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San Beda College of Law
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MEMORY AID IN COMMERCIAL LAW

TRANSPORTATION LAWS
CONTRACT OF TRANSPORTATION/ CARRIAGE undertakes to deliver goods or passengers for

 A contract whereby a person, natural or juridical, compensation. (Home Insurance Co. vs. American
obligates to transport persons, goods, or both, from Steamship Agency, 23 SCRA 24)
one place to another, by land, air or water, for a
price or compensation.  TESTS WHETHER CARRIER IS COMMON OR
 Classifications: PRIVATE:
1. Common or Private  The SC in First Philippine Industrial Corporation
2. Goods or Passengers vs. CA (1995) reiterated the following tests:
3. For a fee (for hire) or Gratuitous 1. It must be engaged in the business of
4. Land, Water/maritime, or Air carrying goods for others as a public
5. Domestic/inter-island/coastwise or employment and must hold itself out as
International/foreign ready to engage in the transportation of
 It is a relationship which is imbued with the goods generally as a business and not as
public interest. a casual occupation;
2. It must undertake to carry goods of the
COMMON CARRIER kind to which its business in confined;
 Persons, corporations, firms or associations 3. It must undertake to carry by the method
engaged in the business of carrying or transporting by which his business is conducted and
passengers or goods or both, by land, water, or air, over its established roads; and
for compensation, offering their services to the 4. The transportation must be for hire.
public (Art. 1732, Civil Code).  In National Steel Corp. vs. CA (1997) the SC held
 Art. 1732 of the New Civil Code avoids any that the true test of a common carrier is the
distinction between one whose principal business carriage of goods or passengers provided it has
activity is the carrying of persons or goods or both space for all who opt to avail themselves of its
and one who does such carrying only as an ancillary transportation for a fee.
activity (sideline). It also avoids a distinction
between a person or enterprise offering
transportation service on a regular or scheduled COMMON CARRIER PRIVATE
basis and one offering such service on an occasional, CARRIER
episodic or unscheduled basis. 1. As to availability
Neither does the law distinguish between a Holds himself out for all Contracts with particular
carrier offering its services to the general public that people indiscriminately individuals or groups
is the general community or population and one only
who offers services or solicits business only from a 2. As to required diligence
narrow segment of the general population. Extraordinary diligence is Ordinary diligence is
A person or entity is a common carrier even if required required
he did not secure a Certificate of Public Convenience
3. As to regulation
(De Guzman vs. CA, 168 SCRA 612).
Subject to State Not subject to State
 It makes no distinction as to the means of
regulation regulation
transporting, as long as it is by land, water or air. It
does not provide that the transportation should be 4. Stipulation limiting liability
by motor vehicle. (First Philippine Industrial Parties may not agree on Parties may limit the
Corporation vs. CA) limiting the carrier’s carrier’s liability,
 One is a common carrier even if he has no fixed liability except when provided it is not
and publicly known route, maintains no terminals, provided by law contrary to law, morals
and issues no tickets (Asia Lighterage Shipping, Inc. or good customs
vs. CA). 5. Exempting circumstance
 Characteristics: Prove extraordinary caso fortuito, Art. 1174
1. Undertakes to carry for all people indifferently diligence and Art. 1733, NCC
and thus is liable for refusal without NCC
sufficient reason (Lastimoso vs. Doliente, 6.Presumption of negligence
October 20, 1961); There is a presumption No presumption of fault
2. Cannot lawfully decline to accept a particular of fault or negligence or negligence
class of goods for carriage to the prejudice
of the traffic in these goods; 7.Governing law
3. No monopoly is favored (Batangas Trans. Law on common carriers Law on obligations and
vs. Orlanes, 52 PHIL 455); contracts
4. Provides public convenience.
GOVERNING LAWS
PRIVATE CARRIER A. Domestic/inter-island/coastwise
 One which, without being engaged in the  Applicable to Land, Water, and Air transportation
business of carrying as a public employment,
COMMERCIAL LAW COMMITTEE
CHAIRPERSON: Garny Luisa Alegre  ASST. CHAIRPERSON:Jayson O’S Ramos EDP: Beatrix I. Ramos SUBJECT
HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario
(Transportation Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel
Gatdula (Banking Laws); Robespierre CU (Law on Intellectual Property)
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1. Civil Code - primary g. One who rides any part of the vehicle
2. Code of Commerce (Arts. 349, 379, 573- which is unsuitable or dangerous or which
734, 580, 806-845) - suppletory he knows is not designed or intended for
passengers.
B. International/foreign/overseas (Foreign
country to Philippines) DEFENSES OF A COMMON CARRIER IN THE
 Applicable to Water/maritime and Air CARRIAGE OF GOODS
transportation 1. CASO FORTUITO/FORCE MAJEURE
 The law of the country of destination generally  Requisites:
applies. a. Must be the proximate and only cause of
1. Civil Code - primary the loss
2. Code of Commerce - suppletory b. Exercise of due diligence to prevent or
3. Others - suppletory minimize the loss before, during or after the
a. Water/maritime: Carriage of Goods by occurrence of the disaster (Art. 1739)
Sea Act (COGSA) c. Carrier has not negligently incurred in
b. Air: Warsaw Convention delay in transporting the goods (Art. 1740)
 Fire is not considered a natural disaster or
I. NEW CIVIL CODE calamity as it arises almost invariably from some act
(Arts. 1732-1766) of man. (Eastern Shipping Lines Inc. vs. IAC)
 Mechanical defects are not force majeure if the
REQUIREMENT OF EXTRAORDINARY same was discoverable by regular and adequate
DILIGENCE inspections. (Notes and Cases on the Law on
 Rendition of service with the greatest skill and Transportation and Public Utilities, Aquino, T. &
utmost foresight. (Davao Stevedore Co. v. Hernando, R.P. 2004 ed. p.120-122)
Fernandez)
 Rationale: 2. ACTS OF PUBLIC ENEMY
1. From the nature of the business and for  Requisites:
reasons of public policy (Art. 1733) a. Must be the proximate and only cause of
2. Relationship of trust the loss
3. Business is impressed with a special b. Exercise of due diligence to prevent or
public duty minimize the loss before, during or after the
4. Possession of the goods act causing the loss, deterioration or
5. Preciousness of human life destruction of the goods (Art. 1739)
 A common carrier is not an absolute insurer of all
risks of travel. 3. NEGLIGENCE OF THE SHIPPER OR OWNER
a. Sole and proximate cause: absolute defense
COVERAGE b. Contributory: partial defense. (Art. 1741)
1. Vigilance over goods (Arts. 1734-1754); and
2. Safety of passengers (Arts. 1755-1763). 4. CHARACTER OF THE GOODS OR DEFECTS IN
THE PACKING OR IN THE CONTAINER
PASSENGER  Even if the damage should be caused by the
 A person who has entered into a contract of inherent defect/character of the goods, the common
carriage, express or implied, with the carrier. They carrier must exercise due diligence to forestall or
are entitled to extraordinary diligence from the lessen the loss. (Art. 1742)
common carrier.  The carrier which, knowing the fact of improper
 The following are not considered passengers, and packing of the goods upon ordinary observation, still
are entitled to ordinary diligence only: accepts the goods notwithstanding such condition,
a. One who has not yet boarded any part of is not relieved of liability or loss or injury resulting
a vehicle regardless of whether or not he therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258)
has purchased a ticket;
b. One who remains on a carrier for an 5. ORDER OR ACT OF PUBLIC AUTHORITY
unreasonable length of time after he has  Said public authority must have the power to
been afforded every safe opportunity to issue the order (Art. 1743). Consequently, where
alight; the officer acts without legal process, the common
c. One who has boarded by fraud, stealth, carrier will be held liable. (Ganzon v. CA 161 SCRA
or deceit; 646)
d. One who attempts to board a moving  Diligence in the selection and supervision of
vehicle, although he has a ticket, unless employees under Article 2180 of the Civil Code
the attempt be with the knowledge and cannot be interposed as a defense by the common
consent of the carrier; carrier because the liability of the carriers arises
e. One who has boarded a wrong vehicle, from the breach of the contract of carriage. The
has been properly informed of such fact, defense under said articles is applicable to
and on alighting, is injured by the carrier; negligence in quasi-delicts under Art. 2176. (Del
f. Invited guests and accommodation Prado v. Manila Electric Co., 52 Phil 900)
passengers. (Lara vs. Valencia)
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LIABILITY OF A COMMON CARRIER FOR Nature of liability
DEATH OR INJURIES TO PASSENGERS DUE TO Tort; however, Not absolute; limited
ACTS OF ITS EMPLOYEES AND OTHER The employee must be by Art. 1763
PASSENGERS OR STRANGERS on duty at the time of
the act. (Maranan v.
FOR ACTS OF OTHER Perez)
FOR ACTS OF ITS PASSENGERS OR
EMPLOYEES STRANGERS  The carrier is liable when its personnel allowed a
passenger to drive the vehicle causing it to collide
Required diligence and defense with another vehicle resulting to the injuries
Extraordinary diligence Ordinary diligence suffered by the other passengers. (MRR vs.
Ballesteros, 16 SCRA 641)
CARRIAGE OF GOODS CARRIAGE OF PASSENGERS
Parties
1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or deterioration of Death or injury to the passengers
the goods
Duration of liability
From the time the goods are unconditionally placed in The duty of a common carrier to provide safety to its
the possession of, and received by the carrier for passengers so obligates it not only during the course
transportation until the same are delivered actually or of the trip, but for so long as the passengers are
constructively by the carrier to the consignee or to thewithin its premises and where they ought to be in
person who has the right to receive them. (Art. 1736) pursuance to the contract of carriage. (LRTA v.
 It remains in full force and effect even when they Navidad, [2003])
are temporarily unloaded or stored in transit unless the All persons who remain on the premises within a
shipper or owner has made use of the right of reasonable time after leaving the conveyance are to
stoppage in transitu. (Art. 1737) be deemed passengers, and what is a reasonable
 It continues to be operative even during the time time or a reasonable delay within this rule is to be
the goods are stored in a warehouse of the carrier at determined from all the circumstances, and includes a
the place of destination until the consignee has bee reasonable time to see after his baggage and prepare
advised of the arrival of the goods and has had for his departure. (La Mallorca v. CA, 17 SCRA 739 ;
reasonable opportunity thereafter to remove them or Abiotiz Shipping Corporation v. CA, 179 SCRA 95)
otherwise dispose of them. (Art. 1738)  It is the duty of common carriers of passengers to
 Delivery of goods to the custom authorities is not stop their conveyances a reasonable length of time in
delivery to the consignee. (Lu Do v. Binamira, 101 Phil order to afford passengers an opportunity to enter,
120) and they are liable for injuries suffered from the
sudden starting up or jerking of their conveyances
while doing so. The duty which the carrier of
passengers owes to its patrons extends to persons
boarding the cars as well as to those alighting
therefrom (Dangwa Trans Co., Inc. vs. CA 202 SCRA
574).
Presumption of negligence
Art.1735 Civil Code Art.1755 Civil Code

Reason: As to when and how goods were damaged in Reason: The contract between the passenger and the
transit is a matter peculiarly within the knowledge of carrier imposes on the latter the duty to transport the
the carrier and its employees. (Mirasol v. Dollar, 53 passenger safely; hence the burden of explaining
PHIL 124) should fall on the carrier.
Mere proof of delivery of goods to a carrier in good
order and the subsequent arrival of the same goods at
the place of destination in bad order makes for a prima
facie case against the carrier. (Coastwise Lighterage
Corp. v. CA, 245 SCRA 796)

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Defenses
1. Ordinary circumstance: Exercise of 1. Exercise of extraordinary diligence (Art.

extraordinary diligence (Art. 1735) 1756)
2. Special circumstances: 2. Caso fortuito
a. Flood, storm, earthquake, lighting, or
other natural disaster or calamity (plus
force majeure)
b. Act of the public enemy in war,
whether international or civil
c. Act or omission of the shipper or the
owner of goods
d. The character of the goods or defects
in the packing or in the containers
e. Order or act of competent public
authority (Art. 1734)
Valid stipulations
1. Reduction of degree of diligence to ordinary Stipulation limiting liability when a passenger is

diligence, provided it be: carried gratuitously, but not for willful acts or gross
a) In writing, signed by the shipper or owner; negligence. (Art. 1758)
b) Supported by a valuable consideration other
than the service rendered by the carriers;
and
c) Reasonable, just and not contrary to public
policy. (Art. 1744)
2. Fixed amount of liability: A contract fixing the sum
to be recovered by the owner or shipper for the loss,
destruction or deterioration of the goods, if it is
reasonable and just under the circumstances and has
been fairly and freely agreed upon. (Art. 1750)
3. Limited liability for delay: An agreement limiting the
common carrier’s liability for delay on account of
strikes or riots (Art. 1748)
4. Stipulation limiting liability to the value of the goods
appearing in the bill of lading, unless the shipper or
owner declares a greater value. (Art. 1749)
 The diligence required in the carriage of the goods

may be reduced by only one degree, from
extraordinary to ordinary diligence or diligence of a
good father of a family. (Art. 1744, Art. 1745, no. 4)
Void stipulations
1. That the goods are transported at the risk of the Dispensing with or lessening the extraordinary
owner or shipper; responsibility of a common carrier for the safety of
2. That carrier will not be liable for any loss, passengers imposed by law by stipulation, by posting
destruction or deterioration of the goods; of notices, by statements on tickets or otherwise.
3. That the carrier need not observe any diligence (Art. 1757)
in the custody of the goods;
4. That the carrier shall exercise a degree of
diligence less than that of a good father of a family
over the movable transported;
5. That the carrier shall not be responsible for the
acts or omissions of his or its employees;
6. That the carrier’s liability for acts committed by
thieves or robbers who do not act with grave or
irresistible threat, violence or force is dispensed with

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or diminished;
7. That the carrier is not responsible for the loss,
destruction or deterioration of the goods on account
of the defective condition of the car, vehicle, ship or
other equipment used in the contract of carriage.
(Art. 1745)

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RULES ON PASSENGERS’ BAGGAGE Inc.)
IN THE CUSTODY OF IN THE CUSTODY
THE PASSENGERS OF THE COMMON  However, the carrier cannot limit its liability for
(HAND-CARRIED) CARRIER injury to, or loss of, goods shipped where such
(CHECKED-IN) injury or loss was caused by its own negligence.
Legal nature of the baggage (Shewaram vs. PAL, 17 SCRA 606)
Necessary deposit Considered as
“goods” SPECIAL RULES ON LIABILITES OF AIRLINE
Required diligence by the common carrier CARRIERS
Diligence of a depositary Extraordinary 1. In case of flight diversion due to bad weather or
(ordinary diligence) diligence other circumstances beyond the pilot’s control, the
Applicable rules relation between the carrier and the passenger
Arts. 1998 and 2000-2003 Arts. 1733-1753 continues until the latter has been landed at the
port of destination and has left the carrier’s
CONCURRING CAUSES OF ACTION ARISING premises. The carrier should necessarily exercise
FROM THE NEGLIGENT ACT OF THE COMMON extraordinary diligence in safeguarding the comfort,
CARRIER convenience and safety of its stranded passengers
1. Culpa contractual (breach of contract) until they have reached their final destination.
 Only the carrier is primarily liable and not the (Philippine Airlines vs. CA, 226 SCRA 423)
driver, because there is no privity between the 2. Even where overbooking of passengers is allowed
driver and the passenger. as a commercial practice, the airline company would
 Basis: Art.1759, NCC. still be guilty of bad faith and still be liable for
 No defense of due diligence in the selection and damages if it did not properly inform passenger that
supervision of employees. it could breach the contract of carriage even if they
were confirmed passengers. (Zalamea vs. CA, 228
2. Culpa aquiliana (quasi-delict) SCRA 23)
 The carrier and driver are solidarily liable as joint 3. An open-dated ticket constitutes a complete
tortfeasors. contract between the carrier and passenger. Hence,
 Basis: Art. 2180, NCC. the airline company is liable if it refused to confirm a
 Defense of due diligence in the selection and passenger’s flight reservation. (Singson vs. CA, 282
supervision of employees is available. Exception: SCRA 149)
maritime tort resulting in collision. (See notes on 4. An airline company which issued a confirmed
Collision) ticket to a passenger covering successive trips on
different airlines can be held liable for damages
3. Culpa criminal (criminal negligence) occasioned by “bumping off” by one of the
 The driver is primarily liable. The carrier is successive airlines. (Lufthansa German Airlines vs.
subsidiarily liable only if the driver is convicted and CA, 238 SCRA 290)
declared insolvent. 5. An airline ticket providing that carriage by
 Basis: Art. 100, RPC. successive air carriers is to be regarded as a “single
operation” is to make the issuing carrier liable for
 In case of injury to a passenger due to the the tortuous conduct of the other carrier. A printed
negligence of the driver of the bus on which he is provision in the ticket limiting liability only to its own
riding and of the driver of another vehicle, the conduct is not enough to rebut that liability. (KLM
drivers as well as the owners of the two vehicles are Royal Dutch Airlines vs. CA, 65 SCRA 237)
jointly and severally liable for damages. It makes
no difference that the liability of the bus driver and II. CODE OF COMMERCE
owner springs from contract while that of the owner
and driver of the other vehicle arises from quasi- A. OVERLAND TRANSPORTATION
delict. (Fabre vs. CA) (Arts. 349-379)
LIMITATIONS AS TO CARRIER’S LIABILITY Applicability

INVALID AS BEING VALID & 1. Domestic land and water/maritime transportation.
CONTRARY TO PUBLIC ENFORCEABLE (Pandect of Commercial Law and Jurisprudence,
POLICY Justice Jose Vitug, 1997 ed.)
1. One exempting the 1. One limiting the 2. Domestic Air Transportation. (Commercial Law
carrier from any and all liability of the carrier to Review, Cesar Villanueva, 2004 ed.)
liability for loss or an agreed valuation,
damage occasioned by its unless the shipper IMPORTANT CONCEPTS:
own negligence. declares a higher value 1. Bill of lading
2. An unqualified and pays a higher rate 2. Obligations of the carrier
limitation of liability to an of freight 3. Right of abandonment
agreed valuation. (H.E. Heacock 4. Notice of damage
Company vs. 5. Combined carrier agreement
Macondray & Company

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BILL OF LADING obliged to use the facilities of other carriers
 The written acknowledgment of receipt of goods as well as his own facilities for the purpose
and agreement to transport them to a specific place of transporting the goods from the city of
to a person named or to his order. the seller to the city of the buyer, which bill
 Rules: of lading is honored by the second and other
1. It is not indispensable for the creation of a interested carriers who do not issue their
contract of carriage. (Compania Maritima vs. own bills.
Insurance Company of North America, 12 SCRA 213) 9. Custody – One wherein the goods are
already received by the carrier but the
2. Ambiguity is construed against the carrier, the vessel indicated therein has not yet arrived
contract being one of adhesion. in the port.
10. Port – One which is issued by the carrier to
3. The consignee, although the instrument is whom the goods have been delivered, and
oftentimes drawn up only by the consignor and the vessel indicated in the bill of lading by
carrier, becomes bound by all the stipulations which the goods are to be shipped is already
contained therein by making a claim for loss on the in the port where the goods are held for
basis of said bill of lading. (Sea-Land Services Inc. shipment.
vs. IAC)  Functions:
1. Best evidence of the existence of the
4. The right of a party to recover for loss of contract of carriage of cargo (Art. 353)
shipment consigned to him under a bill of lading 2. Document of title
drawn up only by and between the shipper and the 3. Receipt of cargo
carrier, springs from either a relation of agency 4. Contract to transport and deliver goods as
between him and the shipper, or his status as stipulated
stranger in whose favor some stipulation is made in 5. Symbol of the goods
said contract, and who becomes a party thereto
when he demands fulfillment of that stipulation. (Art. OBLIGATIONS OF THE CARRIER
1311 (2), (Mendoza vs. PAL Inc.) A. Duty to accept the goods
 GENERAL RULE: A common carrier cannot
5. Acceptance of the bill of lading without dissent ordinarily refuse to carry a particular class of goods.
raises the presumption that all the terms therein  EXCEPTION: For some sufficient reason the
where brought to the knowledge of the shipper and discrimination against the traffic in such goods is
agreed to by him and, in the absence of fraud or reasonable and necessary. (Fisher vs. Yangco
mistake; he is estopped from thereafter denying Steamship Co. 31 Phil 1).
that he assented to such terms. (Notes and Cases  Instances when the carrier may validly refuse to
on the Law on Transportation and Public Utilities, accept the goods include the ff:
Aquino, T. & Hernando, R.P. 2004 ed. p.261) 1.) Goods sought to be transported are dangerous
objects, or substances including dynamite and other
 Kinds: explosives
1. On board - issued when the goods have 2.) Goods are unfit for transportation
been actually placed aboard the ship with 3.) Acceptance would result in overloading
very reasonable expectation that the 4.) Contrabands or illegal goods
shipment is as good as on its way. 5.) Goods are injurious to health
2. Received - one in which it is stated that the 6.) Goods will be exposed to untoward danger like
goods have been received for shipment with flood, capture by enemies and the like
or without specifying the vessel by which the 7.) Goods like livestock will be exposed to disease
goods are to be shipped. 8.) Strike
3. Negotiable - one in which it is stated that 9.) Failure to tender goods on time. (Notes and
the goods referred to therein will be Cases on the Law on Transportation and Public
delivered to the bearer or to the order of Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.68)
any person named therein.  In case of carriage by railway, the carrier is
4. Non-negotiable - One in which it is stated exempted from liability if carriage is insisted upon
that the goods referred to therein will be by the shipper, provided its objections are stated in
delivered to a specified person. the bill of lading.
5. Clean – One which does not indicate any  However, when a common carrier accepts cargo
defect in the goods. for shipment for valuable consideration, it takes the
6. Foul – One which contains a notation risk of delivering it in good condition as when it was
thereon indicating that the goods covered by loaded. (PAL vs. CA)
it are in bad condition.
B. Duty to deliver the goods
7. Spent – One which covers goods that  Not only to transport the goods safely but to the
already have been delivered by the carrier person indicated in the bill of lading. The goods
without a surrender of a signed copy of the should be delivered to the consignee or any other
bill. person to whom the bill of lading was validly
8. Through – One issued by the carrier who is transferred or negotiated.
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absence, Civil Code rules on prescription apply.
Time of delivery  If despite the notice of claim, the carrier refuses
Stipulated in No stipulation to pay, action must be filed in court.
Contract/Bill of 1. No bill of lading was issued:
Lading within 6 years
1. Carrier is bound to 1. Within a reasonable 2. Bill of lading was issued: within
fulfill the contract and is time. 10 years.
liable for any delay; no 2. Carrier is bound to ARTICLE 366 COGSA Sec.3 (6)
matter from what cause forward them in the 1st Applicability
it may have arisen. shipment of the same or 1. Domestic/inter- 1. International/
similar goods which he island/coastwise overseas/foreign (from
may make to the point transportation foreign country to
of delivery. (ART. 358 2. Land, water, air Phils.)
Code of Commerce) transportation Note: subject to the
3. Carriage of goods rule on Paramount
Effects of delay Clause
a. Merely suspends and generally does not 2. Water/maritime
terminate the contract of carriage transportation
b. Carrier remains duty bound to exercise 3. Carriage of goods
extraordinary diligence Notice of damage
c. Natural disaster shall not free the carrier from 1. Condition precedent 1. Not a condition
responsibility (Art.1740) 2. 24-hour period for precedent
d. If delay is without just cause, the contract claiming latent damage 2. 3-day period for
limiting the common carrier’s liability cannot be claiming latent damage
availed of in case of loss or deterioration of the Prescriptive period
goods (Art.1747) None provided; Civil One year from the date
Code applies. of delivery (delivered
RIGHT OF CONSIGNEE TO ABANDON GOODS but damaged goods),
 Instances: or date when the
1. Partial non-delivery, where the goods are vessel left port or from
useless without the others (Art. 363); the date of delivery to
2. Goods are rendered useless for sale or the arrastre (non-
consumption for the purposes for which they are delivery or loss).
properly destined (Art. 365); and
3. In case of delay through the fault of the carrier COMBINED CARRIER AGREEMENT (ART. 373)
(Art. 371).  GENERAL RULE: In case of a contract of
transportation of several legs, each carrier is
NOTICE OF DAMAGE (ART. 366) responsible for its particular leg in the contract.
 Requisites for applicability: EXCEPTION: A combined carrier agreement where
1. Domestic/inter-island/coastwise transportation a carrier makes itself liable assuming the obligations
2. Land/water/air transportation and acquiring as well the rights and causes of action
3. Carriage of goods of those which preceded it.
4. Goods shipped are damaged
 Rules:
a. Patent damage: shipper must file a claim against B. MARITIME COMMERCE
the carrier immediately upon delivery (it may be (Arts. 573-869)
oral or written)
b. Latent damage: shipper should file a claim IMPORTANT CONCEPTS:
against the carrier within 24 hours from delivery. 1. Merchant vessel
Note: These rules does not apply to misdelivery of 2. Maritime lien and Preference of Credit
goods. (Roldan vs. Lim Ponzo) 3. Doctrine of limited liability
 Purpose of notice: To inform the carrier that the 4. Causes of revocation of voyage
shipment has been damaged, and it is charged with 5. Participants in maritime commerce
liability therefore, and to give it an opportunity to 6. Charter party
make an investigation and fix responsibility while 7. Loans on bottomry and respondentia
the matter is fresh. 8. Accidents in maritime commerce
 The filing of notice of claim is a condition
precedent for recovery. MARITIME/ADMIRALTY LAW
 Shorter period may be stipulated by the parties  It is the system of laws which particularly relates
because it merely affects the shipper’s remedy and to the affairs and business of the sea, to ships, their
does not affect the liability of the carrier. crews and navigation, and to maritime conveyance
(PHILAMGEN vs. Sweetlines, Inc.) of persons and property. (Notes and Cases on the
Prescriptive Period Law on Transportation and Public Utilities, Aquino &
 Not provided by Article 366. Thus, in such Hernando, citing Francisco, p.254)

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 Maritime laws apply only to maritime trade and overseas shipping
sea voyages. (Pandect of Commercial Law and Kind of sale
Jurisprudence, Justice Jose Vitug, 1997 ed.) Judicial Judicial and
extrajudicial
 Arrastre service is not maritime in character. It Order of Preference
refers to a contract for the unloading of goods from A preferred mortgage The preferred
a vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA shall have priority over mortgage lien shall
244) all claims against the have priority over all
vessel, except the claims against the
CHARACTERISTICS OF MARITIME following preferences in vessel, except the
TRANSACTION the order stated: following preferences
1. Real - similar to transactions over real property 1. Judicial costs of the in the order stated:
with respect to effectivity against third persons proceedings; 1. Expenses and fees
which is done through registration. (Rubiso vs. 2. Taxes due the allowed and costs
Rivera, 37 Phil. 72). The evidence of real nature is Philippine Government; taxed by the court and
shown by: 1) the limitation of the liability of the 3. Salaries and wages taxes due to the
agents to the actual value of the vessel and the of the Captain and Government;
freight money; and 2) the right to retain the cargo Crew of the vessel 2. Crew’s wages;
and embargo and detention of the vessel (Luzon during its last voyage; 3. General average;
Stevedoring Corp v. CA, 156 SCRA 169); 4. General average or 4. Salvage, including
2. Hypothecary - the liability of the owner of the salvage including contract salvage;
value of the vessel is limited to the vessel itself contract salvage, 5. Maritime liens
(Doctrine of Limited Liability). bottomry loans, and arising prior in time to
indemnity due shippers the recording of the
 The real and hypothecary nature of maritime law for the value of goods preferred mortgage;
simply means that the liability of the carrier in transported but which 6. Damages arising out
connection with losses related to maritime contracts were not delivered to of tort; and
is confined to the vessel, which stands as the the consignee; 7. Preferred mortgage
guaranty for their settlement. (Aboitiz Shipping Corp. 5. Costs of repair and registered prior in time.
vs. General Accident Fire and Life Assurance Corp. equipment of the
217 SCRA 359). vessel, and provisioning
of food, supplies and
MERCHANT VESSEL fuel during its last
 Vessel engaged in maritime commerce, whether voyage; and
foreign or otherwise. (Bar Review Materials in 6. Preferred mortgages
Commercial Law, Jorge Miravite, 2002 ed.) registered prior in time.
 Constitutes property which may be acquired and
transferred by any of the means recognized by law.
They shall continue to be considered as personal  Effect of sale: All pre-existing claims in the vessel
property. (Arts. 573, 585) are terminated. They will then be satisfied from the
 They are susceptible to maritime liens such as for proceeds of the sale subject to the order of
the repair, equipping and provisioning of the vessel preference.
in the preparation of a voyage, as well as mortgage
liabilities, in satisfaction of which a vessel may be DOCTRINE OF LIMITED LIABILITY
validly arrested and sold. (Ship Mortgage Decree of (HYPOTHECARY RULE)
1978)  Cases where applicable:
1. Art. 587 – civil liability for indemnities to
MARITIME LIEN third persons
 It constitutes a present right of property in the 2. Art. 590 – indemnities from negligent acts
ship, a jus in re, to be afterward enforced in of the captain (not the shipowner or ship
admiralty by process in rem. (PNB vs. CA, 337 SCRA agent)
381) 3. Art. 837 – collision
 If the maritime lien arose prior to the recording 4. Art. 643 – liability for wages of the
of a preferred mortgage, it shall have priority over captain and the crew and for advances
the said mortgage lien. (PNB vs. CA, 337 SCRA 381) made by the ship agent if the vessel is
lost by shipwreck or capture
ORDER OF PREFERENCE IN CASE OF SALE OF  GENERAL RULE: The liability of shipowner and
VESSEL ship agent is limited to the amount of interest in
said vessel such that where vessel is entirely lost,
R.A. 6106 P.D. 1521 the obligation is extinguished. (Luzon Stevedoring v.
Effectivity date Escano, 156 SCRA 169) The interest extends to: 1)
1969 1978 the vessel itself; 2) equipments; 3) freightage; and
Applicability 4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)
Overseas shipping only Both domestic and EXCEPTIONS:
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1. Claims under Workmen’s Compensation (Abueg 3. Prohibition to receive cargo at destination;
vs. San Diego 77 Phil 730); 4. Embargo;
2. Injury or damage due to shipowner or to the 5. Inability of the vessel to navigate. (Art. 640)
concurring negligence of the shipowner and
the captain; Terms:
3. The vessel is insured (Vasquez vs. CA 138 1. Interdiction of commerce – A governmental
SCRA 553). prohibition of commercial intercourse intended
4. Expenses for repair on vessel completed before to bring about an entire cessation for the time
loss; being of all trade whatever.
5. In case there is no total loss and the vessel is 2. Blockade – A sort of circumvallation of a place
not abandoned; by which all foreign connection and
6. Collision between two negligent vessels; correspondence is, as far as human power can
effect it, to be cut off.
 Abandonment of the vessel is necessary to limit 3. Embargo – A proclamation or order of a state,
the liability of the shipowner. The only instance usually issued in time of war or threatened
were abandonment is dispensed with is when the hostilities, prohibiting the departure of ships or
vessel is entirely lost (Luzon Stevedoring vs. CA 156 goods from some or all the ports of such state
SCRA 169). until further order.
RIGHT OF SHIPOWNER OR SHIP AGENT TO PARTICIPANTS IN MARITIME COMMERCE

ABANDON VESSEL A. Shipowners and ship agents
 Instances: B. Captains and masters of the vessel
1. In case of civil liability from indemnities to third C. Officers and crew of the vessel
persons (Art. 587); D. Supercargoes
2. In case of leakage of at least ¾ of the contents E. Pilot
of a cargo containing liquids (Art. 687); and
3. In case of constructive loss of the vessel (Sec. A. SHIPOWNERS AND SHIP AGENTS
138, Insurance Code). Shipowner (proprietario)
 Person who has possession, control and
RIGHT OF ABANDONMENT management of the vessel and the consequent right
to direct her navigation and receive freight earned
SHIPOWNER OR SHIP CONSIGNEE and paid, while his possession continues.
AGENT
What may be abandoned Ship agent (naviero)
Vessel Goods shipped  Person entrusted with provisioning and
Instances representing the vessel in the port in which it may
1. In case of civil liability 1. Partial non-delivery, be found; also includes the shipowner.
from indemnities to third where the goods are  Not a mere agent under civil law; he is solidarily
persons (Art. 587); useless without the liable with the ship owner.
2. Sec. 138, Insurance others (Art. 363);  Powers and functions:
Code; 2. Goods are rendered 1. Capacity to trade;
3. In case of leakage of useless for sale or 2. Discharge duties of the captain, subject to
at least ¾ of the consumption for the Art.609;
contents of a cargo purposes for which 3. Contract in the name of the owners with
containing liquids (Art. they are properly respect to repairs, details of equipment,
687) destined (Art. 365); armament, provisions of food and fuel, and
and freight of the vessel, and all that relate to the
3. In case of delay requirements of navigation;
through the fault of the 4. Order a new voyage, make a new charter or
carrier (Art. 371). insure the vessel after obtaining authorization
Effects from the shipowner or if granted in certificate
of appointment.
1. Transfer of ownership 1. Transfer of
of the vessel from the ownership on the
Civil Liabilities of the Shipowner And Ship
shipowner to the goods from the shipper
Agent
shippers or insurer. to the carrier.
1. All contracts of the captain, whether authorized
2. In case of (2), the 2. Carrier should pay
or not, to repair, equip and provision the vessel;
insurer must pay the the shipper the market
(Art. 586)
insured as if there was value of the goods at
2. Loss and damage to the goods loaded on the
actual total loss of the the point of
vessel without prejudice to their right to free
vessel. destination.
themselves from liability by abandoning the
vessel to the creditors. (Art. 587)
CAUSES OF REVOCATION OF VOYAGE
1. War or interdiction of commerce;
Duty of Ship Agent to Discharge the Captain
2. Blockade;
and Members of the Crew
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 If the seamen contract is not for a definite period 7. Follow instructions of and render an
or voyage, he may discharge them at his discretion. accounting to the ship agent;
(Art. 603) 8. Leave the vessel last in case of wreck;
 If for a definite period, he may not discharge 9. Hold in custody properties left by
them until after the fulfillment of their contracts, deceased passengers and crew members;
except on the following grounds: 10. Comply with the requirements of customs,
a. Insubordination in serious matters; health, etc. at the port of arrival;
b. Robbery; 11. Observe rules to avoid collision;
c. Theft; 12. Demand a pilot while entering or leaving a
d. Habitual drunkenness; port. (Art. 612)
e. Damage caused to the vessel or to its
cargo through malice or manifest or proven  A ship’s captain must be accorded a reasonable
negligence. (Art. 605) measure of discretionary authority to decide what
the safety of the ship and of its crew and cargo
B. CAPTAINS AND MASTERS specifically requires on a stipulated ocean voyage
 They are the chiefs or commanders of ships. (Inter-Orient Maritime Enterprises Inc. vs. CA).
 The terms have the same meaning, but are
particularly used in accordance with the size of the  No liability for the following:
vessel governed and the scope of transportation, 1. Damages caused to the vessel or to the
i.e., large and overseas, and small and coastwise, cargo by force majeure;
respectively. 2. Obligations contracted for the repair,
 Nature of position (3-fold character): equipment, and provisioning of the vessel
1. General agent of the shipowner; unless he has expressly bound himself
2. Technical director of the vessel; personally or has signed a bill of
3. Representative of the government of the exchange or promissory note in his name.
country under whose flag he navigates. (Art. 620)
 Qualifications:
1. Filipino citizen; Solidary Liabilities of the Ship
2. Legal capacity to contract; Agent/Shipowner for Acts Done by the
3. Must have passed the required physical Captain towards Passengers and Cargoes
and mental examinations required for 1. Damages to vessel and to cargo due to
licensing him as such. (Art. 609) lack of skill and negligence;
 Inherent powers: 2. Thefts and robberies of the crew;
1. Appoint crew in the absence of ship agent; 3. Losses and fines for violation of laws;
2. Command the crew and direct the vessel 4. Damages due to mutinies;
to its port of destination; 5. Damages due to misuse of power;
3. Impose correctional punishment on those 6. For deviations;
who, while on board vessel, fail to comply 7. For arrivals under stress;
with his orders or are wanting in discipline; 8. Damages due to non-observance of
4. Make contracts for the charter of vessel in marine regulations. (Art. 618)
the absence of ship agent.
5. Supply, equip, and provision the vessel; C. OFFICERS AND CREW
and 1. Sailing Mate/First Mate
6. Order repair of vessel to enable it to 2. Second Mate
continue its voyage. (Art. 610) 3. Engineers
 Sources of funds to comply with the inherent 4. Crew
powers of the captain (in successive order):  No liability under the following circumstances:
1. From the consignee of the vessel; 1. If, before beginning voyage, captain attempts
2. From the consignee of the cargo; to change it, or a naval war with the power to
3. By drawing on the ship agent; which the vessel was destined occurs;
4. By a loan on bottomry; 2. If a disease breaks out and be officially
5. By sale of part of the cargo. (Art. 611) declared an epidemic in the port of destination;
 Duties: 3. If the vessel should change owner or captain.
1. Bring on board the proper certificate and (Art. 647)
documents and a copy of the Code of
Commerce; Sailing Mate/First Mate
2. Keep a Log Book, Accounting Book and  Second chief of the vessel who takes the place of
Freight Book; the captain in case of absence, sickness, or death
3. Examine the ship before the voyage; and shall assume all of his duties, powers and
4. Stay on board during the loading and responsibilities. (Art. 627)
unloading of the cargo;  Duties:
5. Be on deck while leaving or entering the 1. Provide himself with maps and charts with
port; astronomical tables necessary for the
6. Protest arrivals under stress and in case discharge of his duties;
of shipwreck; 2. Keep the Binnacle Book;
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3. Change the course of the voyage on  The seaman’s heirs are entitled to payment as
consultation with the captain and the follows:
officers of the boat, following the decision 1. If death is natural:
of the captain in case of disagreement; a. compensation up to time of death if
4. Responsible for all the damages caused to engaged on wage
the vessel and the cargo by reason of his b. if by voyage - half of amount if death
negligence. (Arts. 628 - 631) occurs on voyage out; and full, if on
voyage in
Second Mate c. if by shares - none, if before departure;
 Takes command of the vessel in case of the full, if after departure
inability or disqualification of the captain and the 2. if death is due to defense of vessel - full
sailing mate, assuming in such case their powers payment;
and responsibilities. 3. if captured in defense of vessel - full payment;
 Third in command 4. if captured due to carelessness - wages up to
 Duties: the date of the capture. (Art. 645)
1. Preserve the hull and rigging of the vessel;
2. Arrange well the cargo; Complement of the Vessel
3. Discipline the crew;  All persons on board, from the captain to the
4. Assign work to crew members; cabin boy, necessary for the management,
5. Inventory the rigging and equipment of maneuvers, and service, thus including the crew,
the vessel, if laid up. (Art. 632) the sailing mates, engineers, stokers and other
employees on board not having specific
Engineers designations.
 Officers of the vessel but have no authority  Does not include the passengers or the persons
except in matters referring to the motor apparatus. whom the vessel is transporting.
When two or more are hired, one of them shall be
the chief engineer. D. SUPERCARGOES
 Duties:  Persons who discharges administrative duties
1. In charge of the motor apparatus, spare assigned to him by ship agent or shippers, keeping
parts, and other instruments pertaining to an account and record of transaction as required in
the engines; the accounting book of the captain. (Art. 649)
2. Keep the engines and boilers in good
condition; E. PILOT
3. Not to change or repair the engine  A person duly qualified, and licensed, to conduct
without authority of the captain; a vessel into or out of ports, or in certain waters.
4. Inform the captain of any damage to the  The term generally connotes a person taken on
motor apparatus; board at a particular place for the purpose of
5. Keep an Engine Book; conducting a ship through a river, road or channel,
6. Supervise all personnel maintaining the or from a port.
engine. (Art. 632)  Master pro hac vice for the time being in the
command and navigation of the ship.
Crew  While in exercising his functions a pilot is in sole
 The aggregate of seamen who man a ship, or the command of the ship and supersedes the master for
ship’s company. the time being in the command and navigation of
 Hired by the ship agent, where he is present and the ship, the master does not surrender his vessel
in his absence, the captain hires them, preferring to the pilot and the pilot is not the master. There
Filipinos, and in their absence, he may take in are occasions when the master may and should
foreigners, but not exceeding 1/5 of the crew. (Art. interfere and even displace the pilot, as when the
634) pilot is obviously incompetent or intoxicated (Far
Eastern Shipping Company vs. CA).
Classes of Seaman’s Contracts  Compulsory Pilotage – States possessing harbors
1. By the voyage; have enacted laws or promulgated rules requiring
2. By the month; and vessels approaching their ports to take on board
3. By share of profits or freightage. pilots licensed under the local laws. (Notes and
Cases on the Law on Transportation and Public
Just Causes for the Discharge of Seaman Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.
While Contract Subsists 518)
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline; Liablity of Pilot
3. Repeated incapacity and negligence; GENERAL RULE: On compulsory pilotage grounds,
4. Habitual drunkenness; the Harbor Pilot is responsible for damage to a
5. Physical incapacity; vessel or to life or property due to his negligence.
6. Desertion. (Art. 637) EXCEPT:
1. Accident caused by force majeure or natural
Rules in case of Death of a Seaman calamity provided the pilot exercised prudence and
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extra diligence to prevent or minimize damages. lessee cannot give up charter party by paying
2. Countermand or overrule by the master of the the lease by paying a half of the freightage
vessel in which case the registered owner of the portion of the amount agreed upon.
vessel is liable. (Sec.11, Art.III PPA Admin Order 03- agreed upon.
85) If the leased property is The new owner is not
sold to one who knows compelled to respect the
SPECIAL CONTRACTS OF MARITIME of the existence of the charter party so long as
COMMERCE lease, the new owner he can load the vessel
1. Charter party must respect the lease. with his own cargo. (Art.
2. Bill of lading 689)
3. Contract of transportation of passengers Civil law concept Commercial law concept
on sea voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance CHARTER PARTY BILL OF LADING
An entire or complete More like a private
CHARTER PARTY
contract. receipt which the
 A contract by virtue of which the owner or agent
captain gives to accredit
binds himself to transport merchandise or persons
goods received from
for a fixed price.
persons
 A contract by which an entire ship, or some
Consensual contract Real contract
principal part thereof is let/leased by the owner to
another person for a specified time or use. (Planters
Products, Inc. vs. CA, 226 SCRA 476) BAREBOAT OR CONTRACT OF
 Parties: DEMISE CHARTER AFFREIGHTMENT
1. Ship owner or ship agent (TIME OR VOYAGE
2. Charterer CHARTER)
 Classes: Charterer becomes Owner remains liable as
1. Bareboat or demise – The charterer provides liable to others caused carrier and must answer
crew, food and fuel. The charterer is liable as if he by its negligence for any breach of duty
were the owner, except when the cause arises from Charterer regarded as Charterer is not
the unworthiness of the vessel. The shipowner owner pro hac vice for regarded as owner.
leases to the charterer the whole vessel, the voyage
transferring to the latter the entire command, Owner of vessel The vessel owner
possession and consequent control over the vessel’s relinquishes possession, retains possession,
navigation, including the master and the crew, who command and command and
thereby become the charter’s servants. It navigation to charterer navigation of the ship
transforms a common carrier into a private carrier.
 The charterer becomes the owner of the
Common carrier is Common carrier is not
vessel pro hac vice, just for that one particular
converted to private converted to a private
purpose only. Because the charterer is treated
carrier. carrier.
as owner pro hac vice, the charterer assumes
the customary rights and liabilities of the
shipowner to third persons and is held liable
for the expense of the voyage and the wages
of the seamen. PERSONS WHO MAY MAKE A CHARTER
2. Contract of Affreightment – A contract whereby 1. Owner or owners of the vessel, either in
the owner of the vessel leases part or all of its whole or in majority part, who have legal
space to haul goods for others. control and possession of the vessel
 The shipowner retains the possession, 2. Charterer may subcharter entire vessel to
command and navigation of the ship, the 3rd person only if not prohibited in original
charterer merely having use of the space in the charter. (Art.679)
vessel in return for his payment of the charter 3. Ship agent if authorized by the owner/s or
hired. given such power in the certificate of
 Kinds: appointment. (Art.598)
a. Time charter – vessel is chartered for a 4. Captain in the absence of the ship agent
fixed period of time or duration of voyage. or consignee and only if he acts in
b. Voyage or trip charter – the vessel is accordance with the instructions of the
leased for one or series of voyages agent or owner and protects the latter’s
usually for purposes of transporting goods interests. (Art.609)
for charterer.
REQUISITES OF A VALID CHARTER PARTY
1. Consent of the contracting parties
LEASE CHARTER PARTY
2. Existing vessel which should be placed at
If for a definite period, Charterer may rescind
the disposition of the shipper

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3. Freight Rescission of a Charter Party
4. Compliance with Art. 652 of the Code of At charterer’s At Fortuitous
Commerce request shipowner’s causes
(Art 688) request (Art. 690)
(Art. 689)
1. By 1. If the extra 1. War or
abandoning lay days interdiction of
Clauses Which May Be Included In a Charter the charter and terminate commerce;
Party paying half of without the 2. Blockade;
the freightage; cargo being 3. Prohibition
Jason clause Clause paramount or 2. Error in placed to receive
paramount clause tonnage or alongside the cargo;
A stipulation in a charter A clause in a charter flag; vessel; 4. Embargo;
party that in case of a party providing that the 3. Failure to 2. Sale by the and
maritime accident for COGSA shall apply, even place the owner of the 5. Inability of
which the shipowner is though the vessel at the vessel before the vessel to
not responsible by law, transportation is charterer’s loading by the navigate.
contract or otherwise, domestic, subject to the disposal; charterer;
the cargo shippers, extent that any term of 4. Return of
consignees or owners the bill of lading is the vessel due
shall contribute with the repugnant to the COGSA to pirates,
shipowner in general or applicable law, then enemies or bad
average. (Pandect of to the extent thereof the weather;
Commercial Law and provision of the bill of 5. Arrival at a
Jurisprudence, Justice lading is void. (Pandect port for
Jose Vitug, 1997 ed.) of Commercial Law and repairs.
Jurisprudence, Justice
Jose Vitug, 1997 ed.) Terms:
1. Primage - bonus to be paid to the captain after
the successful voyage.
2. Demurrage – the sum fixed in the charter party
as a remuneration to the owner of the ship for
the detention of his vessel beyond the number
of days allowed by the charter party for loading
Rights and Obligations of Parties or unloading or for sailing.
3. Deadfreight – the amount paid by or
SHIPOWNER OR CHARTERER recoverable from a charterer of a ship for the
SHIP AGENT portion of the ship’s capacity the latter
1. If the vessel is 1. To pay the agreed contracted for but failed to occupy.
chartered wholly, not to charter price; 4. Lay Days - days allowed to charter parties for
accept cargo from 2. To pay freightage loading and unloading the cargo.
others; on unboarded cargo; 5. Extra Lay Days – days which follow after the
2. To observe 3. To pay losses to lay days have elapsed.
represented capacity; others for loading
3. To unload cargo uncontracted cargo and USUAL FORMS OF CONSUMMATING
clandestinely placed illicit cargo; CONTRACTS
4. To substitute 4. To wait if the 1. C.I.F. – cost, insurance and freight;
another vessel if load is vessel needs repair; 2. F.O.B. - free on board;
less than 3/5 of 5. To pay expenses 3. F.A.S. - free alongside ship; and
capacity; for deviation. (Arts. 4. C. & F. - cost and freight.
5. To leave the port if 679-687)
the charterer does not TRANSSHIPMENT OF GOODS
bring the cargo within  The act of taking cargo out of one ship and
the lay days and extra loading it in another, or the transfer of goods from
lay days allowed; the vessel stipulated in the contract of affreightment
6. To place in a vessel to another vessel before the place of destination
in a condition to named in the contract has been reached, or the
navigate; transfer for further transportation from one ship or
7. to bring cargo to conveyance to another.
nearest neutral port in  It is not dependent on the ownership of the
case of war or blockade. transporting ships or in the change of carriers, but
(Arts. 669-678) rather on the fact of actual physical transfer of
cargo from one vessel to another.

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 If done without legal excuse, however competent Liability of the Not subject to any
and safe the vessel into which the transfer is made, borrower is contingent contingency (absolute
is a violation of contract and infringement of right of on the safe arrival of liability)
shipper and subjects carrier to liability if freight is the vessel or cargo at
lost event by cause otherwise excepted. (Magellan destination
Manufacturing vs. CA, 201 SCRA 102)
LOAN ON BOTTOMRY AND RESPONDENTIA The last lender is a The first lender is a
 A real, unilateral, aleatory contract, by virtue of preferred creditor preferred creditor
which one person lends to another a certain amount
of money or goods on things exposed to maritime WHEN LOAN ON BOTTOMRY OR
risks, which amount, with its earnings, is to be RESPONDENTIA REGARDED AS SIMPLE LOAN
returned if the things are safely transported, and 1. Lender loaned an amount larger than the
which is lost if the latter are lost. value of the object due to fraudulent
means employed by the borrower.
(ART.726)
LOAN ON LOAN ON 2. Full amount of the loan is not used for the
BOTTOMRY RESPONDENTIA cargo or given on the goods if all of them
Definition could not have been loaded, the balance
Loan made by Loan taken on security will be considered a simple loan.
shipowner or ship of the cargo laden on a (ART.727)
agent guaranteed by vessel, and repayable 3. If the effects on which the money is taken
vessel itself and upon safe arrival of is not subjected to any risk. (ART.729)
repayable upon arrival cargo at destination.
of vessel at (Art. 719) Note: Under existing laws, the parties to a loan,
destination. (Art. 719) whether ordinary or maritime, may agree on any
rate of interest. (CB Circular 905)
Who may contract
Shipowner or ship Only the owner of the
MARINE INSURANCE LOAN ON
agent. Outside of the cargo.
BOTTOMRY OR
residence of the
RESPONDENTIA
owners - the captain.
Indemnity is paid after the Indemnity is paid in
Common elements: loss has occurred advance by way of
1. Exposure of security to marine peril; a loan
2. Obligation of the debtor conditioned only In case of loss of the vessel In case of loss of
upon safe arrival of the security at the point due to a risk insured the vessel due to a
of destination. against, the obligation of marine peril, the
Forms: the insurer becomes obligation of the
1. Public instrument absolute borrower to pay is
2. Policy signed by the contracting parties and extinguished
the broker taking part therein Consensual contract Real contract
3. Private instrument (Art. 720)
Contents: Hypothecary Nature of Bottomry/
1. Kind, name and registry of the vessel; Respondentia
2. Name, surname and domicile of the captain; GENERAL RULE: The obligation of the borrower to
3. Names, surnames and domiciles of the pay the loan is extinguished if the goods given as
borrower and the lender; security are absolutely lost by reason of an accident
4. Amount of the loan and the premium of the sea, during the voyage designated, and if it is
stipulated; proven that the goods were on board.
5. Time for repayment; EXCEPTIONS:
6. Goods pledged to secure repayment; 1. Loss due to inherent defect;
7. Voyage during which the risk is run (Art.721) 2. Loss due to the barratry on the part of the
captain;
3. Loss due to the fault or malice of the borrower;
BOTTOMRY/ ORDINARY LOAN 4. The vessel was engaged in contraband; and
RESPONDENTIA (MUTUUM) 5. The cargo loaded on the vessel be different in
from that agreed upon.
Not subject to Usury Subject to Usury Law
Law Concurrence of Marine Insurance and Loan on
Bottomry/Respondentia
1. The insurable interest of the owner of a
ship hypothecated by bottomry is only the
excess of the value over the amount

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secured by bottomry. (Sec. 101, Liability
Insurance Code) The owner of the goods All the persons having
2. The value of what may be saved in case which gave rise to the an interest in the
of shipwreck shall be divided between the expense or suffered the vessel and the cargo
lender and the insurer in proportion to the damage shall bear this therein at the time of
interest of each one. (Art. 735) average. (Art. 810) the occurrence of the
average shall
Note: If a vessel is hypothecated by bottomry only contribute to satisfy
the excess is insurable, since a loan on bottomry this average. (Art. 812)
partakes of the nature likewise of an insurance  The insurers
coverage to the extent of the loan accommodation. (Art.859) and lenders
The same rule would apply to the hypothecation of on bottomry and
the cargo by respondentia. (Pandect of Commercial respondentia shall
Law and Jurisprudence, Justice Jose Vitug, 1997 ed.) likewise contribute.
(Art.732).
ACCIDENTS IN MARITIME COMMERCE Number of interests involved
1. Averages Only one interest Several interests
2. Arrival Under Stress involved involved
3. Collision Share in the damage or expense
4. Shipwreck 100% share In proportion to the
value of the owner’s
AVERAGE property saved
 An extraordinary or accidental expense incurred Right to recover
during the voyage in order to preserve the cargo, No reimbursement There may be
vessel or both, and all damages or deterioration
reimbursement
suffered by the vessel from departure to the port of
Kinds (not exclusive)
destination, and to the cargo from the port of
Art. 809 Art. 811
loading to the port of consignment. (Art. 806)
Procedure for recovery
 The person whose property has been saved must
contribute to reimburse the damage caused or 1. Assembly and
expense incurred if the situation constitutes general deliberation
average. 2. Resolution of the
 Classes: captain
1. Particular or Simple Average 3. Entry of the
2. Gross or General Average resolution in the
 Where both vessel and cargo are saved, it is logbook
general average; where only the vessel or only the 4. Detailed minutes
cargo is saved, it is particular average. 5. Delivery of the
 Expenses incurred to refloat a vessel, which minutes to the
accidentally ran aground, in order to continue its maritime judicial
voyage, do not constitute general average. Not only authority of the first
is there absence of a marine peril, common safety port, within 24 hours
factor, and deliberateness. It is the safety of the from arrival,
property, and not the voyage, which constitutes the 6. Ratification by
true foundation of general average. (A. Magsaysay, captain under oath.
Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955) (Arts. 813-814)
GOODS NOT COVERED BY GENERAL AVERAGE

PARTICULAR OR GROSS OR GENERAL EVEN IF SACRIFICED
SIMPLE 1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or
Definition
records of the vessel. (ART.855 (2))
Damages or expenses Damages or expenses
3. Fuel for the vessel if there is more than
caused to the vessel or deliberately caused in
sufficient fuel for the voyage. (Rule IX,
cargo that did not inure order to save the
York-Antwerp Rule)
to the common benefit, vessel, its cargo or
and borne by respective both from real and
Jettison
owners. (Art. 809) known risk. (Art. 811)
 Act of throwing cargo overboard in order to
Requisites
lighten the vessel.
1. common danger;  Order of goods to be cast overboard:
2. deliberate 1. Those which are on the deck, preferring
sacrifice; the heaviest one with the least utility and
3. success; value;
4. proper formalities 2. Those which are below the upper deck,
and legal steps. beginning with the one with greatest

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weight and smallest value. (Art. 815) 4. Malice,
negligence, lack
 Jettisoned goods are not res nullius nor deemed of foresight or
“abandoned” within the meaning of civil law so as to skill of captain.
be the object of occupation by salvage. (Pandect of (Art. 820)
Commercial Law and Jurisprudence, Justice Jose
Vitug, 1997 ed.)  It is the duty of the captain to continue the
 In order that the jettisoned goods may be voyage without delay after the cause of the arrival
included in the gross or general average, the under stress has ceased failing in such duty renders
existence of the cargo on board should be proven him liable. However, in case the cause has been risk
by means of the bill of lading. (Art. 816) of enemies, there must first be an assembly before
departure. (Art. 825)
York-Antwerp (Y-A) Rules on Determining  Steps:
Liability for Averages With Regard To Deck 1. Captain should determine during the
Cargo voyage if there is well founded fear of
1. Deck cargo is allowed only in seizure, privateers and other valid
domestic/coastwise/inter-island shipping, and is grounds;
prohibited in international/overseas/foreign shipping. 2. Captain shall assemble the officers and
2. If deck cargo is loaded with the consent of the summon the persons interested in the
shipper on overseas trade, it must always contribute cargo who may attend the meeting but
to general average, but should the same be without a right to vote;
jettisoned, it would not be entitled to 3. The officers shall determine and agree if
reimbursement because there is violation of the Y-A there is well-founded reason after
Rules. examining the circumstances. The
3. If deck cargo is loaded with the consent of the captain shall have the deciding vote;
shipper on coastwise shipping, it must always 4. The agreement shall be drafted and the
contribute to general average and if jettisoned proper minutes shall be signed and
would be entitled to reimbursement. entered in the log book;
 Reason: In domestic shipping, voyages are 5. Objections and protests shall likewise be
usually short and the seas are generally not rough. entered in the minutes.
In overseas shipping, the vessel is exposed for
many days to perils of the sea. COLLISION
 Impact of two vessels both of which are moving.
DOMESTIC INTERNATIONAL
Deck cargo is allowed Deck cargo is not Allision
allowed  Impact between a moving vessel and a stationary
With shipper’s consent one.
General average Particular average
Without shipper’s consent Nautical Rules to Determine Negligence
Captain is liable Captain is liable 1. When two vessels are about to enter a port,
the farther one must allow the nearer to enter
ARRIVAL UNDER STRESS (ARRIBADA) first; if they collide, the fault is presumed to be
 The arrival of a vessel at the nearest and most imputable to the one who arrived later, unless
convenient port instead of the port of destination, if it can be proved that there was no fault on its
during the voyage the vessel cannot continue the part.
trip to the port of destination. 2. When two vessels meet, the smaller should
give the right of way to the larger one.
3. A vessel leaving port should leave the way
When lawful When Who bears
clear for another which may be entering the
unlawful expenses:
same port.
4. The vessel which leaves later is presumed to
The inability to 1. Lack of The shipowner
have collided against one which has left earlier.
continue provisions due or ship agent
5. There is a presumption against the vessel
voyage is due to negligence to is liable in case
which sets sail in the night.
to lack of carry according of unlawful
6. There is a presumption against the vessel with
provisions, to usage and arrival under
spread sails which collides with another which
well-founded customs; stress. But
is at anchor and cannot move, even when the
fear of seizure, 2. Risk of they shall not
crew of the latter has received word to lift
privateers, enemy not well be liable for
anchor, when there was not sufficient time to
pirates, or known or the damages
do so or there was fear of a greater damage or
accidents of manifest caused by
other legitimate reason.
the sea 3. Defect of reason of a
7. There is a presumption against an improperly
disabling it to vessel due to lawful arrival.
moored vessel.
navigate. (Art. improper (Art. 821)
8. There is a presumption against a vessel which
819) repair; and

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71

has no buoys to indicate the location of its 4. Third vessel at fault
anchors to prevent damage to vessels which  The third vessel will be liable for losses and
may approach it. damages. (Art. 831)
9. Vessels must have “proper look-outs” or 5. Fortuitous event/force majeure
persons trained as such and who have no  No liability. Each bears its own loss. (Art. 830)
other duty aside therefrom. (Smith Bell v. CA)
 The doctrine of res ipsa loquitur applies in case a
Nautical Rules as to Sailing Vessel and moving vessel strikes a stationary object, such as a
Steamship bridge post, dock, or navigational aid. (Far Eastern
1. Where a steamship and a sailing vessel are Shipping v. CA, Luzon Stevedoring vs. CA)
approaching each other from opposite
directions, or on intersecting lines, the  Even if the cause of action against the common
steamship from the moment the sailing vessel carrier is based on quasi-delict, the defense of due
is seen, shall watch with the highest diligence diligence in the selection and supervision of
her course and movements so as to be able to employees is unavailing in case of a maritime tort
adopt such timely means of precaution as will resulting in collision. It is not a civil tort governed by
necessarily prevent the two boats from coming the Civil Code but a maritime one governed by Arts.
in contact. 826-839 of the Code of Commerce. (Manila
2. The sailing vessel is required to keep her Steamship vs. Insa Abdulhaman)
course unless the circumstances require
otherwise.  Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied in
Zones of Time in the Collision of Vessels collision cases because of Art.827 of the Code of
1. First zone – all time up to the moment when risk Commerce. (Notes and Cases on the Law on
of collision begins. Transportation and Public Utilities, Aquino, T. &
 No rule is as yet applicable for none is necessary. Hernando, R.P. 2004 ed.)
2. Second zone – time between moment when risk
of collision begins and moment it becomes a MARITIME PROTEST
practical certainty.  Condition precedent or prerequisite to recovery
 It is in this period where conduct of the vessels is of damages arising from collisions and other
primordial. It is in this zone that vessels must maritime accidents.
strictly observe nautical rules, unless a departure  It is a written statement made under oath by the
therefrom becomes necessary to avoid imminent captain of a vessel after the occurrence of an
danger. accident or disaster in which the vessel or cargo is
3. Third zone – time when collision is certain and lost or damaged, with respect to the circumstances
time of impact. attending such occurrence, for the purpose of
 An error in this zone would no longer be legally recovering losses and damages.
consequential.  Excuses for not filing protest: 1) where the
 Error in Extremis - sudden movement made by a interested person is not on board the vessel; and 2)
faultless vessel during the third zone of collision on collision time, need not be protested. (Art. 836)
with another vessel which is at fault during the 2nd  Cases applicable:
zone. Even if such sudden movement is wrong, no 1. Collision (Art. 835);
responsibility will fall on said faultless vessel. 2. Arrival under stress (Art. 612(8));
(Urrutia and Co. v. Baco River Plantation Co., 26 3. Shipwrecks (Arts. 612(15), 843);
PHIL 632) 4. Where the vessel has gone through a
hurricane or when the captain believes
Cases Covered By Collision and Allision that the cargo has suffered damages or
1. One vessel at fault averages (Art. 624).
 Vessel at fault is liable for damage caused to  Who makes: Captain
innocent vessel as well as damages suffered by the  When made: within 24 hours from the time the
owners of cargo of both vessels. (Art. 826) collision took place.
2. Both vessels at fault  Before whom made: competent authority at the
 Each vessel must bear its own loss, but the point of collision or at the first port of arrival, if in
shippers of both vessels may go against the the Philippines and to the Philippine consul, if the
shipowners who will be solidarily liable. (Art. 827) collision took place abroad. (Art. 835)
3. Vessel at fault not known
 Each vessel must bear its own loss, but the SHIPWRECK
shippers of both vessels may go against the  It is the loss of the vessel at sea as a
shipowners who will be solidarily liable. (Art. 828) consequence of its grounding, or running against an
 Doctrine of Inscrutable Fault – In case of object in sea or on the coast. It occurs when the
collision where it cannot be determined which vessel sustains injuries due to a marine peril
between the two vessels was at fault, both rendering her incapable of navigation.
vessels bear their respective damage, but both  If the wreck was due to malice, negligence or
should be solidarily liable for damage to the lack of skill of the captain, the owner of the vessel
cargo of both vessels. may demand indemnity from said captain. (Art. 841)
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 The rules on collision or allision, as may be (C.A. No. 65)
pertinent, can equally apply to shipwrecks.
APPLICABILITY
SPECIAL CONCEPTS  The transportation must be:
ARRASTRE SERVICE 1. Water/maritime transportation;
 A contract for the unloading of goods from a 2. for the carriage of goods; and
vessel. 3. overseas/international/foreign (from
 Applicability: Overseas trade only. (Commercial foreign port to Philippine port).
Law Review, C. Villanueva, 2004 ed.)  It can be applied in domestic sea transportation if
 Significance: When a person brings in cargo agreed upon by the parties. (Clause paramount or
from abroad, he cannot unload and deliver the paramount clause)
cargo by himself. The unloading must be done by
the arrastre operator, which will then deliver the IMPORTANT FEATURES:
cargo to the importer. (Commercial Law Review, C. 1. Amount of carrier’s liability
Villanueva, 2004 ed.) 2. Notice of damage
 Nature of business: It is a public utility, 3. Prescriptive period
discharging functions which are heavily invested
with public interest. AMOUNT OF CARRIER’S LIABILITY
 Liability:  Under the Sec. 4(5), the liability limit is set at
1. Similar to a warehouseman (Lua Kian v. Manila $500 per package or customary freight unit unless
Railroad) the nature and value of such goods is declared by
2. Similar to a common carrier (Northern Motors v. the shipper. This is deemed incorporated in the bill
Prince Line) of lading even if not mentioned in it. (Eastern
3. Solidary liability with the common carrier Shipping vs. IAC, 150 SCRA 463)
 Note that Art. 1749, NCC applies to
Note: In order that the arrastre operator may be domestic/inter-island/coastwise trade.
held liable, the consignee must prove that the
damage was due to the negligence and while the NOTICE OF DAMAGE (SEC. 3(6))
goods are in the custody of the arrastre operator.  Rules:
(Hartford Fire Insurance v. E. Razon, Inc.) a. Patent damage: shipper should file a claim with
the carrier immediately upon delivery
STEVEDORING SERVICE b. Latent damage: shipper should file a claim with
 The carriage of goods from the warehouse or the carrier within three days from delivery.
pier to the holds of the vessel. (Chief of Staff vs.
CIR) Note: The filing of a notice of claim is not a
 As understood in the port business, the term condition precedent.
consists of the handling of cargo from the hold of
the ship to the dock, in case of pier-side unloading; PRESCRIPTIVE PERIOD
or to a barge, in case of unloading at sea. (Anglo-Fil  Action for loss or damage to the cargo should be
Trading Corp. vs. Lazaro) brought within one year after:
 The loading on the ship of outgoing cargo is also a. Delivery of the goods (delivered but
part of stevedoring work. (Ibid.) damaged goods); or
b. The date when the goods should have
CONTAINERIZATION/ “SAID-TO-CONTAIN”/ been delivered (non-delivery). (Sec. 3[6])
“SHIPPER’S LOAD AND COUNT” SYSTEM
 System whereby the shipper loads his cargoes in  “Loss or Damage” as applied to the COGSA
a specially designed container, seals the container contemplates a situation where no delivery at all
and delivers it to the carrier for transportation. The was made by the shipper of the goods because the
carrier does not participate in the counting of the same had perished, gone out of commerce, or
merchandise for loading into the container, the disappeared in such a way that their existence is
actual loading, and the sealing of the container. (US unknown or they cannot be recovered. Thus, it is
Lines v. Comm. Of Customs, ICTSI v. Prudential inapplicable in case of misdelivery or conversion.
Guarantee) (Ang vs. American Steamship Agencies Inc.) and
 The matter of quantity, description and damage arising from delay or late delivery (Mitsui
conditions of the cargo inside the container is the O.S.K. Lines Ltd. vs. CA). In such instance the, Civil
sole responsibility of the shipper, unless there is Code rules on prescription shall apply.
stipulation to the contrary. (US Lines vs. Comm. Of
Customs, Reyma Brokerage v. Phil. Home Assurance)  The one-year prescriptive period is suspended by:
1. The express agreement of the parties
Note: In order to attribute to the carrier any (Universal Shipping Lines, Inc. vs. IAC,
damage to the shipment that may be found, 188 SCRA 170)
inspection of the goods should be done at pier-side. 2. The filing of an action in court until it is
(Bankers vs. CA) dismissed. (Stevens & Co. vs.
Nordeutscher Lloyd, 6 SCRA 180)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA
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 The one-year period shall run from delivery of c. Air way bill
the last package and is not suspended by 2. Liability of the carrier for damages
extrajudicial demand. (Dole Phils.,Inc. vs. Maritime a. Death or injury to passengers
Co.,148 SCRA 118) b. Loss or damage to baggage or goods
c. Delay
 The one-year period shall run from delivery to 3. Successive carrier agreement
the arrastre operator and not to the consignee. 4. Jurisdiction
(Union Carbide Phils, Inc. vs. Manila Railroad 5. Combined transportation agreement
Co.,SCRA 359)
PASSENGER BAGGAGE AIR
 The insurer exercising its right of subrogation is TICKET CHECK WAYBILL
bound by the one-year prescriptive period. Passenger Checked-in Goods to be
However, it does not apply to the claim against the baggage shipped
insurer for the insurance proceeds. (Fil. Merchants
Ins. Co. vs. Alejandro; Mayer Steel Pipe Corp. vs. CA) LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the accident
IV. WARSAW CONVENTION OF 1929 (WC) causing it took place on board the aircraft or in the
course of its operations of embarking or
PURPOSE: To protect the emerging air disembarking; (Art. 17)
transportation industry and to secure the uniformity 2. Destruction, loss or damage to any baggage or
of recovery by the passengers. goods, if it took place during the “transportation by
APPLICABILITY air”; (Art. 18) and
 The transportation must be:  Transportation by air – The period during which
1. International transportation; the baggage or goods are in the charge of the
2. Air transportation; and carrier, whether in an airport or on board an aircraft,
3. Carriage of passengers, baggage or goods. or, in case of a landing outside an airport, in any
 The WC shall also apply to fortuitous place whatsoever.
transportation by aircraft performed by an air It includes any transportation by land or water
transportation enterprise. outside an airport if such takes place in the
performance of a contract for transportation by air,
 International transportation - any transportation for the purpose of loading, delivery, or
in which the place of departure and the place of transshipment.
destination are situated either: 3. Delay in the transportation of passengers,
1. Within the territories of two High baggage or goods. (Art. 19)
Contracting Parties regardless of whether or
not there be a break in the transportation or Note: The Hague Protocol amended the WC by
transshipment, or removing the provision that if the airline took all
2. Within the territory of a single High necessary steps to avoid the damage, it could
Contracting Party, if there is an agreed exculpate itself completely (Art. 20(1)). (Alitalia vs.
stopping place within a territory subject to the IAC, 192 SCRA 9)
sovereignty, mandate or authority of another
power, even though that power is not a party LIMIT OF LIABILITY (Art. 22, as amended by
to the Convention. (“round trip”, Am. Jur.) Guatemala Protocol, 1971; Alitalia vs. IAC)
1. Passengers
 Transportation to be performed by several GENERAL RULE: $100,000 per passenger
successive air carriers shall be deemed to be one EXCEPTION: Agreement to a higher limit
undivided transportation, if it has been regarded by
the parties as a single operation, whether it has
been agreed upon under the form of a single
contract or of a series of contracts, and it shall not 2. Checked-in baggage
lose its international character merely because one GENERAL RULE: $20 per kilogram
contract or a series of contracts is to be performed  EXCEPTION: In case of special declaration of
entirely within a territory subject to the sovereignty, value and payment of a supplementary sum by
suzerainty, mandate, or authority of the same High consignor, carrier is liable to not more than the
Contracting Party. (Art. 1 Sec.3) declared sum unless it proves the sum is greater
than actual value.
WHEN INAPPLICABLE 3. Hand-carried baggage
1. When public policy is contradicted;  $1000/passenger
2. If the requirements under the Convention 4. Goods to be shipped
are not complied with. GENERAL RULE: $20 per kilogram
 EXCEPTION: In case of special declaration of
IMPORTANT CONCEPTS: value and payment of a supplementary sum by
1. Transportation documents consignor, carrier is liable to not more than the
a. Passenger ticket
b. Baggage check
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declared sum unless it proves the sum is greater a. Passenger or consignor can file an action
than actual value. against the first carrier and the carrier in
which the damage occurred
 An agreement relieving the carrier from liability b. Passenger or consignee can file an action
or fixing a lower limit is null and void. (Art. 23) against the last carrier and the carrier in
 Carrier is not entitled to the foregoing limit if the which the damage occurred.
damage is caused by willful misconduct or default  These carriers are jointly and severally liable.
on its part. (Art. 25) (Art. 30)
 Thus, the WC does not operate as an exclusive  A contract of international carriage by air,
enumeration of the instances of an absolute limit of although performed by different carriers under a
the extent of liability. It does not preclude the series of airline tickets constitutes a single operation.
application of the Civil Code and other pertinent Members of the International Air Transportation
local laws. It does not regulate or exclude liability Association (IATA) are under a general pool
for other breaches of contract by the carrier, or partnership agreement wherein they act as agent of
misconduct of its employees, or for some particular each other in the issuance of tickets to contracted
or exceptional type of damage. (Alitalia vs. CA) passengers to boost ticket sales worldwide and at
the same time provide passengers easy access to
 In PanAm v. IAC, the WC was applied as regards airlines which are otherwise inaccessible in some
the limitation on the carrier’s liability, there being a parts of the world. (American Airlines vs. CA)
simple loss of baggage without any improper
conduct on the part of the officials or employees of  Under a general pool partnership agreement, the
the airline or other special injury sustained by the ticket-issuing airline is the principal in a contract of
passenger. carriage while the endorsee-airline is the agent.
The obligation of the former remained and did not
 In KLM Royal v. Tuller, the WC has invariably cease even when the breach occurred not on its
been held inapplicable, or as not restrictive of the own flight but on that of another airline which had
carrier’s liability, where there was satisfactory undertaken to carry the passengers to one of their
evidence of malice or bad faith attributable to its destinations. (China Airlines vs. Chiok)
officers and employees. (Alitalia vs. IAC)
JURISDICTION
 At the option of the plaintiff, the action for
damages may be filed in the:
ACTION FOR DAMAGES a. Court of domicile of the carrier;
1. Notice of claim b. Court of its principal place of business;
 A written complaint must me made within: c. Court where it has a place of business
a. 3 days from receipt of baggage through which the contract has been made;
b. 7 days from receipt of goods or
c. In case of delay, 14 days from receipt of d. Court of the place of destination. (Art.
baggage/goods 28(1))
 The complaint is a condition precedent. Without NOTE: It is the passenger’s “ultimate destination”
the complaint, the action is barred except in case of not “an agreed stopping place” that determines the
fraud on the part of the carrier. (Art. 26) country where suit is to be filed.
 The forum of action provided in Art. 28(1) is a
2. Prescriptive period matter of jurisdiction rather than of venue. (Santos
 Action must be filed within 2 years from: III vs. Northwest; 2A C.J.S.)
a. date of arrival at the destination
b. date of expected arrival V. SALVAGE LAW (Act No. 2616)
c. date on which the transportation stopped.
(Art. 29) SALVAGE
 Two concepts:
 In United Airlines vs. Uy the two-year prescriptive 1. Services one person renders to the owner of a
period was not applied where the airline employed ship or goods, by his own labor, preserving the
delaying tactics. goods or the ship which the owner or those
entrusted with the care of them have either
RULE IN CASE OF VARIOUS SUCCESSIVE abandoned in distress at sea, or are unable to
CARRIERS protect or secure.
1. Carriage of passengers 2. Compensation allowed to persons by whose
 GENERAL RULE: Action is filed only against the voluntary assistance a ship at sea or her cargo or
carrier in which the accident or delay occurred. both have been saved in whole or in part from
 EXCEPTION: Agreement or contract whereby the impending sea peril, or such property recovered
first carrier assumed liability for the whole journey. from actual peril or loss, as in cases of shipwreck,
2. Carriage of baggage or goods derelict or recapture.
 Requisites:
1. Valid object of salvage;
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2. Object must have been exposed to marine Vessel must be Vessel need not be
peril (not perils of the ship); involved in an accident involved in an accident
3. Services rendered voluntarily (neither an
existing duty nor out of a pre-existing Fees distributed Fees belong to the
contract); among crewmen tugboat owner
4. Services are successful, total or partial.
 Subjects of Salvage:
1. Ship itself; RULES ON SALVAGE REWARD
2. Jetsam – goods which are cast into the sea, and 1. The reward is fixed by the RTC judge in the
there sink and remain under water; absence of agreement or where the latter is
3. Floatsam or Flotsam – goods which float upon excessive. (Sec. 9)
the sea when cast overboard; 2. The reward should constitute a sufficient
4. Ligan or Lagan – goods cast into the sea tied to a compensation for the outlay and effort of the
buoy, so that they may be found again by the salvors and should be liberal enough to offer
owners (p.173, Judge Diaz). an inducement to others to render services in
 Persons who have no right to a reward for similar emergencies in the future.
salvage: 3. If sold (no claim being made within 3 months
1. Crew of the vessel saved; from publication), the proceeds, after
2. Person who commenced Salvage in spite of deducting expenses and the salvage claim,
opposition of the Captain or his representative; shall go to the owner; if the latter does not
3. In accordance with Sec. 3 of the Salvage Law, claim it within 3 years, 50% of the said
a person who fails to deliver a salvaged vessel or proceeds shall go to the salvors, who shall
cargo to the Collector of Customs. divide it equitably, and the other half to the
government. (Secs. 11-12)
 Derelict – a ship or her cargo which is 4. If a vessel is the salvor, the reward shall be
abandoned and deserted at sea by those who are in distributed as follows:
charge of it, without any hope of recovering it, or a. 50% to the shipowner;
without any intention of returning to it. b. 25% to the captain; and
 The intention of those in charge must be

ascertained. If those in charge left with the c. 25% to the officers and crew in
intention of returning, or of procuring assistance, proportion to their salaries. (Sec. 13)
the property is not derelict, but if they quitted the
property with the intention of finally leaving it, it is  Taking passengers from a sinking ship, without
derelict and a change of their intention and an rendering any service in rescuing the vessel, is not a
attempt to return will not change its nature salvage service, being a duty of humanity and not
(Erlanger & Galinger vs. Swedish East Asiatic Co. for reward.
Ltd.).
VI. PUBLIC SERVICE ACT
 If it is clear that the intention to return is slight, (C.A. No. 146)
the salvage which was done thereafter is considered
valid. (Notes and Cases on the Law on PURPOSES:
Transportation and Public Utilities, Aquino, T. & 1. To secure adequate, sustained service for
Hernando, R.P. 2004 ed. p. 616) the public at the least possible cost;
2. To protect the public against
CONTRACT OF TOWAGE unreasonable charges and poor,
 A contract whereby one vessel, usually motorized, inefficient service;
pulls another, whether loaded or not with 3. To protect and secure investments in
merchandise, from one place to another, for a public services;
compensation. It is a contract for services rather 4. To prevent ruinous competition.
than a contract of carriage.
AUTHORITY TO OPERATE PUBLIC SERVICES
 GENERAL RULE: No public service shall operate
SALVAGE TOWAGE without having been issued a certificate of public
convenience or a certificate of public convenience
Governed by special Governed by Civil Code and necessity.
law (Act No. 2616) on contract of lease EXCEPTIONS:
1. Warehouses;
Requires success, Success is not required 2. Animal drawn vehicles and bancas moved
otherwise no payment by oar or sail;
3. Airships, except for the fixing of maximum
Must be done with the Only the consent of rates for fare and freight;
consent of the the tugboat owner is 4. Radio companies, except for rates fixing;
captain/crewmen needed 5. Public services owned or operated by the
government, except as to rates fixing;

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6. Ice plants; and REQUREMENTS FOR GRANTING CPC OR CPCN
7. Public markets. 1. Applicant must be a citizen of the Philippines or
a corporation or entity 60% of the capital of
PUBLIC SERVICE which is owned by such citizens;
 A person who owns, operates, manages or 2. Applicant must prove public necessity;
controls in the Philippines for hire or compensation, 3. Applicant must prove that the operation of the
with general or limited clientele, whether permanent, public service proposed and the authorization
occasional or accidental, and done for general to do business will promote the public interest
business purposes, any common carrier or public on a proper and suitable manner;
utility, ice plants, power and water supplies, 4. Applicant must have sufficient financial
communication and similar public services. (Sec. capability to undertake the proposed services
13b, CA 146) and meeting the responsibilities incident to its
 A casual or incidental service devoid of public operation.
character and interest is not brought within the
category. The question depends on such factors as
the extent of services, whether such person or POWERS POWERS
company has held himself or itself out as ready to REQUIRING PRIOR EXERCISABLE
serve the public or a portion of the public generally. NOTICE AND WITHOUT PRIOR
(Luzon Stevedoring vs. PSC) HEARING NOTICE AND
HEARING
NOTE: The Public Service Commission created
under the Public Service Law has already been 1. Issuance of CPC 1. Investigation any
abolished under P.D. No. 1 and other issuances. It or CPCN; matter concerning
has been replaced by the following government 2. Fixing of rates, public service;
agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB; tolls, and charges; 2. Requiring
NWRC; CAB; and MIA. 3. Setting up of operators to furnish
standards and safe, adequate, and
classifications; proper service;
CERTIFICATE OF CERTIFICATE OF 4. Establishment of 3. Requiring public
PUBLIC PUBLIC rules to secure services to pay
CONVENIENCE CONVENIENCE AND accuracy of all meters expenses of
(CPC) NECESSITY (CPCN) and all measuring investigation;
appliances; 4. Valuation of
5. Issuance of properties of public
An authorization An authorization orders requiring utilities;
issued by the issued by the establishment or 5. Examination and
appropriate appropriate maintenance of test of measuring
government agency for government agency for extension of facilities; appliances;
the operation of public the operation of public 6. Revocation, or 6. Grant of special
services for which no service for which a modification of CPC or permits to make extra
franchise, either prior franchise is CPCN; or special trips in
municipal or required by law; e.g. 7. Suspension of CPC territories specified in
legislative, is required telephone and other or CPCN, except when the certificate;
by law, e.g., common services. it is necessary to 7. Uniform
carriers. avoid serious and accounting system and
irreparable damage or furnishing of annual
inconvenience to the reports;
public or private 8. Compelling
 A CPC or a CPCN constitutes neither a franchise interest, in which compliance with the
nor a contract, confers no property right, and is a case, a suspension laws and regulations.
mere license or a privilege. The holder of said not more than 30
certificate does not acquire a property right in the days may be ordered,
route covered thereby. Nor does it confer upon the prior to the hearing.
holder any proprietary right or interest or franchise (Soriano v. Medina,
in the public highways. Revocation of this certificate 164 SCRA 36)
deprives him of no vested right. New and additional
burdens, alteration of the certificate, or even UNLAWFUL ACTS OF PUBLIC UTILITY
revocation or annulment thereof is reserved to the COMPANIES
State. (Luque vs. Villegas, 30 SCRA 408) 1. Engagement in public service business without
first securing the proper certificate;
 It is a “property” and has a considerable value 2. Providing or maintaining unsafe, improper or
and can be the subject of sale or attachment. inadequate service as determined by the
(Cogeo-Cubao Operators and Drivers Assn. vs. CA, proper authority;
207 SCRA 343, Raymundo vs. Luneta Motor Co.)

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77

3. Committing any act of unreasonable and unjust following requirements:
preferential treatment to any particular person, 1. One which yields to the carrier a fair
corporation or entity as determined by the return upon the value of the property
proper authority; employed in performing the service; and
4. Refusing or neglecting to carry public mail 2. One which is fair to the public for the
upon request. (Secs. 18 and 19) service rendered.
ACTS REQUIRING PRIOR APPROVAL REGISTERED OWNER RULE

1. Establish and maintain individual or joint rates;  The registered owner of a certificate of public
2. Establish and operate new units; convenience is liable to the public for the injuries or
3. Issue free tickets; damages suffered by third persons caused by the
4. Issue any stock or stock certificates operation of said vehicle, even though the same had
representing an increase of capital; been transferred to a third person.
5. Capitalize any franchise in excess of the  The registered owner is not allowed to escape
amount actually paid to the Government; responsibility by proving that a third person is the
6. Sell, alienate, mortgage or lease property, actual and real owner Reason: It would be easy for
certificates or franchise. him, by collusion with others or otherwise, to
transfer the responsibility to an indefinite person, or
 Under Sec. 20(g) of C.A. No. 146, the sale, etc. to one who possesses no property with which to
may be negotiated and completed before the respond financially for the damage or injury done.
approval by the proper authority. Its approval is not (Erezo, et al. vs. Jepte 102 Phil 103).
a condition precedent to the validity of the contract.
The approval is necessary only to protect public KABIT SYSTEM
interest.  A system whereby a person who has been
granted a certificate of public convenience allows
PRIOR OPERATOR/OLD OPERATOR RULE other persons who own motor vehicles to operate
 The rule allowing an existing franchised operator under such license, for a fee or percentage of such
to invoke a preferential right within the authorized earnings. It is void and inexistent under Art. 1409,
territory as long as he renders satisfactory and Civil Code.
economical service.  Effects:
 The policy is not to issue a certificate to a second 1. The transfer, sale, lease or assignment of the
operator to cover the same field and in competition privilege granted is valid between the
with a first operator who is rendering sufficient, contracting parties but not upon the public or
adequate and satisfactory service. The prior third persons. (Gelisan vs. Alday, 154 SCRA
operator must first be given an opportunity to 388)
improve its service, if inadequate or deficient.
 Purpose: To prevent ruinous and wasteful
competition in order that the interests of the public
would be conserved and preserved.
 It subordinates the prior applicant rule which

gives the first applicant priority only if things and
circumstances are equal.
 Where the operator either fails or neglects to

make the improvement or effect the increase in
services, especially when given the opportunity, new
operators should be given the chance to give the
services needed by the public.
PRIOR APPLICANT RULE

 Presupposes a situation when two interested
persons apply for a certificate to operate a public
utility in the same community over which no person
has as yet granted any certificate. If it turns out,
after the hearing, that the circumstances between
the two applicants are more or less equal, then the
applicant who applied ahead of the other, will be
granted the certificate.
RATE-FIXING POWER
 The rate to be fixed must be just, founded upon 2. The registered owner is primarily liable for all
conditions which are fair and reasonable to both the the consequences flowing from the operations
owner and the public. of the carrier.
 A rate is just and reasonable if it conforms to the
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78

 The public has the right to assume that the
registered owner is the actual or lawful owner
thereof. It would be very difficult and often
impossible, as a practical matter, for the public
to enforce their rights of action that they may
have for injuries inflicted by the vehicle if they
should be required to prove who the actual
owner is. (Benedicto vs. IAC, 187 SCRA 547)
3. The thrust of the law in enjoining the kabit
system is to identify the person upon whom
responsibility may be fixed with the end in view
of protecting the riding public (Lim vs. CA 373
SCRA 394).
4. The registered owner cannot recover from the
actual owner and the latter cannot obtain
transfer of the vehicle to himself, both being in
pari delicto. (Teja Marketing vs. IAC)
5. For the better protection of the public, both the
registered owner and the actual owner are
jointly and severally liable with the driver.
(Zamboanga Transportation Co. vs. CA)

HEADS:

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San Beda College of Law

MEMORY AID IN COMMERCIAL LAW

CONTRACT OF TRANSPORTATION/ CARRIAGE undertakes to deliver goods or passengers for

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

Art.1735 Civil Code Art.1755 Civil Code

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

1. Ordinary circumstance: Exercise of 1. Exercise of extraordinary diligence (Art.

1. Reduction of degree of diligence to ordinary Stipulation limiting liability when a passenger is

 The diligence required in the carriage of the goods

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

LIMITATIONS AS TO CARRIER’S LIABILITY Applicability

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

RIGHT OF SHIPOWNER OR SHIP AGENT TO PARTICIPANTS IN MARITIME COMMERCE

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

GOODS NOT COVERED BY GENERAL AVERAGE

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

MEMORY AID IN COMMERCIAL LAW

 The intention of those in charge must be

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

ACTS REQUIRING PRIOR APPROVAL REGISTERED OWNER RULE

 It subordinates the prior applicant rule which

 Where the operator either fails or neglects to

PRIOR APPLICANT RULE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

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