San Beda College of Law: Emory Id in Ommercial AW

San Beda College of Law 54
MEMORY AID IN COMMERCIAL LAW
TRANSPORTATION LAWS
CONTRACT OF TRANSPORTATION/ CARRIAGE compensation. (Home Insurance Co. vs. American

 A contract whereby a person, natural or juridical, Steamship Agency, 23 SCRA 24)
obligates to transport persons, goods, or both, from
one place to another, by land, air or water, for a  TESTS WHETHER CARRIER IS COMMON OR
price or compensation. PRIVATE:
 Classifications:  The SC in First Philippine Industrial Corporation
1. Common or Private vs. CA (1995) reiterated the following tests:
2. Goods or Passengers 1. It must be engaged in the business of
3. For a fee (for hire) or Gratuitous carrying goods for others as a public
4. Land, Water/maritime, or Air employment and must hold itself out as
5. Domestic/inter-island/coastwise or ready to engage in the transportation of
International/foreign goods generally as a business and not as
 It is a relationship which is imbued with the a casual occupation;
public interest. 2. It must undertake to carry goods of the
kind to which its business in confined;
COMMON CARRIER 3. It must undertake to carry by the method
 Persons, corporations, firms or associations by which his business is conducted and
engaged in the business of carrying or transporting over its established roads; and
passengers or goods or both, by land, water, or air, 4. The transportation must be for hire.
for compensation, offering their services to the  In National Steel Corp. vs. CA (1997) the SC held
public (Art. 1732, Civil Code). that the true test of a common carrier is the
 Art. 1732 of the New Civil Code avoids any carriage of goods or passengers provided it has
distinction between one whose principal business space for all who opt to avail themselves of its
activity is the carrying of persons or goods or both transportation for a fee.
and one who does such carrying only as an ancillary
activity (sideline). It also avoids a distinction
between a person or enterprise offering COMMON CARRIER PRIVATE
transportation service on a regular or scheduled CARRIER
basis and one offering such service on an 1. As to availability
occasional, episodic or unscheduled basis. Holds himself out for all Contracts with particular
Neither does the law distinguish between a people indiscriminately individuals or groups
carrier offering its services to the general public that only
is the general community or population and one 2. As to required diligence
who offers services or solicits business only from a Extraordinary diligence is Ordinary diligence is
narrow segment of the general population. required required
A person or entity is a common carrier even if
3. As to regulation
he did not secure a Certificate of Public Convenience
Subject to State Not subject to State
(De Guzman vs. CA, 168 SCRA 612).
regulation regulation
 It makes no distinction as to the means of
transporting, as long as it is by land, water or air. It 4. Stipulation limiting liability
does not provide that the transportation should be Parties may not agree on Parties may limit the
by motor vehicle. (First Philippine Industrial limiting the carrier’s carrier’s liability,
Corporation vs. CA) liability except when provided it is not
 One is a common carrier even if he has no fixed provided by law contrary to law, morals
and publicly known route, maintains no terminals, or good customs
and issues no tickets (Asia Lighterage Shipping, Inc. 5. Exempting circumstance
vs. CA). Prove extraordinary Caso fortuito, Art. 1174
 Characteristics: diligence and Art. 1733, NCC
1. Undertakes to carry for all people indifferently NCC (Any event which could
and thus is liable for refusal without not be foreseen, or
sufficient reason (Lastimoso vs. Doliente, which though foreseen
October 20, 1961); is inevitable)
2. Cannot lawfully decline to accept a particular 6.Presumption of negligence
class of goods for carriage to the prejudice There is a presumption No presumption of fault
of the traffic in these goods; of fault or negligence or negligence
3. No monopoly is favored (Batangas Trans.
vs. Orlanes, 52 PHIL 455); 7.Governing law
4. Provides public convenience. Law on common carriers Law on obligations and
5. Is imbued with public interest. contracts
PRIVATE CARRIER
 One which, without being engaged in the
business of carrying as a public employment,
undertakes to deliver goods or passengers for
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)
GOVERNING LAWS COVERAGE

A. Domestic/inter-island/coastwise 1. Vigilance over goods (Arts. 1734-1754); and
 Applicable to Land, Water, and Air transportation 2. Safety of passengers (Arts. 1755-1763).
1. Civil Code - primary
2. Code of Commerce (Arts. 349, 379, 573- PASSENGER
734, 580, 806-845) – suppletory  A person who has entered into a contract of
carriage, express or implied, with the carrier. They
Article 349 – A contract of transportation by are entitled to extraordinary diligence from the
land or water ways of any kind shall be common carrier.
considered commercial:  The following are not considered passengers, and
are entitled to ordinary diligence only:
1. When it has for its object merchandise or a. One who has not yet boarded any part of
any Article of commerce. a vehicle regardless of whether or not he
2. When, whatever its object may be, the has purchased a ticket;
carrier is a merchant or is habitually b. One who remains on a carrier for an
engaged in transportation for the public. unreasonable length of time after he has
been afforded every safe opportunity to
Article 379 - Thee provisions contained in alight;
Articles 349 and following shall be c. One who has boarded by fraud, stealth,
understood as equally applicable to those or deceit;
who, although they do not personally d. One who attempts to board a moving
effect the transportation of the vehicle, although he has a ticket, unless
merchandise, contract to do so through the attempt be with the knowledge and
others, either as contractors for a consent of the carrier;
particular and definite operation, or as e. One who has boarded a wrong vehicle,
agents for transportations and has been properly informed of such fact,
conveyances. and on alighting, is injured by the carrier;
f. Invited guests and accommodation
In either case they shall be subrogated in the passengers. (Lara vs. Valencia)
place of the carriers themselves, with - Those who ride for free
respect to the obligations and g. One who rides any part of the vehicle
responsibility of the latter, as well as with which is unsuitable or dangerous or which
regard to their rights. 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
b. Contributory: partial defense. (Art. 1741)

Laws);
4. CHARACTER OF THE GOODS OR DEFECTS IN LIABILITY OF A COMMON CARRIER FOR

THE PACKING OR IN THE CONTAINER DEATH OR INJURIES TO PASSENGERS DUE TO
 Even if the damage should be caused by the ACTS OF ITS EMPLOYEES AND OTHER
inherent defect/character of the goods, the common PASSENGERS OR STRANGERS
carrier must exercise due diligence to forestall or
lessen the loss. (Art. 1742) FOR ACTS OF OTHER
 The carrier which, knowing the fact of improper FOR ACTS OF ITS PASSENGERS OR
packing of the goods upon ordinary observation, still EMPLOYEES STRANGERS
accepts the goods notwithstanding such condition,
is not relieved of liability or loss or injury resulting Required diligence and defense
therefrom. (Southern Lines, Inc. v. CA, 4 SCRA 258) Extraordinary diligence Ordinary diligence
Nature of liability
5. ORDER OR ACT OF PUBLIC AUTHORITY
Tort; however, Not absolute; limited
 Said public authority must have the power to
The employee must be by Art. 1763
issue the order (Art. 1743). Consequently, where
on duty at the time of
the officer acts without legal process, the common
the act. (Maranan v.
carrier will be held liable. (Ganzon v. CA 161 SCRA
Perez)
646)
 Diligence in the selection and supervision of
 The carrier is liable when its personnel allowed a
employees under Article 2180 of the Civil Code
passenger to drive the vehicle causing it to collide
cannot be interposed as a defense by the common
with another vehicle resulting to the injuries
carrier because the liability of the carriers arises
suffered by the other passengers. (MRR vs.
from the breach of the contract of carriage. The
Ballesteros, 16 SCRA 641)
defense under said articles is applicable to
negligence in quasi-delicts under Art. 2176. (Del
Prado v. Manila Electric Co., 52 Phil 900)
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 the within 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 been 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

Laws);
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)
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

Laws);
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
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)

Laws);
RULES ON PASSENGERS’ BAGGAGE  However, the carrier cannot limit its liability for
IN THE CUSTODY OF IN THE CUSTODY injury to, or loss of, goods shipped where such
THE PASSENGERS OF THE COMMON injury or loss was caused by its own negligence.
(HAND-CARRIED) CARRIER (Shewaram vs. PAL, 17 SCRA 606)
(CHECKED-IN)
Legal nature of the baggage SPECIAL RULES ON LIABILITES OF AIRLINE
Necessary deposit Considered as CARRIERS
“goods” 1. In case of flight diversion due to bad weather or
Required diligence by the common carrier other circumstances beyond the pilot’s control, the
Diligence of a depositary Extraordinary relation between the carrier and the passenger
(ordinary diligence) diligence continues until the latter has been landed at the
Applicable rules port of destination and has left the carrier’s
Arts. 1998 and 2000-2003 Arts. 1733-1753 premises. The carrier should necessarily exercise
extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers
CONCURRING CAUSES OF ACTION ARISING
until they have reached their final destination.
FROM THE NEGLIGENT ACT OF THE COMMON
(Philippine Airlines vs. CA, 226 SCRA 423)
CARRIER
2. Even where overbooking of passengers is allowed
1. Culpa contractual (breach of contract)
as a commercial practice, the airline company would
 Only the carrier is primarily liable and not the
still be guilty of bad faith and still be liable for
driver, because there is no privity between the
damages if it did not properly inform passenger that
driver and the passenger.
it could breach the contract of carriage even if they
 Basis: Art.1759, NCC.
were confirmed passengers. (Zalamea vs. CA, 228
 No defense of due diligence in the selection and
SCRA 23)
supervision of employees.
3. An open-dated ticket constitutes a complete
contract between the carrier and passenger. Hence,
2. Culpa aquiliana (quasi-delict)
the airline company is liable if it refused to confirm a
 The carrier and driver are solidarily liable as joint
passenger’s flight reservation. (Singson vs. CA, 282
tortfeasors. SCRA 149)
 Basis: Art. 2180, NCC.
4. An airline company which issued a confirmed
 Defense of due diligence in the selection and ticket to a passenger covering successive trips on
supervision of employees is available. Exception: different airlines can be held liable for damages
maritime tort resulting in collision. (See notes on occasioned by “bumping off” by one of the
Collision) successive airlines. (Lufthansa German Airlines vs.
CA, 238 SCRA 290)
3. Culpa criminal (criminal negligence) 5. An airline ticket providing that carriage by
 The driver is primarily liable. The carrier is successive air carriers is to be regarded as a “single
subsidiarily liable only if the driver is convicted and operation” is to make the issuing carrier liable for
declared insolvent. the tortuous conduct of the other carrier. A printed
 Basis: Art. 100, RPC. provision in the ticket limiting liability only to its own
conduct is not enough to rebut that liability. (KLM
 In case of injury to a passenger due to the Royal Dutch Airlines vs. CA, 65 SCRA 237)
negligence of the driver of the bus on which he is
riding and of the driver of another vehicle, the II. CODE OF COMMERCE
drivers as well as the owners of the two vehicles are
jointly and severally liable for damages. It makes
no difference that the liability of the bus driver and A. OVERLAND TRANSPORTATION
owner springs from contract while that of the owner (Arts. 349-379)
and driver of the other vehicle arises from quasi-
delict. (Fabre vs. CA) Applicability
1. Domestic land and water/maritime transportation.
LIMITATIONS AS TO CARRIER’S LIABILITY (Pandect of Commercial Law and Jurisprudence,
INVALID AS BEING VALID & Justice Jose Vitug, 1997 ed.)
CONTRARY TO PUBLIC ENFORCEABLE 2. Domestic Air Transportation. (Commercial Law
POLICY Review, Cesar Villanueva, 2004 ed.)
1. One exempting the 1. One limiting the
carrier from any and all liability of the carrier to IMPORTANT CONCEPTS:
liability for loss or an agreed valuation, 1. Bill of lading
damage occasioned by its unless the shipper 2. Obligations of the carrier
own negligence. declares a higher value 3. Right of abandonment
2. An unqualified and pays a higher rate 4. Notice of damage
limitation of liability to an of freight 5. Combined carrier agreement
agreed valuation. (H.E. Heacock
Company vs. BILL OF LADING
Macondray & Company  The written acknowledgment of receipt of goods
Inc.) and agreement to transport them to a specific place
to a person named or to his order.

Laws);
 Rules: own bills.

1. It is not indispensable for the creation of a 9. Custody – One wherein the goods are
contract of carriage. (Compania Maritima vs. already received by the carrier but the
Insurance Company of North America, 12 SCRA vessel indicated therein has not yet arrived
213) IN SHORT: DISPENSABLE. in the port.
10. Port – One which is issued by the carrier to
2. Ambiguity is construed against the carrier, the whom the goods have been delivered, and
contract being one of adhesion. the vessel indicated in the bill of lading by
which the goods are to be shipped is already
3. The consignee, although the instrument is in the port where the goods are held for
oftentimes drawn up only by the consignor and shipment.
carrier, becomes bound by all the stipulations  Functions:
contained therein by making a claim for loss on the 1. Best evidence of the existence of the
basis of said bill of lading. (Sea-Land Services Inc. contract of carriage of cargo (Art. 353)
vs. IAC) 2. Document of title
3. Receipt of cargo
4. The right of a party to recover for loss of 4. Contract to transport and deliver goods as
shipment consigned to him under a bill of lading stipulated
drawn up only by and between the shipper and the 5. Symbol of the goods
carrier, springs from either a relation of agency
between him and the shipper, or his status as OBLIGATIONS OF THE CARRIER
stranger in whose favor some stipulation is made in A. Duty to accept the goods
said contract, and who becomes a party thereto GENERAL RULE: A common carrier cannot
when he demands fulfillment of that stipulation. ordinarily refuse to carry a particular class of goods.
(Art. 1311 (2), (Mendoza vs. PAL Inc.) EXCEPTION: For some sufficient reason the
discrimination against the traffic in such goods is
5. Acceptance of the bill of lading without dissent reasonable and necessary. (Fisher vs. Yangco
raises the presumption that all the terms therein Steamship Co. 31 Phil 1).
where brought to the knowledge of the shipper and  Instances when the carrier may validly refuse to
agreed to by him and, in the absence of fraud or accept the goods include the ff:
mistake; he is estopped from thereafter denying 1.) Goods sought to be transported are dangerous
that he assented to such terms. (Notes and Cases objects, or substances including dynamite and other
on the Law on Transportation and Public Utilities, explosives
Aquino, T. & Hernando, R.P. 2004 ed. p.261) 2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
 Kinds: 4.) Contrabands or illegal goods
1. On board - issued when the goods have 5.) Goods are injurious to health
been actually placed aboard the ship with 6.) Goods will be exposed to untoward danger like
very reasonable expectation that the flood, capture by enemies and the like
shipment is as good as on its way. 7.) Goods like livestock will be exposed to disease
2. Received - one in which it is stated that the 8.) Strike
goods have been received for shipment with 9.) Failure to tender goods on time. (Notes and
or without specifying the vessel by which the Cases on the Law on Transportation and Public
goods are to be shipped. Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.68)
3. Negotiable - one in which it is stated that  In case of carriage by railway, the carrier is
the goods referred to therein will be exempted from liability if carriage is insisted upon
delivered to the bearer or to the order of by the shipper, provided its objections are stated in
any person named therein. the bill of lading.
4. Non-negotiable - One in which it is stated  However, when a common carrier accepts cargo
that the goods referred to therein will be for shipment for valuable consideration, it takes the
delivered to a specified person. risk of delivering it in good condition as when it was
5. Clean – One which does not indicate any loaded. (PAL vs. CA)
defect in the goods.
6. Foul – One which contains a notation B. Duty to deliver the goods
thereon indicating that the goods covered by  Not only to transport the goods safely but to the
it are in bad condition. person indicated in the bill of lading. The goods
7. Spent – One which covers goods that should be delivered to the consignee or any other
already have been delivered by the carrier person to whom the bill of lading was validly
without a surrender of a signed copy of the transferred or negotiated.
bill.
8. Through – One issued by the carrier who is Time of delivery
obliged to use the facilities of other carriers Stipulated in No stipulation
as well as his own facilities for the purpose Contract/Bill of
of transporting the goods from the city of Lading
the seller to the city of the buyer, which bill 1. Carrier is bound to 1. Within a reasonable
of lading is honored by the second and other fulfill the contract and is time.
interested carriers who do not issue their liable for any delay; no 2. Carrier is bound to

Laws);
matter from what cause forward them in the 1st ARTICLE 366 COGSA Sec.3 (6)
it may have arisen. shipment of the same or Applicability
similar goods which he 1. Domestic/inter- 1. International/
may make to the point island/coastwise overseas/foreign (from
of delivery. (ART. 358 transportation foreign country to
Code of Commerce) 2. Land, water, air Phils.)
transportation Note: subject to the
Effects of delay 3. Carriage of goods rule on Paramount
a. Merely suspends and generally does not Clause
terminate the contract of carriage 2. Water/maritime
b. Carrier remains duty bound to exercise transportation
extraordinary diligence 3. Carriage of goods
c. Natural disaster shall not free the carrier from Notice of damage
responsibility (Art.1740) 1. Condition precedent 1. Not a condition
d. If delay is without just cause, the contract 2. 24-hour period for precedent
limiting the common carrier’s liability cannot be claiming latent damage 2. 3-day period for
availed of in case of loss or deterioration of the claiming latent damage
goods (Art.1747) Prescriptive period
None provided; Civil One year from the date
RIGHT OF CONSIGNEE TO ABANDON GOODS Code applies. of delivery (delivered
 Instances: but damaged goods),
1. Partial non-delivery, where the goods are or date when the
useless without the others (Art. 363); vessel left port or from
2. Goods are rendered useless for sale or the date of delivery to
consumption for the purposes for which they are the arrastre (non-
properly destined (Art. 365); and delivery or loss).
3. In case of delay through the fault of the carrier
(Art. 371). COMBINED CARRIER AGREEMENT (ART. 373)
GENERAL RULE: In case of a contract of
NOTICE OF DAMAGE (ART. 366) transportation of several legs, each carrier is
 Requisites for applicability: responsible for its particular leg in the contract.
1. Domestic/inter-island/coastwise transportation EXCEPTION: A combined carrier agreement where
2. Land/water/air transportation a carrier makes itself liable assuming the obligations
3. Carriage of goods and acquiring as well the rights and causes of action
4. Goods shipped are damaged of those which preceded it.
 Rules:
a. Patent damage: shipper must file a claim against
the carrier immediately upon delivery (it may be B. MARITIME COMMERCE
oral or written) (Arts. 573-869)
b. Latent damage: shipper should file a claim
against the carrier within 24 hours from IMPORTANT CONCEPTS:
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
Law on Transportation and Public Utilities, Aquino &
Prescriptive Period Hernando, citing Francisco, p.254)
 Not provided by Article 366. Thus, in such
absence, Civil Code rules on prescription apply.  Maritime laws apply only to maritime trade and
 If despite the notice of claim, the carrier refuses sea voyages. (Pandect of Commercial Law and
to pay, action must be filed in court. Jurisprudence, Justice Jose Vitug, 1997 ed.)
1. No bill of lading was issued:
within 6 years  Arrastre service is not maritime in character. It
2. Bill of lading was issued: within refers to a contract for the unloading of goods from
10 years. a vessel. (ICTSI vs. Prudential Guarantee, 320 SCRA
244)

Laws);
CHARACTERISTICS OF MARITIME 1. Judicial costs of the in the order stated:

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

Laws);
 Abandonment of the vessel is necessary to limit correspondence is, as far as human power can
the liability of the shipowner. The only instance effect it, to be cut off.
were abandonment is dispensed with is when the 3. Embargo – A proclamation or order of a state,
vessel is entirely lost (Luzon Stevedoring vs. CA 156 usually issued in time of war or threatened
SCRA 169). hostilities, prohibiting the departure of ships or
goods from some or all the ports of such state
RIGHT OF SHIPOWNER OR SHIP AGENT TO until further order.
ABANDON VESSEL
 Instances: PARTICIPANTS IN MARITIME COMMERCE
1. In case of civil liability from indemnities to third A. Shipowners and ship agents
persons (Art. 587); B. Captains and masters of the vessel
2. In case of leakage of at least ¾ of the contents C. Officers and crew of the vessel
of a cargo containing liquids (Art. 687); and D. Supercargoes
3. In case of constructive loss of the vessel (Sec. E. Pilot
138, Insurance Code).
A. SHIPOWNERS AND SHIP AGENTS
RIGHT OF ABANDONMENT Shipowner (proprietario)
 Person who has possession, control and
SHIPOWNER OR SHIP CONSIGNEE management of the vessel and the consequent right
AGENT to direct her navigation and receive freight earned
What may be abandoned and paid, while his possession continues.
Vessel Goods shipped
Instances Ship agent (naviero)
1. In case of civil liability 1. Partial non-delivery,  Person entrusted with provisioning and
from indemnities to third where the goods are representing the vessel in the port in which it may
persons (Art. 587); useless without the be found; also includes the shipowner.
2. Sec. 138, Insurance others (Art. 363);  Not a mere agent under civil law; he is solidarily
Code; 2. Goods are rendered liable with the ship owner.
3. In case of leakage of useless for sale or  Powers and functions:
at least ¾ of the consumption for the 1. Capacity to trade;
contents of a cargo purposes for which 2. Discharge duties of the captain, subject to
containing liquids (Art. they are properly Art.609;
687) destined (Art. 365); 3. Contract in the name of the owners with
and respect to repairs, details of equipment,
3. In case of delay armament, provisions of food and fuel, and
through the fault of the freight of the vessel, and all that relate to the
carrier (Art. 371). requirements of navigation;
Effects 4. Order a new voyage, make a new charter or
insure the vessel after obtaining authorization
1. Transfer of ownership 1. Transfer of
from the shipowner or if granted in certificate
of the vessel from the ownership on the
of appointment.
shipowner to the goods from the shipper
shippers or insurer. to the carrier.
Civil Liabilities of the Shipowner And Ship
2. In case of (2), the 2. Carrier should pay
Agent
insurer must pay the the shipper the market
1. All contracts of the captain, whether authorized
insured as if there was value of the goods at
or not, to repair, equip and provision the
actual total loss of the the point of
vessel; (Art. 586)
vessel. destination.
2. Loss and damage to the goods loaded on the
vessel without prejudice to their right to free
CAUSES OF REVOCATION OF VOYAGE
themselves from liability by abandoning the
1. War or interdiction of commerce;
vessel to the creditors. (Art. 587)
2. Blockade; effort to cut off food, supplies, war
material or communications from a particular
Duty of Ship Agent to Discharge the Captain
area by force, either in part or totally
and Members of the Crew
3. Prohibition to receive cargo at destination;
 If the seamen contract is not for a definite period
4. Embargo; is the partial or complete prohibition
or voyage, he may discharge them at his discretion.
of commerce and trade with a particular
(Art. 603)
country or a group of countries
 If for a definite period, he may not discharge
5. Inability of the vessel to navigate. (Art. 640)
them until after the fulfillment of their contracts,
except on the following grounds:
Terms:
a. Insubordination in serious matters;
1. Interdiction of commerce – A governmental
b. Robbery;
prohibition of commercial intercourse intended
c. Theft;
to bring about an entire cessation for the time
d. Habitual drunkenness;
being of all trade whatever.
e. Damage caused to the vessel or to its
2. Blockade – A sort of circumvallation of a place
cargo through malice or manifest or proven
by which all foreign connection and
negligence. (Art. 605)

Laws);
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 3. Losses and fines for violation of laws;
agent; 4. Damages due to mutinies;
2. Command the crew and direct the vessel 5. Damages due to misuse of power;
to its port of destination; 6. For deviations;
3. Impose correctional punishment on those 7. For arrivals under stress;
who, while on board vessel, fail to comply 8. Damages due to non-observance of
with his orders or are wanting in marine regulations. (Art. 618)
discipline;
4. Make contracts for the charter of vessel in C. OFFICERS AND CREW
the absence of ship agent. 1. Sailing Mate/First Mate
5. Supply, equip, and provision the vessel; 2. Second Mate
and 3. Engineers
6. Order repair of vessel to enable it to 4. Crew
continue its voyage. (Art. 610)  No liability under the following circumstances:
 Sources of funds to comply with the inherent 1. If, before beginning voyage, captain attempts
powers of the captain (in successive order): to change it, or a naval war with the power to
1. From the consignee of the vessel; which the vessel was destined occurs;
2. From the consignee of the cargo; 2. If a disease breaks out and be officially
3. By drawing on the ship agent; declared an epidemic in the port of destination;
4. By a loan on bottomry; 3. If the vessel should change owner or captain.
5. By sale of part of the cargo. (Art. 611) (Art. 647)
 Duties:
1. Bring on board the proper certificate and Sailing Mate/First Mate
documents and a copy of the Code of  Second chief of the vessel who takes the place of
Commerce; the captain in case of absence, sickness, or death
2. Keep a Log Book, Accounting Book and and shall assume all of his duties, powers and
Freight Book; responsibilities. (Art. 627)
3. Examine the ship before the voyage;  Duties:
4. Stay on board during the loading and 1. Provide himself with maps and charts with
unloading of the cargo; astronomical tables necessary for the
5. Be on deck while leaving or entering the discharge of his duties;
port; 2. Keep the Binnacle Book;
6. Protest arrivals under stress and in case 3. Change the course of the voyage on
of shipwreck; consultation with the captain and the
7. Follow instructions of and render an officers of the boat, following the decision
accounting to the ship agent; of the captain in case of disagreement;
8. Leave the vessel last in case of wreck; 4. Responsible for all the damages caused to
9. Hold in custody properties left by the vessel and the cargo by reason of his
deceased passengers and crew members; negligence. (Arts. 628 - 631)
10. Comply with the requirements of customs,
health, etc. at the port of arrival; Second Mate
11. Observe rules to avoid collision;  Takes command of the vessel in case of the
12. Demand a pilot while entering or leaving a inability or disqualification of the captain and the
port. (Art. 612) sailing mate, assuming in such case their powers
and responsibilities.
 A ship’s captain must be accorded a reasonable  Third in command
measure of discretionary authority to decide what  Duties:
the safety of the ship and of its crew and cargo

Laws);
1. Preserve the hull and rigging of the Complement of the Vessel

vessel;  All persons on board, from the captain to the
2. Arrange well the cargo; cabin boy, necessary for the management,
3. Discipline the crew; maneuvers, and service, thus including the crew,
4. Assign work to crew members; the sailing mates, engineers, stokers and other
5. Inventory the rigging and equipment of employees on board not having specific
the vessel, if laid up. (Art. 632) designations.
 Does not include the passengers or the persons
Engineers whom the vessel is transporting.
 Officers of the vessel but have no authority
except in matters referring to the motor apparatus. D. SUPERCARGOES
When two or more are hired, one of them shall be  Persons who discharges administrative duties
the chief engineer. assigned to him by ship agent or shippers, keeping
 Duties: an account and record of transaction as required in
1. In charge of the motor apparatus, spare the accounting book of the captain. (Art. 649)
parts, and other instruments pertaining to
the engines; E. PILOT
2. Keep the engines and boilers in good  A person duly qualified, and licensed, to conduct
condition; a vessel into or out of ports, or in certain waters.
3. Not to change or repair the engine  The term generally connotes a person taken on
without authority of the captain; board at a particular place for the purpose of
4. Inform the captain of any damage to the conducting a ship through a river, road or channel,
motor apparatus; or from a port.
5. Keep an Engine Book;  Master pro hac vice for the time being in the
6. Supervise all personnel maintaining the command and navigation of the ship.
engine. (Art. 632)  While in exercising his functions a pilot is in sole
command of the ship and supersedes the master for
Crew the time being in the command and navigation of
 The aggregate of seamen who man a ship, or the the ship, the master does not surrender his vessel
ship’s company. to the pilot and the pilot is not the master. There
 Hired by the ship agent, where he is present and are occasions when the master may and should
in his absence, the captain hires them, preferring interfere and even displace the pilot, as when the
Filipinos, and in their absence, he may take in pilot is obviously incompetent or intoxicated (Far
foreigners, but not exceeding 1/5 of the crew. (Art. Eastern Shipping Company vs. CA).
634)  Compulsory Pilotage – States possessing harbors
have enacted laws or promulgated rules requiring
Classes of Seaman’s Contracts vessels approaching their ports to take on board
1. By the voyage; pilots licensed under the local laws. (Notes and
2. By the month; and Cases on the Law on Transportation and Public
3. By share of profits or freightage. Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.
518)
Just Causes for the Discharge of Seaman
While Contract Subsists Liablity of Pilot
1. Perpetration of a crime; GENERAL RULE: On compulsory pilotage grounds,
2. Repeated insubordination, want of discipline; the Harbor Pilot is responsible for damage to a
3. Repeated incapacity and negligence; vessel or to life or property due to his negligence.
4. Habitual drunkenness; EXCEPT:
5. Physical incapacity; 1. Accident caused by force majeure or natural
6. Desertion. (Art. 637) calamity provided the pilot exercised prudence and
extra diligence to prevent or minimize damages.
Rules in case of Death of a Seaman 2. Countermand or overrule by the master of the
 The seaman’s heirs are entitled to payment as vessel in which case the registered owner of the
follows: vessel is liable. (Sec.11, Art.III PPA Admin Order 03-
1. If death is natural: 85)
a. compensation up to time of death if
engaged on wage SPECIAL CONTRACTS OF MARITIME
b. if by voyage - half of amount if death COMMERCE
occurs on voyage out; and full, if on 1. Charter party
voyage in 2. Bill of lading
c. if by shares - none, if before departure; 3. Contract of transportation of passengers
full, if after departure on sea voyages
2. if death is due to defense of vessel - full 4. Loan on bottomry
payment; 5. Loan on respondentia
3. if captured in defense of vessel - full payment; 6. Marine insurance
4. if captured due to carelessness - wages up to
the date of the capture. (Art. 645)

Laws);
CHARTER PARTY goods received from

 A contract by virtue of which the owner or agent persons
binds himself to transport merchandise or persons Consensual contract Real contract
for a fixed price.
 A contract by which an entire ship, or some BAREBOAT OR CONTRACT OF
principal part thereof is let/leased by the owner to DEMISE CHARTER AFFREIGHTMENT
another person for a specified time or use. (Planters (TIME OR VOYAGE
Products, Inc. vs. CA, 226 SCRA 476) CHARTER)
 Parties: Charterer becomes Owner remains liable as
1. Ship owner or ship agent liable to others caused carrier and must answer
2. Charterer by its negligence for any breach of duty
 Classes: Charterer regarded as Charterer is not
1. Bareboat or demise – The charterer provides owner pro hac vice for regarded as owner.
crew, food and fuel. The charterer is liable as if he the voyage
were the owner, except when the cause arises from
Owner of vessel The vessel owner
the unworthiness of the vessel. The shipowner
relinquishes possession, retains possession,
leases to the charterer the whole vessel,
command and command and
transferring to the latter the entire command,
navigation to charterer navigation of the ship
possession and consequent control over the vessel’s
navigation, including the master and the crew, who
thereby become the charter’s servants. Common carrier is Common carrier is not
It transforms a common carrier into a private converted to private converted to a private
carrier. carrier. carrier.
 The charterer becomes the owner of the
vessel pro hac vice, just for that one particular
purpose only. Because the charterer is treated
as owner pro hac vice, the charterer assumes PERSONS WHO MAY MAKE A CHARTER
the customary rights and liabilities of the 1. Owner or owners of the vessel, either in
shipowner to third persons and is held liable whole or in majority part, who have legal
for the expense of the voyage and the wages control and possession of the vessel
of the seamen. 2. Charterer may subcharter entire vessel to
2. Contract of Affreightment – A contract whereby 3rd person only if not prohibited in original
the owner of the vessel leases part or all of its charter. (Art.679)
space to haul goods for others. 3. Ship agent if authorized by the owner/s or
 The shipowner retains the possession, given such power in the certificate of
command and navigation of the ship, the appointment. (Art.598)
charterer merely having use of the space in the 4. Captain in the absence of the ship agent
vessel in return for his payment of the charter or consignee and only if he acts in
hired. accordance with the instructions of the
 Kinds: agent or owner and protects the latter’s
a. Time charter – vessel is chartered for a interests. (Art.609)
fixed period of time or duration of voyage.
b. Voyage or trip charter – the vessel is REQUISITES OF A VALID CHARTER PARTY
leased for one or series of voyages 1. Consent of the contracting parties
usually for purposes of transporting goods 2. Existing vessel which should be placed at
for charterer. the disposition of the shipper
3. Freight
LEASE CHARTER PARTY 4. Compliance with Art. 652 of the Code of
If for a definite period, Charterer may rescind Commerce
lessee cannot give up charter party by paying
the lease by paying a half of the freightage ARTICLE 652. A charter party must be drawn in
portion of the amount agreed upon. duplicate and signed by the contracting parties,
agreed upon. and when either does not know how or is not able
If the leased property is The new owner is not to do so, by two witnesses at his request.
sold to one who knows compelled to respect the
of the existence of the charter party so long as
lease, the new owner he can load the vessel
must respect the lease. with his own cargo. (Art.
689)
Civil law concept Commercial law concept
CHARTER PARTY BILL OF LADING

An entire or complete More like a private
contract. receipt which the
captain gives to accredit

Laws);
Clauses Which May Be Included In a Charter the freightage; cargo being 3. Prohibition
Party 2. Error in placed to receive
tonnage or alongside the cargo;
Jason clause Clause paramount or flag; vessel; 4. Embargo;
paramount clause 3. Failure to 2. Sale by the and
A stipulation in a charter A clause in a charter place the owner of the 5. Inability of
party that in case of a party providing that the vessel at the vessel before the vessel to
maritime accident for COGSA shall apply, even charterer’s loading by the navigate.
which the shipowner is though the disposal; charterer;
not responsible by law, transportation is 4. Return of
contract or otherwise, domestic, subject to the the vessel due
the cargo shippers, extent that any term of to pirates,
consignees or owners the bill of lading is enemies or bad
shall contribute with the repugnant to the COGSA weather;
shipowner in general or applicable law, then 5. Arrival at a
average. (Pandect of to the extent thereof the port for
Commercial Law and provision of the bill of repairs.
Jurisprudence, Justice lading is void. (Pandect
Jose Vitug, 1997 ed.) of Commercial Law and Terms:
Jurisprudence, Justice 1. Primage - bonus to be paid to the captain after
Jose Vitug, 1997 ed.) the successful voyage.
2. Demurrage – the sum fixed in the charter party
as a remuneration to the owner of the ship for
the detention of his vessel beyond the number
of days allowed by the charter party for loading
or unloading or for sailing.
3. Deadfreight – the amount paid by or
Rights and Obligations of Parties recoverable from a charterer of a ship for the
portion of the ship’s capacity the latter
SHIPOWNER OR CHARTERER contracted for but failed to occupy.
SHIP AGENT 4.
1. If the vessel is 1. To pay the agreed 5. Lay Days - days allowed to charter parties for
chartered wholly, not to charter price; loading and unloading the cargo.
accept cargo from 2. To pay freightage 6. Extra Lay Days – days which follow after the
others; on unboarded cargo; lay days have elapsed.
2. To observe 3. To pay losses to
represented capacity; others for loading USUAL FORMS OF CONSUMMATING
3. To unload cargo uncontracted cargo and CONTRACTS
clandestinely placed illicit cargo; 1. C.I.F. – cost, insurance and freight;
4. To substitute 4. To wait if the 2. F.O.B. - free on board;
another vessel if load is vessel needs repair; 3. F.A.S. - free alongside ship; and
less than 3/5 of 5. To pay expenses 4. C. & F. - cost and freight.
capacity; for deviation. (Arts.
5. To leave the port if 679-687) TRANSSHIPMENT OF GOODS
the charterer does not  The act of taking cargo out of one ship and
bring the cargo within loading it in another, or the transfer of goods from
the lay days and extra the vessel stipulated in the contract of affreightment
lay days allowed; to another vessel before the place of destination
6. To place in a vessel named in the contract has been reached, or the
in a condition to transfer for further transportation from one ship or
navigate; conveyance to another.
7. to bring cargo to  It is not dependent on the ownership of the
nearest neutral port in transporting ships or in the change of carriers, but
case of war or blockade. rather on the fact of actual physical transfer of
(Arts. 669-678) cargo from one vessel to another.
 If done without legal excuse, however competent
and safe the vessel into which the transfer is made,
is a violation of contract and infringement of right of
Rescission of a Charter Party
shipper and subjects carrier to liability if freight is
At charterer’s At Fortuitous
lost event by cause otherwise excepted. (Magellan
request shipowner’s causes
Manufacturing vs. CA, 201 SCRA 102)
(Art 688) request (Art. 690)
(Art. 689)
LOAN ON BOTTOMRY AND RESPONDENTIA
1. By 1. If the extra 1. War or
 A real, unilateral, aleatory contract, by virtue of
abandoning lay days interdiction of
which one person lends to another a certain amount
the charter and terminate commerce;
of money or goods on things exposed to maritime
paying half of without the 2. Blockade;
risks, which amount, with its earnings, is to be

Laws);
returned if the things are safely transported, and could not have been loaded, the balance
which is lost if the latter are lost. will be considered a simple loan.
(ART.727)
3. If the effects on which the money is taken
LOAN ON LOAN ON is not subjected to any risk. (ART.729)
BOTTOMRY RESPONDENTIA
Definition Note: Under existing laws, the parties to a loan,
Loan made by Loan taken on security whether ordinary or maritime, may agree on any
shipowner or ship of the cargo laden on a rate of interest. (CB Circular 905)
agent guaranteed by vessel, and repayable
vessel itself and upon safe arrival of
repayable upon arrival cargo at destination. MARINE INSURANCE LOAN ON
of vessel at (Art. 719) BOTTOMRY OR
destination. (Art. 719) RESPONDENTIA
Indemnity is paid after the Indemnity is paid in
loss has occurred advance by way of
Who may contract a loan
Shipowner or ship Only the owner of the
In case of loss of the vessel In case of loss of
agent. Outside of the cargo.
due to a risk insured the vessel due to a
residence of the
against, the obligation of marine peril, the
owners - the captain.
the insurer becomes obligation of the
Common elements: absolute borrower to pay is
1. Exposure of security to marine peril; extinguished
2. Obligation of the debtor conditioned only Consensual contract Real contract
upon safe arrival of the security at the point
of destination. Hypothecary Nature of Bottomry/
Forms: Respondentia
1. Public instrument GENERAL RULE: The obligation of the borrower to
2. Policy signed by the contracting parties and pay the loan is extinguished if the goods given as
the broker taking part therein security are absolutely lost by reason of an accident
3. Private instrument (Art. 720) of the sea, during the voyage designated, and if it is
Contents: proven that the goods were on board.
1. Kind, name and registry of the vessel; EXCEPTIONS:
2. Name, surname and domicile of the captain; 1. Loss due to inherent defect;
3. Names, surnames and domiciles of the 2. Loss due to the barratry (misconduct) on the
borrower and the lender; part of the captain;
4. Amount of the loan and the premium 3. Loss due to the fault or malice of the borrower;
stipulated; 4. The vessel was engaged in contraband; and
5. Time for repayment; 5. The cargo loaded on the vessel be different in
6. Goods pledged to secure repayment; from that agreed upon.
7. Voyage during which the risk is run (Art.721)
Concurrence of Marine Insurance and Loan on
Bottomry/Respondentia
1. The insurable interest of the owner of a
BOTTOMRY/ ORDINARY LOAN ship hypothecated by bottomry is only the
RESPONDENTIA (MUTUUM) excess of the value over the amount
Not subject to Usury Subject to Usury Law secured by bottomry. (Sec. 101,
Law Insurance Code)
2. The value of what may be saved in case
Liability of the Not subject to any of shipwreck shall be divided between the
borrower is contingent contingency (absolute lender and the insurer in proportion to the
on the safe arrival of liability) interest of each one. (Art. 735)
the vessel or cargo at
destination Note: If a vessel is hypothecated by bottomry only
the excess is insurable, since a loan on bottomry
The last lender is a The first lender is a partakes of the nature likewise of an insurance
preferred creditor preferred creditor coverage to the extent of the loan accommodation.
The same rule would apply to the hypothecation of
the cargo by respondentia. (Pandect of Commercial
WHEN LOAN ON BOTTOMRY OR Law and Jurisprudence, Justice Jose Vitug, 1997
RESPONDENTIA REGARDED AS SIMPLE LOAN ed.)
1. Lender loaned an amount larger than the
value of the object due to fraudulent ACCIDENTS IN MARITIME COMMERCE
means employed by the borrower. 1. Averages
(ART.726) 2. Arrival Under Stress
2. Full amount of the loan is not used for the 3. Collision
cargo or given on the goods if all of them 4. Shipwreck

Laws);
Right to recover
AVERAGE No reimbursement There may be
 An extraordinary or accidental expense incurred reimbursement
during the voyage in order to preserve the cargo, Kinds (not exclusive)
vessel or both, and all damages or deterioration Art. 809 Art. 811
suffered by the vessel from departure to the port of Procedure for recovery
destination, and to the cargo from the port of 1. Assembly and
loading to the port of consignment. (Art. 806) deliberation
 The person whose property has been saved must 2. Resolution of the
contribute to reimburse the damage caused or captain
expense incurred if the situation constitutes general 3. Entry of the
average. resolution in the
 Classes: logbook
1. Particular or Simple Average 4. Detailed minutes
2. Gross or General Average 5. Delivery of the
 Where both vessel and cargo are saved, it is minutes to the
general average; where only the vessel or only the maritime judicial
cargo is saved, it is particular average. authority of the first
 Expenses incurred to refloat a vessel, which port, within 24 hours
accidentally ran aground, in order to continue its from arrival,
voyage, do not constitute general average. Not only 6. Ratification by
is there absence of a marine peril, common safety captain under oath.
factor, and deliberateness. It is the safety of the (Arts. 813-814)
property, and not the voyage, which constitutes the
true foundation of general average. (A. Magsaysay,
GOODS NOT COVERED BY GENERAL AVERAGE
Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)
EVEN IF SACRIFICED
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or
PARTICULAR OR GROSS OR GENERAL records of the vessel. (ART.855 (2))
SIMPLE 3. Fuel for the vessel if there is more than
Definition sufficient fuel for the voyage. (Rule IX,
Damages or expenses Damages or expenses York-Antwerp Rule)
caused to the vessel or deliberately caused in
cargo that did not inure order to save the Jettison
to the common benefit, vessel, its cargo or  Act of throwing cargo overboard in order to
and borne by respective both from real and lighten the vessel.
owners. (Art. 809) known risk. (Art. 811)  Order of goods to be cast overboard:
Requisites 1. Those which are on the deck, preferring
1. common danger; the heaviest one with the least utility and
2. deliberate value;
sacrifice; 2. Those which are below the upper deck,
3. success; beginning with the one with greatest
4. proper formalities weight and smallest value. (Art. 815)
and legal steps.
Liability  Jettisoned goods are not res nullius nor deemed
The owner of the goods All the persons having “abandoned” within the meaning of civil law so as to
which gave rise to the an interest in the be the object of occupation by salvage. (Pandect of
expense or suffered the vessel and the cargo Commercial Law and Jurisprudence, Justice Jose
damage shall bear this therein at the time of Vitug, 1997 ed.)
average. (Art. 810) the occurrence of the  In order that the jettisoned goods may be
average shall included in the gross or general average, the
contribute to satisfy existence of the cargo on board should be proven
this average. (Art. 812) by means of the bill of lading. (Art. 816)
 The insurers
(Art.859) and lenders York-Antwerp (Y-A) Rules on Determining
on bottomry and Liability for Averages With Regard To Deck
respondentia shall Cargo
likewise contribute. 1. Deck cargo is allowed only in
(Art.732). domestic/coastwise/inter-island shipping, and is
Number of interests involved prohibited in international/overseas/foreign
Only one interest Several interests shipping.
involved involved 2. If deck cargo is loaded with the consent of the
Share in the damage or expense shipper on overseas trade, it must always contribute
100% share In proportion to the to general average, but should the same be
value of the owner’s jettisoned, it would not be entitled to
property saved reimbursement because there is violation of the Y-A
Rules.

Laws);
3. If deck cargo is loaded with the consent of the examining the circumstances. The
shipper on coastwise shipping, it must always captain shall have the deciding vote;
contribute to general average and if jettisoned 4. The agreement shall be drafted and the
would be entitled to reimbursement. proper minutes shall be signed and
 Reason: In domestic shipping, voyages are entered in the log book;
usually short and the seas are generally not rough. 5. Objections and protests shall likewise be
In overseas shipping, the vessel is exposed for entered in the minutes.
many days to perils of the sea.
COLLISION
DOMESTIC INTERNATIONAL  Impact of two vessels both of which are moving.
Deck cargo is allowed Deck cargo is not
allowed Allision
With shipper’s consent  Impact between a moving vessel and a stationary
General average Particular average one.
Without shipper’s consent
Captain is liable Captain is liable Nautical Rules to Determine Negligence
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.
When lawful When Who bears 3. A vessel leaving port should leave the way
unlawful expenses: clear for another which may be entering the
same port.
The inability to 1. Lack of The shipowner 4. The vessel which leaves later is presumed to
continue provisions due or ship agent have collided against one which has left earlier.
voyage is due to negligence to is liable in case 5. There is a presumption against the vessel
to lack of carry according of unlawful which sets sail in the night.
provisions, to usage and arrival under 6. There is a presumption against the vessel with
well-founded customs; stress. But spread sails which collides with another which
fear of seizure, 2. Risk of they shall not is at anchor and cannot move, even when the
privateers, enemy not well be liable for crew of the latter has received word to lift
pirates, or known or the damages anchor, when there was not sufficient time to
accidents of manifest caused by do so or there was fear of a greater damage or
the sea 3. Defect of reason of a other legitimate reason.
disabling it to vessel due to lawful arrival. 7. There is a presumption against an improperly
navigate. (Art. improper (Art. 821) moored vessel.(Moor: to secure in a place)
819) repair; and 8. There is a presumption against a vessel which
4. Malice, has no buoys to indicate the location of its
negligence, lack anchors to prevent damage to vessels which
of foresight or may approach it.
skill of captain. 9. Vessels must have “proper look-outs” or
(Art. 820) persons trained as such and who have no
* Privateer - A ship privately owned and crewed other duty aside therefrom. (Smith Bell v. CA)
but authorized by a government during wartime to
attack and capture enemy vessels. Nautical Rules as to Sailing Vessel and
Steamship
 It is the duty of the captain to continue the 1. Where a steamship and a sailing vessel are
voyage without delay after the cause of the arrival approaching each other from opposite
under stress has ceased failing in such duty renders directions, or on intersecting lines, the
him liable. However, in case the cause has been risk steamship from the moment the sailing vessel
of enemies, there must first be an assembly before is seen, shall watch with the highest diligence
departure. (Art. 825) her course and movements so as to be able to
 Steps: adopt such timely means of precaution as will
1. Captain should determine during the necessarily prevent the two boats from coming
voyage if there is well founded fear of in contact.
seizure, privateers and other valid 2. The sailing vessel is required to keep her
grounds; course unless the circumstances require
2. Captain shall assemble the officers and otherwise.
summon the persons interested in the
cargo who may attend the meeting but Zones of Time in the Collision of Vessels
without a right to vote; 1. First zone – all time up to the moment when risk
3. The officers shall determine and agree if of collision begins.
there is well-founded reason after  No rule is as yet applicable for none is necessary.

Laws);
2. Second zone – time between moment when risk ARTICLE 827. If the collision is imputable to both
of collision begins and moment it becomes a vessels, each one shall suffer its own damages, and
practical certainty. both shall be solidarily responsible for the losses
 It is in this period where conduct of the vessels is and damages occasioned to their cargoes.
primordial (point of existence). It is in this zone that
vessels must strictly observe nautical rules, unless a MARITIME PROTEST
departure therefrom becomes necessary to avoid  Condition precedent or prerequisite to recovery
imminent danger. of damages arising from collisions and other
3. Third zone – time when collision is certain and maritime accidents.
time of impact.  It is a written statement made under oath by the
 An error in this zone would no longer be legally captain of a vessel after the occurrence of an
consequential. accident or disaster in which the vessel or cargo is
 Error in Extremis - sudden movement made by a lost or damaged, with respect to the circumstances
faultless vessel during the third zone of collision attending such occurrence, for the purpose of
with another vessel which is at fault during the 2nd recovering losses and damages.
zone. Even if such sudden movement is wrong, no  Excuses for not filing protest: 1) where the
responsibility will fall on said faultless vessel. interested person is not on board the vessel; and 2)
(Urrutia and Co. v. Baco River Plantation Co., 26 on collision time, need not be protested. (Art. 836)
PHIL 632)  Cases applicable:
1. Collision (Art. 835);
Cases Covered By Collision and Allision 2. Arrival under stress (Art. 612(8));
1. One vessel at fault 3. Shipwrecks (Arts. 612(15), 843);
 Vessel at fault is liable for damage caused to 4. Where the vessel has gone through a
innocent vessel as well as damages suffered by the hurricane or when the captain believes
owners of cargo of both vessels. (Art. 826) that the cargo has suffered damages or
2. Both vessels at fault averages (Art. 624).
 Each vessel must bear its own loss, but the  Who makes: Captain
shippers of both vessels may go against the  When made: within 24 hours from the time the
shipowners who will be solidarily liable. (Art. 827) collision took place.
3. Vessel at fault not known  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. 828) collision took place abroad. (Art. 835)
 Doctrine of Inscrutable Fault – In case of
collision where it cannot be determined which SHIPWRECK
between the two vessels was at fault, both  It is the loss of the vessel at sea as a
vessels bear their respective damage, but both consequence of its grounding, or running against an
should be solidarily liable for damage to the object in sea or on the coast. It occurs when the
cargo of both vessels. vessel sustains injuries due to a marine peril
4. Third vessel at fault rendering her incapable of navigation.
 The third vessel will be liable for losses and  If the wreck was due to malice, negligence or
damages. (Art. 831) lack of skill of the captain, the owner of the vessel
5. Fortuitous event/force majeure may demand indemnity from said captain. (Art. 841)
 No liability. Each bears its own loss. (Art. 830)  The rules on collision or allision, as may be
pertinent, can equally apply to shipwrecks.
 The doctrine of res ipsa loquitur applies in case a
moving vessel strikes a stationary object, such as a SPECIAL CONCEPTS
bridge post, dock, or navigational aid. (Far Eastern ARRASTRE SERVICE
Shipping v. CA, Luzon Stevedoring vs. CA)  A contract for the unloading of goods from a
vessel.
 Even if the cause of action against the common  Applicability: Overseas trade only. (Commercial
carrier is based on quasi-delict, the defense of due Law Review, C. Villanueva, 2004 ed.)
diligence in the selection and supervision of  Significance: When a person brings in cargo
employees is unavailing in case of a maritime tort from abroad, he cannot unload and deliver the
resulting in collision. It is not a civil tort governed by cargo by himself. The unloading must be done by
the Civil Code but a maritime one governed by Arts. the arrastre operator, which will then deliver the
826-839 of the Code of Commerce. (Manila cargo to the importer. (Commercial Law Review, C.
Steamship vs. Insa Abdulhaman) Villanueva, 2004 ed.)
 Nature of business: It is a public utility,
 Doctrine of Last Clear Chance and Rule on discharging functions which are heavily invested
Contributory Negligence cannot be applied in with public interest.
collision cases because of Art.827 of the Code of  Liability:
Commerce. (Notes and Cases on the Law on 1. Similar to a warehouseman (Lua Kian v. Manila
Transportation and Public Utilities, Aquino, T. & Railroad)
Hernando, R.P. 2004 ed.) 2. Similar to a common carrier (Northern Motors
v. Prince Line)
3. Solidary liability with the common carrier

Laws);
 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  The one-year prescriptive period is suspended
Assurance) 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
(C.A. No. 65)  The one-year period shall run from delivery of
the last package and is not suspended by
APPLICABILITY extrajudicial demand. (Dole Phils.,Inc. vs. Maritime
 The transportation must be: Co.,148 SCRA 118)
1. Water/maritime transportation;
2. for the carriage of goods; and  The one-year period shall run from delivery to
3. overseas/international/foreign (from the arrastre operator and not to the consignee.
foreign port to Philippine port). (Union Carbide Phils, Inc. vs. Manila Railroad
 It can be applied in domestic sea transportation if Co.,SCRA 359)
agreed upon by the parties. (Clause paramount or
paramount clause)  The insurer exercising its right of subrogation is
bound by the one-year prescriptive period.
IMPORTANT FEATURES: However, it does not apply to the claim against the
1. Amount of carrier’s liability insurer for the insurance proceeds. (Fil. Merchants
2. Notice of damage Ins. Co. vs. Alejandro; Mayer Steel Pipe Corp. vs.
3. Prescriptive period CA)
AMOUNT OF CARRIER’S LIABILITY IV. WARSAW CONVENTION OF 1929 (WC)

 Under the Sec. 4(5), the liability limit is set at
$500 per package or customary freight unit unless PURPOSE: To protect the emerging air
the nature and value of such goods is declared by transportation industry and to secure the uniformity
the shipper. This is deemed incorporated in the bill of recovery by the passengers.
of lading even if not mentioned in it. (Eastern APPLICABILITY
Shipping vs. IAC, 150 SCRA 463)  The transportation must be:
1. International transportation;

Laws);
2. Air transportation; and aircraft, or, in case of a landing outside an airport,

3. Carriage of passengers, baggage or in any place whatsoever.
goods. It includes any transportation by land or water
 The WC shall also apply to fortuitous outside an airport if such takes place in the
transportation by aircraft performed by an air performance of a contract for transportation by air,
transportation enterprise. for the purpose of loading, delivery, or
transshipment.
 International transportation - any transportation 3. Delay in the transportation of passengers,
in which the place of departure and the place of baggage or goods. (Art. 19)
destination are situated either:
1. Within the territories of two High Note: The Hague Protocol amended the WC by
Contracting Parties regardless of whether or removing the provision that if the airline took all
not there be a break in the transportation or necessary steps to avoid the damage, it could
transshipment, or exculpate itself completely (Art. 20(1)). (Alitalia vs.
2. Within the territory of a single High IAC, 192 SCRA 9)
Contracting Party, if there is an agreed
stopping place within a territory subject to the LIMIT OF LIABILITY (Art. 22, as amended by
sovereignty, mandate or authority of another Guatemala Protocol, 1971; Alitalia vs. IAC)
power, even though that power is not a party 1. Passengers
to the Convention. (“round trip”, Am. Jur.) GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
 Transportation to be performed by several
successive air carriers shall be deemed to be one
undivided transportation, if it has been regarded by
the parties as a single operation, whether it has 2. Checked-in baggage
been agreed upon under the form of a single GENERAL RULE: $20 per kilogram
contract or of a series of contracts, and it shall not EXCEPTION: In case of special declaration of
lose its international character merely because one value and payment of a supplementary sum by
contract or a series of contracts is to be performed consignor, carrier is liable to not more than the
entirely within a territory subject to the sovereignty, declared sum unless it proves the sum is greater
suzerainty, mandate, or authority of the same High than actual value.
Contracting Party. (Art. 1 Sec.3) 3. Hand-carried baggage
 $1000/passenger
WHEN INAPPLICABLE 4. Goods to be shipped
1. When public policy is contradicted; GENERAL RULE: $20 per kilogram
2. If the requirements under the Convention EXCEPTION: In case of special declaration of
are not complied with. value and payment of a supplementary sum by
consignor, carrier is liable to not more than the
IMPORTANT CONCEPTS: declared sum unless it proves the sum is greater
1. Transportation documents than actual value.
a. Passenger ticket
b. Baggage check  An agreement relieving the carrier from liability
c. Air way bill or fixing a lower limit is null and void. (Art. 23)
2. Liability of the carrier for damages  Carrier is not entitled to the foregoing limit if the
a. Death or injury to passengers damage is caused by willful misconduct or default
b. Loss or damage to baggage or goods on its part. (Art. 25)
c. Delay
3. Successive carrier agreement  Thus, the WC does not operate as an exclusive
4. Jurisdiction enumeration of the instances of an absolute limit of
5. Combined transportation agreement the extent of liability. It does not preclude the
application of the Civil Code and other pertinent
PASSENGER BAGGAGE AIR local laws. It does not regulate or exclude liability
TICKET CHECK WAYBILL for other breaches of contract by the carrier, or
Passenger Checked-in Goods to be misconduct of its employees, or for some particular
baggage shipped or exceptional type of damage. (Alitalia vs. CA)
LIABILITY OF CARRIER FOR DAMAGES  In PanAm v. IAC, the WC was applied as regards
1. Death or injury of a passenger if the accident the limitation on the carrier’s liability, there being a
causing it took place on board the aircraft or in the simple loss of baggage without any improper
course of its operations of embarking or conduct on the part of the officials or employees of
disembarking; (Art. 17) the airline or other special injury sustained by the
2. Destruction, loss or damage to any baggage or passenger.
goods, if it took place during the “transportation by
air”; (Art. 18) and  In KLM Royal v. Tuller, the WC has invariably
 Transportation by air – The period during which been held inapplicable, or as not restrictive of the
the baggage or goods are in the charge of the carrier’s liability, where there was satisfactory
carrier, whether in an airport or on board an

Laws);
evidence of malice or bad faith attributable to its JURISDICTION

officers and employees. (Alitalia vs. IAC)  At the option of the plaintiff, the action for
damages may be filed in the:
a. Court of domicile of the carrier;
ACTION FOR DAMAGES b. Court of its principal place of business;
1. Notice of claim c. Court where it has a place of business
 A written complaint must me made within: through which the contract has been
a. 3 days from receipt of baggage made; or
b. 7 days from receipt of goods d. Court of the place of destination. (Art.
c. In case of delay, 14 days from receipt of 28(1))
baggage/goods NOTE: It is the passenger’s “ultimate destination”
 The complaint is a condition precedent. Without not “an agreed stopping place” that determines the
the complaint, the action is barred except in case of country where suit is to be filed.
fraud on the part of the carrier. (Art. 26)  The forum of action provided in Art. 28(1) is a
matter of jurisdiction rather than of venue. (Santos
2. Prescriptive period III vs. Northwest; 2A C.J.S.)
 Action must be filed within 2 years from:
a. date of arrival at the destination V. SALVAGE LAW (Act No. 2616)
b. date of expected arrival
c. date on which the transportation stopped. SALVAGE
(Art. 29)  Two concepts:
1. Services one person renders to the owner of a
 In United Airlines vs. Uy the two-year prescriptive ship or goods, by his own labor, preserving the
period was not applied where the airline employed goods or the ship which the owner or those
delaying tactics. entrusted with the care of them have either
abandoned in distress at sea, or are unable to
RULE IN CASE OF VARIOUS SUCCESSIVE protect or secure.
CARRIERS 2. Compensation allowed to persons by whose
1. Carriage of passengers voluntary assistance a ship at sea or her cargo or
GENERAL RULE: Action is filed only against the both have been saved in whole or in part from
carrier in which the accident or delay occurred. impending sea peril, or such property recovered
EXCEPTION: Agreement or contract whereby the from actual peril or loss, as in cases of shipwreck,
first carrier assumed liability for the whole journey. derelict or recapture.
2. Carriage of baggage or goods  Requisites:
a. Passenger or consignor can file an action 1. Valid object of salvage;
against the first carrier and the carrier in 2. Object must have been exposed to marine
which the damage occurred peril (not perils of the ship);
b. Passenger or consignee can file an action 3. Services rendered voluntarily (neither an
against the last carrier and the carrier in existing duty nor out of a pre-existing
which the damage occurred. contract);
 These carriers are jointly and severally 4. Services are successful, total or partial.
liable. (Art. 30)  Subjects of Salvage:
1. Ship itself;
 A contract of international carriage by air, 2. Jetsam – goods which are cast into the sea, and
although performed by different carriers under a there sink and remain under water;
series of airline tickets constitutes a single 3. Floatsam or Flotsam – goods which float upon
operation. Members of the International Air the sea when cast overboard;
Transportation Association (IATA) are under a 4. Ligan or Lagan – goods cast into the sea tied to a
general pool partnership agreement wherein they buoy, so that they may be found again by the
act as agent of each other in the issuance of tickets owners (p.173, Judge Diaz).
to contracted passengers to boost ticket sales  Persons who have no right to a reward for
worldwide and at the same time provide passengers salvage:
easy access to airlines which are otherwise 1. Crew of the vessel saved;
inaccessible in some parts of the world. (American 2. Person who commenced Salvage in spite of
Airlines vs. CA) opposition of the Captain or his representative;
3. In accordance with Sec. 3 of the Salvage Law,
 Under a general pool partnership agreement, the a person who fails to deliver a salvaged vessel or
ticket-issuing airline is the principal in a contract of cargo to the Collector of Customs.
carriage while the endorsee-airline is the agent.
The obligation of the former remained and did not  Derelict – a ship or her cargo which is
cease even when the breach occurred not on its abandoned and deserted at sea by those who are in
own flight but on that of another airline which had charge of it, without any hope of recovering it, or
undertaken to carry the passengers to one of their without any intention of returning to it.
destinations. (China Airlines vs. Chiok)
 The intention of those in charge must be
ascertained. If those in charge left with the
intention of returning, or of procuring assistance,

Laws);
the property is not derelict, but if they quitted the salvage service, being a duty of humanity and not
property with the intention of finally leaving it, it is for reward.
derelict and a change of their intention and an
attempt to return will not change its nature VI. PUBLIC SERVICE ACT
(Erlanger & Galinger vs. Swedish East Asiatic Co. (C.A. No. 146)
Ltd.).
PURPOSES:
 If it is clear that the intention to return is slight, 1. To secure adequate, sustained service for
the salvage which was done thereafter is considered the public at the least possible cost;
valid. (Notes and Cases on the Law on 2. To protect the public against
Transportation and Public Utilities, Aquino, T. & unreasonable charges and poor,
Hernando, R.P. 2004 ed. p. 616) inefficient service;
3. To protect and secure investments in
CONTRACT OF TOWAGE public services;
 A contract whereby one vessel, usually 4. To prevent ruinous competition.
motorized, pulls another, whether loaded or not
with merchandise, from one place to another, for a AUTHORITY TO OPERATE PUBLIC SERVICES
compensation. It is a contract for services rather GENERAL RULE: No public service shall operate
than a contract of carriage. without having been issued a certificate of public
convenience or a certificate of public convenience
and necessity.
SALVAGE TOWAGE EXCEPTIONS:
1. Warehouses;
Governed by special Governed by Civil Code
2. Animal drawn vehicles and bancas moved
law (Act No. 2616) on contract of lease
by oar or sail;
3. Airships, except for the fixing of maximum
Requires success, Success is not required rates for fare and freight;
otherwise no payment 4. Radio companies, except for rates fixing;
5. Public services owned or operated by the
Must be done with the Only the consent of government, except as to rates fixing;
consent of the the tugboat owner is 6. Ice plants; and
captain/crewmen needed 7. Public markets.
Vessel must be Vessel need not be
involved in an accident involved in an accident PUBLIC SERVICE
 A person who owns, operates, manages or
controls in the Philippines for hire or compensation,
Fees distributed Fees belong to the with general or limited clientele, whether
among crewmen tugboat owner permanent, occasional or accidental, and done for
general business purposes, any common carrier or
RULES ON SALVAGE REWARD public utility, ice plants, power and water supplies,
1. The reward is fixed by the RTC judge in the communication and similar public services. (Sec.
absence of agreement or where the latter is 13b, CA 146)
excessive. (Sec. 9)  A casual or incidental service devoid of public
2. The reward should constitute a sufficient character and interest is not brought within the
compensation for the outlay and effort of the category. The question depends on such factors as
salvors and should be liberal enough to offer the extent of services, whether such person or
an inducement to others to render services in company has held himself or itself out as ready to
similar emergencies in the future. serve the public or a portion of the public generally.
3. If sold (no claim being made within 3 months (Luzon Stevedoring vs. PSC)
from publication), the proceeds, after
deducting expenses and the salvage claim, NOTE: The Public Service Commission created
shall go to the owner; if the latter does not under the Public Service Law has already been
claim it within 3 years, 50% of the said abolished under P.D. No. 1 and other issuances. It
proceeds shall go to the salvors, who shall has been replaced by the following government
divide it equitably, and the other half to the agencies: LTO; LTFRB; ATO; BOE; NTC; NEA; ERB;
government. (Secs. 11-12) NWRC; CAB; and MIA.
4. If a vessel is the salvor, the reward shall be
distributed as follows:
a. 50% to the shipowner; CERTIFICATE OF CERTIFICATE OF
b. 25% to the captain; and PUBLIC PUBLIC
CONVENIENCE CONVENIENCE AND
(CPC) NECESSITY (CPCN)
c. 25% to the officers and crew in
proportion to their salaries. (Sec. 13)
 Taking passengers from a sinking ship, without

rendering any service in rescuing the vessel, is not a

Laws);
An authorization An authorization maintenance of test of measuring

issued by the issued by the extension of facilities; appliances;
appropriate appropriate 6. Revocation, or 6. Grant of special
government agency for government agency for modification of CPC or permits to make extra
the operation of public the operation of public CPCN; or special trips in
services for which no service for which a 7. Suspension of CPC territories specified in
franchise, either prior franchise is or CPCN, except when the certificate;
municipal or required by law; e.g. it is necessary to 7. Uniform
legislative, is required telephone and other avoid serious and accounting system and
by law, e.g., common services. irreparable damage or furnishing of annual
carriers. inconvenience to the reports;
public or private 8. Compelling
interest, in which compliance with the
case, a suspension laws and regulations.
 A CPC or a CPCN constitutes neither a franchise not more than 30
nor a contract, confers no property right, and is a days may be ordered,
mere license or a privilege. The holder of said prior to the hearing.
certificate does not acquire a property right in the (Soriano v. Medina,
route covered thereby. Nor does it confer upon the 164 SCRA 36)
holder any proprietary right or interest or franchise
in the public highways. Revocation of this certificate UNLAWFUL ACTS OF PUBLIC UTILITY
deprives him of no vested right. New and additional COMPANIES
burdens, alteration of the certificate, or even 1. Engagement in public service business without
revocation or annulment thereof is reserved to the first securing the proper certificate;
State. (Luque vs. Villegas, 30 SCRA 408) 2. Providing or maintaining unsafe, improper or
inadequate service as determined by the
 It is a “property” and has a considerable value proper authority;
and can be the subject of sale or attachment. 3. Committing any act of unreasonable and unjust
(Cogeo-Cubao Operators and Drivers Assn. vs. CA, preferential treatment to any particular person,
207 SCRA 343, Raymundo vs. Luneta Motor Co.) corporation or entity as determined by the
proper authority;
REQUREMENTS FOR GRANTING CPC OR CPCN 4. Refusing or neglecting to carry public mail
1. Applicant must be a citizen of the Philippines or upon request. (Secs. 18 and 19)
a corporation or entity 60% of the capital of
which is owned by such citizens; ACTS REQUIRING PRIOR APPROVAL
2. Applicant must prove public necessity; 1. Establish and maintain individual or joint rates;
3. Applicant must prove that the operation of the 2. Establish and operate new units;
public service proposed and the authorization 3. Issue free tickets;
to do business will promote the public interest 4. Issue any stock or stock certificates
on a proper and suitable manner; representing an increase of capital;
4. Applicant must have sufficient financial 5. Capitalize any franchise in excess of the
capability to undertake the proposed services amount actually paid to the Government;
and meeting the responsibilities incident to its 6. Sell, alienate, mortgage or lease property,
operation. certificates or franchise.
 Under Sec. 20(g) of C.A. No. 146, the sale, etc.

POWERS POWERS may be negotiated and completed before the
REQUIRING PRIOR EXERCISABLE approval by the proper authority. Its approval is not
NOTICE AND WITHOUT PRIOR a condition precedent to the validity of the contract.
HEARING NOTICE AND The approval is necessary only to protect public
HEARING interest.
1. Issuance of CPC 1. Investigation any PRIOR OPERATOR/OLD OPERATOR RULE

or CPCN; matter concerning  The rule allowing an existing franchised operator
2. Fixing of rates, public service; to invoke a preferential right within the authorized
tolls, and charges; 2. Requiring territory as long as he renders satisfactory and
3. Setting up of operators to furnish economical service.
standards and safe, adequate, and  The policy is not to issue a certificate to a second
classifications; proper service; operator to cover the same field and in competition
4. Establishment of 3. Requiring public with a first operator who is rendering sufficient,
rules to secure services to pay adequate and satisfactory service. The prior
accuracy of all meters expenses of operator must first be given an opportunity to
and all measuring investigation; improve its service, if inadequate or deficient.
appliances; 4. Valuation of  Purpose: To prevent ruinous and wasteful
5. Issuance of properties of public competition in order that the interests of the public
orders requiring utilities; would be conserved and preserved.
establishment or 5. Examination and

Laws);
 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.
2. The registered owner is primarily liable for all
RATE-FIXING POWER the consequences flowing from the operations
 The rate to be fixed must be just, founded upon of the carrier.
conditions which are fair and reasonable to both the  The public has the right to assume that the
owner and the public. registered owner is the actual or lawful owner
 A rate is just and reasonable if it conforms to the thereof. It would be very difficult and often
following requirements: impossible, as a practical matter, for the public
1. One which yields to the carrier a fair to enforce their rights of action that they may
return upon the value of the property have for injuries inflicted by the vehicle if they
employed in performing the service; and should be required to prove who the actual
2. One which is fair to the public for the owner is. (Benedicto vs. IAC, 187 SCRA 547)
service rendered. 3. The thrust of the law in enjoining the kabit
system is to identify the person upon whom
REGISTERED OWNER RULE responsibility may be fixed with the end in view
 The registered owner of a certificate of public of protecting the riding public (Lim vs. CA 373
convenience is liable to the public for the injuries or SCRA 394).
damages suffered by third persons caused by the 4. The registered owner cannot recover from the
operation of said vehicle, even though the same had actual owner and the latter cannot obtain
been transferred to a third person. transfer of the vehicle to himself, both being in
 The registered owner is not allowed to escape pari delicto. (Teja Marketing vs. IAC)
responsibility by proving that a third person is the 5. For the better protection of the public, both the
actual and real owner Reason: It would be easy for registered owner and the actual owner are
him, by collusion with others or otherwise, to jointly and severally liable with the driver.
transfer the responsibility to an indefinite person, or (Zamboanga Transportation Co. vs. CA)
to one who possesses no property with which to
respond financially for the damage or injury done.
(Erezo, et al. vs. Jepte 102 Phil 103).
KABIT SYSTEM
 A system whereby a person who has been
granted a certificate of public convenience allows
other persons who own motor vehicles to operate
under such license, for a fee or percentage of such
earnings. It is void and inexistent under Art. 1409,
Civil Code.
 Effects:
1. The transfer, sale, lease or assignment of the
privilege granted is valid between the
contracting parties but not upon the public or
third persons. (Gelisan vs. Alday, 154 SCRA
388)

Laws);

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San Beda College of Law 54

MEMORY AID IN COMMERCIAL LAW

CONTRACT OF TRANSPORTATION/ CARRIAGE compensation. (Home Insurance Co. vs. American

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

GOVERNING LAWS COVERAGE

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

4. CHARACTER OF THE GOODS OR DEFECTS IN LIABILITY OF A COMMON CARRIER FOR

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

over the movable transported;

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

 Rules: own bills.

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

CHARACTERISTICS OF MARITIME 1. Judicial costs of the in the order stated:

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

B. CAPTAINS AND MASTERS specifically requires on a stipulated ocean voyage

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

1. Preserve the hull and rigging of the Complement of the Vessel

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

CHARTER PARTY goods received from

CHARTER PARTY BILL OF LADING

COMMERCIAL LAW COMMITTEE

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

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

 Note that Art. 1749, NCC applies to

AMOUNT OF CARRIER’S LIABILITY IV. WARSAW CONVENTION OF 1929 (WC)

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

2. Air transportation; and aircraft, or, in case of a landing outside an airport,

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW

evidence of malice or bad faith attributable to its JURISDICTION

COMMERCIAL LAW COMMITTEE

MEMORY AID IN COMMERCIAL LAW