vessel testified that the corn grins were farm wet when loaded, seized or destroyed, the common carrier is not responsible,
Insurance Co. (Phil.), (2009). A common carrier is presumed to nevertheless, such matter was disproved by the clean bill of lading provided said public authority had power to issue the order.
have been negligent if it fails to prove that it exercised issued by the carrier which did not contain a notation that the
extraordinary vigilance over the goods it transported. When the corn grains were wet and improperly dried. The master of the Belgian Overseas Chartering v. Phil. First Insurance, (2002).
goods shipped are either lost or arrived in damaged condition, a vessel, being a veteran, should have known at the outset that corn When the cargo is shown to have been damaged, the
presumption arises against the carrier of its failure to observe that grains that were farm wet and not properly dried would presumption of fault or negligence of the common carrier will not
diligence, and there need not be an express finding of negligence eventually deteriorate when stored in sealed and hot arise, when the carrier shows that the damage was due to any of
to hold it liable. compartments as in hatches of a ship. Equipped with this the causes provided for under Art. 1734, CC, thus:
knowledge, the master and his crew should have undertaken
To overcome the presumption of negligence, the common carrier precautionary measures to avoid or lessen the cargo’s possible (1) Flood, storm, earthquake, lightning, or other natural disaster
must establish by adequate proof that it exercised extraordinary deterioration as they were presumed knowledgeable about the or calamity;
diligence over the goods. It must do more than merely show that nature of such cargo. Since no such measure was taken, carrier (2) Act of the public enemy in war, whether international
some other party could be responsible for the damage. was liable for the loss. (3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
(1) Res Ipsa Loquitor The extraordinary diligence in the vigilance over the goods containers;
tendered for shipment requires the common carrier to know and (5) Order or act of competent public authority.
FGU Insurance v. G.P. Sarmiento Trucking, (2002). Res ipsa to follow the required precaution for avoiding damage to,
loquitur, a doctrine being invoked by petitioner, holds a destruction of the goods entrusted to it for safe carriage and This is a closed list for fortuitous events; if the causes of
defendant liable where the thing which caused the injury delivery. destruction, loss or deterioration is other than the enumerated
complained of is shown to be under the latter’s management and circumstances, then the carrier is liable therefor.
the accident is such that, in the ordinary course of things, cannot (d) When Presumption of Negligence Does NOT Arise;
be expected to happen if those who have its management or Defenses – (1) Force Majeure as Defense
control use proper care. It affords reasonable evidence, in the
absence of explanation by the defendant, that the accident arose (1) Fortuitous even (Art. 1739 and 1934, CC) Central Shipping Co. v. Insurance Co. of N.A., (2004). The defense
from want of care. It is not a rule of substantive law and, as such, of fortuitous event or natural disaster cannot be successfully
it does not create an independent ground of liability. Instead, it is Art. 1739. In order that the common carrier may be exempted made when the injury could have been avoided by human
regarded as a mode of proof, or a mere procedural convenience from responsibility, the natural disaster must have been the precaution.
since it furnishes a substitute for, and relieves the plaintiff of, the proximate and only cause of the loss. However, the common
burden of producing specific proof of negligence. The maxim carrier must exercise due diligence to prevent or minimize loss
Lea Mer Industries, Inc. v. Malayan Insurance, (2005). Also, it natural disaster must have been the proximate and only cause of (3) Qualified Liability – this is the only stipulation in a bill of
must be shown that the fortuitous event must have been the the loss, and that the carrier has exercised due diligence to lading which can validly limit liability
proximate and only cause of the loss. prevent or minimize the loss before, during or after the
occurrence of the disaster. Under Qualified liability, carrier fixes the maximum liability in the
Schmitz Transport v. Transport Venture, Inc., (2005). The event shipper does not declare any value or a value up to a certain
unloading outside the breakwater, instead of inside the (2) Contributory Negligence of Owner amount. Should shipper declare a higher value, and willing to pay
breakwater, while a storm signal was up constituting negligence. higher freightage the carrier shall accordingly be liable for greater
The proximate cause of the loss was the carrier’s negligence in Tabacalera Insurance v. North Front Shipping, (1997). Damage to damage. In effect, carrier becomes an insurer for higher
deciding to unload the cargoes at an unsafe place and while a the goods, without proper explanation on the part of carrier to insurance.
typhoon was approaching. show how the damage was sustained, would necessarily lead to
the conclusion that carrier has not complied with its obligation to Shewaran v. PAL, (1966)
PHILAMGEN v. MGG Marine Services, (2002). In order that a observe extraordinary diligence. Nevertheless, the consignee
common carrier may be absolved from liability where the loss, would be guilty of contributory negligence, when it is shown that Facts:
destruction or deterioration of the goods is due to a natural it was seasonably notified of the arrival of the barge but did not
disaster or calamity, it must further be shown that the such immediately start the unloading operations, and without proper 1. A PAL ticket, on the reverse side, stated in fine print that if
natural disaster or calamity was the proximate and only cause of explanation of the delay in unloading. The facts show that the loss the value of the baggage is not stated, and the baggage is
the loss; there must be "an entire exclusion of human agency could have been completely avoided or at least minimized had lost, the maximum liability of PAL is P100.00
from the cause of the injury of the loss." unloading been commenced immediately. For its contributory 2. If the value in excess of P100.00 is stated, PAL will charge
negligence, the consignee should share at least 40% of the loss. extra because PAL is being held liable for an amount
Moreover, even in cases where a natural disaster is the proximate exceeding P100.00.
and only cause of the loss, a common carrier is still required to Cia Maritima v. CA, (1988). The furnishing of inaccurate weight of 3. Shewaran, a Hindu from Davao, boarded a PAL plane for
exercise due diligence to prevent or minimize loss before, during the cargo by the shipper constitutes only contributory negligence Manila.
and after the occurrence of the natural disaster, for it to be to mitigate the carrier’s liability, but did not serve to excuse 4. Among his baggage was a camera worth P800.00 and it was
exempt from liability under the law for the loss of the goods. If a entirely the carrier’s liability by the use of a higher-capacity lost.
common carrier fails to exercise due diligence--or that ordinary equipment which was then available. 5. PAL offered to pay P100.00. Shewaran wanted full payment
care which the circumstances of the particular case demand -- to of P800.00
preserve and protect the goods carried by it on the occasion of a 8. Limitation of Liability by Valuation of Damaged Cargo
natural disaster, it will be deemed to have been negligent, and the Issue: WON Shewaran may recover full payment
loss will not be considered as having been due to a natural (a) Inter-Island Trade: Applicable Law on Limitation of Liability
disaster under Art. 1734(1). Held:
Art. 1749. A stipulation that the common carrier's liability is
Edgar Cokaliong Shipping v. UCPB Gen. Insurance, (2003). When 1. Since this is a stipulation on qualified liability which operates
limited to the value of the goods appearing in the bill of lading,
the ship sank due to fire, which resulted from a crack in the to reduce the liability of the carrier, the carrier and the
unless the shipper or owner declares a greater value, is binding.
auxiliary engine fuel oil service tank which because of its location shipper must agree thereupon. Otherwise, the carrier will be
could not subjected to inspection and care by the crew, the loss liable for the full amount.
cannot be deemed to be caused by force majeure, since fire is not Art. 1750. A contract fixing the sum that may be recovered. by the
2. PAL is fully liable for P800 because Shewaran did not agree
considered a natural disaster or calamity. Since the loss of the owner or shipper for the loss, destruction, or deterioration of the
to the stipulation on the ticket, as manifested by the fact
cargoes raises the presumption of negligence on the part of the goods is valid, if it is reasonable and just under the circumstances,
that Shewaran did not sign the ticket. The ticket should have
common carrier, the shipping company failed in its legal obligation and has been fairly and freely agreed upon.
been signed.
to show that it exercise extraordinary vigilance over the goods
transported, or that the vessel was seaworthy. Illustration: If a shipper ships cargo worth P1,000 with X, Inc., Ong Yui v. CA, (1979). Repealing Shewaran Doctrine – the
and cargo is completely damaged, generally, the liability of X, qualified liability appearing on the ticket is binding even if the
DSR-Senator Lines v. Federal Phoenix Assurance, (2003). Fire Not Inc. will be P1,000. But will it be valid for shipper and carrier to passenger did not sign it.
Falling Within the Exemptions for Carrier’s Liability – Art. 1734 agree on a reduced liability? What will be the liability of carrier if
which enumerates the exemptions from a common carrier’s there is no agreement with respect thereto? Everett Steamship Corp. v. CA, (1998). A stipulation printed in a
liability for the loss, destruction or deterioration of goods, does bill of lading limiting common carrier’s liability for loss or
not include fire among those enumerated which would exempt a A: Heacock v. Macondray, (1921). Three stipulations that may be destruction of a cargo to a certain sum, unless shipper or owner
carrier from liability. Since the peril of fire is not comprehended inserted in a bill of lading limiting liability declares a greater value, is sanction by law, particularly Art. 1749
within the exceptions in Art. 1734, then the common carrier shall and 1750, CC, provided such stipulation must be “reasonable and
be presumed to have been at fault or to have acted negligently, (1) No Liability – the carrier will not be liable at all for the just under the circumstances, and has been freely and fairly
unless it proves that it has observed the extraordinary diligence negligent acts of its crew and employees. This is void for agreed upon”
required by law. being contrary to public policy
(2) Limited Liability – regardless of the value of the cargo, the It should be noted that Art. 1749 and 1750 require that the
Even if fire were to be considered a natural disaster within the maximum liability of the carrier will be, for example, stipulation limiting the common carrier’s liability for loss must be
purview of Art. 1734, it is required under Art. 1739 that the P500.00. This is void for being contrary to public policy
“reasonable and just under the circumstances and has been freely demise charter and a contract of affreightment are as of an agreement between the carrier and the shipper/consignee
and fairly agreed upon.” The printing of such limiting stipulation in follows: extending the one-year period to file a claim.
small print on the bill of lading does not make the bill of lading
invalid nor can it be argued that the stipulation has not been (a) Under the demise or bareboat charter of the vessel, the American Insurance v. Macondray, (1971)
“fairly and freely” agreed upon as to be binding on the carrier. At charterer will generally be regarded as the owner for the
most, the situation only calls for a greater vigilance on the part of voyage or service stipulated. The charterer mans the vessel Facts:
the courts when dealing with such contracts of adhesion in that with his own people and becomes the owner pro hac vice,
said contracts must be carefully scrutinized “in order to shield the subject to liability to others for damages caused by 1. A bill of lading read “N.Y. to Cebu City” charges were pre-
unwary (or weaker party) from deceptive schemes contained in negligence. To create a demise, the owner of a vessel must paid.
ready-made covenants.” completely and exclusively relinquish possession, command 2. The goods were unloaded in Manila and transshipped from
and navigation thereof to the charterer, anything short of Manila to Cebu in an inter-island vessel.
In this case, since the shipper is in the trading business, it cannot such a complete transfer is a contract of affreightment (time 3. The goods arrived in Cebu in damaged condition
be said to be ignorant of the business transactions it entered into or voyage charter party) or not a charter party at all.
involving the shipment of its goods to its customers. The shipper (b) A contract of affreightment is one in which the owner of the Issue: WON the original carrier or the inter-island vessel is liable
could have known, or should know the stipulations in the bill of vessel leases part or all of its space to haul goods for others.
lading and there it should have declared a higher valuation of the It is a contract for special service to be rendered by the Held:
goods shipped. owner of the vessel and under such contract the general
owner retains the possession, command and navigation of 1. Original carrier will be the one liable for any liability, even if
(1) Qualified Liability Clause Inapplicable When Carrier the ship, the charterer or freighter merely having use of the connecting carriers intervened, without prejudice to the
Negligent space in the vessel in return for his payment of the charter original carrier’s right to recover from the connecting carrier.
hire 2. This rule applies also to contracts of carriage of passengers
American Home Assurance v. CA, (1992). The law on average of
the Code of Commerce on limiting of liability cannot apply when An owner who retains possession of the ship, remains liable as a Magellan Mfg. Marketing v. CA, (1991). Transhipment, in
the common carrier is negligent. carrier and must answer for any breach of duty as to the care, maritime law, is defined as "the act of taking cargo out of one ship
loading and unloading of cargo. and loading it in another," or "the transfer of goods from the
(2) When “Limited Liability” Clause Part of Private Carrier vessel stipulated in the contract of affreightment to another
Arrangement (b) Overseas Trade: COGSA Provides for Valuation Clauses on vessel before the place of destination named in the contract has
Cargo been reached," or "the transfer for further transportation from
Valenzuela Hardwood v. CA, (1997). A stipulation in a charter one ship or conveyance to another."
party that the “owners shall not be responsible for loss, split, (a) If no value is stated, the maximum liability of the carrier is
short-landing, breakages and any kind of damage to the cargo” is $500 per package; There is transhipment whether or not the same person, firm or
NOT void as being contrary to public policy contained in Art. 1745, (b) If value is stated, apply the rule of qualified liability entity owns the vessels. In other words, the fact of transhipment
CC, when it is clear from the arrangement that the carrier merely is not dependent upon the ownership of the transporting ships or
acted as a private carrier under the terms of the charter party. Asian Terminals, Inc. v. Philam Insurance Co. Inc., (2013). The conveyances or in the change of carriers, as the petitioner seems
COGSA or Public Act No. 521 of the 74th US Congress was accepted to suggest, but rather on the fact of actual physical transfer of
In a contract of private carriage, the parties may validly stipulate to be made applicable to all contracts for the carriage of goods by cargo from one vessel to another.
that responsibility for the cargo rests solely on the charterer, sea to and from Philippine ports in foreign trade by virtue of C.A.
exempting the shipowner from liability for loss of or damage to 65. Belgian Overseas Chartering v. Phil. First Insurance, (2002).
the cargo caused even by the negligence of the ship captain. “Package” under Sec. 4(5) of COGSA when limiting carrier’s
Insurance Company of N.A. v. Asian Terminals, Inc., (2012). The liability to US$5,000 per package would ordinarily be considered
Coastwise Lighterage Corp. v. CA, (1995) term "carriage of goods" in the COGSA covers the period from the as packages are shipped in a container supplied by the carrier and
time the goods are loaded to the vessel to the time they are the number of such units is disclosed in the shipping documents,
Facts: By the contract of affreightment for the transport of discharged therefrom. each of those units and not the containers constitutes the
molasses which was damaged, the carrier refused to acknowledge “package” referred to under COGSA.
liability on the ground that the contract transformed the carrier The carrier and the ship shall be discharged from all liabilities in
into a private carrier, and for which it has exercised ordinary respect of loss or damage unless suit is brought within one (1) Philippine Charter Insurance Corp. v. Neptune Orient Lines,
diligence as to avoid liability. year after the delivery of the goods or the date when the goods (2008). When the shipper in Hong Kong did not declare the actual
should have been delivered. value of the goods as insured before shipment and that the said
Issue: WON the carrier may be held liable value was inserted in the bill of lading and for which no additional
Cua v. Wallen Phil. Shipping, Inc., (2012). Under Sec. 3(6) of the charges were paid, then the stipulation in the bill of lading that
Held: COGSA, the carrier is discharged from liability for loss or damage the carrier’s liability shall not exceed US$5,000 per package
to the cargo "unless the suit is brought within one year after applies. Such stipulation in the bill of lading limiting the carrier;s
1. The contract between the shipper and the carrier was a delivery of the goods or the date when the goods should have liability for the loss of the subject cargoes is allowed under Art.
“charter agreement”. The distinctions between bareboat or been delivered." Jurisprudence, however, recognized the validity 1749, CC and Sec. 4(5) of the COGSA
accommodate all of the multifarious bases on which a claim
UCPB General Insurance Co., Inc. v. Aboitiz Shipping Corp., Unsworth Transport Int. (Phil.) v. CA, (2011). It is to be noted that might be founded in different countries, whether under
(2009). Art. 366 of the Code of Commerce requires that the claim the Civil Code does not limit the liability of the common carrier to code law or common law, or under contract or torts, etc.
for damage or average must be made within 24 hours from a fixed amount per package. In all matters not regulated by the
receipt of the merchandise if, as in this case, damage cannot be Civil Code, the rights and obligations of common carriers are PAL v. CA, (1992). The assurance made by an airline company that
ascertained merely from the outside packaging of the cargo. governed by the Code of Commerce and special laws. Thus, the it will compensate passenger’s loss for the baggage is a sufficient
COGSA supplements the Civil Code by establishing a provision admission that indeed, passenger has the right to avail himself of
The requirement to give notice of loss or damage to the goods is limiting the carrier’s liability in the absence of a shipper’s the suit for the recovery of the damage sustained. The airline
not an empty formalism. The fundamental reason or purpose of declaration of a higher value in the bill of lading. cannot capitalize on the limited liability clause under Art. 22(2) of
such a stipulation is not to relieve the carrier from just liability, Warsaw Convention because of the unequivocal condition set
but reasonably to inform it that the shipment has been damaged In the present case, the shipper did not declare a higher valuation forth under Art. 4(4), that if the carrier accepts baggages without
and that it is charged with liability therefor, and to give it an of the goods to be shipped. Contrary to the CA’s conclusion, the a baggage check having been delivered, or if the baggage check
opportunity to examine the nature and extent of the injury. This insertion of the words "L/C No. LC No. 1-187-008394/ NY 69867 does not contain the particulars set out by the article, the carrier
protects the carrier by affording it an opportunity to make an covering shipment of raw materials for pharmaceutical Mfg." shall not be entitled to avail itself of those provisions of the
investigation of a claim while the matter is still fresh and easily cannot be the basis of petitioner’s liability.31 Furthermore, the Convention which exclude or limit liability.
investigated so as to safeguard itself from false and fraudulent insertion of an invoice number does not in itself sufficiently and
claims. convincingly show that petitioner had knowledge of the value of 9. Limited Periods to Recover on Damage to Cargo
the cargo.
We have construed the 24-hour claim requirement as a condition (a) Applicable Laws on Period to File Claims
precedent to the accrual of a right of action against a carrier for (c) Warsaw Convention on Air Transportation
loss of, or damage to, the goods. The shipper or consignee must  Art. 366 of the Code of Commerce and COGSA cover the
allege and prove the fulfillment of the condition. Otherwise, no PAN-AM v. Rapadas, (1992). A passenger of an airline is bound by steps that shipper or consignee must take to recover
right of action against the carrier can accrue in favor of the the terms of a passenger ticket declaring that the limitations of damages from carrier in the event carrier refuses to pay:
former. liability set forth in the Warsaw Convention in case of loss,
damage or destruction to a registered luggage of the passenger. (1) Inter-island trade is covered by Art. 366
Sec. 3(6) of the COGSA provides a similar claim mechanism as the The Warsaw Convention governs the availment of the liability (2) Overseas trade is covered by COGSA
Code of Commerce but prescribes a period of three (3) days limitations where the baggage checked is combined with or
within which notice of claim must be given if the loss or damage is incorporated in the passenger ticket. (b) Inter-Island Trade
not apparent
Santos III v. Northwest Orient Airlines, (1991). Art. 366 of the Code of Commerce provides that if the goods
The provision in the last paragraph of Sec. 3(6) that “the notice in arrived in damages condition:
writing need not be given if the state of the goods has at the time (a) The Convention for Unification of Certain Rules Relating to
of their receipt been the subject of joint survey or inspection” can International Transportation by Air (the Warsaw (1) If damage is apparent, shipper must file a claim immediately
apply only when it is clear that the shipper or consignee was Convention), is a treaty commitment voluntarily assumed by (it may be oral or written)
represented by a proper agent when the survey or inspection was the Philippine government and, as such, has the force and (2) If damage is not apparent (e.g. cargo is in a container), he
conducted. effect of law in the Philippines. should file a claim within 24 hours from delivery
(b) Although the Warsaw Convention was drafted at the time
Wallem Phil. Shipping, Inc. v. S.R. Farms, Inc., (2010). With the airline industry was still in its infancy, the Convention Rosario Farmer’s Coop. v. Manila Railroad, (1963). Under Art.
respect to the prescriptive period involving claims arising from contains provisions anticipating developments, and more 366, filing of claim under either (a) or (b) is a condition precedent
shortage, loss of or damage to cargoes sustained during transit, importantly, the treaty has not been rejected by the for recovery. If no claim is filed, there will be no recovery even if
the law that governs the instant case is the COGSA, Sec. 3(6). Philippine government, and therefore, the doctrine of rebus an action therefor is meritorious (because the claim is part of the
sic stantibus does not operate automatically to render the cause of action). If the claim is filed, but carrier refuses to pay:
Petitioner claims that pursuant to the above-cited provision, treaty inoperative and there is a necessity for a formal act of enforce carrier’s liability in court by filing a case:
respondent should have filed its Notice of Loss within three days rejection, usually made by the head of State.
from delivery. It asserts that the cargo was fully discharged from (c) When a contract of carriage provides for transportation of (a) Within six (6) years, if no bill of lading has been issued;
the vessel on April 15, 1992, but that respondent failed to file any passengers "within the territories of two High Contracting (b) Within ten (10) years if a bill of lading had been issued
written notice of claim. Parties," then it is an “international” transportation and the
provisions of the Warsaw Convention automatically apply New Zealand Insurance v. Choa Ty, (1955). Undelivered or Lost
The Court agrees, since under Sec. 3(6) of the COGSA, notice of and exclusively govern the rights and liabilities of the airline Goods or Cargo – In order that the conditions provided in Art. 366
loss or damages must be filed within three (3) days of delivery. and its passenger. The places enumerated by Art. 28(1) of of the Code of Commerce may be demanded, there should be a
Admittedly, respondent did not comply with this provision. Under the Convention where an action for damages may be consignment of goods, through a common carrier, by a consignor
the same provision, however, a failure to file a notice of claims brought are jurisdictional in nature which can be waived. in one place to a consignee in another place, and the delivery of
within three (3) days will not bar recovery if a suit is nonetheless (d) The allegation of willful misconduct resulting in tort is the goods by the carrier to the consignee. Art. 366 does not have
filed within one (1) year from delivery of the goods or from the insufficient to exclude a case from the Warsaw Convention,
date when the goods should have been delivered. because the provisions thereof clearly show the aim to
any application where the goods or cargo were never delivered to, Dole Phil. v. Maritime Co., (1987). The written extrajudicial notice of loss under Sec. 3(6) of COGSA does not apply if the state
or receiver by, the consignee. demand by creditor does not toll the running of the one (1) year of the goods, at the time of their receipt, has been the subject of a
prescriptive period under COGSA since an action must be filed joint inspection or survey. Also as stated in the same provision, a
PAL v. CA, (1996). Delay in Filing Claim Due to Default of Carrier – within the period. failure to file a notice of claim within three (3) days will not bar
Where failure to file a normal claim within the prescriptive period recovery if it is nonetheless filed within a year. This one-year
contemplated in air waybill was largely due to the fault of Ang v. American SS Agencies, (1967). Cargo Misdelivered – prescriptive period also applies to the shipper, the consignee, the
carrier’s representatives, the condition was deemed fulfilled Where there was delivery to the wrong person, the prescriptive insurer of the goods or any legal holder of the bill of lading.
considering the collective action of carrier’s personnel in tossing period is 10 years because there is a violation of contract, and
around the claim and leaving it unresolved for an indefinite period COGSA does not apply to misdelivery. U.S. Insurance v. Cia Maritima, (1967). When There is Local
of time, which was tantamount to “voluntarily preventing its Transshipment – Cargo was loaded in New York for Davao City.
fulfillment,” and therefore the filing of the baggage freight claim Rizal Surety v. Macondray, (1968). Cargo Undelivered – A vessel Since most of the cargo was for Manila, and did not make a trip to
constituted substantial compliance with the requirement for filing arrived in Manila on October 25. It left Manila on October 31. The Davao. Instead, the goods for Davao were transshipped on an
of a formal claim. bill of lading of the shipper showed that the cargo was aboard the inter-island vessel. The cargo arrived in a damaged condition.
vessel, but it was never delivered. The shipper brought an action
Lorenzo Shipping v. Chubb and Sons, Inc., (2004). The 24-hour against the carrier for non-delivery. The one-year period of the COGSA shall still apply since the
period prescribed by Art. 366 of the Code of Commerce within contract of carriage is from New York to Davao. The inter-island
which claims must be presented does not begin to run until the Since there was no tally sheet and no delivery, the prescriptive vessel from Manila to Davao is considered merely a connecting
consignee has received such possession of the merchandise that period for filing the action should be counted from the last day on vessel and the transshipment did not constitute a separate
he may exercise over it the ordinary control pertinent to which the carrier had an opportunity to make the delivery, i.e., contract of carriage.
ownership. In other words, there must be delivery of the cargo by October 31 when it departed.
the carrier to the consignee at the place of destination. (1) COGSA’s (In) Applicability to Claims to Insurance
Union Carbide v. Manila Railroad, (1977). Cargo Delivered
Federal Express v. American Home Assurance, (2004). Under Art. Damaged – In the case when the vessel docked at the pier, where Filipino Merchant’s Ins. Co. v. Alejandro, (1986). Insurer Seeks
366, Code of Commerce, filing of a claim with the carrier within the cargo has been unloaded and delivered to the arrastre, the Recovery – The insurer of the goods is also bound by the one (1)
the time limitation therefor actually constitutes a condition one-year period begins to run from the date of delivery to the year prescriptive period under COGSA to recover as a subrogee,
precedent to the accrual of a right of action against a carrier for arrastre operator (This is differentiated from Rizal v. Macondray because the claim interposed by the insurer is still based on the
loss of or damage to the goods. which involved undelivered goods, while this case dealt with carriage of goods.
damaged but delivered goods)
Phil. Charter Insurance v. Chemoil Lighterage, (2005). The Mayer Steel Pipe Corp. v. CA, (1997). Insurer Refusing to Pay
requirement that a notice of claim should be filed within the Mitsui O.S.K. Lines v. CA, (1998). Cardo Delivered Late – Carrier Claims – Shipper, prior to shipping, insured the merchandise
period stated by Art. 366 of Code of Commerce is not an empty or undertook to deliver goods to France within 28 days from initial against all risks with South Sea Surety. The merchandise were
worthless proviso. Filing of a claim with the carrier within the time loading. However, while in Taiwan, the goods were not damaged during the voyage. Insurer opposed the claim on the
limitation therefore actually constitutes a condition precedent to transshipped immediately, with the result that goods arrived in ground, among others, that it was filed more than one (1) year
the accrual of a right of action against a carrier for loss of, or France late during the “off season”. Consignee paid only half of from discovery of the damage to the merchandise and therefore
damage to, the goods. If it fails to do so, no right of action against the value of the goods and balance was charged against loss barred by COGSA.
the carrier can accrue in favor of the former. sustained due to late arrival. Shipper now seeks to recover the
unpaid balance from carrier which opposes the same since the Sec. 3(6) of COGSA states that the carrier and the ship shall be
(c) Overseas Trade “loss or damage” to goods shipped under Sec. 3(6) of COGSA has discharged from all liability for loss or damage to the goods if no
been barred by the lapse of the one-year period. suit is filed within one (1) year after delivery of goods or date
Under COGSA, where goods arrive in damaged condition from a when they should have been delivered.
foreign port to a Philippine port of entry: Indeed, what is in issue in this petition is not the liability of
petitioner for its handling of goods as provided by Sec. 3(6) of the The provision applies only to carrier’s liability which is
(1) Upon discharge of goods, if damage is apparent, claim COGSA, but its liability under its contract of carriage with private extinguished if no suit is brought within one year. But the liability
should be filed immediately; respondent as covered by laws of more general application. Since of the insurer is not extinguished because the insurer’s liability is
(2) If damage is not apparent, claim should be filed within three the concept of “loss” or “damage”. Since the concept of “loss” or based not on the contract of carriage but on the contract of
(3) days from delivery “damage” involves the deterioration of the goods due to delay in insurance.
their transportation, the claims of the shipper do not constitute
Unlike in Art. 366 of Code of Commerce, under COGSA such a “loss or damage” within the meaning of Sec. 3(6) of COGSA which COGSA governs the relationship between carrier and shipper, the
claim is not a condition precedent, but an action must be filed requires the suit to be brought within one (1) year from the time consignee and/or the insurer and defines the obligations of the
against carrier within a period of one (1) year from discharge; if the cause of action accrued. Therefore, the one-year prescriptive carrier under the contract of carriage. It does not, however, affect
there is no delivery, the one-year period starts to run from the period under COGSA is inapplicable; what applies is Art. 1144, CC relationship between shipper and insurer which is governed by
day the vessel left port (in case of undelivered or lost cargo), or which provides for a prescriptive period of 10 years. Insurance Code.
from delivery to the arrastre (in case of damaged cargo).
Belgian Overseas Chartering v. Phil. First Insurance, (2002). 10. Abandonment
When There Has Been Joint of Cargo – The requirement of 3-day
damaged vessel. He bears loss of P12,000 as co-insurer of vessel
Five (5) Cases of Abandonment: Distinction Between Two Articles: Art. 371 must be distinguished to the extent of 1/5 of full insurable value.
from Art. 358 which provides that when cargo is delivered to a
(a) Art. 365, Code of Commerce carrier, the latter must begin the trip immediately. Under Art. 371, IV. Applicable Provisions of Code of Commerce
(b) Art. 371, Code of Commerce the shipper and carrier agree in advance that the cargo must
(c) Art. 587, Code of Commerce arrive on a date certain. Article Provision
(d) Art. 687, Code of Commerce
Art. 351 Only refers to a schedule that carriers must keep
(e) Sec. 138, Insurance Code Illustration: Shipper loads cargo with X, Inc. with the agreement
Art. 352 Passengers are both carriage of passengers and
that the cargo will arrive in Manila on Nov. 5, 2002. The date came
cargo
In all these cases, abandonment has two (2) characteristics: but the cargo did not arrive due to the fault of the carrier. In this
Art. 353 Best evidence of carriage of cargo is bill of lading,
case, Art. 371 of the Code of Commerce allows Shipper to exercise
and 354 but in its absence, parties may present other
(a) It is a unilateral right: it is perfected by mere notice; and the right of abandonment by notifying carrier thereof. Once
evidence.
(b) Once perfected, ownership over damaged goods passes to notice is given, ownership over the undelivered cargo passes to
carrier and carrier must pay shipper the market value of carrier and carrier must pay shipper market value of the goods at
Thus, Art. 354 states: “In the absence of the bill of
goods at the point of destination. the point of destination.
lading, their respective claims shall be
determined by legal proof which each of the
Aboitiz Shipping v. CA, (2008). When the vessel is totally lost in (c) Art. 578, Code of Commerce
contracting parties may present, in conformity
which case there is no vessel to abandon, abandonment is not
with the general provisions established in this
required. Because of such total loss the liability of the shipowner Reflects hypothecary nature of maritime transactions. Where
Code for commercial contracts
or agent for damages is extinguished. vessel carries goods and goods are damaged and the liability of
Art. 355 Read together with Art. 1736, CC: Liability of
carrier for damaged goods exceeds the value of vessel, owner or
carrier for care of cargo begins from moment
(a) Art. 365, Code of Commerce ship agent may exercise the right of abandonment. Notice to
unconditionally delivered by shipper to carrier for
shipper(s) of exercise of this right will suffice and once all have
purpose of carriage
Where the shipper ships goods and goods arrive in damaged done so, ownership over vessel passes to shipper(s) and all
condition and damage is so great that shipper may not use goods liability of shipowner for the damaged cargo is limited to the value Art. 356 Authorizes a carrier to examine cargo should the
for the purpose for which they had been shipped, the shipper may of abandoned vessel. and 357 carrier suspect that such cargo may be suspicious
exercise the right of abandonment. in nature. This right is important today with the
(d) Art. 687, Code of Commerce danger of explosives, hijacking and terrorism and
Notice to the carrier is sufficient – consent of carrier is not the attempts at smuggling. (Also Sec. 2530 and
necessary and once perfected, ownership over damaged goods The charterers and shippers may abandon the merchandise 2531 of P.D. 1464, Tariff and Customs Code)
passes to carrier and carrier must pay shipper market value of damaged if the cargo should consist of liquids and they have Art. 358 Read with Art. 1747, CC: The occurrence of a
goods at point of destination. leaked out, nothing remaining in the containers but one-fourth and 359 fortuitous even will not extinguish the liability of
(1/4) of their contents, on account of inherent defect or fortuitous carrier where the fortuitous even concurs with
Illustration: Shipper loads cargo with a vessel of X, Inc. The goods event either undue delay in starting the trip or
arrive at the point of destination in: (a) damaged condition; (b) unjustified deviation
the damage is so great the Shipper cannot use it for the purpose (e) Sec. 138, Insurance Code Art. 360 Contracting parties to contract of carriage of
for which the cargo was shipped. cargo are: The carriers and the shipper. Shipper
Permits the exercise of right of abandonment for constructive has the right to change the name of consignee at
In this instance, the Code of Commerce allows Shipper to exercise loss, which takes place when vessel suffers damage in excess of ¾ any time and the carrier must respect this new
the right of abandonment. The consent of X, Inc. is not necessary. of its insured value. Insured then exercises the right of designation
Upon giving notice, the unilateral right of Shipper to abandon is abandonment by notifying the insurer. Thereafter, ownership Art. 361 Repealed by Art. 1745. Goods are transported at
perfected and ownership of the damaged cargo passes to X, Inc., over damaged vessel passes to insurer, and insurer must pay the risk of the carrier, and any stipulation to the
which must pay the market value of the damaged goods at the insured as if it were an actual total loss. contrary is void. Except: In a pure private carrier
point of destination. arrangement where such stipulation is valid.
Abandonment-Constructive Loss: Art. 362 Repealed by Art. 1752, CC where there is now a
(b) Art. 371, Code of Commerce presumption of negligence in the event of
GR: Where there is partial loss, and vessel has not been insured damage to cargo
Shipper and carrier agree in advance that cargo must arrive on a for the full insurable value, there is co-insurance when the owner Art. 363 Cargo must be delivered in the condition in which
certain date. The date arrives and cargo has yet arrived due to of vessel bears part of the loss. it was received.
carrier’s fault. Shipper may exercise the right of abandonment by Art. 364 Measure of damage to cargo is market value of
notifying carrier, and once having done so, ownership over Illustration: If the right of abandonment is not exercised and the the cargo at the point of destination
undelivered cargo passes to carrier, and once having done so, vessel is insured for P80,000 (4/5 of its insurable value) and Art. 367 Permits parties to submit valuation of damage of
ownership over undelivered cargo passes to carrier and carrier suffers damage amounting to P60,000, the insurer in such a case cargo to arbiters
must pay shipper market value of the goods at the point of recovers only P48,000, but he continues to be the owner of the Art. 368 Obligation of vessel to deliver to consignee who
destination. has been designated by shipper
Art. 369 Consignation is allowed in the following cases: custodian of the goods discharged from a vessel, an arrastre provisions that adversely affect the importer. The Management
operator's duty is to take good care of the goods and to turn them Contract contains stipulations in favor of a third person (pour
(a) Consignee cannot be found over to the party entitled to their possession. autrui), and if there is stamped across the Delivery Permit that the
(b) Consignee refuses to accept the goods importer received the goods subject to the Management
(c) Consignee refuses to pay freightage Handling cargo is mainly the arrastre operator's principal work so Contract, then shall be bound by the same.
Art. 370 Covers the agreement between carrier and its drivers/operators or employees should observe the standards
and 371 shipper for delivery of goods on a certain date and measures necessary to prevent losses and damage to There are four (4) stipulations in the Management Contract which
and consequent right of abandonment, which has shipments under its custody. adversely affect the importer although he is not a party to the
been previously discussed. arrastre contract:
Art. 372 Repealed by Art. 1749, CC. Subject matter is the Asian Terminals, Inc. v. Philam Insurance Co., (2013). The
validity of a carrier to stipulate in a bill of lading functions of an arrastre operator involve the handling of cargo (a) Formal claim – documented with invoices and other
for a reduction of its liability for damages deposited on the wharf or between the establishment of the shipping documents, within 30 days from date of final entry
Art. 373 The original carrier that enters into an consignee or shipper and the ship’s tackle. Being the custodian of with the Bureau of Customs (including bill of lading, packing
interconnecting contract of carriage shall be liable the goods discharged from a vessel, an arrastre operator’s duty is list)
for damages caused by its connecting carriers. to take good care of the goods and to turn them over to the party (b) Arrastre operator is given 60 days to act on the claim
Art. 374, The carriers are given several remedies under the entitled to their possession. (c) If claim is rejected, file an action within one (1) year.
375 and Code of Commerce for collection of freightage: However, if the claim is not acted upon, the one (1) year
376 Handling cargo is mainly the arrastre operator’s principal work so period begins to run from the date of the expiration of the
(a) Retaining Lien – the carrier cannot be its drivers/operators or employees should observe the standards 60-day period.
compelled to deliver or surrender cargo and measures necessary to prevent losses and damage to (d) Qualified Liability – P2,000 per package unless the shipper
until the freightage is paid shipments under its custody. declares a higher value (Note: A container is considered as
(b) Carrier’s Lien – the carrier may deliver the one package)
cargo and waive the retaining lien but will While it is true that an arrastre operator and a carrier may not be
have a right of preference over the cargo for held solidarily liable at all times, yet when it is shown that it was Note: Conditions (a) and (b) are conditions precedents, otherwise,
a period of 30 days (as amended by Art. the arrastre operator’s people who took direct control of the consignee/shipper cannot recover
2241, CC) unloading and the selection of the defective equipment used,
(c) Civil Case for Collection of Sum of Money then they would be held liable with the carrier. Firemen’s Fund v. Tabacalera, (1970). The adverse stipulations of
(d) Consignation (Art. 369, Code of Commerce) the Revised Management Contract will affect the importer only of
Art. 377 The liability of carrier for damages arising from 2. Management Contract the delivery permit is stamped “SUBJECT TO RMC”. In this case,
failure to comply with the rules and regulations there appeared no such stamp, and the importer was held not
on delivery of cargo (a) Parties in Arrastre Contract bound by the RMC. This case repealed all previous ones which
Art. 378 Carrier must keep registry of cargo held that the importer is liable to the RMC by merely accepting
The Management Contract is executed between: the services of the arrastre operator. Now, the importer will be
Art. 379 Provisions of the Code of Commerce on
Transportation are equally applicable to persons subject to the RMC stipulations only if his delivery permit is
who, although they do not personally effect the (a) Republic of the Philippines; and stamped “Subject to Revised Management Contract”
transportation of objects, contract to do so (b) Arrastre Operator – private party awarded the privilege of
through others operating the arrastre service Summa Insurance Corp. v. CA, (1996). In cargo handling services,
an arrastre operator is bound by the Management Contract it had
However, the implementation of the Management Contract executed with the Bureau of Customs. A management contract,
V. Arrastre which is a sort of a stipulation pour autrui within the meaning of
affects several “third parties”, namely, the importer-consignee
and the carrier. Art. 1311, CC, is also binding on a consignee and the insurer, as
1. Definition successor-in-interest of the consignee.
Philippine Ports Authority v. Nasipit Integrated Arrastre, (2008).
Arrastre is a broad term which refers to a contract for the An arrastre contract is not an ordinary agreement involving Metro Port Service, Inc. v. IAC, (1992). A provision limiting the
unloading of goods from a vessel. But in mercantile law, the term merely parties therein, as it affects the public in general. In all liability of arrastre operator through the imposition of a
has a technical meaning as it applies only to overseas trade. contracts, the law must protect all parties in securing fair play and requirement that a “formal claim” must be made within 30 days
equity to prevail. from filing of entry, to protect the legitimate interest of the
When a person brings in cargo from abroad, he cannot unload and public, must be deemed to have been complied with when
deliver the cargo by himself. This is done by the arrastre operator, (b) Relationship Between Consignee and Arrastre Operator consignee filed a “provisional claim” within the 30-day period,
which will then deliver the cargo to the importer. because as of that date the arrastre operator was given
Firemen’s Fund v. Cia. General de Tabacos, (1970). Arrastre reasonable opportunity to check the validity of the claim while the
Phil. First Insurance Co. v. Wallem Phil. Shipping, Inc., (2009). operator, for the privilege of that undertaking signs a facts were still fresh in the minds of the person who took part in
The functions of an arrastre operator involve the handling of Management Contract with the Philippine Government. But the transaction and while pertinent documents were still
cargo deposited on the wharf or between the establishment of among the stipulations in the Management Contract are available.
the consignee or shipper and the ship's tackle. Being the
It did not matter that the provisional claim was for the whole (a) Nature of Arrastre’s Obligations opportunity to check the validity of the claim, while the facts are
amount of the invoice; it is sufficient as long as the name of the still fresh in the minds of the persons who took part in the
carrying vessel, its date of arrival and the corresponding bill of Summa Insurance v. CA, (1996). In the performance of its transaction, and while the pertinent documents are still available.
lading are attached. obligations, an arrastre operator should observe the same degree
of diligence as that required of a common carrier and a Note: The Court expressly acknowledged that the ruling was not
International Container Terminal Services, Inc. v. FGU Insurance, warehouseman as enunciated under Art. 1733, CC and Section consistent with the old ruling in a long line of cases that the 15-
(2008). While the Management Contract executed by the arrastre 3(8) of the Warehouse Receipts Law, respectively. Being the day period for filing claims should be counted from the date the
operator with the Bureau of Customs provides a limitation of its custodian of the goods discharged from a vessel, an arrastre consignee learns of the loss, damage or misdelivery of the goods.
liability to P3,500 per package, nonetheless the insurance operator's duty is to take good care of the goods and to turn them But the Court acknowledged that filing a claim within 15 days
subrogee is entitled to recover the actual value of the shipment over to the party entitled to their possession. from knowledge of the claim would still qualify as a substantial
lost while in the custody of the arrastre operator since by its own compliance with the rule, citing Insurance Co. of North America v.
act of not charging the corresponding arrastre fees based on the Therefore, if goods were damaged while in possession of arrastre Manila Port Service, (1970)
value of the shipment after it came to know of such declared operator, he shall be liable therefor.
value from the marine insurance policy, the arrastre operator (d) Solidary Liability of Carrier and Arrastre Operator
cannot now escape liability for the actual value thereof. The value Phil. First Insurance v. Wallem Phil. Shipping, (2009). The records
of the merchandise or shipment may be declared or stated not are replete with evidence which show that the damage to the Eastern Shipping Lines v. CA, (1994). Carrier and arrastre operator
only in the bill of lading or shipping manifest, but also in other bags happened before and after their discharge and it was caused are liable for improper delivery of goods to consignee.
document required by law before shipment is cleared from the by the stevedores of the arrastre operator who were then under
piers. the supervision of the shipping company. (e) Obligations of Arrastre Operator Under “Shipper’s Load
and Count” Shipment
Phil. First Insurance Co. v. Wallem Phil. Shipping, (2009). In It is settled in maritime law jurisprudence that cargoes while being
Fireman’s Fund Insurance Co. v. Metro Port Service, Inc. the Court unloaded generally remain under the custody of the carrier. In the ICTSI v. Prudential Guarantee, (1999). When consigned goods are
explained the relationship and responsibility of an arrastre instant case, the damage or losses were incurred during the shipped under “Shipper’s Load and Count”, the shipper is solely
operator to a consignee of a cargo, to quote: discharge of the shipment while under the supervision of the responsible for the container’s load, and the carrier would then be
carrier. Consequently, the carrier is liable for the damage or losses oblivious of the contents of the shipment. Protection against
The legal relationship between the consignee and the arrastre caused to the shipment. pilferage of the shipment are then the consignee’s lookout. The
operator is akin to that of a depositor and warehouseman. The arrastre operator is, like an ordinary depositary, duty-bound to
relationship between the consignee and the common carrier is Asian Terminals v. Daehan Fire and Marine Insurance Co., (2010). take good care of the goods received from the vessel and to turn
similar to that of the consignee and the arrastre operator. Since it The limitations on loss stipulated in the Management Contract the same over the party entitled to their possession, subject to
is the duty of the ARRASTRE to take good care of the goods that does not apply if the value of the cargo shipment is such qualification as may have validly been imposed in the
are in its custody and to deliver them in good condition to the communicated to the arrastre operator before the discharge of contract between the parties.
consignee, such responsibility also devolves upon the CARRIER. the cargoes. What would be unfair and arbitrary is to hold the
Both the ARRASTRE and the CARRIER are therefore charged with arrastre operator liable for the full value of the merchandise after The arrastre operator is not required to verify the contents of the
and obligated to deliver the goods in good condition to the the consignee has paid the arrastre charges only on the basis container received and to compare them with those declared by
consignee. much lower than the true value of goods. the shipper because the cargo was at the shipper’s load and
count, and is expected to deliver to the consignee only the
The liability of the arrastre operator was reiterated in Eastern (b) Burden of Proof in Arrastre Claims container received from the carrier.
Shipping Lines, Inc. v. CA with the clarification that the arrastre
operator and the carrier are not always and necessarily solidarily ICTSI v. Prudential Guarantee, (1999). In a claim for loss filed by a VI. Freight Forwarder
liable as the facts of a case may vary the rule. consignee, the burden of proof to show compliance with the
obligation to deliver the goods to the appropriate party upon the Unsworth Transport Int. (Phil.) v. CA, (2011). The term "freight
Latest Decision on the Matter: arrastre operator, since the safekeeping of the goods rest within forwarder" refers to a firm holding itself out to the general public
its knowledge, it must prove that the losses were not due to its (other than as a pipeline, rail, motor, or water carrier) to provide
Asian Terminals, Inc. v. Malayan Insurance Co., (2011). Asian negligence or that of its employees. transportation of property for compensation and, in the ordinary
Terminals, Inc., implores us to take judicial notice of Sec. 7.1, Art. course of its business,
VII of the Management Contract for cargo handling services it (c) Period Within Which to Claim on Arrastre
entered into with the PPA, which limits petitioner’s liability to (1) To assemble and consolidate, or to provide for assembling
P5,000 per package. The Management Contract entered into by ICTSI v. Prudential Guarantee, (1999). In order to hold the and consolidating, shipments, and to perform or provide for
the petitioner and the Philippine Ports Authority (PPA) is clearly arrastre operator liable for lost or damaged goods, claimant break-bulk and distribution operations of the shipments;
not among the matters which the courts can take judicial notice should file with operator a claim for the value of said goods within (2) To assume responsibility for the transportation of goods
of. 15 days from date of discharge of the last package from the from the place of receipt to the place of destination; and
carrying vessel, which is in the nature of a prescriptive period for (3) To use for any part of the transportation a carrier subject to
3. Liability and Obligations of Arrastre Operator bringing an action and is a condition precedent to hold the the federal law pertaining to common carriers.
arrastre operator liable. The said requirement is not an empty
formality, since it gives the arrastre contractor a reasonable
A freight forwarder’s liability is limited to damages arising from its
own negligence, including negligence in choosing the carrier; P70,000 FOB Mla. (not CIF Mla.) Eastern Assurance & Surety Corp. v. LTFRB, (2003). Under E.O.
however, where the forwarder contracts to deliver goods to their Or P70,000 CIF NY (not FOB NY) 202, LTFRB has the power to require insurance companies to
destination instead of merely arranging for their transportation, it group themselves for the purpose of providing passenger accident
becomes liable as a common carrier for loss or damage to goods. FOB Mla – Once the vessel is in Manila, the seller loads the sugar insurance coverage. Administrative bodies like the LTFRB have
A freight forwarder assumes the responsibility of a carrier, which on board. expertise in specific matters within the purview of their respective
actually executes the transport, even though the forwarder does jurisdictions, and the law concedes to them the power to
not carry the merchandise itself. (1) After the sugar is loaded, the obligation of the seller is promulgate rules and regulations to implement policies of a given
finished. When does B become the owner of the sugar? statute – provided such rules and regulations conform to the
VII. FOB, FAS and CIF Designations (2) Since the buyer pays for the freightage from Manila to New terms and standards prescribed by that statute that purport to
York, the vessel is considered the agent of B. The carrier carry its general policies into effect. By providing passenger
becomes the agent of B, hence delivery to it is delivery to B; accident insurance policies to operators of PUVs, insurance
1. Importance of Such Designations
B acquires ownership in Manila companies and their businesses directly affect public land
(3) B, as owner shall bear the risk of loss; and transportation. By limiting its regulation of such companies to the
 These initials give rise to a presumption in commercial (4) Since the sale was perfected in Manila, the seller pays the segment of their business that directly affects public land
practice based on commercial customs sales tax in the Philippines transportation, the LTFRB has acted within its jurisdiction in
 In both instances of CIF or FOB, a carrier intervenes issuing the assailed Circulars.
(c) CIF – Cost, Insurance and Freight
2. Two Aspects Involved 3. Chicago International Civil Aviation Convention
The price quotation on CIF presumes that the seller shall pay cost
(a) Transfer of Ownership – when does ownership pass to of crating and packaging, insurance and the freightage. The carrier CIR v. Pilipinas Shell Petroleum, (2012). The provisions of the
buyer? is deemed to be the agent of the seller, so that throughout the 1944 Chicago Convention of International Civil Aviation, which
entire trip ownership is retained by the seller and only passes to forms binding international law, requires the contracting parties
 Res perit domino – if goods are lost in transit, the owner the buyer upon reaching the point of destination and the cargo is not to charge duty on aviation fuel already on board any aircraft
bears the loss. But when does one become owner of goods? discharged in favor of the buyer. Insurable interest is with the that has arrived in their territory from another contracting state.
 Insurance – when is the buyer or the seller said to have seller and taxes are not due as the sale is deemed perfected only Though initially aimed at establishing uniformity of taxation
insurable interest over the goods upon reaching the point of destination. among parties to the treaty to prevent double taxation, the tax
exemption now generally applies to fuel used in international
(b) Taxation – when is the transaction taxable according to Illustration Continued: CIF-NY: The cost of putting the sugar into travel by both domestic and foreign carriers.
Philippine Law which usually depends upon the place where sacks, insurance premium and freight shall be borne by the seller
the transaction was perfected? A. The seller is the owner of the sugar from Manila to New York.
Under the rule on res perit domino, the seller as the owner still
3. Definitions of Commercial Terms shall bear the risk of loss of the sugar. The seller insured the sugar
since as owner he still has insurable interest. Since ownership
(a) FOB – Free on Board does not pass to buyer until delivery of the sugar in New York,
there is no sales tax due in the Philippines.
 A price quotation with FOB presumes that the seller shall
comply with his obligation to deliver the cargo to the vessel. VIII. Miscellany
 Thereupon, it is the buyer who shall pay the freightage and
thus the vessel is deemed the agent of the buyer so that 1. Substantial Compliance with Early Warning Device
delivery to the vessel is delivery to the buyer. Requirement

Butuan Sawmill v. CA, (1966). Ownership over the cargo will pass Baliwag Transit v. CA, (1996). The placing of kerosene lamp or
the buyer upon delivery by the seller to the vessel. Buyer will then torch at the end of the road, near the rear portion of the parked
have insurable interest and the sale shall be considered as having truck to serve as an early warning device is substantial compliance
been perfected in the Philippines so that sales tax would be due with the requirements of Sec. 34(g) of Land Transportation and
from the seller. Traffic Code which requires “appropriate parking lights or flares
visible 100 meters away shall be displayed at the corner of the
(b) FAS – Free Alongside Ship: has the same presumptions as vehicle whenever such vehicle is parked on highways or in places
FOB that are not well-lighted or, is placed in such manner as to
endanger passing traffic”, in lieu of the triangular reflectorized
Illustration: A seller in Manila has 1,000 piculs of sugar which he plates in red and yellow issued by the LTO
wants to sell to a buyer B in New York for P70,000. His quotations
will be: 2. Power of the LTFRB