Transportation Law

Commercial Law Review
Transportation Law
Maria Zarah Villanueva - Castro
TRANSPORTATION LAW
PRELIMINARY CONSIDERATIONS:
A. Governing Laws
1. New Civil Code Primary law
2. Warsaw
Convention
for
international transportation by air
3. Code of Commerce governs
suppletorily; it governs maritime
transaction
4. Carriage of Goods by Sea Act for
transportation by sea; governs
suppletorily
5. Salvage Law
6. Public Service Act
7. Article XII Sec 11 on operation of
public convenience of the 1987
Philippine Constitution
B. Concept of Public Utility & public
service
Sec. 13 (b) of the Public Service
Act provides that: The term 'public
service' includes every person that
now or hereafter may own, operate,
manage, or control 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,
railroad,
street
railway,
traction
railway, sub-way motor vehicle, either
for freight or passenger, or both with
or without fixed route and whatever
may be its classification, freight or
carrier service of any class, express
service, steamboat, or steamship line,
pontines, ferries, and water craft,
engaged in the transportation of
passengers or freight or both,
shipyard, marine railway, marine
repair shop, wharf or dock, ice plant,

ice-refrigeration plant, canal, irrigation
system, gas electric light, heat and
power, water supply and power,
petroleum, sewerage system, wire or
wireless communications system, wire
or wireless broadcasting stations and
other similar public services: Provided,
however, That a person engaged in
agriculture, not otherwise a public
service, who owns a motor vehicle and
uses it personally and/or enters into a
special contract whereby said motor
vehicle is offered for hire or
compensation to a third party or third
engaged in agriculture, not itself or
themselves a public service, for
operation by the latter for a limited
time and for a specific purpose directly
connected with the cultivation of his or
their
farm,
the
transportation,
processing,
and
marketing
of
agricultural products of such third
party or third parties shall not be
considered as operating a public
service for the purposes of this Act.
Public utilities are privately owned
and operated business whose services
are essential to the general public.
Case:
National
Development
Company v CA
C. Constitutional
limitations
on
operation of public utilities
Sec. 11 of Article XII of the 1987
Constitution
states
that:
No
franchise, certificate, or any other
form of authorization for the operation
of a public utility shall be granted
except to citizens of the Philippines or
to
corporations
or
associations
organized under the laws of the
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Transportation Law
Philippines, at least sixty per centum
of whose capital is owned by such
citizens; nor shall such franchise,
certificate,
or
authorization
be
exclusive in character or for a longer
period than fifty years. Neither shall
any such franchise or right be granted
except under the condition that it shall
be subject to amendment, alteration,
or repeal by the Congress when the
common good so requires. The State
shall encourage equity participation in
public utilities by the general public.
The participation of foreign investors
in the governing body of any public
utility enterprise shall be limited to
their proportionate share in its capital,
and all the executive and managing
officers of such corporation or
association must be citizens of the
Philippines.
*The corporation must be a domestic
corporation and that 60% of the
capital must be owned by Filipino
citizens.
Sec. 18 of Article XII of the 1987
Constitution provides that: The
State may, in the interest of national
welfare or defense, establish and
operate vital industries and, upon
payment
of
just
compensation,
transfer to public ownership utilities
and other private enterprises to be
operated by the Government.
Q: What are the bases/reasons for
regulation of public utilities?
A: Basis: Police Power
Justification: Common good
D. Regulatory agencies
1. Land Transportation Franchising

Regulatory Board (LTFRB) land
transportation
2. Land Transportation Office issue
license to drivers
3. Maritime
Industry
Authority
(MARINA) water transportation
4. National
Telecommunications
Commission
communication
utilities
and
services,
radio
communications systems, wire or
wireless telephone and telegraph
systems, radio and television
broadcasting systems and other
similar public utilities
5. Energy Regulatory Board electric
or power companies
6. National Water Resources Council
water resources
7. Civil Aeronautics Board air
transportation
Q: What conditions must concur in the
grant
of
certificate
of
public
convenience and necessity?
A: 1. The grantee must be a citizen of
the Philippines or a corporation or
entity 60% of which is owned by such
citizens; 2. The grantee must have
sufficient
financial
capability
to
undertake the service; and 3. The
service will promote public interest
and convenience in a proper and
suitable manner.
*In Tatad v Garcia, the SC held that
the controlling factor is the citizenship
of the person operating a common
carrier.
Guiding Principles:
1. Prior or Old Operator Rule the
first licensee will be protected in
his investment and will not be
subjected to ruinous competition.
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Transportation Law
*No
certificate
of
public
convenience and necessity will be
issued to other operator as long as
the prior operator still in operation
and can satisfy the public and that
it still has the capacity to do so.
2. Protection Investment Rule
protects from unfair competition
3. Prior Applicant Rule protects the
first applicant. Principle: all things
being equal
*Public interest is the first and
paramount consideration.
E. Concept
of
franchise
and
certificate of public convenience
Franchise is a grant or privilege from
the sovereign power.
Certificate of Public Convenience
is a form of regulation through an
administrative agency.
Q: Is a legislative franchise necessary
before a public utility can be allowed
to secure a certificate of public
convenience?
A: General Rule: NO.
Exception: If a pertinent law requires
such legislative franchise.
Factors:
1. Public interest
2. Public convenience
3. Public necessity
GENERAL CONCEPTS:
A. Contract of transportation in
general
Transportation is 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
commission.
*Importance: For liability purposes

B. Perfection
There is a perfected contract when
there was a meeting of the minds as
to
the
subject
matter
and
consideration.
C. Common Carrier
1. Statutory definition
Article 1732 of the New Civil
Code provides that: Common
carriers are 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.
- one that holds itself out as
ready
to
engage
in
the
transportation of goods for hire
as a public employment and not
as a casual occupation.
Implications being a common
carrier:
a. extraordinary diligence must be
exercised
b. in case of damage, presumption
of negligence on the part of the
common carrier
*It is the activity of the carrier that
is controlling.
Cases: A.F. Sanchez Brokerage,
Inc v CA; Asia Lighterage v CA;
De Guzman v CA
*The fact that there is no license at
the time of the incident happen is
of no moment for liability purposes.
2. Distinguished
from
private
carrier
Common Private
Carrier
Carrier
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Transportation Law
As
to holds
availabili himself out
ty:
for
all
people
indiscrimin
ately
As
to
required
diligence
:
As
to
regulatio
n:
Extraordina
ry diligence
is required
Stipulati
on
limiting
liability:
Parties may
not agree
on limiting
the
carriers
liability
except
when
provided
by law
Subject to
state
regulation
Exemptin
g
circumst
ance:
Prove
extraordina
ry diligence
and Article
1734 NCC
Presump There is a
tion
of presumptio
Negligen n of fault or
ce:
negligence
Governin
g law:
Law
on
common
carriers
Contracts
with
particular
individual
s
or
groups
only
Ordinary
diligence
is
required
Not
subject
to state
regulatio
n
Parties
may limit
the
carriers
liability,
provided
it is not
contrary
to
law,
morals or
good
customs
Caso
fortuito,
Article
1174
NCC
No
presumpt
ion
of
fault
or
negligen
ce
Law
on
obligatio
ns
and
contracts
3. Distinguished
from
towage,
arrastre and stevedoring
Distinctions:
Towage
Arrastre
Stevedo
ring
One
The
The
vessel is functions of function
hired
to an arrastre of
bring
operator
stevedor
another
has nothing es
vessel to to do with involves
another
the
trade the
place;
and
loading
refers to a business of and
service
navigation, unloadin
rendered
nor to the g
of
to
a use
or coastwis
vessel by operation
e vessels
towing for of vessels. calling at
the mere He is no the port.
purpose of different
expediting from that of
her
a
voyage
depositary
without
or
reference
warehouse
to
any man.
circumsta
nces
of
danger.
*The SC held that the following services are
not considered a common carrier:
1) purely arrastre services;
*comparable to that as warehouseman and
depositor
2) purely stevedoring services; and
3) purely towage services.
*In Crisostomo v CA, the SC held that the
respondent being a travel agency is not a
common carrier because the services offered
is not one that carries passenger from one
place to another.
4. Tests to determine common
carrier
Tests:
a. He must engaged in the
business of carrying goods for
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Transportation Law
others as a public employment
and must hold himself out as
ready
to
engage
in
the
transportation of goods for
person generally as a business
and not as a casual occupation;
b. He must undertake to carry
goods of the kind to which his
business is confined;
c. He must undertake to carry by
the method by which his
business is conducted and over
his established roads;
d. The transportation must be for
hire
Case: First Philippine Industrial
Corporation v CA
*Under Sec. 22 of the Electric
Power Distribution Reform Act,
the
company
like
MERALCO
distributing electricity is a common
carrier.
5. Parties to the contract of
carriage
a. Carriage of passengers:
1. Common carrier
2. Passengers
b. Carriage of goods:
1. Shipper
2. Carrier
D. Registered owner rule and Kabit
system
General Rule: Registered owner rule
is applicable in this jurisdiction.
Registered owner rule states that
the person who is the registered
owner of a vehicle is liable for any
damages caused by the negligent
operation of the vehicle although the
same was already sold or conveyed to
another person at the time of the
accident. The registered owner is
liable to the injured party subject to

his right of recourse against the
transferee or the buyer.
Purpose
of
this
rule:
easy
identification of the owner to be sued
for liability.
Recourse: Registered owner may
bring the case to the court to sue the
buyer or operator of the vehicle at
fault.
Exception: in case of stolen vehicle
registered owner is not liable.
*In the case of Duavit v CA, the SC
held that the registered owner is not
liable if the vehicle was taken from his
garage without his knowledge or
consent. To hold the registered owner
liable would be absurd as it would be
holding liable the owner of a stolen
vehicle for an accident caused by the
person who stole such vehicle.
Kabit System is an arrangement
whereby a person who has been
granted
a
certificate
of
public
convenience allows other persons who
own motor vehicles to operate them
under his license, sometimes for a fee
or percentage of the earnings.
*Kabit system is invariably recognized
as being contrary to public policy and
therefore void and inexistent under
Article 1409 of the New Civil Code.
*If the registered owner and the buyer
entered into this transaction they are
In pari delicto thus, in case something
happen the court will not aid them.
The court will leave them as they
were.
*This arrangement is a circumvention
of the requirement for license.

Transportation Law
OBLIGATIONS OF THE COMMON CARRIER
IN A CONTRACT OF CARRIAGE OF
GOODS:
A. Vigilance over the goods
1. Duty to exercise extraordinary
diligence Article 1733 of the
New Civil Code states that:
Common carriers, from the nature
of their business and for reasons of
public policy, are bound to observe
extraordinary diligence in the
vigilance over the goods and for
the safety of the passengers
transported by them, according to
all the circumstances of each case.
Such extraordinary diligence in the
vigilance over the goods is further
expressed in Articles 1734, 1735,
and 1745, Nos. 5, 6, and 7, while
the extraordinary diligence for the
safety of the passengers is further
set forth in Articles 1755 and
1756.
Reason: The nature of the
business is imbued with public
interest and public policy; because
of the exigencies of the business.
The public has no choice but to
trust on the skills of the employees
of the common carrier. The goods
and the life of the passenger are
placed in the hands of the common
carrier.
Article 363 of the Code of
Commerce provides that: Outside
of the cases mentioned in the
second paragraph of Article 361,
the carrier shall be obliged to
deliver the goods shipped in the
same condition in which, according
to the bill of lading, they were
found at the time they were

received, without any damage or
impairment, and failing to do so, to
pay the value which those not
delivered may have at the point
and at the time at which their
delivery should have been made. If
those not delivered form part of the
goods transported, the consignee
may refuse to receive the latter,
when he proves that he cannot
make use of them independently of
the others.
Commerce provides that: If the
effect of the damage referred to in
Article 361 is merely a diminution
in the value of the gods, the
obligation of the carrier shall be
reduced to the payment of the
amount which, in the judgment of
experts, constitutes such difference
in value.
Commerce provides that: If, in
consequence of the damage, the
goods are rendered useless for sale
and consumption for the purposes
for which they are properly
destined, the consignee shall not
be bound to receive them, and he
may have them in the hands of the
carrier, demanding of the latter
their value at the current price on
that day. If among the damaged
goods there should be some pieces
in good condition and without any
defect, the foregoing provision
shall be applicable with respect to
those damaged and the consignee
shall receive those which are
sound, this segregation to be made
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Transportation Law
by distinct and separate pieces and
without dividing a single object,
unless the consignee proves that
impossibility
of
conveniently
making use of them in this form.
The same rule shall be applied to
merchandise in bales or packages,
separating those parcels which
appear sound.
Presumption of negligence
Code provides that: In all cases
other than those mentioned in Nos.
1, 2, 3, 4, and 5 of the preceding
article, if the goods are lost,
destroyed or deteriorated, common
carriers are presumed to have been
at fault or to have acted
negligently, unless they prove that
they
observed
extraordinary
diligence as required in Article
1733.
2. Duration of liability
Code
states
that:
The
extraordinary responsibility of the
common carrier lasts from the time
the goods are unconditionally
placed in the possession of, and
received
by
the
carrier
for
transportation until the same are
delivered,
actually
or
constructively, by the carrier to the
consignee, or to the person who
has a right to receive them, without
prejudice to the provisions of
Article 1738.
Code states that: The common
carrier's
duty
to
observe
extraordinary diligence over the
goods 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.
Code
provides
that:
The
extraordinary
liability
of
the
common carrier 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
been advised of the arrival of the
goods and has had reasonable
opportunity thereafter to remove
them or otherwise dispose of
them.
3. Defenses of common carriers
carriers are responsible for the
loss, destruction, or deterioration
of the goods, unless the same is
due to any of the following causes
only:
(1) Flood, storm, earthquake,
lightning, or other natural disaster
or calamity;
(2) Act of the public enemy in war,
whether international or civil;
(3) Act of omission of the shipper
or owner of the goods;
(4) The character of the goods or
defects in the packing or in the
containers;
(5) Order or act of competent
public authority.
*The enumeration is exclusive or a
closed list.
General Rule: Common carriers
are responsible for the loss,
7

Transportation Law
destruction or deterioration of the
goods.
Exceptions:
1. Flood, storm, earthquake,
lightning or other natural
disaster or calamity;
2. Act of the public enemy in
war whether international or
civil;
3. Act of omission of the
shipper or owner of the
goods;
4. The character of the goods
or defects in the packaging
or in the containers; and
5. Order
or
act
of
the
competent public authority
Code states that: If the common
carrier negligently incurs in delay
in transporting the goods, a natural
disaster shall not free such carrier
from responsibility.
a. Fortuitous event
Code provides that: In order
that the common carrier may be
exempted from responsibility,
the natural disaster must have
been the proximate and only
cause of the loss. However, the
common carrier must exercise
due diligence to prevent or
minimize loss before, during
and after the occurrence of
flood, storm or other natural
disaster in order that the
common
carrier
may
be
exempted from liability for the
loss,
destruction,
or
deterioration of the goods. The
same duty is incumbent upon
the common carrier in case of
an act of the public enemy

referred to in Article 1734, No.
2.
*Fire is not within the ambit of
natural disaster or calamity.
*Calamity
includes
thunderstorm.
*mechanical defect is not within
the ambit of the natural
disaster; it is within the control
of the common carrier.
Requisites:
1. Proximate cause is the
natural calamity
2. Absence of negligence on
the part of the common
carrier
3. The common carrier must
exercise due diligence to
prevent loss before, during
the disaster
4. Free
from
unreasonable
delay by the common carrier
or unreasonable deviation
b. Public enemy
Code states that: In order that
the common carrier may be
exempted from responsibility,
the natural disaster must have
cause of the loss. However, the
common carrier must exercise
due diligence to prevent or
minimize loss before, during
flood, storm or other natural
disaster in order that the
common
carrier
may
be
exempted from liability for the
loss,
destruction,
or
deterioration of the goods. The
8

Transportation Law
same duty is incumbent upon
the common carrier in case of
an act of the public enemy
referred to in Article 1734, No.
2.
*Public enemy includes pirates
however it does not include
robbery and thief.
*Pirates are enemies of all
civilized nation.
General Rule: rebels and
insurreccion is not included.
Exception: If it they are cast of
and took allegiance a hostile
manner territory
*Existence of actual war is
imperative.
c. Act of omission on the part
of the shipper or owner of
the goods
*There must be no fault or
contributory negligence on the
part of the carrier.
*In Compania Maritima v CA,
the SC held that the common
carrier is also at fault; the
common carrier should have
exercise extraordinary diligence
by not relying solely on the
statement of the shipper; it
should have conducted its own
weighing. In this case the
common carrier is not totally
absolved from its liability.
d. Improper packing
Code states that: Even if the
loss,
destruction,
or
deterioration of the goods
should be caused by the
character of the goods, or the
faulty nature of the packing or
of the containers, the common
carrier
must
exercise
due
diligence to forestall or lessen
the loss.
*If the defect is apparent, the
carrier may refuse to accept the
goods for carriage; if the
shipper insists, the remedy is to
make a protestation; make a
foul bill of lading.
*In Iron Bulk v CA (Dec. 8,
2003), carrier issued pro forma
bill of lading stated where in
that it accepted goods in good
condition. The goods arrived
defective. The SC held that the
carrier is not exempt from
liability because it accepted the
goods without protestation.
*Foul Bill of Lading preserves
the right of the carrier to use
the excuse provided in 1734.
e. Order of public authority
Code states that: If through
the order of public authority the
goods are seized or destroyed,
the common carrier is not
responsible,
provided
said
public authority had power to
issue the order.
*The important requisite is that
the public authority has the
power to issue an order.
Case: Ganzon v CA
4. Contributory negligence of the
shipper
Code states that: If the shipper or
owner merely contributed to the
loss, destruction or deterioration of
the goods, the proximate cause
thereof being the negligence of the
common carrier, the latter shall be
9

Transportation Law
liable in damages, which however,
shall be equitably reduced.
5. Stipulation limiting liability of
carrier
Code states that: A stipulation
between the common carrier and
the shipper or owner limiting the
liability of the former for the loss,
destruction, or deterioration of the
goods to a degree less than
extraordinary diligence shall be
valid, provided it be:
(1) In writing, signed by the shipper
or owner;
(2) Supported by a valuable
consideration
other
than
the
service rendered by the common
carrier; and
(3) Reasonable, just and not
contrary to public policy.
*This is for the benefit of the
carrier.
Consideration: Reduction of fare
*The stipulation must be in writing
for the purpose of preventing
abuse from the carrier.
Code
provides
that:
An
agreement limiting the common
carrier's liability for delay on
account of strikes or riots is valid.
that the common carrier's liability
is limited to the value of the goods
appearing in the bill of lading,
unless the shipper or owner
declares a greater value, is
binding.
Code provides that: A contract
fixing the sum that may be
recovered by the owner or shipper

for the loss, destruction, or
deterioration of the goods is valid,
if it is reasonable and just under
the circumstances, and has been
fairly and freely agreed upon.
a. Requisites
between the common carrier
and the shipper or owner
limiting the liability of the
former for the loss, destruction,
or deterioration of the goods to
a
degree
less
than
(1) In writing, signed by the
shipper or owner;
consideration other than the
service
rendered
by
the
common carrier; and
Code provides that: The fact
that the common carrier has no
competitor along the line or
route, or a part thereof, to
which the contract refers shall
be taken into consideration on
the question of whether or not a
stipulation limiting the common
carrier's liability is reasonable,
just and in consonance with
public policy.
*Liability can be limited but
cannot be totally exempted.
*Stipulations reducing diligence
or limiting liability must be in
writing to be enforceable.
b. Invalid stipulations
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Transportation Law
Code states that: Any of the
following or similar stipulations
shall
be
considered
unreasonable,
unjust
and
contrary to public policy:
(1)
That
the
goods
are
transported at the risk of the
owner or shipper;
(2) That the common carrier will
not be liable for any loss,
destruction, or deterioration of
the goods;
(3) That the common carrier
need not observe any diligence
in the custody of the goods;
(4) That the common carrier
shall exercise a degree of
diligence less than that of a
good father of a family, or of a
man of ordinary prudence in the
vigilance over the movables
transported;
(5)
That
the
common carrier shall not be
responsible for the acts or
omission
of
his
or
its
employees;
(6) That the common carrier's
liability for acts committed by
thieves, or of robbers who do
not act with grave or irresistible
threat, violence or force, is
dispensed with or diminished;
(7) That the common carrier is
not responsible for the loss,
goods on account of the
defective condition of the car,
vehicle, ship, airplane or other
equipment used in the contract
of carriage.
*Even if they agreed with regard

to numbers 1,2 and 3, the
stipulation is void because it is
contrary
to
public
policy
because all these stipulations
exempt the carrier from liability.
General Rule: The degree of
diligence may be lowered
Exception: Not lower than that
of a good father of a family.
General
Rule:
stipulations
exempting from liability acts
committed by robbers and
thieves who do not act with
grave threat or irresistible
threats are not valid.
Exception: In case the robbers
or thieves used grave threat or
irresistible threats.
*In this case, the presumption
of negligence is still applicable,
the stipulation only affects the
outcome of the case.
c. Effect of delay
Code states that: If the
common carrier, without just
cause, delays the transportation
of the goods or changes the
stipulated or usual route, the
contract limiting the common
carrier's liability cannot be
availed of in case of the loss,
the goods.
*Delay will prevent the carrier
from raising natural disaster as
a
defense
and
that
the
agreement limiting its liability
cannot be raised as a defense.
d. Rule on presumption of
negligence
despite
stipulation
11

Transportation Law
Code states that: Even when
there is an agreement limiting
the liability of the common
carrier in the vigilance over the
goods, the common carrier is
disputably presumed to have
been negligent in case of their
loss,
destruction
or
deterioration.
B. Other obligations
1. Duty to accept goods
a. Grounds for valid refusal to
accept goods
i. General
Rule:
Goods
sought to be transported are
dangerous
objects
or
substances
including
dynamite
and
other
explosives;
Exception: Carriers that are
permitted or allowed to
transport dangerous objects
or substances for the reason
that it is their function to do
so or it is their operation.
ii. Goods
are
unfit
for
transportation;
*This can be found under
Commerce
iii. Acceptance would result in
overloading;
iv. Contrabands or illegal goods;
v. Goods
are
injurious
to
health;
vi. Goods will be exposed to
untoward danger like flood,
capture by enemies and the
like;
vii. Goods like livestock will be
exposed to disease;
viii.
Strike; and
ix. Failure to tender goods on

time
2. Duty to deliver goods
a. Time of delivery
General
Rule:
It
is
by
stipulation
Exception: In the absence of
stipulation Code of Commerce
governs.
Commerce provides that: If
there is no period fixed for the
delivery of the goods the carrier
shall be bound to forward them
in the first shipment of the
same or similar goods which he
may make to the point where he
must deliver them; and should
he not do so, the damages
caused by the delay should be
for his account.
*When
a
common
carrier
undertakes to convey goods,
the law implies a contract that
they shall be delivered at
destination within a reasonable
time, in the absence of any
agreement as to the time of
delivery.
*Mercantile usage or practice
With
Without
stipulation
stipulation
Carrier
is
1. Within
a
bound
to
reasonable
fulfil
the
time.
contract and
2. Carrier is
is liable for
bound to
any
delay;
forward
no
matter
them
in
from
what
the
first
cause it may
shipment
have arisen
of
the
same
or
12

Transportation Law
similar
goods
which he
may make
to
the
point
of
delivery
b. Consequences of delay
Code provides that: If the
common
carrier
negligently
incurs in delay in transporting
the goods, a natural disaster
shall not free such carrier from
responsibility.
Code provides that: If the
common carrier, without just
cause, delays the transportation
of the goods or changes the
stipulated or usual route, the
contract limiting the common
carrier's liability cannot be
availed of in case of the loss,
the goods.
Commerce provides that: If a
period has been fixed for the
delivery of the goods, it must be
made within such time, and, for
failure to do so, the carrier shall
pay the indemnity stipulated in
the bill of lading, neither the
shipper nor the consignee being
entitled to anything else. If no
indemnity has been stipulated
and the delay exceeds the time
fixed in the bill of lading, the
carrier shall be liable for the
damages which the delay may
have caused.

Commerce provides that: In
case of delay through the fault
of the carrier, referred to in the
preceding
articles,
the
consignee may leave the goods
transported in the hands of the
former, advising him thereof in
writing before their arrival at
the point of destination. When
this abandonment takes place,
the carrier shall pay the full
value of the goods as if they
had been lost or mislaid. If the
abandonment is not made, the
indemnification for losses and
damages by reason of the delay
cannot exceed the current price
which the goods transported
would have had on the day and
at the place in which they
should have been delivered; this
same rule is to be observed in
all other cases in which this
indemnity may be due.
Commerce states that: The
value of the goods which the
carrier must pay in cases of loss
or
misplacement
shall
be
determined in accordance with
that declared in the bill of
lading, the shipper not being
allowed to present proof that
among the goods declared
therein there were articles of
greater value and money.
Horses,
vehicles,
vessels,
equipment
and
all
other
principal and accessory means
of
transportation
shall
be
especially bound in favour of
13

Transportation Law
the shipper, although with
respect to railroads said liability
shall be subordinated to the
provisions of the laws of
concession with respect to the
property, and to what this Code
established as to the manner
and form of effecting seizures
and attachments against said
companies.
carrier who makes the delivery
of the merchandise to the
consignee
by
virtue
of
combined
agreements
or
services with other carriers shall
assume the obligations of those
who preceded him in the
conveyance, reserving his right
to proceed against the latter if
he was not the party directly
responsible for the fault which
gave rise to the claim of the
shipper or consignee. The
carrier who makes the delivery
shall likewise acquire all the
actins and rights of those who
preceded
him
in
the
conveyance. The shipper and
the consignee shall have an
immediate
right
of
action
against
the
carrier
who
executed the transportation
contract, or against the other
carriers who may have received
the goods transported without
reservation.
However,
the
reservation made by the latter
shall not relieve them from the
responsibilities which they may
have incurred by their own

acts.
consignees
to
whom
the
shipment was made may not
defer the payment of the
expenses and transportation
charges of the goods they
receive after the lapse of 24
hours following their delivery;
and in case of delay in this
payment, the
carrier
may
demand the judicial sale of the
goods transported in an amount
necessary to cover the cost of
transportation and the expenses
incurred.
Effects of delay:
1. Excusable delay in carriage
merely
suspends
and
generally does not terminate
the contract of carriage.
When the cause is removed,
the master must proceed
with the voyage and make
delivery;
2. Carrier remains duty bound
to exercise extraordinary
diligence;
3. Natural disaster shall not
free
the
carrier
from
responsibility;
4. 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.
c. Place of Delivery
Commerce provides that: The
14

Transportation Law
shipper, without changing the
place where the delivery is to
be made, may change the
consignment of the goods which
he delivered to the carrier,
provided that at the time of
ordering
the
change
of
consignee the bill of lading
signed by the carrier, if one has
been issued, be returned to
him, in exchange for another
wherein the novation of the
contract appears. The expenses
which
this
change
of
consignment occasions shall be
for the account of the shipper.
d. To whom delivery shall be
made
carrier must deliver to the
consignee, without any delay or
obstruction, the goods which he
may have received, by the mere
fact of being named in the bill of
lading to receive them; and if he
does not do so, he shall be
liable for the damages which
may be caused thereby.
the consignee cannot be found
at the residence indicated in the
bill of lading, or if he refuses to
pay the transportation charges
and expenses, or if he refuses
to receive the goods, the
municipal judge, where there is
none of the first instance, shall
provides for their deposit at the
disposal of the shipper, this
deposit producing all the effects
of delivery without prejudice to

third parties with a better
right.
OBLIGATIONS OF THE COMMON CARRIER
IN A CONTRACT OF CARRIAGE OF
PASSENGERS:
A. Safety of Passengers
1. Duty
to
observe
utmost
diligence
Code provides that: A common
carrier is bound to carry the
passengers safely as far as human
care and foresight can provide,
using the utmost diligence of very
cautious persons, with a due regard
for all the circumstances.
*There are claims not really
focused on death, injuries, loss or
damage of goods but concentrates
on moral damages; and the SC said
that these claims can still prosper
in because there is still a breach of
contract of carriage.
*Behavior
of
the
employees
towards to passengers is also a
factor considered by the court to
rule against a common carrier.
*In CAL v PAL, the SC held that
hijacking
of
the
airplane
is
considered to be a force majeure
thus cannot held the carrier liable.
Case:
Singapore
Airline
v
Andion Fernandez
*In Japan Airlines v Asuncion
(January 28, 2005), the SC held
that the things invoked by the
respondent do not fall within the
ambit of extraordinary diligence.
Though it is the duty of the carrier
to check that travel documents are
15

Transportation Law
with the passengers but it is not
under the obligation of the carrier
to check the veracity of the
information in the travel document;
it also held that the obligation of
the carrier is limited to endorsing
and not to influence. The issue of
whether or not an alien be
admitted entrance to a country is a
sovereign act and such cannot be
interfered by the petitioner.
2. Duration of liability
*The carrier is bound to exercise
utmost diligence with respect to
passengers the moment the person
who purchases the ticket or token
from the carrier presents himself at
the proper place and in a proper
manner to be transported. Such
person must have a bona fide
intention to use the facilities of the
carrier, possess sufficient fare with
which to pay for his passage, and
present himself to the carrier for
transportation in the place and
manner provided.
*In LRTA v Navidad, the SC held
the petitioner carrier liable for
breach of contract. The SC held
that Nicanor Navidad was a
passenger when he died after he
fell on the LRT tracks and was
struck by a moving train. He was
considered a passenger because
he entered the LRT station after
having purchased a token and he
fell while he was on the platform
waiting for a train. Thus, he was
where he was supposed to be with
the intention of boarding a train.
*Once created, the relationship will
not ordinarily terminate until the
passenger has, after reaching his

destination, safely alighted from
the carriers conveyance or has
had a reasonable opportunity to
leave the carriers premises. 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
reasonable time to look after his
baggage and prepare for his
departure.
*In La Mallorca v CA, the SC held
that there was a breach of duty to
exercise extraordinary diligence
with respect to the 4 year old child
and the carrier is liable as a
consequence. The presence of
passengers near the bus was not
unreasonable and they were,
therefore, to be considered still as
passengers of the carrier, entitled
to the protection under their
contract.
*In
Aboitiz
Shipping
Corporation v CA, the SC held
that extraordinary diligence was
still owed to AV at the time of the
accident. It was ruled that AVs
presence in the premises was not
without cause. The victim had to
claim his baggage which was
possible only one hour after the
vessel arrived since it was the
standard procedure in the case of
petitioners
vessels
that
the
unloading operation shall start only
after that time.
16

Transportation Law
*The differences between the La
Mallorca case and Aboitiz Shipping
Corporation are: 1. The business is
different from that of La Mallorca
case; and 2. The capacity of
passengers and baggages are
different
3. Presumption of negligence
Code states that: In case of
death of or injuries to passengers,
common carriers are presumed to
have been at fault or to have acted
negligently, unless they prove that
they
observed
extraordinary
diligence as prescribed in Articles
1733 and 1755.
4. Liability for acts of employees
carriers are liable for the death of
or injuries to passengers through
the negligence or wilful acts of the
former's employees, although such
employees may have acted beyond
the scope of their authority or in
violation of the orders of the
common carriers.
This liability of the common
carriers does not cease upon proof
that they exercised all the diligence
of a good father of a family in the
selection and supervision of their
employees.
Case: Maranan v Perez
5. Liability for acts of strangers
Code provides that: A common
carrier is responsible for injuries
suffered by a passenger on account
of the wilful acts or negligence of
other passengers or of strangers, if
the common carrier's employees

through the exercise of the
diligence of a good father of a
family could have prevented or
stopped the act or omission.
Case: Bachelor Express v CA
6. Effect of stipulation on liability
Code
provides
that:
The
responsibility of a common carrier
for the safety of passengers as
required in Articles 1733 and 1755
cannot be dispensed with or
lessened by stipulation, by the
posting of notices, by statements
on tickets, or otherwise.
Code provides that: When a
passenger is carried gratuitously, a
carrier's liability for negligence is
valid, but not for wilful acts or
gross negligence.
The reduction of fare does not
justify any limitation of the
common carrier's liability.
carrier's responsibility prescribed in
the preceding article cannot be
eliminated or limited by stipulation,
by the posting of notices, by
statements on the tickets or
otherwise.
B. Passengers Baggages
Article 1754 of the New Civil Code
provides that: The provisions of
Articles 1733 to 1753 shall apply to
the passenger's baggage which is not
in his personal custody or in that of his
employee. As to other baggage, the
rules in Articles 1998 and 2000 to
17

Transportation Law
2003 concerning the responsibility of
hotel-keepers shall be applicable.
states that: The deposit of effects
made by the travellers in hotels or
inns shall also be regarded as
necessary. The keepers of hotels or
inns shall be responsible for them as
depositaries, provided that notice was
given to them, or to their employees,
of the effects brought by the guests
and that, on the part of the latter, they
take the precautions which said hotelkeepers or their substitutes advised
relative to the care and vigilance of
their effects.
states
that:
The
responsibility
referred to in the two preceding
articles shall include the loss of, or
injury to the personal property of the
guests caused by the servants or
employees of the keepers of hotels or
inns as well as strangers; but not that
which may proceed from any force
majeure. The fact that travellers are
constrained to rely on the vigilance of
the keeper of the hotels or inns shall
be considered in determining the
degree of care required of him.
provides that: The act of a thief or
robber, who has entered the hotel is
not deemed force majeure, unless it is
done with the use of arms or through
an irresistible force.
provides that: The hotel-keeper is not
liable for compensation if the loss is
due to the acts of the guest, his
family, servants or visitors, or if the
loss arises from the character of the

things brought into the hotel.
provides that: The hotel-keeper
cannot free himself from responsibility
by posting notices to the effect that he
is not liable for the articles brought by
the guest. Any stipulation between the
hotel-keeper and the guest whereby
the responsibility of the former as set
forth in articles 1998 to 2001 is
suppressed or diminished shall be
void.
*The baggage in the personal custody
of the passenger or his employee in
that the baggage in transit will be
considered as necessary deposits. The
common carrier shall be responsible
for the baggage as depositaries,
provided that notice was given to
them or its employees, and the
passenger
took
the
necessary
precaution, which the carrier has
advised them relative to the care and
vigilance of their baggage. In case of
loss due to the fault of the passenger
the carrier will not be liable.
*They are not absolutely responsible
as depository because the law
requires notice.
*It is also required to declare the value
of the baggage.
*The carrier who has in his custody
the baggage of the passenger to be
carried like any other goods is required
to observe extraordinary diligence. In
case of loss or damage the carrier is
presumed negligent.
OBLIGATIONS
OF
THE
SHIPPER,
CONSIGNEE AND PASSENGER:
18

Transportation Law
A. Effect of negligence of shipper or
passenger Article 1741 of the New
Civil Code states that: If the shipper
or owner merely contributed to the
loss, destruction or deterioration of
the goods, the proximate cause
thereof being the negligence of the
common carrier, the latter shall be
liable in damages, which however,
shall be equitably reduced.
provides that: The passenger must
observe the diligence of a good father
of a family to avoid injury to himself.
states
that:
The
contributory
negligence of the passenger does not
bar recovery of damages for his death
or injuries, if the proximate cause
thereof is the negligence of the
common carrier, but the amount of
damages shall be equitably reduced.
*The shipper is also obliged to
exercise due diligence in avoiding
damage or injury.
*With
respect
to
carriage
of
passengers, the said passengers are
likewise bound to observe due
diligence to avoid injury.
*The contributory negligence on the
part of the passenger is not a defense
that will excuse the carrier from
liability. It will only mitigate such
liability.
*The carrier may be able to prove that
the only cause of the loss of the goods
is any of the following acts of the
shipper:
1. failure of the shipper to disclose the
nature of the goods;
2. improper marking or direction as to
destination; and
3. improper loading when he assumed

such responsibility.
*The shipper must likewise see to it
that the goods are properly packed;
otherwise, liability of the carrier may
be mitigated or barred depending on
the circumstances.
B. Payment of freight
Who will pay:
Shipper - before or at the time he
delivers the goods to the carrier for
shipment.
Consignee - if agreed upon by the
parties at the point of destination is
bound by such stipulation the moment
he accepts the goods.
Passengers - they are contractually
bound to pay the fare within such time
as prescribed by regulations or by the
carrier.
Time to pay:
Tickets are purchased in advance from
ticket outlets.
Consignees to whom the shipment
was made may not defer the payment
of the expenses and transportation
charges of the goods they receive
after the lapse of 24 hours following
their delivery.
*In case of delay in payment, the
carrier may demand the judicial sale
of the goods transported in an amount
necessary to cover the cost of
transportation and the expenses
incurred.
Commerce provides that: The carrier
who makes the delivery of the
merchandise to the consignee by
virtue of combined agreements or
services with other carriers shall
assume the obligations of those who
19

Transportation Law
preceded him in the conveyance,
reserving his right to proceed against
the latter if he was not the party
directly responsible for the fault which
gave rise to the claim of the shipper or
consignee. The carrier who makes the
delivery shall likewise acquire all the
actions and rights of those who
preceded him in the conveyance. The
shipper and the consignee shall have
an immediate right of action against
the
carrier
who
executed
the
transportation contract, or against the
other carriers who may have received
the
goods
transported
without
reservation. However, the reservation
made by the latter shall not relieve
them from the responsibilities which
they may have incurred by their own
acts.
Commerce provides that: The goods
transported shall be especially bound
to
answer
for
the
cost
of
transportation and for the expenses
and fees incurred for them during their
conveyance and until the moment of
their delivery. This special right shall
prescribe 8 days after the delivery has
been made, and once prescribed, the
carrier shall have no other action than
that corresponding to him as an
ordinary creditor.
C. Liability for demurrage
Demurrage is the compensation
provided for in the contract of
affreightment for the detention of the
vessel beyond the time agreed on for
loading and unloading. It is a claim for
damages for failure to accept delivery.
*Liability for demurrage exists only

when expressly stipulated in the
contract.
EXTRAORDINARY DILIGENCE:
A. Underlying reason
Reasons:
1. From the nature of the business
and for reasons of public policy;
2. Relationship of trust;
3. Business is impressed with a
special public duty;
4. Possession of the goods;
5. Preciousness of human life
B. Effect of Stipulation
between the common carrier and
the shipper or owner limiting the
liability of the former for the loss,
destruction, or deterioration of the
goods to a degree less than
(1) In writing, signed by the shipper
or owner;
consideration
other
than
the
service rendered by the common
carrier; and
Code
states
that:
The
responsibility of a common carrier
for the safety of passengers as
required in Articles 1733 and 1755
cannot be dispensed with or
lessened by stipulation, by the
posting of notices, by statements
on tickets, or otherwise.
20

Transportation Law
Code states that: When a
passenger is carried gratuitously, a
carrier's liability for negligence is
valid, but not for wilful acts or
gross negligence.
The reduction of fare does not
justify any limitation of the
common carrier's liability.
carrier's responsibility prescribed in
the preceding article cannot be
eliminated or limited by stipulation,
by the posting of notices, by
statements on the tickets or
otherwise.
C. Extraordinary
diligence
in
carriage by sea
1. Seaworthiness of the vessel
Sec. 3 [1] of the COGSA
provides that: The carrier shall
be bound before and at the
beginning of the voyage to
exercise due diligence to
(a) Make the ship seaworthy;
(b) Properly man,equip, and
supply the ship;
(c) Make
the
holds,
refrigerating
and
cooling
chambers, and all other parts of
the ship in which goods are
carried, fit and safe for their
reception,
carriage,
and
preservation.
Sec. 3 [2] of the COGSA
provides that: The carrier shall
properly and carefully load,
handle, stow, carry, keep, care
for, and discharge the goods
carried.
Sec. 116 of the IC

Sec. 119 of the IC
Commerce
states
that:
Captains, masters or patrons of
vessels must be Filipinos, have
legal capacity to contract in
accordance with this code, and
prove the skill, capacity, and
qualifications
necessary
to
command and direct the vessel,
as established by marine or
navigation laws, ordinances, or
regulations, and must not be
disqualified according to the
same for the discharge of the
duties of the position. If the
owner of a vessel desires to be
the captain thereof, without
having the legal qualifications
therefor, he shall limit himself to
the financial administration of
the vessel, and shall intrust the
navigation
to
a
person
possessing the qualifications
required by said ordinances and
regulations.
*Extraordinary
diligence
requires that the ship which will
transport the passengers and
goods is seaworthy.
*The carriers are deemed to
warrant
impliedly
the
seaworthiness of the ship. The
failure of a common carrier to
maintain in seaworthy condition
the vessel involved in its
contract of carriage is a clear
breach of its duty prescribed in
Article 1755 of the NCC.
*Shippers of goods are not
expected to inquire into the
21

Transportation Law
2.
3.
4.
5.
vessels
seaworthiness
and
compliance with all maritime
laws.
*The unseaworthiness can be
established by the fact that it
did not withstand the natural
and inevitable action of the sea.
Overloading
*Duty to exercise due diligence
includes the duty to take
passengers or cargoes that are
within the carrying capacity of
the vessel.
Proper storage
*The ship must not be only
seaworthy but it must also be
cargoworthy. The ship must be
an efficient storehouse for her
cargo.
*The vessel must be adequately
equipped and properly manned.
Obligation of captain and
crew
*If the negligence of the captain
and crew can be traced to the
fact that they are really
incompetent,
the
Limited
Liability Rule cannot be invoked
because the ship owner may be
deemed negligent.
Rule
on
deviation
and
transhipment Deviation
*If route is stipulated upon by
the shipper and carrier, carrier
cant change unless due to
force majeure.
*Carrier shall be liable for all
losses suffered from any other
cause,
beside
the
sum
stipulated for such case.
*If due to said force majeure he
took another route and incurred
expenses by reason thereof, he
shall be reimbursed for such

increase upon formal proof
thereof (Art. 359, Code of
Commerce).
Transshipment is the act of
taking cargo out of one ship and
loading it in another.
*When done without legal
excuse, however competent and
safe the vessel into which the
transfer is made, is a violation
of
the
contract
and
an
infringement of the right of the
shipper and subjects the carrier
to liability if the freight is lost
even by a cause otherwise
excepted
(Magellan
Manufacturing Corp. v. CA).
there is an agreement between
the shipper and the carrier as to
the road over which the
conveyance is to be made, the
carrier may not change the
route, unless it be by reason of
force majeure; and should he do
so without this cause, he shall
be liable for all the losses which
the goods he transports may
suffer from any other cause,
beside paying the sum which
may have been stipulated for
such case. When on account of
said cause of force majeure, the
carrier had to take another
route
which
produced
an
increase
in
transportation
charges, he shall be reimbursed
for such increase upon formal
proof thereof.
22

Transportation Law
D. Extraordinary
diligence
in
carriage by land
1. Vehicles condition
*Owners are required to make
sure that the vehicles they are
using are in good order and
condition.
2. Traffic rules (RA 4136)
*In cases involving breach of
contract of carriage, proof of
violation of traffic rules confirms
that the carrier failed to
exercise
extraordinary
diligence.
3. Obligation to Inspect
*in
overland
transportation,
common carrier is not bound
nor empowered to make an
examination of the contents of
packages or bags particularly
those hand carried.
Airline
companies are required to
inspect each and every cargo
brought into the aircraft (RA
6235).
E. Extraordinary
diligence
in
carriage by air
1. Airworthiness - an aircraft, its
engines, propellers and other
components and accessories are of
proper design and construction,
and are safe for air navigation
purposes,
such
design
and
construction being consistent with
accepted engineering practice and
in accordance with aerodynamic
laws and aircraft science (RA 779).
2. Competent and well trained
crew
3. To take the required and
prescribed route
4. Adverse weather conditions or
extreme climatic changes are some
of the perils involved in air travel

consequence
of
which
the
passenger must assume or expect.
5. RA 6235 (An Act Prohibiting
Certain Acts Inimical to Civil
Aviation and for Other Purposes) acts punishable:
a. to compel a change in the
course or destination of an aircraft
of Philippine registry; or
b. to seize or usurp control of the
aircraft while in flight.
ACTIONS IN CASE OF
CONTRACT OF CARRIAGE:
BREACH
OF
A. Causes
of
action
and
nature/extent of liability (culpa
contractual, culpa aquiliana
and culpa delictual)
Culpa contractual only the carrier
is primarily liable and not the
driver.
Reason: There is no privity
between the driver and the
passenger.
*The party to be impleaded is the
carrier itself.
Basis: Article 1759 of the New Civil
Code
Culpa
delictual/criminal
the
driver is primarily liable. The carrier
is subsidiarily liable only if the
driver is convicted and declared
insolvent.
Basis: Article 100 of the Revised
Penal Code
Culpa aquiliana the carrier and
the driver are solidarily liable as
joint tortfeasor.
Basis: Article 2180 of the New Civil
Code
23

Transportation Law
B. Prescriptive
period
and
conditions precedent
1. Overland transportation of
goods
and
coastwise
shipping (Domestic)
Commerce
provides
that:
Within the 24 hours following
the receipt of the merchandise,
the claim against the carrier for
damage or average which may
be found therein upon opening
the packages, may be made,
provided that the indications of
the damage or average which
gives rise to the claim cannot
be ascertained from the outside
part of such packages, in which
case the claim shall be admitted
only at the time of receipt. After
the periods mentioned have
elapsed, or the transportation
charges have been paid, no
claim shall be admitted against
the carrier with regard to the
condition in which the goods
transported were delivered.
*Prior notice of claim does not
apply to misdelivery of goods.
Purpose of notice: To inform
the carrier that the shipment
has been damaged and that it is
charged with liability therefor,
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 in case of damage
condition of the goods.
*Not provided by Article 366 of

the Code of Commerce. Thus, in
such absence, the New Civil
Code rules on prescription
apply.
Prescriptive period:
General Rule: If written, 10
years, if not written, 6 years
Exceptions:
1. COGSA 1 year
2. Warsaw Convention 2
years
Example: Q: In case of pending
extrajudicial claim, does it
suspend the one year period?
A: NO
*One year period applies to
shipper,
assignee,
insurer,
subrogees, and successor in
interest.
*One year period does not apply
in cases of delay or misdelivery.
International
Carriage
of
Goods by Sea Sec. 3 [6] of
the
COGSA substantially
provides that in case of patent
damage, the shipper should file
a
claim
with
the
carrier
immediately upon delivery. In
case of latent damage, the
shipper should file a claim with
the carrier within 3 days from
delivery. Action for loss or
damage to the cargo should be
brought within one year after:
delivery of the goods (delivered
but damaged goods); or the
date when the goods should
have been delivered (loss).
*The filing of a notice of claim is
not a condition precedent.
24

Transportation Law
Recoverable Damages
The court may award the following
damages:
1. Actual/Compensatory Damages
2. Temperate Damages
3. Liquidated Damages
4. Exemplary Damages
5. Moral Damages
6. Nominal Damages
Actual/Compensatory damages are
those awarded to the aggrieved party
as adequate compensation only for
such pecuniary loss suffered by him as
he has alleged and duly proved.
Article 2199 of the Civil Code
states that: Except as provided by
law or by stipulation, one is entitled to
an adequate compensation only for
such pecuniary loss suffered by him as
he
has
duly
proved.
Such
compensation is referred to as actual
or compensatory damages.
*To claim this award, proving the
amount is necessary.
*Procedures
or
plastic
surgeries
performed to restore the part of the
body injured are included as a
component of actual damages.
Temperate damages or moderate
damages these are damages the
amount of which is left to the sound
discretion of the court, but it is
necessary that there be some injury or
pecuniary loss established, the exact
amount of which, could not be
determined by the plaintiff by reason
of the nature of the case.
provides
that:
Temperate
or
moderate damages, which are more
than
nominal
but
less
than
compensatory damages, may be

recovered when the court finds that
some pecuniary loss has been suffered
but its amount can not, from the
nature of the case, be provided with
certainty.
*The court is convinced that there is
pecuniary loss.
*There is no actual certainty of the
actual amount loss. The court is
allowed to calculate the amount.
*This is in the form of actual damages
Liquidated
damages are fixed
damages previously agreed by the
parties to the contract and payable to
the innocent party in case of breach
by the other.
provides that: Liquidated damages
are those agreed upon by the parties
to a contract, to be paid in case of
breach thereof.
*This is in the form of actual damages
but a stipulated one.
*Proving the amount is not necessary.
*In this kind of damages, estoppel
applies.
General Rule: The court cannot
change the amount.
Exception: If the amount stipulated is
excessive the court may disregard said
amount and may compute the actual
damages.
*The only thing to be proved is the
fact of loss.
Exemplary damages are mere
accessories to other forms of damages
except nominal damages. They are
mere additions to actual, moral,
temperate and liquidated damages
which may or may not be granted at
all depending upon the necessity of
setting an example for the public good
25

Transportation Law
as a form of deterrent to the repetition
of the same act by any one.
provides
that:
Exemplary
or
corrective damages are imposed, by
way of example or correction for the
public good, in addition to the moral,
temperate,
liquidated
or
compensatory damages.
*Awarded because of the wanton,
fraudulent, malevolent, oppressive
acts of the carrier.
*This is awarded to prevent other
carrier to commit oppressive acts.
*This cannot be awarded unless the
plaintiff is entitled to moral at the
same time actual or temperate
damages.
states
that:
In
quasi-delicts,
exemplary damages may be granted if
the defendant acted with gross
negligence.
states that: In contracts and quasicontracts, the court may award
exemplary damages if the defendant
acted in a wanton, fraudulent,
reckless, oppressive, or malevolent
manner.
states that: Exemplary damages
cannot be recovered as a matter of
right; the court will decide whether or
not they should be adjudicated.
states that: While the amount of the
exemplary damages need not be
proved, the plaintiff must show that he
is entitled to moral, temperate or
compensatory damages before the
court may consider the question of
whether or not exemplary damages

should be awarded In case liquidated
damages have been agreed upon,
although no proof of loss is necessary
in order that such liquidated damages
may be recovered, nevertheless,
before the court may consider the
question of granting exemplary in
addition to the liquidated damages,
the plaintiff must show that he would
be entitled to moral, temperate or
compensatory damages were it not for
the
stipulation
for
liquidated
damages.
states that: A stipulation whereby
exemplary damages are renounced in
advance shall be null and void.
Nominal damages are not for
indemnification of loss but for
vindication of a right violated.
provides that: Nominal damages are
adjudicated in order that a right of the
plaintiff, which has been violated or
invaded by the defendant, may be
vindicated or recognized, and not for
the purpose of indemnifying the
plaintiff for any loss suffered by him.
states that: The court may award
nominal damages in every obligation
arising from any source enumerated in
Article 1157, or in every case where
any property right has been invaded.
states that: The adjudication of
nominal damages shall preclude
further contest upon the right involved
and all accessory questions, as
between the parties to the suit, or
their respective heirs and assigns.
26

Transportation Law
*In Japan Airlines v CA, JAL failed to
give the plaintiff the priority for the
first available flight. The SC awarded
nominal damages.
Moral damages are in the category
of an award designed to compensate
the claimant for actual injury suffered
and not to impose a penalty on the
wrongdoer.
provides that: Moral damages include
physical suffering, mental anguish,
fright, serious anxiety, besmirched
reputation, wounded feelings, moral
shock, social humiliation, and similar
injury. Though incapable of pecuniary
computation, moral damages may be
recovered if they are the proximate
result of the defendant's wrongful act
for omission.
Q: When moral damages may be
awarded?
A: 1. Death of a passenger; 2. Carrier
is guilty of fraud, malice, bad faith
even if there is no death of a
passenger (Case: Lopez v PanAmerican); 3. In Air France case
MARITIME LAW:
Source: Code of Commerce
A. Concept of Maritime Law
Maritime Law 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.
*Apply only to maritime trade and sea
voyages.
B. Limited Liability Rule
1. Concept
The
exclusively
real
and
hypothecary nature of maritime
law operates to limit the liability of
the shipowner to the value of the
vessel, earned freightage and
proceeds of the insurance, if any.
NO VESSEL NO LIABILITY
expresses in a nutshell the limited
liability rule. The total destruction
of the vessel extinguishes maritime
lien as there is no longer any res to
which it can attach.
Q: Is this rule applies in the
handling of the passengers?
A: YES
Q: Whose liability is this?
A: Shipowner or Agents.
Article 586 2nd paragraph states
that: By ship agent is understood
the
person
entrusted
with
provisioning or representing the
vessel in the port in which it may
be found.
*Ship agent is the only person that
can be sued directly.
Reason: Article 618 of the Code of
Commerce provides so.
Article 618 1st paragraph states
that: The ship captain shall be
civilly liable to the ship agent, and
the latter to the third persons who
may have made contracts with the
former; x x x.
Q: What kind?
A: Maritime in nature; marine
transactions
connected
with
maritime law; maritime trade and
commerce
Purpose:
To
encourage
shipbuilding
and
maritime
transactions
27

Transportation Law
ship agent shall also be civilly
liable for the indemnities in favor of
third persons which may arise from
the conduct of the captain in the
care of the goods which he loaded
on the vessel; but he may exempt
himself therefrom by abandoning
the vessel with all her equipments
and the freight it may have earned
during the voyage.
Commerce provides that: The coowners of a vessel shall be civilly
liable in the proportion of their
interests in the common fund, for
the results of the acts of the
captain, referred to in Article 587.
Each co-owner may exempt himself
from
this
liability
by
the
abandonment, before a notary, of
the part of the vessel belonging to
him.
civil liability incurred by the
shipowners in the case prescribed
in this section, shall be understood
as limited to the value of the vessel
with all its appurtenances and
freightage earned during the
voyage.
When applicable:
The Code of Commerce sanctions
the application of the doctrine in
the following cases: 1. Civil liability
for indemnities in favor of third
persons which arise from the
conduct of the captain in the case
of the goods which the vessel
carried; 2. Civil liability arising from
collisions; 3. Unpaid wages of the
captain and the crew if the vessel
and its cargo are totally lost by

reason of capture of shipwreck.
2. Exceptions to the rule
Exceptions:
1. When the injury to or death of a
passenger is due either to the
fault of the shipowner, or to the
concurring negligence of the
shipowner and the captain;
2. When the vessel is insured to
the extent of the insurance
proceeds; and
*Freightage collectible
Q: How come insurance is an
exception?
A: Because there is no loss. The
loss was compensated by the
insurance company
3. In Workmens Compensation
claims
Q: Why is an exception?
A: Because not
maritime in
nature
*In Yangco v Laserna case,
the SC held that it covers
anything that is connected with
maritime transactions
3. Abandonment
Q: If theres partial loss can the
shipowner/agent be exempted from
liability?
A: YES. If there is abandonment.
Q: If there is total loss, is it
necessary to abandon?
A: NO. There is nothing to
abandon.
Case: Luzon Stevedoring
Commerce states that: The ship
agent shall also be civilly liable for
the indemnities in favor of third
persons which may arise from the
conduct of the captain in the care
of the goods which he loaded on
28

Transportation Law
the vessel; but he may exempt
himself therefrom by abandoning
during the voyage.
Q: How claims are satisfied under
the Limited Liability Rule?
A: All claims should be collated
before they can be satisfied from
what remains of the insurance
proceeds and freightage at the
time of the loss. No claimant
should be given preference over
the
others
by
the
simple
expedience of having filed or
completed its action earlier than
the rest. Thus, the execution of
judgment in earlier completed
cases, even those already final and
executory, must be stayed pending
completion of all cases occasioned
by the subject sinking. Then and
only then can all such claims be
simultaneously
settled,
either
completely or pro-rata should the
insurance proceeds and freightage
be not enough to satisfy the claim.
Case: Aboitiz Shipping Co. v
General Accident Fire and Life
Insurance Corporation
C. Vessels
- Those engaged in navigation,
whether coastwise or on the
high seas, including floating
docks,
pontoons,
dredges,
scows and any other floating
apparatus destined for the
services of the industry or
maritime commerce. Excluded
are local and foreign military
vessels, bancas and other
watercrafts of less than 3 tons

gross
capacity
and
small
watercrafts engaged in river
and bay traffic.
1. Acquisition
a. By prescription
Commerce
states
that:
Merchant vessels constitute
property which may be acquired
and transferred by any of the
means recognized by law. The
acquisition of a vessel must
appear in a written instrument,
which shall not produce any
effect with respect to third
persons if not inscribed in the
registry
of
vessels.
The
ownership of a vessel shall
likewise
be
acquired
by
possession
in
good
faith,
continued for three years, with
a just title duly recorded. In the
absence of any of these
requisites,
continuous
possession for ten years shall
be necessary in order to acquire
ownership. A captain may not
acquire by prescription the
vessel of which he is in
command.
Requisites:
1. Acquisition must appear in a
written instrument
2. Such shall not produce any
effect to third persons if not
inscribed in the registry of
vessels
3. Shall
be
acquired
by
possession in good faith,
continued for 3 years
29

Transportation Law
4. With a just title duly
recorded
5. In the absence of any of
there, continuous possession
for 10 years shall be
necessary
to
acquire
ownership
Q: Can the ship captain acquire
vessel by prescription?
A: NO. The character of
possession he has is not those
for acquisitive possession. The
requisite
for
acquisitive
possession is that possession as
an owner.
Commerce states that: Coowners of vessels shall have the
right
of
repurchase
and
redemption in sales made to
strangers,
but
they
may
exercise the same only within
the 9 days following the
inscription of the sale in the
registry, and by depositing the
price at the same time.
b. By sale
Commerce states that: In the
sale of a vessel it shall always
be understood as included the
rigging, masts, stores and
engine
of
a
steamer
appurtenant thereto, which at
the time belongs to the vendor.
The arms, munitions of war,
provisions and fuel shall not be
considered as included in the
sale. The vendor shall be under
the obligation to deliver to the
purchaser a certified copy of the
record sheet of the vessel in the

registry up to the date of sale.
Commerce states that: If the
alienation of the vessel should
be made while it is on voyage,
the freightage which it earns
from the time it receives its last
cargo shall pertain entirely to
the purchaser, and the payment
of the crew and other persons
who make up its complement
for the same voyage shall be for
his account. If the sale is made
after the vessel has arrived at
the port of its destination, the
freightage shall pertain to the
vendor, and the payment of the
crew and other individuals who
make up its complement shall
be for his account, unless the
contrary is stipulated in either
case.
*If made while it is on voyage,
the freightage which it earns
from the time it receives its last
cargo shall pertain entirely to
the purchaser, and the payment
of the crew and other persons
who make up its complement
shall be for his account.
*If made after vessel arrived at
port
of
its
destination,
freightage shall pertain to the
vendor, and the payment of the
crew and other individuals who
make up its complement shall
be for his account, unless the
contrary is stipulated in either
case.
30

Transportation Law
vessel being on a voyage or in a
foreign port, its owner or
owners
should
voluntarily
alienate it, either to Filipinos or
to foreigners domiciled in the
capital or in a port of another
country, the bill of sale shall be
executed before the consul of
the Republic of the Philippines
at the port where it terminates
its voyage and said instrument
shall produce no effect with
respect to third persons if it is
not inscribed in the registry of
the consulate. The consul shall
immediately forward a true
copy of the instrument of
purchase and sale of the vessel
to the registry of vessels of the
port where said vessel is
inscribed and registered. In
every case the alienation of the
vessel must be made to appear
with a statement of whether the
vendor receives its price in
whole or in part, or whether he
preserves in whole or in part
any claim on said vessel. In
case the sale is made to a
Filipino, this fact shall be stated
in the certificate of navigation.
When a vessel, being in a
voyage, shall be rendered
useless for navigation, the
captain shall apply to the
competent judge or court of the
port of arrival, should it be in
the Philippines; and should it be
in a foreign country, to the
consul of the Republic of the
Philippines, should there be
one, or, where there is none, to

the judge or court or to the local
authority; and the consul, or the
judge or court, shall order an
examination of the vessel to be
made. If the consignee or the
insurer should reside at said
port,
or
should
have
representatives
there,
they
must be cited in order that they
may
take
part
in
the
proceedings
on
behalf
of
whoever may be concerned.
c. Registration
Section 810 of the Tariff and
Customs Code provides that:
The Bureau of Customs is
vested with exclusive authority
over
the
registration
and
documentation of Philippine
vessels. By it shall be kept and
preserved
the
records
of
registration and of transfers and
encumbrances of vessels; and
by it shall be issued all
certificates, licenses or other
documents
incident
to
registration and documentation,
or
otherwise
requisite
for
Philippine vessels.
*Through the MARINA
d. Ships manifest
Sec. 906 of the Tariff and
Customs Code provides that:
Manifests shall be required for
cargo
and
passengers
transported from one place or
port in the Philippines to
another only when one or both
of such places is a port of
entry.
31

Transportation Law
*Declaration of the entire cargo.
The object is to furnish customs
officers with a list to check
against, to inform the revenue
officers what goods are brought
into a port of the country on a
vessel. Hence, the requirement
that a vessel must carry a
manifest is not complied with
even if a bill of lading can be
presented.
*A bill of lading is just a
declaration of a specific cargo
rather than the entire cargo. It
is issued as a matter of
convenience by virtue of a
contract.
D. Persons who take part in Maritime
Commerce
1. Shipowners and shipagents
shipowner and the ship agent shall
be civilly liable for the acts of the
captain and for the obligations
contracted by the latter to repair,
equip, and provision the vessel,
provided the creditor proves that
the amount claimed was invested
for the benefit of the same. By ship
agent is understood the person
entrusted with provisioning or
representing the vessel in the port
in which it may be found.
ship agent shall also be civilly
liable for the indemnities in favor of
third persons which may arise from
the conduct of the captain in the
care of the goods which he loaded
on the vessel; but he may exempt

himself thereform by abandoning
during the voyage.
Commerce provides that: Neither
the shipowner nor the ship agent
shall be liable for the obligations
contracted by the captain, if the
latter exceeds the powers and
privileges pertaining to him by
reason of his position or conferred
upon
him
by
the
former.
Nevertheless, if the amounts
claimed were invested for the
benefit
of
the
vessel,
the
responsibility therefor shall devolve
upon its owner or agent.
a. Rules in case of part-owners
two or more persons should be
part owners of a merchant
vessel, a partnership shall be
presumes as estrablished by the
co-owners.
This
partnership
shall be governed by the
resolution of the majority of the
members. If the part-owners
should not be more than two,
the disagreement of views, if
any, shall be decided by the
vote of the member having the
largest interest. If the interests
are equal, it should be decided
by lot. The person having the
smallest share in the ownership
shall have one vote; and
proportionately the other part
owners as many votes as they
have parts equal to the smallest
32

Transportation Law
one. A vessel may not be
detained, attached or levied
upon in execution in its entirety,
for the private debts of a part
owner, but the proceedings
shall be limited to the interest
which the debtor may have in
the vessel, without interfering
with the navigation.
co-owners of a vessel shall be
civilly liable in the proportion of
their interests in the common
fund, for the results of the acts
of the captain, referred to in
Article 587.
Commerce provides that: All
the part owners shall be liable,
in proportion to their respective
ownership, for the expenses for
repairing the vessel, and for
other expenses which are
incurred
by
virtue
of
a
resolution of the majority. They
shall likewise be liable in the
same
proportion
for
the
expenses for the maintenance,
equipment, and provisioning of
the
vessel,
necessary
for
navigation.
resolution of the majority with
regard to the repair, equipment,
and provisioning of the vessel in
the port of departure shall bind
the
minority,
unless
the
minority members renounce
their interests, which must be
acquired by the other co-
owners,
after
a
judicial
appraisement of the value of
the
portion
or
portions
assigned. The resolutions of the
majority
relating
to
the
dissolution of the partnership
and sale of the vessel shall also
be binding on the minority. The
sale of the vessel must be made
at public auction, subject to the
provisions of the law of civil
procedure,
unless
the
coowners
unanimously
agree
otherwise, saving always the
right
of
repurchase
and
redemption provided for in
Article 575.
owners of a vessel shall have
preference in her charter over
other persons, under the same
conditions and price. If two or
more of them should claim this
right, the one having the
greater
interest
shall
be
preferred; and should they have
equal interests, the matter shall
be decided by lot.
co-owners
shall
elect
the
manager who is to represent
them in the capacity of ship
agent. The appointment of
director or ship agent shall be
revocable at the will of the
members.
b. Rules in case of shipagents
ship agent, whether he is at the
33

Transportation Law
same time the owner of the
vessel, or a manager for an
owner or for an association of
co-owners, must have the
capacity to trade and must be
recorded in the merchants
registry of the province. The
ship agent shall represent the
ownership of the vessel, and
may, in his own name and in
such capacity, take judicial and
extrajudicial steps in matters
relating to commerce.
ship agent may discharge the
duties of captain of the vessel,
subject in every case to the
provision of Article 609. If two or
more co-owners apply for the
position
of
captain,
the
disagreement shall be decided
by a vote of the members; and
if the vote should result in a tie,
it shall be decided in favor of
the co-owner having the larger
interest in the vessel. If the
interests of the applicants
should be equal, and there
should be a tie, the matter shall
be decided by lot.
ship agent shall designate and
come to terms with the captain,
and shall contract in the name
of the owners, who shall be
bound in all that refer to repairs,
details equipment, armament,
provisions of food and fuel, and
freight of the vessel, and, in
general, in all that relate to the

requirements of navigation.
ship agent may not order a new
voyage, or make contracts for a
new charter, or insure the
vessel,
without
the
authorization of its owner or
resolution of the majority of the
co-owners, unless these powers
were granted him in the
certificate of his appointment. If
he insures the vessel without
authorization therefore, he is
subsidiarily
liable
for
the
solvency of the insurer.
ship agent managing for an
association shall render to his
associates an account of the
results of each voyage of the
vessel, without prejudice to
always having the books and
correspondence relating to the
vessel and to its voyages at
their disposal.
Commerce states that: After
the account of the managing
agent has been approved by a
relative majority, the co-owners
shall pay the expenses in
proportion to their interest,
without prejudice to the civil or
criminal actions which the
minority may deem fit to
institute afterwards. In order to
enforce
the
payment,
the
managing
agent
shall
be
entitled to an executor action
34

Transportation Law
(accion ejecutiva), which shall
be instituted by virtue of a
resolution of the majority, and
without
further
proceedings
than the acknowledgment of
the signatures of the persons
who voted for the resolution.
Commerce states that: Should
there be any profits, the coowners may demand of the
managing agent the amount
corresponding to their interests
by means of an executor action
(accion ejecutiva), without any
other
requisite
than
the
acknowledgment
of
the
signatures on the instrument
approving the account.
ship agent shall indemnify the
captain for all the expenses he
may have incurred with funds of
his own or of others, for the
benefit of the vessel.
*The ship agent is entrusted
with
the
provisioning
and
representing the vessel in the
port in which it may be found.
His liability to passengers and
cargo owners for loss or injury is
the same as the shipowner.
*He is solidarily liable with the
owner for such loss or damage
subject to his right to claim
reimbursement
from
the
shipowner.
*Only agent that can be sued
directly.
2. Captains
and
masters
of
vessels
a. Qualifications
Commerce
states
that:
Captains, masters or patrons of
vessels must be Filipinos, have
legal capacity to contract in
accordance with this code, and
prove the skill, capacity, and
qualifications
necessary
to
command and direct the vessel,
as established by marine or
navigation laws, ordinances, or
regulations, and must not be
disqualified according to the
same for the discharge of the
duties of the position. If the
owner of a vessel desired to be
the captain thereof, without
having the legal qualifications
therefor, he shall limit himself to
the financial administration of
the vessel, and shall intrust the
navigation
to
a
person
possessing the qualifications
required by said ordinances and
regulations.
b. Powers and functions
following
powers
shall
be
inherent in the position of
captain, master or patron of a
vessel: 1. To appoint or make
contracts with the crew in the
absence of the ship agent, and
to propose said crew, should
said agent be present; but the
ship agent may not employ any
member against the captains
express refusal; 2. To command
the crew and direct the vessel
to the port of its destination, in
35

Transportation Law
accordance with the instructions
he may have received from the
ship agent; 3. To impose, in
accordance with the contracts
and
with
the
laws
and
regulations of the merchant
marine, and when on board the
vessel, correctional punishment
upon those who fail to comply
with his orders or are wanting in
discipline, holding a preliminary
hearing
on
the
crimes
committed on board the vessel
on the seas, which crimes shall
be
turned
over
to
the
authorities having jurisdiction
over the same at the first port
touched; 4. To make contracts
for the charter of the vessel in
the absence of the ship agent or
of its consignee, acting in
accordance with the instructions
received and protecting the
interests of the owner with
utmost care; 5. To adopt all
proper measures to keep the
vessel
well
supplied
and
equipped, purchasing all that
may be necessary for the
purpose, provided there is no
time to request instruction from
the ship agent; and 6. To order,
in similar urgent cases while on
a voyage, the repairs on the hull
and engines of the vessel and in
its rigging and equipment,
which are absolutely necessary
to enable it to continue and
finish its voyage; but if he
should arrive at a point where
there is a consignee of the
vessel,
he
shall
act
in
concurrence with the latter.
Commerce states that: In
order to comply with the
obligations mentioned in the
preceding article, the captain,
when he has no funds and does
not expect to receive any from
the ship agent, shall obtain the
same in the successive order
stated below: 1. By requesting
said funds from the consignee
of the vessel or correspondents
of the ship agent; 2. By applying
to the consignees of the cargo
or to those interested therein; 3.
By drawing on the ship agent; 4.
By
borrowing
the
amount
required by means of a loan on
bottomry; and 5. By selling a
sufficient amount of the cargo
to cover the sum absolutely
indispensable for the repair of
the vessel and to enable it to
continue its voyage. In these
two last cases he must apply to
the judicial authority of the port,
if in the Philippines, and to the
consul of the Republic of the
Philippines if in a foreign
country, and where there is
none, to the local authority,
proceeding in accordance with
the provisions of Article 583,
and with the provisions of the
law of civil procedure.
following obligations shall be
inherent in the office of the
captain:
36

Transportation Law
1. To have on board before
starting on a voyage a detailed
inventory of the hull, engines,
rigging, spare-masts, tackle,
and other equipment of the
vessel;
the
royal
or
the
navigation certificate; the roll of
the persons who make up the
crew of the vessel, and the
contracts entered into with
them; the lists of passengers;
the bill of health; the certificate
of the registry proving the
ownership of the vessel and all
the obligations which encumber
the same up to that date; the
charter parties or authenticated
copies thereof; the invoices or
manifests of the cargo, and the
memorandum of the visit or
inspection by experts, should it
have been made at the port of
departure;
2. To have a copy of this code
on board; 3. To have thee
folioed and stamped books,
placing at the beginning of each
one a memorandum of the
number of folios it contains,
signed
by
the
maritime
authority, and in his absence by
the competent authority. In the
first book, which shall be called
log book, he shall enter day
by day the condition of the
atmosphere,
the
prevailing
winds, the courses taken, the
rigging carried, the power of the
engines used in navigation, the
distances
covered,
the
maneuvers executed, and other
incidents of navigation; he shall
also enter the damage suffered

by the vessel in her hull,
engines, rigging, and tackle, no
matter what its cause may be,
as well as the impairment and
damage suffered by cargo, and
the effect and importance of the
jettison, should there be any;
and
in
cases
of
serious
decisions which require the
advice or a meeting of the
officers of the vessel, or even of
the crew and passengers, he
shall
record
the
decisions
adopted. For the information
indicated he shall make use of
the binnacle book and of the
steam of engine book kept by
the engineer. In the second
book called the accounting
book, he shall record all the
amounts collected and paid for
the account of the vessel,
entering specifically the article
by article, the source of the
collection and the amounts
spent for provisions, repairs,
acquisitions of equipment or
goods, fuel, food, outfits, wages,
and other expenses of whatever
nature they may be. He shall
furthermore enter therein a list
of all the members of the crew,
stating their domiciles, their
wages and salaries, and the
amounts
they
may
have
received on account, directly or
by delivery to their families. In
the third book, called freight
book, he shall record the
loading and discharge of all the
37

Transportation Law
gods, stating their marks and
packages,
names
of
the
shippers and of the consignees,
ports of loading and unloading,
and the freightage they give. In
this same book he shall record
the names and places of sailing
of the passengers, the number
of packages in their baggage,
and the price of passage;
4. Before receiving cargo, to
make with the officers of the
crew and two experts, if
required by the shippers and
passengers, an examination of
the vessel, in order to ascertain
whether it is water-tight, with
the rigging and engines in good
condition,
and
with
the
equipment required for good
navigation, preserving under his
responsibility a certificate of the
memorandum of his inspection,
signed by all those who may
have taken part therein. The
experts shall be appointed, one
by the captain of the vessel and
another by those who request
its examination, and in case of
disagreement a third shall be
appointed
by
the
marine
authority of the port or by the
authority
exercising
his
functions;
5. To remain constantly on
board the vessel with the crew
while the cargo is being taken
on board and to carefully watch
the stowage thereof; not to
consent to the loading of any
merchandise or matter of a
dangerous character, such as
inflammable
or
explosive
substances,
without
the
precautions
which
are
recommended for their packing,
handling and isolation; not to
permit the carriage on deck of
any cargo which by reason of its
arrangement, volume, or weight
makes the work of the sailors
difficult,
and
which
might
endanger the safety of the
vessel; and if, on account of the
nature of the merchandise, the
special
character
of
the
shipment, and principally the
favorable season in which it is
undertaken, merchandise may
be carried on deck, he must
hear the opinion of the officers
of the vessel and have the
consent of the shippers and of
the ship agent;
6. To demand a pilot at the
expense of the vessel whenever
required by the navigation, and
principally when he has to enter
a port, canal, or river, or has to
take a roadstead or anchoring
place with which neither he nor
the officers and crew are
acquainted;
7. To be on deck on reaching
land and to take command on
entering and leaving ports,
canals, roadsteads, and rivers,
unless there is a pilot on board
discharging his duties. He shall
not spend the night away from
the vessel except for serious
causes or by reason of official
business;
38

Transportation Law
8. To present himself, when
making a port in distress, to the
maritime authority if in the
Philippines and to the consul of
the Republic of the Philippines if
in a foreign country, before 24
hours have elapsed, and to
make a statement of the name
registry, and port of departure
of the vessel, of its cargo, and
the cause of arrival which
declaration shall be visaed by
the authority or the consul, if
after examining the same it is
found to be acceptable, giving
the
captain
the
proper
certificate proving his arrival in
distress
and
the
reasons
therefor. In the absence of the
maritime authority or of the
consul, the declaration must be
made before the local authority;
9. To take the necessary steps
before the competent authority
in order to record in the
certificate of the vessel in the
registry
of
vessels
the
obligations
which
he
may
contract in accordance with
Article 583;
10. To place under good care
and custody all the papers and
belongings of any members of
the crew who might die on the
vessel, drawing up a detailed
inventory, in the presence of
passengers,
or,
in
their
absence, of members of the
crew as witnesses;
11.
To
conduct
himself
according to the rules and
precepts
contained in the
instructions of the ship agent,

being liable for all that which he
may do in violation thereof;
12. To inform the ship agent
from the port at which the
vessel arrives, of the reason of
his arrival, taking advantage of
the semaphore, telegraph, mail,
etc., as the case may be; to
notify him of the cargo he may
have received, stating the
names and domiciles of the
shippers, freightage earned,
and amounts borrowed on
bottomry loan; to advise him of
his departure, and of any
operation and date which may
be of interest to him;
13. To observe the rules with
respect to situation, lights and
maneuvers in order to avoid
collisions;
14. To remain on board, in case
the vessel is in danger, until all
hope to save it is lost, and
before abandoning it, to hear
the officers of the crew, abiding
by the decision of the majority;
and if the boats are to be taken
to, he shall take with him,
before anything else, the books
and papers, and then the
articles of most value, being
obliged to prove, in case of the
loss of the books and papers,
that he did all he could to save
them;
15. In case of wreck, to make
the proper protest in due form
at the first port of arrival, before
the competent authority or the
Philippine consul, within 24
39

Transportation Law
hours, specifying therein all the
incidents of the wreck, in
accordance with subdivision 8
of this article;
16.
To
comply
with
the
obligations imposed by the laws
and regulations on navigation,
customs, health, and others.
c. Discretion powers
*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.
Case:Inter-Orient
Maritime
Enterprises Inc. v CA
3. Pilot
a. Concept
Pilot is a person duly qualified
and licensed to conduct a
vessel into or out of ports or in
certain waters.
*Generally connotes a person
taken on board at a particular
place for the purpose of
conducting a ship through a
river, road or channel or from a
port.
*If he is in command, he
becomes the Master pro hac
vice.
*While 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.
Case: Far Eastern Shipping
v CA
b. Relationship to master and
shipowner
4. Officers and crew of the vessel
i. Sailing mate/First mate
ii. Second mate
iii. Engineers marine engineers
iv. Crew cabin boy; paramedics;
watchkeeper; radio officers
5. Supercargoes
person
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.
E. Charter parties
1. Concept
Commerce states that: Charter
parties executed by the captain in
the absence of the ship agent shall
be valid and effective, even though
in executing them he should have
acted in violation of the orders and
instructions of the ship agent or
shipowner; but the latter shall have
a right of action against the captain
for indemnification of damages.
Charter party is a lease contract
by which with the entire ship or
some principal part thereof is let by
the owner to another person for a
specified period of time or use.
2. Kinds; bareboat and contract of
affreightment
Kinds:
40

Transportation Law
1. Bareboat or demise means
the whole vessel is lend to the
charterer which transfers to him
its
entire
command
and
possession
and
consequent
control over its navigation,
including the master and crew
who are his servants. The
charterer is treated as owner
pro hac vice of the vessel. In
such case, a common carrier
becomes a private carrier.
*Charterer means the vessel
assumes all responsibilities of
navigation and provides his own
people.
*Shipowner is not liable to third
person; it is the charterer who is
liable to them.
General Rule: The charterer is
liable to the third person.
Exception: Shipowner may still
be held liable if the injury was
caused by unseaworthiness or
negligence of the shipowner
beyond before the demise or
bareboat took over.
2. Contract of affreightment
involves that use of shipping
space leased by the owner in
part or as a whole, to carry
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.
*The shipowner is liable to third
person.
3. Persons qualified to make

charter
Q: Can the captain enter into a
charter contract?
A: YES provided that he is
authorized.
Q: Can the charterer enter into a
sub-charter contract?
A: YES provided it is not
prohibited. This is just like the rule
in lease.
4. Requisites of a valid charter
Commerce states that: A charter
party must be drawn in duplicate
and signed by the contracting
parties, and when either does not
know how or is not able to do so,
by two witnesses at his request.
The charter party shall contain,
besides
the
conditions
freely
stipulated,
the
following
circumstances: 1. The kind, name,
and tonnage of the vessel; 2. Its
flag and port of registry; 3. The
name, surname, and domicile of
the captain; 4. The name, surname,
and domicile of the ship agent, if
the latter should make the charter
party; 5. The name, surname, and
domicile of the charterer; and if he
states that he is acting by
commission, that of the person for
whose account he makes the
contract; 6. The port of loading and
unloading; 7. The capacity, number
of
tons
or
the
weight
or
measurement
which
they
respectively bind themselves to
load and to transport, or whether
the charter party is total; 8. The
freightage to be paid, stating
41

Transportation Law
whether it is to be a fixed amount
for the voyage or so much per
month, or for the space to be
occupied, or for the weight or
measure of the goods of which the
cargo consists, or in any other
manner whatsoever agreed upon;
9. The amount of primage to be
paid to the captain; 10. The days
agreed upon for loading and
unloading; 11. The lay days and
extra lay days to be allowed and
the demurrage to be paid for each
of them.
Requisites:
1. Consent of the contracting
parties
2. Existing vessel which should be
placed at the disposition of the
shipper
3. Freight
4. Compliance with Article 652 of
the Code of Commerce
5. Concept of and liability for
demurrage
Demurrage is the sum due, by
express contract, for the detention
of the vessel, in loading and
unloading,
beyond
the
time
allowed
in
the
contract
of
affreightment, and to any other
improper
detention
or
delay
beyond the time set for loading.
6. Rights
and
obligations
of
charter parties
Shipowner or
Charterer
Ship agent
If the vessel is To
pay
the
chartered
agreed charter
wholly, not to price
accept
cargo
from others
To
observe To
pay
represented
capacity
To unload cargo
clandestinely
placed
freightage
on
unboarded cargo
To pay losses to
others
for
loading
uncontracted
cargo or illicit
cargo
To
substitute To wait if the
another vessel if vessel
needs
load is less than repair
3/5 of capacity
To leave the port To pay expenses
if the charterer for deviation
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
F. Loans
on
Bottomry
and
Respondentia
1. Definition
Commerce states that: A loan in
which
under
any
condition
whatever, the repayment of the
sum loaned and of the premium
stipulated depends upon the safe
arrival in port of the goods on
which it is made, or of the price
they may receive in case of
accident, shall be considered a loan
on bottomry or respondentia.
Bottomry is a loan secured by the
shipowner
or
ship
agent
guaranteed by the vessel itself and
42

Transportation Law
payable only upon arrival of vessel
at destination.
*Captain may enter into bottomry
loan provided there is justification,
example of which is, for immediate
repairs.
Respondentia is a loan secured
by the owner of the cargo payable
upon safe arrival of cargo at
destination.
Barratry is an act of the captain or
crew for fraudulent purposes.
2. Distinguished from ordinary
loan
Ordinary
Loan
With
or
without
collateral
Any property
may be used
as collateral
Absolutely
payable
Obligation to
pay
still
exists in the
event
the
collateral
was lost
First lender
is the first
priority
Need not be
in writing to
be
enforceable
Bottomry/Respon
dentia
Always
with
collateral
Property is limited
to vessel/cargo
Conditionally
payable
Loan is extinguished
in the event that the
vessel/cargo
was
lost
Last lender is the
first priority
Need
to
be
writing
to
enforceable
3. Parties to the loan

Parties:
1. Ship owner or ship agent
2. Owner of the cargo
3. Lender
4. Formalities needed
in
be

Commerce states that: Loans on
bottomry or respondentia may be
executed:
1. By means of a public instrument;
2. By means of a policy signed by
the contracting parties and the
broker taking part therein;
3. By means of a private
instrument.
Under whichever of these forms
the contract is executed, it shall be
entered in the certificate of the
registry of the vessel and shall be
recorded in the registry of vessels,
without which requisites the credits
of this kind shall not have, with
regard to other credits, the
preference which, according to
their nature, they should have,
although the obligation shall be
valid between the contracting
parties.
Formal Requirements: a. By
means of public instrument; b.
Policy signed by the contracting
parties and the broker taking part
therein; and c. by means of private
instrument.
Reason: Must be in writing to be
enforceable.
5. Effect of loss of on loan
actions pertaining to the lender
shall be extinguished by the
absolute loss of the goods on which
the loan was made, if it arose from
an accident of the sea at the time
and during the voyage designated
in the contract, and it is proven
that the cargo was on board; but
43

Transportation Law
this shall not take place if the loss
was caused by the inherent defect
of the thing, or through the fault or
malice, of the borrower, or barratry
on the part of the captain, or if it
was caused by damages suffered
by the vessel as a consequence of
being engaged in contraband, or if
it arose from having loaded the
merchandise on a vessel different
from that designated in the
contract, unless this change should
have been made by reason of force
majeure. Proof of the loss as well
as of the existence of the vessel of
the goods declared to the lender as
the object of the loan is incumbent
upon him who received the loan.
General Rule: If the property that
was collateral was loss, the loan is
extinguished.
Exceptions: 1. Perished due to
inherent defects; 2. Brought about
by malicious conduct of the
shipowner; 3. Barratry of the
captain; 4. Engaged in unlawful
transaction; and 5. The cargo
loaded on the vessel be different in
from that agreed upon.
*Commonality of all the exceptions
is that the borrower is at fault.
6. Cases where loan is regarded
as simple loan
a. The loan must be made in
connection with the maritime
transaction otherwise the loan
becomes a simple loan.
b. If the loan is bigger than the
value of the collateral, the loan
becomes a simple loan.
c. If the property is not exposed to
maritime peril.
Reason: To prevent abuse by the

borrower of the benefits of this
loan.
lender should prove that he loaned
as amount larger than the value of
the object liable for the bottomry
loan, on account of fraudulent
measures
employed
by
the
borrower, the loan shall be valid
only for the amount at which said
object is appraised by experts. The
surplus principal shall be returned
with legal interests for the entire
time required for repayment.
Commerce states that: If the full
amount of the loan contracted in
order to load the vessel should not
be used for the cargo, the balance
shall be returned before clearing.
The same procedure shall be
observed with regard to the goods
taken as loan, if they were not
loaded.
Commerce states that: The loan
which the captain takes at the
point of residence of the owners of
the vessel shall only affect that
part thereof which belongs to the
captain, if the other owners or their
agents should not have given their
express authorization therefor or
should not have taken part in the
transaction. If one or more of the
owners should be requested to
furnish the amount necessary to
repair or provision the vessel, and
they should not do so within 24
hours, the interest which the
44

Transportation Law
parties in default may have in the
vessel shall be liable for the loan in
the proper proportion. Outside of
the residence of the owners the
captain may contract loans in
accordance with the provisions of
Articles 583 and 611.
Commerce provides that: Should
the goods on which money is taken
not be subjected to risk, the
contract shall be considered a
simple loan, with the obligation on
the part of the borrower to return
the principal and interest at the
legal rate, if that agreed upon
should not be lower.
G. Averages
1. Concept
Commerce provides that: For the
purposes of this code the following
shall be considered averages: 1. All
extraordinary
or
accidental
expenses which may be incurred
during the voyage in order to
preserve the vessel, the cargo, or
both;
2.
Any
damages
or
deteriorations which the vessel
may suffer from the time it puts to
sea from the port of departure until
it casts anchor in the port of
destination, and those suffered by
the merchandise from the time
they are loaded in the port of
shipment until they are unloaded in
the port of their consignment.
2. Classes of average and the
persons liable
a. Simple average

Commerce provides that: As a
general
rule,
simple
or
particular averages shall include
all the expenses and damages
caused to the vessel or to her
cargo which have not inured to
the common benefit and profit
of all the persons interested in
the vessel and her cargo, and
especially the following:
1. The losses suffered by the
cargo from the time of its
embarkation
until
it
is
unloaded, either on account
of inherent defect of the
goods or by reason of an
accident of the sea or force
majeure, and the expenses
incurred to avoid and repair
the same;
2. The losses and expenses
suffered by the vessel in its
hull, rigging, arms, and
equipment, for the same
causes and reasons, from
the time it puts to sea from
the port of departure until it
anchors and lands in the
port of destination;
3. The losses suffered by the
merchandise
loaded
on
deck, except in coastwise
navigation, if the marine
ordinances allow it;
4. The wages and victuals of
the crew when the vessel is
detained or embargoed by
legitimate order or force
majeure, if the charter has
been contracted for a fixed
sum for the voyage;
45

Transportation Law
5. The necessary expenses on
arrival at a port, in order to
make repairs or secure
provisions;
6. The lowest value of the
goods sold by the captain in
arrivals under stress for the
payment of provisions and in
order to save the crew, or to
meet any other need of the
vessel, against which the
proper amount shall be
charged;
7. The victuals and wages of
the crew while the vessel is
in quarantine;
8. The loss inflicted upon the
vessel or cargo by reason of
an impact or collision with
another, if it is accidental
and unavoidable. If the
accident
should
occur
through
the
fault
or
negligence of the captain,
the latter shall be liable for
all the losses caused;
9. Any loss suffered by the
cargo through the fault,
negligence, or barratry of
the captain or of the crew,
without prejudice to the right
of the owner to recover the
corresponding
indemnity
from the captain, the vessel,
and the freightage.
General
Rule:
No
reimbursement
Principle: Loss will lie where it
falls
Reason: There was no common
benefit
Exception: if there is insurance
Exception to the Exception:

Stipulated in the insurance
policy stating no liability on the
part of the insurer regarding
particular average.
owner of the goods which gave
rise to the expense or suffered
the damage shall bear the
simple or particular averages.
Q: Who is liable?
A: Owner of the goods
b. General average
Commerce provides that: As a
general rule, general or gross
averages shall include all the
damages and expenses which
are deliberately caused in order
to save the vessel, its cargo, or
both at the same time, from a
real and known risk, and
particularly the following:
1. The goods or cash invested
in the redemption of the
vessel or of the cargo
captured
by
enemies,
privateers, or pirates, and
the provisions, wages, and
expenses of the vessel
detained during the time the
settlement or redemption is
being made;
2. The goods jettisoned to
lighten the vessel, whether
they belong to the cargo, to
the vessel, or to the crew,
and the damage suffered
through said act by the
goods which are kept on
board;
46

Transportation Law
3. The cables and masts which
are cut or rendered useless,
the anchors and the chains
which are abandoned, in
order to save the cargo, the
vessel, or both;
4. The expenses of removing or
transferring a portion of the
cargo in order to lighten the
vessel and place it in
condition to enter a port or
roadstead, and the damage
resulting therefrom to the
goods
removed
or
transferred;
5. The damage suffered by the
goods of the cargo by the
opening made in the vessel
in order to drain it and
prevent its sinking;
6. The expenses caused in
order to float a vessel
intentionally stranded for the
purpose of saving it;
7. The damage caused to the
vessel which had to be
opened, scuttled or broken in
order to save the cargo;
8. The
expenses
for
the
treatment and subsistence
of the members of the crew
who
may
have
been
wounded or crippled in
defending or saving the
vessel;
9. The wages of any member of
the crew held as hostage by
enemies,
privateers,
or
pirates, and the necessary
expenses which he may
incur in his imprisonment,
until he is returned to the
vessel or to his domicile,

should he prefer it;
10.The wages and victuals of
the crew
of a vessel
chartered by the month,
during the time that it is
embargoed or detained by
force majeure or by order of
the government, or in order
to repair the damage caused
for the common benefit;
11.The depreciation resulting in
the value of the goods sold
at arrival under stress in
order to repair the vessel by
reason of gross average;
12.The
expenses
of
the
liquidation of the average.
order to satisfy the amount of
the gross or general averages,
all the persons having an
interest in the vessel and cargo
therein at the time of the
occurrence of the average shall
contribute.
order to incur the expenses and
cause
the
damages
corresponding to gross average,
there must be a resolution of
the captain, adopted after
deliberation with the sailing
mate and other officers of the
vessel, and after hearing the
persons interested in the cargo
who may be present. If the
latter shall object, and the
captain and officers or a
majority of them, or the captain,
47

Transportation Law
if opposed to the majority,
should
consider
certain
measures necessary, they may
be
executed
under
his
responsibility, without prejudice
to the right of the shippers to
proceed against the captain
before the competent judge or
court, if they can prove that he
acted with malice, lack of skill,
or negligence. If the persons
interested in the cargo, being
on board the vessel, have not
been heard, they shall not
contribute to the gross average,
their share being chargeable
against the captain, unless the
urgency of the case should be
such that the time necessary for
previous
deliberations
was
wanting.
Commerce states that: In
order that the goods jettisoned
may be included in the gross
average and the owners thereof
be entitled to indemnity, it shall
be necessary insofar as the
cargo is concerned that their
existence on board be proven
by means of the bill of lading;
and with regard to those
belonging to the vessel, by
means
of
the
inventory
prepared before the departure
in accordance with the first
paragraph of Article 812.
Commerce states that: if in
lightning a vessel on account of
a storm, in order to facilitate its
entry into a port or roadstead,
part of the cargo should be

transferred to lighters or barges
and be lost, the owner of said
part shall be entitled to
indemnity, as if the loss had
originated
from
a
gross
average, the amount thereof
being distributed between the
vessel and cargo from which it
came. If, on the contrary, the
merchandise transferred should
be saved and the vessel should
be lost, no liability may be
demanded of the salvage.
Commerce states that: If, as a
necessary
measure
to
extinguish a fire in port,
roadstead, creek, or bay, it
should be decided to sink any
vessel, this loss shall be
considered gross average, to
which the vessels saved shall
contribute.
Commerce
provides
that:
Lenders
on
bottomry
or
respondentia shall suffer, in
proportion to their respective
interest, the general average
which may take place in the
goods on which the loan is
made. In particular averages, in
the absence of an express
agreement
between
the
contracting parties, the lender
on bottomry or respondentia
shall
also
contribute
in
proportion to his respective
interest, should it not belong to
the kind of risks excepted in the
foregoing article.
48

Transportation Law
insurers of the vessel of the
freightage, and of the cargo
shall be obliged to pay for the
indemnification of the gross
average, insofar as is required
of each one of these objects
respectively.
Commerce provides that: If,
notwithstanding the jettison of
merchandise,
breakage
of
masts, ropes, and equipment,
the vessel should be lost
running the same risk, no
contribution
whatsoever
by
reason of gross average shall be
proper. The owners of the goods
saved shall not be liable for the
indemnification
of
those
jettisoned, lost, or damaged.
Commerce provides that: If,
after the vessel has been saved
from the risk which gave rise to
the jettison, it should be lost
through another accident taking
place during the voyage, the
goods saved and existing from
the first risk shall continue liable
to contribution by reason of the
gross average according to their
value in the condition in which
they may be found, deducting
the expenses incurred in saving
them.
Remedy: Reimbursement
General Rule: The sacrifice
made must be in the course of
the voyage.
Exceptions: General average

exists even if there is no voyage
yet: 1. Article 817 of the Code
of Commerce which covers fire
in the port; and 2. Article 818 of
the Code of Commerce which
covers transfer of cargo to
another vessel for the necessity
to enter another port.
Requisites:
1. Exposure to common danger
to ship and the cargo after it
has been loaded whether
during voyage or port of
loading and unloading;
2. That for the common safety
part of the vessel or the
cargo or both is sacrificed
deliberately;
3. That from the expenses or
damages caused follows the
successful saving of the
vessel and cargo;
4. That
the
expenses
or
damages should have been
incurred or inflicted after
taking
legal
steps
and
authority
Formalities:
1. There must be a resolution
of the captain, adopted after
a deliberation with the other
officers of the vessel and
after hearing all persons
interested in the cargoes. If
the latter disagree, the
decision of the captain
should prevail but they shall
register their objections.
2. The resolution must be
entered in the logbook,
stating the reasons and
49

Transportation Law
motives for the dissent, and
the irresistible and urgent
causes if he acted in his own
accord. It must be signed, in
the first case, by all persons
present in the hearing. In the
second case, by the captain
and all the officers of the
vessel. The minutes must
also contain a detail of all
the goods jettisoned and
those injuries caused to
those on board.
H. Collisions
1. Definition
Collision is an impact of two
vessels both of which are moving.
Allision is an impact between a
moving vessel and a stationary
one.
Possible damage:
a. Damage to vessel
b. Loss/damage to cargo
c. Injury or death of passenger
Example:
Q: A and B collided, A was found to
be negligent, who bears the
consequential damages?
A: A shall be liable for the
consequential damages for she is
at fault.
Q: What if A and B were found to
be negligent, who bears the
consequential damages?
A: With regard to the vessel, each
vessel shall be liable for their own
losses. With regard to the cargoes
and passengers, they are solidarily
liable.
2. Zones in collision (Doctrine of
error in extremis)
*Knowing
these
zones
are
important for liability purposes.
1. First zone all time up to the
moment when risk of collision
begins
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.
Doctrine of Error in Extremis is
a sudden movement made by a
faultless vessel during the third
zone of collision with another
vessel which is at fault during the
second zone. Even if such sudden
movement
is
wrong,
no
responsibility will fall on said
faultless vessel.
Doctrine of Last Clear Chance
provides
that
a
negligent
defendant is held liable to a
negligent plaintiff or even to a
plaintiff who has been grossly
negligent where he should have
been aware of it in the reasonable
exercise of due care, had in fact an
opportunity later than that of the
plaintiff to avoid an accident.
50

Transportation Law
*In this doctrine, both parties are at
fault but only one party is liable.
Only the party who has the last
clear opportunity to avoid the
impact is held liable.
*This doctrine is inapplicable in the
following instances:
1. If the suit is between a parties of
contract of carriage; and
2. In case of collision of vessels
3. Rule on liability
vessel should collide with another,
through the fault, negligence, or
lack of skill of the captain, sailing
mate, or any other member of the
complement, the owner of the
vessel at fault shall indemnify the
losses and damages suffered, after
an expert appraisal.
Commerce provides that: If the
collision is imputable to both
vessels, each one shall suffer its
own damages, and both shall be
solidarily responsible for the losses
and damages occasioned to their
cargoes.
*This is known as the Doctrine of
Inscrutable Fault.
Doctrine of Inscrutable Fault
provides that 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.
provisions of the preceding article

are applicable to the use in which it
cannot be determined which of the
two vessels has caused the
collision.
Commerce states that: In the
cases above mentioned the civil
action of the owner against the
person causing the injury as well as
the criminal liabilities, which may
be proper, are reserved.
Commerce states that: If a vessel
should
collide
with
another,
through fortuitous event or force
majeure, each vessel and its cargo
shall bear its own damages.
Requisites:
1. The natural disaster must have
cause of the loss;
2. The common carrier must have
exercised due diligence to
prevent or minimize loss before,
during and after the occurrence
of the natural disaster;
3. The common carrier must not
have been guilty of delay; and
4. The captain must have made a
protest before the competent
authority at the first port he
touched within the 24 hours
following his arrival, and should
have ratified it within the same
period when he arrived at the
port of destination, proceeding
immediately with the proof of
the facts, without opening the
hatches until after this has been
done.
51

Transportation Law
vessel should be forced by a third
vessel to collide with another, the
owner of the third vessel shall
indemnify the losses and damages
caused, the captain thereof being
civilly liable to said owner.
*This is known as the Doctrine of
Proximate Cause
Commerce states that: If by
reason of a storm or other cause of
force majeure, a vessel which is
properly anchored and moored
should collide with those nearby,
causing them damages, the injury
occasioned shall be considered as
particular average of the vessel run
into.
4. Limited liability rule
*There must be no fault on the part
of the shipowner.
*The fault falls only with his crew.
Commerce states that: The civil
liability incurred by the shipowners
in the case prescribed in this
section, shall be understood as
limited to the value of the vessel
with all its appurtenances and
freightage.
I. Arrival under stress
1. Concept
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.
during the voyage the captain

should believe that the vessel can
not continue the trip to the port of
destination on account of the lack
provisions, well founded fear of
seizure, privateers, or pirates, or by
reason of any accident of the sea
disabling it to navigate, he shall
assemble the officers and shall
summon the persons interested in
the cargo who may be present, and
who may attend the meeting
without the right to vote; and if,
after examining the circumstances
of the case, the reason should be
considered
well-founded,
the
arrival at the nearest and most
convenient port shall be agreed
upon, drafting and entering the
proper minutes, which shall be
signed by all, in the log book. The
captain shall have the deciding
vote, and the persons interested in
the
cargo,
may
make
the
objections and protests they may
deem proper, which shall be
entered in the minutes in order
that they may make use thereof in
the manner they may consider
advisable.
2. When improper
Commerce provides that: An
arrival shall not be considered
lawful in the following cases:
1. If the lack of provisions should
arise from the failure to take the
necessary provisions for the
voyage according to usage and
customs, or if they should have
been rendered useless or lost
52

Transportation Law
through
bad
stowage
or
negligence in their care;
2. If
the
risk
of
enemies,
privateers, or pirates should not
have
been
well
known,
manifest, and based on positive
and provable facts;
3. If the defect of the vessel
should have arisen from the fact
that it was not repaired, rigged,
equipped, and prepared in a
manner suitable for the voyage,
or from some erroneous order of
the captain;
4. When malice, negligence, want
of foresight, or lack of skill on
the part of the captain exists in
the act causing the damage.
3. Expenses
expenses of an arrival under stress
shall always be for the account of
the shipowner or agent, but they
shall not be liable for the damages
which may be caused the shippers
by reason of the arrival, provided
the latter is legitimate. Otherwise,
the ship agent and the captain
shall be jointly liable.
Commerce provides that: If in
order to make repairs to the vessel
or because there is danger that the
cargo may suffer, it should be
necessary to unload, the captain
must request the authorization
from the competent judge or court
for the removal, and carry it out
with the knowledge of the person
interested in the cargo, or his
representative, should there be
any. In a foreign port, it shall be the

duty of the Philippine Consul,
where there is one, to give the
authorization. In the first case, the
expenses shall be for the account
of the ship agent or owner, and in
the
second,
they
shall
be
chargeable against the owners of
the merchandise for whose benefit
the act was performed. If the
unloading should take place for
both reasons, the expenses shall
be divided proportionately between
the value of the vessel and that of
the cargo.
4. Custody of Cargo
custody and preservation of the
cargo which has been unloaded
shall be intrusted to the captain,
who shall be responsible for the
same, except in cases of force
majeure.
entire cargo or part thereof should
appear to be damaged, or there
should be imminent danger of its
being damaged, the captain may
request of the competent judge or
court, or of the consul in a proper
case, the sale of all or of part of the
former, and the person taking
cognizance of the matter shall
authorize it, after an examination
and
declaration
of
experts,
advertisements,
and
other
formalities required by the case,
and an entry in the book, in
accordance with the provisions of
Article 624. The captain shall, in
53

Transportation Law
proper case, justify the legality of
his conduct, under the penalty of
answering to the shipper for the
price the merchandise would have
brought if they had arrived in good
condition
at
the
port
of
destination.
5. Captains liability
captain shall be responsible for the
damages caused by his delay, if
after the cause of the arrival under
stress has ceased, he should not
continue the voyage. If the cause
of arrival should have been the fear
of enemies, privateers, or pirates, a
deliberation and resolution in a
meeting of the officers of the
vessel and persons interested in
the cargo who may be present, in
accordance with the provisions
contained in Article 819, shall
precede the departure.
6. Rules in case of shipwreck
Shipwreck denotes all types of
loss/ wreck of a vessel at sea either
by being swallowed up by the
waves, by running against another
vessel or thing at sea or on coast
where the vessel is rendered
incapable of navigation.
losses and deteriorations by a
vessel and her cargo by reason of
shipwreck or stranding shall be
individually for the account of the
owners, the part which may be
saved belonging to them in the
same proportion.

wreck or stranding should be
caused by the malice, negligence,
or lack of skill of the captain, or
because the vessel put to sea was
insufficiently
repaired
and
equipped, the ship agent or the
shippers may demand indemnity of
the captain for the damages
caused to the vessel or to the
cargo
by
the
accident,
in
accordance with the provisions
contained in Articles 610, 612, 614,
and 621.
goods saved from the wreck shall
be specially bound for the payment
of the expenses of the respective
salvage, and the amount thereof
must be paid by the owners of the
former before they are delivered to
them, and with preference over
any
other
obligation
if
the
merchandise should be sold.
Commerce states that: If several
vessels sail under convoy, and any
of them should be wrecked, the
cargo saved shall be distributed
among the rest in proportion to the
amount which each one is able to
take. If any captain should refuse,
without sufficient cause, to receive
what may correspond to him, the
captain of the wrecked vessel shall
enter a protest against him, before
two sea officials, of the losses and
damages
resulting
therefrom,
ratifying the protest within 24
hours after arrival at the first port,
54

Transportation Law
and including it in the proceedings
he must institute in accordance
with the provisions contained in
Article 612. If it is not possible to
transfer to the other vessels the
entire cargo of the vessel wrecked,
the goods of the highest value and
smallest volume shall be saved
first, the designation thereof to be
made by the captain with the
concurrence of the officers of his
vessel.
Commerce provides that: A
captain who may have taken on
board the goods saved from the
wreck shall continue his course to
the port of destination, and on
arrival shall deposit the same, with
judicial intervention, at the disposal
of their legitimate owners. In case
he changes his course, if he can
unload them at the port of which
they were consigned, the captain
may make said port if the shippers
or supercargoes present and the
officers and passengers of the
vessel consent thereto; but he may
not do so, even with said consent,
in time of war or when the port is
difficult and dangerous to make.
The owners of the cargo shall
defray all the expenses of this
arrival as well as the payment of
the freightage which, after taking
into
consideration
the
circumstances of the case, may be
fixed by agreement or by a judicial
decision.
Commerce provides that: If on
the vessel there should be no
person interested in the cargo who

can
pay
the
expenses
and
freightage corresponding to the
salvage, the competent judge or
court may order the sale of the part
necessary to cover the same. This
shall also be done when its
preservation is dangerous, or when
in a period of one year it should not
have been possible to ascertain
who are its legitimate owners. In
both cases the proceedings shall
be
with
the
publicity
and
formalities prescribed in Article
579, and the net proceeds of the
sale shall be safely deposited, in
the discretion of the judge or court,
so that they may be delivered to
the legitimate owner thereof.
*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.
*The rules on collision or allusion,
as may be pertinent, can equally
apply to shipwrecks.
J. Salvage
1. Definition
Salvage - 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 an impending
or
actual
peril,
shipwrecks,
derelicts or recapture
- Services one person render to the
owner of a ship or goods, by his
own labor, preserving the goods or
55

Transportation Law
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.
2. Rights
and
obligations
of
salvors and owners (Salvage
Law)
Salvors
Entitled
to
compensation
for
services
rendered
Acquires a lien
upon
the
property
salvaged
until
he
is
compensated
To all intents
and
purposes,
he is a joint
owner and if the
property is lost
he must bear his
share
Acquires
the
right
of
possession
of
derelict
for
purposes of a
salvage claim
Entitled to half
of the deposit of
the derelict sold,
if after the lapse
of 3 years no
claim was made
WARSAW CONVENTION:
Owners
He
does
not
renounce
his
right
to
the
derelict
Has a right to
the delivery of
the vessel or
things
saved
after the salvage
is accomplished,
provided
he
pays or gives a
bond
Should make a
claim within 3
months after the
publication of a
salvage report,
otherwise
the
thing saved shall
be sold
Entitled to the
salvage reward
for the use of his
vessel
in
rendering
salvage services
Warsaw Convention is an agreement

among sovereign countries concerning the
regulation in a uniform manner of the
conditions of international transportation by
air in respect of the documents used for such
transportation and of the liability of the
carrier.
Signed on October 12, 1929 in
Warsaw, Poland.
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
3. Carriage of passengers, baggage or
goods
*The Warsaw Convention shall also apply to
fortuitous events affecting transportation by
aircraft performed by an air transportation
enterprise.
*The Convention is likewise applicable to air
transportation by legal entities constituted
under public law of the High Contracting
Parties.
*The Convention does not apply to
transportation performed under the terms of
any international postal convention.
International
Transportation
is
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 transhipment; or
Controlling: Two territories must be
High Contracting Parties
*Also called as one way ticket
2. Within the territory of a single High
Contracting Parties, if there is an
agreed stopping place within a
56

Transportation Law
territory subject to the sovereignty,
mandate or authority of another
power, even though that power is not
a party to the Convention.
Controlling: There must be a
stopping place in another territory.
*Also called as round trip ticket.
High Contracting Party is one of the
original parties to the convention.
When inapplicable:
1. When public policy is contradicted;
2. If
the
requirement
under
the
Convention are not complied with
Transportation Documents:
a. Passenger passenger ticket
b. Checked-in baggage baggage check
c. Goods to be shipped airway bill
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;
2. Destruction, loss or damage to any
baggage or goods, if it took place
during the transportation by air; and
3. Delay
in
the
transportation
of
passengers, baggage or goods.
Limit of Liability:
1. Passenger:
In case of death or injury, general
rule: 100,000 STR per passenger
*1.51 US Dollar
Exception: Agreement to a higher
limit
In case of delay, 4150 STR per
passenger
2. Checked in baggage:
General Rule: 20 STR 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 STR per
passenger
4. Goods to be shipped:
General Rule: 17 STR 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.
Action for damages:
1. Notice of claim
*A written complaint must be made
within: 3 days from receipt of
baggage; 7 days from receipt of
goods; 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.
2. Prescriptive period
*Action must be filed within 2 years
from:
a. The date of arrival at the
destination
*An
intermediate
place
where carriage may be
broken is not a place of
destination.
b. The date of expected arrival
c. The date on which the
transportation stopped
Venue:
At the option of the plaintiff, the action for
damages may be filed in the:
1. Court of domicile of the carrier;
2. Court of its principal place of business;
3. Court where it has a place of business
through which the contract has been
made; or
57

Transportation Law
4. Court of the place of destination.
*In Santos III v Northwest Airline, the SC
held that the forum of action is a matter of
jurisdiction rather than of venue.
58

Transportation Law

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repair shop, wharf or dock, ice plant,

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1. Land Transportation Franchising

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*Importance: For liability purposes

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liable to the injured party subject to

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found at the time they were

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an act of the public enemy

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recovered by the owner or shipper

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*Even if they agreed with regard

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ix. Failure to tender goods on

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Article 371 of the Code of

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have incurred by their own

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of delivery without prejudice to

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passenger has, after reaching his

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the common carrier's employees

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loss arises from the character of the

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3. improper loading when he assumed

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*Liability for demurrage exists only

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Sec. 116 of the IC

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shall be reimbursed for such

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of the perils involved in air travel

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*Not provided by Article 366 of

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compensatory damages, may be

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whether or not exemplary damages

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Commercial Law Review

and its cargo are totally lost by

Commercial Law Review

watercrafts of less than 3 tons

Commercial Law Review

record sheet of the vessel in the

Commercial Law Review

one, or, where there is none, to

Commercial Law Review

on the vessel; but he may exempt

Commercial Law Review

Commercial Law Review

general, in all that relate to the