Chapter 1 – Preliminary Considerations

 NCC: Art 1732 – 1766

 In matters not regulated by Civil Code
- Code of Commerce
- Special Laws – Carriage of Goods by Sea Act (COGSA), Salvage Law

 May a 100% Foreign Corp own a public utility?

- A foreign corp may own the rails, terminals, power plant etc, but not the public utility.
- Public utility is to serve the public, where the Consti provides; thus, the operation of the
public utility is granted only to Filipino Citizens, or Corp / entities – 60% capital owned
by Filipinos.
- Franchise is required to operate a public utility; no requirement of franchise for the
ownership. (operation of public utility with franchise, hence must comply with
requisites of the law on citizenship vs the ownership of equipment or facilities)
 Tatad vs Sec Garcia and EDSA LRT
- DOTC shall operate the public utility, it shall assume obligations and liabilities of
common carrier.
Shall be liable for injuries, damages, death – due to operation / implementation of the
common carrier.
- It shall not be held liable for injuries, damages, death due to defective maintenance of
equipment / facilities (owner).
 Determining factor of Filipino Nationality is when the entity applies for franchise, certificates,
other forms of authorization.

Art 1732
 Common Carriers – persons, corporations, firms, associations
Engaged in the business of carrying or transporting pax, goods, or both
By land, water, air, for compensation
Offering their services to the public

 No distinction – carrying pax, good is exercised as principal activity or ancillary

- Or serve regularly; scheduled;
 Certificate of Public Convenience – is not a requisite for incurring liability
Liability arises the moments a person / entity acts as common carrier, regardless of
noncompliance with the applicable regulatory statute

 Common Carrier
- Certain persons / association of persons obligate themselves to transport persons,
things, or news
- For one place to another
- For a fixed price
- Offering services to public generally
 Determining test to know whether a party is a common carrier
- Engaged in the business of carrying goods, for hire as public employment

 Common Carrier vs Private Carrier (Special Carrier)

- As to the degree of care:
Common Carrier – Extraordinary Diligence by virtue of public policy (one acts with due
care, that of a human foresight could provide)
(1) To ascertain the nature and characteristics of goods for shipment
(2) Act with diligence, to the extent that a human foresight could provide.

Private Carrier – Diligence of a good father of the family – degree of care that an
ordinarily prudent person would have observed when confronted with similar situation.

- Private Carrier
Isolated transaction (not part of business / occupation), carrier does not cater to carry
goods for general public or limited clientele, although involving the carriage of goods for
fee

- Engaged in the business is deemed to cover operations whether regular or scheduled, occasional,
episodic or unscheduled.

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- One is a common carrier even if he has no fixed and publicly known route, maintains no terminals
and issues no ticket.
- The true test of whether the character of the use is whether the public may enjoy it by right or by
permission. Note that the contract of transportation is a consensual contract. Hence, a common
carrier engages in a continuous offer. If you flag a common carrier down, the contract becomes
perfected and is consistent with the idea that entering with a contract with the common carrier is a
matter of right and not permission. You would know when the carrier you are going to flag down is a
common carrier because it should hold itself out principally as such.
- Recovery from a contract of private carriage, requires a contract, that there was negligence, and
that the goods are lost. On the other hand, recovery from a contract with a common carrier, only
requires the contract and that the goods were lost. This is so because of the presumption of
negligence.
- Regardless of whether the object are goods or passengers,a common carrier mus observe extra-
ordinary diligence.
- If loss, destruction or deterioration of the goods occurs or death or physical injuries is suffered by a
passenger, there is a presumption of negligence that arises. The presumption may only be
overcome by a showing that the required degree of diligence has been observed or that Article 1735
applies in the case of goods. In case of passengers, only the former.
- The following or similar stipulations shall be considered unreasonable, unjust and contrary to public
policy:
a. that the common carrier shall not be responsible for the acts or omissions of its or his employees
b. that the common carrier's liability for acts committed by thieves, or of robbers who do not act with
grave or irresistible threat, violence or force, is dispensed with or diminished. (stipulation of
exemption for acts which do not constitute as force majeure)
c. that the common carrier is not responsible for the loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the
contract of carriage.

 Test of Common Carrier

- If it may obligate itself to transport for all those who opt to avail the same.
- Special contract of charter party – is a private carrier
- Liability arose from a special contract between the private carriage and the other party;
liability should be negligence / failure to exercise diligence of good father of the family.
 Art 361 – Merchandise shall be transported at the risk of the shipper, unless the contrary is
stipulated,
Damages / impairment shall be for the account and risk of the shipper:
1. Fortuitous event
2. For Majeure

 Common Carrier - Burden of proof – carrier

Carrier shall be liable should the damages, injury, death is due to the failure of the carrier to
exercise diligence required.

Exception: the Shipper is liable (even though fortuitous / force majeure) – unless the shipper
committed fraud in bill of lading – making the carrier believe that goods were of a class or
quality different from what really were.

 Private carrier – code of commerce govern

Burden of proof is upon the shipper / pax – the prove that the carrier was negligent.

 Contract of private carrier – parties may freely stipulate their duties and obligations, which is
binding to them; private carrier does not involve the general public.
- A stipulation exempting the private carrier / owner from the liability of negligence is
valid; thus the shipper is solely responsible for the damages.
- The NCC provides that rights may be waived, provided it is not contrary to law, public
policy, public morals;
- The contract of private carrier binds the shipper and the carrier, it is not impressed with
public policy for the 3rd persons / public is not affected thereby.
- Contract of private carrier – obligation arises from the contract, which is not impressed
with public policy, thus a stipulation waiving the liability of the carrier is valid; Rights
may be waived.

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Art 1733
 Common carriers
- Due to (1) nature of business and (2 public policy
- Bound to observe extraordinary diligence

 Burden of proof of the exercise of extraordinary diligence – upon the common carrier.
 The liability in the event of injury, damage, or death is upon the holder of the franchise, cert,
authorization to operate, and not upon the owner; non-ownership of the facility will not negate
the non-performance of extraordinary diligence required by the law.

 Seaworthy vessel (1) adequately equipped for voyage; (2) sufficient number of competent
officers or crew.
- Failure to comply on the above requisite amounts to failure to exercise the
extraordinary
- It allowed the vessel to sail despite the approaching typhoon,
 Presumption that the common carrier was negligent.
Exception: the circumstance listed under Art 1743.
Fire is not considered as a natural disaster; unless was due to lightning
- COGSA – carrier of goods by sea act

 Fault; Negligence; Proximate Cause

- Fault / Negligence
Is the omission of the diligence required by the nature of the obligation.
- In case of private carrier (the obligation arise from the contract, breach of contract the
obligor is presumed at fault.
- The duly to perform extraordinary diligence by the common carrier remains in full force,
even when they are temporarily unloaded or stored in transit; exceptions under Art
1734.
- Proximate cause – natural and continuous sequence (unless broken by intervening
cause) that process injury.
- The liability is upon the common carrier, which is true even if the shipper failed to
declare the value of goods / luggage.