San Beda College of Law 54: Transportation Laws

San Beda College of Law
54
MEMORY AID
IN
COMMERCIAL LAW
TRANSPORTATION LAWS
PRIVATE CARRIER
One which, without being engaged in the
business of carrying as a public employment,
undertakes to deliver goods or passengers for
compensation. (Home Insurance Co. vs.
American Steamship Agency, 23 SCRA 24)
TESTS WHETHER CARRIER IS COMMON OR
PRIVATE:
The SC in First Philippine Industrial
Corporation vs. CA (1995) reiterated the
following tests:
1. It must be engaged in the business
of carrying goods for others as a
public employment and must hold
itself out as ready to engage in the
transportation of goods generally as
a business and not as a casual
occupation;
2. It must undertake to carry goods of
the kind to which its business in
confined;
3. It must undertake to carry by the
method by which his business is
conducted and over its established
roads; and
4. The transportation must be for hire.
In National Steel Corp. vs. CA (1997) the SC
held that the true test of a common carrier is
the carriage of goods or passengers provided
it has space for all who opt to avail
themselves of its transportation for a fee.
COMMON CARRIER
PRIVATE
CARRIER
1. As to availability
Holds himself out for
all
people
indiscriminately
Contracts
with
particular individuals
or groups only
2. As to required diligence
Extraordinary
diligence is required
Ordinary diligence is
required
3. As to regulation
Subject
to
regulation
State
Not subject to State

regulation
4. Stipulation limiting liability

Parties may not agree
on
limiting
the
carriers
liability
except when provided
by law
Parties may limit the

carriers
liability,
provided it is not
contrary
to
law,
morals
or
good
customs
5. Exempting circumstance
Prove
extraordinary
diligence
and
Art.
caso
fortuito,
1174 NCC
Art.
CONTRACT OF TRANSPORTATION/ CARRIAGE

A contract whereby a person, natural or
juridical, obligates to transport persons,
goods, or both, from one place to another, by
land, air or water, for a price or
compensation.
Classifications:
1. Common or Private
2. Goods or Passengers
3. For a fee (for hire) or Gratuitous
4. Land, Water/maritime, or Air
5. Domestic/inter-island/coastwise or
International/foreign
It is a relationship which is imbued with the
public interest.
COMMON CARRIER
Persons, corporations, firms or associations
engaged in the business of carrying or
transporting passengers or goods or both, by
land, water, or air, for compensation, offering
their services to the public (Art. 1732, Civil
Code).
Art. 1732 of the New Civil Code avoids any
distinction between one whose principal
business activity is the carrying of persons or
goods or both and one who does such
carrying only as an ancillary activity
(sideline).
It also avoids a distinction
between a person or enterprise offering
transportation service on a regular or
scheduled basis and one offering such service
on an occasional, episodic or unscheduled
basis.
Neither does the law distinguish between
a carrier offering its services to the general
public that is the general community or
population and one who offers services or
solicits business only from a narrow segment
of the general population.
A person or entity is a common carrier
even if he did not secure a Certificate of
Public Convenience (De Guzman vs. CA, 168
SCRA 612).
It makes no distinction as to the means of
transporting, as long as it is by land, water or
air.
It does not provide that the
transportation should be by motor vehicle.
(First Philippine Industrial Corporation vs. CA)
One is a common carrier even if he has no
fixed and publicly known route, maintains no
terminals, and issues no tickets (Asia
Lighterage Shipping, Inc. vs. CA).
Characteristics:
1. Undertakes to carry for all people
indifferently and thus is liable for
refusal without sufficient reason
(Lastimoso vs. Doliente, October 20,
1961);
2. Cannot lawfully decline to accept a
particular class of goods for carriage
to the prejudice of the traffic in these
goods;
3. No monopoly is favored (Batangas
Trans. vs. Orlanes, 52 PHIL 455);
4. Provides public convenience.
COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)

55
MEMORY AID
diligence only:
a. One who has not yet boarded any
part of a vehicle regardless of
whether or not he has purchased a
ticket;
b. One who remains on a carrier for an
unreasonable length of time after
he has been afforded every safe
opportunity to alight;
c. One who has boarded by fraud,
stealth, or deceit;
d. One who attempts to board a
moving vehicle, although he has a
ticket, unless the attempt be with
the knowledge and consent of the
carrier;
e. One who has boarded a wrong
vehicle, has been properly informed
of such fact, and on alighting, is
injured by the carrier;
f.
Invited guests and accommodation
passengers. (Lara vs. Valencia)
g. One who rides any part of the
vehicle which is unsuitable or
dangerous or which he knows is not
designed
or
intended
for
passengers.
DEFENSES OF A COMMON CARRIER IN THE
CARRIAGE OF GOODS
1. CASO FORTUITO/FORCE MAJEURE
Requisites:
a. Must be the proximate and only cause
of the loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after
the occurrence of the disaster (Art.
1739)
c. Carrier has not negligently incurred in
delay in transporting the goods (Art.
1740)
Fire is not considered a natural disaster or
calamity as it arises almost invariably from
some act of man. (Eastern Shipping Lines Inc.
vs. IAC)
Mechanical defects are not force majeure if
the same was discoverable by regular and
adequate inspections. (Notes and Cases on
the Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.120122)
2. ACTS OF PUBLIC ENEMY
Requisites:
a. Must be the proximate and only cause
of the loss
b. Exercise of due diligence to prevent or
minimize the loss before, during or after
the act causing the loss, deterioration or
destruction of the goods (Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute
defense
b.
Contributory: partial defense. (Art.
1741)
4. CHARACTER OF THE GOODS OR DEFECTS
IN THE PACKING OR IN THE CONTAINER
Even if the damage should be caused by
IN
COMMERCIAL LAW
1733, NCC
6.Presumption of negligence
There
is
a
presumption of fault
or negligence
No presumption of
fault or negligence
7.Governing law
Law on common
carriers
Law on obligations
and contracts
GOVERNING LAWS
A. Domestic/inter-island/coastwise
Applicable to Land, Water, and Air
transportation
1. Civil Code - primary
2. Code of Commerce (Arts. 349, 379,
573-734, 580, 806-845) - suppletory
B. International/foreign/overseas
(Foreign
country to Philippines)
Applicable to Water/maritime and Air
transportation
The law of the country of destination
generally applies.
1. Civil Code - primary
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of Goods
by Sea Act (COGSA)
b. Air: Warsaw Convention
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT
OF
EXTRAORDINARY
DILIGENCE
Rendition of service with the greatest skill
and utmost foresight. (Davao Stevedore Co. v.
Fernandez)
Rationale:
1. From the nature of the business and
for reasons of public policy (Art.
1733)
2. Relationship of trust
3. Business is impressed with a
special public duty
4. Possession of the goods
5. Preciousness of human life
A common carrier is not an absolute insurer
of all risks of travel.
COVERAGE
1. Vigilance over goods (Arts. 1734-1754);
and
2. Safety of passengers (Arts. 1755-1763).
PASSENGER
A person who has entered into a contract of
carriage, express or implied, with the carrier.
They are entitled to extraordinary diligence
from the common carrier.
The following are not considered
passengers, and are entitled to ordinary


56
MEMORY AID
IN
Extraordinary
diligence
COMMERCIAL LAW
Ordinary diligence
Nature of liability
Tort; however,
The employee must
be on duty at the time
of the act. (Maranan v.
Perez)
Not absolute; limited

by Art. 1763
The carrier is liable when its personnel

allowed a passenger to drive the vehicle
causing it to collide with another vehicle
resulting to the injuries suffered by the other
passengers. (MRR vs. Ballesteros, 16 SCRA
641)


57
MEMORY AID
CARRIAGE OF GOODS
IN
COMMERCIAL LAW
CARRIAGE OF PASSENGERS
Parties
1.
2.
3.
Common carrier
Shipper
Consignee
1.
2.
Common carrier
Passenger
Cause of liability
Delay in delivery, loss, destruction, or
deterioration of the goods
Death or injury to the passengers

Duration of liability
From the time the goods are unconditionally

placed in the possession of, and received by the
carrier for transportation until the same are
delivered actually or constructively by the carrier
to the consignee or to the person who has the
right to receive them. (Art. 1736)
It remains in full force and effect even when
they are temporarily unloaded or stored in transit
unless the shipper or owner has made use of the
right of stoppage in transitu. (Art. 1737)
It continues to be operative even during the
time the goods are stored in a warehouse of the
carrier at the place of destination until the
consignee has bee advised of the arrival of the
goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose
of them. (Art. 1738)
Delivery of goods to the custom authorities is
not delivery to the consignee. (Lu Do v. Binamira,
101 Phil 120)
The duty of a common carrier to provide safety

to its passengers so obligates it not only during
the course of the trip, but for so long as the
passengers are within its premises and where
they ought to be in pursuance to the contract of
carriage. (LRTA v. Navidad, [2003])
All persons who remain on the premises
within a reasonable time after leaving the
conveyance are to be deemed passengers, and
what is a reasonable time or a reasonable delay
within this rule is to be determined from all the
circumstances, and includes a reasonable time
to see after his baggage and prepare for his
departure. (La Mallorca v. CA, 17 SCRA 739 ;
Abiotiz Shipping Corporation v. CA, 179 SCRA
95)
It is the duty of common carriers of
passengers to stop their conveyances a
reasonable length of time in order to afford
passengers an opportunity to enter, and they
are liable for injuries suffered from the sudden
starting up or jerking of their conveyances while
doing so.
The duty which the carrier of
passengers owes to its patrons extends to
persons boarding the cars as well as to those
alighting therefrom (Dangwa Trans Co., Inc. vs.
CA 202 SCRA 574).
Presumption of negligence
Art.1735 Civil Code
Reason: As to when and how goods were
damaged in transit is a matter peculiarly within
the knowledge of the carrier and its employees.
(Mirasol v. Dollar, 53 PHIL 124)
Mere proof of delivery of goods to a carrier in
good order and the subsequent arrival of the
same goods at the place of destination in bad
order makes for a prima facie case against the
carrier. (Coastwise Lighterage Corp. v. CA, 245
SCRA 796)
Art.1755 Civil Code

Reason: The contract between the passenger
and the carrier imposes on the latter the duty to
transport the passenger safely; hence the
burden of explaining should fall on the carrier.


58
MEMORY AID
IN
COMMERCIAL LAW
Defenses
1.
2.
Ordinary circumstance: Exercise of

extraordinary diligence (Art. 1735)
Special circumstances:
a. Flood, storm, earthquake, lighting,
or
other natural disaster or
calamity (plus force majeure)
b. Act of the public enemy in war,
whether international or civil
c. Act or omission of the shipper or
the owner of goods
d. The character of the goods or
defects in the packing or in the
containers
e. Order or act of competent public
authority (Art. 1734)
1. Exercise of extraordinary diligence

(Art. 1756)
2. Caso fortuito
Valid stipulations
1. Reduction of degree of diligence to ordinary
diligence, provided it be:
a) In writing, signed by the shipper or
owner;
b) Supported by a valuable consideration
other than the service rendered by the
carriers; and
c) Reasonable, just and not contrary to
public policy. (Art. 1744)
2. Fixed amount of liability: A contract fixing the
sum to be recovered by the owner or shipper for
the loss, destruction or deterioration of the
goods, if it is reasonable and just under the
circumstances and has been fairly and freely
agreed upon. (Art. 1750)
3. Limited liability for delay: An agreement
limiting the common carriers liability for delay
on account of strikes or riots (Art. 1748)
4. Stipulation limiting liability to the value of the
goods appearing in the bill of lading, unless the
shipper or owner declares a greater value. (Art.
1749)
Stipulation limiting liability when a passenger is

carried gratuitously, but not for willful acts or
gross negligence. (Art. 1758)
The diligence required in the carriage of the

goods may be reduced by only one degree, from
extraordinary to ordinary diligence or diligence of
a good father of a family. (Art. 1744, Art. 1745,
no. 4)


59
MEMORY AID
IN
COMMERCIAL LAW
Void stipulations
1.
2.
3.
4.
5.
6.
7.
That the goods are transported at the risk

of the owner or shipper;
That carrier will not be liable for any loss,
destruction or deterioration of the goods;
That the carrier need not observe any
diligence in the custody of the goods;
That the carrier shall exercise a degree of
diligence less than that of a good father of
a family over the movable transported;
That the carrier shall not be responsible for
the acts or omissions of his or its
employees;
That the carriers liability for acts
committed by thieves or robbers who do
not act with grave or irresistible threat,
violence or force is dispensed with or
diminished;
That the carrier is not responsible for the
loss, destruction or deterioration of the
goods on account of the defective condition
of the car, vehicle, ship or other equipment
used in the contract of carriage. (Art. 1745)
Dispensing with or lessening the extraordinary

responsibility of a common carrier for the safety
of passengers imposed by law by stipulation, by
posting of notices, by statements on tickets or
otherwise. (Art. 1757)

1. One exempting the

carrier from any and all
liability for loss or
damage occasioned by
its own negligence.
2.
An
unqualified
limitation of liability to
an agreed valuation.
1. One limiting the

liability of the carrier
to
an
agreed
valuation, unless the
shipper declares a
higher value and
pays a higher rate of
freight
(H.E.
Heacock
Company
vs.
Macondray
&
Company Inc.)
However, the carrier cannot limit its liability

for injury to, or loss of, goods shipped where
such injury or loss was caused by its own
negligence.
(Shewaram vs. PAL, 17 SCRA 606)
SPECIAL RULES ON LIABILITES OF AIRLINE
CARRIERS
1. In case of flight diversion due to bad
weather or other circumstances beyond the
pilots control, the relation between the
carrier and the passenger continues until the
latter has been landed at the port of
destination and has left the carriers
premises. The carrier should necessarily
exercise
extraordinary
diligence
in
safeguarding the comfort, convenience and
safety of its stranded passengers until they
have
reached
their
final
destination.
(Philippine Airlines vs. CA, 226 SCRA 423)
2. Even where overbooking of passengers is
allowed as a commercial practice, the airline
company would still be guilty of bad faith and
still be liable for damages if it did not properly
inform passenger that it could breach the
contract of carriage even if they were
confirmed passengers. (Zalamea vs. CA, 228
SCRA 23)
3. An open-dated ticket constitutes a
complete contract between the carrier and
passenger. Hence, the airline company is
liable if it refused to confirm a passengers
flight reservation. (Singson vs. CA, 282 SCRA
149)
4. An airline company which issued a
confirmed ticket to a passenger covering
successive trips on different airlines can be
held liable for damages occasioned by
bumping off by one of the successive
airlines. (Lufthansa German Airlines vs. CA,
238 SCRA 290)
5. An airline ticket providing that carriage by
successive air carriers is to be regarded as a
single operation is to make the issuing
carrier liable for the tortuous conduct of the
other carrier. A printed provision in the ticket
limiting liability only to its own conduct is not
enough to rebut that liability. (KLM Royal
Dutch Airlines vs. CA, 65 SCRA 237)
II. CODE OF COMMERCE
A.
OVERLAND TRANSPORTATION
(Arts. 349-379)
RULES ON PASSENGERS BAGGAGE

IN THE CUSTODY OF
THE PASSENGERS
(HAND-CARRIED)
IN THE CUSTODY OF
THE COMMON
CARRIER
(CHECKED-IN)
Legal nature of the baggage

Necessary deposit
Considered
goods
as
Required diligence by the common carrier

Diligence
depositary
diligence)
of
a
(ordinary
Extraordinary
diligence
Applicable rules
Arts. 1998 and 20002003
Arts. 1733-1753
CONCURRING CAUSES OF ACTION ARISING

FROM THE NEGLIGENT ACT OF THE COMMON
CARRIER
1. Culpa contractual (breach of contract)
Only the carrier is primarily liable and not
the driver, because there is no privity
between the driver and the passenger.
Basis: Art.1759, NCC.
No defense of due diligence in the selection
and supervision of employees.
2. Culpa aquiliana (quasi-delict)
The carrier and driver are solidarily liable
as joint tortfeasors.
Basis: Art. 2180, NCC.
Defense of due diligence in the selection
and supervision of employees is available.
Exception: maritime tort resulting in collision.
(See notes on Collision)
3. Culpa criminal (criminal negligence)
The driver is primarily liable. The carrier is
subsidiarily liable only if the driver is
convicted and declared insolvent.
Basis: Art. 100, RPC.
In case of injury to a passenger due to the
negligence of the driver of the bus on which
he is riding and of the driver of another
vehicle, the drivers as well as the owners of
the two vehicles are jointly and severally
liable for damages. It makes no difference
that the liability of the bus driver and owner
springs from contract while that of the owner
and driver of the other vehicle arises from
quasi-delict. (Fabre vs. CA)
LIMITATIONS AS TO CARRIERS LIABILITY
INVALID AS BEING
CONTRARY TO PUBLIC
POLICY
VALID &
ENFORCEABLE
3.
4.
5.
6.
the vessel by which the goods are to

be shipped.
Negotiable - one in which it is stated
that the goods referred to therein will
be delivered to the bearer or to the
order of any person named therein.
Non-negotiable - One in which it is
stated that the goods referred to
therein will be delivered to a specified
person.
Clean One which does not indicate
any defect in the goods.
Foul One which contains a notation
thereon indicating that the goods
covered by it are in bad condition.
7.
Spent One which covers goods that

already have been delivered by the
carrier without a surrender of a signed
copy of the bill.
8. Through One issued by the carrier
who is obliged to use the facilities of
other carriers as well as his own
facilities
for
the
purpose
of
transporting the goods from the city
of the seller to the city of the buyer,
which bill of lading is honored by the
second and other interested carriers
who do not issue their own bills.
9. Custody One wherein the goods are
already received by the carrier but
the vessel indicated therein has not
yet arrived in the port.
10. Port One which is issued by the
carrier to whom the goods have been
delivered, and the vessel indicated in
the bill of lading by which the goods
are to be shipped is already in the
port where the goods are held for
shipment.
Functions:
1. Best evidence of the existence of the
contract of carriage of cargo (Art.
353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver
goods as stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier cannot
ordinarily refuse to carry a particular class of
goods.
EXCEPTION: For some sufficient reason the
discrimination against the traffic in such
goods is reasonable and necessary. (Fisher vs.
Yangco Steamship Co. 31 Phil 1).
Instances when the carrier may validly
refuse to accept the goods include the ff:
1.) Goods sought to be transported are
dangerous objects, or substances including
dynamite and other explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger
like flood, capture by enemies and the like
Applicability
1. Domestic land and water/maritime
transportation. (Pandect of Commercial Law
and Jurisprudence, Justice Jose Vitug, 1997
ed.)
2. Domestic Air Transportation. (Commercial
Law Review, Cesar Villanueva, 2004 ed.)
IMPORTANT CONCEPTS:
1. Bill of lading
2. Obligations of the carrier
3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
BILL OF LADING
The written acknowledgment of receipt of
goods and agreement to transport them to a
specific place to a person named or to his
order.
Rules:
1. It is not indispensable for the creation of a
contract of carriage. (Compania Maritima vs.
Insurance Company of North America, 12
SCRA 213)
2. Ambiguity is construed against the carrier,
the contract being one of adhesion.
3. The consignee, although the instrument is
oftentimes drawn up only by the consignor
and carrier, becomes bound by all the
stipulations contained therein by making a
claim for loss on the basis of said bill of
lading. (Sea-Land Services Inc. vs. IAC)
4. The right of a party to recover for loss of
shipment consigned to him under a bill of
lading drawn up only by and between the
shipper and the carrier, springs from either a
relation of agency between him and the
shipper, or his status as stranger in whose
favor some stipulation is made in said
contract, and who becomes a party thereto
when he demands fulfillment of that
stipulation. (Art. 1311 (2), (Mendoza vs. PAL
Inc.)
5. Acceptance of the bill of lading without
dissent raises the presumption that all the
terms therein where brought to the
knowledge of the shipper and agreed to by
him and, in the absence of fraud or mistake;
he is estopped from thereafter denying that
he assented to such terms. (Notes and Cases
on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed.
p.261)
Kinds:
1. On board - issued when the goods
have been actually placed aboard the
ship with very reasonable expectation
that the shipment is as good as on its
way.
2. Received - one in which it is stated
that the goods have been received for
shipment with or without specifying
transportation
2. Land/water/air transportation
3. Carriage of goods
4. Goods shipped are damaged
Rules:
a. Patent damage: shipper must file a claim
against the carrier immediately upon
delivery (it may be oral or written)
b. Latent damage: shipper should file a claim
against the carrier within 24 hours from
delivery.
Note: These rules does not apply to
misdelivery of goods. (Roldan vs. Lim Ponzo)
Purpose of notice: To inform the carrier that
the shipment has been damaged, and it is
charged with liability therefore, and to give it
an opportunity to make an investigation and
fix responsibility while the matter is fresh.
The filing of notice of claim is a condition
precedent for recovery.
Shorter period may be stipulated by the
parties
because
it merely affects the
shippers remedy and does not affect the
liability of the carrier. (PHILAMGEN vs.
Sweetlines, Inc.)
Prescriptive Period
Not provided by Article 366. Thus, in such
absence, Civil Code rules on prescription
apply.
If despite the notice of claim, the carrier
refuses to pay, action must be filed in court.
1. No bill of lading was
issued: within 6 years
2. Bill of lading was issued:
within 10 years.
ARTICLE 366
COGSA Sec.3 (6)
Applicability
1.
Domestic/interisland/coastwise
transportation
2. Land, water, air
transportation
1. International/
overseas/foreign
(from foreign country
to Phils.)
Note: subject to the
rule on Paramount
Clause
2. Water/maritime
transportation
Notice of damage
1. Condition
precedent
2. 24-hour period for
claiming latent
damage
1. Not a condition
precedent
2. 3-day period for
claiming latent
damage
Prescriptive period
None provided;
Code applies.
Civil
One year from the

date
of
delivery
(delivered
but
damaged goods), or
date when the vessel
left port or from the
date of delivery to
the arrastre (nondelivery or loss).
7.) Goods like livestock will be exposed to

disease
8.) Strike
9.) Failure to tender goods on time. (Notes
and Cases on the Law on Transportation and
Public Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p.68)
In case of carriage by railway, the carrier is
exempted from liability if carriage is insisted
upon by the shipper, provided its objections
are stated in the bill of lading.
However, when a common carrier accepts
cargo for shipment for valuable consideration,
it takes the risk of delivering it in good
condition as when it was loaded. (PAL vs. CA)
B. Duty to deliver the goods
Not only to transport the goods safely but
to the person indicated in the bill of lading.
The goods should be delivered to the
consignee or any other person to whom the
bill of lading was validly transferred or
negotiated.
Time of delivery
Stipulated in
Contract/Bill of Lading
No stipulation
1. Carrier is bound to
fulfill the contract and
is liable for any delay;
no matter from what
cause it may have
arisen.
1. Within a reasonable
time.
2. Carrier is bound to
forward them in the
1st shipment of the
same or similar goods
which he may make
to
the
point
of
delivery. (ART. 358
Code of Commerce)
Effects of delay
a. Merely suspends and generally does not
terminate the contract of carriage
b. Carrier remains duty bound to exercise
extraordinary diligence
c. Natural disaster shall not free the carrier
from responsibility (Art.1740)
d. If delay is without just cause, the
contract limiting the common carriers
liability cannot be availed of in case of
loss or deterioration of the goods
(Art.1747)
RIGHT OF CONSIGNEE TO ABANDON GOODS
Instances:
1. Partial non-delivery, where the goods
are useless without the others (Art.
363);
2. Goods are rendered useless for sale or
consumption for the purposes for which
they are properly destined (Art. 365);
and
3. In case of delay through the fault of the
carrier (Art. 371).
NOTICE OF DAMAGE (ART. 366)
Requisites for applicability:
1. Domestic/inter-island/coastwise
General Accident Fire and Life Assurance

Corp. 217 SCRA 359).
MERCHANT VESSEL
Vessel engaged in maritime commerce,
whether foreign or otherwise. (Bar Review
Materials in Commercial Law, Jorge Miravite,
2002 ed.)
Constitutes property which may be
acquired and transferred by any of the means
recognized by law. They shall continue to be
considered as personal property. (Arts. 573,
585)
They are susceptible to maritime liens such
as for the repair, equipping and provisioning
of the vessel in the preparation of a voyage,
as well as mortgage liabilities, in satisfaction
of which a vessel may be validly arrested and
sold. (Ship Mortgage Decree of 1978)
MARITIME LIEN
It constitutes a present right of property in
the ship, a jus in re, to be afterward enforced
in admiralty by process in rem. (PNB vs. CA,
337 SCRA 381)
If the maritime lien arose prior to the
recording of a preferred mortgage, it shall
have priority over the said mortgage lien.
(PNB vs. CA, 337 SCRA 381)
ORDER OF PREFERENCE IN CASE OF SALE OF
VESSEL
R.A. 6106
P.D. 1521
Effectivity date
1969
1978
Applicability
Overseas shipping
only
Both domestic and

overseas shipping
Kind of sale
Judicial
Judicial and
extrajudicial
0.
COMBINED CARRIER AGREEMENT (ART. 373)
GENERAL RULE: In case of a contract of
transportation of several legs, each carrier is
responsible for its particular leg in the
contract.
EXCEPTION: A combined carrier agreement
where a carrier makes itself liable assuming
the obligations and acquiring as well the
rights and causes of action of those which
preceded it.
B.
MARITIME COMMERCE
(Arts. 573-869)
IMPORTANT CONCEPTS:
1. Merchant vessel
2. Maritime lien and Preference of
Credit
3. Doctrine of limited liability
4. Causes of revocation of voyage
5. Participants in maritime commerce
6. Charter party
7. Loans
on
bottomry
and
respondentia
8. Accidents in maritime commerce
MARITIME/ADMIRALTY LAW
It is the system of laws which particularly
relates to the affairs and business of the sea,
to ships, their crews and navigation, and to
maritime conveyance of persons and
property. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino &
Hernando, citing Francisco, p.254)
Maritime laws apply only to maritime trade
and sea voyages. (Pandect of Commercial
Law and Jurisprudence, Justice Jose Vitug,
1997 ed.)
Arrastre service is not maritime in
character. It refers to a contract for the
unloading of goods from a vessel. (ICTSI vs.
Prudential Guarantee, 320 SCRA 244)
CHARACTERISTICS
OF
MARITIME
TRANSACTION
1. Real - similar to transactions over real
property with respect to effectivity against
third persons which is done through
registration. (Rubiso vs. Rivera, 37 Phil. 72).
The evidence of real nature is shown by: 1)
the limitation of the liability of the agents to
the actual value of the vessel and the freight
money; and 2) the right to retain the cargo
and embargo and detention of the vessel
(Luzon Stevedoring Corp v. CA, 156 SCRA
169);
2. Hypothecary - the liability of the owner of
the value of the vessel is limited to the vessel
itself (Doctrine of Limited Liability).
The real and hypothecary nature of
maritime law simply means that the liability
of the carrier in connection with losses related
to maritime contracts is confined to the
vessel, which stands as the guaranty for their
settlement. (Aboitiz Shipping Corp. vs.
equipments; 3) freightage; and 4) insurance

proceeds. (Chua v. IAC, 166 SCRA 183)
EXCEPTIONS:
1. Claims under Workmens Compensation
(Abueg vs. San Diego 77 Phil 730);
2. Injury or damage due to shipowner or to
the concurring negligence of the
shipowner and the captain;
3. The vessel is insured (Vasquez vs. CA
138 SCRA 553).
4. Expenses for repair on vessel completed
before loss;
5. In case there is no total loss and the
vessel is not abandoned;
6. Collision between two negligent vessels;
Abandonment of the vessel is necessary to
limit the liability of the shipowner. The only
instance were abandonment is dispensed with
is when the vessel is entirely lost (Luzon
Stevedoring vs. CA 156 SCRA 169).
RIGHT OF SHIPOWNER OR SHIP AGENT TO
ABANDON VESSEL
Instances:
1. In case of civil liability from indemnities to
third persons (Art. 587);
2. In case of leakage of at least of the
contents of a cargo containing liquids (Art.
687); and
3. In case of constructive loss of the vessel
(Sec. 138, Insurance Code).
RIGHT OF ABANDONMENT
SHIPOWNER OR SHIP
AGENT
CONSIGNEE
What may be abandoned

Vessel
Order of Preference
A preferred mortgage
shall have priority
over
all
claims
against the vessel,
except the following
preferences in the
order stated:
1. Judicial costs of
the proceedings;
2. Taxes due the
Philippine
Government;
3.
Salaries
and
wages of the Captain
and Crew of the
vessel during its last
voyage;
4. General average
or salvage including
contract
salvage,
bottomry loans, and
indemnity
due
shippers
for
the
value
of
goods
transported
but
which
were
not
delivered
to
the
consignee;
5. Costs of repair and
equipment of the
vessel,
and
provisioning of food,
supplies
and
fuel
during
its
last
voyage; and
6.
Preferred
mortgages registered
prior in time.
The
preferred
mortgage lien shall
have priority over all
claims against the
vessel, except the
following preferences
in the order stated:
1. Expenses and fees
allowed and costs
taxed by the court
and taxes due to the
Government;
2. Crews wages;
3. General average;
4. Salvage, including
contract salvage;
5.
Maritime
liens
arising prior in time
to the recording of
the
preferred
mortgage;
6. Damages arising
out of tort; and
7.
Preferred
mortgage registered
prior in time.
Goods shipped
Instances
1. In case of civil
liability
from
indemnities to third
persons (Art. 587);
2. Sec. 138, Insurance
Code;
3. In case of leakage
of at least of the
contents of a cargo
containing liquids (Art.
687)
1.
Partial
nondelivery, where the
goods are useless
without the others
(Art. 363);
2.
Goods
are
rendered useless for
sale or consumption
for the purposes for
which
they
are
properly
destined
(Art. 365); and
3. In case of delay
through the fault of
the carrier (Art. 371).
Effect of sale: All pre-existing claims in the

vessel are terminated. They will then be
satisfied from the proceeds of the sale subject
to the order of preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
Cases where applicable:
1. Art. 587 civil liability for
indemnities to third persons
2. Art. 590 indemnities from
negligent acts of the captain (not
the shipowner or ship agent)
3. Art. 837 collision
4. Art. 643 liability for wages of the
captain and the crew and for
advances made by the ship agent if
the vessel is lost by shipwreck or
capture
GENERAL RULE: The liability of shipowner
and ship agent is limited to the amount of
interest in said vessel such that where vessel
is entirely lost, the obligation is extinguished.
(Luzon Stevedoring v. Escano, 156 SCRA 169)
The interest extends to: 1) the vessel itself; 2)
4.
and freight of the vessel, and all that

relate to the requirements of navigation;
Order a new voyage, make a new
charter or insure the vessel after
obtaining
authorization
from
the
shipowner or if granted in certificate of
appointment.
Civil Liabilities of the Shipowner And Ship

Agent
1. All contracts of the captain, whether
authorized or not, to repair, equip and
provision the vessel; (Art. 586)
2. Loss and damage to the goods loaded
on the vessel without prejudice to their
right to free themselves from liability by
abandoning the vessel to the creditors.
(Art. 587)
Duty of Ship Agent to Discharge the Captain
and Members of the Crew
If the seamen contract is not for a definite
period or voyage, he may discharge them at
his discretion. (Art. 603)
If for a definite period, he may not
discharge them until after the fulfillment of
their contracts, except on the following
grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to its
cargo through malice or manifest or
proven negligence. (Art. 605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders of
ships.
The terms have the same meaning, but are
particularly used in accordance with the size
of the vessel governed and the scope of
transportation, i.e., large and overseas, and
small and coastwise, respectively.
Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government
of the country under whose flag he
navigates.
Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required
physical and mental examinations
required for licensing him as such.
(Art. 609)
Inherent powers:
1. Appoint crew in the absence of ship
agent;
2. Command the crew and direct the
vessel to its port of destination;
3. Impose correctional punishment on
those who, while on board vessel,
fail to comply with his orders or are
wanting in discipline;
4. Make contracts for the charter of
vessel in the absence of ship agent.
5. Supply, equip, and provision the
vessel; and
Effects
1.
Transfer
of
ownership of the
vessel from the
shipowner to the
shippers or insurer.
2. In case of (2), the
insurer must pay
the insured as if
there was actual
total loss of the
vessel.
1. Transfer
of
ownership on the
goods from the
shipper to the
carrier.
2. Carrier
should
pay the shipper
the market value
of the goods at
the
point
of
destination.
CAUSES OF REVOCATION OF VOYAGE

1. War or interdiction of commerce;
2. Blockade;
3. Prohibition
to
receive
cargo
at
destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art.
640)
Terms:
1. Interdiction
of
commerce
A
governmental prohibition of commercial
intercourse intended to bring about an
entire cessation for the time being of all
trade whatever.
2. Blockade A sort of circumvallation of a
place by which all foreign connection
and correspondence is, as far as human
power can effect it, to be cut off.
3. Embargo A proclamation or order of a
state, usually issued in time of war or
threatened hostilities, prohibiting the
departure of ships or goods from some
or all the ports of such state until further
order.
PARTICIPANTS IN MARITIME COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who has possession, control
management of the vessel and
consequent right to direct her navigation
receive freight earned and paid, while
possession continues.
and
the
and
his
Ship agent (naviero)

Person entrusted with provisioning and
representing the vessel in the port in which it
may be found; also includes the shipowner.
Not a mere agent under civil law; he is
solidarily liable with the ship owner.
Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject
to Art.609;
3. Contract in the name of the owners with
respect to repairs, details of equipment,
armament, provisions of food and fuel,
8.
Damages due to non-observance of

marine regulations. (Art. 618)
C. OFFICERS AND CREW

1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No
liability
under
the
following
circumstances:
1. If, before beginning voyage, captain
attempts to change it, or a naval war
with the power to which the vessel was
destined occurs;
2. If a disease breaks out and be officially
declared an epidemic in the port of
destination;
3. If the vessel should change owner or
captain. (Art. 647)
Sailing Mate/First Mate
Second chief of the vessel who takes the
place of the captain in case of absence,
sickness, or death and shall assume all of his
duties, powers and responsibilities. (Art. 627)
Duties:
1. Provide himself with maps and
charts with astronomical tables
necessary for the discharge of his
duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage
on consultation with the captain
and the officers of the boat,
following the decision of the captain
in case of disagreement;
4. Responsible for all the damages
caused to the vessel and the cargo
by reason of his negligence. (Arts.
628 - 631)
Second Mate
Takes command of the vessel in case of the
inability or disqualification of the captain and
the sailing mate, assuming in such case their
powers and responsibilities.
Third in command
Duties:
1. Preserve the hull and rigging of the
vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory
the
rigging
and
equipment of the vessel, if laid up.
(Art. 632)
Engineers
Officers of the vessel but have no authority
except in matters referring to the motor
apparatus. When two or more are hired, one
of them shall be the chief engineer.
Duties:
1. In charge of the motor apparatus,
spare parts, and other instruments
pertaining to the engines;
2. Keep the engines and boilers in
good condition;
3. Not to change or repair the engine
without authority of the captain;
6.
Order repair of vessel to enable it to

continue its voyage. (Art. 610)
Sources of funds to comply with the
inherent powers of the captain (in successive
order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art.
611)
Duties:
1. Bring
on
board
the
proper
certificate and documents and a
copy of the Code of Commerce;
2. Keep a Log Book, Accounting Book
and Freight Book;
3. Examine the ship before the
voyage;
4. Stay on board during the loading
and unloading of the cargo;
5. Be on deck while leaving or
entering the port;
6. Protest arrivals under stress and in
case of shipwreck;
7. Follow instructions of and render an
accounting to the ship agent;
8. Leave the vessel last in case of
wreck;
9. Hold in custody properties left by
deceased passengers and crew
members;
10. Comply with the requirements of
customs, health, etc. at the port of
arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or
leaving a port. (Art. 612)
A ships captain must be accorded a
reasonable measure of discretionary authority
to decide what the safety of the ship and of
its crew and cargo specifically requires on a
stipulated
ocean
voyage
(Inter-Orient
Maritime Enterprises Inc. vs. CA).
No liability for the following:
1. Damages caused to the vessel or to
the cargo by force majeure;
2. Obligations contracted for the
repair, equipment, and provisioning
of the vessel unless he has
expressly bound himself personally
or has signed a bill of exchange or
promissory note in his name. (Art.
620)
Solidary
Liabilities
of
the
Ship
Agent/Shipowner for Acts Done by the
Captain towards Passengers and Cargoes
1. Damages to vessel and to cargo
due to lack of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of
laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
taken on board at a particular place for the

purpose of conducting a ship through a river,
road or channel, or from a port.
Master pro hac vice for the time being in
the command and navigation of the ship.
While in exercising his functions a pilot is in
sole command of the ship and supersedes the
master for the time being in the command
and navigation of the ship, the master does
not surrender his vessel to the pilot and the
pilot is not the master. There are occasions
when the master may and should interfere
and even displace the pilot, as when the pilot
is obviously incompetent or intoxicated (Far
Eastern Shipping Company vs. CA).
Compulsory Pilotage States possessing
harbors have enacted laws or promulgated
rules requiring vessels approaching their
ports to take on board pilots licensed under
the local laws. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino,
T. & Hernando, R.P. 2004 ed. p. 518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage
grounds, the Harbor Pilot is responsible for
damage to a vessel or to life or property due
to his negligence.
EXCEPT:
1. Accident caused by force majeure or
natural calamity provided the pilot exercised
prudence and extra diligence to prevent or
minimize damages.
2. Countermand or overrule by the master of
the vessel in which case the registered owner
of the vessel is liable. (Sec.11, Art.III PPA
Admin Order 03-85)
SPECIAL
CONTRACTS
OF
MARITIME
COMMERCE
1. Charter party
2. Bill of lading
3. Contract
of
transportation
of
passengers on sea voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance
CHARTER PARTY
A contract by virtue of which the owner or
agent binds himself to transport merchandise
or persons for a fixed price.
A contract by which an entire ship, or some
principal part thereof is let/leased by the
owner to another person for a specified time
or use. (Planters Products, Inc. vs. CA, 226
SCRA 476)
Parties:
1. Ship owner or ship agent
2. Charterer
Classes:
1. Bareboat or demise The charterer
provides crew, food and fuel. The charterer is
liable as if he were the owner, except when
the cause arises from the unworthiness of the
vessel. The shipowner leases to the charterer
the whole vessel, transferring to the latter the
entire command, possession and consequent
control over the vessels navigation, including
the master and the crew, who thereby
4.
5.
6.
Inform the captain of any damage

to the motor apparatus;
Keep an Engine Book;
Supervise all personnel maintaining
the engine. (Art. 632)
Crew
The aggregate of seamen who man a ship,
or the ships company.
Hired by the ship agent, where he is
present and in his absence, the captain hires
them, preferring Filipinos, and in their
absence, he may take in foreigners, but not
exceeding 1/5 of the crew. (Art. 634)
Classes of Seamans Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman
While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of
discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
The seamans heirs are entitled to payment
as follows:
1. If death is natural:
a. compensation up to time of death if
engaged on wage
b. if by voyage - half of amount if
death occurs on voyage out; and
full, if on voyage in
c. if by shares - none, if before
departure; full, if after departure
2. if death is due to defense of vessel - full
payment;
3. if captured in defense of vessel - full
payment;
4. if captured due to carelessness - wages
up to the date of the capture. (Art. 645)
Complement of the Vessel
All persons on board, from the captain to
the
cabin
boy,
necessary
for
the
management, maneuvers, and service, thus
including the crew, the sailing mates,
engineers, stokers and other employees on
board not having specific designations.
Does not include the passengers or the
persons whom the vessel is transporting.
D. SUPERCARGOES
Persons who discharges administrative
duties assigned to him by ship agent or
shippers, keeping an account and record of
transaction as required in the accounting
book of the captain. (Art. 649)
E. PILOT
A person duly qualified, and licensed, to
conduct a vessel into or out of ports, or in
certain waters.
The term generally connotes a person
Charterer
becomes
liable
to
others
caused
by
its
negligence
Owner remains liable

as carrier and must
answer for any breach
of duty
Charterer regarded as
owner pro hac vice for
the voyage
Charterer
is
not
regarded as owner.
Owner
of
vessel
relinquishes
possession, command
and
navigation
to
charterer
The
vessel
owner
retains
possession,
command
and
navigation of the ship
Common carrier is
converted to private
carrier.
Common carrier is not

converted to a private
carrier.
PERSONS WHO MAY MAKE A CHARTER

1. Owner or owners of the vessel,
either in whole or in majority part,
who have legal control and
possession of the vessel
2. Charterer may subcharter entire
vessel to 3rd person only if not
prohibited
in
original
charter.
(Art.679)
3. Ship agent if authorized by the
owner/s or given such power in the
certificate of appointment. (Art.598)
4.
Captain in the absence of the ship
agent or consignee and only if he
acts in accordance with the
instructions of the agent or owner
and protects the latters interests.
(Art.609)
REQUISITES OF A VALID CHARTER PARTY
1. Consent of the contracting parties
2. Existing vessel which should be
placed at the disposition of the
shipper
3. Freight
4. Compliance with Art. 652 of the
Code of Commerce
Clauses Which May Be Included In a Charter

Party
Jason clause
become the charters servants. It transforms

a common carrier into a private carrier.
The charterer becomes the owner of
the vessel pro hac vice, just for that one
particular purpose only.
Because the
charterer is treated as owner pro hac
vice,
the
charterer
assumes
the
customary rights and liabilities of the
shipowner to third persons and is held
liable for the expense of the voyage and
the wages of the seamen.
2. Contract of Affreightment A contract
whereby the owner of the vessel leases part
or all of its space to haul goods for others.
The shipowner retains the possession,
command and navigation of the ship, the
charterer merely having use of the space
in the vessel in return for his payment of
the charter hired.
Kinds:
a. Time charter vessel is chartered
for a fixed period of time or
duration of voyage.
b. Voyage or trip charter the vessel
is leased for one or series of
voyages usually for purposes of
transporting goods for charterer.
LEASE
CHARTER PARTY
If for a definite period,

lessee cannot give up
the lease by paying a
portion of the amount
agreed upon.
Charterer may rescind

charter
party
by
paying half of the
freightage
agreed
upon.
If the leased property

is sold to one who
knows
of
the
existence
of
the
lease, the new owner
must
respect
the
lease.
The new owner is not

compelled to respect
the charter party so
long as he can load
the vessel with his
own cargo. (Art. 689)
Civil law concept
Commercial
concept
law
CHARTER PARTY
BILL OF LADING
An entire or complete
contract.
More like a private

receipt
which
the
captain
gives
to
accredit
goods
received from persons
Consensual contract
Real contract
Clause paramount or
paramount clause
BAREBOAT OR DEMISE
CHARTER
CONTRACT OF
AFFREIGHTMENT
(TIME OR VOYAGE
CHARTER)
Rescission of a Charter Party

At charterers request
(Art 688)
By abandoning the charter

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

SHIPOWNER OR SHIP
AGENT
1.
Terms:
1. Primage - bonus to be paid to the
captain after the successful voyage.
2. Demurrage the sum fixed in the
charter party as a remuneration to the
owner of the ship for the detention of
his vessel beyond the number of days
allowed by the charter party for loading
or unloading or for sailing.
3. Deadfreight the amount paid by or
recoverable from a charterer of a ship
for the portion of the ships capacity the
latter contracted for but failed to
occupy.
4. Lay Days - days allowed to charter
parties for loading and unloading the
cargo.
5. Extra Lay Days days which follow after
the lay days have elapsed.
USUAL
FORMS
OF
CONSUMMATING
CONTRACTS
1. C.I.F. cost, insurance and freight;
2. F.O.B. - free on board;
3. F.A.S. - free alongside ship; and
4. C. & F. - cost and freight.
TRANSSHIPMENT OF GOODS
The act of taking cargo out of one ship and
loading it in another, or the transfer of goods
from the vessel stipulated in the contract of
affreightment to another vessel before the
place of destination named in the contract
has been reached, or the transfer for further
transportation from one ship or conveyance
to another.
2.
3.
4.
5.
6.
7.
If the vessel is
chartered
wholly, not to
accept
cargo
from others;
To
observe
represented
capacity;
To unload cargo
clandestinely
placed
To
substitute
another vessel if
load is less than
3/5 of capacity;
To leave the port
if the charterer
does not bring
the cargo within
the lay days and
extra lay days
allowed;
To place in a
vessel
in
a
condition
to
navigate;
to bring cargo to
nearest neutral
port in case of
war or blockade.
(Arts. 669-678)
CHARTERER
1.
2.
3.
4.
5.
To
pay
the
agreed charter
price;
To
pay
freightage
on
unboarded
cargo;
To pay losses to
others
for
loading
uncontracted
cargo and illicit
cargo;
To wait if the
vessel
needs
repair;
To pay expenses
for
deviation.
(Arts. 679-687)
BOTTOMRY/
RESPONDENTIA
ORDINARY LOAN
(MUTUUM)
Not subject to Usury Subject to Usury Law

Law
Liability
of
borrower
contingent on
safe arrival of
vessel or cargo
destination
the Not subject to any

is contingency
the (absolute liability)
the
at
The last lender is a

preferred creditor
The first lender is a

preferred creditor
WHEN
LOAN
ON
BOTTOMRY
OR
RESPONDENTIA REGARDED AS SIMPLE LOAN
1. Lender loaned an amount larger
than the value of the object due to
fraudulent means employed by
the borrower. (ART.726)
2. Full amount of the loan is not used
for the cargo or given on the
goods if all of them could not have
been loaded, the balance will be
considered
a
simple
loan.
(ART.727)
3. If the effects on which the money
is taken is not subjected to any
risk. (ART.729)
Note: Under existing laws, the parties to a
loan, whether ordinary or maritime, may
agree on any rate of interest. (CB Circular
905)
MARINE INSURANCE
LOAN ON
BOTTOMRY OR
RESPONDENTIA
Indemnity is paid after

the loss has occurred
Indemnity is paid
in advance by
way of a loan
In case of loss of the

vessel due to a risk
insured
against,
the
obligation of the insurer
becomes absolute
In case of loss of
the vessel due to
a marine peril,
the obligation of
the borrower to
pay
is
extinguished
Consensual contract
Real contract
It is not dependent on the ownership of the

transporting ships or in the change of
carriers, but rather on the fact of actual
physical transfer of cargo from one vessel to
another.
If done without legal excuse, however
competent and safe the vessel into which the
transfer is made, is a violation of contract and
infringement of right of shipper and subjects
carrier to liability if freight is lost event by
cause
otherwise
excepted.
(Magellan
Manufacturing vs. CA, 201 SCRA 102)
LOAN ON BOTTOMRY AND RESPONDENTIA
A real, unilateral, aleatory contract, by
virtue of which one person lends to another a
certain amount of money or goods on things
exposed to maritime risks, which amount,
with its earnings, is to be returned if the
things are safely transported, and which is
lost if the latter are lost.
LOAN ON BOTTOMRY
Definition
Loan
made
by
shipowner or ship
agent guaranteed by
vessel
itself
and
repayable
upon
arrival of vessel at
destination.
(Art.
719)
Loan
taken
on
security of the cargo
laden on a vessel,
and repayable upon
safe arrival of cargo
at destination. (Art.
719)
Who may contract

Shipowner or ship Only the owner of
agent.
Outside of the cargo.
the residence of the
owners - the captain.
1.
2.
Common elements:
Exposure of security to marine peril;
Obligation of the debtor conditioned
only upon safe arrival of the security at
the point of destination.
1.
2.
3.
1.
2.
3.
4.
Hypothecary
Nature
of
Bottomry/
Respondentia
GENERAL RULE: The obligation of the
borrower to pay the loan is extinguished if the
LOAN ON
RESPONDENTIA
5.
6.
7.
Forms:
Public instrument
Policy signed by the contracting
parties and the broker taking part
therein
Private instrument (Art. 720)
Contents:
Kind, name and registry of the vessel;
Name, surname and domicile of the
captain;
Names, surnames and domiciles of the
borrower and the lender;
Amount of the loan and the premium
stipulated;
Time for repayment;
Goods pledged to secure repayment;
Voyage during which the risk is run
(Art.721)
of general average. (A. Magsaysay, Inc. vs.

Agan, G.R.No. L-6393, Jan. 31, 1955)
PARTICULAR OR
SIMPLE
GROSS OR GENERAL
Definition
Damages or expenses
caused to the vessel
or cargo that did not
inure to the common
benefit, and borne by
respective
owners.
(Art. 809)
Damages
or
expenses
deliberately caused
in order to save the
vessel, its cargo or
both from real and
known risk.
(Art.
811)
Requisites
1.
2.
3.
4.
common
danger;
deliberate
sacrifice;
success;
proper
formalities and
legal steps.
Liability
The owner of the
goods which gave rise
to the expense or
suffered the damage
shall
bear
this
average. (Art. 810)
All
the
persons
having an interest in
the vessel and the
cargo therein at the
time
of
the
occurrence of the
average
shall
contribute to satisfy
this average. (Art.
812)
The
insurers
(Art.859) and lenders
on
bottomry
and
respondentia
shall
likewise contribute.
(Art.732).
Number of interests involved

Only
one
involved
interest
Several
involved
interests
Share in the damage or expense

100% share
In proportion to the
value of the owners
property saved
Right to recover
No reimbursement
There
may
reimbursement
Kinds (not exclusive)

Art. 809
Art. 811
be
goods given as security are absolutely lost by

reason of an accident of the sea, during the
voyage designated, and if it is proven that the
goods were on board.
EXCEPTIONS:
1. Loss due to inherent defect;
2. Loss due to the barratry on the part of
the captain;
3. Loss due to the fault or malice of the
borrower;
4.
The vessel was engaged in contraband;
and
5. The cargo loaded on the vessel be
different in from that agreed upon.
Concurrence of Marine Insurance and Loan on
Bottomry/Respondentia
1. The insurable interest of the owner
of a ship hypothecated by bottomry
is only the excess of the value over
the amount secured by bottomry.
(Sec. 101, Insurance Code)
2. The value of what may be saved in
case of shipwreck shall be divided
between the lender and the insurer
in proportion to the interest of each
one. (Art. 735)
Note: If a vessel is hypothecated by bottomry
only the excess is insurable, since a loan on
bottomry partakes of the nature likewise of an
insurance coverage to the extent of the loan
accommodation. The same rule would apply
to the hypothecation of the cargo by
respondentia. (Pandect of Commercial Law
and Jurisprudence, Justice Jose Vitug, 1997
ed.)
ACCIDENTS IN MARITIME COMMERCE
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
AVERAGE
An extraordinary or accidental expense
incurred during the voyage in order to
preserve the cargo, vessel or both, and all
damages or deterioration suffered by the
vessel from departure to the port of
destination, and to the cargo from the port of
loading to the port of consignment. (Art. 806)
The person whose property has been saved
must contribute to reimburse the damage
caused or expense incurred if the situation
constitutes general average.
Classes:
1. Particular or Simple Average
2. Gross or General Average
Where both vessel and cargo are saved, it
is general average; where only the vessel or
only the cargo is saved, it is particular
average.
Expenses incurred to refloat a vessel, which
accidentally ran aground, in order to continue
its voyage, do not constitute general average.
Not only is there absence of a marine peril,
common safety factor, and deliberateness. It
is the safety of the property, and not the
voyage, which constitutes the true foundation
reimbursement
because
there
is
violation of the Y-A Rules.
3. If deck cargo is loaded with the consent
of the shipper on coastwise shipping, it
must always contribute to general
average and if jettisoned would be
entitled to reimbursement.
Reason: In domestic shipping, voyages are
usually short and the seas are generally not
rough. In overseas shipping, the vessel is
exposed for many days to perils of the sea.
DOMESTIC
Deck cargo is allowed
INTERNATIONAL
Deck cargo
allowed
is
not
With shippers consent

General average
Particular average
Without shippers consent

Captain is liable
Procedure for recovery

1. Assembly
and
deliberation
2. Resolution of the
captain
3. Entry
of
the
resolution in the
logbook
4. Detailed minutes
5. Delivery of the
minutes to the
maritime judicial
authority of the
first port, within
24 hours from
arrival,
6. Ratification
by
captain
under
oath. (Arts. 813814)
Captain is liable
ARRIVAL UNDER STRESS (ARRIBADA)

The arrival of a vessel at the nearest and
most convenient port instead of the port of
destination, if during the voyage the vessel
cannot continue the trip to the port of
destination.
When lawful
The inability
to
continue
voyage is due to lack of
provisions, well-founded fear
of seizure, privateers, pirates,
or accidents of the sea
disabling it to navigate. (Art.
819)
1.
2.
3.
4.
GOODS NOT COVERED BY GENERAL AVERAGE

EVEN IF SACRIFICED
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or
records of the vessel. (ART.855 (2))
3. Fuel for the vessel if there is more
than sufficient fuel for the voyage.
(Rule IX, York-Antwerp Rule)
Jettison
When unlawful
Act of throwing cargo overboard in order to
lighten the vessel.
Order of goods to be cast overboard:
Lack of provisions due
1. to
Those which are on the deck,
negligence
to
carry
preferring the heaviest one with the
according to usage and
least utility and value;
customs;
2. Those which are below the upper
Risk of enemy not well
deck, beginning with the one with
known or manifest
greatest weight and smallest value.
Defect of vessel due to
(Art. 815)
improper repair; and
Malice, negligence,
lack of goods are not res nullius nor
Jettisoned
foresight or skilldeemed
of captain.
abandoned within the meaning of
(Art. 820)
civil law so as to be the object of occupation
by salvage. (Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997 ed.)
In order that the jettisoned goods may be
included in the gross or general average, the
existence of the cargo on board should be
proven by means of the bill of lading. (Art.
816)
York-Antwerp (Y-A) Rules on Determining
Liability for Averages With Regard To Deck
Cargo
1. Deck cargo is
allowed
only in
domestic/coastwise/inter-island
shipping,
and
is
prohibited
in
international/overseas/foreign shipping.
2. If deck cargo is loaded with the consent
of the shipper on overseas trade, it
must always contribute to general
average, but should the same be
jettisoned, it would not be entitled to
9.
Vessels must have proper look-outs or

persons trained as such and who have
no other duty aside therefrom. (Smith
Bell v. CA)
Nautical Rules as to Sailing Vessel and

Steamship
1. Where a steamship and a sailing vessel
are approaching each other from
opposite directions, or on intersecting
lines, the steamship from the moment
the sailing vessel is seen, shall watch
with the highest diligence her course and
movements so as to be able to adopt
such timely means of precaution as will
necessarily prevent the two boats from
coming in contact.
2. The sailing vessel is required to keep her
course unless the circumstances require
otherwise.
Zones of Time in the Collision of Vessels
1. First zone all time up to the moment
when risk of collision begins.
No rule is as yet applicable for none is
necessary.
2. Second zone time between moment
when risk of collision begins and moment it
becomes a practical certainty.
It is in this period where conduct of the
vessels is primordial. It is in this zone that
vessels must strictly observe nautical rules,
unless a departure therefrom becomes
necessary to avoid imminent danger.
3. Third zone time when collision is certain
and time of impact.
An error in this zone would no longer be
legally consequential.
Error in Extremis - sudden movement made
by a faultless vessel during the third zone of
collision with another vessel which is at fault
during the 2nd zone. Even if such sudden
movement is wrong, no responsibility will fall
on said faultless vessel. (Urrutia and Co. v.
Baco River Plantation Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
Vessel at fault is liable for damage caused
to innocent vessel as well as damages
suffered by the owners of cargo of both
vessels. (Art. 826)
2. Both vessels at fault
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art.
827)
3. Vessel at fault not known
Each vessel must bear its own loss, but the
shippers of both vessels may go against the
shipowners who will be solidarily liable. (Art.
828)
Doctrine of Inscrutable Fault In case
of
collision
where
it
cannot
be
determined which between the two
vessels was at fault, both vessels bear
their respective damage, but both should
be solidarily liable for damage to the
cargo of both vessels.
4. Third vessel at fault
It is the duty of the captain to continue the

voyage without delay after the cause of the
arrival under stress has ceased failing in such
duty renders him liable. However, in case the
cause has been risk of enemies, there must
first be an assembly before departure. (Art.
825)
Steps:
1. Captain should determine during
the voyage if there is well founded
fear of seizure, privateers and other
valid grounds;
2. Captain shall assemble the officers
and summon the persons interested
in the cargo who may attend the
meeting but without a right to vote;
3. The officers shall determine and
agree if there is well-founded
reason
after
examining
the
circumstances. The captain shall
have the deciding vote;
4. The agreement shall be drafted and
the proper minutes shall be signed
and entered in the log book;
5. Objections
and
protests
shall
likewise be entered in the minutes.
COLLISION
Impact of two vessels both of which are
moving.
Allision
Impact between a moving vessel and a
stationary one.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a
port, the farther one must allow the
nearer to enter first; if they collide, the
fault is presumed to be imputable to the
one who arrived later, unless it can be
proved that there was no fault on its
part.
2. When two vessels meet, the smaller
should give the right of way to the
larger one.
3. A vessel leaving port should leave the
way clear for another which may be
entering the same port.
4. The vessel which leaves later is
presumed to have collided against one
which has left earlier.
5. There is a presumption against the
vessel which sets sail in the night.
6. There is a presumption against the
vessel with spread sails which collides
with another which is at anchor and
cannot move, even when the crew of
the latter has received word to lift
anchor, when there was not sufficient
time to do so or there was fear of a
greater damage or other legitimate
reason.
7. There is a presumption against an
improperly moored vessel.
8. There is a presumption against a vessel
which has no buoys to indicate the
location of its anchors to prevent
damage to vessels which may approach
it.
vessel may demand indemnity from said

captain. (Art. 841)
The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from
a vessel.
Applicability:
Overseas
trade
only.
(Commercial Law Review, C. Villanueva, 2004
ed.)
Significance: When a person brings in cargo
from abroad, he cannot unload and deliver
the cargo by himself. The unloading must be
done by the arrastre operator, which will then
deliver
the
cargo
to
the
importer.
(Commercial Law Review, C. Villanueva, 2004
ed.)
Nature of business: It is a public utility,
discharging functions which are heavily
invested with public interest.
Liability:
1. Similar to a warehouseman (Lua Kian v.
Manila Railroad)
2. Similar to a common carrier (Northern
Motors v. Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may
be held liable, the consignee must prove that
the damage was due to the negligence and
while the goods are in the custody of the
arrastre operator. (Hartford Fire Insurance v.
E. Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse
or pier to the holds of the vessel. (Chief of
Staff vs. CIR)
As understood in the port business, the
term consists of the handling of cargo from
the hold of the ship to the dock, in case of
pier-side unloading; or to a barge, in case of
unloading at sea. (Anglo-Fil Trading Corp. vs.
Lazaro)
The loading on the ship of outgoing cargo is
also part of stevedoring work. (Ibid.)
CONTAINERIZATION/
SAID-TO-CONTAIN/
SHIPPERS LOAD AND COUNT SYSTEM
System whereby the shipper loads his
cargoes in a specially designed container,
seals the container and delivers it to the
carrier for transportation. The carrier does not
participate
in
the
counting
of
the
merchandise for loading into the container,
the actual loading, and the sealing of the
container. (US Lines v. Comm. Of Customs,
ICTSI v. Prudential Guarantee)
The matter of quantity, description and
conditions of the cargo inside the container is
the sole responsibility of the shipper, unless
there is stipulation to the contrary. (US Lines
vs. Comm. Of Customs, Reyma Brokerage v.
Phil. Home Assurance)
Note: In order to attribute to the carrier any
damage to the shipment that may be found,
inspection of the goods should be done at
The third vessel will be liable for losses and

damages. (Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss. (Art.
830)
The doctrine of res ipsa loquitur applies in
case a moving vessel strikes a stationary
object, such as a bridge post, dock, or
navigational aid. (Far Eastern Shipping v. CA,
Luzon Stevedoring vs. CA)
Even if the cause of action against the
common carrier is based on quasi-delict, the
defense of due diligence in the selection and
supervision of employees is unavailing in case
of a maritime tort resulting in collision. It is
not a civil tort governed by the Civil Code but
a maritime one governed by Arts. 826-839 of
the Code of Commerce. (Manila Steamship vs.
Insa Abdulhaman)
Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied in
collision cases because of Art.827 of the Code
of Commerce. (Notes and Cases on the Law
on Transportation and Public Utilities, Aquino,
T. & Hernando, R.P. 2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite to
recovery of damages arising from collisions
and other maritime accidents.
It is a written statement made under oath
by the captain of a vessel after the
occurrence of an accident or disaster in which
the vessel or cargo is lost or damaged, with
respect to the circumstances attending such
occurrence, for the purpose of recovering
losses and damages.
Excuses for not filing protest: 1) where the
interested person is not on board the vessel;
and 2) on collision time, need not be
protested. (Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through
a hurricane or when the captain
believes that the cargo has suffered
damages or averages (Art. 624).
Who makes: Captain
When made: within 24 hours from the time
the collision took place.
Before whom made: competent authority at
the point of collision or at the first port of
arrival, if in the Philippines and to the
Philippine consul, if the collision took place
abroad. (Art. 835)
SHIPWRECK
It is the loss of the vessel at sea as a
consequence of its grounding, or running
against an object in sea or on the coast. It
occurs when the vessel sustains injuries due
to a marine peril rendering her incapable of
navigation.
If the wreck was due to malice, negligence
or lack of skill of the captain, the owner of the
2.
Inc. vs. IAC, 188 SCRA 170)

The filing of an action in court until
it is dismissed. (Stevens & Co. vs.
Nordeutscher Lloyd, 6 SCRA 180)
The one-year period shall run from delivery

of the last package and is not suspended by
extrajudicial demand. (Dole Phils.,Inc. vs.
Maritime Co.,148 SCRA 118)
The one-year period shall run from delivery
to the arrastre operator and not to the
consignee.
(Union Carbide Phils, Inc. vs.
Manila Railroad Co.,SCRA 359)
The insurer exercising its right of
subrogation is bound by the one-year
prescriptive period. However, it does not
apply to the claim against the insurer for the
insurance proceeds. (Fil. Merchants Ins. Co.
vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)
IV. WARSAW CONVENTION OF 1929 (WC)
PURPOSE: To protect the emerging air
transportation industry and to secure the
uniformity of recovery by the passengers.
APPLICABILITY
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or
goods.
The WC shall also apply to fortuitous
transportation by aircraft performed by an air
transportation enterprise.
International
transportation
any
transportation in which the place of departure
and the place of destination are situated
either:
1. Within the territories of two High
Contracting Parties regardless of whether
or not there be a break in the
transportation or transshipment, or
2. Within the territory of a single High
Contracting Party, if there is an agreed
stopping place within a territory subject
to the sovereignty, mandate or authority
of another power, even though that
power is not a party to the Convention.
(round trip, Am. Jur.)
Transportation to be performed by several
successive air carriers shall be deemed to be
one undivided transportation, if it has been
regarded by the parties as a single operation,
whether it has been agreed upon under the
form of a single contract or of a series of
contracts, and it shall not lose its
international character merely because one
contract or a series of contracts is to be
performed entirely within a territory subject
to the sovereignty, suzerainty, mandate, or
authority of the same High Contracting Party.
(Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the
pier-side. (Bankers vs. CA)

III. CARRIAGE OF GOODS BY SEA ACT/COGSA
(C.A. No. 65)
APPLICABILITY
The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from
foreign port to Philippine port).
It can be applied in domestic sea
transportation if agreed upon by the parties.
(Clause paramount or paramount clause)
IMPORTANT FEATURES:
1. Amount of carriers liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIERS LIABILITY
Under the Sec. 4(5), the liability limit is set
at $500 per package or customary freight unit
unless the nature and value of such goods is
declared by the shipper. This is deemed
incorporated in the bill of lading even if not
mentioned in it. (Eastern Shipping vs. IAC,
150 SCRA 463)
Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a. Patent damage: shipper should file a
claim with the carrier immediately upon
delivery
b. Latent damage: shipper should file a
claim with the carrier within three days
from delivery.
Note: The filing of a notice of claim is not a
condition precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo
should be brought within one year after:
a. Delivery of the goods (delivered but
damaged goods); or
b. The date when the goods should
have been delivered (non-delivery).
(Sec. 3[6])
Loss or Damage as applied to the COGSA
contemplates a situation where no delivery at
all was made by the shipper of the goods
because the same had perished, gone out of
commerce, or disappeared in such a way that
their existence is unknown or they cannot be
recovered. Thus, it is inapplicable in case of
misdelivery or conversion. (Ang vs. American
Steamship Agencies Inc.) and damage arising
from delay or late delivery (Mitsui O.S.K. Lines
Ltd. vs. CA). In such instance the, Civil Code
rules on prescription shall apply.
The one-year prescriptive period is
suspended by:
1. The express agreement of the
parties (Universal Shipping Lines,
EXCEPTION: In case of special declaration of

value and payment of a supplementary sum
by consignor, carrier is liable to not more than
the declared sum unless it proves the sum is
greater than actual value.
An agreement relieving the carrier from
liability or fixing a lower limit is null and void.
(Art. 23)
Carrier is not entitled to the foregoing limit
if the damage is caused by willful misconduct
or default on its part. (Art. 25)
Thus, the WC does not operate as an
exclusive enumeration of the instances of an
absolute limit of the extent of liability. It does
not preclude the application of the Civil Code
PASSENGER TICKET
and other pertinent local laws. It does not
regulate or exclude liability for other breaches
of contract by the carrier, or misconduct of its
employees, or for some particular or
exceptional type of damage. (Alitalia vs. CA)
In PanAm v. IAC, the WC was applied as
regards the limitation on the carriers liability,
there being a simple loss of baggage without
any improper conduct on the part of the
officials or employees of the airline or other
special injury sustained by the passenger.
In KLM Royal v. Tuller, the WC has
invariably been held inapplicable, or as not
restrictive of the carriers liability, where there
was satisfactory evidence of malice or bad
faith attributable to its officers and
employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES

1. Notice of claim
A written complaint must me made within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from
receipt of baggage/goods
The complaint is a condition precedent.
Without the complaint, the action is barred
except in case of fraud on the part of the
carrier. (Art. 26)
2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation
stopped. (Art. 29)
In United Airlines vs. Uy the two-year
prescriptive period was not applied where the
airline employed delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against
the carrier in which the accident or delay
occurred.
Convention are not complied with.

IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or
goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
BAGGAGE CHECK
Checked-in baggage
AIR WAYBILL
Goods to be shipped
LIABILITY OF CARRIER FOR DAMAGES

1. Death or injury of a passenger if the
accident causing it took place on board the
aircraft or in the course of its operations of
embarking or disembarking; (Art. 17)
2. Destruction, loss or damage to any
baggage or goods, if it took place during the
transportation by air; (Art. 18) and
Transportation by air The period during
which the baggage or goods are in the charge
of the carrier, whether in an airport or on
board an aircraft, or, in case of a landing
outside an airport, in any place whatsoever.
It includes any transportation by land or
water outside an airport if such takes place in
the
performance
of
a
contract
for
transportation by air, for the purpose of
loading, delivery, or transshipment.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19)
Note: The Hague Protocol amended the WC
by removing the provision that if the airline
took all necessary steps to avoid the damage,
it could exculpate itself completely (Art.
20(1)). (Alitalia vs. IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as amended by
Guatemala Protocol, 1971; Alitalia vs. IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more than
the declared sum unless it proves the sum is
greater than actual value.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
2. Compensation allowed to persons by

whose voluntary assistance a ship at sea or
her cargo or both have been saved in whole
or in part from impending sea peril, or such
property recovered from actual peril or loss,
as in cases of shipwreck, derelict or
recapture.
Requisites:
1. Valid object of salvage;
2. Object must have been exposed to
marine peril (not perils of the
ship);
3. Services
rendered
voluntarily
(neither an existing duty nor out of
a pre-existing contract);
4. Services are successful, total or
partial.
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea,
and there sink and remain under water;
3. Floatsam or Flotsam goods which float
upon the sea when cast overboard;
4. Ligan or Lagan goods cast into the sea
tied to a buoy, so that they may be found
again by the owners (p.173, Judge Diaz).
Persons who have no right to a reward for
salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite
of opposition of the Captain or his
representative;
3. In accordance with Sec. 3 of the Salvage
Law, a person who fails to deliver a salvaged
vessel or cargo to the Collector of Customs.
Derelict a ship or her cargo which is
abandoned and deserted at sea by those who
are in charge of it, without any hope of
recovering it, or without any intention of
returning to it.
The intention of those in charge must be
ascertained. If those in charge left with the
intention of returning, or of procuring
assistance, the property is not derelict, but if
they quitted the property with the intention of
finally leaving it, it is derelict and a change of
their intention and an attempt to return will
not change its nature (Erlanger & Galinger vs.
Swedish East Asiatic Co. Ltd.).
If it is clear that the intention to return is
slight, the salvage which was done thereafter
is considered valid. (Notes and Cases on the
Law on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p. 616)
CONTRACT OF TOWAGE
A contract whereby one vessel, usually
motorized, pulls another, whether loaded or
not with merchandise, from one place to
another, for a compensation. It is a contract
for services rather than a contract of carriage.
SALVAGE
TOWAGE
EXCEPTION: Agreement or contract whereby

the first carrier assumed liability for the whole
journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an
action against the first carrier and
the carrier in which the damage
occurred
b. Passenger or consignee can file an
action against the last carrier and
the carrier in which the damage
occurred.
These carriers are jointly and severally
liable. (Art. 30)
A contract of international carriage by air,
although performed by different carriers
under a series of airline tickets constitutes a
single
operation.
Members
of
the
International Air Transportation Association
(IATA) are under a general pool partnership
agreement wherein they act as agent of each
other in the issuance of tickets to contracted
passengers to boost ticket sales worldwide
and at the same time provide passengers
easy access to airlines which are otherwise
inaccessible in some parts of the world.
(American Airlines vs. CA)
Under a general pool partnership
agreement, the ticket-issuing airline is the
principal in a contract of carriage while the
endorsee-airline is the agent. The obligation
of the former remained and did not cease
even when the breach occurred not on its
own flight but on that of another airline which
had undertaken to carry the passengers to
one of their destinations. (China Airlines vs.
Chiok)
JURISDICTION
At the option of the plaintiff, the action for
damages may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of
business;
c. Court where it has a place of
business through which the contract
has been made; or
d. Court of the place of destination.
(Art. 28(1))
NOTE: It is the passengers ultimate
destination not an agreed stopping place
that determines the country where suit is to
be filed.
The forum of action provided in Art. 28(1) is
a matter of jurisdiction rather than of venue.
(Santos III vs. Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
Two concepts:
1. Services one person renders to the owner
of a ship or goods, by his own labor,
preserving the goods or the ship which the
owner or those entrusted with the care of
them have either abandoned in distress at
sea, or are unable to protect or secure.
GENERAL RULE: No public service shall

operate without having been issued a
certificate of public convenience or a
certificate
of
public
convenience
and
necessity.
EXCEPTIONS:
1. Warehouses;
2. Animal drawn vehicles and bancas
moved by oar or sail;
3. Airships, except for the fixing of
maximum rates for fare and freight;
4. Radio companies, except for rates
fixing;
5. Public services owned or operated
by the government, except as to
rates fixing;
6. Ice plants; and
7. Public markets.
PUBLIC SERVICE
A person who owns, operates, manages or
controls in the Philippines for hire or
compensation, with general or limited
clientele, whether permanent, occasional or
accidental, and done for general business
purposes, any common carrier or public
utility, ice plants, power and water supplies,
communication and similar public services.
(Sec. 13b, CA 146)
A casual or incidental service devoid of
public character and interest is not brought
within the category. The question depends on
such factors as the extent of services,
whether such person or company has held
himself or itself out as ready to serve the
public or a portion of the public generally.
(Luzon Stevedoring vs. PSC)
NOTE: The Public Service Commission created
under the Public Service Law has already
been abolished under P.D. No. 1 and other
issuances. It has been replaced by the
following government agencies: LTO; LTFRB;
ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
MIA.
Governed by special
law (Act No. 2616)
Governed by Civil
Code on contract of
lease
Requires success,
otherwise no
payment
Success
required
Must be done with

the consent of the
captain/crewmen
Only the consent of

the tugboat owner is
needed
Vessel must be
involved in an
accident
Vessel need not be

involved
in
an
accident
Fees distributed
among crewmen
Fees belong to the

tugboat owner
CERTIFICATE
OF
PUBLIC
CONVENIENCE AND
NECESSITY (CPCN)
An authorization
issued
by
the
appropriate
government agency
for the operation of
public services for
which no franchise,
either municipal or
legislative,
is
required by law, e.g.,
common carriers.
An authorization
issued
by
the
appropriate
government agency
for the operation of
public service for
which
a
prior
franchise is required
by
law;
e.g.
telephone and other
services.
A CPC or a CPCN constitutes neither a

franchise nor a contract, confers no property
not
RULES ON SALVAGE REWARD

1. The reward is fixed by the RTC judge in
the absence of agreement or where the
latter is excessive. (Sec. 9)
2. The reward should constitute a sufficient
compensation for the outlay and effort
of the salvors and should be liberal
enough to offer an inducement to others
to
render
services
in
similar
emergencies in the future.
3. If sold (no claim being made within 3
months from publication), the proceeds,
after deducting expenses and the
salvage claim, shall go to the owner; if
the latter does not claim it within 3
years, 50% of the said proceeds shall go
to the salvors, who shall divide it
equitably, and the other half to the
government. (Secs. 11-12)
4. If a vessel is the salvor, the reward shall
be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c.
CERTIFICATE OF
PUBLIC
CONVENIENCE (CPC)
is
25% to the officers and crew in

proportion to their salaries. (Sec.
13)
Taking passengers from a sinking ship,

without rendering any service in rescuing the
vessel, is not a salvage service, being a duty
of humanity and not for reward.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)
PURPOSES:
1. To secure adequate, sustained
service for the public at the least
possible cost;
2. To protect the public against
unreasonable charges and poor,
inefficient service;
3. To protect and secure investments
in public services;
4. To prevent ruinous competition.
AUTHORITY TO OPERATE PUBLIC SERVICES
POWERS
REQUIRING PRIOR
NOTICE AND
HEARING
1.
Issuance
of
CPC or CPCN;
2. Fixing of rates,
tolls,
and
charges;
3. Setting up of
standards and
classifications;
4. Establishment
of
rules
to
secure
accuracy of all
meters and all
measuring
appliances;
5. Issuance
of
orders
requiring
establishment
or
maintenance
of
extension
of facilities;
6. Revocation, or
modification
of
CPC
or
CPCN;
7. Suspension of
CPC
or
CPCN,
except when it is
necessary to avoid
serious
and
irreparable damage
or inconvenience to
the public or private
interest, in which
case, a suspension
not more than 30
days
may
be
ordered, prior to the
hearing. (Soriano v.
Medina, 164 SCRA
36)
POWERS
EXERCISABLE
WITHOUT PRIOR
NOTICE AND
HEARING
1.
2.
3.
4.
5.
6.
7.
8.
Investigation
any
matter
concerning
public service;
Requiring
operators
to
furnish
safe,
adequate, and
proper service;
Requiring
public services
to
pay
expenses
of
investigation;
Valuation
of
properties
of
public utilities;
Examination
and
test
of
measuring
appliances;
Grant of special
permits
to
make extra or
special trips in
territories
specified in the
certificate;
Uniform
accounting
system
and
furnishing
of
annual reports;
Compelling
compliance
with the laws
and
regulations.
UNLAWFUL
ACTS
OF
PUBLIC
UTILITY
COMPANIES
1. Engagement in public service business
without first securing the proper
certificate;
2. Providing
or
maintaining
unsafe,
improper or inadequate service as
determined by the proper authority;
3. Committing any act of unreasonable
and unjust preferential treatment to any
particular person, corporation or entity
as determined by the proper authority;
4. Refusing or neglecting to carry public
mail upon request. (Secs. 18 and 19)
right, and is a mere license or a privilege. The

holder of said certificate does not acquire a
property right in the route covered thereby.
Nor does it confer upon the holder any
proprietary right or interest or franchise in the
public highways. Revocation of this certificate
deprives him of no vested right. New and
additional
burdens,
alteration
of
the
certificate, or even revocation or annulment
thereof is reserved to the State. (Luque vs.
Villegas, 30 SCRA 408)
It is a property and has a considerable
value and can be the subject of sale or
attachment. (Cogeo-Cubao Operators and
Drivers Assn. vs. CA, 207 SCRA 343,
Raymundo vs. Luneta Motor Co.)
REQUREMENTS FOR GRANTING CPC OR CPCN
1. Applicant must be a citizen of the
Philippines or a corporation or entity
60% of the capital of which is owned by
such citizens;
2. Applicant must prove public necessity;
3. Applicant must prove that the operation
of the public service proposed and the
authorization to do business will
promote the public interest on a proper
and suitable manner;
4. Applicant must have sufficient financial
capability to undertake the proposed
services
and
meeting
the
responsibilities incident to its operation.
REGISTERED OWNER RULE

The registered owner of a certificate of
public convenience is liable to the public for
the injuries or damages suffered by third
persons caused by the operation of said
vehicle, even though the same had been
transferred to a third person.
The registered owner is not allowed to
escape responsibility by proving that a third
person is the actual and real owner Reason: It
would be easy for him, by collusion with
others or otherwise, to transfer the
responsibility to an indefinite person, or to
one who possesses no property with which to
respond financially for the damage or injury
done. (Erezo, et al. vs. Jepte 102 Phil 103).
KABIT SYSTEM
A system whereby a person who has been
granted a certificate of public convenience
allows other persons who own motor vehicles
to operate under such license, for a fee or
percentage of such earnings. It is void and
inexistent under Art. 1409, Civil Code.
Effects:
1. The transfer, sale, lease or assignment
of the privilege granted is valid between
the contracting parties but not upon the
public or third persons. (Gelisan vs.
Alday, 154 SCRA 388)
ACTS REQUIRING PRIOR APPROVAL

1. Establish and maintain individual or
joint rates;
2. Establish and operate new units;
3. Issue free tickets;
4. Issue any stock or stock certificates
representing an increase of capital;
5. Capitalize any franchise in excess of the
amount
actually
paid
to
the
Government;
6. Sell, alienate, mortgage or lease
property, certificates or franchise.
Under Sec. 20(g) of C.A. No. 146, the sale,
etc. may be negotiated and completed before
the approval by the proper authority. Its
approval is not a condition precedent to the
validity of the contract. The approval is
necessary only to protect public interest.
PRIOR OPERATOR/OLD OPERATOR RULE
The rule allowing an existing franchised
operator to invoke a preferential right within
the authorized territory as long as he renders
satisfactory and economical service.
The policy is not to issue a certificate to a
second operator to cover the same field and
in competition with a first operator who is
rendering
sufficient,
adequate
and
satisfactory service. The prior operator must
first be given an opportunity to improve its
service, if inadequate or deficient.
Purpose: To prevent ruinous and wasteful
competition in order that the interests of the
public would be conserved and preserved.
It subordinates the prior applicant rule
which gives the first applicant priority only if
things and circumstances are equal.
Where the operator either fails or neglects
to make the improvement or effect the
increase in services, especially when given
the opportunity, new operators should be
given the chance to give the services needed
by the public.
2.
The registered owner is primarily liable

for all the consequences flowing from
the operations of the carrier.
The public has the right to assume that
the registered owner is the actual or
lawful owner thereof. It would be very
difficult and often impossible, as a
practical matter, for the public to enforce
their rights of action that they may have
for injuries inflicted by the vehicle if they
should be required to prove who the
actual owner is. (Benedicto vs. IAC, 187
SCRA 547)
PRIOR APPLICANT RULE

Presupposes a situation when two
interested persons apply for a certificate to
operate a public utility in the same
community over which no person has as yet
granted any certificate. If it turns out, after
the hearing, that the circumstances between
the two applicants are more or less equal,
then the applicant who applied ahead of the
other, will be granted the certificate.
RATE-FIXING POWER
The rate to be fixed must be just, founded
upon conditions which are fair and reasonable
to both the owner and the public.
A rate is just and reasonable if it conforms
to the following requirements:
1. One which yields to the carrier a
fair return upon the value of the
property employed in performing
the service; and
2. One which is fair to the public for
the service rendered.
3.
4.
5.
The thrust of the law in enjoining the

kabit system is to identify the person
upon whom responsibility may be fixed
with the end in view of protecting the
riding public (Lim vs. CA 373 SCRA 394).
The registered owner cannot recover
from the actual owner and the latter
cannot obtain transfer of the vehicle to
himself, both being in pari delicto. (Teja
Marketing vs. IAC)
For the better protection of the public,
both the registered owner and the
actual owner are jointly and severally
liable with the driver. (Zamboanga
Transportation Co. vs. CA)

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