Commercial Law Review
Transportation Law
TRANSPORTATION LAW
PRELIMINARY CONSIDERATIONS:
A. Governing Laws
1. New Civil Code – Primary law
2. Warsaw Convention – for international
transportation by air
3. Code of Commerce – governs
suppletorily; it governs maritime
transaction
4. Carriage of Goods by Sea Act – for
transportation by sea; governs
suppletorily
5. Salvage Law
6. Public Service Act
7. Article XII Sec 11 on operation of public
convenience of the 1987 Philippine
Constitution
B. Concept of Public Utility & public service
Sec. 13 (b) of the Public Service Act
provides that: ―The term 'public service'
includes every person that now or hereafter
may own, operate, manage, or control in the
Philippines, for hire or compensation, with
general or limited clientele, whether
permanent, occasional or accidental, and
done for general business purposes, any
common carrier, railroad, street railway,
traction railway, sub-way motor vehicle,
either for freight or passenger, or both with
or without fixed route and whatever may be
its classification, freight or carrier service of
any class, express service, steamboat, or
steamship line, pontines, ferries, and water
craft, engaged in the transportation of
passengers or freight or both, shipyard,
marine railway, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant,
canal, irrigation system, gas electric light,
heat and power, water supply and power,
petroleum, sewerage system, wire or
wireless communications system, wire or
wireless broadcasting stations and other
similar public services: Provided, however,
That a person engaged in agriculture, not
otherwise a public service, who owns a
motor vehicle and uses it personally and/or
enters into a special contract whereby said
motor vehicle is offered for hire or
compensation to a third party or third
engaged in agriculture, not itself or
themselves a public service, for operation
by the latter for a limited time and for a
specific purpose directly connected with the
cultivation of his or their farm, the
transportation, processing, and marketing
of agricultural products of such third party
or third parties shall not be considered as
operating a public service for the purposes
of this Act.‖
Public utilities are privately owned and
operated business whose services are
essential to the general public.
Case: National Development Company v
CA
C. Constitutional limitations on operation of
public utilities
Sec. 11 of Article XII of the 1987
Constitution states that: ―No franchise,
certificate, or any other form of
authorization for the operation of a public
utility shall be granted except to citizens of
the Philippines or to corporations or
associations organized under the laws of the
Philippines, at least sixty per centum of
whose capital is owned by such citizens; nor
shall such franchise, certificate, or
authorization be exclusive in character or
for a longer period than fifty years. Neither
shall any such franchise or right be granted
except under the condition that it shall be
subject to amendment, alteration, or repeal
by the Congress when the common good so
requires. The State shall encourage equity
participation in public utilities by the
general public. The participation of foreign
investors in the governing body of any
public utility enterprise shall be limited to
their proportionate share in its capital, and
all the executive and managing officers of
such corporation or association must be
citizens of the Philippines.‖
*The corporation must be a domestic
corporation and that 60% of the capital
must be owned by Filipino citizens.
Sec. 18 of Article XII of the 1987
Constitution provides that: ―The State may,
in the interest of national welfare or
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defense, establish and operate vital
industries and, upon payment of just
compensation, transfer to public ownership
utilities and other private enterprises to be
operated by the Government.‖
Q: What are the bases/reasons for
regulation of public utilities?
A: Basis: Police Power
Justification: Common good
D. Regulatory agencies
1. Land Transportation Franchising
Regulatory Board (LTFRB) – land
transportation
2. Land Transportation Office – issue
license to drivers
3. Maritime Industry Authority
(MARINA) – water transportation
4. National Telecommunications
Commission – communication utilities
and services, radio communications
systems, wire or wireless telephone and
telegraph systems, radio and television
broadcasting systems and other similar
public utilities
5. Energy Regulatory Board – electric or
power companies
6. National Water Resources Council –
water resources
7. Civil Aeronautics Board – air
transportation
Q: What conditions must concur in the
grant of certificate of public convenience
and necessity?
A: 1. The grantee must be a citizen of the
Philippines or a corporation or entity 60% of
which is owned by such citizens; 2. The
grantee must have sufficient financial
capability to undertake the service; and 3.
The service will promote public interest and
convenience in a proper and suitable
manner.
*In Tatad v Garcia, the SC held that the
controlling factor is the citizenship of the
person operating a common carrier.
Guiding Principles:
1. Prior or Old Operator Rule – the first
licensee will be protected in his
investment and will not be subjected to
ruinous competition.
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*No certificate of public convenience
and necessity will be issued to other
operator as long as the prior operator
still in operation and can satisfy the
public and that it still has the capacity
to do so.
2. Protection Investment Rule – protects
from unfair competition
3. Prior Applicant Rule – protects the first
applicant. Principle: all things being
equal
*Public interest is the first and paramount
consideration.
E. Concept of franchise and certificate of
public convenience
Franchise is a grant or privilege from the
sovereign power.
Certificate of Public Convenience is a form
of regulation through an administrative
agency.
Q: Is a legislative franchise necessary before
a public utility can be allowed to secure a
certificate of public convenience?
A: General Rule: NO.
Exception: If a pertinent law requires such
legislative franchise.
Factors:
1. Public interest
2. Public convenience
3. Public necessity
GENERAL CONCEPTS:
A. Contract of transportation in general
Transportation is a contract whereby a
person, natural or juridical, obligates to
transport persons, goods, or both, from one
place to another, by land, air, or water, for a
price or commission.
*Importance: For liability purposes
B. Perfection
There is a perfected contract when there
was a meeting of the minds as to the subject
matter and consideration.
C. Common Carrier
1. Statutory definition
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Transportation Law
Article 1732 of the New Civil Code morals or
provides that: ―Common carriers are good
persons, corporations, firms or customs
associations engaged in the business of Exempting Prove Caso
circumstan extraordinar fortuito,
carrying or transporting passengers or
ce: y diligence Article
goods or both, by land, water, or air, for and Article 1174 NCC
compensation, offering their services to 1734 NCC
the public.‖ Presumpti There is a No
- one that holds itself out as ready to on of presumption presumpti
engage in the transportation of Negligence of fault or on of fault
: negligence or
goods for hire as a public
negligence
employment and not as a casual
Governing Law on Law on
occupation. law: common obligation
Implications being a common carrier: carriers s and
a. extraordinary diligence must be contracts
exercised
b. in case of damage, presumption of 3. Distinguished from towage, arrastre
negligence on the part of the and stevedoring
common carrier Distinctions:
*It is the activity of the carrier that is Towage Arrastre Stevedori
controlling. ng
The The
Cases: A.F. Sanchez Brokerage, Inc v
One vessel functions of function
CA; Asia Lighterage v CA; De Guzman is hired to an arrastre of
v CA bring operator has stevedore
*The fact that there is no license at the another nothing to do s involves
time of the incident happen is of no vessel to with the the
moment for liability purposes. another trade and loading
2. Distinguished from private carrier place; business of and
refers to a navigation, unloading
Common Private
service nor to the of
Carrier Carrier
rendered to use or coastwise
As to holds himself Contracts
a vessel by operation of vessels
availabilit out for all with
y: towing for vessels. He is calling at
people particular
the mere no different the port.
indiscriminat individual
purpose of from that of
ely s or
expediting a depositary
groups
her voyage or
only
without warehousem
As to Extraordinar Ordinary
reference to an.
required y diligence is diligence
any
diligence: required is required
circumstan
As to Subject to Not
ces of
regulation: state subject to
danger.
regulation state
*The SC held that the following services are not
regulation
Stipulation Parties may Parties considered a common carrier:
limiting not agree on may limit 1) purely arrastre services;
liability: limiting the the *comparable to that as warehouseman and
carrier‘s carrier‘s depositor
liability liability, 2) purely stevedoring services; and
except when provided 3) purely towage services.
provided by it is not
*In Crisostomo v CA, the SC held that the
law contrary
to law, respondent being a travel agency is not a common

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carrier because the services offered is not one that
carries passenger from one place to another.
4. Tests to determine common carrier
Tests:
a. He must engaged in the business of
carrying goods for others as a public
employment and must hold himself
out as ready to engage in the
transportation of goods for person
generally as a business and not as a
casual occupation;
b. He must undertake to carry goods of
the kind to which his business is
confined;
c. He must undertake to carry by the
method by which his business is
conducted and over his established
roads;
d. The transportation must be for hire
Case: First Philippine Industrial
Corporation v CA
*Under Sec. 22 of the Electric Power
Distribution Reform Act, the company
like MERALCO distributing electricity
is a common carrier.
5. Parties to the contract of carriage
a. Carriage of passengers:
1. Common carrier
2. Passengers
b. Carriage of goods:
1. Shipper
2. Carrier
D. Registered owner rule and Kabit system
General Rule: Registered owner rule is
applicable in this jurisdiction.
Registered owner rule states that the
person who is the registered owner of a
vehicle is liable for any damages caused by
the negligent operation of the vehicle
although the same was already sold or
conveyed to another person at the time of
the accident. The registered owner is liable
to the injured party subject to his right of
recourse against the transferee or the buyer.
Purpose of this rule: easy identification of
the owner to be sued for liability.
Recourse: Registered owner may bring the
case to the court to sue the buyer or
operator of the vehicle at fault.
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Exception: in case of stolen vehicle
registered owner is not liable.
*In the case of Duavit v CA, the SC held
that the registered owner is not liable if the
vehicle was taken from his garage without
his knowledge or consent. To hold the
registered owner liable would be absurd as
it would be holding liable the owner of a
stolen vehicle for an accident caused by the
person who stole such vehicle.
Kabit System is an arrangement whereby a
person who has been granted a certificate of
public convenience allows other persons
who own motor vehicles to operate them
under his license, sometimes for a fee or
percentage of the earnings.
*Kabit system is invariably recognized as
being contrary to public policy and
therefore void and inexistent under Article
1409 of the New Civil Code.
*If the registered owner and the buyer
entered into this transaction they are In pari
delicto thus, in case something happen the
court will not aid them. The court will leave
them as they were.
*This arrangement is a circumvention of the
requirement for license.
OBLIGATIONS OF THE COMMON CARRIER
IN A CONTRACT OF CARRIAGE OF GOODS:
A. Vigilance over the goods
1. Duty to exercise extraordinary
diligence Article 1733 of the New Civil
Code states that: ―Common carriers,
from the nature of their business and for
reasons of public policy, are bound to
observe extraordinary diligence in the
vigilance over the goods and for the
safety of the passengers transported by
them, according to all the circumstances
of each case.
Such extraordinary diligence in the
vigilance over the goods is further
expressed in Articles 1734, 1735, and
1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of
the passengers is further set forth in
Articles 1755 and 1756.‖
Reason: The nature of the business is
imbued with public interest and public
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policy; because of the exigencies of the
business. The public has no choice but
to trust on the skills of the employees of
the common carrier. The goods and the
life of the passenger are placed in the
hands of the common carrier.
Article 363 of the Code of Commerce
provides that: ―Outside of the cases
mentioned in the second paragraph of
Article 361, the carrier shall be obliged
to deliver the goods shipped in the same
condition in which, according to the bill
of lading, they were found at the time
they were received, without any
damage or impairment, and failing to
do so, to pay the value which those not
delivered may have at the point and at
the time at which their delivery should
have been made. If those not delivered
form part of the goods transported, the
consignee may refuse to receive the
latter, when he proves that he cannot
make use of them independently of the
others.‖
Article 364 of the Code of Commerce
provides that: ―If the effect of the
damage referred to in Article 361 is
merely a diminution in the value of the
gods, the obligation of the carrier shall
be reduced to the payment of the
amount which, in the judgment of
experts, constitutes such difference in
value.‖
Article 365 of the Code of Commerce
provides that: ―If, in consequence of the
damage, the goods are rendered useless
for sale and consumption for the
purposes for which they are properly
destined, the consignee shall not be
bound to receive them, and he may have
them in the hands of the carrier,
demanding of the latter their value at
the current price on that day. If among
the damaged goods there should be
some pieces in good condition and
without any defect, the foregoing
provision shall be applicable with
respect to those damaged and the
consignee shall receive those which are
sound, this segregation to be made by
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distinct and separate pieces and without
dividing a single object, unless the
consignee proves that impossibility of
conveniently making use of them in this
form. The same rule shall be applied to
merchandise in bales or packages,
separating those parcels which appear
sound.‖
Presumption of negligence
Article 1735 of the New Civil Code
provides that: ―In all cases other than
those mentioned in Nos. 1, 2, 3, 4, and 5
of the preceding article, if the goods are
lost, destroyed or deteriorated, common
carriers are presumed to have been at
fault or to have acted negligently, unless
they prove that they observed
extraordinary diligence as required in
Article 1733.‖
2. Duration of liability
Article 1736 of the New Civil Code
states that: ―The extraordinary
responsibility of the common carrier
lasts from the time the goods are
unconditionally placed in the possession
of, and received by the carrier for
transportation until the same are
delivered, actually or constructively, by
the carrier to the consignee, or to the
person who has a right to receive them,
without prejudice to the provisions of
Article 1738.‖
Article 1737 of the New Civil Code
states that: ―The common carrier's duty
to observe extraordinary diligence over
the goods remains in full force and
effect even when they are temporarily
unloaded or stored in transit, unless the
shipper or owner has made use of the
right of stoppage in transitu.‖
Article 1738 of the New Civil Code
provides that: ―The extraordinary
liability of the common carrier continues
to be operative even during the time the
goods are stored in a warehouse of the
carrier at the place of destination, until
the consignee has been advised of the
arrival of the goods and has had
reasonable opportunity thereafter to
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remove them or otherwise dispose of
them.‖
3. Defenses of common carriers
Article 1734 of the New Civil Code
provides that: ―Common carriers are
responsible for the loss, destruction, or
deterioration of the goods, unless the
same is due to any of the following
causes only:
(1) Flood, storm, earthquake, lightning,
or other natural disaster or calamity;
(2) Act of the public enemy in war,
whether international or civil;
(3) Act of omission of the shipper or
owner of the goods;
(4) The character of the goods or defects
in the packing or in the containers;
(5) Order or act of competent public
authority.‖
*The enumeration is exclusive or a
closed list.
General Rule: Common carriers are
responsible for the loss, destruction or
deterioration of the goods.
Exceptions:
1. Flood, storm, earthquake,
lightning or other natural
disaster or calamity;
2. Act of the public enemy in war
whether international or civil;
3. Act of omission of the shipper or
owner of the goods;
4. The character of the goods or
defects in the packaging or in the
containers; and
5. Order or act of the competent
public authority
Article 1740 of the New Civil Code
states that: ―If the common carrier
negligently incurs in delay in
transporting the goods, a natural
disaster shall not free such carrier from
responsibility.‖
a. Fortuitous event
Article 1739 of the New Civil Code
provides that: ―In order that the
common carrier may be exempted
from responsibility, the natural
disaster must have been the
proximate and only cause of the loss.
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However, the common carrier must
exercise due diligence to prevent or
minimize loss before, during and
after the occurrence of flood, storm
or other natural disaster in order
that the common carrier may be
exempted from liability for the loss,
destruction, or deterioration of the
goods. The same duty is incumbent
upon the common carrier in case of
an act of the public enemy referred
to in Article 1734, No. 2.‖
*Fire is not within the ambit of
natural disaster or calamity.
*Calamity includes thunderstorm.
*mechanical defect is not within the
ambit of the natural disaster; it is
within the control of the common
carrier.
Requisites:
1. Proximate cause is the natural
calamity
2. Absence of negligence on the
part of the common carrier
3. The common carrier must
exercise due diligence to prevent
loss before, during and after the
occurrence of the disaster
4. Free from unreasonable delay by
the common carrier or
unreasonable deviation
b. Public enemy
Article 1739 of the New Civil Code
states that: ―In order that the
common carrier may be exempted
from responsibility, the natural
disaster must have been the
proximate and only cause of the loss.
However, the common carrier must
exercise due diligence to prevent or
minimize loss before, during and
after the occurrence of flood, storm
or other natural disaster in order
that the common carrier may be
exempted from liability for the loss,
destruction, or deterioration of the
goods. The same duty is incumbent
upon the common carrier in case of
an act of the public enemy referred
to in Article 1734, No. 2.‖
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*Public enemy includes pirates
however it does not include robbery
and thief.
*Pirates are enemies of all civilized
nation.
General Rule: rebels and
insurreccion is not included.
Exception: If it they are cast of and
took allegiance a hostile manner
territory
*Existence of actual war is
imperative.
c. Act of omission on the part of the
shipper or owner of the goods
*There must be no fault or
contributory negligence on the part
of the carrier.
*In Compania Maritima v CA, the
SC held that the common carrier is
also at fault; the common carrier
should have exercise extraordinary
diligence by not relying solely on the
statement of the shipper; it should
have conducted its own weighing.
In this case the common carrier is
not totally absolved from its liability.
d. Improper packing
Article 1742 of the New Civil Code
states that: ―Even if the loss,
destruction, or deterioration of the
goods should be caused by the
character of the goods, or the faulty
nature of the packing or of the
containers, the common carrier must
exercise due diligence to forestall or
lessen the loss.‖
*If the defect is apparent, the carrier
may refuse to accept the goods for
carriage; if the shipper insists, the
remedy is to make a protestation;
make a foul bill of lading.
*In Iron Bulk v CA (Dec. 8, 2003),
carrier issued pro forma bill of
lading stated where in that it
accepted goods in good condition.
The goods arrived defective. The SC
held that the carrier is not exempt
from liability because it accepted the
goods without protestation.
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*Foul Bill of Lading preserves the
right of the carrier to use the excuse
provided in 1734.
e. Order of public authority
Article 1743 of the New Civil Code
states that: ―If through the order of
public authority the goods are
seized or destroyed, the common
carrier is not responsible, provided
said public authority had power to
issue the order.‖
*The important requisite is that the
public authority has the power to
issue an order.
Case: Ganzon v CA
4. Contributory negligence of the shipper
Article 1741 of the New Civil Code
states that: ―If the shipper or owner
merely contributed to the loss,
destruction or deterioration of the
goods, the proximate cause thereof
being the negligence of the common
carrier, the latter shall be liable in
damages, which however, shall be
equitably reduced.‖
5. Stipulation limiting liability of carrier
Article 1744 of the New Civil Code
states that: ―A stipulation between the
common carrier and the shipper or
owner limiting the liability of the former
for the loss, destruction, or deterioration
of the goods to a degree less than
extraordinary diligence shall be valid,
provided it be:
(1) In writing, signed by the shipper or
owner;
(2) Supported by a valuable
consideration other than the service
rendered by the common carrier; and
(3) Reasonable, just and not contrary to
public policy.‖
*This is for the benefit of the carrier.
Consideration: Reduction of fare
*The stipulation must be in writing for
the purpose of preventing abuse from
the carrier.
Article 1748 of the New Civil Code
provides that: ―An agreement limiting
the common carrier's liability for delay
on account of strikes or riots is valid.‖
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Article 1749 of the New Civil Code
states that: ―A stipulation that the
common carrier's liability is limited to
the value of the goods appearing in the
bill of lading, unless the shipper or
owner declares a greater value, is
binding.‖
Article 1750 of the New Civil Code
provides that: ―A contract fixing the
sum that may be recovered by the
owner or shipper for the loss,
destruction, or deterioration of the
goods is valid, if it is reasonable and just
under the circumstances, and has been
fairly and freely agreed upon.‖
a. Requisites
Article 1744 of the New Civil Code
states that: ―A stipulation between
the common carrier and the shipper
or owner limiting the liability of the
former for the loss, destruction, or
deterioration of the goods to a
degree less than extraordinary
diligence shall be valid, provided it
be:
(1) In writing, signed by the shipper
or owner;
(2) Supported by a valuable
consideration other than the service
rendered by the common carrier;
and
(3) Reasonable, just and not contrary
to public policy.‖
Article 1751 of the New Civil Code
provides that: ―The fact that the
common carrier has no competitor
along the line or route, or a part
thereof, to which the contract refers
shall be taken into consideration on
the question of whether or not a
stipulation limiting the common
carrier's liability is reasonable, just
and in consonance with public
policy.‖
*Liability can be limited but cannot
be totally exempted.
*Stipulations reducing diligence or
limiting liability must be in writing
to be enforceable.
b. Invalid stipulations
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Article 1745 of the New Civil Code
states that: ―Any of the following or
similar stipulations shall be
considered unreasonable, unjust and
contrary to public policy:
(1) That the goods are transported at
the risk of the owner or shipper;
(2) That the common carrier will not
be liable for any loss, destruction, or
deterioration of the goods;
(3) That the common carrier need
not observe any diligence in the
custody of the goods;
(4) That the common carrier shall
exercise a degree of diligence less
than that of a good father of a
family, or of a man of ordinary
prudence in the vigilance over the
movables transported; (5) That the
common carrier shall not be
responsible for the acts or omission
of his or its employees;
(6) That the common carrier's
liability for acts committed by
thieves, or of robbers who do not act
with grave or irresistible threat,
violence or force, is dispensed with
or diminished;
(7) That the common carrier is not
responsible for the loss, destruction,
or deterioration of goods on account
of the defective condition of the car,
vehicle, ship, airplane or other
equipment used in the contract of
carriage.‖
*Even if they agreed with regard to
numbers 1,2 and 3, the stipulation is
void because it is contrary to public
policy because all these stipulations
exempt the carrier from liability.
General Rule: The degree of
diligence may be lowered
Exception: Not lower than that of a
good father of a family.
General Rule: stipulations
exempting from liability acts
committed by robbers and thieves
who do not act with grave threat or
irresistible threats are not valid.
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Exception: In case the robbers or *This can be found under Article
thieves used grave threat or 356 of the Code of Commerce
irresistible threats. iii. Acceptance would result in
*In this case, the presumption of overloading;
negligence is still applicable, the iv. Contrabands or illegal goods;
stipulation only affects the outcome v. Goods are injurious to health;
of the case. vi. Goods will be exposed to
c. Effect of delay untoward danger like flood,
Article 1747 of the New Civil Code capture by enemies and the like;
states that: ―If the common carrier, vii. Goods like livestock will be
without just cause, delays the exposed to disease;
transportation of the goods or viii. Strike; and
changes the stipulated or usual ix. Failure to tender goods on time
route, the contract limiting the 2. Duty to deliver goods
common carrier's liability cannot be a. Time of delivery
availed of in case of the loss, General Rule: It is by stipulation
destruction, or deterioration of the Exception: In the absence of
goods.” stipulation Code of Commerce
*Delay will prevent the carrier from governs.
raising natural disaster as a defense Article 358 of the Code of
and that the agreement limiting its Commerce provides that: ―If there is
liability cannot be raised as a no period fixed for the delivery of
defense. the goods the carrier shall be bound
d. Rule on presumption of negligence to forward them in the first
despite stipulation shipment of the same or similar
Article 1752 of the New Civil Code goods which he may make to the
states that: ―Even when there is an point where he must deliver them;
agreement limiting the liability of and should he not do so, the
the common carrier in the vigilance damages caused by the delay should
over the goods, the common carrier be for his account.‖
is disputably presumed to have been *When a common carrier undertakes
negligent in case of their loss, to convey goods, the law implies a
destruction or deterioration.‖ contract that they shall be delivered
B. Other obligations at destination within a reasonable
1. Duty to accept goods time, in the absence of any
a. Grounds for valid refusal to accept agreement as to the time of delivery.
goods *Mercantile usage or practice
i. General Rule: Goods sought to With Without
be transported are dangerous stipulation stipulation
objects or substances including Carrier is 1. Within a
dynamite and other explosives; bound to fulfil reasonable
Exception: Carriers that are the contract time.
and is liable 2. Carrier is
permitted or allowed to
for any delay; bound to
transport dangerous objects or no matter forward
substances for the reason that it from what them in the
is their function to do so or it is cause it may first
their operation. have arisen shipment of
ii. Goods are unfit for the same or
similar
transportation;
goods
which he
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may make damages by reason of the delay
to the point cannot exceed the current price
of delivery which the goods transported would
have had on the day and at the place
b. Consequences of delay in which they should have been
Article 1740 of the New Civil Code
delivered; this same rule is to be
provides that: ―If the common
observed in all other cases in which
carrier negligently incurs in delay in
this indemnity may be due.‖
transporting the goods, a natural
Article 372 of the Code of
disaster shall not free such carrier Commerce states that: ―The value of
from responsibility.‖ the goods which the carrier must
Article 1747 of the New Civil Code
pay in cases of loss or misplacement
provides that: ―If the common
shall be determined in accordance
carrier, without just cause, delays
with that declared in the bill of
the transportation of the goods or
lading, the shipper not being
changes the stipulated or usual
allowed to present proof that among
route, the contract limiting the
the goods declared therein there
common carrier's liability cannot be
were articles of greater value and
availed of in case of the loss,
money. Horses, vehicles, vessels,
destruction, or deterioration of the
equipment and all other principal
goods.‖
and accessory means of
Article 370 of the Code of
transportation shall be especially
Commerce provides that: ―If a
bound in favour of the shipper,
period has been fixed for the
although with respect to railroads
delivery of the goods, it must be
said liability shall be subordinated
made within such time, and, for
to the provisions of the laws of
failure to do so, the carrier shall pay
concession with respect to the
the indemnity stipulated in the bill
property, and to what this Code
of lading, neither the shipper nor the
established as to the manner and
consignee being entitled to anything
form of effecting seizures and
else. If no indemnity has been
attachments against said
stipulated and the delay exceeds the
companies.‖
time fixed in the bill of lading, the
Article 373 of the Code of
carrier shall be liable for the
Commerce states that: ―The carrier
damages which the delay may have
who makes the delivery of the
caused.‖
merchandise to the consignee by
Article 371 of the Code of
virtue of combined agreements or
Commerce provides that: ―In case of
services with other carriers shall
delay through the fault of the
assume the obligations of those who
carrier, referred to in the preceding
preceded him in the conveyance,
articles, the consignee may leave the
reserving his right to proceed
goods transported in the hands of
against the latter if he was not the
the former, advising him thereof in
party directly responsible for the
writing before their arrival at the
fault which gave rise to the claim of
point of destination. When this
the shipper or consignee. The carrier
abandonment takes place, the carrier
who makes the delivery shall
shall pay the full value of the goods
likewise acquire all the actins and
as if they had been lost or mislaid. If
rights of those who preceded him in
the abandonment is not made, the
the conveyance. The shipper and the
indemnification for losses and
consignee shall have an immediate

Page 10

right of action against the carrier
who executed the transportation
contract, or against the other carriers
who may have received the goods
transported without reservation.
However, the reservation made by
the latter shall not relieve them from
the responsibilities which they may
have incurred by their own acts.‖
Article 374 of the Code of
Commerce states that: ―The
consignees to whom the shipment
was made may not defer the
payment of the expenses and
transportation charges of the goods
they receive after the lapse of 24
hours following their delivery; and
in case of delay in this payment, the
carrier may demand the judicial sale
of the goods transported in an
amount necessary to cover the cost
of transportation and the expenses
incurred.‖
Effects of delay:
1. Excusable delay in carriage
merely suspends and generally
does not terminate the contract
of carriage. When the cause is
removed, the master must
proceed with the voyage and
make delivery;
2. Carrier remains duty bound to
exercise extraordinary diligence;
3. Natural disaster shall not free
OBLIGATIONS OF THE COMMON CARRIER
the carrier from responsibility;
IN A CONTRACT OF CARRIAGE OF
4. If delay is without just cause, the
PASSENGERS:
contract limiting the common
carrier‘s liability cannot be
availed of in case of loss or
deterioration of the goods.
c. Place of Delivery
Article 360 of the Code of
Commerce provides that: ―The
shipper, without changing the place
where the delivery is to be made,
may change the consignment of the
goods which he delivered to the
carrier, provided that at the time of
ordering the change of consignee the
bill of lading signed by the carrier, if
Commercial Law Review
Transportation Law
one has been issued, be returned to
him, in exchange for another
wherein the novation of the contract
appears. The expenses which this
change of consignment occasions
shall be for the account of the
shipper.‖
d. To whom delivery shall be made
Article 368 of the Code of
Commerce provides that: ―The
carrier must deliver to the
consignee, without any delay or
obstruction, the goods which he may
have received, by the mere fact of
being named in the bill of lading to
receive them; and if he does not do
so, he shall be liable for the damages
which may be caused thereby.‖
Article 369 of the Code of
Commerce provides that: ―If the
consignee cannot be found at the
residence indicated in the bill of
lading, or if he refuses to pay the
transportation charges and
expenses, or if he refuses to receive
the goods, the municipal judge,
where there is none of the first
instance, shall provides for their
deposit at the disposal of the
shipper, this deposit producing all
the effects of delivery without
prejudice to third parties with a
better right.‖
A. Safety of Passengers
1. Duty to observe utmost diligence
Article 1755 of the New Civil Code
provides that: ―A common carrier is
bound to carry the passengers safely as
far as human care and foresight can
provide, using the utmost diligence of
very cautious persons, with a due
regard for all the circumstances.‖
*There are claims not really focused on
death, injuries, loss or damage of goods
but concentrates on moral damages; and
the SC said that these claims can still
Page 11

prosper in because there is still a breach
of contract of carriage.
*Behavior of the employees towards to
passengers is also a factor considered by
the court to rule against a common
carrier.
*In CAL v PAL, the SC held that
hijacking of the airplane is considered to
be a force majeure thus cannot held the
carrier liable.
Case: Singapore Airline v Andion
Fernandez
*In Japan Airlines v Asuncion (January
28, 2005), the SC held that the things
invoked by the respondent do not fall
within the ambit of extraordinary
diligence. Though it is the duty of the
carrier to check that travel documents
are with the passengers but it is not
under the obligation of the carrier to
check the veracity of the information in
the travel document; it also held that the
obligation of the carrier is limited to
endorsing and not to influence. The
issue of whether or not an alien be
admitted entrance to a country is a
sovereign act and such cannot be
interfered by the petitioner.
2. Duration of liability
*The carrier is bound to exercise utmost
diligence with respect to passengers the
moment the person who purchases the
ticket or token from the carrier presents
himself at the proper place and in a
proper manner to be transported. Such
person must have a bona fide intention
to use the facilities of the carrier, possess
sufficient fare with which to pay for his
passage, and present himself to the
carrier for transportation in the place
and manner provided.
*In LRTA v Navidad, the SC held the
petitioner carrier liable for breach of
contract. The SC held that Nicanor
Navidad was a passenger when he died
after he fell on the LRT tracks and was
struck by a moving train. He was
considered a passenger because he
entered the LRT station after having
purchased a token and he fell while he
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Transportation Law
was on the platform waiting for a train.
Thus, he was where he was supposed to
be with the intention of boarding a train.
*Once created, the relationship will not
ordinarily terminate until the passenger
has, after reaching his destination, safely
alighted from the carrier‘s conveyance
or has had a reasonable opportunity to
leave the carrier‘s premises. All persons
who remain on the premises within a
reasonable time after leaving the
conveyance are to be deemed
passengers, and what is a reasonable
time or a reasonable delay within this
rule is to be determined from all the
circumstances, and includes reasonable
time to look after his baggage and
prepare for his departure.
*In La Mallorca v CA, the SC held that
there was a breach of duty to exercise
extraordinary diligence with respect to
the 4 year old child and the carrier is
liable as a consequence. The presence of
passengers near the bus was not
unreasonable and they were, therefore,
to be considered still as passengers of
the carrier, entitled to the protection
under their contract.
*In Aboitiz Shipping Corporation v
CA, the SC held that extraordinary
diligence was still owed to AV at the
time of the accident. It was ruled that
AV‘s presence in the premises was not
without cause. The victim had to claim
his baggage which was possible only
one hour after the vessel arrived since it
was the standard procedure in the case
of petitioner‘s vessels that the unloading
operation shall start only after that time.
*The differences between the La
Mallorca case and Aboitiz Shipping
Corporation are: 1. The business is
different from that of La Mallorca case;
and 2. The capacity of passengers and
baggages are different
3. Presumption of negligence
Article 1756 of the New Civil Code
states that: “In case of death of or
injuries to passengers, common carriers
are presumed to have been at fault or to
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have acted negligently, unless they
prove that they observed extraordinary
diligence as prescribed in Articles 1733
and 1755.‖
4. Liability for acts of employees
Article 1759 of the New Civil Code
provides that: ―Common carriers are
liable for the death of or injuries to
passengers through the negligence or
wilful acts of the former's employees,
although such employees may have
acted beyond the scope of their
authority or in violation of the orders of
the common carriers.
This liability of the common carriers
does not cease upon proof that they
exercised all the diligence of a good
father of a family in the selection and
supervision of their employees.‖
Case: Maranan v Perez
5. Liability for acts of strangers
Article 1763 of the New Civil Code
provides that: ―A common carrier is
responsible for injuries suffered by a
passenger on account of the wilful acts
or negligence of other passengers or of
strangers, if the common carrier's
employees through the exercise of the
diligence of a good father of a family
could have prevented or stopped the act
or omission. ―
Case: Bachelor Express v CA
6. Effect of stipulation on liability
Article 1757 of the New Civil Code
provides that: ―The responsibility of a
common carrier for the safety of
passengers as required in Articles 1733
and 1755 cannot be dispensed with or
lessened by stipulation, by the posting
of notices, by statements on tickets, or
otherwise.”
Article 1758 of the New Civil Code
provides that: ―When a passenger is
carried gratuitously, a stipulation
limiting the common carrier's liability
for negligence is valid, but not for wilful
acts or gross negligence.
The reduction of fare does not justify
any limitation of the common carrier's
liability.‖
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Transportation Law
Article 1760 of the New Civil Code
states that: ―The common carrier's
responsibility prescribed in the
preceding article cannot be eliminated
or limited by stipulation, by the posting
of notices, by statements on the tickets
or otherwise.‖
B. Passenger’s Baggages
Article 1754 of the New Civil Code
provides that: ―The provisions of Articles
1733 to 1753 shall apply to the passenger's
baggage which is not in his personal
custody or in that of his employee. As to
other baggage, the rules in Articles 1998 and
2000 to 2003 concerning the responsibility of
hotel-keepers shall be applicable.”
Article 1998 of the New Civil Code states
that: ―The deposit of effects made by the
travellers in hotels or inns shall also be
regarded as necessary. The keepers of hotels
or inns shall be responsible for them as
depositaries, provided that notice was given
to them, or to their employees, of the effects
brought by the guests and that, on the part
of the latter, they take the precautions
which said hotel-keepers or their substitutes
advised relative to the care and vigilance of
their effects.‖
Article 2000 of the New Civil Code states
that: ―The responsibility referred to in the
two preceding articles shall include the loss
of, or injury to the personal property of the
guests caused by the servants or employees
of the keepers of hotels or inns as well as
strangers; but not that which may proceed
from any force majeure. The fact that
travellers are constrained to rely on the
vigilance of the keeper of the hotels or inns
shall be considered in determining the
degree of care required of him.‖
Article 2001 of the New Civil Code
provides that: ―The act of a thief or robber,
who has entered the hotel is not deemed
force majeure, unless it is done with the use
of arms or through an irresistible force.‖
Article 2002 of the New Civil Code
provides that: ―The hotel-keeper is not
liable for compensation if the loss is due to
the acts of the guest, his family, servants or
Page 13

visitors, or if the loss arises from the
character of the things brought into the
hotel.‖
Article 2003 of the New Civil Code
provides that: ―The hotel-keeper cannot free
himself from responsibility by posting
notices to the effect that he is not liable for
the articles brought by the guest. Any
stipulation between the hotel-keeper and
the guest whereby the responsibility of the
former as set forth in articles 1998 to 2001 is
suppressed or diminished shall be void.”
*The baggage in the personal custody of the
passenger or his employee in that the
baggage in transit will be considered as
necessary deposits. The common carrier
shall be responsible for the baggage as
depositaries, provided that notice was given
to them or its employees, and the passenger
took the necessary precaution, which the
carrier has advised them relative to the care
and vigilance of their baggage. In case of
loss due to the fault of the passenger the
carrier will not be liable.
*They are not absolutely responsible as
depository because the law requires notice.
*It is also required to declare the value of
the baggage.
*The carrier who has in his custody the
baggage of the passenger to be carried like
any other goods is required to observe
extraordinary diligence. In case of loss or
damage the carrier is presumed negligent.
OBLIGATIONS OF THE SHIPPER, CONSIGNEE
AND PASSENGER:
A. Effect of negligence of shipper or
passenger Article 1741 of the New Civil
Code states that: ―If the shipper or owner
merely contributed to the loss, destruction
or deterioration of the goods, the proximate
cause thereof being the negligence of the
common carrier, the latter shall be liable in
damages, which however, shall be equitably
reduced.‖
Article 1761 of the New Civil Code
provides that: ―The passenger must observe
the diligence of a good father of a family to
avoid injury to himself.”
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Transportation Law
Article 1762 of the New Civil Code states
that: ―The contributory negligence of the
passenger does not bar recovery of damages
for his death or injuries, if the proximate
cause thereof is the negligence of the
common carrier, but the amount of
damages shall be equitably reduced.‖
*The shipper is also obliged to exercise due
diligence in avoiding damage or injury.
*With respect to carriage of passengers, the
said passengers are likewise bound to
observe due diligence to avoid injury.
*The contributory negligence on the part of
the passenger is not a defense that will
excuse the carrier from liability. It will only
mitigate such liability.
*The carrier may be able to prove that the
only cause of the loss of the goods is any of
the following acts of the shipper:
1. failure of the shipper to disclose the
nature of the goods;
2. improper marking or direction as to
destination; and
3. improper loading when he assumed such
responsibility.
*The shipper must likewise see to it that the
goods are properly packed; otherwise,
liability of the carrier may be mitigated or
barred depending on the circumstances.
B. Payment of freight
Who will pay:
Shipper - before or at the time he delivers
the goods to the carrier for shipment.
Consignee - if agreed upon by the parties at
the point of destination is bound by such
stipulation the moment he accepts the
goods.
Passengers - they are contractually bound to
pay the fare within such time as prescribed
by regulations or by the carrier.
Time to pay:
Tickets are purchased in advance from
ticket outlets.
Consignees to whom the shipment was
made may not defer the payment of the
expenses and transportation charges of the
goods they receive after the lapse of 24
hours following their delivery.
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 Commercial Law Review
Transportation Law
*In case of delay in payment, the carrier EXTRAORDINARY DILIGENCE:
may demand the judicial sale of the goods
A. Underlying reason
transported in an amount necessary to
Reasons:
cover the cost of transportation and the
1. From the nature of the business and
expenses incurred.
for reasons of public policy;
Article 374 of the Code of Commerce
2. Relationship of trust;
provides that: ―The carrier who makes the
3. Business is impressed with a special
delivery of the merchandise to the
public duty;
consignee by virtue of combined
4. Possession of the goods;
agreements or services with other carriers
5. Preciousness of human life
shall assume the obligations of those who
preceded him in the conveyance, reserving
B. Effect of Stipulation
his right to proceed against the latter if he
Article 1744 of the New Civil Code
was not the party directly responsible for
states that: ―A stipulation between the
the fault which gave rise to the claim of the
common carrier and the shipper or
shipper or consignee. The carrier who
owner limiting the liability of the former
makes the delivery shall likewise acquire all
for the loss, destruction, or deterioration
the actions and rights of those who
of the goods to a degree less than
preceded him in the conveyance. The
extraordinary diligence shall be valid,
shipper and the consignee shall have an
provided it be:
immediate right of action against the carrier
(1) In writing, signed by the shipper or
who executed the transportation contract, or
owner;
against the other carriers who may have
(2) Supported by a valuable
received the goods transported without
consideration other than the service
reservation. However, the reservation made
rendered by the common carrier; and
by the latter shall not relieve them from the
(3) Reasonable, just and not contrary to
responsibilities which they may have
public policy.‖
incurred by their own acts.‖
Article 1757 of the New Civil Code
Article 375 of the Code of Commerce
states that: ―The responsibility of a
provides that: ―The goods transported shall
common carrier for the safety of
be especially bound to answer for the cost
passengers as required in Articles 1733
of transportation and for the expenses and
and 1755 cannot be dispensed with or
fees incurred for them during their
lessened by stipulation, by the posting
conveyance and until the moment of their
of notices, by statements on tickets, or
delivery. This special right shall prescribe 8
otherwise.‖
days after the delivery has been made, and
Article 1758 of the New Civil Code
once prescribed, the carrier shall have no
states that: ―When a passenger is carried
other action than that corresponding to him
gratuitously, a stipulation limiting the
as an ordinary creditor.‖
common carrier's liability for negligence
is valid, but not for wilful acts or gross
C. Liability for demurrage
negligence.
Demurrage is the compensation provided
The reduction of fare does not justify
for in the contract of affreightment for the
any limitation of the common carrier's
detention of the vessel beyond the time
liability.‖
agreed on for loading and unloading. It is a
Article 1760 of the New Civil Code
claim for damages for failure to accept
states that: ―The common carrier's
delivery.
responsibility prescribed in the
*Liability for demurrage exists only when
preceding article cannot be eliminated
expressly stipulated in the contract.
or limited by stipulation, by the posting

Page 15

of notices, by statements on the tickets
or otherwise.‖
C. Extraordinary diligence in carriage by
sea
1. Seaworthiness of the vessel
Sec. 3 [1] of the COGSA provides
that: ―The carrier shall be bound
before and at the beginning of the
voyage to exercise due diligence to
— of its duty prescribed in Article 1755
(a) Make the ship seaworthy;
(b) Properly man,equip, and supply
the ship;
(c) Make the holds, refrigerating
and cooling chambers, and all other
parts of the ship in which goods are
carried, fit and safe for their
reception, carriage, and
preservation.‖
Sec. 3 [2] of the COGSA provides
that: ―The carrier shall properly and
carefully load, handle, stow, carry,
keep, care for, and discharge the
goods carried.‖
Sec. 116 of the IC
Sec. 119 of the IC
Article 609 of the Code of
Commerce states that: ―Captains,
masters or patrons of vessels must
be Filipinos, have legal capacity to
contract in accordance with this
code, and prove the skill, capacity,
and qualifications necessary to
command and direct the vessel, as
established by marine or navigation
laws, ordinances, or regulations, and
must not be disqualified according
to the same for the discharge of the
duties of the position. If the owner
of a vessel desires to be the captain
thereof, without having the legal
qualifications therefor, he shall limit
himself to the financial
administration of the vessel, and
shall intrust the navigation to a
person possessing the qualifications
required by said ordinances and
regulations.‖
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Transportation Law
*Extraordinary diligence requires
that the ship which will transport
the passengers and goods is
seaworthy.
*The carriers are deemed to warrant
impliedly the seaworthiness of the
ship. The failure of a common
carrier to maintain in seaworthy
condition the vessel involved in its
contract of carriage is a clear breach
of the NCC.
*Shippers of goods are not expected
to inquire into the vessel‘s
seaworthiness and compliance with
all maritime laws.
*The unseaworthiness can be
established by the fact that it did not
withstand the natural and inevitable
action of the sea.
2. Overloading
*Duty to exercise due diligence
includes the duty to take passengers
or cargoes that are within the
carrying capacity of the vessel.
3. Proper storage
*The ship must not be only
seaworthy but it must also be
cargoworthy. The ship must be an
efficient storehouse for her cargo.
*The vessel must be adequately
equipped and properly manned.
4. Obligation of captain and crew
*If the negligence of the captain and
crew can be traced to the fact that
they are really incompetent, the
Limited Liability Rule cannot be
invoked because the ship owner
may be deemed negligent.
5. Rule on deviation and
transhipment Deviation
*If route is stipulated upon by the
shipper and carrier, carrier can‘t
change unless due to force majeure.
*Carrier shall be liable for all losses
suffered from any other cause,
beside the sum stipulated for such
case.
*If due to said force majeure he took
another route and incurred expenses
Page 16

by reason thereof, he shall be
reimbursed for such increase upon
formal proof thereof (Art. 359, Code
of Commerce).
Transshipment is the act of taking
cargo out of one ship and loading it
in another.
*When done without legal excuse,
however competent and safe the
vessel into which the transfer is
made, is a violation of the contract
and an infringement of the right of
the shipper and subjects the carrier
to liability if the freight is lost even
by a cause otherwise excepted
(Magellan Manufacturing Corp. v.
CA).
Article 359 of the Code of
Commerce provides that: ―If there is
an agreement between the shipper
and the carrier as to the road over
which the conveyance is to be made,
the carrier may not change the route,
unless it be by reason of force
majeure; and should he do so
without this cause, he shall be liable
for all the losses which the goods he
transports may suffer from any
other cause, beside paying the sum
which may have been stipulated for
such case. When on account of said
cause of force majeure, the carrier
had to take another route which
produced an increase
transportation charges, he shall be
reimbursed for such increase upon
formal proof thereof.‖
D. Extraordinary diligence in carriage by
land
1. Vehicle’s condition
*Owners are required to make sure
that the vehicles they are using are
in good order and condition.
2. Traffic rules (RA 4136)
*In cases involving breach of
contract of carriage, proof of
violation of traffic rules confirms
that the carrier failed to exercise
extraordinary diligence.
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3. Obligation to Inspect
*in overland transportation,
common carrier is not bound nor
empowered to make an examination
of the contents of packages or bags
particularly those hand carried.
Airline companies are required to
inspect each and every cargo
brought into the aircraft (RA 6235).
E. Extraordinary diligence in carriage by
air
1. Airworthiness - an aircraft, its
engines, propellers and other
components and accessories are of
proper design and construction, and are
safe for air navigation purposes, such
design and construction being
consistent with accepted engineering
practice and in accordance with
aerodynamic laws and aircraft science
(RA 779).
2. Competent and well trained crew
3. To take the required and prescribed
route
4. Adverse weather conditions or
extreme climatic changes are some of
the perils involved in air travel
consequence of which the passenger
must assume or expect.
5. RA 6235 (An Act Prohibiting Certain
Acts Inimical to Civil Aviation and for
Other Purposes) - acts punishable:
a. to compel a change in the course or
in destination of an aircraft of Philippine
registry; or
b. to seize or usurp control of the
aircraft while in flight.
ACTIONS IN CASE OF BREACH OF
CONTRACT OF CARRIAGE:
A. Causes of action and nature/extent of
liability (culpa contractual, culpa
aquiliana and culpa delictual)
Culpa contractual only the carrier is
primarily liable and not the driver.
Reason: There is no privity between the
driver and the passenger.
*The party to be impleaded is the carrier
itself.
Page 17

Basis: Article 1759 of the New Civil
Code
Culpa delictual/criminal the driver is
primarily liable. The carrier is
subsidiarily liable only if the driver is
convicted and declared insolvent.
Basis: Article 100 of the Revised Penal
Code
Culpa aquiliana the carrier and the
driver are solidarily liable as joint
tortfeasor.
Basis: Article 2180 of the New Civil
Code
B. Prescriptive period and conditions
precedent
1. Overland transportation of goods
and coastwise shipping (Domestic)
Article 366 of the Code of
Commerce provides that: ―Within
the 24 hours following the receipt of
the merchandise, the claim against
the carrier for damage or average
which may be found therein upon
opening the packages, may be made,
provided that the indications of the
damage or average which gives rise
to the claim cannot be ascertained
from the outside part of such
packages, in which case the claim
shall be admitted only at the time of
receipt. After the periods mentioned
have elapsed, or the transportation
charges have been paid, no claim
shall be admitted against the carrier
with regard to the condition in
which the goods transported were
delivered.‖
*Prior notice of claim does not apply
to misdelivery of goods.
Purpose of notice: To inform the
carrier that the shipment has been
damaged and that it is charged with
liability therefor, and to give it an
opportunity to make an
investigation and fix responsibility
while the matter is fresh.
*The filing of notice of claim is a
condition precedent for recovery in
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case of damage condition of the
goods.
*Not provided by Article 366 of the
Code of Commerce. Thus, in such
absence, the New Civil Code rules
on prescription apply.
Prescriptive period:
General Rule: If written, 10 years, if
not written, 6 years
Exceptions:
1. COGSA – 1 year
2. Warsaw Convention – 2 years
Example: Q: In case of pending
extrajudicial claim, does it suspend
the one year period?
A: NO
*One year period applies to shipper,
assignee, insurer, subrogees, and
successor in interest.
*One year period does not apply in
cases of delay or misdelivery.
International Carriage of Goods by
Sea Sec. 3 [6] of the COGSA
substantially provides that in case of
patent damage, the shipper should
file a claim with the carrier
immediately upon delivery. In case
of latent damage, the shipper should
file a claim with the carrier within 3
days from delivery. Action for loss
or damage to the cargo should be
brought within one year after:
delivery of the goods (delivered but
damaged goods); or the date when
the goods should have been
delivered (loss).
*The filing of a notice of claim is not
a condition precedent.
Recoverable Damages
The court may award the following
damages:
1. Actual/Compensatory Damages
2. Temperate Damages
3. Liquidated Damages
4. Exemplary Damages
5. Moral Damages
6. Nominal Damages
Page 18

Actual/Compensatory damages are those
awarded to the aggrieved party as adequate
compensation only for such pecuniary loss
suffered by him as he has alleged and duly
proved.
Article 2199 of the Civil Code states that:
―Except as provided by law or by
stipulation, one is entitled to an adequate
compensation only for such pecuniary loss
suffered by him as he has duly proved.
Such compensation is referred to as actual
or compensatory damages.‖
*To claim this award, proving the amount is
necessary.
*Procedures or plastic surgeries performed
to restore the part of the body injured are
included as a component of actual damages.
Temperate damages or moderate damages
these are damages the amount of which is
left to the sound discretion of the court, but
it is necessary that there be some injury or
pecuniary loss established, the exact
amount of which, could not be determined
by the plaintiff by reason of the nature of
the case.
Article 2224 of the New Civil Code
provides that: ―Temperate or moderate
damages, which are more than nominal but
less than compensatory damages, may be
recovered when the court finds that some
pecuniary loss has been suffered but its
amount can not, from the nature of the case,
be provided with certainty.‖
*The court is convinced that there is
pecuniary loss.
*There is no actual certainty of the actual
amount loss. The court is allowed to
calculate the amount.
*This is in the form of actual damages
Liquidated damages are fixed damages
previously agreed by the parties to the
contract and payable to the innocent party
in case of breach by the other.
Article 2226 of the New Civil Code
provides that: ―Liquidated damages are
those agreed upon by the parties to a
contract, to be paid in case of breach
thereof.‖
*This is in the form of actual damages but a
stipulated one.
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*Proving the amount is not necessary.
*In this kind of damages, estoppel applies.
General Rule: The court cannot change the
amount.
Exception: If the amount stipulated is
excessive the court may disregard said
amount and may compute the actual
damages.
*The only thing to be proved is the fact of
loss.
Exemplary damages are mere accessories to
other forms of damages except nominal
damages. They are mere additions to actual,
moral, temperate and liquidated damages
which may or may not be granted at all
depending upon the necessity of setting an
example for the public good as a form of
deterrent to the repetition of the same act by
any one.
Article 2229 of the New Civil Code
provides that: ―Exemplary or corrective
damages are imposed, by way of example
or correction for the public good, in
addition to the moral, temperate, liquidated
or compensatory damages.‖
*Awarded because of the wanton,
fraudulent, malevolent, oppressive acts of
the carrier.
*This is awarded to prevent other carrier to
commit oppressive acts.
*This cannot be awarded unless the plaintiff
is entitled to moral at the same time actual
or temperate damages.
Article 2231 of the New Civil Code states
that: ―In quasi-delicts, exemplary damages
may be granted if the defendant acted with
gross negligence.‖
Article 2232 of the New Civil Code states
that: ―In contracts and quasi-contracts, the
court may award exemplary damages if the
defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent
manner.‖
Article 2233 of the New Civil Code states
that: ―Exemplary damages cannot be
recovered as a matter of right; the court will
decide whether or not they should be
adjudicated.‖
Article 2234 of the New Civil Code states
that: ―While the amount of the exemplary
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damages need not be proved, the plaintiff
must show that he is entitled to moral,
temperate or compensatory damages before
the court may consider the question of
whether or not exemplary damages should
be awarded In case liquidated damages
have been agreed upon, although no proof
of loss is necessary in order that such
liquidated damages may be recovered,
nevertheless, before the court may consider
the question of granting exemplary in
addition to the liquidated damages, the
plaintiff must show that he would be
entitled to moral, temperate or
compensatory damages were it not for the
stipulation for liquidated damages.‖
Article 2235 of the New Civil Code states
that: ―A stipulation whereby exemplary
damages are renounced in advance shall be
null and void.‖
Nominal damages are not for
indemnification of loss but for vindication
of a right violated.
Article 2221 of the New Civil Code
provides that: ―Nominal damages are
adjudicated in order that a right of the
plaintiff, which has been violated or
invaded by the defendant, may be
vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for
any loss suffered by him.‖
Article 2222 of the New Civil Code states
that: ―The court may award nominal
damages in every obligation arising from
any source enumerated in Article 1157, or in
every case where any property right has
been invaded.‖
Article 2223 of the New Civil Code states
that: ―The adjudication of nominal damages
shall preclude further contest upon the right
involved and all accessory questions, as
between the parties to the suit, or their
respective heirs and assigns.‖
*In Japan Airlines v CA, JAL failed to give
the plaintiff the priority for the first
available flight. The SC awarded nominal
damages.
Moral damages are in the category of an
award designed to compensate the claimant
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for actual injury suffered and not to impose
a penalty on the wrongdoer.
Article 2217 of the New Civil Code
provides that: ―Moral damages include
physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation,
wounded feelings, moral shock, social
humiliation, and similar injury. Though
incapable of pecuniary computation, moral
damages may be recovered if they are the
proximate result of the defendant's
wrongful act for omission.‖
Q: When moral damages may be awarded?
A: 1. Death of a passenger; 2. Carrier is
guilty of fraud, malice, bad faith even if
there is no death of a passenger (Case:
Lopez v Pan-American); 3. In Air France
case
MARITIME LAW:
Source: Code of Commerce
A. Concept of Maritime Law
Maritime Law is the system of laws which
particularly relates to the affairs and
business of the sea, to ships, their crews and
navigation, and to maritime conveyance of
persons and property.
*Apply only to maritime trade and sea
voyages.
B. Limited Liability Rule
1. Concept
The exclusively real and hypothecary
nature of maritime law operates to limit
the liability of the shipowner to the
value of the vessel, earned freightage
and proceeds of the insurance, if any.
―NO VESSEL NO LIABILITY‖
expresses in a nutshell the limited
liability rule. The total destruction of the
vessel extinguishes maritime lien as
there is no longer any res to which it can
attach.
Q: Is this rule applies in the handling of
the passengers?
A: YES
Q: Whose liability is this?
A: Shipowner or Agents.
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Article 586 2nd paragraph states that:
―By ship agent is understood the person
entrusted with provisioning or
representing the vessel in the port in
which it may be found.‖
*Ship agent is the only person that can
be sued directly.
Reason: Article 618 of the Code of
Commerce provides so.
Article 618 1st paragraph states that:
―The ship captain shall be civilly liable
to the ship agent, and the latter to the
third persons who may have made
contracts with the former; x x x.‖
Q: What kind?
A: Maritime in nature; marine
transactions connected with maritime
law; maritime trade and commerce
Purpose: To encourage shipbuilding
and maritime transactions
Article 587 of the Code of Commerce
provides that: ―The ship agent shall also
be civilly liable for the indemnities in
favor of third persons which may arise
from the conduct of the captain in the
care of the goods which he loaded on
the vessel; but he may exempt himself
therefrom by abandoning the vessel
with all her equipments and the freight
it may have earned during the voyage.‖
Article 590 of the Code of Commerce
provides that: ―The co-owners of a
vessel shall be civilly liable in the
proportion of their interests in the
common fund, for the results of the acts
of the captain, referred to in Article 587.
Each co-owner may exempt himself
from this liability by the abandonment,
before a notary, of the part of the vessel
belonging to him.‖
Article 837 of the Code of Commerce
provides that: ―The civil liability
incurred by the shipowners in the case
prescribed in this section, shall be
understood as limited to the value of the
vessel with all its appurtenances and
freightage earned during the voyage.‖
When applicable:
The Code of Commerce sanctions the
application of the doctrine in the
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following cases: 1. Civil liability for
indemnities in favor of third persons
which arise from the conduct of the
captain in the case of the goods which
the vessel carried; 2. Civil liability
arising from collisions; 3. Unpaid wages
of the captain and the crew if the vessel
and its cargo are totally lost by reason of
capture of shipwreck.
2. Exceptions to the rule
Exceptions:
1. When the injury to or death of a
passenger is due either to the fault of
the shipowner, or to the concurring
negligence of the shipowner and the
captain;
2. When the vessel is insured to the
extent of the insurance proceeds;
and
*Freightage collectible
Q: How come insurance is an
exception?
A: Because there is no loss. The loss
was compensated by the insurance
company
3. In Workmen‘s Compensation claims
Q: Why is an exception?
A: Because not maritime in nature
*In Yangco v Laserna case, the SC
held that it covers anything that is
connected with maritime
transactions
3. Abandonment
Q: If there‘s partial loss can the
shipowner/agent be exempted from
liability?
A: YES. If there is abandonment.
Q: If there is total loss, is it necessary to
abandon?
A: NO. There is nothing to abandon.
Case: Luzon Stevedoring
Article 587 of the Code of Commerce
states that: ―The ship agent shall also be
civilly liable for the indemnities in favor
of third persons which may arise from
the conduct of the captain in the care of
the goods which he loaded on the
vessel; but he may exempt himself
therefrom by abandoning the vessel
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with all her equipments and the freight
it may have earned during the voyage.‖
Q: How claims are satisfied under the
Limited Liability Rule?
A: All claims should be collated before
they can be satisfied from what remains
of the insurance proceeds and freightage
at the time of the loss. No claimant
should be given preference over the
others by the simple expedience of
having filed or completed its action
earlier than the rest. Thus, the execution
of judgment in earlier completed cases,
even those already final and executory,
must be stayed pending completion of
all cases occasioned by the subject
sinking. Then and only then can all such
claims be simultaneously settled, either
completely or pro-rata should the
insurance proceeds and freightage be
not enough to satisfy the claim.
Case: Aboitiz Shipping Co. v General
Accident Fire and Life Insurance
Corporation
C. Vessels
- Those engaged in navigation,
whether coastwise or on the high
seas, including floating docks,
pontoons, dredges, scows and any
other floating apparatus destined for
the services of the industry or
maritime commerce. Excluded are
local and foreign military vessels,
bancas and other watercrafts of less
than 3 tons gross capacity and small
watercrafts engaged in river and bay
traffic.
1. Acquisition
a. By prescription
Article 573 of the Code of
Commerce states that: ―Merchant
vessels constitute property which
may be acquired and transferred by
any of the means recognized by law.
The acquisition of a vessel must
appear in a written instrument,
which shall not produce any effect
with respect to third persons if not
inscribed in the registry of vessels.
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The ownership of a vessel shall
likewise be acquired by possession
in good faith, continued for three
years, with a just title duly recorded.
In the absence of any of these
requisites, continuous possession for
ten years shall be necessary in order
to acquire ownership. A captain may
not acquire by prescription the
vessel of which he is in command.‖
Requisites:
1. Acquisition must appear in a
written instrument
2. Such shall not produce any effect
to third persons if not inscribed
in the registry of vessels
3. Shall be acquired by possession
in good faith, continued for 3
years
4. With a just title duly recorded
5. In the absence of any of there,
continuous possession for 10
years shall be necessary to
acquire ownership
Q: Can the ship captain acquire
vessel by prescription?
A: NO. The character of possession
he has is not those for acquisitive
possession. The requisite for
acquisitive possession is that
possession as an owner.
Article 575 of the Code of
Commerce states that: ―Co-owners
of vessels shall have the right of
repurchase and redemption in sales
made to strangers, but they may
exercise the same only within the 9
days following the inscription of the
sale in the registry, and by
depositing the price at the same
time.‖
b. By sale
Article 576 of the Code of
Commerce states that: ―In the sale of
a vessel it shall always be
understood as included the rigging,
masts, stores and engine of a
steamer appurtenant thereto, which
at the time belongs to the vendor.
The arms, munitions of war,
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provisions and fuel shall not be
considered as included in the sale.
The vendor shall be under the
obligation to deliver to the
purchaser a certified copy of the
record sheet of the vessel in the
registry up to the date of sale.‖
Article 577 of the Code of
Commerce states that: ―If the
alienation of the vessel should be
made while it is on voyage, the
freightage which it earns from the
time it receives its last cargo shall
pertain entirely to the purchaser,
and the payment of the crew and
other persons who make up its
complement for the same voyage
shall be for his account. If the sale is
made after the vessel has arrived at
the port of its destination, the
freightage shall pertain to the
vendor, and the payment of the crew
and other individuals who make up
its complement shall be for his
account, unless the contrary is
stipulated in either case.
*If made while it is on voyage, the
freightage which it earns from the
time it receives its last cargo shall
pertain entirely to the purchaser,
and the payment of the crew and
other persons who make up its
complement shall be for his account.
*If made after vessel arrived at port
of its destination, freightage shall
pertain to the vendor, and the
payment of the crew and other
individuals who make up its
complement shall be for his account,
unless the contrary is stipulated in
either case.
Article 578 of the Code of
Commerce states that: ―If the vessel
being on a voyage or in a foreign
port, its owner or owners should
voluntarily alienate it, either to
Filipinos or to foreigners domiciled
in the capital or in a port of another
country, the bill of sale shall be
executed before the consul of the
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Republic of the Philippines at the
port where it terminates its voyage
and said instrument shall produce
no effect with respect to third
persons if it is not inscribed in the
registry of the consulate. The consul
shall immediately forward a true
copy of the instrument of purchase
and sale of the vessel to the registry
of vessels of the port where said
vessel is inscribed and registered. In
every case the alienation of the
vessel must be made to appear with
a statement of whether the vendor
receives its price in whole or in part,
or whether he preserves in whole or
in part any claim on said vessel. In
case the sale is made to a Filipino,
this fact shall be stated in the
certificate of navigation. When a
vessel, being in a voyage, shall be
rendered useless for navigation, the
captain shall apply to the competent
judge or court of the port of arrival,
should it be in the Philippines; and
should it be in a foreign country, to
the consul of the Republic of the
Philippines, should there be one, or,
where there is none, to the judge or
court or to the local authority; and
the consul, or the judge or court,
shall order an examination of the
vessel to be made. If the consignee
or the insurer should reside at said
port, or should have representatives
there, they must be cited in order
that they may take part in the
proceedings on behalf of whoever
may be concerned.‖
c. Registration
Section 810 of the Tariff and
Customs Code provides that: ―The
Bureau of Customs is vested with
exclusive authority over the
registration and documentation of
Philippine vessels. By it shall be kept
and preserved the records of
registration and of transfers and
encumbrances of vessels; and by it
shall be issued all certificates,
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licenses or other documents incident
to registration and documentation,
or otherwise requisite for Philippine
vessels.‖
*Through the MARINA
d. Ship’s manifest
Sec. 906 of the Tariff and Customs
Code provides that: ―Manifests shall
be required for cargo and
passengers transported from one
place or port in the Philippines to
another only when one or both of
such places is a port of entry.‖
*Declaration of the entire cargo. The
object is to furnish customs officers
with a list to check against, to inform
the revenue officers what goods are
brought into a port of the country on
a vessel. Hence, the requirement that
a vessel must carry a manifest is not
complied with even if a bill of lading
can be presented.
*A bill of lading is just a declaration
of a specific cargo rather than the
entire cargo. It is issued as a matter
of convenience by virtue of a
contract.
D. Persons who take part in Maritime
Commerce
1. Shipowners and shipagents
Article 586 of the Code of Commerce
provides that: ―The shipowner and the
ship agent shall be civilly liable for the
acts of the captain and for the
obligations contracted by the latter to
repair, equip, and provision the vessel,
provided the creditor proves that the
amount claimed was invested for the
benefit of the same. By ship agent is
understood the person entrusted with
provisioning or representing the vessel
in the port in which it may be found.‖
Article 587 of the Code of Commerce
provides that: ―The ship agent shall also
be civilly liable for the indemnities in
favor of third persons which may arise
from the conduct of the captain in the
care of the goods which he loaded on
the vessel; but he may exempt himself
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thereform by abandoning the vessel
with all her equipments and the freight
it may have earned during the voyage.‖
Article 588 of the Code of Commerce
provides that: ―Neither the shipowner
nor the ship agent shall be liable for the
obligations contracted by the captain, if
the latter exceeds the powers and
privileges pertaining to him by reason
of his position or conferred upon him by
the former. Nevertheless, if the amounts
claimed were invested for the benefit of
the vessel, the responsibility therefor
shall devolve upon its owner or agent.‖
a. Rules in case of part-owners
Article 589 of the Code of
Commerce provides that: ―If two or
more persons should be part owners
of a merchant vessel, a partnership
shall be presumes as estrablished by
the co-owners. This partnership
shall be governed by the resolution
of the majority of the members. If
the part-owners should not be more
than two, the disagreement of views,
if any, shall be decided by the vote
of the member having the largest
interest. If the interests are equal, it
should be decided by lot. The person
having the smallest share in the
ownership shall have one vote; and
proportionately the other part
owners as many votes as they have
parts equal to the smallest one. A
vessel may not be detained, attached
or levied upon in execution in its
entirety, for the private debts of a
part owner, but the proceedings
shall be limited to the interest which
the debtor may have in the vessel,
without interfering with the
navigation.‖
Article 590 of the Code of
Commerce provides that: ―The co-
owners of a vessel shall be civilly
liable in the proportion of their
interests in the common fund, for
the results of the acts of the captain,
referred to in Article 587.‖
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Article 591 of the Code of
Commerce provides that: ―All the
part owners shall be liable, in
proportion to their respective
ownership, for the expenses for
repairing the vessel, and for other
expenses which are incurred by
virtue of a resolution of the majority.
They shall likewise be liable in the
same proportion for the expenses for
the maintenance, equipment, and
provisioning of the vessel, necessary
for navigation.‖
Article 592 of the Code of
Commerce provides that: ―The
resolution of the majority with
regard to the repair, equipment, and
provisioning of the vessel in the port
of departure shall bind the minority,
unless the minority members
renounce their interests, which must
be acquired by the other co-owners,
after a judicial appraisement of the
value of the portion or portions
assigned. The resolutions of the
majority relating to the dissolution
of the partnership and sale of the
vessel shall also be binding on the
minority. The sale of the vessel must
be made at public auction, subject to
the provisions of the law of civil
procedure, unless the co-owners
unanimously agree otherwise,
saving always the right of
repurchase and redemption
provided for in Article 575.‖
Article 593 of the Code of
Commerce provides that: ―The
owners of a vessel shall have
preference in her charter over other
persons, under the same conditions
and price. If two or more of them
should claim this right, the one
having the greater interest shall be
preferred; and should they have
equal interests, the matter shall be
decided by lot.‖
Article 594 of the Code of
Commerce states that: ―The co-
owners shall elect the manager who
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is to represent them in the capacity
of ship agent. The appointment of
director or ship agent shall be
revocable at the will of the
members.‖
b. Rules in case of shipagents
Article 595 of the Code of
Commerce states that: ―The ship
agent, whether he is at the same
time the owner of the vessel, or a
manager for an owner or for an
association of co-owners, must have
the capacity to trade and must be
recorded in the merchant‘s registry
of the province. The ship agent shall
represent the ownership of the
vessel, and may, in his own name
and in such capacity, take judicial
and extrajudicial steps in matters
relating to commerce.‖
Article 596 of the Code of
Commerce provides that: ―The ship
agent may discharge the duties of
captain of the vessel, subject in every
case to the provision of Article 609.
If two or more co-owners apply for
the position of captain, the
disagreement shall be decided by a
vote of the members; and if the vote
should result in a tie, it shall be
decided in favor of the co-owner
having the larger interest in the
vessel. If the interests of the
applicants should be equal, and
there should be a tie, the matter shall
be decided by lot.‖
Article 597 of the Code of
Commerce states that: ―The ship
agent shall designate and come to
terms with the captain, and shall
contract in the name of the owners,
who shall be bound in all that refer
to repairs, details equipment,
armament, provisions of food and
fuel, and freight of the vessel, and, in
general, in all that relate to the
requirements of navigation.‖
Article 598 of the Code of
Commerce states that: ―The ship
agent may not order a new voyage,
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or make contracts for a new charter,
or insure the vessel, without the
authorization of its owner or
resolution of the majority of the co-
owners, unless these powers were
granted him in the certificate of his
appointment. If he insures the vessel
without authorization therefore, he
is subsidiarily liable for the solvency
of the insurer.‖
Article 599 of the Code of
Commerce states that: ―The ship
agent managing for an association
shall render to his associates an
account of the results of each voyage
of the vessel, without prejudice to
always having the books and
correspondence relating to the vessel
and to its voyages at their disposal.‖
Article 600 of the Code of
Commerce states that: ―After the
account of the managing agent has
been approved by a relative
majority, the co-owners shall pay the
expenses in proportion to their
interest, without prejudice to the
civil or criminal actions which the
minority may deem fit to institute
afterwards. In order to enforce the
payment, the managing agent shall
be entitled to an executor action
(‗accion ejecutiva‘), which shall be
instituted by virtue of a resolution of
the majority, and without further
proceedings than the
acknowledgment of the signatures
of the persons who voted for the
resolution.‖
Article 601 of the Code of
Commerce states that: ―Should there
be any profits, the co-owners may
demand of the managing agent the
amount corresponding to their
interests by means of an executor
action (‗accion ejecutiva‘), without
any other requisite than the
acknowledgment of the signatures
on the instrument approving the
account.‖
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Article 602 of the Code of
Commerce states that: ―The ship
agent shall indemnify the captain for
all the expenses he may have
incurred with funds of his own or of
others, for the benefit of the vessel.‖
*The ship agent is entrusted with the
provisioning and representing the
vessel in the port in which it may be
found. His liability to passengers
and cargo owners for loss or injury
is the same as the shipowner.
*He is solidarily liable with the
owner for such loss or damage
subject to his right to claim
reimbursement from the shipowner.
*Only agent that can be sued
directly.
2. Captains and masters of vessels
a. Qualifications
Article 609 of the Code of
Commerce states that: ―Captains,
masters or patrons of vessels must
be Filipinos, have legal capacity to
contract in accordance with this
code, and prove the skill, capacity,
and qualifications necessary to
command and direct the vessel, as
established by marine or navigation
laws, ordinances, or regulations, and
must not be disqualified according
to the same for the discharge of the
duties of the position. If the owner
of a vessel desired to be the captain
thereof, without having the legal
qualifications therefor, he shall limit
himself to the financial
administration of the vessel, and
shall intrust the navigation to a
person possessing the qualifications
required by said ordinances and
regulations.‖
b. Powers and functions
Article 610 of the Code of
Commerce states that: ―The
following powers shall be inherent
in the position of captain, master or
patron of a vessel: 1. To appoint or
make contracts with the crew in the
absence of the ship agent, and to
Page 26

propose said crew, should said
agent be present; but the ship agent
may not employ any member
against the captain‘s express refusal;
2. To command the crew and direct
the vessel to the port of its
destination, in accordance with the
instructions he may have received
from the ship agent; 3. To impose, in
accordance with the contracts and
with the laws and regulations of the
merchant marine, and when on
board the vessel, correctional
punishment upon those who fail to
comply with his orders or are
wanting in discipline, holding a
preliminary hearing on the crimes
committed on board the vessel on
the seas, which crimes shall be
turned over to the authorities having
jurisdiction over the same at the first
port touched; 4. To make contracts
for the charter of the vessel in the
absence of the ship agent or of its
consignee, acting in accordance with
the instructions received and
protecting the interests of the owner
with utmost care; 5. To adopt all
proper measures to keep the vessel
well supplied and equipped,
purchasing all that may be necessary
for the purpose, provided there is no
time to request instruction from the
ship agent; and 6. To order, in
similar urgent cases while on a
voyage, the repairs on the hull and
engines of the vessel and in its
rigging and equipment, which are
absolutely necessary to enable it to
continue and finish its voyage; but if
he should arrive at a point where
there is a consignee of the vessel, he
shall act in concurrence with the
latter.‖
Article 611 of the Code of
Commerce states that: ―In order to
comply with the obligations
mentioned in the preceding article,
the captain, when he has no funds
and does not expect to receive any
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from the ship agent, shall obtain the
same in the successive order stated
below: 1. By requesting said funds
from the consignee of the vessel or
correspondents of the ship agent; 2.
By applying to the consignees of the
cargo or to those interested therein;
3. By drawing on the ship agent; 4.
By borrowing the amount required
by means of a loan on bottomry; and
5. By selling a sufficient amount of
the cargo to cover the sum
absolutely indispensable for the
repair of the vessel and to enable it
to continue its voyage. In these two
last cases he must apply to the
judicial authority of the port, if in
the Philippines, and to the consul of
the Republic of the Philippines if in
a foreign country, and where there is
none, to the local authority,
proceeding in accordance with the
provisions of Article 583, and with
the provisions of the law of civil
procedure.‖
Article 612 of the Code of
Commerce states that: ―The
following obligations shall be
inherent in the office of the captain:
1. To have on board before starting
on a voyage a detailed inventory of
the hull, engines, rigging, spare-
masts, tackle, and other equipment
of the vessel; the royal or the
navigation certificate; the roll of the
persons who make up the crew of
the vessel, and the contracts entered
into with them; the lists of
passengers; the bill of health; the
certificate of the registry proving the
ownership of the vessel and all the
obligations which encumber the
same up to that date; the charter
parties or authenticated copies
thereof; the invoices or manifests of
the cargo, and the memorandum of
the visit or inspection by experts,
should it have been made at the port
of departure;
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2. To have a copy of this code on
board; 3. To have thee folioed and
stamped books, placing at the
beginning of each one a gods, stating their marks and
memorandum of the number of
folios it contains, signed by the
maritime authority, and in his
absence by the competent authority.
In the first book, which shall be
called ―log book,‖ he shall enter day
by day the condition of the
atmosphere, the prevailing winds,
the courses taken, the rigging
carried, the power of the engines
used in navigation, the distances
covered, the maneuvers executed,
and other incidents of navigation; he
shall also enter the damage suffered
by the vessel in her hull, engines,
rigging, and tackle, no matter what
its cause may be, as well as the
impairment and damage suffered by
cargo, and the effect and importance
of the jettison, should there be any;
and in cases of serious decisions
which require the advice or a
meeting of the officers of the vessel,
or even of the crew and passengers,
he shall record the decisions
adopted. For the information
indicated he shall make use of the
binnacle book and of the steam of
engine book kept by the engineer. In
the second book called the
―accounting book,‖ he shall record
all the amounts collected and paid
for the account of the vessel,
entering specifically the article by
article, the source of the collection
and the amounts spent for
provisions, repairs, acquisitions of
equipment or goods, fuel, food,
outfits, wages, and other expenses of
whatever nature they may be. He
shall furthermore enter therein a list
of all the members of the crew,
stating their domiciles, their wages
and salaries, and the amounts they
may have received on account,
directly or by delivery to their
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families. In the third book, called
―freight book,‖ he shall record the
loading and discharge of all the
packages, names of the shippers and
of the consignees, ports of loading
and unloading, and the freightage
they give. In this same book he shall
record the names and places of
sailing of the passengers, the
number of packages in their
baggage, and the price of passage;
4. Before receiving cargo, to make
with the officers of the crew and two
experts, if required by the shippers
and passengers, an examination of
the vessel, in order to ascertain
whether it is water-tight, with the
rigging and engines in good
condition, and with the equipment
required for good navigation,
preserving under his responsibility a
certificate of the memorandum of
his inspection, signed by all those
who may have taken part therein.
The experts shall be appointed, one
by the captain of the vessel and
another by those who request its
examination, and in case of
disagreement a third shall be
appointed by the marine authority
of the port or by the authority
exercising his functions;
5. To remain constantly on board the
vessel with the crew while the cargo
is being taken on board and to
carefully watch the stowage thereof;
not to consent to the loading of any
merchandise or matter of a
dangerous character, such as
inflammable or explosive
substances, without the precautions
which are recommended for their
packing, handling and isolation; not
to permit the carriage on deck of any
cargo which by reason of its
arrangement, volume, or weight
makes the work of the sailors
difficult, and which might endanger
the safety of the vessel; and if, on
Page 28

account of the nature of the
merchandise, the special character of
the shipment, and principally the
favorable season in which it is
undertaken, merchandise may be
carried on deck, he must hear the
opinion of the officers of the vessel
and have the consent of the shippers
and of the ship agent;
6. To demand a pilot at the expense
of the vessel whenever required by
the navigation, and principally
when he has to enter a port, canal, or
river, or has to take a roadstead or
anchoring place with which neither
he nor the officers and crew are
acquainted;
7. To be on deck on reaching land
and to take command on entering
and leaving ports, canals,
roadsteads, and rivers, unless there
is a pilot on board discharging his
duties. He shall not spend the night
away from the vessel except for
serious causes or by reason of
official business;
8. To present himself, when making
a port in distress, to the maritime
authority if in the Philippines and to
the consul of the Republic of the
Philippines if in a foreign country,
before 24 hours have elapsed, and to
make a statement of the name
registry, and port of departure of the
vessel, of its cargo, and the cause of
arrival which declaration shall be
visaed by the authority or the
consul, if after examining the same it
is found to be acceptable, giving the
captain the proper certificate
proving his arrival in distress and
the reasons therefor. In the absence
of the maritime authority or of the
consul, the declaration must be
made before the local authority;
9. To take the necessary steps before
the competent authority in order to
record in the certificate of the vessel
in the registry of vessels the
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obligations which he may contract in
accordance with Article 583;
10. To place under good care and
custody all the papers and
belongings of any members of the
crew who might die on the vessel,
drawing up a detailed inventory, in
the presence of passengers, or, in
their absence, of members of the
crew as witnesses;
11. To conduct himself according to
the rules and precepts contained in
the instructions of the ship agent,
being liable for all that which he
may do in violation thereof;
12. To inform the ship agent from
the port at which the vessel arrives,
of the reason of his arrival, taking
advantage of the semaphore,
telegraph, mail, etc., as the case may
be; to notify him of the cargo he may
have received, stating the names and
domiciles of the shippers, freightage
earned, and amounts borrowed on
bottomry loan; to advise him of his
departure, and of any operation and
date which may be of interest to
him;
13. To observe the rules with respect
to situation, lights and maneuvers in
order to avoid collisions;
14. To remain on board, in case the
vessel is in danger, until all hope to
save it is lost, and before
abandoning it, to hear the officers of
the crew, abiding by the decision of
the majority; and if the boats are to
be taken to, he shall take with him,
before anything else, the books and
papers, and then the articles of most
value, being obliged to prove, in
case of the loss of the books and
papers, that he did all he could to
save them;
15. In case of wreck, to make the
proper protest in due form at the
first port of arrival, before the
competent authority or the
Philippine consul, within 24 hours,
specifying therein all the incidents of
Page 29

the wreck, in accordance with
subdivision 8 of this article;
16. To comply with the obligations
imposed by the laws and regulations
on navigation, customs, health, and
others.‖
c. Discretion powers
*A ship‘s captain must be accorded a
reasonable measure of discretionary
authority to decide what the safety
of the ship and of its crew and cargo
specifically requires on a stipulated
ocean voyage.
Case:Inter-Orient Maritime
Enterprises Inc. v CA
3. Pilot
a. Concept
Pilot is a person duly qualified and
licensed to conduct a vessel into or
out of ports or in certain waters.
*Generally connotes a person taken
on board at a particular place for the
purpose of conducting a ship
through a river, road or channel or
from a port.
*If he is in command, he becomes
the Master pro hac vice.
*While exercising his functions a
pilot is in sole command of the ship
and supersedes the master for the
time being in the command and
navigation of the ship; the master
does not surrender his vessel to the
pilot and the pilot is not the master.
There are occasions when the master
may and should interfere and even
displace the pilot, as when the pilot
is obviously incompetent or
intoxicated.
Case: Far Eastern Shipping v CA
b. Relationship to master and
shipowner
4. Officers and crew of the vessel
i. Sailing mate/First mate
ii. Second mate
iii. Engineers – marine engineers
iv. Crew – cabin boy; paramedics;
watchkeeper; radio officers
5. Supercargoes person who discharges
administrative duties assigned to him
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by ship agent or shippers, keeping an
account and record of transaction as
required in the accounting book of the
captain.
E. Charter parties
1. Concept
Article 655 of the Code of Commerce
states that: ―Charter parties executed by
the captain in the absence of the ship
agent shall be valid and effective, even
though in executing them he should
have acted in violation of the orders and
instructions of the ship agent or
shipowner; but the latter shall have a
right of action against the captain for
indemnification of damages.‖
Charter party is a lease contract by
which with the entire ship or some
principal part thereof is let by the owner
to another person for a specified period
of time or use.
2. Kinds; bareboat and contract of
affreightment
Kinds:
1. Bareboat or demise means the
whole vessel is lend to the charterer
which transfers to him its entire
command and possession and
consequent control over its
navigation, including the master and
crew who are his servants. The
charterer is treated as owner pro hac
vice of the vessel. In such case, a
common carrier becomes a private
carrier.
*Charterer means the vessel assumes
all responsibilities of navigation and
provides his own people.
*Shipowner is not liable to third
person; it is the charterer who is
liable to them.
General Rule: The charterer is liable
to the third person.
Exception: Shipowner may still be
held liable if the injury was caused
by unseaworthiness or negligence of
the shipowner beyond before the
demise or bareboat took over.
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2. Contract of affreightment involves goods of which the cargo consists, or in
that use of shipping space leased by any other manner whatsoever agreed
the owner in part or as a whole, to upon; 9. The amount of primage to be
carry goods for others. paid to the captain; 10. The days agreed
*The shipowner retains the upon for loading and unloading; 11. The
possession, command and lay days and extra lay days to be
navigation of the ship, the charterer allowed and the demurrage to be paid
merely having use of the space in for each of them.‖
the vessel in return for his payment Requisites:
of the charter hired. 1. Consent of the contracting parties
*The shipowner is liable to third 2. Existing vessel which should be
person. placed at the disposition of the
3. Persons qualified to make charter shipper
Q: Can the captain enter into a charter 3. Freight
contract? 4. Compliance with Article 652 of the
A: YES provided that he is authorized. Code of Commerce
Q: Can the charterer enter into a sub- 5. Concept of and liability for demurrage
charter contract? Demurrage is the sum due, by express
A: YES provided it is not prohibited. contract, for the detention of the vessel,
This is just like the rule in lease. in loading and unloading, beyond the
4. Requisites of a valid charter time allowed in the contract of
Article 652 of the Code of Commerce affreightment, and to any other
states that: ―A charter party must be improper detention or delay beyond the
drawn in duplicate and signed by the time set for loading.
contracting parties, and when either 6. Rights and obligations of charter
does not know how or is not able to do parties
so, by two witnesses at his request. The Shipowner or Charterer
charter party shall contain, besides the Ship agent
conditions freely stipulated, the If the vessel is To pay the agreed
chartered wholly, charter price
following circumstances: 1. The kind,
not to accept cargo
name, and tonnage of the vessel; 2. Its from others
flag and port of registry; 3. The name, To observe To pay freightage
surname, and domicile of the captain; 4. represented on unboarded
The name, surname, and domicile of the capacity cargo
ship agent, if the latter should make the To unload cargo To pay losses to
charter party; 5. The name, surname, clandestinely others for loading
placed uncontracted
and domicile of the charterer; and if he
cargo or illicit
states that he is acting by commission, cargo
that of the person for whose account he To substitute To wait if the
makes the contract; 6. The port of another vessel if vessel needs repair
loading and unloading; 7. The capacity, load is less than
number of tons or the weight or 3/5 of capacity
measurement which they respectively To leave the port if To pay expenses
the charterer does for deviation
bind themselves to load and to
not bring the cargo
transport, or whether the charter party
within the lay days
is total; 8. The freightage to be paid, and extra lay days
stating whether it is to be a fixed allowed
amount for the voyage or so much per To place in a vessel
month, or for the space to be occupied, in a condition to
or for the weight or measure of the navigate; to bring

Page 31

cargo to nearest
neutral port in
case of war or
blockade
F. Loans on Bottomry and Respondentia
1. Definition
Article 719 of the Code of Commerce
states that: ―A loan in which under any
condition whatever, the repayment of
the sum loaned and of the premium
stipulated depends upon the safe arrival
in port of the goods on which it is made,
or of the price they may receive in case
of accident, shall be considered a loan
on bottomry or respondentia.‖
Bottomry is a loan secured by the
shipowner or ship agent guaranteed by
the vessel itself and payable only upon
arrival of vessel at destination.
*Captain may enter into bottomry loan
provided there is justification, example
of which is, for immediate repairs.
Respondentia is a loan secured by the
owner of the cargo payable upon safe
arrival of cargo at destination.
Barratry is an act of the captain or crew
for fraudulent purposes.
2. Distinguished from ordinary loan
Ordinary Bottomry/Respondentia
Loan
With or Always with collateral
without
collateral
Any property Property is limited to
may be used vessel/cargo
as collateral
Absolutely Conditionally payable
payable
Obligation to Loan is extinguished in
pay still the event that the
exists in the vessel/cargo was lost
event the
collateral was
lost
First lender is Last lender is the first
the first priority
priority
Need not be Need to be in writing to
in writing to be enforceable
be
enforceable
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3. Parties to the loan
Parties:
1. Ship owner or ship agent
2. Owner of the cargo
3. Lender
4. Formalities needed
Article 720 of the Code of Commerce
states that: ―Loans on bottomry or
respondentia may be executed:
1. By means of a public instrument;
2. By means of a policy signed by the
contracting parties and the broker
taking part therein;
3. By means of a private instrument.
Under whichever of these forms the
contract is executed, it shall be entered
in the certificate of the registry of the
vessel and shall be recorded in the
registry of vessels, without which
requisites the credits of this kind shall
not have, with regard to other credits,
the preference which, according to their
nature, they should have, although the
obligation shall be valid between the
contracting parties.‖
Formal Requirements: a. By means of
public instrument; b. Policy signed by
the contracting parties and the broker
taking part therein; and c. by means of
private instrument.
Reason: Must be in writing to be
enforceable.
5. Effect of loss of on loan
Article 731 of the Code of Commerce
states that: ―The actions pertaining to
the lender shall be extinguished by the
absolute loss of the goods on which the
loan was made, if it arose from an
accident of the sea at the time and
during the voyage designated in the
contract, and it is proven that the cargo
was on board; but this shall not take
place if the loss was caused by the
inherent defect of the thing, or through
the fault or malice, of the borrower, or
barratry on the part of the captain, or if
it was caused by damages suffered by
the vessel as a consequence of being
engaged in contraband, or if it arose
from having loaded the merchandise on
Page 32

a vessel different from that designated
in the contract, unless this change
should have been made by reason of
force majeure. Proof of the loss as well
as of the existence of the vessel of the
goods declared to the lender as the
object of the loan is incumbent upon
him who received the loan.‖
General Rule: If the property that was
collateral was loss, the loan is
extinguished.
Exceptions: 1. Perished due to inherent
defects; 2. Brought about by malicious
conduct of the shipowner; 3. Barratry of
the captain; 4. Engaged in unlawful
transaction; and 5. The cargo loaded on
the vessel be different in from that
agreed upon.
*Commonality of all the exceptions is
that the borrower is at fault.
6. Cases where loan is regarded as simple
loan
a. The loan must be made in
connection with the maritime
transaction otherwise the loan
becomes a simple loan.
b. If the loan is bigger than the value of
the collateral, the loan becomes a
simple loan.
c. If the property is not exposed to
maritime peril.
Reason: To prevent abuse by the
borrower of the benefits of this loan.
Article 726 of the Code of Commerce
states that: ―If the lender should prove
that he loaned as amount larger than the
value of the object liable for the
bottomry loan, on account of fraudulent
measures employed by the borrower,
the loan shall be valid only for the
amount at which said object is
appraised by experts. The surplus
principal shall be returned with legal
interests for the entire time required for
repayment.‖
Article 727 of the Code of Commerce
states that: ―If the full amount of the
loan contracted in order to load the
vessel should not be used for the cargo,
the balance shall be returned before
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clearing. The same procedure shall be
observed with regard to the goods taken
as loan, if they were not loaded.‖
Article 728 of the Code of Commerce
states that: ―The loan which the captain
takes at the point of residence of the
owners of the vessel shall only affect
that part thereof which belongs to the
captain, if the other owners or their
agents should not have given their
express authorization therefor or should
not have taken part in the transaction. If
one or more of the owners should be
requested to furnish the amount
necessary to repair or provision the
vessel, and they should not do so within
24 hours, the interest which the parties
in default may have in the vessel shall
be liable for the loan in the proper
proportion. Outside of the residence of
the owners the captain may contract
loans in accordance with the provisions
of Articles 583 and 611.‖
Article 729 of the Code of Commerce
provides that: ―Should the goods on
which money is taken not be subjected
to risk, the contract shall be considered a
simple loan, with the obligation on the
part of the borrower to return the
principal and interest at the legal rate, if
that agreed upon should not be lower.‖
G. Averages
1. Concept
Article 806 of the Code of Commerce
provides that: ―For the purposes of this
code the following shall be considered
averages: 1. All extraordinary or
accidental expenses which may be
incurred during the voyage in order to
preserve the vessel, the cargo, or both; 2.
Any damages or deteriorations which
the vessel may suffer from the time it
puts to sea from the port of departure
until it casts anchor in the port of
destination, and those suffered by the
merchandise from the time they are
loaded in the port of shipment until they
are unloaded in the port of their
consignment.‖
Page 33

2. Classes of average and the persons
liable
a. Simple average
Article 809 of the Code of
Commerce provides that: ―As a
general rule, simple or particular
averages shall include all the
expenses and damages caused to the
vessel or to her cargo which have
not inured to the common benefit
and profit of all the persons
interested in the vessel and her
cargo, and especially the following:
1. The losses suffered by the cargo
from the time of its embarkation
until it is unloaded, either on
account of inherent defect of the
goods or by reason of an
accident of the sea or force
majeure, and the expenses
incurred to avoid and repair the
same;
2. The losses and expenses suffered
by the vessel in its hull, rigging,
arms, and equipment, for the
same causes and reasons, from
the time it puts to sea from the
port of departure until it anchors
and lands in the port of
destination;
3. The losses suffered by the
merchandise loaded on deck,
except in coastwise navigation, if
the marine ordinances allow it;
4. The wages and victuals of the
crew when the vessel is detained
or embargoed by legitimate
order or force majeure, if the
charter has been contracted for a
fixed sum for the voyage;
5. The necessary expenses on
arrival at a port, in order to make
repairs or secure provisions;
6. The lowest value of the goods
sold by the captain in arrivals
under stress for the payment of
provisions and in order to save
the crew, or to meet any other
need of the vessel, against which
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the proper amount shall be
charged;
7. The victuals and wages of the
crew while the vessel is in
quarantine;
8. The loss inflicted upon the vessel
or cargo by reason of an impact
or collision with another, if it is
accidental and unavoidable. If
the accident should occur
through the fault or negligence
of the captain, the latter shall be
liable for all the losses caused;
9. Any loss suffered by the cargo
through the fault, negligence, or
barratry of the captain or of the
crew, without prejudice to the
right of the owner to recover the
corresponding indemnity from
the captain, the vessel, and the
freightage.‖
General Rule: No reimbursement
Principle: Loss will lie where it falls
Reason: There was no common
benefit
Exception: if there is insurance
Exception to the Exception:
Stipulated in the insurance policy
stating no liability on the part of the
insurer regarding particular average.
Article 810 of the Code of
Commerce provides that: ―The
owner of the goods which gave rise
to the expense or suffered the
damage shall bear the simple or
particular averages.‖
Q: Who is liable?
A: Owner of the goods
b. General average
Article 811 of the Code of
Commerce provides that: ―As a
general rule, general or gross
averages shall include all the
damages and expenses which are
deliberately caused in order to save
the vessel, its cargo, or both at the
same time, from a real and known
risk, and particularly the following:
1. The goods or cash invested in
the redemption of the vessel or
Page 34

of the cargo captured by
enemies, privateers, or pirates,
and the provisions, wages, and
expenses of the vessel detained
during the time the settlement or
redemption is being made;
2. The goods jettisoned to lighten
the vessel, whether they belong
to the cargo, to the vessel, or to
the crew, and the damage
suffered through said act by the
goods which are kept on board;
3. The cables and masts which are
cut or rendered useless, the
anchors and the chains which
are abandoned, in order to save
the cargo, the vessel, or both;
4. The expenses of removing or
transferring a portion of the
cargo in order to lighten the
vessel and place it in condition
to enter a port or roadstead, and
the damage resulting therefrom
to the goods removed or
transferred;
5. The damage suffered by the
goods of the cargo by the
opening made in the vessel in
order to drain it and prevent its
sinking;
6. The expenses caused in order to
float a vessel intentionally
stranded for the purpose of
saving it;
7. The damage caused to the vessel
which had to be opened, scuttled
or broken in order to save the
cargo;
8. The expenses for the treatment
and subsistence of the members
of the crew who may have been
wounded or crippled in
defending or saving the vessel;
9. The wages of any member of the
crew held as hostage by enemies,
privateers, or pirates, and the
necessary expenses which he
may incur in his imprisonment,
until he is returned to the vessel
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or to his domicile, should he
prefer it;
10. The wages and victuals of the
crew of a vessel chartered by the
month, during the time that it is
embargoed or detained by force
majeure or by order of the
government, or in order to repair
the damage caused for the
common benefit;
11. The depreciation resulting in the
value of the goods sold at arrival
under stress in order to repair
the vessel by reason of gross
average;
12. The expenses of the liquidation
of the average.‖
Article 812 of the Code of
Commerce provides that: ―In order
to satisfy the amount of the gross or
general averages, all the persons
having an interest in the vessel and
cargo therein at the time of the
occurrence of the average shall
contribute.‖
Article 813 of the Code of
Commerce provides that: ―In order
to incur the expenses and cause the
damages corresponding to gross
average, there must be a resolution
of the captain, adopted after
deliberation with the sailing mate
and other officers of the vessel, and
after hearing the persons interested
in the cargo who may be present. If
the latter shall object, and the
captain and officers or a majority of
them, or the captain, if opposed to
the majority, should consider certain
measures necessary, they may be
executed under his responsibility,
without prejudice to the right of the
shippers to proceed against the
captain before the competent judge
or court, if they can prove that he
acted with malice, lack of skill, or
negligence. If the persons interested
in the cargo, being on board the
vessel, have not been heard, they
shall not contribute to the gross
Page 35

average, their share being
chargeable against the captain,
unless the urgency of the case
should be such that the time
necessary for previous deliberations
was wanting.‖
Article 816 of the Code of
Commerce states that: ―In order that
the goods jettisoned may be
included in the gross average and
the owners thereof be entitled to
indemnity, it shall be necessary
insofar as the cargo is concerned that
their existence on board be proven
by means of the bill of lading; and
with regard to those belonging to
the vessel, by means of the
inventory prepared before the
departure in accordance with the
first paragraph of Article 812.‖
Article 817 of the Code of
Commerce states that: ―if in
lightning a vessel on account of a
storm, in order to facilitate its entry
into a port or roadstead, part of the
cargo should be transferred to
lighters or barges and be lost, the
owner of said part shall be entitled
to indemnity, as if the loss had
originated from a gross average, the
amount thereof being distributed
between the vessel and cargo from
which it came. If, on the contrary,
the merchandise transferred should
be saved and the vessel should be
lost, no liability may be demanded
of the salvage.‖
Article 818 of the Code of
Commerce states that: ―If, as a
necessary measure to extinguish a
fire in port, roadstead, creek, or bay,
it should be decided to sink any
vessel, this loss shall be considered
gross average, to which the vessels
saved shall contribute.‖
Article 732 of the Code of
Commerce provides that: ―Lenders
on bottomry or respondentia shall
suffer, in proportion to their
respective interest, the general
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average which may take place in the
goods on which the loan is made. In
particular averages, in the absence of
an express agreement between the
contracting parties, the lender on
bottomry or respondentia shall also
contribute in proportion to his
respective interest, should it not
belong to the kind of risks excepted
in the foregoing article.‖
Article 859 of the Code of
Commerce provides that: ―The
insurers of the vessel of the
freightage, and of the cargo shall be
obliged to pay for the
indemnification of the gross
average, insofar as is required of
each one of these objects
respectively.‖
Article 860 of the Code of
Commerce provides that: ―If,
notwithstanding the jettison of
merchandise, breakage of masts,
ropes, and equipment, the vessel
should be lost running the same risk,
no contribution whatsoever by
reason of gross average shall be
proper. The owners of the goods
saved shall not be liable for the
indemnification of those jettisoned,
lost, or damaged.‖
Article 861 of the Code of
Commerce provides that: ―If, after
the vessel has been saved from the
risk which gave rise to the jettison, it
should be lost through another
accident taking place during the
voyage, the goods saved and
existing from the first risk shall
continue liable to contribution by
reason of the gross average
according to their value in the
condition in which they may be
found, deducting the expenses
incurred in saving them.‖
Remedy: Reimbursement
General Rule: The sacrifice made
must be in the course of the voyage.
Exceptions: General average exists
even if there is no voyage yet: 1.
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Article 817 of the Code of Commerce
which covers fire in the port; and 2.
Article 818 of the Code of Commerce
which covers transfer of cargo to
another vessel for the necessity to
enter another port.
Requisites:
1. Exposure to common danger to
ship and the cargo after it has
been loaded whether during
voyage or port of loading and
unloading;
2. That for the common safety part
of the vessel or the cargo or both
is sacrificed deliberately;
3. That from the expenses or
damages caused follows the
successful saving of the vessel
and cargo;
4. That the expenses or damages
should have been incurred or
inflicted after taking legal steps
and authority
Formalities:
1. There must be a resolution of the
captain, adopted after a 1. First zone – all time up to the
deliberation with the other
officers of the vessel and after
hearing all persons interested in
the cargoes. If the latter disagree,
the decision of the captain
should prevail but they shall
register their objections.
2. The resolution must be entered
in the logbook, stating the
reasons and motives for the
dissent, and the irresistible and
urgent causes if he acted in his
own accord. It must be signed, in
the first case, by all persons
present in the hearing. In the
second case, by the captain and
all the officers of the vessel. The
minutes must also contain a
detail of all the goods jettisoned
and those injuries caused to
those on board.
H. Collisions
1. Definition
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Collision is an impact of two vessels
both of which are moving.
Allision is an impact between a moving
vessel and a stationary one.
Possible damage:
a. Damage to vessel
b. Loss/damage to cargo
c. Injury or death of passenger
Example:
Q: A and B collided, A was found to be
negligent, who bears the consequential
damages?
A: A shall be liable for the consequential
damages for she is at fault.
Q: What if A and B were found to be
negligent, who bears the consequential
damages?
A: With regard to the vessel, each vessel
shall be liable for their own losses. With
regard to the cargoes and passengers,
they are solidarily liable.
2. Zones in collision (Doctrine of error in
extremis)
*Knowing these zones are important for
liability purposes.
moment when risk of collision
begins
2. Second zone – time between
moment when risk of collision
begins and moment it becomes a
practical certainty.
*It is in this period where conduct of
the vessels is primordial. It is in this
zone that vessels must strictly
observe nautical rules unless a
departure therefrom becomes
necessary to avoid imminent danger.
3. Third zone – time when collision is
certain and time of impact.
*An error in this zone would no
longer be legally consequential.
Doctrine of Error in Extremis is a
sudden movement made by a faultless
vessel during the third zone of collision
with another vessel which is at fault
during the second zone. Even if such
sudden movement is wrong, no
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responsibility will fall on said faultless
vessel.
Doctrine of Last Clear Chance provides
that a negligent defendant is held liable
to a negligent plaintiff or even to a
plaintiff who has been grossly negligent
where he should have been aware of it
in the reasonable exercise of due care,
had in fact an opportunity later than
that of the plaintiff to avoid an accident.
*In this doctrine, both parties are at fault
but only one party is liable. Only the
party who has the last clear opportunity
to avoid the impact is held liable.
*This doctrine is inapplicable in the
following instances:
1. If the suit is between a parties of
contract of carriage; and
2. In case of collision of vessels
3. Rule on liability
Article 826 of the Code of Commerce
provides that: ―If a vessel should collide
with another, through the fault,
negligence, or lack of skill of the captain,
sailing mate, or any other member of the
complement, the owner of the vessel at
fault shall indemnify the losses and
damages suffered, after an expert
appraisal.‖
Article 827 of the Code of Commerce
provides that: ―If the collision is
imputable to both vessels, each one shall
suffer its own damages, and both shall
be solidarily responsible for the losses
and damages occasioned to their
cargoes.‖
*This is known as the Doctrine of
Inscrutable Fault.
Doctrine of Inscrutable Fault provides
that in case of collision where it cannot
be determined which between the two
vessels was at fault, both vessels bear
their respective damage, but both
should be solidarily liable for damage to
the cargo of both vessels.
Article 828 of the Code of Commerce
states that: ―The provisions of the
preceding article are applicable to the
use in which it cannot be determined
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which of the two vessels has caused the
collision.‖
Article 829 of the Code of Commerce
states that: ―In the cases above
mentioned the civil action of the owner
against the person causing the injury as
well as the criminal liabilities, which
may be proper, are reserved.‖
Article 830 of the Code of Commerce
states that: ―If a vessel should collide
with another, through fortuitous event
or force majeure, each vessel and its
cargo shall bear its own damages.‖
Requisites:
1. The natural disaster must have been
the proximate and only cause of the
loss;
2. The common carrier must have
exercised due diligence to prevent or
minimize loss before, during and
after the occurrence of the natural
disaster;
3. The common carrier must not have
been guilty of delay; and
4. The captain must have made a
protest before the competent
authority at the first port he touched
within the 24 hours following his
arrival, and should have ratified it
within the same period when he
arrived at the port of destination,
proceeding immediately with the
proof of the facts, without opening
the hatches until after this has been
done.
Article 831 of the Code of Commerce
provides that: ―If a vessel should be
forced by a third vessel to collide with
another, the owner of the third vessel
shall indemnify the losses and damages
caused, the captain thereof being civilly
liable to said owner.‖
*This is known as the Doctrine of
Proximate Cause
Article 832 of the Code of Commerce
states that: ―If by reason of a storm or
other cause of force majeure, a vessel
which is properly anchored and moored
should collide with those nearby,
causing them damages, the injury
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occasioned shall be considered as
particular average of the vessel run
into.‖
4. Limited liability rule
*There must be no fault on the part of
the shipowner.
*The fault falls only with his crew.
Article 837 of the Code of Commerce
states that: ―The civil liability incurred
by the shipowners in the case prescribed
in this section, shall be understood as
limited to the value of the vessel with all
its appurtenances and freightage.‖
I. Arrival under stress
1. Concept
The arrival of a vessel at the nearest and
most convenient port instead of the port
of destination, if during the voyage the
vessel cannot continue the trip to the
port of destination.
Article 819 of the Code of Commerce
provides that: ―If during the voyage the
captain should believe that the vessel
can not continue the trip to the port of
destination on account of the lack
provisions, well founded fear of seizure,
privateers, or pirates, or by reason of
any accident of the sea disabling it to
navigate, he shall assemble the officers
and shall summon the persons
interested in the cargo who may be
present, and who may attend the
meeting without the right to vote; and if,
after examining the circumstances of the
case, the reason should be considered
well-founded, the arrival at the nearest
and most convenient port shall be
agreed upon, drafting and entering the
proper minutes, which shall be signed
by all, in the log book. The captain shall
have the deciding vote, and the persons
interested in the cargo, may make the
objections and protests they may deem
proper, which shall be entered in the
minutes in order that they may make
use thereof in the manner they may
consider advisable.‖
2. When improper
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Transportation Law
Article 820 of the Code of Commerce
provides that: ―An arrival shall not be
considered lawful in the following
cases:
1. If the lack of provisions should arise
from the failure to take the necessary
provisions for the voyage according
to usage and customs, or if they
should have been rendered useless
or lost through bad stowage or
negligence in their care;
2. If the risk of enemies, privateers, or
pirates should not have been well
known, manifest, and based on
positive and provable facts;
3. If the defect of the vessel should
have arisen from the fact that it was
not repaired, rigged, equipped, and
prepared in a manner suitable for
the voyage, or from some erroneous
order of the captain;
4. When malice, negligence, want of
foresight, or lack of skill on the part
of the captain exists in the act
causing the damage.‖
3. Expenses
Article 821 of the Code of Commerce
provides that: ―The expenses of an
arrival under stress shall always be for
the account of the shipowner or agent,
but they shall not be liable for the
damages which may be caused the
shippers by reason of the arrival,
provided the latter is legitimate.
Otherwise, the ship agent and the
captain shall be jointly liable.‖
Article 822 of the Code of Commerce
provides that: ―If in order to make
repairs to the vessel or because there is
danger that the cargo may suffer, it
should be necessary to unload, the
captain must request the authorization
from the competent judge or court for
the removal, and carry it out with the
knowledge of the person interested in
the cargo, or his representative, should
there be any. In a foreign port, it shall be
the duty of the Philippine Consul,
where there is one, to give the
authorization. In the first case, the
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expenses shall be for the account of the
ship agent or owner, and in the second,
they shall be chargeable against the
owners of the merchandise for whose
benefit the act was performed. If the
unloading should take place for both
reasons, the expenses shall be divided
proportionately between the value of
the vessel and that of the cargo.‖
4. Custody of Cargo
Article 823 of the Code of Commerce
provides that: ―The custody and
preservation of the cargo which has
been unloaded shall be intrusted to the
captain, who shall be responsible for the
same, except in cases of force majeure.‖
Article 824 of the Code of Commerce
states that: ―If the entire cargo or part
thereof should appear to be damaged,
or there should be imminent danger of
its being damaged, the captain may
request of the competent judge or court,
or of the consul in a proper case, the sale
of all or of part of the former, and the
person taking cognizance of the matter
shall authorize it, after an examination
and declaration of experts,
advertisements, and other formalities
required by the case, and an entry in the
book, in accordance with the provisions
of Article 624. The captain shall, in
proper case, justify the legality of his
conduct, under the penalty of answering
to the shipper for the price the
merchandise would have brought if
they had arrived in good condition at
the port of destination.‖
5. Captain’s liability
Article 825 of the Code of Commerce
states that: ―The captain shall be
responsible for the damages caused by
his delay, if after the cause of the arrival
under stress has ceased, he should not
continue the voyage. If the cause of
arrival should have been the fear of
enemies, privateers, or pirates, a
deliberation and resolution in a meeting
of the officers of the vessel and persons
interested in the cargo who may be
present, in accordance with the
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provisions contained in Article 819, shall
precede the departure.‖
6. Rules in case of shipwreck
Shipwreck denotes all types of loss/
wreck of a vessel at sea either by being
swallowed up by the waves, by running
against another vessel or thing at sea or
on coast where the vessel is rendered
incapable of navigation.
Article 840 of the Code of Commerce
provides that: ―The losses and
deteriorations by a vessel and her cargo
by reason of shipwreck or stranding
shall be individually for the account of
the owners, the part which may be
saved belonging to them in the same
proportion.‖
Article 841 of the Code of Commerce
states that: ―If the wreck or stranding
should be caused by the malice,
negligence, or lack of skill of the captain,
or because the vessel put to sea was
insufficiently repaired and equipped,
the ship agent or the shippers may
demand indemnity of the captain for the
damages caused to the vessel or to the
cargo by the accident, in accordance
with the provisions contained in Articles
610, 612, 614, and 621.‖
Article 842 of the Code of Commerce
states that: ―The goods saved from the
wreck shall be specially bound for the
payment of the expenses of the
respective salvage, and the amount
thereof must be paid by the owners of
the former before they are delivered to
them, and with preference over any
other obligation if the merchandise
should be sold.‖
Article 843 of the Code of Commerce
states that: ―If several vessels sail under
convoy, and any of them should be
wrecked, the cargo saved shall be
distributed among the rest in proportion
to the amount which each one is able to
take. If any captain should refuse,
without sufficient cause, to receive what
may correspond to him, the captain of
the wrecked vessel shall enter a protest
against him, before two sea officials, of
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the losses and damages resulting
therefrom, ratifying the protest within
24 hours after arrival at the first port,
and including it in the proceedings he
must institute in accordance with the
provisions contained in Article 612. If it
is not possible to transfer to the other
vessels the entire cargo of the vessel
wrecked, the goods of the highest value
and smallest volume shall be saved first,
the designation thereof to be made by
the captain with the concurrence of the
officers of his vessel.‖
Article 844 of the Code of Commerce
provides that: ―A captain who may have
taken on board the goods saved from
the wreck shall continue his course to
the port of destination, and on arrival
shall deposit the same, with judicial
intervention, at the disposal of their
legitimate owners. In case he changes
his course, if he can unload them at the
port of which they were consigned, the
captain may make said port if the
shippers or supercargoes present and
the officers and passengers of the vessel
consent thereto; but he may not do so,
even with said consent, in time of war or
when the port is difficult and dangerous
to make. The owners of the cargo shall
defray all the expenses of this arrival as
well as the payment of the freightage
which, after taking into consideration
the circumstances of the case, may be
fixed by agreement or by a judicial
decision.‖
Article 845 of the Code of Commerce
provides that: ―If on the vessel there
should be no person interested in the
cargo who can pay the expenses and
freightage corresponding to the salvage,
the competent judge or court may order
the sale of the part necessary to cover
the same. This shall also be done when
its preservation is dangerous, or when
in a period of one year it should not
have been possible to ascertain who are
its legitimate owners. In both cases the
proceedings shall be with the publicity
and formalities prescribed in Article
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Transportation Law
579, and the net proceeds of the sale
shall be safely deposited, in the
discretion of the judge or court, so that
they may be delivered to the legitimate
owner thereof.‖
*It is the loss of the vessel at sea as a
consequence of its grounding, or
running against an object in sea or on
the coast. It occurs when the vessel
sustains injuries due to a marine peril
rendering her incapable of navigation.
*The rules on collision or allusion, as
may be pertinent, can equally apply to
shipwrecks.
J. Salvage
1. Definition
Salvage - Compensation allowed to
persons by whose voluntary assistance a
ship at sea or her cargo or both have
been saved in whole or in part from an
impending or actual peril, shipwrecks,
derelicts or recapture
- Services one person render to the
owner of a ship or goods, by his own
labor, preserving the goods or the ship
which the owner or those entrusted
with the care of them have either
abandoned in distress at sea, or are
unable to protect or secure.
2. Rights and obligations of salvors and
owners (Salvage Law)
Salvors Owners
Entitled to He does not
compensation for renounce his right
services rendered to the derelict
Acquires a lien Has a right to the
upon the property delivery of the
salvaged until he vessel or things
is compensated saved after the
salvage is
accomplished,
provided he pays
or gives a bond
To all intents and Should make a
purposes, he is a claim within 3
joint owner and if months after the
the property is lost publication of a
he must bear his salvage report,
share otherwise the
thing saved shall
be sold
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Acquires the right Entitled to the
of possession of salvage reward for
derelict for the use of his
purposes of a vessel in rendering
salvage claim salvage services
Entitled to half of
the deposit of the
derelict sold, if
after the lapse of 3
years no claim was
made
WARSAW CONVENTION:
Warsaw Convention is an agreement among
sovereign countries concerning the regulation in a
uniform manner of the conditions of international
transportation by air in respect of the documents
used for such transportation and of the liability of
the carrier.
- Signed on October 12, 1929 in Warsaw,
Poland.
Purpose: To protect the emerging air transportation
industry and to secure the uniformity of recovery
by the passengers.
Applicability: The transportation must be:
1. International transportation
2. Air transportation
3. Carriage of passengers, baggage or goods
*The Warsaw Convention shall also apply to
fortuitous events affecting transportation by
aircraft performed by an air transportation
enterprise.
*The Convention is likewise applicable to air
transportation by legal entities constituted under
public law of the High Contracting Parties.
*The Convention does not apply to transportation
performed under the terms of any international
postal convention.
International Transportation is any transportation
in which the place of departure and the place of
destination are situated either:
1. Within the territories of two High
Contracting Parties regardless of whether or
not there be a break in the transportation or
transhipment; or
Controlling: Two territories must be High
Contracting Parties
*Also called as one way ticket
2. Within the territory of a single High
Contracting Parties, if there is an agreed
stopping place within a territory subject to
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the sovereignty, mandate or authority of
another power, even though that power is
not a party to the Convention.
Controlling: There must be a stopping
place in another territory.
*Also called as round trip ticket.
High Contracting Party is one of the original
parties to the convention.
When inapplicable:
1. When public policy is contradicted;
2. If the requirement under the Convention
are not complied with
Transportation Documents:
a. Passenger – passenger ticket
b. Checked-in baggage – baggage check
c. Goods to be shipped – airway bill
Liability of carrier for damages:
1. Death or injury of a passenger if the
accident causing it took place on board the
aircraft or in the course of its operations of
embarking or disembarking;
2. Destruction, loss or damage to any baggage
or goods, if it took place during the
transportation by air; and
3. Delay in the transportation of passengers,
baggage or goods.
Limit of Liability:
1. Passenger:
In case of death or injury, general rule:
100,000 STR per passenger
*1.51 US Dollar
Exception: Agreement to a higher limit
In case of delay, 4150 STR per passenger
2. Checked in baggage:
General Rule: 20 STR per kilogram
Exception: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more
than the declared sum unless it proves the
sum is greater than actual value.
3. Hand carried baggage: 1000 STR per
passenger
4. Goods to be shipped:
General Rule: 17 STR per kilogram
Exception: In case of special declaration of
value and payment of a supplementary sum
by consignor, carrier is liable to not more
than the declared sum unless it proves the
sum is greater than actual value.
Action for damages:
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1. Notice of claim
*A written complaint must be made
within: 3 days from receipt of baggage; 7
days from receipt of goods; in case of
delay, 14 days from receipt of
baggage/goods.
*The complaint is a condition precedent.
Without the complaint, the action is
barred except in case of fraud on the
part of the carrier.
2. Prescriptive period
*Action must be filed within 2 years
from:
a. The date of arrival at the
destination
*An intermediate place where
carriage may be broken is not a
place of destination.
b. The date of expected arrival
c. The date on which the
transportation stopped
Venue:
At the option of the plaintiff, the action for
damages may be filed in the:
1. Court of domicile of the carrier;
2. Court of its principal place of business;
3. Court where it has a place of business
through which the contract has been made;
or
4. Court of the place of destination.
*In Santos III v Northwest Airline, the SC held that
the forum of action is a matter of jurisdiction rather
than of venue.

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