TRANSPORTATION LAW

CONTRACT OF TRANSPORTATION
There is a contract of transportation when a person obligates himself to transport persons or property
from one place to another for a consideration

➢ Contract of Carriage
o Goods
▪ Carrier
▪ Shipper
o Passenger
▪ Carrier
▪ Passenger

➢ Carrier (person who obligates)

o Common
o Private

CARRIAGE OF PASSENGERS
PASSENGER

A passenger is defined as one who travels in a public conveyance by virtue of a contract, express or
implied, with the carrier, subject to payment of fare or equivalent thereof (Vda. De Nueca v. The Manila
Railroad Company).

Gratuitous or reduced fare

➢ A person is still considered a passenger even if he is carried gratuitously or under a reduced fare
➢ A stipulation limiting the carrier’s liability for negligence is valid (Art. 1758, Civil Code)

Jesusavda De Nueca v. The Manila Railroad Company – Definition of passenger

➢ Person must have 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.

Baliwag Transit Corporation v. Court of Appeals

✓ Release of claim is valid

✓ In a contract of carriage, the real party-in-interest was the injured passenger
✓ Passenger has the contractual right

Sps. Fabre v. Court of Appeals

➢ Breach of the provisions of the agreement will entitle one party to file an action against the
other
➢ Whether or not there is written agreement, the carrier owes a duty of extraordinary diligence
directly to the passengers

CARRIAGE OF GOODS
The parties are the shipper and the carrier.

Shipper
✓ The person who delivers the goods to the carrier for transportation
✓ The person who pays for the consideration or on whose behalf payment is made

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Consignee
✓ The person to whom the goods are delivered
✓ May be the shipper himself (other branch) or a third person (not a party to the contract)

When a consignee is bound by Contract

➢ Where it is established that he accepted the terms and conditions of the bill of lading and is
trying to enforce the agreement (Everett Steamship Corporation v. Court of Appeals)
➢ If it is stipulated in the agreement

MOF Company Inc. v. Shin Yang

A consignee becomes a party by reason of either:

a) Relationship of agency between the consignee and consignor/shipper

b) Unequivocal acceptance of the bill of lading delivered to the consignee with full knowledge of its
content
c) Availment of the stipulation pour autrui

PERFECTION CONTRACT OF CARRIAGE

British Airways v. Court of Appeals – Two Types of Contract of Carriage of passengers

1) Contract to Carry
a. Agreement to carry passengers at some future time
b. Consensual, thus perfected by mere consent

2) Contract of Carriage – common carriage

a. Considered a real contract for not until the facilities of the carrier are actually used can
the carried be said to have already assumed the obligation

➢ Even if NO TICKETS were ISSUED, a verbal contract to carry is already binding

➢ Airfare tickets were already paid!

PERFECTION CONTRACT OF GOODS

The liability of the carrier as common carrier begins with the actual delivery of the goods for
transportation, and not merely with the formal execution of a receipt or bill of lading

Mauro Ganzon v. Court of Appeals – When contract of carriage of goods is perfected

➢ By the act of delivery, that is, when the goods are unconditionally placed in the possession and
control of the carrier and upon their receipt by carrier for transportation.
➢ Nothing remains to be done by the shipper

NOTE: If no goods are actually received, there can be no contract of cariage

CompaniaMaritima v. Insurance Company of North America

➢ Preparatory steps are part and parcel of a contract of carriage

Bill of lading
✓ is not essential to the contract
✓ A documentary proof of the stipulations and conditions agreed upon by the parties

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Korean Airlines Co. Ltd v. Court of Appeals – contract of carriage perfected

If it can be shown that passenger had already checked in at the departure counter, passed through
customs and immigration, boarded the shuttle bus and proceeded to the ramp of the aircraft

Dangwa Transportation Co., Inc v. Court of Appeals – continuing offer rule

➢ When a public utility vehicle stops, it is in effect making a continuing offer to bus riders

COMMON CARRIER

✓ Article 1732, Civil Code. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or both, by land, water, or air, for
compensation, offering their service to the public.
o Section 13 of the Public Service Act partially supplements the law

✓ 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 (De Guzman v. Court of Appeals)

First Philippine Industrial Corporation v. Court of Appeals

➢ Test of Common Carrier (4 items)

1) He must be engaged in the business of carrying goods for others as a public
employment (generally as business) and not as a casual occupation
2) He must undertake to carry the goods of the kind to which his business is confined
3) He must undertake to carry the goods by the method by which his business
conducted and over his established roads
4) The transportation must be for hire

National Steel Corporation

Carriage of goods or passengers, provided it has space for all who opt to avail themselves of its
transportation for a fee.

The United States v. Tan Piaco

✓ The passengers or the owners of the freight controlled the whole vehicles as to
content,direction, and time of use, which facts, under all circumstances of the case, would take
away the defendant’s business from the concept of public utility

What is public use?

➢ Means the same as use by the public

➢ Not synonymous with public interest
➢ It is not confined to privileged individuals but is open to the indefinite public (the quality that
gives the public character)
o Character of the business + mode of doing it must be considered
➢ Not public if:
o Use is optional by the owner
o Public benefit is incidental
➢ True criterion:
o Public may enjoy it by right or by permission

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Bascos v. Court of Appeals

✓ Whether the given undertaking is part of the business engaged in by the carrier which he has
held out to the general public as his occupation rather than the quantity or extent of the
business transacted (Common Carrier Test, Sps. Perena v. Sps. Nicolas)

✓ As long as a person or corporation holds itself to the public for the purpose of transporting
goods as business, it is already considered a COMMON CARRIER; regardless whether he owns
the vehicle or has to actually hire one (Westwind Shipping Corporation v.UCPB).

Sps. Perena v. Sps. Nicolas

✓ If the undertaking is a single transaction and not part of the general business or occupation
engaged in as advertised and held out to the public, the individual or entity is a private carrier,
not a common carrier

✓ They are a common carrier because they held themselves out as a ready transportation
indiscriminately to the students of a particular school living within or near where they operated
the service for a fee

Sps. Cruz v. Sun Holidays Inc.

➢ Owners of Tour package contracts that includes transportation to and from the Resort are
common carriers
➢ Ferry services are so intertwined with its main business and not merely ancillary
➢ Constancy of ferry services is underscored by its having its own boats.

Characteristics of Common Carrier

1) No distinction between principal and ancillary business activity

2) No distinction between regular, scheduled or occasional, non-scheduled basis
3) No distinction between general public or narrow segment of the general population
4) Common carrier has the obligation of a common carrier even if no certificate of public
convenience
5) No distinction as to the means of transportation
6) CC does not provide that the transportation should be motor vehicle
7) Common carrier even if no fixed or publicly known route, maintains no terminals, and issues no
tickets
8) Not necessarily engaged in the business of transportation in order for the provisions of the civil
code to apply
9) Common carrier even if he does not own a vehicle or vessel

De Guzman v. Court of Appeals

✓ Common carrier even if transportation business is secondary to the main business of buying and
selling used bottles
✓ Respondent charged freights lower than commercial rates

Luzon Stevedoring Co., Inc. v. The Public Service Commission

✓ Although clientele is limited, the regularity of the activities may indicate that the person or
entity is a common carrier
✓ A public utility may not evade control and supervision of its operation by the government by
selecting its customers under the guise of private transactions
✓ An enterprise is a public service if conducted for hire or compensation even if the operator deals
only with a portion of the public or limited clientele

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Luzon Brokerage Company v. The Public Service Commission

✓ Public Service is that which is rendered for compensation, although limited exclusively the
customers of the petitioner and not to the public at large

Westwind Shipping Corporation v. UCPB General Insurance Co., Inc.

➢ Custom brokers are common carriers because transportation of goods is an integral part of their
business

VirginesCalvo v. UCPB General Insurance Co., Inc.

➢ As a common carrier, she is bound to exercise extraordinary diligence in transporting the goods
➢ He is presumed negligent when he failed to deliver the same

Philippine American General Insurance Company, et al v. PKS Shipping Company

➢ PKS is a common carrier because it is engaged in the business of carrying goods for a fee
➢ The regularities of its activities in the area indicates more than just casual activities on its part

Asia Lighterage and Shipping, Inc. v. Court of Appeals

➢ Considered a common carrier whether its business of carrying goods is done on an irregular
basis rather than on a scheduled manner and with a limited clientele
➢ Need not have a fixed and publicly known route nor does it have to maintain terminals or issue
no tickets

Saltis v. A.B.B. Daimler Benz

✓ Airport Shuttle Train is considered a public transportation

✓ It has the duty of extraordinary care on such public conveyances
✓ Public pays indirectly through airport fees
✓ Payment is made directly by the airport agency
✓ Even if not a common carrier under the Civil code, the nature of the business requires the
highest degree of diligence because the lives of the passengers are at stake.

First Philippine Industrial Corp. v. Court of Appeals

➢ Pipeline operators are common carriers that are subject to business taxes on common carriers
➢ Common carriers even if the oil or petroleum are transported not through motor vehicles but
through pipelines
➢ Civil code makes no distinction as to the means of transporting, as long as it is by land, air, water

NOT A COMMON CARRIER BY LAW

✓ Foreign vessels engaging in carriage conducted in accordance with Section 7, R.A. No. 10668,
shall not be considered common carriers under the new Civil Code

EFFECT OF A CHARTER PARTY

A charter party may transform a common carrier into a private carrier However, it must:

✓ Be a bareboat or a demise charter where the charterer mans the vessel with his own people and
becomes in effect the owner for the voyage or service stipulated (Caltex Philippines v. Sulpicio
Lines)

NOTE: The common carrier IS NOT transformed into a private carrier if the charter party is a
CONTRACT OF AFFREIGHTMENT like a voyage charter or a time charter.

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✓ In a voyage charter, the carrier is answerable to the loss of the goods received for transportation

Planters Products, Inc. v. Court of Appeals

What is a Charter Party

A contract by which an entire ship or some principal part thereof is let by the owner to another person
for a specified time or use

1) Contract of Affreightment
a. By which the owner of a ship or other vessel lets the whole or part of her to a merchant
or other person for the conveyance of goods on a particular voyage, in consideration of
the payment of freight
b. Involves the use of shipping space leased by the owner in part or as a whole to carry
goods for others;
c. May either be time or voyage charter
i. Time – leased for a fixed period of time
ii. Voyage – leased for a single or consecutive voyage

2) Bareboat or Demise
a. By the terms of which the whole vessel is let to the charterer with a transfer to his of its
entire command and possession and consequent control over its navigation, including
the master and crew, who are his servants
b. It is only when the charter involves both the vessel and its crew as in a demise or
bareboat charter that a common carrier becomes private

IMPORTANT: The DISTINCTION between a common carrier and a private carrier lies in the character of
the business such that if the undertaking is a single transaction, not part of the general business or
occupation, although involving carriage of goods for a fee, the person or corporation is a PRIVATE
CARRIER

Common Carrier

➢ Article 1733 mandates that they exercise extraordinary diligence by reason of the nature of their
business
➢ In case of loss, destruction or deterioration of the goods, they are presumed to have been at
fault or to have acted negligently
➢ The burden of proving otherwise rests on them

Private Carrier

✓ Ordinary diligence will suffice

✓ No presumption of negligence
✓ Onus rests on the party alleging damage or negligence

Slot or Space Charter Agreement (Philam Insurance Company, Inc. v. Heung-A Shipping Corporation)

✓ In the nature of a contract of affreightment

✓ Only allowed the shipper to load its cargo for a certain specified space

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TOWAGE

• One vessel is hired to bring another vessel to another place

• A tugboat may be hired by a common carrier to bring a barge to a port
• In maritime law, it refers to the service rendered to a vessel by towing for the mere purpose of
expediting her voyage without reference to any circumstances of danger
• It is confined to vessels that have received no injury or damage

ARRASTRE

✓ Spanish word which means hauling of cargo

✓ Comprehends the hauling of cargo on the wharf or between the establishment of the consignee
or shipper and the ship’s tackle
✓ Responsibility of the Arrastre operator lasts until the delivery of the cargo to the consignee
✓ Longshoremen usually perform the service
✓ It is the duty of the operator to take good care of the goods and turn over to the party entitled
to their possession

STEVEDORING

✓ Involves the loading and unloading of coastwise vessels calling at the port (Cebu Arrastre Service
v. Collector of Internal Revenue)
✓ From the Latin word “stipare” meaning “to Stuff”
✓ Spanish escribador, Portuguese Estivador
o Means “a man who stuffs in the sense of a man who loads ships”
✓ The handling of cargo in the holds of the vessel or between the ship’s tackle and the holds of
the vessel
✓ Responsibility ends upon the loading and stowing of the cargo in the vessel
✓ Ordinary diligence is required
✓ Not a common carrier for it does not transport goods or passengers
✓ Mainly provides labor in loading and stowing of cargoes for clients

TRAVEL AGENCY

➢ Not a common carrier

➢ The object of contract is the agency’s service of arranging and facilitating the booking, ticketing
and accommodation of a package tour
➢ In a contract of carriage, the object is transportation
➢ Contract of service not a contract of carriage
➢ Ordinary diligence required (Art. 1173, Civil Code)

CARGO OPERATION

Line Service

✓ RA 9515 defines it as the operation of a common carrier which publicly offers services without
discrimination to any user, has regular ports of call or destination, fixed sailing schedules and
frequencies and published freight rates and attendant charges and usually carries multiple
consignments
✓ Liners carry general cargoes.
✓ Line service is a common carrier

Tramp Service

✓ The operation of a contract carrier which has no regular and fixed routes and schedules but
accepts cargo whenever and wherever the shipper desires
✓ Hired on a contractual basis or chartered by anyone or few shippers under mutually agreed
terms and usually carries bulk or break bulk cargoes

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✓ Referred to as a contract carrier, but may become a common carrier under certain
circumstances

GOVERNING LAWS
Article 1766, Civil Code. In all matters not regulated by this Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and by Special Laws

Code of Commerce
• Articles 826 to 839, Book III of the Code

Special laws
• Carriage of Goods by Sea Act

Article 1753, Civil Code. The law of the country to which the goods are to be transported shall govern
the liability of the carrier for their loss, destruction or deterioration.

Warsaw Convention (Convention for the Unification of Certain Rules Relating to the International
Carriage by Air

1) The place of departure and the place of destination are within the territories of two
contracting countries regardless of whether or not there was a break in the transportation or
transhipment

2) The place of departure and the place of destination are within the territory of a single
contracting country if there is an agreed stopping place within a territory subject to the
sovereignty, mandate or authority of another power, even though the power is not a party to
the Convention

SUMMARY OF RULES
A. Coastwise Shipping

1) Civil Code (1732 – 1766) – Primary

2) Code of Commerce – Suppletory

B. Carriage from Foreign Ports to Philippine Ports

1) Civil Code – Primary

2) Code of Commerce – Suppletory
3) Carriage of Goods by Sea Act

C. Carriage from Philippine Ports to Foreign Ports

1) Law of the Country to which the goods are to be transported

D. Overland Transportation

1) Civil Code – Primary

2) Code of Commerce – Suppletory

E. Air Transportation

1) Civil Code – Primary

2) Code of Commerce – Suppletory
3) Warsaw Convention
a. For international Carriage
b. Primary law under R.A. 10668

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