LAW ON TRANSPORTATION AND PUBLIC UTILITIES

CHAPTER 1
GENERAL CONCEPTS

I. DEFINITION AND CONCEPTS

A. Contract of Transportation

There is a contract of transportation where a person obligates himself to transport persons or property
from one place to another for consideration.

B. Parties
a. Carriage of Passengers
The parties in a contract of carriage of passengers are the common carrier and the passenger.
Passenger – is one who travels in a public conveyance by virtue of a contract, express or implied, with
the carrier as to the payment of fare or that which is accepted as an equivalent thereof.
b. Carriage of Goods
When the contract is for the carriage of goods, the parties are the shipper and carrier.
Shipper – is the person who delivers the goods to the carrier for transportation. He pays the
consideration or on whose behalf payment is made.
Consignee – is the person to whom the goods are to be delivered. He may be the shipper himself or may
be a third person who is not actually a party to the contract.
Nevertheless, there are instances when the third party consignee is bound by the agreement between
the shipper and the carrier.

C. Perfection
There are two types of contracts of carriage of passengers:
1. Contract to Carry – an agreement to carry the passenger at some future time. This contract is
consensual and is therefore perfected by mere consent.
2. Contract of Carriage or of Common Carriage Itself – considered as the real contract for not until the
facilities of the carrier are actually used can the carrier be said to have already assumed the obligation of
the carriage.
a. Aircraft

There is a perfected contract to carry passengers even if no tickets have been issued to said passengers
so long as there was already a meeting of minds with respect to the subject matter and the
consideration.
There is a perfected contract of carriage between a passenger and an airline if it was established that
the passenger had checked in at the departure counter, passed through customs and immigration,
boarded the shuttle bus and proceeded to the ramp of the aircraft.

b. Buses, Jeepneys, and Street Cars

With respect to buses, jeepneys, or street cars, the Supreme Court explained in one case that once a
public utility bus (or jeepney) stops, it is in effect making a continuous offer to bus riders. Hence, it is the
duty of the drivers to stop their conveyances for a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from sudden starting up of the carrier. It follows that the passenger is deemed to
be accepting the offer if he is already attempting to board the conveyances and the contract of carriage
is perfected from that point.

c. Trains

A person who wants to board a train in a railway station must purchase a ticket and must present
himself at the proper place and in a proper manner to be transported. If he does not do so, he will not
be considered a passenger.

II. CARRIER

Article 1732. 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.

The concept of “common carrier” under 1732 may be seen to coincide neatly with the notion of “public
service” under the Public Service Act.

a. Tests

1. He must be engaged in the business of carrying goods for others as a public employment xxxx not as a
casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry goods of the kind to kind to which his business is conducted and over his
established roads; and
4. The transportation must be for hire.
b. Characteristics

The concept of common carriers contemplated under the Public Service Act results in the application of
the following rules or principles:
III. DISTINGUISHED FROM PRIVATE CARRIER

The distinction between a “common or public carrier” and a private or special carrier lies in the
character of the business, such that if the undertaking is a single transaction, not a part of a general
business or occupation, althougn involving the carriage of the goods for a fee, the person or corporation
offering such service is a private carrier.

While a common carrier is bound to exercise extraordinary diligence, a private carrier owes only
diligence of a good father of a father of a family.

Moreover, while a common carrier cannot stipulate that it is exempt from liability for negligence of its
agents or employees, a private carrier may validly enter into such stipulation.

IV. DISTINGUISHED FROM TOWAGE, ARRASTRE AND STEVEDORING

In towage, one vessel is hired to bring another vessel to another place.

On the other hand, the functions of arrastre operator usually include: to receive, handle, care for, and
deliver all merchandise; to record or check all merchandise; and to furnish light, and water services and
other incidental services.

The function of stevedores involve the loading and unloading of coastwise vessels calling at the port.

V. GOVERNING LAWS

Article 1766 of the Civil Code expresses: “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.”

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

IV. NATURE OF BUSINESS

Common carriers are public utilities. As such, they are impressed with public interest and concern.

V. REGISTERED OWNER RULE AND KABIT SYSTEM

a. Registration Laws

Registration of motor vehicles is now government by Republic Act 4136 otherwise known as “The Land
Transportation and Traffic Code”
b. Registered Owner Rule

The rule in this jurisdiction is that the person who is the registered owner of a vehicle is liable for any
damage 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 or recourse against the transferee
or the buyer.

c. Kabit System

The “registered owner” rule is applicable whenever the persons involved are engaged in what is known
as the “kabit system.”

The 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.

a. Pari Delicto Rule

Both parties are at fault. Having entered into an illegal contract, neither party cannot invoke the same as
against each other either to enforce their illegal agreement or to invoke the same to escape liability.
Both parties cannot seek relief from the courts, and each must bear the consequences of his acts.

b. Aircraft and Vessels

Kabit System may also be applied to vessels and aircrafts that are covered by the certificates of
convenience and necessity.
CHAPTER 2
OBLIGATIONS OF THE PARTIES

I. OBLIGATIONS OF THE CARRIER

a. Duty to Accept

A common carrier that is granted a certificate of public convenience is duty bound to accept passengers
or cargo without any discrimination.

The instances when the carrier may validly refuse to accept goods include:
When the goods sought to be transported are dangerous objects, or substances including dynamites and
other explosives;

The goods are unfit for transportation;

Acceptance would result in overloading;

The goods are considered contrabands or illegal goods;

Goods are injurious to health;

Goods will be exposed to untoward danger like flood, capture by enemies and the like;

Goods like livestock will be exposed to diseases;

Strike; and

Failure to tender goods on time.

b. Duty to Deliver the Goods

a. Time of Delivery

Article 358 of the Code of Commerce: “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 of delivery; and should he not do so, the damages caused by the delay should be for his
account.”

b. Consequences of Delay

Article 1747 of the Civil Code: “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, destruction, or deterioration of the goods.

In cases of delay on account of the fault of the shipper, the consignee may leave the goods transported
in the hands of the carrier, informing him thereof in writing before the arrival of the same at the point of
destination.

Right of Passengers in Case of Delay is specifically provided in Article 698 of the Code of Commerce: “In
case a voyage already begun should be interrupted, the passenger shall be obliged to pay the fare in
proportion to the distance covered, without right to recover for losses and damages if the interruption is
due to fortuitous event or force majeure, but with a right to indemnity if the interruption should have
been caused by the captain exclusively.

Memorandum Circular No. 112 issued by Maritime Industry Authority provides: “In case the vessel is not
able to depart on time and the delay is unreasonable, the passenger may opt to have his/her ticket
immediately refunded without any refund service fee….”

c. Where and to Whom Delivered

a. Place

The goods should be delivered to the consignee in the place agreed upon by the parties. If the specific
place or warehouse is designated in the bill of lading, the goods must be delivered in such place.

b. Consignee

The goods should be delivered to the consignee or any other person to whom the bill of lading was
validly transferred or negotiated.

Article 369 of the Code of Commerce provides: “If 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 provide
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.

c. Delay to Transport Passengers

The basic rule that applies to carriage of goods shall also apply to carriage of passengers.

d. Duty to Exercise Extraordinary Diligence

The goods should be delivered in the same condition that they were received and to transport
passengers without encountering any harm or loss. In the exercise of this obligation, the common carrier
is obligated to exercise extraordinary diligence.

Article 1755 of the Civil Code explains extraordinary diligence: “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 person, with due regard for all circumstances.

a. Presumption of Negligence

In case of loss of effects or cargo or passengers or death or injuries to passengers, the common carrier is
presumed to be at fault or have acted negligently unless he had observed extraordinary diligence in the
vigilance thereof.

b. Duration of Duty

Article 1736 of the Civil Code provides: “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….”

With respect to carriage of passengers by trains, the extraordinary diligence commences the moment
the person who purchases the ticket presents himself at the proper place and in a proper manner to be
transported with a bona fide intent to ride the coach.

With respect to carriage of passengers by sea, the duty of the carrier commences as soon as the person
with bona fide intention of taking passage places himself in the care of the carrier or its employees and
is accepted as passenger.

Motor vehicles like passenger jeepneys and buses are duty bound to stop their conveyances for a
reasonable length of time in order to afford passengers an opportunity to board and enter. The rule is
that once a public utility bus or jeepney stops, it is making a continuous offer to bus riders.

e. Defenses of Common Carriers

The defenses that can be raised by common carriers for the loss, destruction, deterioration of the goods
are:

(1) Flood, storm, earthquake, lightning and other natural disaster and calamity;

(2) Acts of the public enemy at war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the packing of the goods in the packing or in the containers;

(5) Order or act of the competent authority;

(6) Exercise of extraordinary diligence.

Fortuitous Event

A fortuitous event is an event that is unforeseen, but if foreseen, is inevitable.

Requisites:

(1) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply
with his obligation, must be independent of the human will.

(2) It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be
foreseen, it must be impossible to avoid.

(3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner.

(4) The obligor (debtor) must be free from any participation in or the aggravation of the injury resulting
to the creditor.

Fortuitous event, to be a valid defense, must be established to be the proximate case of the loss. (Art.
1739)

Invalid Defenses:
1. Fire
2. Hijacking
3. Mechanical Defects
4. Other Invalid Defenses
a) Explosion
b) Worms and Rats
c) Water Damage
d) Barratry

Public Enemy

The term ‘public enemy,’ in its general acceptation presupposes the existence of an actual state of war,
and refers to the government of a foreign nation at war with the country to which the carrier belongs
xxxx

Improper Packing

It is also the rule that if the carrier accepts the goods knowing the fact of improper packing of the goods
upon ordinary observation or notwithstanding such condition, it is not relieved of liability for loss or
injury resulting therefrom.

Order of Public Authority

Article 1743: 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.

f. Defenses in Carriage of Passengers

The primary defense of the carrier in transporting passengers is exercise of extraordinary diligence.
Thus, even if there is a fortuitous event, the carrier must also present proof of exercise of extraordinary
diligence.

a. Employees

Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful 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.

b. Other Passengers and Third Persons

Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the
willful acts or negligence of other passengers or 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.

g. Passenger’s Baggages

Baggage that are checked in or delivered to the carrier are governed by the rules discussed above
requiring extraordinary diligence.

II. OBLIGATIONS OF SHIPPER, CONSIGNEE AND PASSENGER

a. Negligence of Shipper or Passenger

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. However, the negligence of the shipper or the passenger may
be the proximate and only cause of the loss, in which case, the carrier should not be made liable.

In Article 1761 of Civil Code provides: “The passenger must observe the diligence of a good father of a
family to avoid injury to himself.

Thus, 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 assumes that responsibility.

Doctrine of avoidable consequences

Even if the carrier is responsible for the loss or injury, the passenger is also required to lessen the
damage or injury.

Doctrine of Last Clear Chance

A negligent defendant is held liable to a negligent plaintiff, if he, aware of the plaintiff’s peril, or
according to some authorities, 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.

The Supreme Court reiterated the rule that passengers must take such risks incident to the mode of
travel.

b. Freight

When private property is used for public purpose and is affected with public interest, it ceases to be juris
privati only and becomes subject to regulation.

The shipper may pay the necessary freight before or at the time he deliver the goods to the carrier for
shipment. However, the parties may also stipulate that the freight will be paid by the consignee at the
point of the destination.

In the absence of any agreement, the consignee who is supposed to pay must do so within twenty-four
(24) hours from the time of delivery.

With respect to carriage of goods by sea, the tickets are purchased in advance from ticket outlets or
booking offices. Carriers are not supposed to allow passengers without tickets.

The carrier shall collect/inspect passenger’s ticket within one (1) hour from the vessel’s departure so as
not to disrupt passengers who are either sleeping or resting.

If the consignor or the consignee failed to pay the consideration for the transportation of the goods, this
special right shall prescribe eight 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.

Demurrage
It 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 the claim for damages for failure to accept delivery.

CHAPTER 3
EXTRAORDINARY DILIGENCE
I. RATIONALE

Article 1755 of the Civil Code explains extraordinary diligence: “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 person, with due regard for all circumstances.”

The Code Commission explained why extraordinary diligence must be complied with the performance of
the functions of a common carrier: “This high standard of care is imperatively demanded by the
preciousness of human life and by the consideration that every person must be in every way be
safeguarded against all injury.”

II. HOW DUTY IS COMPLIED WITH

There is no hard and fast rule in the exercise of extraordinary diligence. The law does not prescribe
formula. Thus, the Supreme Court explained in one case that “it is sufficient to reiterate that the source
of a common carrier's legal liability is the contract of carriage, and by entering into said contract, it binds
itself to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of a very cautious person, with a due regard for all the circumstances.

A. Duty to Third Persons

The duty to exercise extraordinary diligence is primarily owed to the passengers and the goods that are
being transported.

However, it was ruled in one case that the duty even extends to the members of the crew or
complement operating the carrier.

Additionally, there is authority for the view that extraordinary diligence is owed not only to passengers
or shippers but also to third persons as well. Thus, the Supreme Court ruled in Kapalaran Bus Lines v.
Coronado: “... The passengers and owners of cargo carried by common carrier, they are not only persons
that the law seeks to benefit. For if common carriers carefully observed the statutory standard of
extraordinary diligence in respect of their own passengers, they cannot help but simultaneously benefit
pedestrians and the owners and passengers of other vehicles who are equally entitled to the safe and
convenient use of our roads and highways.”

III. EFFECT OF STIPULATION

A. Goods
The parties cannot stipulate that the carrier will not exercise any diligence in the custody of goods.
Neither can it be stipulated that the goods are at the shipper's risk. However, the law allows a
stipulation whereby the carrier will exercise a degree of diligence less than extraordinary with respect to
goods.

B. Passenger

There can be no stipulation lessening the utmost diligence that is owed to passengers. The responsibility
to observe extraordinary diligence cannot be dispensed with or lessened through stipulation or posting
of notices Art. 1757 of the Civil Code).

a. Gratuitous passenger

When a passenger is carried gratuitously, a stipulation limiting the common carrier's liability for
negligence is valid, but not for willful acts or gross negligence. The reduction of fare does not justify any
limitation of the common carrier's liability (Art. 1758 of the Civil Code).

The provision implies that the same degree of diligence is required even if the passenger is carried
gratuitously.

In Lara v. Valencia however, the view expressed by the Supreme Court is to the effect that the diligence
owed to accommodation passenger is only ordinary diligence. The defendant in the said case was not a
common carrier. It was a private carrier who accommodated the deceased passenger.

IV. EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA

A. Seaworthiness

a. Warranty of seaworthiness of ship

The first step that must be undertaken by the common carrier in complying with the duty to exercise
extraordinary diligence in transporting goods or passengers by sea or any other body of water is to make
the vessel seaworthy. Seaworthiness of the vessel is a rule found in the carriage of Goods by Sea Act,
Sec.3.(1).

b. No duty to inquire

It follows that because the implied warranty of seaworthiness, shippers of the goods, when transacting
with common carriers, are not expected to inquire into the vessels seaworthiness, genuineness of its
licenses, and compliance with all maritime laws.
By the same token, passengers cannot be expected to inquire every time they board a common carrier,
whether the carrier possesses the necessary papers or that all the carrier's employees are qualified.
Such a practice would be an absurdity.

c. Meaning of Seaworthiness

The concept of seaworthiness was explained by the Supreme Court: “ (1) Generally, seaworthiness is
that strength, durability and engineering skill made a part of a ship's construction and continued
maintenance, together with a competent and sufficient crew, which would withstand the vicissitudes
and dangers of the elements which might reasonably be expected or encountered during her voyage
without loss or damage to her particular cargo.”

(1) Fitness of the vessel itself

It is necessary that the vessel can be expected to meet the normal hazards of the journey.

(2) The ship must be “cargoworthy”

Even if vessel was properly maintained and is free from defect, the carrier must not accept goods that
cannot properly be transported in the ship.

(3) The vessel must be adequately equipped and properly manned

The ship must be manned with sufficient number of competent officers and crew.

(4) Adequate equipment

With respect to vessels that carries passengers, the Maritime Industry Authority prescribes rules which
provide for indispensable equipment and facilities.

B. Overloading

Duty to exercise due diligence likewise includes the duty to take passengers or cargoes that are within
the carrying capacity of the vessel.

C. Proper Storage

The vessel may be suitable for the cargo but this is not enough because the cargo must also be properly
stored.

D. Negligence of Captain and Crew

a. Rules on passenger safety

Memorandum Circular No. 12 issued by MARINA provides that “have the right to be treated by the
carrier and its employees with kindness, respect, courtesy and due consideration. They entitled to be
protected against personal conduct, injurious language, indignities and abuses from the said carrier and
its employees.”

E. Deviation and Transshipment

a. Deviation

Art. 359 of the Code of Commerce:

“If 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 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.”

b. Transshipment

Transshipment of freight without legal excuse 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.

Transshipment, in maritime law, is defined as “the act of taking cargo out of one ship and loading it in
another,” or “the transfer of goods from vessel stipulated in the contract of affreightment to another
vessel before the place of destination named in the contract has been reached.”

V. EXTRAORDINARY DILIGENCE IN CARRIAGE BY LAND

A. Condition of vehicle

Common carriers that offer transportation by land are similarly required to make sure that the vehicles
that they are using are in good order or condition.

B. Traffic Rules
The carrier fails to exercise extraordinary diligence if it will not comply with basic traffic rules.

C. Duty to Inspect

There is no unbending duty to inspect each and every package or baggage that is being brought inside
the bus or jeepney. The carrier is duty bound to conduct such inspection depending on the
circumstances.

A carrier is ordinarily not liable for injuries to passengers from fires or explosions caused by articles
brought into its conveyances by other passengers, in the absence of any evidence that the carrier,
through its employees, was aware of the nature of the article or had any reason to anticipate danger
therefrom.

It should be noted that in overland transportation, the common carrier is not bound nor empowered to
make an examination on the contents of packages or bags particularly those handcarried by passengers.

VI. EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR

Like vessels, aircrafts that are used by common carriers must also be fit to transport goods and
passengers. The aircraft must be in such a condition that it must be able to withstand the rigors of the
flight. The law that governs the Civil Aeronautic Board calls this “airworthiness.”

Republic Act 779 defines airworthiness means that “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.”

Extraordinary diligence likewise requires the carrier provide competent and well trained crew.

The carrier is likewise deemed to have failed to exercise extraordinary diligence if the plane did not take
the designated route and the tragic crash could have been avoided had it taken said designated route.

It is the duty of airlines to strictly require their personnel to be more accommodating towards
customers, passengers and the general public.

A. Inspection

An airline company is duty bound to inspect each and every cargo that is brought into the aircraft (Sec. 8
of RA 6235).
CHAPTER 4
BILL OF LADING AND OTHER FORMALITIES

I. CONCEPTS
A bill of lading or a ticket is not necessary for the perfection of a contract of carriage. Thus, the
obligation of the carrier to exercise extraordinary diligence in transporting the goods or passengers is
present even if no bill of lading or ticket was issued by the carrier.
Additionally, Sections 25 and 26 of the Electronic Commerce Act (RA No. 8792) allow data messages or
electronic documents to be used in lieu of transport documents in writing or paper documents.
A. Definition
Bill of Lading – is a written acknowledgment, signed by the master of a vessel or other authorized agent
of the carrier, that he has received the described goods from the shipper, to be transported on the
expressed terms to the described place of destination, and to be delivered there to the designated
consignee or parties.
B. Kinds
A bill of lading may be either: (1) negotiable or non-negotiable, (2) clean bill of lading or foul bill of
lading, (3) “on board bill” or “received for shipment bill”, (4) spent bill of lading, (5) through bill of
lading, (6) custody bill of lading, or (7) port bill of lading.
a. Clean bill of lading and foul bill of lading
A clean bill of lading is one which does not contain any notation indicating any defect in the goods. A
foul bill of lading is one that contains such notation.
b. Spent bill of lading
Where the goods are already delivered by the carrier, the carrier is supposed to have retrieved the
covering bill of lading that he issued for the goods. If the goods were already delivered but the bill of
lading was not returned, the bill of lading is called “spent bill of lading.”
c. Through bill of lading
A “through bill of lading” is one issued by a carrier who is obliged to use the facilities of other carriers as
well as his own facilities for the purpose of transporting the goods from the city of the seller to the city
of the buyer, which bill of lading is honored by the second and other interested carriers who do not
issue their own bill of lading.
d. On board bill v. received for shipment bill
An on board bill of lading is one in which it is stated that the goods have been received on board the
vessel which is to carry the goods, whereas a received for shipment bill of lading is one in which it is
stated that the goods have been received with or without specifying the vessel by which the goods are
to be shipped.
e. Custody bill of lading
In this type of bill of lading, the goods are already received by the carrier but the vessel indicated therein
has not yet arrived in the port.
f. Port bill of lading
In a port bill of lading, the vessel indicated in the bill of lading that will transport the goods is already in
the port.
II. NATURE OF BILL OF LADING
It is a long standing jurisprudential rule that a bill of lading operates both: (1) as a receipt and (2) as a
contract. A third characteristic may be added – (3) it is a document of title.
It is a receipt for the goods shipped and a contract to transport and deliver the same as therein
stipulated.
As a contract, it stipulates the rights and obligations assumed by the parties. Being a contract, it is the
law between the parties who are bound by its terms and conditions provided that these are not contrary
to law, morals, good customs, public order, and public policy.

III. WHEN EFFECTIVE

A bill of lading usually becomes effective upon its delivery to and acceptance by the shipper. It is
presumed that the stipulations of the bill were, in the absence of fraud, concealment or improper
conduct, known to the shipper, and he is generally bound by his acceptance whether he reads the bill or
not.
The holding in most jurisdictions has been that a shipper who receives a bill of lading without objection
after an opportunity to inspect it is presumed to have accepted it as correctly stating the contract and to
have assented to its terms.

IV. BILL OF LADING AS CONTRACT

The three-fold nature of a bill of lading is obviously applicable only to carriage of goods. However, the
nature of bill of lading as a contract applies to tickets issued to passengers.
A. Contract of Adhesion
Bills of lading, as well as tickets, constitute a class of contracts of adhesion. Hence, they are normally
construed liberally in favor of the passenger or shipper who adhered to such bill of lading or ticket.
Contracts of adhesion are contracts wherein almost all the provisions of which have been drafted only
by one party. The only participation of the other party is the signing of his signature or his 'adhesion'
thereto. Examples are: insurance contracts, bills of lading, contracts of make of lots on the installment
plan.
Under which contracts, the passenger/shippers cannot change terms and they are thus made to adhere
thereto on the “take it or leave it” basis. Thus, certain guidelines in the determination of their validity
and enforceability have been formulated in order that justice and fair play characterize the relationship
of the contracting parties.
Consequently, the parties, whether the carrier or shipper, cannot escape liability by adverting to the bill
of lading as a contract of adhesion, if the bill of lading has no ambiguities or obscurities.
B. Parol Evidence Rule
A bill of lading is covered by the parol evidence rule. Under the parol evidence rule, the terms of a
contract are rendered conclusive upon the parties, and evidence aliunde is not admissible to vary or
contradict a complete and enforceable agreement embodied in a document, subject to well defined
exceptions.
As an exception to the parol evidence rule is one which is a mistake of fact mutual to the parties.
However, in order that parol evidence may be admitted, said mistake must be put in issue by the
pleadings, such that if not raised inceptively in the complaint or in the answer, as the case may be, a
party cannot later on be permitted to introduce parol evidence thereon.
Parol evidence cannot be admitted where the mistake adverted to was supposedly committed by one
party only and was raised by the former rather belatedly.
C. Bill of Lading as Evidence
Bill of lading is the legal evidence of the contract.
All the essential elements of a valid contract are present in a bill of lading or ticket, i.e. consent, cause or
consideration and object.
D. Bill of Lading as Actionable Document
When a shipper enforces contractual obligation under the contract of carriage as stated in the bill of
lading, such bill of lading can be categorized as an actionable document under the Rules of Court. Hence,
the bill of lading must be properly pleaded either as causes of action or defenses; the genuineness and
due execution of which are deemed admitted unless specifically denied under oath by the adverse
party.
E. Basic Stipulations
The stipulations that must be stated in the bill of lading are provided for in the Code of Commerce.
F. Prohibited and Limiting Stipulations
a. Civil Code
Three kinds of limiting stipulations have often been made in bill of lading:
1. exempting the carrier from any and all liability for loss or damage occasioned by its own negligence
2. providing for an unqualified limitation of such liability of the carrier to an agreed valuation
3. limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value
and pays a higher rate of freight
The first and second kinds of stipulations are invalid. The third is valid and enforceable.
(1) Purpose
The purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such
stipulation obliges the shipper/consignee to notify the common carrier of the amount that the latter
may be liable for in case of loss of the goods. The common carrier can then take appropriate measures---
getting insurance, if needed, to cover or protect itself.
(2) Stipulation reducing diligence
The parties cannot stipulate so as to totally exempt the carrier from exercising any degree of diligence;
and the parties cannot stipulate that the common carrier shall exercise diligence less than the diligence
of a good father of a family. However, the parties may stipulate that diligence to be exercised by the
common carrier in the carriage of goods be less than the extraordinary diligence provided that the
following requisites are complied with:
1. that the stipulation be in writing signed by both parties
2. that the stipulation be supported by a valuable consideration other than the service rendered by the
common carrier, and
3. that the stipulation be reasonable, just and not contrary to law
However, no such stipulation is allowed for carriage of passengers. The responsibility of a common
carrier to exercise utmost diligence for the safety of the passengers cannot be dispensed with or
lessened by stipulation or statement on tickets or otherwise (Art. 1757 of the Civil Code).
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 (Art. 1750 of the Civil Code).
Moreover, Art. 1749 of the Civil Code provides that a stipulation 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, is binding.

b. Carriage of Goods by Sea Act (COGSA)

COGSA applies suppletorily to the Civil Code if the goods are to be shipped from a foreign port to the
Philippines. Under COGSA, the liability of the carrier is US$500 per package in the absence of a shipper's
declaration of a higher value in the bill of lading.
Each carton is considered a package, or that would be considered package shipped in a container
supplied by the carrier.

V. BILL OF LADING AS RECEIPT

The issuance of a bill of lading carries the presumption that the goods were delivered to the carrier
issuing the bill, for immediate shipment.

VI. BILL OF LADING AS DOCUMENT OF TITLE

The Bill of Lading, until complete delivery of the cargo has been made on someone rightfully claiming
under it, remains in force as a symbol, and carries with it not only the full ownership of the goods, but
also all rights created by the contract of carriage between the shipper and the ship owner.
Art. 1507 of the Civil Code states: “A document of title in which it is stated that the goods referred to
therein will be delivered to the bearer, or to the order of any person named in such document is
negotiable document of title.”
How negotiated? (a) bearer document; (b) order document – a document which states that the goods
are to be delivered to the order of a person name therein.
Effect of Negotiation: Art. 1513 of the Civil Code provides:
“A person to whom a negotiable document of title has been duly negotiated acquires thereby:
(1) Such title to the goods xxx;
(2) The direct obligation of the bailee issuing the document to hold possession of the goods for him xxx

CHAPTER 5
ACTIONS AND DAMAGES IN CASE OF BREACH

I. DISTINCTIONS
Passengers and shippers who suffered damages because of the breach of the contractual obligation of
the carrier may sue the latter for damages. The source of obligation is culpa contractual. This source of
obligation is separate and distinct from quasi-delict under Art. 2176 of the Civil Code.

II. CONCURRENT CAUSES OF ACTION

The same act that breaches the contract may also be tort. Hence, a negligent act that breaches the
contract may give rise to a liability based on contract and quasi-delict under Art. 2176 of the Civil Code.
In fact, with respect to the employee of the carrier, civil liability may be based on quasi-delict as well as
on criminal liability under Art. 100 of the Revised Penal Code.
Hence, the cause of action of a passenger or shipper against the common carrier can be culpa
contractual or culpa aquiliana while the basis on the part of the driver is either culpa delictual or culpa
aquiliana.
A. Solidary Liability
In case the negligence of the carrier's driver and a third person concurs, the liabilities of the parties –
carrier and his driver, third person – is joint and several.
e.g. While docking the vessel, “Taurus”, the master, through negligence, damaged the wharf and the
merchandise loaded on the deck. The owner of the wharf and the owner of the merchandise sued the
owner of the vessel and master of the vessel for the damage.
a) What is the basis of the liability of the owner of the vessel with respect to the damage of the wharf?
b) With respect to the damage to the merchandise?
Ans: a) The shipowner may be made liable based on quasi-delict under Art. 2176 of the Civil Code with
respect to the damage of the wharf. The master of the vessel caused damage to the wharf through
negligence without any preexisting contractual relations between the parties.
b) The shipowner may be liable for breach of contract for the damage to the merchandise. The carrier
has an obligation safely to their destination. The carrier failed to do so because of the negligence of his
employees.

III. NOTICE OF CLAIM AND PRESCRIPTIVE PERIOD

A. Overland Transportation of Goods and Coastwise Shipping
a. When to file a claim with carrier
A condition precedent for an action against the carrier in overland transportation is the filing of claim
with the carrier within the period prescribed under Art. 366 of the Code of Commerce. Non-filing of the
claim bars recovery. Before an action can properly be commenced all the essential elements of the
cause of action must be in existence, that is, the cause of action must be complete.
Under Art. 366 of the Code of Commerce, an action for damages is barred if the goods arrived in
damaged condition and no claim is filed by the shipper within the following period: (1) immediately if
damage is apparent; or (2) within twenty four (24) hours from delivery if damage is not apparent.
The period does not begin to run until the consignee has received possession of the merchandise that he
may exercise over it the ordinary control pertinent to ownership.
1) Effect of stipulation
The period prescribed in Art. 366 of the Code of Commerce may be subject to modification by
agreement of the parties. The parties may stipulate in the bill of lading a period that is different from the
period provided by Art. 366.
b. Extinctive Prescription
There being no special rules with respect to the contract of carriage, the general rule under the Civil
Code, the extinctive period is six (6) years if there is no written contract and ten (10) years if there is a
written contract.
B. International Carriage of Goods by Sea
A claim must be filed with the carrier within the following period: (1) if the damage is apparent the claim
should be filed immediately upon discharge of the goods; or (2) within three (3) days from delivery if
damage is not apparent. Nevertheless, it has been settled that the filing of claim is not condition
precedent. Sec. 3 of the Carriage of Goods by Sea Act provides that “such fact shall not affect or
prejudice the right of the shipper to bring suit.” The shipper can still bring an action to recover said loss
or damage within one (1) year after the delivery of goods.
a. Prescription
The action for damages under COGSA must be filed within a period of one (1) year from discharge of the
goods. In other words, the prescriptive period of one (1) year commences from discharge.
The period is not suspended by an extra-judicial demand. Art. 1155 of the Civil Code cannot be applied
because matters affecting transportation of goods by sea should be decided in as short a time as
possible.
If the damage sustained by the cargo is not apparent, notice should be given within three (3) days to the
carrier, and action for damages should be filed within one (1) year from date of delivery.
The period does not apply to misdelivery. The applicable rule is the Civil Code provisions on prescriptive
period, including Art. 1155 thereof. The goods are not actually lost or damaged. The applicable period is
10 years.
The rule applies in collision cases. However, the one (1) year period starts not from the date of collision
but when the goods should have been delivered, had the cargoes been saved.
1) Insurance
The insurer who is exercising its right of subrogation is also bound by the one (1) year prescriptive
period. However, it does not apply to the claim against the insurer for the insurance proceeds. The claim
against the insurer is based on contract that expires in ten (10) years.

IV. RECOVERABLE DAMAGES

Damages – is the pecuniary compensation, recompense, or satisfaction for injury sustained.
Other definition: Damages is pecuniary consequences which the law imposes for the breach of some
duty or violation of some rights.
The Code Commission saw that the old civil code had “but few general principles on the measure of
damages.”
A. Extent of Recovery
The extent of recovery in case of contractual breach is expressly provided for in Art. 2201 of the New
Civil Code. Applying the provisions to a contract of carriage, the carrier in good faith is liable only to pay
for the damages that are the natural and probable consequence of the breach of obligation, and which
the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.
However, if the carrier is in bad faith or gross negligence, the carrier is liable for all damages, whether
the same can be foreseen or not.
It should be noted, however that the carrier who may be compelled to pay damages for the loss or
damage to the goods or passengers has the right of recourse against the employee who committed the
negligent, willful or fraudulent act.
B. Kinds of Damages
a. Actual or compensatory damages
Art. 2199 of the Civil Code provides 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.
Two kinds of actual or compensatory damages:
(a) the loss of what the person already possesses (dano emergente)
(b) the failure to receive as a benefit that would have pertained to him (lucro cesante)
In case of a person's death caused by a crime or quasi-delict, under Art.2206 of the Civil Code, the
plaintiff is entitled to at least three thousand pesos (P3,000.00). In addition:
(a) loss of the earning capacity of the deceased
(b) support to the recipient whom the deceased was obliged to giveaccording to the provisions of Art.
291 of the Civil Code
(c) moral damages for mental anguish of the spouse, legitimate and illegitimate descendants and
ascendants of the deceased by reason of the death of the deceased
1) Loss of earning capacity
The amount of loss of earning capacity that should be awarded is:
Net Earning Capacity = Life Expectancy x (Gross Annual Income less Necessary Living expenses)
Life expectancy is computed by applying the formula: 2/3 x 80 – age at death (adopted in the American
Expectancy Table of Mortality)
2) Attorney's Fees
3)Interests
b. Moral damages
The Civil Code provides that moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury.
Moral damages may be recovered if they are the proximate result of the defendant's wrongful act or
ommission.
Generally, no moral damages where the breach of contract is not malicious.
c. Nominal damages
It is adjudicated to vindicate the right of the plaintiff.
d. Temperate or moderate damages
It may be recovered when the court finds that some pecuniary loss has been suffered but its amount
cannot be provided with certainty.
e. Liquidated damages
It is that is agreed upon by the parties to a contract, to be paid in case of breach thereof.
f. exemplary or corrective damages
It may be imposed by way of example in addition to compensatory damages.
PART II
MARITIME LAW

CHAPTER 6
GENERAL CONCEPTS

I. MARITIME LAW: DEFINED

It is the system of laws which particularly relates to the affairs and business of the sea, to ships, their
crews and navigation, and to marine conveyance of persons and property.
This system of laws includes Book III of the Code of Commerce entitled Maritime Commerce Act, Act No.
2616 otherwise known as the “Salvage Law,” Commonwealth Act No. 65 otherwise known as the
“Carriage of Goods by Sea Act,” Presidential Decree No. 1521 known as the “Ship Mortgage Decree of
19978” and other special laws relating to maritime commerce.
However, the primary law on maritime commerce is still the New Civil Code provisions on common
carriers.
II. REAL AND HYPOTHECARY NATURE
A. Naturale and Rationale
The real and hypothecary nature of maritime laws means that the liability of the carrier in connection
with losses related to maritime contracts is confined to the vessel, which is hypothecated for such
obligations or which stands as the guaranty for their settlement. The liability of the vessel owner and
agent arising from the operation of such vessel were confined to the vessel itself, its equipment, freight,
and insurance.
Philippine maritime law is of Anglo-American extraction, and is governed by adherence to both
international maritime conventions. This is highlighted by the following excerpts on the limited liability
of vessel owners and/or agents:
“Section 183. The liability of the owner of any vessel xxx for any embezzlement, loss or destruction by
any person or any property xxx or for any loss, damage xxx without the privity or knowledge of such
owner or owners shall not exceed the amount or value of the interest of such owner in such vessel xxx.”
(US federal Limitation of Liability Act).
B. Statutory Provisions
The statutory provisions that provide for the limited liability rule are Arts. 587, 590, 643 and 837 of the
Code of Commerce
· Art. 587: “The ship agent shall also be civilly liable for the indemnities in favor of third persons xxx but
he may exempt himself therefrom by abandoning the vessel with all her equipments xxx.”
· Art. 590: “The co-owners of the vessel shall be civilly liable in the proportion of their contributions xxx
for the results of the acts of the captain xxx.
Each co-owner may exempt himself from this liability by the abandonment xxx.”
· Art. 643: “If the vessel and her cargo should be totally lost by reason of capture or wreck, all rights shall
be extinguished xxx
· Art. 837: “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 her appurtenances and freight earned during
the voyage.”
C. Coverage
Art. 837 applies the principle of limited liability in cases of collision. While Arts. 587 and 590 embody the
universal principle of limited liability in all cases. However, taken together, Arts. 837, 587, and 590 cover
only: (1) liability to third persons, (2) acts of the captain, and (3) collisions.
D. Exceptions
Exceptions to the limited liability rule:
(a) where the injury or death to a passenger is due either to the fault of the shipowner, or to the
concurring negligence of the shipowner and the captain
(b) where the vessel is insured
(c) in workmen's compensation claim
a. Negligence
The limited liability rule applies if the captain or the crew caused the damage or injury.
However, if the failure to maintain in the seaworthiness of the vessel can be ascribed to the shipowner
alone or the shipowner concurrently with the captain, then the limited liability principle cannot be
invoked.
b. Insurance
The limited liability rule does not apply to insurance claims. The Supreme Court explained that the total
loss of a vessel does not extinguish the liability of the carrier's insurer. Its insurance answers for the
damages that a shipowner or agent, may be held liable for by reason of the death of its passengers.”
c. Worker's compensation
The Supreme Court held that the limited liability rule have no room in the application of the Worker's
Compensation Act which seeks to improve, and aims at the amelioration of, the condition of laborers
and employees. Such compensation has nothing to do with the provisions of the Code of Commerce. It is
an item in the cost of production which must be included in the budget of any well-managed industry.
E. Abandonment
Abandonment of the vessel, its appurtenances and the freightage is an indispensable requirement
before the shipowner or shipagent can enjoy the benefits of the limited liability principle. If the carrier
does not want to abandon the vessel, then he is still liable even beyond the value of the vessel.
The only instance where such abandonment is dispensed with is when the vessel was entirely lost. In
such case, the obligation is thereby extinguished.
F. Procedure for Enforcement
The Supreme Court stated that “more to the point, the rights of parties to claim against an agent or
owner of a vessel may be compared to those of creditors against an insolvent corporation whose assets
are not enough to satisfy the totality of claims as against it... Creditors must limit their recovery to what
is left in the name of the corporation.”

III. PROTESTS
Protest is the written statement by the master of a vessel or any authorized officer, attested by proper
officer or a notary, to the effect that damages has been suffered by the ship.
Protest is required under the Code of Commerce in the following cases:
(a) when the vessel makes an arrival under stress
(b) where the vessel is shipwrecked
(c) where the vessel has gone through a huricane or the captain believes that the cargo has suffered
damages or averages
(d) maritime collisions
(di)
IV. ADMIRALTY JURISDICTION
The Regional Trail Court has jurisdiction in all actions in admiralty and maritime jurisdiction where the
demand or claim exceeds P300,000 or, in Metro Manila, where such demand or claim exceeds P400,000.
(Sec. 19(3) of BP Blg. 129.
It means that all other cases where the amount of the demand or claim is less than the jurisdictional
amount in the Regional Trail Court, the jurisdiction are with the metropolitan Trial Court, Municipal Trial
Court or Municipal Circuit Trial Court as the case may be.
CHAPTER 7
VESSELS

I. GENERAL CONCEPTS
A. Definitions
A Vessel or watercraft is defined under Presidential Decree No. 474 as “any barge, lighter, bulk carrier,
passenger ship freighter, tanker, container ship, fishing boats, or other artificial contrivance utilizing any
source of motive power, designed, used or capable of being used as a means of transportation operating
either as a common contract carrier, including fishing vessels covered under Presidential decree No. 43,
except: (i) those owned and/or operated by the Armed Forces of the Philippines and by foreign
governments for military purposes, and (ii) bancas, sailboats and other waterbone contrivance of less
than three gross tons capacity and not motorized.”
B. Construction, Equipment and Manning
The construction, equipment and manning of vessels are subject to the rules issued by the Maritime
Industry Authority. This rule is consistent with the provisions of Code of Commerce particularly Art. 574.
C. Personal Property
Vessels are personal property under Art. 416 of the Civil Code. The same rule can be found in Art. 585 of
the Code of Commerce.
II. OWNERSHIP
A. Acquisition
Vessels may be acquired or transferred by any means recognized by law. Thus, vessels may be sold,
donated, and may even be acquired through prescription.
B. Registration
Vessels are now registered through the Maritime Industry Authority.
It is a long standing rule that the person who is the registered owner of the vessel is presumed to be the
owner of the vessel. Moreover, it is likewise a settled rule that the sale or transfer of the vessel is not
binding on third persons unless the same is registered.

III. SHIP'S MANIFEST

Vessels are required to carry manifests in coastwise trade as provided in Section 906 of the Tariff and
Customs Code. This requirement is likewise imposed on every vessel from foreign port under Section
1005 of the same Code.
A manifest is a declaration of the entire cargo. Hence, the requirement is not complied 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.

IV. MORTGAGE
Mortgage and other encumbrances over vessels are governed by the provisions of presidential Decree
1521, otherwise known as the Ship mortgage Decree of 1978. The same law as well as Section 12 of
Executive Order 125 as amended is being implemented with respect to annotation/cancellation of
mortgages and transfer of rights and other encumbrances of vessels by Memorandum Circular No. 100
which was issued by MARINA in April 1995.

V. OTHER CODE OF COMMERCE PROVISIONS

The provisions of the Code of Commerce are deemed modified not only by the Civil Code but also by
special laws.

VI. SAFETY REGULATIONS

On February 23, 2000, MARINA under Memorandum Circular No. 154 reiterated the rules in line with
the continuing thrust of government to foster maritime safety.
CHAPTER 8
PERSONS WHO TAKE PART IN MARITIME COMMERCE

I. SHIPOWNERS AND SHIP AGENTS

The Code of Commerce at times uses the term “naviero” to indicate the person who is liable. The
“naviero” has been construed to include: the shipowner, ship agent and even the charterer who is
considered as owner pro hac vice.
Shipowner – is the person who is primarily liable for damages sustained in the operation of the vessel.
Ship agent – is the person entrusted with provisioning of the vessel, or who represents her in the port in
which she happens to be.
The Code of Commerce makes the ship agent jointly and severally liable with the owner. The joint and
several liability applies both breach of contract and extra-contractual obligation such as tort. The ship
agent, eventhough he is not the owner, is liable in every way to the creditor for losses and damages,
without prejudice to his right against the owner, the vessel and its equipment and freight.
A. Part Owners
Art. 586 of the Code of Commerce states that “if two or more persons should be part owners of a
merchant vessel, a partnership shall be presumed as established by the co-owners.
Art. 590 of the Code of Commerce states further that “the co-owners of vessel shall be civilly liable in
the proportion of their interests in the common fund....”
B. Ship Agent
a. Powers.
The ship agent may discharge the duties of captain of the vessel.
b. Limitation on Power,
The 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.
c. Duty to Account.
The ship agent managing for an association shall render to his associates an account of the results of
each voyage of the vessel.
d. Reimbursement and Liabilities
The co-owners shall pay the expenses in proportion to their interest. In order to enforce the payment,
the managing agent shall be entitled to an executory action (“accion ejecutiva”), which shall be
instituted by virtue of a resolution of the majority.
The ship agent shall indemniify the captain for all the expenses he may have incurred with funds of his
own or of others, for the benefit of the vessel.
e. Discharge of Captain and Crew
The provisions of the Code of Commerce on discharge of the captain of the crew is subject to the
provisions of the Labor Code of the Philippines for those who are employed for domestic transportation
or commerce as well as rules promulgated the Philippine Overseas Employment Administration (POEA)
for seamen who are hired for overseas employment.
II. CAPTAINS AND MASTERS OF VESSELS
A. Concept
The name of captain or master is given according to the kind of vessel the person is in charge of.
Captain - as a denomination is applied to those who govern vessels that navigate the high seas or ships
of large dimensions and importance, although they be engaged in the coastwise trade.
Master – are those who command smaller ships engaged exclusively in the coastwise trade.
Nevertheless, for the purposes of maritime commerce, the words “captain” and “master” have the same
meaning; both being the chiefs or commanders of ships.

B. Qualifications
Art.609 of the Code of Commerce states that “Captains, amsters or patrons of vessels must be Filipinos,
have legal capacity to contract in accordance with this code, and prove the skill, and qualifications
necessary to command and direct the vessel, as established by marine and navigation laws, ordinances,
or regulations...”
C. Powers and Functions
A captain commonly performs three (3) distinct roles:
(1) he is a general agent of the shipowner;
(2) he is also commander and technical director of the vessel; and
(3) he is a representative of the country under whose flag he navigates
Of these roles, the most important role is being the commander of the vessel--- operation and
preservation of the vessel during its voyage and the protection of passengers, crew and cargo.
In his role as general agent of the shipowner, the captain has authority to sign bills of lading, carry goods
aboard and deals with the freight earned, agree upon rates and decide whether to take cargo. He has
legal authority to enter into contracts with respect to the vessel subject to applicable limitations by
statute, contract, or instructions and regulations of shipowner.
D. Discretion of Captain or Master
A ship's captainmust be accorded a reasonable measure of discretionary authority to decide what the
safety of the ship and of its crew and cargo. The captain is held responsible for such safety, presumed to
be knowledgeable as to the specific requirements of seaworthiness and the particular risks and perils of
the voyage he is to embark on.
Indeed, if the ship captain is convinced that the ship owner's or ship agent's instructions will result in
imposing unacceptable risks or loss or serious danger to ship or crew, he cannot casually seek absolution
from his responsibility, if a marine casualty occurs, in following such instructions.
E. Pilotage
Pilot - in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of ports,
or in certain waters.
States possessing harbors have enacted laws or promulgated rules requiring vessels approaching their
ports to take on board pilots licensed under the local law. This is known as compulsory pilotage.
In this juridiction, compulsory pilotage is being implemented in the Port of Manila.
A pilot shall be held responsible for the direction of a vessel from the time he assumes his work as a
pilot thereof until he leaves it anchored or berthed safely. However, his responsibility shall cease at the
moment the Master neglects or refuses to carry out his order.
a. Master and Pilot
Generally, the pilot supersedes the master for the time being in the command and navigation of the
ship, and his orders must be obeyed in all matters connected with her navigation. He becomes the
master pro hac vice and should give all directions as to speed, course, stopping and reversing,
anchooring, towing and the like.
b. Shipowner and Pilot
In general, a pilot is personally liable for damages caused by his own negligence or default to the owners
of the vessel, and to third parties for damages sustained in collision. Such negligence of the pilot in the
performance of duty constitutes a maritime tort.
The owners of the vessel are responsible to the injured party for the acts of the pilot.
c. Pilot and His Association
The fact that the pilot is a member of an association does not make the association jointly and severally
liable. It is because there is no employer-employee relationship.
F. Code of Commerce Provisions on Captains
A shipowner would only be liable for contracts made by the captain (a) when duly authorized or (b) even
when authorized, for ship repairs, or for equipping or provisioning the vessel when the proceeds are
invested therein.

III. OFFICERS AND CREW OF VESSELS

Art. 648 of the Code of Commerce provides that “the complement of a vessel shall be understood all the
persons on board, from the captain to the cabin boy, necessary for the management, maneuvers, and
service....”
The officers who are named in the regulation issued by MARINA in connection with safe manning for
international trade are: Master, Deck Officer, Chief Engineer, Engineer Officer, Radio Officer, Ratings
Man.
Memorandum Circular No. 148 issued by MARINA for domestic trade specifies the following officers:
Officer, Master, Chief Mate, Deck Officer, Chief Engineer Officer, Second Engineer Officer, Engineer
Officer, Medical Practitioner, Radio Officer, Paramedic, Major Patron, Minor Patron, Boat Captain,
Marine Diesel Mechanic,Electrician, Ratings Man.
A. Regulation of Merchant Marine Profession
The practice of marine profession is now governed by special laws and pertinent rules issued by MARINA
and the Board of Marine Deck Officers and Board of Marine Engineer Officers. In particular, the
“Philippine Merchant Marine Officers Act of 1998” was passed in order to regulate Merchant Marine
Profession in the Philippines.
The law declares that “it is the policy of the State to promote and insure the safety of life and property
at sea, protect and serve the marine environment and ecology...”
B. Minimum Safe Manning
It is not enough that the officers manning the merchant vessel have all the qualifications imposed by the
Philippine Merchant Marine Officers Act and other special laws or regulations. It is also required that
there is sufficient number of officers and crew that are serving in the vessel.
No foreign officers shall be allowed on board unless approved by the administration.
C. Security of Tenure
Every worker in the Philippines has a constitutionally protected right to security of tenure.
Consequently, an employee cannot be dismissed without just or lawful cause and without affording the
employee with due process.
The Labor Code provisions apply to officers and crew of merchant vessels engaged in domestic trade or
coastwise shipping.

CHAPTER 9
CHARTER PARTIES

I. DEFINITION AND CONCEPT

Charter Party – a contract whereby an entire ship, or some principal part of the said ship, is let by the
owner thereof to a merchant or other person for a specified time or use for the conveyance of goods,
inconsideration of the payment of freight.
The charter contract is often to as a form of “mercantile lease” for it involves a charterer who desires to
lease a ship or vessel owned by another for transport of his or her goods for commercial purposes.

II. DIFFERENT KINDS OF CHARTER PARTIES

(1) The Bareboat or Demise Charter; and
(2) Contract of Affreightment
A. Bareboat Charter
In a bareboat or demise charter, the shipowner leases to the charterer the whole vessel. The charterer
becomes the owner “pro hac vice” of the vessel since he mans the vessel with his own set of master and
crew, effectively becoming the owner for the voyage or service stipulated, subject however to any
liability for damages arising from negligence.
Moreover, the bareboat charterer assumes the customary rights and liabilities of the shipowner in
relation to third persons who may have dealt with him or with the vessel.

B. Contract of Affreightment
The contract of Affreightment is subdivided into:
(1) Time Charter, and
(2) Voyage Charter
Time Charter – the vessel is leased to the charterer for a fixed period of time.
Voyage Charter – the vessel is leased for a single or particular voyage.
In the contract of affreightment, the charterer hires the vessel only, either for a determinate period of a
time or for a single or consecutive voyage, with the shipowner providing for the provisions of the ship,
the wages of the master and crew, and the expenses and maintenance of the vessel.

III. EFFECT OF CHARTER ON CHARACTER OF CARRIER

Generally, the character of the common carrier as such is not affected by the charter party if the same is
a contract of affreightment. The rights and responsibilities of ownership still rested on the owner, and
the charterer was thereby freed from any liabiltiy to third persons in respect of the vessel.

IV. PERSONS WHO MAY MAKE CHARTER

The owner or owners of the vessel, either in whole or in majoority part, who have legal control and
possession of the vessel, may validly enter into charter parties with a charterer.
A third person called a broker may, however, intervene in the execution of the charter between the
principals.
The charterer, by himself, may subcharter the entire vessel to a third person but only in the event that
there is no prohibition in the original charter. The subcharter, where entered into, is an independent
contract by itself involving only the charterer and the subcharterer and therefore does not give rise to
any contractual relation between the general owner and the subcharterer.

V. REQUISITES OF A VALID CHARTER PARTY

As the charter party is a contract, it is therefore to be governed by the general principles governing
ordinary contracts. Hence, the aprties therein are free to stipulate upon such terms and conditions that
would suit their purposes, subject to the caveat that these should not be contrary to law or public
policy.
The requisites of a charter may be enumerated thus:
(1) consent of the contracting parties;
(2) an existing vessel which should be placed at the disposition of the shipper;
(3) the freight; and,
(4) compliance with the requirements of Art. 652 of the Code of Commerce
VI. FREIGHT
The parties themselves may fix the manner or form in which the charter price or money shall be
satisfied.
If there should be no stipulation, the rules should be that: (1) the freight shall begin to run from the day
of loading of the vessel; (2) in charters with a fixed period, the freight shall begin upon that very day;
and (3) if the freight is charged according to weight, the payment thereof shall be made according to the
gross weight, including the weight of the containers.

VII. DEMURRAGE AND DEADFREIGHT

Art. 652 of the Code of Commerce (par. 10) provides that the time for loading and unloading shall be
provided for in the Charter Party. The period so stipulated is what is known as the “lay days.”
Demurrage – a sum of money due by express contract for the detention of the vessel in loading or
unloading, beyond the time allowed for that purpose in the charter party.
Deadfreight – the charterer may be made liable by the shipowner where the charterer failed to occupy
the leased portion of the vessel.
In connection with demurrage, it has been observed that unless the contrary intention appears in the
charter party, the stipulate dlay days do not begin to run against the consignee until the vessel has
arrived at berth or other usual and customary place for loading or unloading, and is in actual readiness
to discharge its cargo in accordance with its legal obligation.

VIII. RIGHTS AND OBLIGATIONS OF THE CHARTER PARTIES

A. Shipowner or Captain
The evident failure or refusal on the part of the shipowner or of his agents to receive cargo which had
been contracted to be transported under the charter party constituted a sure breach of the charter
party, as to warrant a suit for damages by the charterer for such breach.
Some of the primary rights and obligations of shipowners or captain:
(a) the shipowner is bound to observe the capacity of the vessel...;
(b) generally, any loss incurred by the shipper whose cargo is refused on account of the receipt by the
shipowner of a greater amount of cargo belonging to other persons shall be for the account of the
shipowner in the form of indemmnity;
(c) if there should be several charter parties, and due to lack of space, preference shall be given to the
person who is first in loading his cargo;
(d) the shipowner may effect a substitution in respect of the vessel so long as the substitute vessel had
been duly inspected and seaworthy;
(e) after three-fifths of the vessel is loaded, the shipowner may not substitute the chartered vessel,
unless he procures the consent of the charterers;
(f) the captain may not, if the vessel has been chartered in whole, accept cargo from any other persons
unless the consent of the charterer is obtained;
(g) the shipowner may also be generally held liable for damages incurred by the charterer due to the
voluntary delay of the captain in putting to sea.
A shipowner may ask for rescission of the charter party in the case the owner sold the vessel before the
charter has begun to load the vessel. However, the charterer may recover damages to the extent of its
losses.
B. Charterer
The rights and obligations of the charterer may be summarized as follows:
(a) the charterer shall have the right to subcharter the vessel to a third person only if he is authorized by
the owner;
(b) a charterer who loads goods different from that contracted upon, without the knowledge of the
shipowner or captain, or which results to damage shall be liable to indemnify the parties injured
thereby;
(c) should illicit cargo be shipped by the charterer with the knowledge of the shipowner or captain, the
said charterer shall be jointly liable with the shipowner for all damages caused to other shippers;
(d) the charterers and shippers may not abandon the goods damaged due to inherent defects or
fortuitous events.

IX. EFFECT OF BILL OF LADING

If a bill of lading was issued by the shipowner to the charterer, the charter party still governs their rights
and the bill of lading may be used as proof of receipt of the goods.

CHAPTER 10
LOANS ON BOTTOMRY AND RESPONDENTIA

I. DEFINITIONS AND CONCEPT

Bottomry – is a contract whereby the owner of a ship borrows for the use, equipment or repair of the
vessel, for a definite term, and pledges the ship as security, with the stipulation that if the ship is lost
during the voyage or during the limited time on account of perils enumerated, the lender shall lose his
money.
Where the goods, or some part thereof, are hypothecated as security for a loan, the payment of which is
dependent upon maritime risks, what ensues is a loan on respondentia.
Loan on Respondentia – it is the borrower's personal responsibility which is deemed to be the principal
security for the performance of the contract.

II. DISTINGUISHED FROM SIMPLE LOAN

(a) in bottomry or respondentia, the rate of interest is not subject to the Usury Law on account of
extraordinary risks involved whereas in simple loan, the rate of interest must not exceed the ceiling
fixed by the Usury Law;
(b) in bottomry or respondentia, there must be a marine risk, whereas in simple loan, there need not be
risks involved;
(c) the loan on bottomry or respondentia must be executed in accordance with form and manner
required in the Code of Commerce, whereas in a simple loan, the formal requisites regarding contracts
in general would apply;
(d) the loan on bottomry or respondentia must be recorded in the registry of vessels, whereas in simple
loan, no such registration is required;
(e) in the loan on bottomry or respondentia, preference is extended to the last lender, whereas in
simple loan, the first lender, as a general rule, enjoys preference.
There may be events where the loan on bottomry or respondentia may be regarded as simple loan only.

III. PARTIES TO THE LOANS

The shipowner may secure a loan on bottomry upon his ship.
In the case where the shipowner is only a part owner, any bottomry that he may contract shall be
limited only to the extent of his interest in the vessel.
There are instances when the captain, although he has no interest in the ship, may enter into a loan on
bottomry on account of extreme necessity under Arts. 583 and 611 of the Code of Commerce.
The cargo owner on the other hand shall have the right to enter into loan on respondentia involving his
cargo.

IV. CONSEQUENCES OF LOSS EFFECTS OF THE LOANS

If the effects of the loans be lost due to an accident of the sea during the time, and on the occasion of
the voyage which has been designated in the contract and it is proven that the cargo was on board, then
the lender loses the right to institute the action which would pertain to him as such.
The lender, however, retains such right of action if the loss was caused by the inherent defect of the
thing, or through the fault or malice of the borrower, or through barratry on the part of the captain, or if
it was caused by the damages suffered by the vessel.
If what transpires is a shipwreck, the amount fot the payment of the loan shall be reduced to the
proceeds of the effects which have been saved but only after deducting the costs of the salvage.
If the loan should be on vessel or any of her parts, the freight earned during the voyage for which the
loan was contracted shall also be liable for its payment, as far as it may reach.

CHAPTER 11
AVERAGES

I. AVERAGES IN GENERAL
Art. 806 of the Code of Commerce considered averages as:
(a) all extraordinary or accidental expenses which may be incurred during the voyage in order to
preserve the vessel, the cargo, or both;
(b) any damages or deteriorations which the vessel may suffer from the time it ppputs 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 loaded in the port of shipment until they are unloaded in the port of their
consignment.
Petty or ordinary expenses incident to navigation shall be considered ordinary expenses to be defrayed
by the shipowner, unless there is an express agreement to the contrary.

II. SIMPLE AVERAGE

Simple average – include all the expenses and damages caused to the vessel or to her cargo whci have
not inured to the common benefit and profit of all the persons interested in the vessel and her cargo.
Since simple or particular averages do not inure to the common benefit, the owner of of the goods that
suffered the damage bears the loss.
e.g. losses suffered by the cargo either on account of inherent defect of the goods or by reason of an
accident of the sea or force majeure.

III. GENERAL AVERAGE

General or gross average – include all damages and expenses which are deliberately caused in order to
save the vessel, its cargo or both at the same time, from real and known risk.
The Supreme Court adopted the following requisites of general averages:
(a) there must be a common danger
(b) that for the common safety, part of of the vessel or of the cargo or both is sacrificed deliberately
(c) that from the expenses or damages caused follows the successful saving of the vessel and cargo
(d) that the expenses or damages should have been incurred or inflicted after taking proper legal steps
and authority
a. Common danger
It means that both the ship and the cargo are subject to the same danger, whether during the voyage, or
in the port of loading or unloading.
b. Deliberate sacrifice
There must be a voluntary sacrifice of a part for the benefit of the whole in order to justify general
average contribution.
c. Sacrifice must be successful
No general contribution can be demanded if the vessel and other cargo that are sought to be saved
were in fact not saved.
d. Compliance with legal steps
The expenses or damages should have been incurred or inflicted after taking proper legal steps and
authority as prescribed in Arts. from 813 to 815 of the Code of Commerce:
Art. 813 – there must be resolution of the captain
Art. 814 – the resolution must be entered in the log book
Art. 815 – the captain shall direct the jettison, and shall order the goods cast overboard
The Code of Commerce expressly provides that gross or general average shall be borne by those who
benefited from the sacrifice: the shipowners and the owners of the cargoes that were saved.
Contribution may also be imposed on the insurers of the vessel or cargoes that were saved as well as
lenders on bottomry or respondentia.
The owner of the goods which were sacrificed is entitled to receive the general average contribution.
However, the following goods even if sacrificed are not covered: 1) goods carried on deck; 2) goods that
are not recorded in the books or records of the vessel; and 3) fuel for the vessel if there is more than
sufficient fuel for the voyage.

IV. YORK – ANTWERP RULES

Although the Code of Commerce provisions on averages are still in force, the parties may, by stipulation
in the charter party or any written agreement, agree that the York-Antwerp Rules shall be applied.
The York-Antwerp Rules may also be used to solve controversies where no provision in the Code of
Commerce is in point because the said rules embody the custom of maritime states.
CHAPTER 12
COLLISIONS

I. CONCEPT
Collision – as applied to Maritime Commerce, is an impact or sudden contact of a vessel with another
whether both are in motion or one stationary.
Zones of collision:
(a) all the time up to the moment when the risk of collision may be said to have begun. Within this zone,
no rule is applicable because none is necessary
(b) the time between the moment when risk of collision begins and the moment when it has become a
practical certainty. The burden is on the vessel required to keep away and avoid the danger
(c) the time between the moment of actual contact. The rule is that the vessel which has forced the
privileged vessel into danger is responsible even if the privileged vessel has committed an error within
that zone

II. APPLICABLE LAW

Liabilities of shipowners and ship agents as well as the captain or crew in collision cases is governed by
the provisions of the Code of Commerce on Collision.

III. RULES ON LIABILITY

Although the liability with respect to collision is not governed by quasi-delict, liability in collision cases
are still negligence based.
In the determination of negligence, the same test of reasonable man in the position of an expert that
applies in quasi-delict. In some respect, however, the rules that apply to quasi-delict cannot be applied
in collision cases. For example, the view is that the doctrine of last clear chance and the rule on
contributory negligence cannot be applied in collision cases.
If two vessels collided each other due to fault imputable to both, each vessel must bear its own
damages, and both shall be solidarily responsible for the losses and damages occasioned to their
cargoes (Art. 827 of the Code of Commerce).
If it cannot be determined which of the two vessels was at fault resulting in collision, each of the vessels
should bear their respective damages under the doctrine of “inscrutable fault.” Neither of the carrier
may go after the other. The shipper may claim damages against the ship owners and the captains of
both vessels, having been both negligent. Their liability is solidary.
The shipowners have the right to recover damages from the masters of the vessels who were both guilty
of negligence.
Art. 835 of the Code of Commerce states that “the action for recovery of damages and losses arising
from collisions cannot be admitted without a previous protest or declaration presented by the captain
within 24 hours before the competent authority of the point where the collision took place, or of the
first port of arrival.” A maritime protest is required to be made by the master of the vessel not by the
passenger or shipper.
IV. LIMITED LIABILITY RULE
In collision cases, the law limits the liability of the shipowner and ship agent:
Art. 837 of the Code of Commerce states that “the civil liability incurred by the ship owners... shall be
understood as limited to the value of the vessel with all its appurtenances and freightage earned during
the voyage.”

CHAPTER 13
ARRIVAL UNDER STRESS AND SHIPWRECKS

I. ARRIVAL UNDER STRESS

Arrival Under Stress – under Art. 819, is the arrival of the vessel at the nearest and most convenient port
which was decided upon after determining that there is a well-founded fear of seizure, privateers, or
pirates or reason of any accident of the sea disabling it to navigate.
Steps to be taken in the determination of the propriety of an arrival under stress:
(a) the captain should determine during the voyage if there is well-founded fear of seizure, privateers
and other valid grounds;
(b) the captain shall then assemble the officers;
(c) the captain shall summon the persons interested in the cargo who may be present and who may
attend but without right to vote;
(d) the officers shall determine and agree if there is well-founded reason after examining the
circumstances. The captain shall have the deciding vote;
(e) the agreement shall be drafted and proper minutes shall be signed and entered into the log book;
(f) objections and protests shall likewise be entered in the minutes.
II. SHIPWRECKS
Shipwreck – the demolition or shattering of the vessel caused by her driving ashore or on rocks and
shoals in the midseas, or by the violence of winds and waves in tempest.
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, 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.

CHAPTER 14
SALVAGE

I. GOVERNING LAW
The law that governs salvage in this jurisdiction is Act No. 2616, otherwise known as the “Salvage Law.”

II. DEFINITION AND CONCEPT OF SALVAGE

Salvage – a service which one person renders to the owner of a ship or goods, by his own labor,
preserving the goods or the ship which the owner or those entrusted with the care of them have either
abandoned in distress at sea, or are unable to protect and secure.
Salvage is founded on equity of remunerating private and individual services performed in saving, whole
or in part, a ship or its cargo from impending peril, or recovering them after actual loss.
Kinds of salvage services:
(a) voluntary, wherein the compensation is dependent upon success
(b) rendered under a contract for a per diemor per horam wage payable at all events
(c) under a contract for compensation payable only in case of success

III. CLAIM FOR VALID SALVAGE AND ITS ELEMENTS

(a) there must be a marine peril
(b) the service is voluntarily rendered and is not required as an existing duty or from special contract
(c) and, there must be success in whole or in part or that the service rendered contributed to such
success
Additionally, Section 1 of the Salvage Law makes clear of requirement that
(d) the vessel is shipwrecked beyond the control of the crew or shall have been abandoned
Under Section 8 of the law, the following persons shall have no right to a reward:
(a) the crew of the vessel shipwrecked or which was in danger of shipwreck
(b) he who shall have commenced the salvage in spite of opposition of the captain of of his
representatives
(c) he who shall have failed to comply with the provisions of Sec. 3 of the Salvage Law.
A. Abandonment
The requirement of section 1 of the salvage Law that the vessel sought to be salvaged is shipwrecked
beyond the control of the crew or abandoned, is present when the vessel is considered a derelict.

IV. BASIS FOR ENTITLEMENT TO SALVAGE REWARD

A salvage reward should neither be too liberal nor too stingy. It should constitute a sufficient
compensation for the outlay and effort of the salvors.

V. RIGHTS AND OBLIGATIONS OF SALVORS AND OWNERS

The salvor is of course entitled of compensation for services rendered, and in the enforcement of that
right, he has, under the Salvage Law, a lien upon the property salvaged whereby he is not bound to part
with the possession of the vessel salvaged or of the cargo saved until he is paid his due compensation.
When a vessel is found at sea, deserted, and has been abandoned by the master and crew without the
intention of returning and resuming possession, she is, in the sense of the law, derelict, abandoned, and
the finder who takes possession with the intention of saving her gains a right of possession which he can
maintain against the true owner.
On the other hand, the owner of the vessel which is a derelict, does not renounce his right to the
property. There is no presumption of an intention to abandon such property rights. What the owner
abandons temporarily is his right of possession, which is thereby transferred to the salvor who becomes
bound to preserve the property with good faith and bring it to a place of safety for the owner's use.
In Sec. 3 of the Salvage Law, the salvor shall convey and deliver the vessel or merchandise as soon as
possible to the collector of customs, if the port has a collector, and otherwise to the provincial treasurer
or municipal mayor.
If the owner does not make any claim within 3 months after the publication by the authorities of a
salvage report, the thing saved shall be sold at a public auction, the proceeds shall be deposited in the
National Treasury after deducting the expenses and the proper reward to which the salvor is entitled.

CHAPTER 15
CARRIAGE OF GOODS BY SEA

I. HISTORY
COGSA was originally passed by the Congress of the United States on April 16, 1936 as Public Act. No.
521. It was later adopted on October 22, 1936 through Commonwealth Act No. 65.

II. EXTENT OF APPLICATION

When the New Civil Code took effect on August 30, 1950, the said Code became the primary law on
carriage of goods by sea.
Nevertheless, the COGSA remains to be a suppletory law for such type of transportation – international
shipping.
III. THE LAW
The most important provisions of COGSA were already discussed and cited in the earlier chapters.
· The term “goods” includes goods, wares, merchandise, and articles of every kind whatsoever, except
live animals cargo being carried on deck.

PART III
PUBLIC UTILITIES

CHAPTER 16
PUBLIC SERVICE REGULATIONS

I. CONCEPT
Public Utility – business or service engaged in regularly supplying the public with some commodity or
service of public consequence such as electricity, gas, water, transportation, telephone or telegraph
service.
As such, public utility services are impressed with public interest and concern, hence they cease to juris
privati only.
The term “public service” is therefore included in the broad concept of public utilities.
Section 13 of the Public Service Act provides the definition of public service as the term which “includes
every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation xxx and done for general business purpose any common carrier xxx.”

II. REGULATORY AGENCIES

(a) Dept. of Transportation and Communication – for operation of national railroad carriers
(b) Land Transportation Franchising Regulatory Board (LTFRB) – land transportation
(c) The Land Transportation Office (LTO) – registration of drivers and motor vehicles
(d) Maritime Industry Authority (MARINA) – water transportation
(e) Philippine Coast Guard – safety in water transportation
(f) National Telecommunications Commission – communication utilities and services
(g) Energy Regulatory Board – electric or power companies
(h) National Water and Resource Council – water resources
(i) Civil Aeronautics Board – air transportation
(j) The Air Transportation Office – maintenance and operation of airports; registers aircrafts; provides
safety regulations in air transportation
(k) Philippine Ports Authority – wharves and ports

III. BASES OF REGULATION OF PUBLIC UTILITIES

The police power of the State justifies the regulation of public utilities. Whenever private property is
used for a public purpose and is affected with public interest, it ceases to be juris privati only and
becomes subject to regulation.

IV. OWNERSHIP OF PUBLIC UTILITIES

Ownership of public utilities is subject regulation by the State.
Under Sec. 11 of Art. XII of the Constitution states that “no franchise, certificate or any other form of
authorization for the operation of public utility shall be granted except to citizens of the Philippines or to
corporations or associations organized under the laws of the Philippines at least sixty per centum (60%)
of whose capital is owned by such citizens xxx.”
The Supreme Court clarified that the limit imposed by the Constitution on foreign equity applies only to
the operation of a public utility and not to ownership of the facilities.

V. REGULATIONS OF RATES
The regulation of public utilities include the regulation of rates that they are charging to the public. This
aspect of regulation is in line with the policy of the State to protect the public against arbitrary and
excessive rates while maintaining the efficiency and quality of services rendered.
A. Non-Delegation
The power to fix the rates of public utilities is a power that has been delegated to the regulatory
administrative agencies. As such, it cannot be further delegated by the said administrative agencies.
· It should be noted, however, that EO no. 213 issued by the President of the Republic of the Philippines
on Nov. 28, 1994, instituted the deregulation of domestic shipping rates.
B. Discrimination
Discrimination in the charging of rates is not allowed under existing law and rules.

C. Standard in Fixing Rates

The only standard which the legislature is required to prescribe for the guidance of the administrative
authority is that the rate be reasonable and just.
a. Factors to Consider
The Supreme Court ruled three major factors in determining the just and reasonable rates to be charged
by a public utility:
(a) rate of return
(b) rate base
(c) the rate itself or the computed revenue to be earned based on the rate of return and rate base

VI. AUTHORITY TO OPERATE AS PUBLIC UTILITY

The power to authorize and control the operation of a public utility is admittedly a prerogative of the
legislature, since Congress is that branch of government vested with plenary powers of legislation.
A. Issuance of Certificate of Public Convenience
A certificate of public convenience is different from a certificate of public convenience and necessity in
that the former requires prior issuance of municipal franchise while the latter does not.
Basic requirements in the issuance of certificate of public convenience:
(a) the applicant must be a citizen of the Philippines, or corporations or associations organized under the
laws of the Philippines at least sixty per centum (60%) of whose capital is owned by such citizens
(b) the applicant must be financially capable of undertaking the proposed service and meeting the
responsibilities incident to its operations
(c) the applicant must prove that the operation of the public service proposed and the authorization to
do business will promote the public interest in a proper and suitable manner
Policies that may be used by the administrative body concerned in determining who among the number
of applicants is entitled to a certificate, aside from public interest, convenience and necessity as
controlling factor:
(a) Prior operator rule – protection of the first licensee's investment not to be subjected to ruinous
competition.
(b) Prior applicant rule – provides priority in the filing of application.
(c) Third operator rule – just a variation of the “prior operator rule”; instead of one prior operator, there
are two prior operators who are rendering sufficient service.
(d) Protection of investment rule – related to prior operator rule, the law aims not only to protect the
public but the operators as well.

B. Nature and Certificate of Public Convenience

Insofar as the State is concerned a certificate of public convenience constitutes neither a franchise nor a
contract, confers no property right, and is a mere license or privilege.
C. Instances When Certificate of Public Convenience is not Required:
(a) warehouses
(b) vehicles drawn by animals and bancas moved by oar, and tugboats and lighters
(c) airships within the Philippines
(d) radio companies
(e) public services owned or operated by any instrumentality of the National Government or by any
government-owned or controlled corporations
Note, however, that airlines and radio companies are now under the Civil Aeronautics Board and the
National Telecommunications Commission.
D. Transfer of Certificate
The law really requires the approval of the Public Service Commission in order that a franchise, or any
privilege pertaining thereto, may be sold or leased without infringing the certificate issued to the
grantee.
The “Registered Owner Rule” applies if the transfer of the franchise was not approved by the regulating
agency.
The Supreme Court sustained the cancellation of the certificate of public convenience:
(1) where the holder is a mere dummy;
(2) where the operator ceased operations and placed his vehicles on storage; and,
(3) where the operator totally abandoned the service.

VII. DUE PROCESS

The Public Service Commission and its successor regulatory agencies are acquired to accord parties
before them their right to administrative due process. This includes the right to give the parties
concerned notice and hearing.

CHAPTER 17
POWERS OF THE ADMINISTRATIVE AGENCIES

I. DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS

The Department of Transportation and Communications has the following powers under EO No. 125-A:
· formulate and recommend national policies and guidelines for the preparation and implementation of
integrated and comprehensive transportation and communication systems at national, regional and
local levels.
· Establish and administer comprehensive and integrated programs for transportation and
communication.
· Assess and review and provide direction to transportation and communications research and
development programs.
· Administer and enforce all laws, rules and regulations in the field of transportation and
communications
· etc.

II. LAND TRSNPORTATION FRANCHISING AND REGULATORY BOARD

The powers of the LTFRB as provided for in EO No. 202 are:
· prescribe and regulate routes of service provided by motorized vehicles in accordance with the public
land transportation development plans and programs approved by the department of Transportation
and Communications.
· issue, amend, revise, suspend or cancel Certificates of Public Convenience
· determine, prescribe and approve and periodically review and adjust, reasonable fares, rates and other
related charges.
· etc.

III. LAND TRANSPORTATION OFFICE

The law that governs registration of motor vehicles in the Philippines is republic Act No. 4136, otherwise
known as the “Land Transportation and Traffic Code” (as amended) which was enacted on June 20,
1964. The Code provides that the Land Transportation Commission shall “control as far as they apply,
the registration and operation of motor vehicles and the licensing of owners, dealers, conductors,
drivers, and similar matters.”
The main functions of LTO are:
1. inspection and registration of motor vehicles
2. Issuance of licenses and permits
3. enforcement of Land Transportation Rules and Regulations
4. adjudication of traffic cases

IV. CIVIL AERONAUTICS BOARD

The CAB as mandated under republic Act No. 776 and amended by PD No. 1462 is the agency charged
with the power to regulate the economic aspects of air transportation in the Philippines. It shall have
the general supervision and jurisdiction over air carriers as well as their properties, property rights,
equipment, and franchise.

V. AIR TRANSPORTATION OFFICE

The Air Transportation Office through its Air Safety Division has the following main functions:
1. establishes minimum safety standards on the operating methods, flight operations and maintenance
activities of foreign and domestic carrier;
2. issues certificate of registration and airworthiness of aircraft; air carrier operating certificate, air
agency certificates, and certificate of airmen licenses.
There are two(2) services in the Air Transportation Office:
1. Airways Navigation Service
2. Air Traffic Service

VI. MARITIME INDUSTRY AUTHORITY

The powers of the MARINA as defined under EO No. 125 as amended by EO No. 125-A are:
· develop and formulate plans, policies, programs, projects, standards, promotions and development of
the maritime industry
· establish, prescribe and regulate routes, zones and/or areas of operations of particular operators of
public water services
· issue certificate of public convenience for the operation of domestic and overseas water carriers
· register vessels as well as issue certificates, licenses or document necessary or incident thereto
· undertake the safety regulatory functions pertaining to vessel construction and operation
· enforce laws, prescribe and enforce rules and regulations, including penalties for violations thereof,
governing water transportation and the Philippine merchant marine
· undertake the issuance of license to qualified seamen and harbor bay river pilots
· etc.

VII. PHILIPPINE COAST GUARD

PD No. 601 issued on Dec. 09, 1974 otherwise known as the “Revised Coast Guard Law of 1974”
provides the objectives and basic functions of the Philippine Coast Guard. However, this is subject to the
changes brought about by EO No. 125 and EO No. 125-A and other special laws.
The objectives and powers of the Coast Guard are found in Sec. 2 and 5 of PD No. 601 which provide as
follows:
· enforce or assist in the enforcement of all applicable laws upon the high seas and territorial waters of
the Philippines
· enforce laws, promulgate and administer regulations for the promotion of safety of life and property
within the maritime jurisdiction of the Philippines
· develop, establish, maintain and operate with due regard to the requirements of national defense aids
to maritime navigation for the promotion of safety on and over high seas and territorial waters of the
Philippines
· etc.

VIII. PHILIPPINE PORTS AUTHORITY

PD No. 857 issued in Dec. 1975 organized the Philippine Ports Authority. The law recognized the need to
integrate and coordinate port planning, development, control and operations at the national level, and
at the same time promote the growth of regional port bodies responsive to the needs of their individual
localities.

IX. NATIONAL TELECOMMUNICATIONS COMMISSION

The NTC is the government agency created under EO No. 546 and conferred with regulatory and quasi-
judicial functions.
Primarily, the NTC is the sole body that exercises supervision, adjudication and control over
telecommunications services. It adopts and promulgates guidelines, rules, and regulations relative to the
establishment, operation and maintenance of various telecommunications facilities and services
nationwide.
NTC remains under the administartive supervision of the Department of Transportation and
Communication as an attached agency. However, with respect to its quasi-judicial functions, NTC's
decisions are appealable only and directly to the Supreme Court.