NOTES ON TRANSPORTATION The participation of foreign investors in the governing body of any public
KATHRYN PINEDA – DELA SERNA utility enterprise shall be limited to their proportionate share in the capital, and all
I. GENERAL CONSIDERATIONS
A. PUBLIC UTILITIES
WHAT IS PUBLIC UTILITY?
Public utility is a business or service engaged in supplying the public with
some commodity or service of public consequence, or essential to the general
public such as electricity, gas, water, transportation, telephone or telegraph
service. The term implies public use and service. (Albano vs. Reyes, 175 SCRA
264, Kilusang Mayo Uno Labor Center vs. Garcia, Jr., 239 SCRA 386, National
Power Corporation vs. Court of Appeals and Cepalco, G.R. No. 112702,
September 26, 1997)
As its name indicates, the term “public utility” implies a public use and
service to the public, and indeed, the principal determinative characteristic of a
public utility is that of service to, or readiness to serve, an indefinite public (or
portion of the public as such) which has a legal right to demand and receive its
services or commodities. There must be a dedication or holding out, either express
or implied, of produce or services to the public as a class.
WHAT ARE THE CONSTITUTIONAL LIMITATIONS ON PUBLIC UTILITIES?
a. Public utilities - No franchise, certificate, or any other form of
authorization for the operation of public utility shall be granted
except to:
a) Citizens of the Philippines; or
b) Corporations or associations organized under the
Philippine laws where at least 60% of the capital is
owned by Filipino citizens (Article XII, Section 11) 1
1
SECTION 11. 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,
the executive and managing officers of such corporations or associations must be
citizens of the Philippines.
b. Mass Media – Mass media and commercial telecommunications
shall be:
a) 100% Filipino capital; and
b) 100% Filipino management
c. Government Take-Over of Public Utilities – In times of national
emergency, when the public interest so requires, the State may,
during the emergency and under reasonable terms, temporarily
take over or direct the operation of any privately owned public
utility or business affected with public interests. (Article XII,
Section 17)
d. Operation of Vital Industries – The State may, in the interest of
national welfare or 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. (Article XII, Section 18)
e. Prohibition Against Monopolies – The State shall regulate or
prohibit monopolies when the public interest so requires; no
combination in restraint of trade or unfair competition shall be
allowed. (Article XII, Section 19)
WHAT IS THE BASIS FOR THE STATE REGULATION OF PUBLIC UTILITIES?
The basis for the State to regulate public utilities, including those engaged
in transportation, is police power for the protection of the public as well as of the
utilities themselves
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.
 Page 2
WHAT IS THE EXTENT OF THE POWER TO REGULATE PUBLIC UTILITIES?
1. A rightful exercise of police power in the regulation and
supervision of public utilities does not deprive them of their
property without due process of law, or deny compensation, nor
does it impair the obligation of any contract.
2. The right to regulate a public utility under the police power does
not extent beyond:
1) The right to regulate rates and charges;
2) The right to prevent discrimination upon the part
of the public utility against those who employ it;
and
3) The right to make orders governing the conduct of
the public utility to the end that its efficiency may
be built-up and maintained, and the public and its
employees be accorded desirable safeguards and
conveniences.
MAY A 100% FOREIGN CORPORATION OWN A PUBLIC UTILITY? (People vs.
William M. Quasha, L-6055, June 12, 1953; and Tatad vs. Garcia, G.R. No.
114222, April 16, 1995)
The Supreme Court, when confronted with the issue of whether
respondent EDSA LRT Corporation, LTD., a foreign corporation can own EDSA
LRT III, a public utility, ruled: Section II of Article XII of the Constitution, in no
uncertain terms, requires a franchise for the operation of a public utility. However, it
does require a franchise before one can own the facilities needed to operate a
public utility so long as it does not operate them to serve the public.
In law, there is a clear distinction between the “operation” of a public utility
and the ownership of the facilities and equipment used to serve the public. The
right to operate a public utility may exist independently and separately from the
ownership of the facilities thereof. One can own said facilities without operating
them as a public utility, or conversely, one may operate a public utility without
owning the facilities used to serve the public. Indeed, a mere owner or lessor of the
facilities used by a public utility is not a public utility. Even the mere formation of a
public utility corporation does not ipso facto characterize the corporation as one
operating a public utility. The moment of determining the requisite Filipino
By: Kathryn Pineda – Dela Serna
nationality is when the entity applies for a franchise, certificate or any other form of
authorization for that purpose.
WHAT IS PUBLIC SERVICE?
It includes every person who 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, with or without fixed route and whatever may be its classifications,
engaged in the transportation of passenger or freight or both, canal, irrigation
system gas, electric light, heat and power, water supply power, petroleum,
sewerage system, wire or wireless communication systems, wire or wireless
broadcasting stations and stations and other similar public service. (Section 13 [b],
CA 146)
It includes railroad, street railway, traction railway, subway motor vehicle,
steamboat, or steamship line, ferries, and water craft, shipyard, ice plant, electric
light, heat and power or any other public utility.
In Kilusang Mayo Uno Labor Center vs. Garcia, Jr. 239 SCRA 386, the
Supreme Court ruled: A foreign corporation may own facilities by which a public
utility may operate, but actual operations would be granted to a qualified Filipino
corporation to which the franchise shall be granted. The right to operate a public
utility may exist independently and separately from the ownership of the facilities
thereof.
WHAT IS THE EXTENT OF USE OR SERVICE INVOLVED?
The word “public” does not mean the whole public nor does it mean all the
people in a certain area or political subdivision. Rather, it means individuals in
general without restriction or selection to the extent that the capacity of the utility
may admit of such service or use. Accordingly, the use and enjoyment of the utility
service may be local and limited in the territory served, and the fact that the service
is limited to a particular district or a part of a town does not prevent the
organization or business from being a public utility.
The number of people actually served does not determine whether a
person or company is a public utility. Such a person or company which holds
himself or itself out to serve all who wish to avail themselves of the service may be
a public utility even though only one or two people actually receive service.
Furthermore, the mere fact that service is rendered only under contract does not
prevent a company from being a public utility.
 Page 3
The principal distinguishing characteristic is its readiness to serve the
public indiscriminately regardless of the number of people actually served, which
offeree has the right to demand such service, such use of the public utility by right
and not by permission. The offeror offers service which is a public and continuing
one and the refusal of the utility to render the service to the offeree is a violation of
the nature and character of a public utility.
WHAT IS THE PURPOSE OF THE PUBLIC SERVICE LAW?
The ordinary purpose of the Public Service Law is to subject public service
to state control and regulation. Specifically, the primary purpose of its enactment is
twofold, namely:
1. To secure adequate, sustained service for the public at the least possible
cost and protect the public against unreasonable charges and poor,
inefficient service.
2. To protect and conserve investments which have already been made for
public service, and prevent ruinous competition.
WHAT IS THE DIFFERENCE BETWEEN A PUBLIC UTILITY AND A PUBLIC SERVICE?
To all practical intent and purposes, there is no difference and the terms
are used interchangeably.
WHICH IS BROADER, PUBLIC SERVICE OR PUBLIC UTILITY?
Public utility is a broader concept than public service. Public utility
embraces public service. If one is a public utility, one is not necessarily a public
service; but if one is a public service, one is necessarily a public utility.
If one is a public utility, then it is subject to the limitations and restrictions
provided for in the constitution (Article 12, Sections 11, 17, 18 and 19) If a public
service is necessarily a public utility, then it is also subject to the same
constitutional restrictions.
MAY A PUBLIC UTILITY NOT BE A PUBLIC SERVICE?
Yes, as it may not be part of the enumeration in the Public Service ct and
therefore not subject to restriction of the Public Service Commission 2 or other
successor board or agency but still subject to the constitutional requirements.
2
Any reference to the defunct Public Service commission shall be understood to be
the appropriate board, authority or agency of the government that took over its
functions.
By: Kathryn Pineda – Dela Serna
WHEN IS A PUBLIC UTILITY A PUBLIC UTILITY?
Go back to the definition of a public utility … when it is regularly supplying
the public with some commodity or service of public consequence.
A IS THE OWNER OF A TRACTOR, WHICH HE USES IN CULTIVATING HIS LAND.
ON DAYS THAT HE IS NOT USING THE TRACTOR, HE LEASES THE SAME TO OTHER
PERSONS FOR PURPOSES OF TILLING THE LATTER’S LAND. IS A ENGAGED IN PUBLIC
SERVICE?
No. Under Section 13 [b] of CA 146, 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 is offered for hire or
compensation to third parties 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 the Act.
IS A PUBLIC MARKET INCLUDED AMONG THE “PUBLIC SERVICE” DEFINED BY
LAW?
While a public Market is a public service or utility, it is not one that falls
under the jurisdiction of the corresponding board, not being ejusdem generis with
those public services enumerated in Section 13 [b] of the Public Service Act over
which the Board has jurisdiction. Hence the approval of the Board of the fees fixed
by the City of Manila for the use of its markets is not covered by Section 20 of the
Public Service Act. (Chamber of Filipino Retailers, Inc. vs. Villegas, 44 SCRA 406.
B. TRANSPORTATION
WHAT IS TRANSPORTATION?
It is the carriage of goods or persons from one point to another.
WHAT IS A CONTRACT OF TRANSPORTATION?
A contract of transportation is one whereby a certain person or association
of persons oblige themselves to transport person, things, or news from one place
to another for a fixed price.
WHAT IS THE NATURE OF TRANSPORTATION?
 Page 4
It is for public use, which means that the use is not confined to privileged
individuals; it is open to an indefinite public. It is this definite or unrestricted quality
that gives it its public character. The true criterion by which to judge the character
of the use is whether the public may enjoy it by right or only by permission. There
must be, in general, a right which the law compels the owner to give to the general
public.
WHAT ARE EXEMPTED FROM THE PROVISIONS OF THE PUBLIC SERVICE ACT?
The following are exempted from the provisions of the Section 14.
1. Warehouses;
2. Vehicles drawn by animals and bancas moved by oar or sail; and tugboats
and lighters;
3. Airships within the Philippines except as regards the fixing of their
maximum rates on freights and passengers (Airships engaged in air
transportation are under the jurisdiction of the Civil Aeronautics Board);
4. Radio companies except with respect to the fixing of rates (Radio
companies are under the jurisdiction of the national telecommunications
Commission);
5. Public service owned and operated by any instrumentality of the National
Government or by any government-owned or controlled corporation,
except with respect to the fixing of rates (Section 14)
6. Public markets (Chamber of Filipino Retailers, Inc. vs. Villegas, supra)
7. Ice-plants and cold storage (PD No. 43)
WHAT IS REQUIRED TO THOSE ENGAGED IN “PUBLIC SERVICE”?
With the exception of those enumerated in Section 14, no public service
shall operated in the Philippines without possessing a valid and subsisting
certificate from the Public Service Commissions, 3, known as “certificate of public
convenience”, or “certificate of convenience and public necessity,” as the case may
be, to the effect that the operation of said service and the authorization to do
business will promote the public interests in a proper and suitable manner (Section
15, par. 1)
The Commission may prescribe as a condition for the issuance of the
certificate provided in the preceding paragraph that the service can be acquired by
the Republic of the Philippines or by any instrumentality thereof upon payment of
3
Any reference to the defunct Public Service commission shall be understood to be
the appropriate board, authority or agency of the government that took over its
functions.
By: Kathryn Pineda – Dela Serna
the cost price of its useful equipment, less reasonable depreciation; and likewise,
that the certificate shall be valid only for a definite period of time, and that the
violation of any of these conditions shall produce the immediate cancellation of the
certificate without the necessity of any express action on the part of the
Commission (Section 15, par. 2)
The foregoing is likewise applicable to any extension or amendment of
certificates actually in force and to those which may hereafter be issued, to permits
to modify itineraries and time schedule of public services, and to authorizations to
renew and increase equipment and properties. (Section 15, par. 4)
WHAT ENTITIES ENGAGED IN PUBLIC SERVICE ARE NOT REQUIRED TO OBTAIN A
CERTIFICATE OF PUBLIC CONVENIENCE OR CERTIFICATE OF PUBLIC CONVENIENCE AND
NECESSITY?
The following are exempted from obtaining a certificate of public
convenience or certificate of public convenience and necessity:
1. Public service owned or operated by government entities or
government-owned or controlled corporations shall be regulated by
the commission in the same way as privately-owned public services
but certificates of public convenience or certificates of public
convenience and necessity shall not be required of such entities or
corporations. (Section 13)
2. Grantees of legislative franchise when expressly exempted from
obtaining a certificate from the Commission (Section 18)
3. Those expressly exempted from the jurisdiction of the Commission by
the provisions of Section 13 of the Act (Section 18)
EXAMPLES: A city may establish and maintain a telephone system, or an
electric service, without the national government such as Philippine Railway (PD
731) and Metro Manila Transit (PD 860) are likewise exempted from the
requirement of obtaining a certificate of public convenience.
WHAT IS THE NATURE OF A CERTIFICATE OF PUBLIC CONVENIENCE?
It is neither a franchise nor a contract. It confers no property rights, and is
a mere license or privilege which may be forfeited when the grantee fails to comply
with his commitments behind which lies the paramount interest of the public.
 Page 5

WHAT IS THE DIFFERENCE BETWEEN A CERTIFICATE OF PUBLIC CONVENIENCE 1. Albano v. Reyes—Does ICTSI or anyone for that matter need a franchise
AND CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY? to operate MICT? Is MICT a public utility?
2. Raymundo vs. Luneta:
CPC CPCN
It is issued by the PSC to a public It is any authorization to operate a a. A CPC is a property subject to execution, if it can be
service which any political subdivision public service issued by the PSC sold voluntarily, it can be sold involuntarily (public
has granted a franchise under Act 667 auction after attachment)
after it has approved the same under
Par. [b] of Section 16 of the Public b. If it is a privilege, how can it be considered a property?
Service Law. It is a privilege as between the grantor and the grantee;
It is an authorization for operation of a It is an authorization issued by the but it is property as between the grantee and a private person.
public service for which a franchise is Commission for the operation of a
required by law. public service for which no franchise, 3. In PAL vs. CAB, G.R. No. 119528, March 26, 1997, it was held that there is
either municipal or legislative is required no more distinction between certificate of public convenience and
by law. certificate of public convenience and necessity. Said the Supreme Court:
It is issued whenever the Commission It is issued upon approval of any “Many and varied are the definition of certificates of public convenience
finds that the operation of the proposed franchise or privilege granted by any which court’s and legal writers have drafted. Some statutes use the terms
public service will promote the public political subdivision of the Philippines “convenience and necessity” while others use only the words “public
interests in a proper and suitable when in the judgment of the convenience”. The terms “convenience and necessity”, if used together in
manner, for which a municipal or Commission, such franchise or privilege a statute, are usually held not to be separable, but are construed together.
legislative franchise is not necessary. will properly conserve the public The word “necessity” is so connected, not as an additional requirement but
(Section 16 [a]) interest. (Section 16 [b]) to modify and qualify what might otherwise be taken as the strict
significance of the word necessity. Public convenience and necessity
IF A PUBLIC SERVICE HAS A FRANCHISE FROM CONGRESS, WHY IS THERE A exists when the proposed facility will meet a reasonable want of the public
NEED TO GET A CPCN TO OPERATE? and supply a need which the existing facilities do not adequately afford. It
does not mean or require an actual physical necessity or an indispensable
Even with a franchise, there is still a need to get a CPCN or a permit to thing.
operate. A franchise is a legislative grant, a law therefore it does not mean that
one, upon grant of such franchise, can operate at once. The regulatory The terms “convenience and necessity are to be construed
boards/agencies determine the schedule, the kind of transportation, the rates together; although they are not synonymous, and effect must be given
….and all these are governed by the CPCN. both. The convenience of the public must not be circumscribed by
according to the word “necessity” its strict meaning or an essential
FRANCHISE: requisite.

A franchise is a legislative act, in the form of a law. It goes through the
lawmaking process. (Such grant should not exceed 50 years)
CAN ONE GO TO THE SENATE TO ASK FOR A FRANCHISE?
No. A franchise is a private bill which must originate from Congress.
The use of the word “necessity”, in conjunction with “public
convenience” in a certificate of authorization to a public service entity to
operate, does not in any way modify the nature of such certification, or the
requirements for the issuance of the same. It is the law which determines
the requisites of such certification, and not the title indicating the
certificate.

CASES:
By: Kathryn Pineda – Dela Serna
 Page 6
WHAT ARE THE REQUISITES FOR THE GRANT OF CERTIFICATE?
a. The applicant must be a citizen of the Philippines, or corporation
and association constituted and organized under the laws of the
Philippines, 60 % of which must be owned by Filipino citizens;
b. The applicant must prove that the operation of the public service
proposed and the authorization to do business will promote the
public interest and suitable manner;
c. The applicant must be financially capable of undertaking the
proposed service and meeting the responsibilities incident to its
operation.
WHEN MAY THE COMMISSION ISSUE CERTIFICATES OF PUBLIC CONVENIENCE?
The Commission shall have the power, upon proper notice and hearing to
issue operation of public services within the Phili[ppines whenever the Commission
finds that the operation of the public service proposed and the authorization to do
business will promote the public interest in a proper and suitable manner. (Section
16 [a])
WHEN MAY THE COMMISSION ISSUE CERTIFICATES OF PUBLIC CONVENIENCE
AND NECESSITY?
The Commission shall have the power, upon notice and hearing to
approve, subject to constitutional limitations, any franchise or privilege granted
under the provisions of Act No. 667, as amended by Act No. 1022, by any political
subdivision of the Philippines when, in the judgment of the commission, such
franchise or privilege will properly conserve the public interest, and to issue
certificates of public convenience and necessity when such is required or provided
by law or franchise (Section 16 [b])
WHAT IS THE PRIOR OPERATOR RULE?
It means that before permitting a new operator to invade the territory of
another already established with a CPC, the prior operator must first be given the
opportunity to extend its service in order to meet public needs in the matter of
transportation.
HOW DOES THE PRIOR OPERATOR RULE WORK?
The prior operator rule works to protect the prior operator if it maintains an
adequate service and is able to meet demands of the public. His investment is
By: Kathryn Pineda – Dela Serna
protected by not allowing a subsequent operator to be granted a license for the
same route.
WHAT IS THE RATIONALE OF THE PRIOR OPERATOR RULE?
The preservation of public convenience and prevent ruinous competition.
WHAT IS RUINOUS COMPETITION?
There is ruinous competition when there is actual ruin of the business of
the operator; that the existing operator will not gain enough profit if another person
is allowed to enter the business; that which will result in the deprivation of sufficient
gain in respect of reasonable return of investment to prior operator, therefore, the
oppositor, alleging this, must show that he will be deprived of a reasonable return
of his investment.
WHAT IS THE PRIOR APPLICANT RULE?
Where there are applicants for a PU over the same territory, all conditions
being equal, priority in filing of the application for a CPC becomes an important
factor in granting or refusal of a cert. But if other conditions are not equal, such
priority is not ordinarily sufficient importance to control the granting of a CPC and
the PSC is authorized to determine which of the applicants can best meet the
requirements of public convenience.
CASE:
Carmelo vs. Monserrat:
 The prior operator rule does not apply in this case.
 How did Monserrat know that Carmelo was actually applying for a CPC?
Carmelo was required to publish in newspaper of general
circulation to give other parties an opportunity to oppose. The opposition
may, as a legal basis, invoke the prior operator rule.
WHEN IS THE PRIOR OPERATOR RULE OR PROTECTION OF INVESTMENT NOT
APPLICABLE?
a. Where public interest would be served by the new
operator (Guico v. Estate of Buan, L-9769, Aug. 30,
1957)
 Page 7
b. Where the old operator has failed to make an offer to
meet the increase in traffic (Manila Yellow Taxi Cab v.
Castelo, L- 13910, May 30, 1960
c. Where the CPC granted to the new operator is a maiden
certificate, which does not overlap with the entire route
of the old operator but only a short portion thereof as a
convergence point (Mandbusco v. Francisco, 32 SCRA
405)
d. If the application of the rule will be conducive to
monopoly of the service, and contrary to the principle
that promotes healthy competition (Villa Rey Transit v.
Pangasinan Trans. 5 SCRA 234)
e. Where line passes through private subdivision whose
owners granted permit to another (Estrella v PSC L-
12641, Sept. 30, 1960)
WHAT IS THE “KABIT SYSTEM”?
It is an arrangement entered into by an owner of a unit or units who has no
certificate of public convenience with an operator having a certificate of public
convenience to operate along a route but who has not fielded all the units allowed
him to be operated under the said certificate.
Under the said arrangement, the owner of the unit transfers the
registration of the said unit to the operator having the certificate of public
convenience. With that transfer, the operator having the certificate of public
convenience will now become the registered owner of the said unit. Actually, it is
the true owner of the unit who operates the said unit under the certificate of public
convenience of the operator or grantee of such franchise. The real owner of the
unit only pays the operator or grantee a certain amount monthly as agreed upon
between them for the use of the privilege to operate under said certificate or
franchise.
IN CASE THE UNIT BEING OPERATED UNDER THE “KABIT SYSTEM” MEETS
ACCIDENT, CAUSING DAMAGE OR INJURY TO ANY PASSENGER OR TO A THIRD PARTY,
WHO IS LIABLE FOR SUCH DAMAGE OR INJURY?
The operator and the real owner of the unit involved are jointly and
severally liable for such damage or injury to the third party, the passenger and/or
the latter’s next of kin.
UPON WHAT GROUNDS MAY THE COMMISSION SUSPEND OR REVOKE ANY
CERTIFICATE?
By: Kathryn Pineda – Dela Serna
a. The facts and circumstances on the strength of which said cert was issued
have been misrepresented or materially changed? (sec. 16 [m])
b. The holder thereof has violated or willfully and contumaciously refused to
comply with any order, rule or regulation of the Comm or nay provision of
the PSA (sec. 16 [n])
c. The common carrier repeatedly fails to comply with his or its duty to
observe extraordinary diligence as prescribed by law (Art. 1765, CC)
WHERE SHOULD ENTITIES ENGAGED IN TRANSPORTATION OBTAIN THE
NECESSARY CERTIFICATES OF PUBLIC CONVENIENCE?
The appropriate certificates of public convenience may be obtained by
entities engaged in transportation as follows:
a. Those engaged in public transportation services by motorized vehicles,
from the Land Transportation Franchising and Regulatory Board (LTFRB)
[Section 5 {b}, EO No. 125]
b. Those engaged in the operation of domestic and overseas water carriers,
from the Maritime Industry Authority (MARINA) [Section 12, EO No. 125]
c. Those engaged in air commerce and/or air transportation, foreign or
domestic, from the Civil Aeronautics Board (CAB) [Section 11, R.A. No.
776, as amended]
d. Those engaged in providing land transportation by the use of tricycles,
from the local Sangguniang Bayan or Sangguniang Panlungsod [Section
446 {3, vi} and Section 458 {3, vi}, Local Government Code]
WHAT GOVERNMENT AGENCIES GOVERN OTHER ENTITIES ENGAGED IN PUBLIC
SERVICE OTHER THAN TRANSPORTATION?
a. Radio, television, telephone and other telecommunications entities-
National Telecommunications Commission (NTC) [R.A. No. 7525]
b. Electric companies and cooperatives – National Electrification
Administration [R.A. No. 6038 as amended by P.D. No. 269 and P.D. No.
1645]
c. Local water utilities – Local Water Utilities Administration [P.S. No. 198,
768 and 1479]
d. Express and/or messenger services – Philippine Postal Corporation [P.D.
No. 240, as amended]

WHAT
SERVICE AND ACTS ON THE PART OF THE PUBLIC UTILITY
CONSIDERED UNLAWFUL?
a. To provide or maintain any service that is unsafe, improper, or
inadequate, or withhold or refuse any service which can
reasonably be demanded and furnished, as founded and
determined by the Commission4 in a final order which shall be
conclusive and shall effect in accordance with the PSA, upon
appeal or otherwise (sec. 19 [a]) (Asked 1993 Bar)
b. To make or give or give, directly or indirectly, by itself or through its
agents, discounts or rebates on authorized rates, or grant credit
for the payment of freight charges, or any undue or unreasonable
preference or advantage to any person or corporation or locality or
any particular description of traffic to any prejudice or
disadvantage in any respect whatsoever; to adopt, maintain, or
enforce any regulation, practice or measurement which shall be
found or determined by the Commission to be unjust, reasonable,
unduly preferential or unjustly discriminatory (sec. 19 [b])
c. To refuse or neglect, when requested by the Director of Posts or
his authorized representative, to carry public mail on the regular
trips of any public land transportation service maintained or
operated by any such public service, upon such terms and
conditions and for a consideration in such amount as may be
agreed upon by the Director of Posts and the public service carrier
(sec. 19 [c])
II. COMMON CARRIERS 4
Governing laws (Common Carriers):
a. Articles 1732 to 1763 of the Civil Code
b. Sections 349 to 379, 573 to 736, and 806 to 869 of the Code of
Commerce.
In case of conflict between the two sets of laws, the provisions of the Civil
Code shall generally prevail, being the latter law.
There are also special laws that govern particular cases such as the Public
Service Act, Carriage of Goods by Sea Act, Land Transportation and Traffic Code.
4 1. Article 1732 makes no distinction between one whose principle business
Unless otherwise indicated, reference is to the Civil Code.
By: Kathryn Pineda – Dela Serna
Page 8
IS WHAT ARE COMMON CARRIERS?
Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public (Article
1732).
WHY IS IT IMPORTANT TO KNOW WHETHER A CARRIER IS A COMMON CARRIER
OR NOT?
There is a concern about whether a carrier is a common carrier or not
because the obligations arising from common carriage contract are different from
that which arise from otherwise.
IS A PUJ A COMMON CARRIER?
No, because a common carrier is a person, corporation, firm or
association, etc. and not the means of transporting.
WHAT ARE THE REQUISITES TO BE A COMMON CARRIER OF GOODS? TEST FOR
DETERMINING WHETHER A PARTY IS A COMMON CARRIER OF GOODS:
a. He must be 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 persons 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 routes; and
d. The transportation must be for fire.
WHAT ARE THE CHARACTERISTICS OF A COMMON CARRIER?
The concept of common carriers contemplated under Article 1732 of the
Civil Code and the fact that the said concept corresponds to the concept of “public
service” under the Public Service Act results in the application of the following rules
or principles:
activity is the carrying of persons or goods or both, and one who does
 Page 9
such carrying only as an ancillary activity (in local idiom, as a “sideline”)
(De Guzman vs. CA).
2. Article 1732 also carefully avoids making any distinction between a person
or enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or
unscheduled basis (Ibid).
3. Article 1732 does not distinguish between a carrier offering its service to
the “general public”, i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of the
general population (ibid).
4. A person or entity is a common carrier and has the obligations of a
common carrier under the Civil Code even if he did not secure a Certificate
of Public Convenience (ibid).
5. The Civil Code makes no distinction as to the means of transporting, as
long as it is by land, water or air (First Philippine Industrial Corp. vs. CA).
6. The Civil Code does not provide that the transportation should be by motor
vehicle (ibid).
7. A person or entity may be a common carrier even if he has no fixed and
publicly known route, maintains no terminals, and issued no tickets (Asia
Lighterage and Shipping, Inc. vs. CA).
8. A person or entity need not be engaged in the business of public
transportation for the provisions of the Civil Code on common carriers to
apply to them (Fabre, Jr. vs. CA).
HOW IS A COMMON CARRIER DISTINGUISHED FROM A PRIVATE CARRIER?
The distinction between a “common or public carrier” and a “private or
special carrier” lies in the character of the business, such that if the undertaking is
a single transaction, not a part of a general business or occupation, although
involving the carriage of the goods for a fee, the person or corporation offering
such service is a private carrier (Planters Product vs. CA). Thus, if a person agrees
to carry a person to the airport using his privately-owned car that is meant for
personal use, he will be considered a private carrier.
HOW IS A COMMON CARRIER DISTINGUISHED FROM TOWAGE, ARRASTRE AND
STEVEDORING?
In towage, one vessel is hired to bring another vessel to another place. In
this case, the operator of a tugboat cannot be considered a common carrier.
Likewise, an arrastre operator is not a common carrier
By: Kathryn Pineda – Dela Serna
WHAT IS THE NATURE AND BASIS OF LIABILITY OF COMMON CARRIERS? WHAT
IS THE DEGREE OF DILIGENCE REQUIRED OF COMMON CARRIERS?
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 (Article 1733).
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 (Article 1733).
In the case of passengers, the law further provides that they are
bound to carry the passengers safely as far as human care and foresight can
provide, using utmost diligence of very cautious person with due regard for all
circumstances (Article 1755). As a matter of fact, in case of death or injuries to
passengers, they are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed by law
(Article 1756).
WHY IS THE DEFENSE OF PROOF OF DILIGENCE IN THE SELECTION AND
SUPERVISION OF EMPLOYEES NOT AVAILABLE IN CASE OF BREACH OF CONTRACT?
The liability of the common carrier in case of breach of contract is direct
and immediate. In quasi-delict, the employer’s liability is merely subsidiary.
WHEN DOES THE VINCULUM JURIS (LEGAL TIE) ARISE?
In the case of contracts, the legal tie arises upon their perfection; while in
the case of quasi-delict, the legal tie arises upon the occurrence of the injury. Thus,
the negligent act which constitutes the breach of contract of carriage does not
create a new vinculum juris nor gives rise to a separate cause of action.
CAUSE OF ACTION ARISING FROM THE SAME NEGLIGENT ACT:
Problem:
X, Inc. – Public Utility Co.
Y – Bus driver, reckless driving
Z – Passenger injured
Z, the injured passenger, can avail of any of the three causes of action:
 Page 10
a. culpa contractual – negligence based on contract
b. culpa aquiliana – negligence based on tort
c. culpa criminal – negligence based on a crime
Discussion:
a. Culpa contractual
In the contract of carriage of passengers, it is the obligation of the
carrier to convey the passenger safely to the point of destination. In case a
passenger is not brought safely thereto, there will be a breach of contract.
Title of the case: “passenger Z vs. X, Inc.” because the contract is
between them. The driver is not to be included as a party to the action
because he is not a party to the contract. As to him, there is no privity of
contract.
b. Culpa aquiliana
Damage caused another due to negligence. Title of the case:
“passenger Z vs. X, Inc. and Driver Y.” he defendants will be solidarily
liable as joint tort-feasors.
c. Culpa criminal
The driver’s act may amount to a crime: physical injuries through
reckless imprudence. Title of the case: People of the Philippines vs. Driver
Y” If the latter is insolvent, an action can be pursued by Z against X, Inc. to
enforce the latter’s subsidiary liability.
Note that:
a. The weakest cause of action is culpa aquiliana where the employer may
raise the defense of due diligence in the selection and supervision of the
driver.
b. Culpa criminal is a stronger cause of action because as to the company’s
subsidiary liability, the latter’s defense is limited; however the quantum of
evidence needed to convict the employee would have to be guilt beyond
reasonable doubt.
c. In transportation law, culpa contractual is the cause of action. In a contract
of carriage of passengers, it is the obligation of the common carrier to
bring the passengers safely to the point of destination. If the death or injury
By: Kathryn Pineda – Dela Serna
occurs, the presumption of negligence automatically arises and the
common carrier can be held liable if he fails to prove extraordinary
diligence for the duration of the carriage.
Subsection 2 – VIGILANCE OVER THE GOODS
WHAT IS THE RESPONSIBILITY OF COMMON CARRIERS WITH REGARD TO GOODS
CARRIED BY THEM?
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, according to all the circumstances of each case (Article 1733).
WHAT IS THE PRESUMPTION WHEN THE GOODS TRANSPORTED ARE LOST,
DESTROYED OR DETERIORATED? HOW IS THE PRESUMPTION REBUTTED?
If the goods are lot, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they can prove
extraordinary diligence as required by Article 1733.
WHAT IS THE PRACTICAL EFFECT OF SUCH PRESUMPTION?
Since it is the law who makes such presumption of negligence, the plaintiff
does not have the burden of proving the negligence of the carrier.
WHEN IS THIS PRESUMPTION NOT APPLICABLE?
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:
a. Flood, storm, earthquake, lightning, or other natural disaster or calamity;
b. ct of the public enemy in war, whether international or civil;
c. Act or omission of the shipper or owner of the goods;
d. The character of the goods or defects in the packing or in the containers;
e. Order of act of competent authority (Article 1734).
WHO HAS THE BURDEN OF PROVING THAT THE CAUSE OF THE LOSS,
DESTRUCTION OR DETERIORATION IS ONE OF THE EXCEPTIONS PROVIDED BY LAW?
 Page 11
The carrier has the burden of proving that the cause of the damage is one
of the instances mentioned in Article 1734. However, the shipper has the onus
probandi to show the carrier’s fault so that the latter could be made liable.
HOW MAY THE LEGAL PRESUMPTION OF NEGLIGENCE WHEN THE GOODS ARE
LOST, DESTROYED, OR DETERIORATED IN THE POSSESSION OF THE COMMON CARRIER
BE OVERCOME?
They have to prove that they observed extra-ordinary diligence as required
in Article 1733.
WHAT ARE THE REQUISITES FOR DEFENSE OF NATURAL DISASTER?
A common carrier is still liable for a loss caused by a natural disaster,
except when it is proven that:
a. The natural disaster is the proximate and only cause of the loss,
destruction or deterioration;
b. The common carrier exercised due diligence to prevent or minimize the
loss before, during and after the occurrence of the natural disaster; and
c. The common carrier has not incurred in delay in transporting the goods.
WHAT IS THE EFFECT OF DELAY ON THE PART OF THE CARRIER IN SUCH A CASE?
If at the time of the loss, the carrier had already negligently incurred in
delay in transporting the good, natural disaster shall not exempt it from liability
(Article 1740).
WHAT IS THE EFFECT OF CONTRIBUTORY NEGLIGENCE OF THE SHIPPER IN
SUCH A CASE?
If there was contributory negligence of the shipper, the carrier would still
be liable provided that the proximate cause of the loss is the latter’s negligence.
However, the damages to be paid to the shipper shall be equitably reduced (Article
1741).
IS FIRE A NATURAL DISASTER? EXCEPTION.
Fire is not a natural disaster or calamity as it arises almost invariably from
some act of man or by human means. It does not fall within the category of an act
of God unless cause by lightings or other natural disaster or calamity.
By: Kathryn Pineda – Dela Serna
WHAT ARE THE REQUISITES IN ORDER THAT THE COMMON CARRIER MAY BE
EXEMPTED FROM LIABILITY FOR ACTS OF PUBLIC ENEMY?
a. The act of the public enemy must have been the proximate and only
cause; and
b. The common carrier must have exercised due diligence to prevent or
minimize the loss before, during and after the act of the public enemy
causing the loss, destruction or deterioration of the goods.
WHAT IS THE EFFECT OF CONTRIBUTORY NEGLIGENCE OF THE SHIPPER OR
OWNER?
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.
WHAT MUST THE COMMON CARRIER DO TO FORESTALL OR LESSEN THE LOSS
CAUSED BY THE CHARACTER OF THE GOODS OR FAULTY PACKING?
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 diligence to forestall or lessen the
loss.
Thus, if the fact of improper packing is known to the carrier or its servants,
or apparent upon ordinary observation, but it accepts the goods notwithstanding
such condition, it is not relieved of liability for loss or injury resulting therefrom.
IS THE COMMON CARRIER LIABLE IF THE GOODS ARE SEIZED OR DESTROYED
THROUGH THE ORDER OF PUBLIC AUTHORITY?
If through the order of public authority the goods are seized or destroyed,
the common carrier is not responsible, provided said public authority had the
power to issue the order.
WHEN SHALL OBSERVANCE OF EXTRAORDINARY LIABILITY COMMNECE AND
WHEN SHALL IT STOP?
The extraordinary responsibility of the common carrier lasts from the time
the goods are unconditionally placed in the possession of, and received by the
 Page 12
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 1736).
WHAT IS THE LIABILITY OF THE COMMON CARRIER IN CASE OF LOSS,
DESTRUCTION OR DETERIORATION OF THE GOODS CAUSED BY THE CHARACTER
THEREOF OR OF THE FAULTY NATURE OF THE PACKING OR CONTAINERS?
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 (Article 1742).
IS THE STIPULATION BETWEEN THE COMMON CARRIER AND THE SHIPPER OR
OWNER LIMITING THE LIABILITY OF THE FORMER TO LESS THAN EXTRAORDINARY
DILIGENCE VALID?
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:
a. In writing, signed by the shipper or owner;
b. Supported by a valuable consideration other than the service rendered by
the common carrier; and
c. Reasonable, just and not contrary to public policy (Article 1744).
WHAT STIPULATIONS IN A CONTRACT OF CARRIAGE ARE CONSIDERED
UNREASONABLE, UNJUST AND CONTRARY TO PUBLIC POLICY?
Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:
a. That the goods are transported at the risk of the owner or shipper;
b. That the common carrier will not be liable for any loss, destruction, or
deterioration of the goods;
c. That the common carrier need not observe any diligence in the custody of
the goods;
d. 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;
e. That the common carrier shall not be responsible for the acts or omissions
of his or its employees;
By: Kathryn Pineda – Dela Serna
f. 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;
g. 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
(Article 1745).
WHEN MAY AN AGREEMENT LIMITING THE LIABILITY OF THE CARRIER BE
ANNULLED BY THE SHIPPER?
An agreement limiting the common carrier’s liability may be annulled by
the shipper or owner if the common carrier refused to carry the goods unless the
former agreed to such stipulation.
WHAT IS THE EFFECT IF THE COMMON CARRIER, WITHOUT JUST CAUSE, DELAYS
TRANSPORTING THE GOODS OR CHANGES THE STIPULATED OR USUAL ROUTE?
If the common carrier, without just cause, delays the transportation of
goods or changes the stipulated or usual route, the contract limiting the liability of
the common carrier cannot be availed of in case of loss, destruction or
deterioration of the goods.
WHAT IS THE EFFECT OF DELAY ON ACCOUNT OF STRIKES OR RIOTS ON THE
LIABILITY OF THE COMMON CARRIER?
An agreement limiting the common carrier’s liability for delay on account of
strikes or riots is valid (Article 1748). Besides, and this is the reason behind the
law, not only natural disasters or acts of God but even acts of men or force
majeure which are unforeseeable or unavoidable, such as wars, strikes, and riots,
are classified as fortuitous events. Under the doctrine of fortuitous event (Article
1174), such agreement would be perfectly valid.
WHAT ARE THE KINDS OF STIPULATIONS OFTEN MADE IN THE BILL OF LADING
CONCERNING THE LIABILITY OF THE COMMON CARRIER? ARE THESE STIPULATIONS
VALID?
Three kinds of stipulations have often been made in a bill of lading:
 Page 13
a. One exempting the carrier from liability for loss or damage occasioned by
its own negligence;
b. One proving for an unqualified limitation on such liability to an agreed
valuation;
c. One limiting the liability of the carrier to an agreed valuation unless the
shipper declares a higher value and pays a higher rate of freight.
The firsts and the second kinds of stipulations are invalid as being contrary
to public policy, but the third is valid and enforceable.
WHAT IS THE EFFECT OF A CONTRACT LIMITING THE CARRIER’S LIABLITY IF THE
COMMON CARRIER DELAYS OR CHANGES THE STIPULATED OR USUAL ROUTE?
If the common carrier, without just cause, delays the transportation of the
goods or changes the stipulated or usual route, the contract limiting the common
carrier's liability cannot be availed of in case of the loss, destruction, or
deterioration of the goods (Article 1747).
IS
A STIPULATION LIMITING THE COMMON CARRIER’S LIABILITY TO THE VALUE
OF THE GOODS DECLARED BY THE SHIPPER IN THE BILL OF LADING VALID?
If the stipulation limits the carrier’s liability to an agreed valuation such as
the value of the goods appearing in the bill of lading, unless the shipper declares a
greater value, it is valid (Article 1749).
If the stipulation limits the carrier’s liability to an agreed valuation without
any qualification whatsoever such as the value of the goods stated in the bill of
lading, as a rule, it is contrary to public policy, and therefore, void. However, if it
can be shown to be reasonable and just under the circumstances, and had been
fairly agreed upon, then it is perfectly valid (Article 1750).
WHICH FACTOR 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?
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.
WHAT IS THE PRESUMPTION OF THE LAW IN CASE OF LOSS, DESTRUCTION OR
DETERIORATION OF THE GOODS WHILE IN THE CARE OF A COMMON CARRIER (EVEN
WHEN THERE IS AN AGREEMENT LIMITING THE CARRIER’S LIABILITY?)
By: Kathryn Pineda – Dela Serna
Even when there is an agreement limiting the liability of the common
carrier in the vigilance over the goods, the common carrier is disputably presumed
to have been negligent in case of their loss, destruction or deterioration.
WHAT LAW SHALL GOVERN THE LIABILITY OF THE COMMON CARRIER WHERE
THE GOODS ARE TO BE TRANSPORTED FROM ONE COUNTRY TO ANOTHER?
The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or deterioration.
WHAT PROVISIONS OF LAW SHALL APPLY TO A PASSENGER’S BAGGAGE?
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 employees. As to the
other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the
responsibility of hotel-keepers shall be applicable.
Hence, with respect to the passenger’s baggage, which is in his personal
custody or in that of his employees, the following rules shall apply:
a. The common carrier shall be responsible as depositaries for the effects
brought by the passengers, provided that notice was given to them, or to
their employees, of the effects brought in by passengers and that on the
part of the latter, they take the precautions which said common carriers
advised relative to the care and vigilance of their effects;
b. For the effects brought in by the passengers as mentioned above, the
common carrier shall be responsible for the loss or injury thereto that may
be caused by the servants or employees of the common carrier as well as
by strangers; but not that which may proceed from any force majeure. The
fact that the passengers are constrained to rely on the vigilance of the
common carrier shall be considered in determining the degree of care
required of him;
c. The act of a thief or robber, who has entered the vehicle is not deemed
force majeure, unless it is done with the use of arms or through irresistible
force;
d. The common carrier is not liable for compensation if the loss is due to the
acts of the passenger, his family, servants or visitors, or if the loss arises
from the character of the things brought in the vehicle;
e. The common carrier cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the
passengers. Any stipulation between the common carrier and the
passenger whereby the responsibility of the former set forth in Articles
1998 to 2001 is suppressed or diminished, shall be void.
 Page 14
With respect however, to the effects checked-in or entrusted by the
passenger to the carrier, the provisions on the liability of the common carrier shall
apply.
SUPPOSE THE CARRIER WAS NOT PAID FOR THE TRANSPORT OR CARRYING OF
THE BAGGAGE, ARE THE RULES ABOVE CITED STILL APPLICABLE?
Yes, because payment of the fare for the baggage or non issuance of a bill
of lading is not important. The contract of carriage was already perfected at the
moment there was meeting of the minds between the parties.
WHEN DOES THE EXTRAORDINARY RESPONSIBILITY OF THE COMMON CARRIER
BEGIN AND WHEN DOES IT END?
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 the right to receive them,
without prejudice to the provisions of Article 1738
Notice of arrival of the goods amounts to constructive delivery.
TO WHOM MUST THE CARRIER DELIVER THE GOODS TRANSPORTED?
The carrier must deliver the goods to the consignee, or to the person who
has the right to receive them.
IS DELIVERY BY THE COMMON CARRIER TO THE CUSTOMS AUTHORITIES
CONSIDERED AS DELIVERY TO THE CONSIGNEE SO AS TO END THE CARRIER’S
EXTRAORDINARY RESPONSIBILITY OVER THE GOODS?
Delivery of the cargo to the customs authorities is not delivery to the
consignee or “to the persons who has the right to receive them” as contemplated in
Article 1736, because in such a case the goods are still in the hands of the
Government and the owner cannot exercise dominion over them. (But the parties
may agree to limit the carrier’s liability in this case)
DOES THE RESPONSIBILITY OF THE COMMON CARRIER REMAIN WHEN THE
GOODS ARE TEMPORARILY UNLOADED OR STORED IN TRANSIT? WHAT THE EXCEPTION?
The common carrier’s duty to observe extraordinary diligence in the
vigilance over the goods remains in full force and effect even when they are
By: Kathryn Pineda – Dela Serna
temporarily unloaded or stored in transit, unless the shipper or owner has made
use of the right of stoppage in transitu.
WHAT IS STOPPAGE IN TRANSITU?
The act by which the unpaid vendor of the goods stops their progress and
resumes possession of them, while they are in the course of transit from him to the
purchaser, and not yet actually delivered to the latter.
The right of stoppage in transitu may be exercised when the buyer of the
goods being transported is or becomes insolvent. The unpaid seller who has
parted with the possession of the goods has the right of stopping them in transitu,
that is to say, he may resume possession of the goods at any time while they are
in transit, and he will then become entitled to the same rights in regard to the
goods as he would have had if he had never parted with the possession.
WHO HAS THE LIABILITY WHILE THE GOODS ARE IN THE WAREHOUSE OF THE
COMMON CARRIER AT THE PLACE OF DESTINATION?
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 remove them or otherwise
dispose of them.
MAY THERE BE A CONTRACT OF CARRIAGE OF PASSENGER EVEN WITHOUT A
TICKET?
Yes, the statute of frauds covers six contracts, none of which is a contract
of transportation, which means that a contract of carriage maybe oral.
WHAT IS THE PRESUMPTION CREATED BY LAW IF THERE WAS AN AGREEMENT
LIMITING THE LIABILITY OF THE COMMON CARRIER AND THE GOODS TRANSPORTED BY
THEM ARE LOST, DESTROYED OR DAMAGED?
Even when there is an agreement limiting the liability of the common
carrier in the vigilance over the goods, the common carrier is disputably presumed
to have been negligent in case of their loss, destruction or deterioration (Article
1752).
 Page 15
SUBSECTION 3
SAFETY OF PASSENGERS
WHAT IS THE DEGREE OF DILIGENCE REQUIRED OF COMMON CARRIERS IN
TRANSPORTING PASSENGERS?
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 (Article 1755).
WHAT IS THE PRESUMPTION CREATED BY LAW IN CASE OF DEATH OF OR
INJURIES TO PASSENGERS?
In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in articles 1733 and 1755
(Article 1756).
Thus, in case of death of a passenger, the presumption is that the carrier
was at fault in the absence of satisfactory explanation by the carrier as to how the
accident occurred (Abeto vs. Philippine Airlines, Inc., 115 SCRA 589).
A common carrier is vested with public interest. Once a passenger in the
course of travel is injured or does not reach his destination safely, the carrier and
driver are presumed to be at fault (Bacarro vs. Castano, 118 SCRA 187).
This statutory presumption may only be overcome by evidence that the
carrier exercised extraordinary diligence as prescribed by law (Baliwag Transit,
Inc. vs. Court of Appeals, 256 SCRA 747), or that the death or injury of the
passenger was due to fortuitous event (Philippine Rabbit Bus Lines, Inc. vs.
Intermediate Appellate Court, 189 SCRA 158).
In an action for damages, the issue is not whether or not the party seeking
damages has adduced sufficient evidence to show the negligence of the common
carrier but whether or not the carrier has presented the required quantum of proof
to overcome the presumption that it has been at fault or that it acted negligently in
the performance of its duty.
IS A COMMON CARRIER LIABLE FOR DAMAGES DUE TO FORTUITOUS EVENT?
A common carrier’s liability does not extend to damages caused by
fortuitous event (Ampang vs. Guinoo Trans., Co., 92 Phil. 1085). Accordingly, a
common carrier is not responsible for events which, could not be foreseen, or
which, though foreseen, are inevitable (Laguna Tayabas Co. vs. Tiongson, 16
By: Kathryn Pineda – Dela Serna
SCRA 940). After all, the carrier is not an insurer against all risks of travel (Isaac
vs. A.L. Ammen Transportation Co., Inc. L-9671, August 23, 1957). If a common
carrier would be an insurer of the passenger’s safety, it ought to be liable in case of
death of, or injuries to, passengers, although not negligent. But a common carrier’s
liability rests upon negligence, its failure to exercise the utmost diligence that the
law requires (Necesito vs. Paras, 104 Phil. 75).
WHEN IS THERE A CASE OF CASO FORTUITO WHICH WOULD EXEMPT THE
CARRIER FROM RESPONSIBILITY?
To constitute a caso fortuito that would exempt a person from
responsibility, it is necessary that:
1. The event must be independent of the human will;
2. The occurrence must render it impossible for the debtor to fulfill the
obligation in a normal manner;
3. The obligor must be free of participation in, or aggravation of, the injury to
the creditor; and
4. The event must have been impossible to foresee, of if it could be foreseen,
must have been impossible to avoid (Vasquez vs. Court a Appeals, 138
SCRA 553; Fortune Express, Inc. vs. Court of Appeals, G.R. No. 119756,
March 18, 1999).
In order that a common carrier may be absolved from liability in case of
force majeure, it is not enough that the accident was caused by force majeure. The
common carrier must still prove that it exercised extra-ordinary diligence in the
transport of passengers and was not negligent in causing the injuries resulting
from such accident. Therefore, defense of force majeure is not enough. It must be
coupled with the assertion that extra-ordinary diligence was observed by the
common carrier.
Presumption of negligence of common carrier is NOT rebutted by force
majeure. Only the exercise of extra-ordinary diligence by the common carrier
during the occurrence of the caso fortuito to lessen or mitigate its effects can the
common carrier be absolved from liability.
IS ACCIDENT CAUSED BY DEFECTIVE BREAKS OF A VEHICLE OR ANY OTHER
MECHANICAL DEFECT A CASO FORTUITO?
A mishap caused by defective breaks could not be considered as
fortuitous in character. Some extraordinary circumstance independent of the will of
the obligor, or his employees is an essential element of caso fortuito (Tugade vs.
Court of Appeals, 85 SCRA 226).
 Page 16
While a carrier is not an insurer of the safety of its passengers, the carrier
must nevertheless be held answerable for the flaws in its equipment if such flaws
were discoverable. The manufacturer of the defective equipment is in law the
carrier’s agent, and the good repute of the carrier will not relieve it from liability.
The rationale of the carrier’s liability is the fact that the passenger has no privity
with the manufacturer of the defective equipment. Hence, the passenger has no
remedy against the manufacturer while the carrier usually has (Necesito vs. Paras,
104 Phil. 75).
TO HOLD THE COMMON CARRIER LIABLE FOR DEATH, OR INJURY TO A
PASSENGER, MUST THE COURT MAKE AN EXPRESS FINDING OF FAULT OR NEGLIGENCE
ON THE PART OF THE COMMON CARRIER?
In an action based on contract of carriage, the court need not make an
express finding of fault or negligence in the part of the carrier in order to hold it
responsible to pay damages sought for by the passenger. By the contract of
carriage, the carrier assumes the express obligation to transport the passenger to
his destination safely and to observe extraordinary with a due regard for all of the
circumstances, and any injury that might be suffered by the passenger is right
away attributable to the fault of the carrier (Article 1756). This is an exception to
the general rule that negligence must be proved, and it is therefore incumbent
upon the carrier to prove that it has exercised extraordinary diligence as prescribed
by law (Batabgas Transportation Co. vs. Caguimbal, 22 SCRA 171; Landingin vs.
Pangasinan Co., 33 SCRA 284).
WHAT IS THE DURATION OF EXTRA-ORDINARY LIABILITY OF COMMON CARRIER
OF PASSENGERS?
There is no specific provision to this effect. But jurisprudence provides that
this extra-ordinary liability starts from the time the passenger unconditionally
places himself for transport up to the time the passenger alights from the vehicle.
However, when the passenger has reasonable cause to be near the vehicle, or
remains in the premises within a reasonable time after alighting, extra-ordinary
diligence of the carrier will still have to be exercised.
CAN THE RESPONSIBILITY OF A COMMON CARRIER FOR THE SAFETY OF
PASSENGERS BE DISPENSED WITH OR LESSENED BY STIPULATION?
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
1757). However, when a passenger is carried gratuitously, a stipulation limiting the
carrier’s liability is valid, but not for willful acts or gross negligence (Article 1758).
By: Kathryn Pineda – Dela Serna
The reduction of fare does not justify any limitation of the common carrier's liability
(ibid).
The foregoing provision means that the fact that a passenger is carried
gratuitously does not necessarily relieve the carrier from responsibility to such
passenger. The common carrier is only allowed to stipulate with the passenger
carried gratuitously that the former is not responsible for simple negligence. It also
means that in the absence of stipulation, the carrier is still liable for negligence. But
even with a stipulation, the carrier cannot be exempted from liability for willful acts
or gross negligence to a non-paying passenger. And a mere discount or reduction
in fare does not justify any limitation on the carrier’s liability (Article 1758).
ARE CHILDREN WHO DO NOT PAY THE FARE CONSIDERED AS PASSENGERS FOR
WHOM THE COMMON CARRIER SHOULD BE RESPONSIBLE?
A child going on a train with its mother, or in charge of another person who
has a ticket or pays fare for herself or himself is a passenger, although no fare is
paid for such child. But this rule does not apply where the child is unaccompanied
by one having it in charge and to newsboys or children who are permitted to ride
on a car gratuitously by an employee who has no authority to do so.
WHAT IS THE RESPONSIBILITY OF COMMON CARRIERS FOR THE DEATH OF OR
INJURIES TO PASSENGERS THROUGH THE NEGLIGENCE OR WILLFUL ACTS OF THE
FORMER’S EMPLOYEES?
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 (Article 1759).
However, the carrier cannot be made liable for the unauthorized act of its
employee in confirming a reservation made by a passenger with an expired ticket,
especially if such employee did not know the requirements to have such ticket
extended (Cervantes vs. Court of Appeals, 304 SCRA 27).
WHAT IS MEANT BY THE PRINCIPLE OF RESPONDEAT SUPERIOR?
The principle of respondeat superior refers to that rule by virtue of which, if
the damage or injury is caused by the negligence or willful act of an employee, the
 Page 17
employer is liable only when the act of the employee is within the scope of his
authority (Maranan vs. Perez, 20 SCRA 412). As far as our laws on common
carriers is concerned, this view, which is the minority view in Anglo-American law,
is not followed in this jurisdiction (ibid). As the Supreme Court has stated it so
emphatically: “We do not – and have never – followed the respondeat superior
rule” (Ramos vs. Pepsi Cola Bottling Co., 19 SCRA 289).
WHAT ARE THE REASONS FOR ARTICLE 1759 IN MAKING THE COMMON
CARRIER LIABLE FOR INJURIES OR DEATH BY THE NEGLIGENCE OR WILLFUL ACTS OF ITS
EMPLOYEES?
There are at least three cogent reasons for making the common carrier
liable for injuries or death caused by the negligence or willful acts of its employees:
1. The special undertaking of the carrier requires that it furnish its
passengers that full measure of protection afforded by the exercise of high
degree of care prescribed by law, inter alia, from violence and insults at
the hands of strangers and other passengers, but above all, from the acts
of the carrier’s own servants charged with the passenger’s safety.
2. Said liability of the carrier for the servant’s violation of duty to passengers,
is a result of the former’s confiding in the servant’s hands the performance
of his contract to safely transport the passenger, delegating therewith the
duty of protecting the passenger with the utmost care prescribed by law;
and
3. As between the carrier and the passenger, the former must bear the risk of
wrongful acts of negligence of the carrier’s employees against passengers,
since it, and not the passengers, has power to select and remove them
(Maranan vs. Perez, 20 SCRA 413).
MAY THE CARRIER BE HELD LIABLE IF THE DEATH OF OR INJURY TO A
PASSENGER IS CAUSED BY THE NEGLIGENCE OR WILLFUL ACTS OF ANOTHER
PASSENGER OR OF A STRANGER?
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 (Article 1763).
WHERE IS THE DEFENSE OF THE EXERCISE OF DILIGENCE OF A GOOD FATHER
OF A FAMILY IN THE SELECTION AND SUPERVISION OF THEIR EMPLOYEES APPROPRIATE?
By: Kathryn Pineda – Dela Serna
This defense is appropriate only in quasi-delict or culpa aquiliana (Article
2180). It is not available, however in culpa contractual and therefore, a common
carrier cannot raise such defense in action bought by its passengers (Article 1759)
MAY THE COMMON CARRIER’S RESPONSIBILITY FOR THE NEGLIGENCE AND
WILLFUL ACTS OF ITS EMPLOYEES BE ELIMINATED OR DIMINISHED BY STIPULATION OR
OTHERWISE?
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 (Article 1760).
WHAT DEGREE OF DILIGENCE MUST THE PASSENGER OBSERVE TO AVOID
INJURY TO HIMSELF?
The passenger must observe the diligence of a good father of a family to
avoid injury to himself (Article 1761).
Thus, where the proximate cause of the injury to the passenger was his
own negligence, the carrier cannot be held liable (Lara vs. Valencia, L-9907, June
30, 1958).
WHAT IS THE EFFECT OF CONTRIBUTORY NEGLIGENCE OF THE PASSENGER?
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
(Article 1762).
Even when the common carrier failed to exercise extraordinary diligence
as required by law, a contributory negligence of the passenger while not exempting
the carrier form liability, nevertheless justified the deletion of amount adjudicated
as moral damages. By the same token, the award of exemplary damages must be
set aside. Exemplary damages may be allowed only in cases where the defendant
acted in wanton, fraudulent, reckless, oppressive or malevolent manner (Philippine
Railways vs. Court of Appeals, 139 SCRA 87).
SUMMARY: WHAT IS THE DEGREE OF DILIGENCE REQUIRED OF A COMMON
CARRIER?
1. In transporting goods, the common carrier must exercise EXTRAORDINARY
DILIGENCE (Articles 1733 and 1735).
 Page 18
2. In transporting passengers, the common carrier must exercise UTMOST
DILIGENCE of very cautious persons, with due regard for all the
circumstances (Article 1755)
3. In preventing or stopping injuries to a passenger on account of the willful
or negligence of other passengers or of strangers, the common carrier’s
employees must exercise the DILIGENCE OF A GOOD FATHER OF A FAMILY
(Article 1763).
WHAT ARE THE DAMAGES THAT MAY BE AWARDED AGAINST A COMMON
CARRIER?
Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Article 2206 shall
also apply to the death of a passenger caused by the breach of contract by a
common carrier (Article 1764).

SUBSECTION 4 Under Article 2197, damages may be:

Common Provisions
1. Actual or compensatory;
INAN ACTION BASED ON CULPA CONTRACTUAL, MUST THE DRIVER OF THE 2. Moral;
CARRIER BE INCLUDED AS PARTY DEFENDANT? 3. Nominal;
4. Temperate or moderate;
For breach of contractual obligation to carry the passengers safely to their 5. Liquidated; or
place of destination, the common carrier is primarily liable for damages, and the 6. Exemplary or corrective.
case may be brought against the carrier alone, without the necessity of including
the driver (Cachero vs. Manila Yellow Taxicab Co., Inc., L-8721, May 23, 1957). WHAT DAMAGES MAY BE RECOVERED IN CASE OF DEATH OF A PASSENGER?

IS THE CARRIER’S CONTRACTUAL LIABILITY THE SAME AS ITS DRIVER’S CIVIL
LIABILITY ARISING FROM CRIMINAL NEGLIGENCE?
1.
A civil action based on the contractual liability of a common carrier is 2.
distinct from the criminal action instituted against the carrier or its employee cased 3.
on the latter’s criminal negligence. The first is governed by the provisions of the 4.
Civil Code, and not by those of the Revised Penal Code, and it being entirely 5.
separate and distinct from the criminal action, the same may be instituted and
prosecuted independently of, and regardless of the result of the latter (Benaldes
vs. Bohol Transportation, Inc., 7 SCRA 277). THAN THAT PROVIDED BY LAWM WHAT MAY THE COURTS CONSIDER?
When death occurs, the following items of damages may be recovered:
An indemnity for the death of the victim;
An indemnity for loss of earning capacity of the deceased;
Moral damages;
Attorney’s fee and expenses of litigation;
Interest in proper cases (Brinas vs. People, 125 SCRA 687).
IN FIXING A GREATER AMOUNT OF DAMAGES FOR DEATH OF A PASSENGER

IS THE DRIVER OF THE CARRIER JOINTLY AND SEVERALLY LIABLE WITH THE Article 2206 applies in case of death caused by breach of contract by the
CARRIER IN CASE OF BREACH OF CONTRACT OF CARRIAGE? common carrier (Article 1764). It fixes the minimum indemnity for death at P____
which the courts may increase according to circumstances. It is in fixing a greater
The driver is not jointly and severally liable with the carrier in case of amount of indemnity that courts may consider the financial capacity of the common
breach of contract of carriage. The rationale behind this is that the contract of carrier, along with such other factors as:
carriage is between the carrier and the passenger, and in the event of contractual
liability, the carrier is exclusively responsible therefore to the passenger, even if 1. Life expectancy of the deceased or of the beneficiary, whichever is shorter;
such breach is due to the negligence of the driver. Further, if the driver is jointly 2. Pecuniary loss to the plaintiff or beneficiary;
and severally liable with the carrier, that would make the carrier’s liability personal 3. Loss of support;
instead of merely vicarious and consequently, entitled to recover only the share 4. Loss of service;
which corresponds to the driver (Philippine Rabbit Bus Lines vs. Intermediate 5. Loss of society;
Appellate Court, 189 SCRA 158). 6. Mental suffering of beneficiaries; and

By: Kathryn Pineda – Dela Serna

 Page 19
7. Medical and funeral expenses (Pangasinan Transportation Co., Inc. vs.
Legaspi, 12 SCRA 592).
In awarding compensatory damages, the age of the plaintiff, his expected
life span, and his earning capacity within that life span must be taken into
consideration. Thus, the fact that the plaintiff was only in his twenties, when
through the negligence of the defendant, he lost the use of his limbs, being
condemned for the remainder of his life to be a paralytic, in effect leading a
maimed, well-nigh useless existence, were taken into account in fixing
compensatory damages (Marchan vs. Mendoza, 24 SCRA 889).
HOW MAY LIFE EXPECTANCY OF A PERSON BE DETERMINED FOR PUPROSES OF
FIXING THE AMOUNT OF DAMAGES THAT MAY BE RECOVERED?
ARTICLE 2200. Indemnification for damages shall comprehend
not only the value of the loss suffered, but also that of the profits which the obligee
failed to obtain. (1106)
ARTICLE 2201. In contracts and quasi-contracts, the damages for
which the obligor who acted in good faith is liable shall be those that are the
natural and probable consequences of the breach of the obligation, and which the
parties have foreseen or could have reasonably foreseen at the time the obligation
was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the non-
performance of the obligation. (1107a)

In determining the number of years on the basis of which the damages ARTICLE 2202. In crimes and quasi-delicts, the defendant shall be
shall be computed and the rate which the losses sustained by said heirs should be liable for all damages which are the natural and probable consequences of the act
fixed, the following formula was adopted in the American Expectancy Table of or omission complained of. It is not necessary that such damages have been
Mortality or the actual Combined Experience Table of Mortality: foreseen or could have reasonably been foreseen by the defendant. cdasia

2/3 x (80 – age of the decedent) = life expectancy. ARTICLE 2203. The party suffering loss or injury must exercise
Thus, the life expectancy of the passenger who died when he was over 29 the diligence of a good father of a family to minimize the damages resulting from
years of age (or around 30 for purposes of computation) was placed at 33 1/3 the act or omission in question.
years, following the foregoing formula (Villa Rey Transit, Inc. vs. Court of Appeals,
31 SCRA 514). And where the passenger was 37 years old when he died, he had ARTICLE 2204. In crimes, the damages to be adjudicated may be
a life expectancy of 28 2/3 more years (Fortune Express, Inc. vs. Court of Appeals, respectively increased or lessened according to the aggravating or mitigating
G.R. No. 119756, March 18, 1999). circumstances.

In the computation of the damages to be awarded, it should be life ARTICLE 2205. Damages may be recovered:
expectancy of the passenger who died and not the life expectancy of the
beneficiary which should be considered (Philippine Airlines vs. Court of Appeals, (1) For loss or impairment of earning capacity in cases of temporary or
185 SCRA 110). permanent personal injury;
(2) For injury to the plaintiff's business standing or commercial credit.
ACTUAL OR COMPENSATORY DAMAGES
ARTICLE 2206. The amount of damages for death caused by a
Actual damages are adequate compensation for pecuniary loss suffered crime or quasi-delict shall be at least three thousand pesos, even though there
and proved. It includes attorney’s fees. may have been mitigating circumstances. In addition:

ARTICLE 2199. 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.
(1) The defendant shall be liable for the loss of the earning capacity of the
deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity
shall in every case be assessed and awarded by the court, unless the deceased
on account of permanent physical disability not caused by the defendant, had no
earning capacity at the time of his death;

By: Kathryn Pineda – Dela Serna

 Page 20
(2) If the deceased was obliged to give support according to the provisions of no stipulation to the contrary, shall be the payment of the interest agreed upon,
article 291, the recipient who is not an heir called to the decedent's inheritance by and in the absence of stipulation, the legal interest, which is six per cent per
the law of testate or intestate succession, may demand support from the person annum. (1108) casia
causing the death, for a period not exceeding five years, the exact duration to be
fixed by the court; ARTICLE 2210. Interest may, in the discretion of the court, be
(3) The spouse, legitimate and illegitimate descendants and ascendants of the allowed upon damages awarded for breach of contract.
deceased may demand moral damages for mental anguish by reason of the death
of the deceased. cdtai ARTICLE 2211. In crimes and quasi-delicts, interest as a part of the
damages may, in a proper case, be adjudicated in the discretion of the court.
ARTICLE 2207. If the plaintiff's property has been insured, and he
has received indemnity from the insurance company for the injury or loss arising ARTICLE 2212. Interest due shall earn legal interest from the time
out of the wrong or breach of contract complained of, the insurance company shall it is judicially demanded, although the obligation may be silent upon this point.
be subrogated to the rights of the insured against the wrongdoer or the person who (1109a)
has violated the contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled to recover the ARTICLE 2213. Interest cannot be recovered upon unliquidated
deficiency from the person causing the loss or injury. claims or damages, except when the demand can be established with reasonable
certainty.
ARTICLE 2208. In the absence of stipulation, attorney's fees and
expenses of litigation, other than judicial costs, cannot be recovered, except: ARTICLE 2214. In quasi-delicts, the contributory negligence of the
plaintiff shall reduce the damages that he may recover.
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate ARTICLE 2215. In contracts, quasi-contracts, and quasi-delicts,
with third persons or to incur expenses to protect his interest; casia the court may equitably mitigate the damages under circumstances other than the
(3) In criminal cases of malicious prosecution against the plaintiff; case referred to in the preceding article, as in the following instances: cdtai
(4) In case of a clearly unfounded civil action or proceeding against the
plaintiff; (1) That the plaintiff himself has contravened the terms of the contract;
(5) Where the defendant acted in gross and evident bad faith in refusing to (2) That the plaintiff has derived some benefit as a result of the contract;
satisfy the plaintiff's plainly valid, just and demandable claim; (3) In cases where exemplary damages are to be awarded, that the defendant
(6) In actions for legal support; acted upon the advice of counsel;
(7) In actions for the recovery of wages of household helpers, laborers and (4) That the loss would have resulted in any event;
skilled workers; (5) That since the filing of the action, the defendant has done his best to
(8) In actions for indemnity under workmen's compensation and employer's lessen the plaintiff's loss or injury.
liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded; OTHER KINDS OF DAMAGES
(11) In any other case where the court deems it just and equitable that
attorney's fees and expenses of litigation should be recovered. ARTICLE 2216. No proof of pecuniary loss is necessary in order
that moral, nominal, temperate, liquidated or exemplary damages, may be
In all cases, the attorney's fees and expenses of litigation must be adjudicated. The assessment of such damages, except liquidated ones, is left to
reasonable. the discretion of the court, according to the circumstances of each case. cda

ARTICLE 2209. If the obligation consists in the payment of a sum MORAL DAMAGES
of money, and the debtor incurs in delay, the indemnity for damages, there being
By: Kathryn Pineda – Dela Serna
 Page 21
ARTICLE 2217. Moral damages include physical suffering, mental not only because Article 2220 specifically provided for damages that are caused by
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral contractual breach, but because the definition of quasi delict in Article 2176
shock, social humiliation, and similar injury. Though incapable of pecuniary expressly excludes the cases where there is a “pre-existing contractual relation
computation, moral damages may be recovered if they are the proximate result of between the parties” (Verzosa vs. Baytan, 107 Phil. 1010; Martinez vs. Gonzales,
the defendant's wrongful act or omission. 6 SCRA 331).

ARTICLE 2218. In the adjudication of moral damages, the WHAT ARE THE EXCEPTIONS TO THE FOREGOING RULE WHEN MORAL DAMAGES
sentimental value of property, real or personal, may be considered. MAY BE RECOVERED IN BREACH OF CONTRACT OF TRANSPORTATION?

ARTICLE 2219. Moral damages may be recovered in the following Moral damages may be recovered in an action for breach of contract of
and analogous cases: transportation in the following cases:

(1) A criminal offense resulting in physical injuries; 1. When the mishap results in the death of a passenger (M. Ruiz Highway
(2) Quasi-delicts causing physical injuries; Transit, Inc. vs. Court of Appeals, 11 SCRA 98);
(3) Seduction, abduction, rape, or other lascivious acts; 2. Where it is proved that the carrier was guilty of fraud or bad faith, even if
(4) Adultery or concubinage; death does not result (Rex Taxicab Co., Inc. vs. Bautista, L-15392,
(5) Illegal or arbitrary detention or arrest; September 30, 1960; Singson vs. Court of Appeals, 282 SCRA 149).
(6) Illegal search;
(7) Libel, slander or any other form of defamation; Bad faith means a breach of a known duty through some motive or ill-will.
(8) Malicious prosecution; Self enrichment or fraternal interest, and not personal ill-will, may have been the
(9) Acts mentioned in article 309; motive, but it is malice nevertheless which may be the ground for awarding moral
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and damages for breach of contract of carriage (Lopez vs. Pan American World
35. casia Airways, 16 SCRA 431). The bad faith referred to may be bad faith in the securing
and in the execution of the contract and in the enforcement of its terms or any
The parents of the female seduced, abducted, raped, or abused, referred other kind of deceit which may have been used by the carrier (Tamayo vs. Aquino,
to in No. 3 of this article, may also recover moral damages. L-12634 and 12720, may 29, 1959).

The spouse, descendants, ascendants, and brothers and sisters may bring MAY MORAL DAMAGES BE GRANTED IN CASE OF BREACH OF CONTRACT OF
the action mentioned in No. 9 of this article, in the order named. TRANSPORTATION WHICH MERELY CAUSES PHYSICAL INJURIES TO PASSENGERS?

ARTICLE 2220. Willful injury to property may be a legal ground for In case of breach of contract of carriage resulting only to physical injuries
awarding moral damages if the court should find that, under the circumstances, of passengers, moral damages are not recoverable (Laguna Tayabas Bus Co. vs.
such damages are justly due. The same rule applies to breaches of contract where Cornista, 11 SCRA 182), unless the carrier acted fraudulently or with malice or in
the defendant acted fraudulently or in bad faith. bad faith (Roque vs. Buan, 21 SCRA 651; Bulante vs. Chu Liante, 23 SCRA 604).

AS A GENERAL RULE, MAY MORAL DAMAGES BE RECOVERED IN BREACH OF NOMINAL DAMAGES

CONTRACT OF TRANSPORTATION?
Nominal damages are awarded not to compensate but to vindicate a right
Moral damages are not recoverable in damage actions predicated on a of the plaintiff that has been violated by the defendant. Temperate damages, on the
breach of contract of transportation in view of the provisions of Articles 2219 and other hand, refers to pecuniary loss suffered but cannot be proven with certainty.
2220. The said provisions limited the award of moral damages to those
enumerated therein and “analogous cases”. A breach of contract cannot be ARTICLE 2221. Nominal damages are adjudicated in order that a
considered included in the descriptive term “analogous cases” used in Article 2219, right of the plaintiff, which has been violated or invaded by the defendant, may be
By: Kathryn Pineda – Dela Serna
 Page 22
vindicated or recognized, and not for the purpose of indemnifying the plaintiff for more aggravating circumstances. Such damages are separate and distinct from
any loss suffered by him. cd fines and shall be paid to the offended party.

ARTICLE 2222. The court may award nominal damages in every ARTICLE 2231. In quasi-delicts, exemplary damages may be
obligation arising from any source enumerated in article 1157, or in every case granted if the defendant acted with gross negligence.
where any property right has been invaded.
ARTICLE 2232. In contracts and quasi-contracts, the court may
ARTICLE 2223. The adjudication of nominal damages shall award exemplary damages if the defendant acted in a wanton, fraudulent,
preclude further contest upon the right involved and all accessory questions, as reckless, oppressive, or malevolent manner.
between the parties to the suit, or their respective heirs and assigns. cdtai
ARTICLE 2233. Exemplary damages cannot be recovered as a
TEMPERATE OR MODERATE DAMAGES matter of right; the court will decide whether or not they should be adjudicated.
cdt
ARTICLE 2224. Temperate or moderate damages, which are more
than nominal but less than compensatory damages, may be recovered when the ARTICLE 2234. While the amount of the exemplary damages
court finds that some pecuniary loss has been suffered but its amount can not, need not be proved, the plaintiff must show that he is entitled to moral, temperate
from the nature of the case, be proved with certainty. or compensatory damages before the court may consider the question of whether
or not exemplary damages should be awarded. In case liquidated damages have
ARTICLE 2225. Temperate damages must be reasonable under been agreed upon, although no proof of loss is necessary in order that such
the circumstances. liquidated damages may be recovered, nevertheless, before the court may
consider the question of granting exemplary in addition to the liquidated damages,
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 2226. Liquidated damages are those agreed upon by cdtai
the parties to a contract, to be paid in case of breach thereof. aisa dc
ARTICLE 2235. A stipulation whereby exemplary damages are
ARTICLE 2227. Liquidated damages, whether intended as an renounced in advance shall be null and void.
indemnity or a penalty, shall be equitably reduced if they are iniquitous or
unconscionable.

ARTICLE 2228. When the breach of the contract committed by the

defendant is not the one contemplated by the parties in agreeing upon the IS THE DOCTRINE OF LAST CLEAR CHANCE APPLICABLE TO PASSENGERS OF A
liquidated damages, the law shall determine the measure of damages, and not the COMMON CARRIER?
stipulation.
The principle about the “last clear chance” would call for application in a
EXEMPLARY OR CORRECTIVE DAMAGES suit between the owners and drivers of two colliding vehicles. It does not apply
where a passenger demands responsibility form the carrier to enforce its
ARTICLE 2229. Exemplary or corrective damages are imposed, by contractual obligation. It would be inequitable to exempt the negligent driver of the
way of example or correction for the public good, in addition to the moral, common carrier in the ground that the other driver was likewise guilty of negligence
temperate, liquidated or compensatory damages. (Anuran vs. Buno, 17 SCRA 224).

ARTICLE 2230. In criminal offenses, exemplary damages as a

part of the civil liability may be imposed when the crime was committed with one or
By: Kathryn Pineda – Dela Serna
 Page 23
WHAT MAY BE DONE TO THE CERTIFICATE OF PUBLIC CONVENIENCE GRANTED
TO A COMMON CARRIER THAT REPEATEDLY FAILS TO COMPLY WITH ITS DUTY TO
OBSERVE EXTRAORDINARY DILIGENCE?
The Public Service Commission may, on its own motion or on petition of
any interested party, after due hearing, cancel the certificate of public convenience
granted to any common carrier that repeatedly fails to comply with his or its duty to
observe extraordinary diligence as prescribed in this Section (Article 1765).
WHAT LAWS SHOULD APPLY FOR MATTERS NOT REGULATED BY THE CIVIL
CODE?
In all matters not regulated by this Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and by special laws
(Article 1766).
III. CODE OF COMMERCE PROVISIONS ON OVERLAND TRANSPORTATION
(Unless otherwise indicated, reference is to Code of Commerce)
WHAT IS THE SCOPE OF OVERLAND TRANSPORTATION?
It applies to transport on land and small bodies of water, waterways, both
natural and artificial including transport on rivers which are not very large.
In transport on sea, the law on Admiralty governs.
WHAT IS THE NATURE OF THE CONTRACT OF TRANSPORTATION BY LAND AND
WATERWAYS? (WHEN A CONTRACT IS DEEMED COMMERCIAL)
A contract of transportation by land or waterways of any kind shall be
considered commercial:
1. When it has for its object merchandise or any article of commerce;
2. When, whatever its object may be, the carrier is a merchant or is habitually
engaged in transportation for the public.
IS COMMON CARRIER COMMERCIAL?
Common carrier is necessarily commercial – falls under (2) because it is
habitually engaged in transportation for public.
By: Kathryn Pineda – Dela Serna
(1) refers to both common carriers and private carriers (for so long as it
involves commercial objects)
WHAT GOVERNS COMMON CARRIERS?
1. Common carriers are primarily governed by the Civil Code.
2. Suppletory- Code of Commerce and special laws.
WHAT DOES THE CODE OF COMMERCE GOVERN?
Overland transportation
Martime/Admiralty
WHAT GOVERN COMMERCIAL CONTRACTS?
1. Commercial contract involving common carrier- refer to the Civil Code
first and then the Code of Commerce thereafter.
2. Private carrier involving commercial contract – refer to the Code of
Commerce first and the Civil Code thereafter (but not to Civil Code
provisions on common carriers) ex. Provisions on tort, contracts, etc.
EFFECT OF CIVIL CODE, ART. 1766, 2270, CIVIL CODE
The Civil Code does not expressly repeal the provisions of the Code of
Commerce on overland transportation. Instead, it makes such provisions
suppletory to the provisions of the Civil Code on common carriers.
DEFINE BILL OF LADING.
It is a written acknowledgment of the receipt of goods and an agreement to
transport and to deliver them at a specified place to a person named or his order.
Also called shipping receipts, forwarder’s receipts, receipt for transportation, air
ways bill of lading.
A bill of lading is an instrument in writing, signed by a carrier or his agent,
describing the freight so as to identify, stating the name of the consignor, the terms
of the contract of carriage, and agreeing or directing that the freight be delivered to
the order or assigns of a specified person at a specified place.
WHAT IS THE NATURE OF A BILL OF LADING?
1. It is a contract in itself and the parties are bound by its terms, by which the
3 parties namely the shipper, the carrier and the consignee undertake
 Page 24
specific responsibilities and assume stipulated obligations. As a contract, it
also fixes the route, destination, and freight rate or charges, and stipulates
the rights and obligations assumed by the parties.
2. It is a receipt- it recites the date and place of shipment, and describes the
goods as to marks, quality, quantity and value.
3. It is a symbol of the goods covered by it. It is a legal evidence of the
contract between the shipper and the carrier. As evidence, its contents
shall decide all disputes, which may arise with regard to their execution
and fulfillment. However, in the absence of a bill of lading, their respective
claims may be determined by legal proofs which each of the contracting
parties may present, in conformity with law. (Art. 354)
WHAT ARE THE CLASSES OF BILLS OF LADING?
1. NEGOTIABLE BILL OF LADING- One in which it is stated that the goods
referred to therein will be delivered to the bearer, or to the order of any
person named in such document.
2. NON-NEGOTIABLE BILL OF LADING- One in which it is stated that the goods
referred to therein will be delivered to a specified person.
3. CLEAN AND FOUL BILL OF LADING- One which contains a notation thereon
indicating that the goods covered by it are in bad condition.
4. SPENT BILL OF LADING- One which covers goods that have already been
delivered by the carrier without a surrender of a signed copy of the lading.
5. THROUGH BILL OF LADING- One issued by a carrier who is obliged to use the
facilities of other carriers as well as his own facilities for the purpose of
transporting the goods from the city of the seller to the city of the buyer,
which bill of lading is honored by the second and other interested carriers
who do not issue their own ladings.
6. ON BOARD BILL OF LADING- One in which it is stated that the goods have
been received on board the vessel which is to carry the goods.
7. RECEIVED-FOR-SHIPMENT BILL OF LADING- One in which it is stated that the
goods have been received for shipment with or without specifying the
vessel by which the goods are to be shipped.
8. CUSTODY BILL OF LADING- One which is issued by the carrier to whom the
goods have been delivered for shipment but the steamer indicated in the
bill of lading which is to carry the goods has not yet reached the port
where the goods are held for shipment.
9. PORT BILL OF LADING- One which is issued by the carrier to whom the
goods have been delivered, and the steamer indicated in the bill of lading
by which the goods are to be shipped is already in the port where the
goods are held for shipment.
By: Kathryn Pineda – Dela Serna
WHAT IS THE EFFECT OF THE ISSUANCE BY A CARRIER OF AN UNSIGNED BILL
OF LADING WHEN ACCEPTED BY THE SHIPPER OR CONSIGNEE?
A bill of lading delivered and accepted constitutes the contract of carriage
even though not signed, because the acceptance of a paper containing the terms
of a proposed contract generally constitutes an acceptance of a contract and of all
of its terms and conditions which the acceptor has actual or constructive notice. In
a nutshell, the acceptance of a bill of lading by the shipper and the consignee with
full knowledge of its contents gives rise to the presumption that the same was a
perfected and binding contract (Keng Hua Paper Products Co., Inc. vs. Court of
Appeals, 286 SCRA 257).
WHAT MUST BE STATED IN THE BILL OF LADING?
The shipper as well as the carrier of merchandise or effects may mutually demand
of each other the issuance of a bill of lading in which there shall be stated:
1. The name, surname and domicile of the shipper;
2. The name, surname and domicile of the carrier;
3. The name, surname and domicile of the person to whom or to whose order
the effects are sent, or whether such effects are to be delivered to the
bearer of the said bill;
4. The description of the effects, with a statement of their kind, weight, and
the exterior marks or signs of the packages containing the same;
5. The cost of transportation;
6. The date on which the shipment is made;
7. The place of delivery to the carrier;
8. The place and time of delivery to the consignee;
9. The indemnity to be paid by the carrier in case of delay, should there be an
agreement on this point (Art. 350).
HOW IS AN AMBIGUITY IN A BILL OF LADING CONSTRUED?
Ambiguity in a bill of lading is construed against the carrier, the contract
being one of adhesion.
WHO ARE THE PARTIES TO A BILL OF LADING?
1. shipper
2. consignee
 Page 25
3. carrier
WHAT IS THE EVIDENCE OF THE CONTRACT BETWEEN THE SHIPPER AND THE
CARRIER?
Since a bill of lading constitutes the legal evidence of the contract of
transportation between the parties, all disputes between the parties regarding the
execution and performance of the contract of transportation shall be decided by
the contents of the bill of lading issued by the carrier.
Exception: falsity and material error in the drafting of the bill.
Bill not essential to contract-the fact that a bill is not issued does not
preclude the existence of a contract of transportation, provided there is a meeting
of the minds, since a contract of transportation is essentially a consensual
contract.
If no bill is issued, the disputes between the parties shall be determined by
the legal proofs which the parties may present in support of their respective claims,
according to the general provisions established by the Code of Commerce and the
Civil Code. (Art. 354)
However, the parties may mutually demand that a bill of lading be issued
(Art. 350), but the same is not obligatory for the purpose of giving effect to the
contract of carriage.
WHEN CAN A CARRIER REFUSE TO TRANSPORT? (ART. 356)
1. If the packages appear to be unfit for transportation;
2. Nevertheless, in the case of railroads, this authority is not absolute. If the
transportation of such packages is insisted upon, railroads cannot refuse
to carry them, but they shall be exempt from all their responsibility if their
objections are made to appear in the bill of lading.
HOW SHOULD THE CARRIER EXAMINE THE PACKAGE IN CASE OF WELL FOUNDED
SUSPICIONS OF THE FALSITY IN THE DECLARATION OF THE CONTENTS OF THE PACKAGE
(ART. 357)?
1. If the carrier has a well founded suspicion of falsity in the declaration as to
the contents of a package, he may examine it. However, he must make the
examination either in the presence of the shipper or consignee and
witnesses or before a notary public where the shipper or consignee does
not appear after having been cited to do so.
By: Kathryn Pineda – Dela Serna
2. Should the declaration of the shipper appear to be true, the expenses
occasioned by the examination and by the careful repacking of the said
packages shall be paid by the carrier, and in a contrary case, the shipper.
IS A BILL OF LADING INDISPENSABLE TO A CONTRACT OF CARRIAGE?
Although Article 350 provides that the “Shipper as well as the carrier of
merchandise or goods may mutually demand that a bill of lading be made,” still,
said bill of lading is not indispensable. For as long as there is a meeting of the
minds of the parties, a contract of carriage exists even in the absence of a bill of
lading.
If no bill is issued, the disputes between the parties shall be determined by
the legal proofs which the parties may present in support of their respective claims,
according to the general provisions established by the Code of Commerce and the
Civil Code.
Parol evidence rule prohibits one from raising the terms and conditions not
contained in the bill of lading. Exceptions: Falsity and fraud.
If no bill of lading, apply Article 51:
1. If value exceeds P300, testimony of witness is NOT sufficient; it needs of
proof through other writing (ex, receipts, checks).
2. IF VALUE IS EXACTLY P300 or less, one can introduce testimonial
evidence.
WHEN DOES RESPONSIBILITY OF THE CARRIER COMMENCE (ART. 355)?
From the moment he receives the merchandise personally or through his
duly authorized agent, at the place indicated for receiving them. (Also provided in
Art. 1736, Civil Code)
WHAT IS THE ROUTE TO BE TAKEN BY THE CARRIER IN TRANSPORTING THE
GOODS (ART. 359)?
1. The route agreed by the parties should there be an agreed route, in which
case the carrier must not change the route, UNLESS by force majeure.
Otherwise, the carrier shall be liable for (1) losses due not only to the
change of route but also to (2) other causes, (3) together with the
indemnity agreed upon. Furthermore, under Article 1747 of the Civil Code,
(4) the carrier cannot avail of the contract limiting his liability. When by the
said cause of force majeure, the carrier is obliged to take another route,
 Page 26
producing an increase in the transportation charges, the amount of such
increase, after presenting formal proof thereof, shall be reimbursable to
him.
2. When there is no agreed route, the carrier must select one which may be
the shortest, least expensive and practically passable.
WHAT IS THE RIGHT OF THE CARRIER WHEN THE GOODS TRANSPORTED RUN
THE RISK OF BEING LOST (ARTS. 361, 362)?
If the goods transported run the risk of being lost on account of their nature
or by reason of an inevitable accident, there being no time for the owners to
dispose of the same, the carrier may proceed to their sale, placing them for this
purpose at the disposal of the judicial authority or of the officials provided for in
special provisions.
WHAT IS THE OBLIGATION OF THE COMMON CARRIER WITH RESPECT TO THE
GOODS TO BE DELIVERED (ART. 363)?
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.
WHEN MAY THE CONSIGNEE REFUSE TO RECEIVE THE GOODS?
1. 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 (Art. 363, par. 2).
2. 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 (Art. 365, par. 1).
3. 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 distinct and
By: Kathryn Pineda – Dela Serna
separate pieces and without dividing a single object, unless the consignee
proves the impossibility of conveniently making use of them in this form
(Art. 365. par. 2.
4. The same rule shall be applied to merchandise in bales or packages,
separating those parcels which appear sound (Art. 365, par. 3).
TO WHOM MUST DELIVERY BE MADE (ART. 368)?
The carrier must deliver without delay or difficulty the merchandise
received by him to the consignee, by the mere fact of being so designated in the
bill of lading to receive it; and should the carrier not do so, he shall be liable for the
damages which may arise therefrom.
This provision however, is deemed amended by Article 1736 of the Civil
Code which provides that the delivery by the carrier may be made either to the
consignee, or to the person who has a right to receive them, aside therefrom, the
delivery by the carrier is subject to the right of the unpaid seller to stoppage in
transitu. (Art. 1532, Civil Code.)
WHAT MUST BE DONE IF THE CONSIGNEE CANNOT BE FOUND, DOES NOT PAY
THE TRANSPORTATION CHARGES, OR REFUSES TO RECEIVE THE GOODS (ART. 369,
ART. 1752, CIVIL CODE)?
1. If the consignee can not be found at the residence indicated in the bill of
lading;
2. If he refuses to pay the transportation charges and expenses;
3. To receive the goods, the deposit of the said goods shall be ordered by the
municipal judge, where there is no judge of first instance, to be placed at
the disposal of the shipper or sender, without prejudice to third persons
having a better right, this deposit having all the effects of a delivery.
WHEN SHOULD THE CARRIER DELIVER THE GOODS (ARTS. 370, 358)?
1. In case a period for the delivery has been agreed upon, the carrier must
deliver within the period agreed upon.
2. Should there be no period, the carrier shall be under the obligation to
forward them with the first shipment of the same or similar merchandise he
may make to the point where he must deliver them; and should he not do
so, the damages occasioned by the delay suffered by him. And where the
carrier negligently incurs in delay, a natural disaster shall not free such
carrier from responsibility, and the carrier shall be liable for damages.
 Page 27
WHAT IS THE RESPONSIBILITY OF THE CARRIER IN CASE OF AGREEMENT FOR
THE USE OF THE COMBINED SERVICES OF OTHER CARRIERS (ART. 373)?
Should a carrier deliver merchandise to a consignee by virtue of
agreements combined with other carriers, he shall assume the obligations of those
who preceded him in the conveyance, reserving his right to proceed against them
if he should not be the party directly responsible for the fault which gives rise to the
claim of the shipper of the consignee.
The carrier making the delivery shall also assume all the actions and rights
of those who may have preceded him in the transportation.
The shipper and the consignee shall have an immediate right of action
against the carrier who executed the transportation contract, or against the other
carriers who received the goods transported without reservation.
The reservation made by the latter shall not exempt them, however, from
liabilities they may have incurred by reason of their own acts.
WITHIN
WHAT TIME SHOULD A CLAIM BE BROUGHT AGAINST THE CARRIER ON
ACCOUNT OF DAMAGE TO THE GOODS TO BE TRANSPORTED?
Within the twenty-four hours following the receipt of the merchandise, the
claim against the carrier for damage or average 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 (Art. 366).
SUMMARY:
1. If the damage is apparent from the exterior of the package, the claim must
be made upon receipt of the package. For such purpose, a verbal claim
made immediately is sufficient compliance with the law.
2. If the damage cannot be known from the exterior part of the packages, the
claim must be made within 24 hours following the receipt of the
merchandise.
3. When the consignee receives the merchandise, paying the freight charges
without protest, all claims against the carrier are extinguished.
By: Kathryn Pineda – Dela Serna
4. The foregoing rule has no application wherein the goods are not delivered
by the carrier to the consignee.
5. The periods of prescription under the Civil Code does not repeal Art. 366
of the Code of Commerce, because the limitations of actions in the Civil
Code are without prejudice to those specified in the Code of Commerce.
(Art. 1148, Civil Code)
6. The 24 hour rule is inapplicable to misdelivery or conversion where the
ordinary prescriptive periods will apply, or when the right to the period is
waived.
WHAT IS CONVERSION?
It is an unauthorized assumption and exercise of the right of ownership
over goods or personal chattels belonging to another, resulting in the alteration of
their condition or the exclusion of the owner’s rights.
HOW SHALL THE VALUE OF THE GOODS TRANSPORTED BE DETERMINED?
The value of the goods which the carrier must pay in case of their loss or
conversion shall be determined in accordance with the declaration in the bill of
lading, no proofs being allowed on the part of the shipper that there were among
the goods declared therein, articles of greater value, and money.
WHAT SECURITY DOES THE SHIPPER HAVE TO ASSURE PAYMENT OF HIS CLAIMS
FROM THE CARRIER?
Horses, vehicles, vessels, equipment, and all other principal and
accessory means of transportation, shall be specially obligated in favor of the
shipper, although with relation to railroad, said obligations shall be subordinated to
the provisions of the law of concession with respect to the property, and those of
this Code with regard to the manner and form of effecting the attachments and
retentions against said companies.
WHEN MAY THE CONSIGNEE REFUSE TO RECEIVE THE GOODS?
1. Should a part of the goods transported be delivered, the consignee may
refuse to receive it, when he proves that he cannot make use of it without
the others. (par. 2, Art, 363).
2. If due to the effect of the damages, the goods are rendered useless for
sale or consumption for particular purposes for which they are to be used,
the consignee shall not be bound to receive them, and he may leave them
in the hands of the carrier, demanding payment of their value at the current
market price on said day (par. 1, Art. 365);
 Page 28
3. If among the damaged goods there should be some in good condition and
without defect whatsoever, the foregoing provision shall be applicable with
regard to the damaged ones, and the consignee shall receive those which
are sound, this segregation being made by distinct and separate pieces,
without dividing for such purpose one whole article, unless the consignee
proves the impossibility of conveniently utilizing them in this form. The
same rule shall be applied to goods in bales and packages, with distinction
of those which appear sound. (par. 2 & 3, Art. 365)
SUMMARY:
Cases where consignee may abandon the goods:
1. In case of partial delivery, where the consignee can prove that he can not
make use of the goods capable of delivery independently of those
delivered,
2. Under art. 365 where the goods are rendered useless for sale or
consumption for purpose for which they were properly destined,
3. Under Art. 371, where there is delay through the fault of the carrier.
WHEN MAY THE CONSIGNEE ABANDON THE GOODS?
In cases of delay on account of the fault of the carrier, the consignee may
leave the goods transported in the hands of the carrier, informing him thereof in
writing before the arrival of the same at the point of destination.
When this abandonment takes place, the carrier shall satisfy the total
value of the goods, and if they had been lost or mislaid.
Should the abandonment not take place, the indemnity for damages on
account of the delay may not exceed the current price that the goods transported
would have on the day and at the place where the delivery should have been
made, and this provision shall be observed in all other cases where this indemnity
is due.
If the carrier delays delivery, the consignee cannot refuse the deliver, his
remedy is to seek damages, but if the delay is unreasonable, abandonment or
conversion is proper. (Art. 371)
WITHINWHAT TIME SHOULD THE CONSIGNEE PAY THE EXPENSES OF
TRANSPORTATION? WHAT IS THE REMEDY OF THE CARRIER IN CASE OF NON-PAYMENT?
By: Kathryn Pineda – Dela Serna
The consignee to whom the shipment may have been made cannot defer
the payment of the expenses and transportation charges on the goods received
after twenty-four hours have lapsed following the time of the delivery; and in case
of delay in making this payment, the carrier may demand the judicial sale of the
goods he transported for an amount sufficient to cover the transportation charges
and the expenses incurred.
WHAT SECURITY DOES THE CARRIER HAVE FOR THE PAYMENT OF THE
TRANSPORTATION EXPENSES?
The goods transported shall be specially obligated to answer for the
transportation charges and for the expenses and fees caused by the same during
their transportation and until the time of their delivery.
The credits for transportation shall be preferred claims or liens, upon the
goods carried, for the price of the contract and incidental expenses until their
delivery and for thirty days thereafter. One prescribed, the carrier shall have no
further right of action than that corresponding to him as an ordinary creditor.
The preference of the carrier to the payment of what is due for the
transportation and expenses of the goods delivered to the consignee shall not be
affected by the insolvency of the latter, provided that the lien is exercised within
eight (now thirty) days from delivery.
WHAT ARE THE RIGHTS OF SHIPPER?
1. Damages subject to the 24-hour rule
2. Abandonment (3 cases)
3. Right to change consignment
WHAT ARE THE OBLIGATIONS OF SHIPPER/CONSIGNEE?
1. To pay transport charges
2. To return bill of lading or otherwise issue a receipt.
IV. ADMIRALTY AND MARITIME COMMERCE
A. CONCEPT OF ADMIRALTY; JURISDICTION OVER ADMIRALTY CASES -
BATAS PAMBANSA BLG. 129, SEC. 19 (3), SEC. 33 (1)
DEFINE MARITIME LAW.
 Page 29
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 marine
conveyance of persons and property”.
This system of laws includes:
1. Book III of the Code of Commerce entitled Maritime Commerce,
2. Act No. 2616 otherwise known as the “Salvage Law”,
3. Commonwealth Act No. 65 otherwise known as the Carriage of Goods by
Sea Act”,
4. Presidential Decree No. 1521 known as the “Ship Mortgage Decree of
1978, and
5. Other special laws relating to Maritime Commerce.
However, the primary law on the maritime commerce is still the New Civil
Code provisions on common carriers. The Code of Commerce and special laws
apply only suppletorily.
WHAT IS THE CONCEPT OF ADMIRALTY AS DITINGUISHED FROM OVERLAND
TRANSPORTATION?
As distinguished from overland transportation, admiralty depends on the
size of vessel and the size of the body of water over which such vessel traverses.
WHICH COURT HAS JURISDICTION OVER ADMIRALTY CASES?
B.P. 129 provides that the RTC shall have exclusive jurisdiction in all
actions in admiralty and maritime jurisdiction where the demand of the claim
exceeds P300, 000.00. The MTC shall have exclusive original jurisdiction over
actions where the value of the personal property or amount of the demand does
not exceed P300, 000.
The law therefore, does not really care if the case is an admiralty or
maritime claim. It is the amount that is relevant, and not the nature of claim, for
purposes of vesting jurisdiction. B.P. 129, in providing for “admiralty and maritime”
jurisdiction is superfluous.
B. VESSELS
1. Meaning
WHAT IS A VESSEL OR SHIP?
By: Kathryn Pineda – Dela Serna
The words “ship” and “vessel” designate every craft, large or small so long
as it be not an accessory of another, such as the small boat of a vessel, of greater
or less tonnage. This definition comprises both craft intended for ocean or for
coastwise navigation, as well as the floating docks, mud lighters, dredges,
dumpscrows or any other floating apparatus used in the service of an industry or in
that of maritime commerce (Yu Con vs. Ipil, 41 Phil. 770).
Under the mercantile Code, vessels refer solely and exclusively to
merchant ships and to those which are engaged in the transportation of
passengers and freight from one port to another or from one place to another
(Lopez vs. Duruelo, 52 Phil. 232).
A banca then must also be considered as a “vessel” within the meaning of
the word as understood in the Code of Commerce (Yu Con vs. Ipil, supra).
WHAT KINDS OF VESSELS ARE GOVERNED BY THE CODE OF COMMERCE?
Vessels which are licensed to engage in maritime commerce or commerce
by sea, whether in foreign or coastwise trade are regulated by Book III (Maritime
Commerce).
These refer exclusively to merchant ships engaged in the transportation of
passengers and freight from one port to another.
It is not intended though to include all ships, craft or floating structures of
every kind without limitation, and should not include minor craft engaged in river or
bay traffic (Lopez vsa. Duruelo, 52 Phil. 229). Vessels of minor nature, such as
river boats and those carrying passengers from ship to shore are governed as to
their liability to passengers by the Civil Code.
2. Nature and Acquisition of - Articles 573, 574, 585, Article 712, Civil Code
HOW MAY OWNERSHIP OF MERCHANT VESSELS BE ACQUIRED?
1. 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.
2. The ownership of a vessel shall likewise be acquired by possession in good
faith, continued for three years, with a just title duly recorded.
 Page 30
3. In the absence of any of these requisites, continuous possession for ten years
shall be necessary in order to acquire ownership.
4. A captain may not acquire by prescription the vessel of which he is in
command (Article 573). There can be no adverse possession in the case of a
captain who hold fiduciary relationship with the ship owner; except where the
captain repudiates the fiduciary relationship and takes on an adverse
possession which is known to the public (adverse, open, continuous, notorious
possession).
Thus, in accordance with the foregoing provision, ownership of a vessel
may be acquired in the following manner:
1. By any of the means recognized by law, such as sale, dacion en pago, or
any other contract by which ownership of a property is acquired. It must
however, be in writing and to bind third persons, must be recorded in the
Registry of Vessels.
2. By possession of the vessel in good faith for three years, with good title
duly recorded.
3. In the absence of the foregoing requisites, by continuous possession for
ten years.
WHAT MATERIALS MAY BUILDERS OF VESSELS EMPLOY, AND WHAT SYSTEM
SHOULD THEY FOLLOW IN THEIR CONSTRUCTION AND RIGGING?
Builders of vessels may employ the materials and follow, with respect to
their construction and rigging, the systems most suitable to their interests. Ship
owners and seamen shall be subject to what the laws and regulations of the public
administration on navigation, customs, health, safety of vessels, and other similar
matters (Article 574).
HOW IS A VESSEL CONSIDERED?
Vessels are personal property under Article 416 of the Civil Code. The
same rule can be found in Article 585 of the Code of Commerce which provides:
“For all purposes of law not modified or restricted by the provisions of this
Code, vessels shall continue to be considered as personal property (Article 585).”
However, although a vessel is a personal property, the ownership thereof
is evidenced by a certificate of ownership and the transfer thereof to be binding on
third persons, must be registered in its registry of property.
By: Kathryn Pineda – Dela Serna
3. Registration; Certificates Issued; Distinctions - Tariff and Custom Code,
Sections 802, et seq.; PD 761, as amended by PD 1064, 1521
WHERE SHALL REGISTRATION OF A VESSEL BE EFFECTED?
The registration of a vessel shall be effected at its home port, being a port
when a coast guard district or station is in the said port, and at the nearest Coast
Guard or Station when the home port does not have such (Section 803).
WHAT KIND OF VESSELS NEED TO BE REGISTERED?
1. Every vessel used in the Philippine waters, not being a transient of foreign
registry shall be registered with the Philippine Coast Guard. To this end, it
shall be the duty of the master, owner or agent of every vessel to make
application to the proper Philippine Coast Guard District/Station for
registration thereof within fifteen days after the vessel becomes subject to
such registration.
2. A vessel of three tons gross or less shall not be registered, unless the
owner shall so desire, nor shall documents or licenses of any kind be
required for such vessel, but the proper fee shall be charged for
admeasurement, when admeasurement is necessary, except when the
same is engaged in towing or carrying of articles and passengers for hire.
3. All undocumented vessels shall be numbered in such form prescribed by
the Commandant, Philippine Coast Guard.
WHAT RECORD OF DOCUMENTS AFFECTING TITLE MUST BE REGISTERED?
In the record of transfers and encumbrances of vessels, to be kept at each
principal port of entry, shall be recorded at length all transfers, bills of sale,
mortgages, liens or other documents which evidence ownership or directly or
indirectly affect the title of registered vessels, and therein shall be recorded all
receipts, certificates or acknowledgment cancelling or satisfying, in whole or in
part, any such obligations. No other record of any such document or paper shall be
required than such as is affected hereunder (Section 805).
WHAT ARE THE OPTIONS OF SMALL BOAT OWNERS?
1. If the vessel is of domestic ownership, and of more than fifteen tons gross
or less, the taking of a certificate of Philippine registry shall be optional
(Section 806, Tariff and Customs Code, as amended by P.D. 761 and
1064).
2. If the vessel is five tons gross or less, and the owner does not take a
certificate of Philippine registry, the taking of a certificate of ownership
shall be optional to the owner (Section 808, Tariff and Customs Code,
 Page 31
Section 1178 RAC and Section 1504, Phil. Merchant Marine Rules and
Regs.)
3. A vessel of three tons or less shall not be registered unless the owner so
desires (Section 1503 (b) Phil. Merchant Marine Rules and Regs.)
WHAT ARE THE DISTINCTIONS OF THE FOREGOING?
The first case refers to a certificate of Philippine register, the privilege of
which are outlined in Section 810; while the second is a certificate of ownership as
distinguished in Section 808. The third is simple registration.
WHAT DOES “DOMESTIC OWNERSHIP” MEAN?
“Domestic Ownership” refers to the ownership of vessels entitled to
Philippine register limited to citizens of the Philippines or to corporations owned by
such citizens. But it does not exclude aliens from being licensed as ship brokers.
WHAT RIGHTS DO A CERTIFICATE OF PHILIPPINE REGISTRY CONFER UPON A
VESSEL?
A certificate of Philippine registry confers upon the vessel the right to
engage, consistently with law, in the Philippine coastwise trade and entitles it to the
protection of the authorities and the flag of the Philippines in all ports and on the
high seas, and at the same time secures to it the same privileges and subjects it to
the same disabilities as, under the laws of the Philippines, pertain to foreign-built
vessels transferred abroad to citizens of the Philippines (Section 810).
WHAT ARE THE REQUIREMENTS FOR APPROVAL OF APPLICATIONS FOR
CERTIFICATE OF PHILIPPINE REGISTRY?
No application for a certificate of Philippine registry shall be approved until
the commandant, Philippine Coast Guard, is satisfied from an inspection of the
vessel that it is engaged or destined to be engaged in legitimate trade and that it is
of domestic ownership as such ownership is defined in Section 1504 hereof.
The Coast Guard or Station Commander may at any time inspect a vessel
or examine its owner, master, crew or passenger in order to ascertain whether the
vessel is engaged in legitimate trade and is entitled to have or retain the certificate
of the Philippine registry.
The Coast Guard District/Station Commander may at any time make an
administrative investigation as to the ownership or title of any vessel engaged in
the coastwise trade and whether such title or ownership is in accordance with the
By: Kathryn Pineda – Dela Serna
requirements of law; and any vessel sold, transferred or mortgaged to any person
not a citizen of the Philippines without previous approval of the President of the
Philippines, or leased or chartered to any citizen or national of a country with which
the Philippines has no diplomatic relations, or put under foreign registry or flag
without such approval, or operated in violation of any of the provisions of this
Code, shall be seized by the Government of the Republic of the Philippines; and
any person, corporation, company or association violating any of the provisions of
this section shall be guilty of a misdemeanor and be punished by a fine of not more
than five thousand pesos or imprisonment for not more than five years, or both:
Provided, That in the event the person guilty of such violation is a corporation,
company or association, the manager or, in his default, the president thereof shall
be criminally responsible for such violation (Section 811).
4. Significance of Registration of Transactions Affecting Vessels
WHAT IS THE SIGNIFICANCE OF REGISTERING TRANSACTIONS AFFECTING
VESSELS?
The significance of registration are:
1. It determines ownership of the vessel; and
2. It binds third persons.
C. PERSONS PARTICIPATING IN MARITIME COMMERCE
WHO ARE THE PERSONS PARTICIPATING IN MARITIME COMMERCE?
1. Ship owner
2. Ship agent
3. Captain or master
4. Other officers of the vessel, e.g., first mate, second master, etc
5. Seamen
6. Other persons of the complement, e.g., stokers, supercargoes, etc.
1. SHIP OWNERS AND SHIP AGENTS - ARTICLES 586 TO 608; 618
WHAT IS A SHIP OWNER?
A ship owner is a natural or juridical person who owns the vessel. He is the
person who is primarily liable for damages sustained in the operation of vessel.
WHAT IS A SHIP AGENT?
 Page 32
By ship agent is understood the person entrusted with provisioning or
representing the vessel in the port in which it may be found (Section 586, par. 2).
The Code of Commerce likewise makes the ship agent jointly and severally liable
with the owner.
WHAT IS THE RATIONALE FOR SHIP AGENTS?
So that the ship owner will have a representative in all the places where
his vessel makes port. This is for convenience and economic reasons (expensive
to put office in every port of call).
WHAT ARE THE FUNCTIONS OF SHIP AGENTS?
1. Issuance of tickets
2. Issuance of bill of lading
a. Responsibilities and Liabilities
WHAT IS THE LIABILITY OF THE SHIP OWNER AND SHIP AGENT FOR THE ACTS
OF, AND OBLIGATIONS CONTRACTED BY THE CAPTAIN?
Ship owners and ship agents are primarily liable for the following:
1. 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 (Article 586, par. 1).
2. 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 587).
3. For damages to third persons for tort or quasi-delict committed by the
captain (Basis: Article 2180) Exception: Collision with another vessel (See
discussion under Collision)
4. Under Article 826 for damages in case of collision due to the fault,
negligence or want of skill of the captain, or any other member of the
complement.
5. For the obligations contracted by the captain, if the latter does not exceed
the powers and privileges pertaining to him by reason of his position or
conferred upon him by the former (Article 588).
6. If the amounts claimed were invested for the benefit of the vessel, the
responsibility therefor shall devolve upon its owner or agent (Section 588).
By: Kathryn Pineda – Dela Serna
OTHERS:
ARTICLE 589. If two or more persons should be part owners of a
merchant vessel, a partnership shall be presumed as established by the co-
owners.
This partnership shall be governed by the resolutions 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. aisadc
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. 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 591. 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. 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.
 Page 33
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, saying always the right of repurchase and redemption provided for in
Article 575.
ARTICLE 593. 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. The co-owners shall elect the manager who 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.
ARTICLE 595. 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. 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. 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 of equipment, armament, provisions of food and fuel,
and freight of the vessel, and, in general, in all that relate to the requirements of
navigation.
By: Kathryn Pineda – Dela Serna
ARTICLE 598. The ship agent may not order a new voyage, or make
contracts for a new charter, or insure the vessel, without the authorization of its
owner or resolution of the majority of the co-owners, unless these powers were
granted him in the certificate of his appointment. cdasia
If he insures the vessel without authorization therefore, he shall be subsidiarily
liable for the solvency of the insurer.
ARTICLE 599. 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. 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
executory 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. Should there be any profits, the co-owners may demand
of the managing agent the amount corresponding to their interests by means of an
executory action ("accion ejecutiva"), without any other requisite than the
acknowledgment of the signatures on the instrument approving the account.
ARTICLE 602. 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.
ARTICLE 603. Before the vessel sets out to sea the ship agent may at his
discretion discharge the captain and members of the crew whose contracts are not
for a definite period or voyage, paying them the salaries earned according to their
contracts, and without any indemnity whatsoever, unless there is an express and
specific agreement in respect thereto.
ARTICLE 604. If the captain or any other member of the crew should be
discharged during the voyage, they shall receive their salary until they return to the
port where the contract was made, unless there should be just cause for the
discharge, all in accordance with Article 636 and following of this Code.
 Page 34
ARTICLE 605. If the contracts of the captain and members of the crew
with the ship agent should be for a definite period or voyage, they may not be
discharged until after the fulfillment of their contracts, except by reason of
insubordination in serious matters, robbery, theft, habitual drunkenness, or
damage caused to the vessel or to its cargo through malice or manifest or proven
negligence.
ARTICLE 606. If the captain should be a co-owner of the vessel, he may
not be discharged unless the ship agent returns to him the amount of his interest
therein, which, in the absence of agreement between the parties, shall be
appraised by experts appointed in the manner established in the law of civil
procedure.
ARTICLE 607. If the captain who is a co-owner should have obtained the
command of the vessel by virtue of a special agreement contained in the articles of
association, he may not be deprived of his office except for the causes mentioned
in Article 605.
ARTICLE 608. In case of the voluntary sale of the vessel, all contracts
between the ship agent and the captain shall terminate, reserving to the latter his
right to the indemnity which may pertain to him, according to the agreements made
with the ship agent.
They vessel sold shall remain subject to the security of the payment of said
indemnity if, after the action against the vendor has been instituted, the latter is
found to be insolvent.
ARTICLE 618. The captain shall be civilly liable to the ship agent, and the
latter to the third persons who may have made contracts with the former;
1. For all the damages suffered by the vessel and its cargo by reason of want
of skill or negligence on his part. If a misdemeanor or crime has been committed,
he shall be liable in accordance with the Penal Code. cda
2. For all the thefts committed by the crew, reserving his right of action
against the guilty parties.
3. For the losses, fines, and confiscations imposed an account of violation of
customs, police, health, and navigation laws and regulations.
4. For the losses and damages caused by mutinies on board the vessel or by
reason of faults committed by the crew in the service and defense of the same, if
By: Kathryn Pineda – Dela Serna
he does not prove that he made timely use of all his authority to prevent or avoid
them.
5. For those caused by the misuse of the powers and the non-fulfillment of
the obligations pertaining to him in accordance with Articles 610 and 612.
6. For those arising by reason of his going out of his course or taking a
course which he should not have taken without sufficient cause, in the opinion of
the officers of the vessel, at a meeting with the shippers or supercargoes who may
be on board.
No exceptions whatsoever shall exempt him from this obligation.
7. For those arising by reason of his voluntarily entering a port other than that
of his destination, outside of the cases or without the formalities referred to in
Article 612.
8. For those arising by reason of non-observance of the provisions contained
in the regulations on situation of lights and maneuvers for the purpose of
preventing collisions.
WHAT IS THE LIABILITY OF SHIP CAPTAINS TO THE SHIP AGENT?
The captain shall be civilly liable to the ship agent, and the latter to the
third persons who may have made contracts with the former;
1. For all the damages suffered by the vessel and its cargo by reason of want
of skill or negligence on his part. If a misdemeanor or crime has been committed,
he shall be liable in accordance with the Penal Code. cda
2. For all the thefts committed by the crew, reserving his right of action
against the guilty parties.
3. For the losses, fines, and confiscations imposed an account of violation of
customs, police, health, and navigation laws and regulations.
4. For the losses and damages caused by mutinies on board the vessel or by
reason of faults committed by the crew in the service and defense of the same, if
he does not prove that he made timely use of all his authority to prevent or avoid
them.
5. For those caused by the misuse of the powers and the non-fulfillment of
the obligations pertaining to him in accordance with Articles 610 and 612.
 Page 35
6. For those arising by reason of his going out of his course or taking a
course which he should not have taken without sufficient cause, in the opinion of
the officers of the vessel, at a meeting with the shippers or supercargoes who may
be on board.
No exceptions whatsoever shall exempt him from this obligation.
7. For those arising by reason of his voluntarily entering a port other than that
of his destination, outside of the cases or without the formalities referred to in
Article 612.
8.For those arising by reason of non-observance of the provisions contained in the
regulations on situation of lights and maneuvers for the purpose of preventing
collisions (Article 618).
NOTES:
 Ship owners have direct responsibility to third persons. Article 618
recognizes the direct responsibility of the ship owner and ship agent; so
that the injured parties may immediately look for reimbursement to the
owner of the ship, it being universally recognized that the ship master or
captain is primarily the representative of the owner.
 This direct liability is moderated and limited by the owner’s right to
abandon the vessel and earned freight.
 Liability of owner when vessel is leased: If leased by the owner to another
person who appoints the captain, majority of authority holds that the owner
continues to be responsible to third persons for the acts of the captain
because he is the only one who appears as having control of the vessel in
the certificate of registration.
 Based on the Civil Code, the master and the supercargo are liable as
depositaries. It is a necessary condition in the transportation of the
property that it be placed in their possession for the obligation to preserve
and guard said property Having failed to exercise the diligence required
after the money has been placed in their possession, they are liable for its
loss and for damages, if any. The Code of Commerce likewise makes the
ship owner civilly liable for loss suffered by those who contracted with the
captain in consequence of the misdemeanors and crimes committed by
the latter or by members of its crew (Yu Con vs. Ipil, 41 Phil. 770).
b. The Doctrine of Limited Liability - Article 587
By: Kathryn Pineda – Dela Serna
This doctrine of limited liability, however, cannot be invoked if the ship
owner is at fault. Like when the ship owner knowingly hired an unlicensed captain
(Manila Steamship vs. Abdulhaman, 100 Phil. 31).
WHAT IS THE REAL AND HYPOTHECARY NATURE OF MARITIME LAW?
The Supreme Court explained in one case that the spirit of the Code of
Commerce is accurately set forth in a treatise of Madriaga on maritime law
(Philippine Shipping Company, et al. vs. Francisco Garcia Vergara, No. 1600, June
1, 1906, 6 Phil. 281).
“That which distinguishes the maritime from civil law and
even from the mercantile law in general is the real and
hypothecary nature of the former, and the many securities of a real
nature that maritime customs from time immemorial, the laws, the
codes, and the later jurisprudence, have provided for the
protection of the various and conflicting interest which are
ventured and risked in maritime expeditions, such as the interests
of the vessel and of the agent, those who make loans upon the
cargo, and those of a constructor as to repairs made to the vessel.
The real and hypothecary nature of maritime law operates to limit such
liability to the value of the vessel or the insurance thereof, if any. This is called the
doctrine of limited liability. It is called real and hypothecary because the interest is
limited to the res (vessel) which when lost, the liability of the owner is extinguished
except for unpaid freight and salvaged goods and equipment.
In Aboitiz Shipping Corporation vs. General Accident Fire and Life
Assurance Corporation, Ltd., No. 100446, January 21, 1993, 217 SCRA 359, the
Supreme Court likewise explained that the real and hypothecary nature of maritime
law simply means that the liability of the carrier in connection with losses related to
maritime contracts is confined to the vesse, which is hypothecated for such
obligations or which stands as the guaranty for their settlement.
Abandonment may be made so as to be exempted from liability like:
1. Civil liability to third persons arising from the conduct of the
captain in the vigilance over the goods which the vessel carried
(Article 587);
2. The proportionate contribution of co-owners of the vessel to a
common fund for the results of the acts of the captain referred to
in Article 587 (Article 590)
 Page 36
3. Civil liability incurred by the ship owner in case of collision (Article
837)
4. This doctrine also applies for claims due to death or injuries to
passengers although Article 587 speaks only of goods.
Thus, the sinking of the ship gives the owner/agent the right to abandon the
vessel. In abandoning the vessel, there is no required procedure to be followed.
There is no prescriptive period with in which the ship owner can make the
abandonment; he may do so for so long as he is not estopped form invoking the
same or do an act inconsistent with abandonment (i.e., salvage).
This real and hypothecary nature is evidenced by:
1. The limitation of the liability of the agents to the actual value of the
vessel and the freight money; and
2. The right to retain the cargo and the embargo and detention of the
vessel even in cases where ordinary civil law would not allow
more than a personal action against the debtor.
WHAT IS THE POLICY BEHIND THIS DOCTRINE?
The policy behind this doctrine is to promote the encouragement of ship
building and investment in maritime commerce.
There are two reasons why it is impossible to do away with these
privileges, to wit:
1. The risk to which the thing is exposed, and
2. The ‘real’ nature of maritime law, exclusively ‘real’, according to which the
liability of the parties is limited to a thing to which is at mercy of the waves.
If the agent is only liable with the vessel and freight money and both may
be lost through the accidents of navigation it is only just that the maritime creditors
have some means of obviating this precious nature of his rights by detaining the
ship, his only security, before it is lost (Philippine Shipping Company, et al. vs.
Francisco Garcia Vergara, supra).
WHAT IS THE REQUIREMENT BEFORE THE DOCTRINE OF LIMITED LIABILITY CAN
BE INVOKED?
Abandonment of the vessel, its appurtenances and the freightage is an
indispensable requirement before the ship owner or ship agent can enjoy the
By: Kathryn Pineda – Dela Serna
benefits of the limited liability principle. If the carrier does not want to abandon the
vessel, then he is still liable even beyond the value of the vessel,
WHAT ARE THE STATUTORY PROVISIONS THAT PROVIDED FOR THE LIMITED
LIABILITY RULE?
1. 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 587).
2. 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 (Article 837).
3. If the vessel and her cargo should be totally lost, by reason of capture or
wreck, all rights shall be extinguished, both as regards the crew to demand
any wages whatsoever, and as regards the ship agent to recover the
advances made.
If a portion of the vessel or of the cargo, or of both, should be
saved, the crew engaged on wages, including the captain, shall retain their
rights on the salvage, so far as they go, on the remainder of the vessel as
well as on the amount of the freightage of the cargo saved; but sailors who
are engaged on shares shall not have any right whatsoever on the salvage
of the hull, but only on the portion of the freightage saved. If they should
have worked to recover the remainder of the shipwrecked vessel they shall
be given from the amount of the salvage an award in proportion of the
efforts made and to the risks, encountered in order to accomplish the
salvage (Article 643).
4. 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 590).
DISCUSSION:
 Page 37
Article 837 apples the principle of limited liability in cases of collision while
Articles 587 and 590 embody the universal principle of limited liability in all cases
(Monarch Insurance Co., Inc. vs. Court of Appeals, G.R. Nos. 92735, 94867,
95578, June 8, 2000, 333 SCRA 71, 94).
However, it was explained in Aboitiz Shipping Corporation vs. General
Accident Fire and Life Assurance Corporation, Ltd., supra, that taken together with
related articles, Articles 837, 587 and 590 cover only:
1. Liability to third persons (Article 587);
2. Acts of the captain (Article 590); and
3. Collisions (Article 837).
In connection with Article 587, the carrier cannot invoke Articles 1733 and
1735 of the Civil Code. While the primary law governing the instant case is the
Civil Code, in all matters not regulated by said Code, the Code of Commerce and
other special laws shall govern. Since the Civil Code contains no provision
regulating liability of ship owners in the event of total loss or destruction of the
vessel, it is the provisions of the Code of Commerce, particularly Article 857, that
governs (Chua Yek Hong vs. Intermediate Appellate Court, G.R. No. L-74811,
December 14, 1988).
WHAT ARE THE EXCEPTIONS TO THE LIMITED LIABILITY OF THE SHIP OWNER
AND SHIP AGENT?
1. In case the voyage is not maritime, but only in river, bay, or gulf;
2. In case of the expenses for equipping, repairing or provisioning the vessel
contemplated before its loss;
3. In case the vessel is not a common carrier;
4. In case the vessel totally sunk or became a total loss due to the fault of the
ship owner or ship agent;
5. If workmen’s compensation claims (claim of an employee against the
employer) (Abueg vs. San Diego, 77 Phil. 730 [1946]);
6. Where the injury or death to a passenger is due either to the fault of the
ship owner, or to the concurring negligence of the ship owner and the
captain (Manila Steamship vs. Abdulhamen, 100 Phil. 32 [1956]).
7. Where the vessel is insured.
DOES THE DOCTRINE OF LIMITED LIABILITY APPLY IF THE CAPTAIN OR THE
CREW WAS NEGLIGENT?
The limited liability rule applies if the captain or the crew caused the
damage or injury.
By: Kathryn Pineda – Dela Serna
For instance, the ship owner’s or ship agent’s liability is limited to the value
of the vessel if the damage was caused by the unseaworthiness of the vessel
caused by the negligence of the captain or crew during the voyage (Aboitiz
Shipping Corporation vs. General Accident Fire and Life Assurance Corporation,
Ltd., supra).
However, if the failure to maintain the seaworthiness of the vessel can be
ascribed to the ship owner alone or the ship owner concurrently with the captain,
then the limited liability principle can not be invoked (Monarch Insurance Co., Inc.
vs. Court of Appeals, supra).
The carrier is liable for the damage to the full extent and not up to the
value of the vessel if it was established that the carrier was guilty of negligence in
allowing the captain and the crew to play mahjong during the voyage, in failing to
maintain the ship as seaworthy and in allowing the ship to carry more passengers
than it was allowed to carry (No. 110390, November 7, 1997, 281 SCRA 534).
c. Specific Rights and Prerogatives - Articles 575, 593, 594, 596, 601
1. ARTICLE 575. 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 nine days following the inscription of the sale in the
registry, and by depositing the price at the same time.
2. ARTICLE 593. 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.
3. ARTICLE 594. The co-owners shall elect the manager who 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.
4. 4ARTICLE 596. 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.
5. ARTICLE 601. Should there be any profits, the co-owners may demand
of the managing agent the amount corresponding to their interests by
means of an executory action ("accion ejecutiva"), without any other
 Page 38
requisite than the acknowledgment of the signatures on the instrument
approving the account.
patron of a vessel:
2. CAPTAINS AND MASTER
DISTINGUISH A CAPTAIN FROM A MASTER OF A VESSEL.
Technically, the name of captain or master is given, according to the kind
of vessel, to the person in charge of it. The first is applied to those who govern
vessels that navigate the high seas or ships of large dimensions and importance,
although they may be engaged in coastwise trade.
Masters are those who command smaller ships engaged in the coastwise
trade. But for purposes of maritime commerce, the words “captain” and “master”
have the same meaning; both being the chiefs or commanders of vessels (Yu Con
vs. Ipil, 41 Phil. 770). Matron on the other hand command bancas.
(a) Qualifications and Licensing - Rep. Act 5173, Sec. 3
Article 609
WHO HAS THE AUTHORITY TO ISSUE LICENSE TO OFFICERS, PILOTS, PATRONS
AND SEAMEN?
The Philippine Coast Guard has the authority to issue licenses and
certificates to officers, pilots, major and minor patrons and seamen, as well as
suspend and revoke such licenses and certificates.
WHAT ARE THE QUALIFICATIONS OF MASTERS, MATES OR PATRONS OF A
VESSEL?
An applicant for certificate or license as master, mate or patron shall be:
1. Citizen of the Philippines
2. Must be physically fir and must be examined physically
3. Must undergo examination into moral and technical qualifications
4. Must have the other prescribed requirements (Sections 829, 1188, 1189 ½,
1190 and 1191, R.A. No 1937, repealing Article 609 of the Code of
Commerce)
(b) Power and Duties - Articles 610, 611, 612, 622, 624,
625
WHAT ARE THE INHERENT POWERS OF THE CAPTAIN OR MASTER OF A
VESSEL ?
By: Kathryn Pineda – Dela Serna
The following powers shall be inherent in the position of captain, master or
1. To appoint or make contracts with the crew in the absence of the ship
agent, and to 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.
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 610).
WHAT ARE THE GENERAL FUNCTIONS OF THE CAPTAIN OF A VESSEL?
In general, a captain of a vessel has the following functions :
1. He is a general agent of the ship owner ;
2. He is a technical director of the vessel ;
3. He is a representative of the Government in the country whose flag he
navigates
TO COMPLY WITH HIS OBLIGATIINS, HOW MAY THE CAPTAIN RAISE FUNDS ?
 Page 39
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 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.
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 (Article 611).
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 611).
WHAT DUTIES ARE INHERENT IN THE OFFICE OF THE CAPTAIN?
The following obligations shall be inherent in the office of 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.
2. To have a copy of this code on board.
3. To have three folioed and stamped books, placing at the beginning of each
one a memorandum of the number of folios it contains, signed by the
maritime authority, and in his absence by the competent authority.
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
By: Kathryn Pineda – Dela Serna
navigation, preserving under his responsibility a certificate of the
memorandum of his inspection, signed by all those who may have taken
part therein.
5. 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.
6. 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
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.
7. 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.
8. 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.
9. 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 twenty-four 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.
 Page 40
10. 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
obligations which he may contract in accordance with Article 583.
11. 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.
12. 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.
13. 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.
14. To observe the rules with respect to situation, lights and maneuvers in
order to avoid collisions.
15. 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.
16. 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
twenty-four hours, specifying therein all the incidents of the wreck, in
accordance with subdivision 8 of this article.
17. To comply with the obligations imposed by the laws and regulations on
navigation, customs, health, and others (Article 612).
WHAT BOOKS MUST BE CARRIED BY THE CAPTAIN ON BOARD THE VESSEL?
1. 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,
By: Kathryn Pineda – Dela Serna
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.
2. 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 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 families.
3. In the third book, called "freight book," he shall record the loading and
discharge of all the goods, stating their marks and 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 (Article 612, No. 3).
(c) Prohibited Acts and Transactions - Articles 613, 614,
615, 617, 621, 583
WHAT ARE THE PROHIBITED ACTS AND TRANSACTIONS OF CAPTAIN?
1. ARTICLE 613. A captain who navigates for freight in common or on
shares may not make any separate transaction for his own account; and
should he do so, the profit which may accrue shall belong to the other
persons interested, and the losses shall be borne by him exclusively.
2. ARTICLE 614. A captain who, having made an agreement to make a
voyage, fails to perform his undertaking, without prevented by fortuitous
accident or force majeure, shall indemnify for all the losses which he may
cause without prejudice to the criminal penalties which may be proper.
 Page 41
3. ARTICLE 615. Without the consent of the agent, the captain cannot have
himself substituted by another person; and should he do so, besides being
liable for all the acts of the substitute and bound to the indemnities
mentioned in the foregoing articles, the captain as well as the substitute
may be discharged by the ship agent.
THIRD PERSONS?
4. ARTICLE 617. The captain may not contract loans on respondentia
secured by the cargo; and should he do so, the contracts shall be void.
third persons who may have made contracts with the former:;
Neither may he borrow money on bottomry for his own
transactions, except on the portion of the vessel he owns, provided no
money has been previously borrowed on the whole vessel, and there does
not exist any other kind of lien or obligation chargeable against the vessel.
If he may do so, he must state what interest he has in the vessel.
In case of violation of this article, the principal, interest, and costs
shall be for the personal account of the captain, and the ship agent may
furthermore discharge him.
5. ARTICLE 621. A captain who borrows money on the hull, engine, rigging
or tackle of the vessel, or pledges or sells merchandise or provisions
outside of the cases and without the formalities prescribed in this Code,
shall be liable for the principal, interests, and costs, and shall indemnify for
the damages he may cause.
He who commits fraud in his accounts shall pay the amount
defrauded and shall be subject to the provisions of the Penal Code.
6. ARTICLE 583. If while on a voyage the captain should find it necessary to
contract one or more of the obligations mentioned in subdivisions 8 and 9
of Article 580, he shall apply to the judge or court if he is in Philippine
territory, and otherwise to the consul of the Republic of the Philippines,
should there be one, and, in his absence, to the judge or court or proper
local authority, presenting the certificate of the registration sheet treated of
in Article 612 and the instruments proving the obligation contracted.
The judge or court, the consul, or the local authority, as the case
may be, in view of the result of the proceedings instituted, shall make a
temporary memorandum of their result in the certificate, in order that it
may be recorded in the registry when the vessel returns to the port of its
registry, or so that it can be admitted as a legal and preferred obligation in
case of sale before its return, by reason of the sale of the vessel on
account of a declaration of unseaworthiness.
By: Kathryn Pineda – Dela Serna
The omission of this formality shall make the captain personally liable
for the credits prejudiced on his account.
WHEN IS THE CAPTAIN CIVILLY LIABLE TO THE SHIP AGENT AND THE LATTER TO
The captain shall be civilly liable to the ship agent, and the latter to the
1. For all the damages suffered by the vessel and its cargo by reason of want
of skill or negligence on his part. If a misdemeanor or crime has been
committed, he shall be liable in accordance with the Penal Code.
2. For all the thefts committed by the crew, reserving his right of action
against the guilty parties.
3. For the losses, fines, and confiscations imposed an account of violation of
customs, police, health, and navigation laws and regulations.
4. For the losses and damages caused by mutinies on board the vessel or
by reason of faults committed by the crew in the service and defense of
the same, if he does not prove that he made timely use of all his authority
to prevent or avoid them.
5. For those caused by the misuse of the powers and the non-fulfillment of
the obligations pertaining to him in accordance with Articles 610 and 612.
6. For those arising by reason of his going out of his course or taking a
course which he should not have taken without sufficient cause, in the
opinion of the officers of the vessel, at a meeting with the shippers or
supercargoes who may be on board.
No exceptions whatsoever shall exempt him from this obligation.
7. For those arising by reason of his voluntarily entering a port other than that
of his destination, outside of the cases or without the formalities referred to
in Article 612.
8. For those arising by reason of non-observance of the provisions contained
in the regulations on situation of lights and maneuvers for the purpose of
preventing collisions (Article 618).
 Page 42
WHEN IS THE CAPTAINPERSONALLY LIABLE FOR LOANS ON THE HULL, ENGINE,
RIGGING OR TACKLE OF THE VESSEL?
A captain who borrows money on the hull, engine, rigging or tackle of the
vessel, or pledges or sells merchandise or provisions outside of the cases and
without the formalities prescribed in this Code, shall be liable for the principal,
interests, and costs, and shall indemnify for the damages he may cause.
He who commits fraud in his accounts shall pay the amount defrauded and
shall be subject to the provisions of the Penal Code (Article 621).
WHAT IS THE DUTY OF THE CAPTAIN IF HE SHOULD RECEIVE NEWS OF THE
APPEARANCE OF CORSAIRS OR MEN OF WAR AGAINST HIS FLAG WHILE ONE VOYAGE?
If while on a voyage the captain should learn of the appearance of
privateers or men of war against his flag, he shall be obliged to make the nearest
neutral port, inform his agent or shippers, and await an occasion to sail under
convoy, or until the danger is over or he has received express orders from the ship
agent or the shippers (Article 622).
WHAT IS MEANT BY CORSAIRS AND MEN OF WAR?
A corsair is a pirate ship or a privateer; while men of war or men o’ war are
battleships or warships used by the navy of a government.
WHAT MUST THE CAPTAIN DO SHOULD THE VESSEL OR HER CARGO BE
FORCIBLY TAKEN BY A CORSAIR?
If he should be attacked by a privateer, and, after having tried to avoid the
encounter and having resisted the delivery of the effects of the vessel or its cargo,
they should be forcibly taken away from him, or he should be obliged to deliver
them, he shall make an entry thereof in his freight book and shall prove the fact
before the competent authority at the first port he touches.
After the force majeure has been proved, he shall be exempted from liability
(Article 623).
WHAT ARE THE DUTIES OF A CAPTAIN OF A VESSEL WHICH HAS GONE THROUGH A
HURRICANE OR WHOSE CARGO HAS SUFFERED DAMAGE OR AVERAGE?
A captain whose vessel has gone through a hurricane or who believes that
the cargo has suffered damages or averages, shall make a protest thereon before
the competent authority at the first port he touches, within twenty-four hours
By: Kathryn Pineda – Dela Serna
following his arrival and shall ratify it within the same period when he arrives at his
destination, immediately proceeding with the proof of the facts, and he may not
open the hatches until after this has been done.
The captain shall proceed in the same manner, if, the vessel having been
wrecked; he is saved alone or with part of his crew, in which case he shall appear
before the nearest authority, and make a sworn statement of facts.
The authority or the consul shall verify the said facts receiving sworn
statements of the members of the crew and passengers who may have been
saved; and taking such other steps as may assist in arriving at the facts he shall
make a statement of the result of the proceedings in the log book and in that of the
sailing mate, and shall deliver to the captain the original record of the proceedings,
stamped and folioed, with a memorandum of the folios, which he must rubricate, in
order that it may be presented to the judge or court of the port of destination.
The statement of the captain shall be accepted if it is in accordance with
those of the crew and passengers; if they disagree, the latter shall be accepted,
always saying proof to the contrary (Article 624).
WHAT IS MARITIME PROTEST?
Maritime protest is a written statement under oath, made by the master of
a vessel, after the occurrence of an accident or disaster in which the vessel or
cargo is lost or destroyed, with respect to the circumstances attending such
occurrence. It is usually intended to show that the loss or damage resulted from a
peril of the sea, or for some other cause for which neither the master nor the owner
was responsible, and concludes with the protestation against any liability of the
owner for such loss or damage.
WHAT ARE THE INSTANCES WHERE PROTEST IS REQUIRED?
1. When the vessel makes an arrival under stress (Article 612);
2. Where the vessel is shipwrecked (Articles 612, 624 and 843);
3. Where the vessel has gone through a hurricane or the captain believes
that the cargo has suffered damages or averages (Article 624); and
4. Maritime collisions (Article 835)
WHEN AND WHERE SHOULD MARITIME PROTEST BE FILED?
A captain whose vessel has gone through a hurricane or who believes that
the cargo has suffered damages or averages, shall make a protest thereon before
the competent authority at the first port he touches, within twenty-four hours
 Page 43
following his arrival and shall ratify it within the same period when he arrives at his
destination, immediately proceeding with the proof of the facts, and he may not
open the hatches until after this has been done.
The captain shall proceed in the same manner, if, the vessel having been
wrecked; he is saved alone or with part of his crew, in which case he shall appear
before the nearest authority, and make a sworn statement of facts.
The authority or the consul shall verify the said facts receiving sworn
statements of the members of the crew and passengers who may have been
saved; and taking such other steps as may assist in arriving at the facts he shall
make a statement of the result of the proceedings in the log book and in that of the
sailing mate, and shall deliver to the captain the original record of the proceedings,
stamped and folioed, with a memorandum of the folios, which he must rubricate, in
order that it may be presented to the judge or court of the port of destination.
The statement of the captain shall be accepted if it is in accordance with
those of the crew and passengers; if they disagree, the latter shall be accepted,
always saying proof to the contrary (Article 624).
WHAT IS THE DUTY OF THE CAPTAIN UPON ARRIVAL AT THE PORT OF
DESTINATION REGARDING THE DELIVERY OF THE CARGO?
The captain, under his personal responsibility as soon as he arrives at the
port of destination, should get the necessary permission from the health and
customs officers, and perform the other formalities required by the regulations of
the administration, delivering the cargo without any defalcation, to the consignee,
and in a proper case, the vessel, rigging, and freightage to the ship agent.
If by reason of the absence of the consignee or on account of the
nonappearance of a legal holder of the bills of lading, the captain should not know
to whom he is to legally make the delivery of the cargo, he shall place it at the
disposal of the proper judge or court or authority, in order that he may determine
what is proper with regard to its deposit, preservation and custody (Article 625).
3. OTHER OFFICERS AND CREW
WHO SHALL TAKE PLACE OF THE CAPTAIN IN CASE OF ABSENCE, SICKNESS OR
DEATH OF THE LATTER?
The sailing mate, as the second chief of the vessel, and unless the agent
orders otherwise, shall take the place of the captain in cases of absence, sickness,
or death, and shall then assume all his powers, duties, and responsibilities (Article
627).
By: Kathryn Pineda – Dela Serna
(a) Contracts and Formalities - Article 634
WHO MAY ENLIST THE CREW?
The captain may make up the crew of his vessel with such number of men
as he may consider proper, and in the absence of Filipino sailors, he may take on
foreigners residing in the country, the number thereof not to exceed one-fifth of the
crew. If in foreign ports the captain should not find a sufficient number of Filipino
sailors, he may complete the crew with foreigners, with the consent of the consul
or marine authorities (Article 634).
In case however, of Philippine vessels operating in the coastwise trade or
on the high seas, no officer or member of the crew may be hired who is not a
citizen of the Philippines (Section 829, Tariff and Customs Code).
(b) Duties and Liabilities - Article 635
MAY A SAILOR CONTRACTED TO SERVE A VESSEL RESCIND HIS CONTRACT?
A sailor who has been contracted to serve on a vessel may not rescind his
contract or fail to comply therewith except by reason of a legitimate impediment
which may have happened to him.
Neither may he transfer from the service of one vessel to another without
obtaining the written permission of the captain of the vessel on which he may be.
If, without obtaining said permission, the sailor who has signed for one vessel
should sign for another one, the second contract shall be void, and the captain
may choose between forcing him to fulfill the service to which he first bound
himself, or at his expense to look for a person to substitute him.
Furthermore, he shall lose the wages earned on his first contract, to the benefit
of the vessel for which he had signed.
A captain who, knowing that a seaman is in the service of another vessel,
should have made a new agreement with him without having required of him the
permission referred to in the preceding paragraphs, shall be subsidiarily
responsible to the captain of the vessel to which the seaman first belonged, for that
part of the indemnity, referred to in the third paragraph of this article, which the
seaman may not be able to pay (Article 635).
(c) Rights - Articles 636 to 647
 Page 44
WHAT IS THE DURATION OF THE SAILOR’S CONTRACT?
If there is no fixed period for which a seaman has been contracted he may
not be discharged until the end of the return voyage to the port where he enlisted
(Article 636).
WHAT ARE THE GROUNDS FOR WHICH A SAILOR MAY BE DISCHARGED BY THE
CAPTAIN?
Neither may the captain discharge a seaman during the time of his
contract except for just cause, the following being considered as such:
1. The perpetration of a crime which disturbs order on the vessel.
2. Repeated insubordination, want of discipline, or non-fulfillment of the
service.
3. Repeated incapacity and negligence in the fulfillment of the service he
should render.
4. Habitual drunkenness.
5. Any occurrence which incapacitates the seaman to perform the work
entrusted to him, with the exception of that provided in Article 644.
6. Desertion.
The captain may, however, before getting out on a voyage and without
giving any reason, refuse to permit a seaman whom he may have engaged to go
on board, and leave him on land, in which case he will be obliged to pay him his
wages as if he had rendered services.
This indemnity shall be paid from the funds of the vessel if the captain
should have acted for reasons of prudence and in the interest of the safety and
good services of the farmer. Should this not be the case, it shall be paid by the
captain personally (Article 637).
After the voyage has begun, during the same, and until the conclusion thereof,
the captain may not abandon any member of his crew on land or on sea, unless,
by reason of some crime, his imprisonment and delivery to the competent authority
in the first port touched should be proper, a matter obligatory for the captain.
WHAT IS THE EFFECT ON THE CREW OF THE REVOCATION OF THE VOYAGE OR
CHANGE OF DESTINATION?
If, after the crew has been engaged, the voyage is revoked by the will of
the ship agent or of the charterers before or after the vessel has put to sea, or if
By: Kathryn Pineda – Dela Serna
the vessel is for the same reason given a destination different from that fixed in the
agreement with the crew, the latter shall be indemnified on account of the
rescission of the contract, according to the cases follows:
1. If the revocation of the voyage should be decided upon before the
departure of the vessel from the port, each sailor engaged shall be given
one month's salary, besides what may be due him, in accordance with his
contract, for the services rendered to the vessel up to the date of the
revocation.
2. If the agreement should have been for a fixed amount for the whole
voyage, that which may be due for said month and days shall be
determined in proportion to the approximate number of days the voyage
should have lasted, in the judgment of experts, in the manner established
in the law of Civil Procedure; and if the proposed voyage should be of
such short duration that it is calculated at approximately one month, the
indemnity shall be fixed for fifteen days, discounting in all cases the sums
advanced.
3. If the revocation should take place after the vessel has put to sea, the
seamen engaged for a fixed amount for the voyage shall receive in full the
salary which may have been offered them as if the voyage had terminated;
and those engaged by the month shall receive the amount corresponding
to the time they might have been on board and to the time they may
require to arrive at the port of destination, the captain being obliged,
furthermore, to pay the seamen in both cases, the passage to the said port
or to the port of sailing of the vessel, as may be convenient for them.
4. If the ship agent or the charterers of the vessel should give it a destination
different from that fixed in the agreement, and the members of the crew
should not agree thereto, they shall be given by way of indemnity half the
amount fixed in case No. 1, besides what may be owed them for the part
of the monthly wages corresponding to the days which have elapsed from
the date of their agreements.
If they accept the change, and the voyage, on account of the greater
distance or of other reasons, should give rise to an increase of wages, the latter
shall be adjusted privately or through amicable arbitrators in case of disagreement.
Even though the voyage should be shortened to a nearer point, this shall not give
rise to a reduction in the wages agreed upon.
If the revocation or change of the voyage should come from the shippers
or charterers, the agent shall have a right to demand of them the indemnity which
may be justly due (Article 638).
 Page 45
HOWEVER: If the revocation of the voyage should arise from a just cause
independent of the will of the ship agent and charterers, and the vessel should not
have left the port, the members of the crew shall have no other right than to collect
the wages earned up to the day on which the revocation took place (Article 639).
WHAT ARE JUST CAUSES FOR THE REVOCATION OF THE VOYAGE?
The following shall be just causes for the revocation of the voyage.
1. A declaration of war or interdiction of commerce with the power to whose
territory the vessel was bound.
2. The blockade of the port of its destination, or the breaking out of an
epidemic after the agreement.
3. The prohibition to receive in said port the goods which make up the cargo
of the vessel.
4. The detention or embargo of the same by order of the government, or for
any other reason independent of the will of the ship agent.
5. The inability of the vessel to navigate (Article 640).
WHAT ARE: (A) INTERDICTION OF COMMERCE; (B) BLOCKADE; AND (C)
EMBARGO?
(a) Interdiction of commerce between two countries is a government
prohibition of commercial intercourse, intended to bring about an
entire cessation for the time being of all trade whatever.
(b) Blockade is a circumvallation round a place by which all foreign
connection and correspondence is, as far as human power can effect
it, to be cut off. It is the actual investment of a port or place by a
hostile force fully competent, under ordinary circumstances, to cut off
all communication therewith, so arranged or disposed as to be able
to apply its force to every point of practicable access or approach to
the port or place so invested.
(c) Embargo is a proclamation or order of state, usually issued in time of
war or threatened hostilities, prohibiting the departure of ships or
goods from some or all the ports of such state until further order.
IN CASE THE VOYAGE IS REVOKED FOR A JUST CAUSE, DO SAILORS HAVE A
RIGHT TO BE PAID, IF SO, HOW MUCH?
If, after a voyage has been begun, any of the first three causes mentioned
in the foregoing article should occur, the sailors shall be paid at the port which the
captain may deem advisable to make for the benefit of the vessel and cargo,
according to the time they may have served thereon; but if the vessel is to continue
By: Kathryn Pineda – Dela Serna
its voyage, the captain and the crew may mutually demand the enforcement of the
contract.
In case of the occurrence of the fourth cause, the crew shall continue to be
paid half wages, if the agreement is by month; but if the detention should exceed
three months, the contract shall be rescinded and the crew shall be paid what they
should have earned according to the contract if the voyage had been concluded.
And if the agreement should be for a fixed sum for the voyage, the contract must
be complied within the terms agreed upon.
In the fifth case, the crew shall have no other right than to collect the
wages earned; but if the disability of the vessel should have been caused by the
negligence or lack of skill of the captain, engineer, or sailing mate, they shall
indemnify the crew for the damages suffered, always without prejudice to the
criminal liability which may be proper (Article 641).
WHEN ARE SAILORS NOT ENTITLED TO BE PAID WHENEVER THE VOYAGE IS
REVOKED?
If the crew have been engaged on shares, they shall not be entitled, by
reason of the revocation, delay, or greater extension of the voyage, to anything but
the proportionate part of the indemnity which way be paid into the common funds
of the vessel by the persons liable for said occurrences (Article 642).
In the foregoing case, a form of partnership is formed between the ship
owner and the sailors for which both of them should share in the profits and losses,
and therefore, in case the voyage is revoked or delayed, the sailors are not entitled
to anything other than a proportionate part of the indemnity which may be paid to
the common fund of the vessel.
WHAT IS THE EFFECT OF TOTAL OR PARTIAL LOSS OF THE VESSEL ON THE
RIGHT OF THE CREW TO WAGES, AND SHIP AGENT FOR ADVANCES MADE?
If the vessel and her cargo should be totally lost, by reason of capture or
wreck, all rights shall be extinguished, both as regards the crew to demand any
wages whatsoever, and as regards the ship agent to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should be saved, the
crew engaged on wages, including the captain, shall retain their rights on the
salvage, so far as they go, on the remainder of the vessel as well as on the
amount of the freightage of the cargo saved; but sailors who are engaged on
shares shall not have any right whatsoever on the salvage of the hull, but only on
the portion of the freightage saved. [If they should have worked to recover the
 Page 46
remainder of the shipwrecked vessel they shall be given from the amount of the
salvage an award in proportion of the efforts made and to the risks, encountered in
order to accomplish the salvage.] (Article 643) (Note: last sentence which is
bracketed has been repealed by the Salvage Law, Section 8, Act No. 2616).
The aforesaid provision, however, has no effect on the right of the crew
under the Employees’ Compensation provision of the Labor Code of the
Philippines (P.D. 412, as amended). Thus, the widows of the captain, machinist
and patron of the a vessel who perished as a result of the sinking of the vessel
where they were working, are entitled to compensation under the said law (Enciso
vs. Dy-Liaco, 57 Phil. 446; Abueg, et al. vs. San Diego, 44 O.G. 80).
IS A SAILOR WHO FALLS SICK DURING THE VOYAGE ENTITLED TO WAGES AND
COSTS OF MEDICAL ATTENTION?
A sailor who falls sick shall not lose his right to wages during the voyage,
unless the sickness is the result of his own fault. At any rate, the costs of the
attendance and cure shall be defrayed from the common funds, in the form of a
loan.
If the sickness should come from an injury received in the service or
defense of the vessel, the seaman shall be attended and cured at the expense of
the common funds deducting, before anything else, from the proceeds of the
freightage the cost of the attendance and cure (Article 644).
The sailor shall be entitled to the benefits provided for by the Labor Code
of the Philippines (Abueg, et al. vs. San Diego, supra).
WHAT IS THE EFFECT OF THE DEATH OF THE SAILOR DURING THE VOYAGE ON
HIS RIGHT T WAGES NOT YET RECEIVED?
If a sailor should die during the voyage, his heirs will be given the wages
earned and not received according to his contract and the cause of his death,
namely —
1. If he died a natural death and was engaged on wages, that which may have
been earned up to the date of his death shall be paid.
2. If the contract was for a fixed sum for the whole voyage, half the amount
earned shall be paid if the seamen died on the voyage out, and the whole
amount if he died on the return voyage.
3. And if the contract was on shares and death occurred after the voyage was
begun, the heirs shall be paid the entire portion due the seaman; but if the
By: Kathryn Pineda – Dela Serna
latter died before the departure of the vessel from the port, the heirs shall not
be entitled to claim anything.
4. If death occurred in the defense of the vessel, the seaman shall be considered
as living, and his heirs shall be paid, at the end of the voyage, the full amount
of wages or the integral part of the profits which may be due him as to others
of his class.
In the same manner, the sailor captured while defending the vessel shall be
considered present so as to enjoy the same benefits as the rest; but should he
have been captured on account of carelessness or other accident not related to
the service, he shall only receive the wages due up to the day of his capture
(Article 645).
UPON WHAT ASSETS DO THE CREW HAVE A LIEN FOR UNPAID WAGES?
The vessel with her engines, rigging, equipment, and freightage shall be
liable for the wages earned by the crew engaged per month or for the trip, the
liquidation and payment to take place between one voyage and the other.
After a new voyage has been undertaken, credits of such kind pertaining
to the preceding voyage shall lose their right of preference (Article 646).
WHICH IS MORE SUPERIOR LIEN, THAT IN FAVOR OF THE CREW FOR UNPAID
WAGES OR THAT CREATED IN FAVOR OF A MORTGAGEE?
The lien created in favor of the crew for their wages take preferences over
a lien created by giving the ship as security for money borrowed. The crew
therefore, has a prior lien upon a ship over the lien created by a chattel mortgage
(McMicking vs. El Blanco Español-Filipino, 13 Phil. 429), and the purchaser of the
vessel would be obliged to respect the lien created by unpaid wages of the crew
(Philippine Shipping Co. vs. Garcia, 6 Phil. 281).
WHEN ARE OFFICERS AND CREW FREE FROM ALL OBLIGATIONS THEY
CONTRACTED?
The officers and the crew of the vessel shall be free from all obligations if
they deem it proper, in the following cases:
1. If, before beginning the voyage, the captain attempts to change it, or a
naval war with the power to which the vessel was destined occurs.
2. If a disease should break out and be officially declared an epidemic in the
port of destination.
3. If the vessel should change owner or captain (Article 647).
 Page 47
4. SUPERCARGOES, ARTICLES 649-651
WHO IS A SUPERCARGO?
Supercargo is a person especially employed by the owner of a cargo to
take charge of and sell to the best advantage merchandise which has been
shipped, and to purchase returning cargoes and to receive freight, as he may be
authorized.
WHAT ARE THE DUTIES OF A SUPERCARGO? WHAT IS THE EFFECT OF
DESIGNATION OF A SUPERCARGO ON THE POWERS AND RESPONSIBILITIES OF THE
CAPTAIN?
Supercargoes shall discharge on board the vessel the administrative
duties which the ship agent or the shippers may have assigned to them; they shall
keep an account and record of their transactions in a book which shall have the
same conditions and requisites as required for the accounting book of the captain,
and they shall respect the latter in his capacity as chief of the vessel. cdta
WHAT ARE CONSIDERED AS AVERAGES?
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 (Article 806).
The petty and ordinary expenses incident to navigation, such as those of
pilotage of coasts and ports, those of lighterage and towage, anchorage,
inspection, health, quarantine, lazaretto, and other so-called port expenses, costs
of barges and unloading until the merchandise is placed on the wharf, and any
other usual expenses of navigation, shall be considered ordinary expenses to be
defrayed by the shipowner, unless there is an express agreement to the contrary
(Article 807).

The powers and responsibilities of the captain shall cease, when there is a WHAT ARE THE KINDS OF AVERAGES?
supercargo, with regard to that part of the administration legitimately conferred Averages shall be:
upon the latter, but shall continue in force for all acts which are inseparable from
his authority and office (Article 649). 1. Simple or particular.
2. General or gross (Article 808).
WHAT TRANSACTIONS ARE NOT ALLOWED TO BE ENTERED INTO BY
SUPERCARGOES? (1) SIMPLE OR PARTICULAR

Supercargoes may not, without special authorization or agreement, make
any transaction for their own account during the voyage, with the exception of the
ventures which, in accordance with the custom of the port of destination, they are
permitted to do.
Neither shall they be permitted to invest in the return trip more than the
profits from the ventures, unless there is an express authorization from the
principals (Article 651).
(A) DEFINITIONS - ARTICLE 809
WHAT ARE SIMPLE OR PARTICULAR AVERAGES?
Simple of particular averages shall include all the expenses and damages
caused to vessel or to her cargo which have not inured to the common benefit and
profit of all persons interested in the vessel and her cargo (Article 808). If a
damage is not general average, the same can be considered a particular average.

D. ACCIDENTS AND DAMAGES IN MARITIME COMMERCE 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
1. AVERAGES inured to the common benefit and profit of all the persons interested in the vessel
and her cargo, and especially the following:
(a) Nature and Kinds - Articles 806 to 808

By: Kathryn Pineda – Dela Serna

 Page 48
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 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 (Article 809).
(B) EFFECTS - ARTICLE 810
WHO BEARS SIMPLE AND PARTICULAR AVERAGES?
Since simple or particular averages do mot inure to the common benefit,
the owner of the goods that suffered the damage bears the loss. 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.” This
rule on simple or particular average is consistent with the maxim res perit domino.
However, under Article 732 of the Code of Commerce, if the vessel or
goods are hypothecated by a loan on bottomry or respondentia, the lender shall
also bear the loss in proportion to his interest.
By: Kathryn Pineda – Dela Serna
(2) GROSS GENERAL
(A) DEFINITIONS - ARTICLES 811, 817, 818
WHAT ARE GENERAL OR GROSS AVERAGES?
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 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 saying 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 saying 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 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.
 Page 49
( B) ESSENTIAL REQUISITES - ARTICLES 813, 814,
860
WHAT ARE THE REQUISITES OF GENERAL AVERAGE?
In A. Magsaysay, Inc. vs. Agan, No. L-6393, January 31, 1955, the
Supreme Court adopted the requisites of general averages stated by Senator
Tolentino in his commentaries on the Code of Commerce:
1. There must be a common danger;
2. That for the common safety part of the vessel or of the cargo or both is
sacrificed deliberately;
3. That from the expenses or damage caused follows the successful
saving of the vessel and cargo; and
4. That the expenses or damages should have been incurred or inflicted
after taking proper legal steps and authority.
FIRST REQUISITE: COMMON DANGER
The requirement that there must be common means:
1. That both the ship and the cargo, after it has been loaded, are subject to
the same danger, whether during the voyage, or in the port of loading or
unloading;
2. That the danger arises from the accidents from the sea, dispositions of the
authority, or faults of men;
3. That the circumstances producing the peril should be ascertained and
imminent or may rationally be said to be certain and imminent (A.
Magsaysay, Inc. vs. Agan, supra).
SECOND REQUISITE: DELIBERATE SACRIFICE
There must be voluntary sacrifice of a part for the benefit of the whole in
order to justify general average. For example, it may involve a voluntary jettison or
casting away of some portion of the associated interests for the purpose of
avoiding a common peril from the whole to a particular portion of those interests
(Compagnie de Commerce vs. Hamburg Amerika, supra). It cannot involve a
damage which resulted beyond the contract of the captain and crew without any
intention on their part. As a matter of fact, the Code of Commerce prescribes a
procedure in deciding whether a sacrifice should be made (See Article 813).
By: Kathryn Pineda – Dela Serna
Normally, the sacrifice is made though the jettison of the cargo or part of
the ship is thrown overboard during the voyage. However, there can also be
general averages even if the sacrifice was not made during the voyage in at least
two cases:
1. Where the sinking of a vessel is necessary to extinguish a fire in a port,
roadstead, creek or bay; and
2. Where cargo is transferred to lighten the ship on account of a storm to
facilitate entry into the port. These cases are covered by Articles 816, 817
and 818.
ARTICLE 816. 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. If in lightening 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. If, as a necessary measure to extinguish a fire in a 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.
It should be noted that the loss can no longer be considered a general
average if the thing was inevitably lost. Consistently, Rule IV of the York-Antwerp
Rules provides that “loss or damage sustained by cutting away wreck or parts of
the ship which have been previously carried away or are effectively lost by
accident shall not be made good as general average.
THIRD REQUISITE: SACRIFICE MUST BE SUCCESSFUL
NO general contribution can be demanded if the vessel and other cargo
that are sought to be saved were in fact not saved. Consistently, Article 860 of the
Code of Commerce provides:
 Page 50
ARTICLE 860. If, notwithstanding the jettison of merchandise, breakage
of masts, ropes, and equipment, the vessel shall be lost running the same risk, no
contribution whatsoever by jettison 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.
For example, goods belonging to Mr. A were sacrificed to save the ship
from sinking because of a typhoon. There will be no general average contribution if
the ship still sank because of the same typhoon. Hence, the sacrifice was not
successful in saving the ship.
However, if the ship was saved from the typhoon, there will be liability for
general average contribution even if the vessel will be subsequently lost for some
other reason during the voyage. Thus, Article 861 of the Code of Commerce
provides:
ARTICLE 861. 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.
FOURTH REQUISITE: COMPLIANCE WITH LEGAL STEPS
The expenses or damages should have been incurred or inflicted after
taking proper legal steps and authority under Articles 813 to 815 of the Code of
Commerce which provide:
ARTICLE 813. 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 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.
By: Kathryn Pineda – Dela Serna
ARTICLE 814. The resolution adopted to cause the damages which
constitute general average must necessarily be entered in the log book, stating the
motives and reasons for the dissent, should there be any, and the irresistible and
urgent causes which impelled the captain if he acted of his own accord.
In the first case the minutes shall be signed by all the persons present who
could do so before taking action, if possible; and if not, at the first opportunity. In
the second case, it shall be signed by the captain and by the officers of the vessel.
In the minutes, and after the resolution, shall be stated in detail all the
goods jettisoned, and mention shall be made of the injuries caused to those kept
on board. The captain shall be obliged to deliver one copy of these minutes to the
maritime judicial authority of the first port he may make, within twenty-four hours
after his arrival, and to ratify it immediately under oath.
ARTICLE 815. The captain shall direct the jettison, and shall order the
goods cast overboard in the following order:
1. Those which are on deck, beginning with those which embarrass the
maneuver or damage of the vessel, preferring, if possible, the heaviest
ones with the least utility and value.
2. Those which are below the upper deck, always beginning with those of the
greatest weight and smallest value, to the amount and number absolutely
indispensable.
(C) EFFECTS - ARTICLE 812
WHO BEARS THE GROSS OR GENERAL AVERAGE?
Gross or general average shall be borne by those who benefited from the
sacrifice. These include the ship owner and the owners of the cargoes that were
saved. Contribution may also be imposed on the insurers of the vessel or cargoes
that were saved as well as lenders on bottomry or respondetia (Articles 732 and
859).
ARTICLE 812. 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.
(D) JETTISON - ARTICLES 815, 816
HOW SHALL JETTISON BE MADE?
 Page 51
ARTICLE 815. The captain shall direct the jettison, and shall order the
goods cast overboard in the following order:
1. Those which are on deck, beginning with those which embarrass the
maneuver or damage of the vessel, preferring, if possible, the heaviest
ones with the least utility and value.
2. Those which are below the upper deck, always beginning with those of the
greatest weight and smallest value, to the amount and number absolutely
indispensable.
ARTICLE 816. 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.
(E) JASON CLAUSES (SEE YORK-ANTWERP RULES,
RULE D)
Rights to contribution in general average shall not be affected, though the
event which gave rise to the sacrifice or expenditure may have been due to the
fault of one of the parties to the adventure, but this shall not prejudice any
remedies which may be open against that party for such fault.
Although the Code of Commerce provisions on averages are still in force,
the parties may, by stipulation in the charter party or any written agreement, agree
that the York-Antwerp Rules shall be applied. In addition, the York-Antwerp Rules
may also be used to solve controversies where no provision in the Code of
Commerce is in point because the said rules embody the custom of maritime
states. Jason clause is a standard provision in maritime commerce. It provides for
uniform rules on adjustment of averages in maritime accidents to address the
varied systems of determining the same.
( B) PROOF AND LIQUIDATION OF AVERAGES
(1) MODES - ARTICLES 846, 847, 848
ARTICLE 846. Those interested in the proof and liquidation of averages
may mutually agree and bind themselves at any time with regard to the liability,
liquidation, and payment thereof. cdt
In the absence of agreements, the following rules shall be observed:
By: Kathryn Pineda – Dela Serna
1. The proof of the average shall take place in the port where the repairs are
made, should any be necessary, or in the port of unloading.
2. The liquidation shall be made in the port of unloading, if it is a Philippine
port.
3. If the average occurred outside of the jurisdictional waters of the
Philippines, or the cargo has been sold in a foreign port by reason of an arrival
under stress, the liquidation shall be made in the port of arrival.
4. If the average has occurred near the port of destination, so that said port
can be made, the proceedings mentioned in Rules 1 and 2 shall be held there.
ARTICLE 847. In the case where the liquidation of the averages is made
privately by virtue of agreement, as well as when a judicial authority intervened at
the request of any of the parties interested who do not agree thereto, all of them
shall be cited, and heard, should they not have renounced this right.
Should they not be present or should the have no legal representative, the
liquidation shall be made by the Consul in a foreign port, and where there is none,
by the competent judge or court, according to the laws of the country and for the
account of the proper party.
When the representative is a person well known in the place where the
liquidation is made, his intervention shall be admitted and shall produce legal
effects, even though he be authorized only by a letter of the ship agent, the
shipper, or the insurer.
ARTICLE 848. Claims for averages shall not be admitted if they do not
exceed 5 per cent of the interest which the claimant may have in the vessel or in
the cargo if it be gross average and 1 per cent of the goods damaged if particular
average, deducting in both cases the expenses of appraisal, unless there is an
agreement to the country.
(2) APPRAISAL OF GENERAL AVERAGE - ARTICLES
855; 857
ARTICLE 855. The merchandise loaded on the upper deck of the vessel
shall contribute to the gross average should they be saved; but there shall be no
right to indemnity if they should be lost by reason of having been jettisoned for
common safety, except when the marine ordinances allow their shipment in this
manner in coastwise navigation.
 Page 52
The same shall take place with that which is on board and is not included
in the bills of lading or inventories, according to the cases.
In any case the shipowner and the captain shall be liable to the shippers
for the damages from the jettison, if the storage on the upper deck was made
without the consent of the latter.
ARTICLE 857. After the appraisement of the goods saved and of those
lost which constitute the gross average, has been concluded by the experts, the
repairs, if any, made on the vessel, and in this case, the accounts of the same
approved by the persons interested or by the judge or court, the entire record shall
be turn over to the liquidator appointed, in order that he may proceed with the
distribution of the average.
(3) LIQUIDATION OF GENERAL AVERAGE - ARTICLES
858, 865 TO 869
ARTICLE 858. In order to effect the liquidation, the liquidator shall
examine the protest of the captain, comparing it, if necessary, with the log book,
and all the contracts which may have been made among the persons interested in
the average, the appraisements, expert examinations, and accounts of repairs
made. If, as a result of this examination, he should find any defect in the procedure
which might injure the rights of the person interested or affect the liability of the
captain, he shall call attention thereof in order that it may be corrected, if possible,
and otherwise he shall include it in the exordial of the liquidation.
Immediately thereafter he shall proceed with the distribution of the amount
of the average, for which purpose he shall fix:
1. The contributing capital, which he shall determine by the value of the
cargo, in accordance with the rules established in Article 854.
2. That of the vessel in her actual condition, according to the statement of
experts.
3. The 50 per cent of the amount of the freightage, deducting the remaining
50 per cent for wages and maintenance of the crew.
After the amount of the gross average has been determined in accordance
with the provisions of this Code, it shall be distributed pro rata among the goods
which are to cover the same. cdasia
By: Kathryn Pineda – Dela Serna
ARTICLE 865. The distribution of the gross average shall not be final until
it has been agreed to, or in the absence thereof, until it has been approved by the
judge or court, after an examination of the liquidation and a hearing of the persons
interested who may be present or of their representatives.
ARTICLE 866. After the liquidation has been approved, it shall be the
duty of the captain to collect the amount of the contributions, and he shall be liable
to the owners of the goods averaged for the damages they may suffer through his
delay or negligence.
ARTICLE 867. If the person contributing should not pay the amount of the
contribution at the end of the third day after having been required to do so, the
goods saved shall be proceeded against, in the request of the captain, until
payment has been made from their proceeds.
ARTICLE 868. If the person interested in receiving the goods saved
should not give security sufficient to answer for the amount corresponding to the
gross average, the captain may defer the delivery thereof until payment has been
made. aisadc
(4) LIQUIDATION OF PARTICULAR AVERAGE -
ARTICLE 869
ARTICLE 869. The experts whom the court or the person interested may
appoint, as the case may be, shall proceed with the examination and appraisement
of the averages in the manner prescribed in Articles 853 and 854, Rules 2 to 7,
insofar as they are applicable.
2. ARRIVALS UNDER STRESS
WHAT IS ARRIVAL UNDER STRESS?
A definition of “arrival under stress” can be derived from Article 819 of the
Code of Commerce. Under the said provision, “arrival under stress” is the arrival of
a vessel at the nearest and most convenient port which was decided upon after
determining that there is well-founded fear of seizure, privateers, or pirates or by
reason of any accident of the sea disabling it to navigate, or by lack of provisions.
Lack of provision should not be due from the failure to take necessary
provisions according to usage and customs.
WHY IS IT IMPORTANT TO DETERMINE WHETHER ARRIVAL IS UNDER STRESS OR
NOT?
 Page 53
Because as a general rule, the captain and the ship owner are made liable
for deviation from route during the voyage. Arrival under stress is an exception.
( A) CAUSES - ARTICLES 819 AND 820
WHAT ARE THE CAUSES FOR ARRIVAL UNDER STRESS?
ARTICLE 819. 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 of
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.
ARTICLE 820. 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.
( B) FORMALITIES - ARTICLES 819, 822
WHAT FORMALITIES MUST BE OBSERVED IN ARRIVAL UNDER STRESS?
By: Kathryn Pineda – Dela Serna
ARTICLE 819. 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 of
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.
ARTICLE 822. If in order to make repairs to the vessel or because there
is danger that the cargo may suffer damage, it should be necessary to unload, the
captain must request 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 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.
(C) EXPENSE - ARTICLES 821, 822
ARTICLE 821. 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. If in order to make repairs to the vessel or because there
is danger that the cargo may suffer damage, it should be necessary to unload, the
captain must request authorization from the competent judge or court for the
 Page 54
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 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.
( D) RESPONSIBILITY OF CAPTAIN - ARTICLES 823 – 825
WHAT ARE RESPONSIBILITES OF THE CAPTAIN IN CASE OF ARRIVAL UNDER
STRESS?
ARTICLE 823. 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. 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 a 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.
ARTICLE 825. 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
provisions contained in Article 819, shall precede the departure.
By: Kathryn Pineda – Dela Serna
3. COLLISIONS
DEFINE COLLISION.
Collision is defined as an impact or sudden contact of a moving body with
an obstruction in its line of motion, whether both bodies are in motion or one
stationary and the other, no matter which, in motion.
As applied to maritime commerce, collision is therefore an impact or
sudden contact of a vessel with another whether both are in motion or stationary.
Strictly speaking, collision refers to the contact of two moving vessels. If
one vessel is moving while the other is stationary, the same is more appropriately
called “allision”. Nevertheless, for purposes of applying the provisions of the Code
of Commerce, collision includes collision per se and allision.
WHAT ARE THE 3 ZONES IN COLLISION?
In collision of vessels, there exists 3 DIVISION OF TIME or ZONES:
(A) FIRST DIVISION – covers all the time up to the moment when the risk of collision
may be said to have begun. Within this time zone, no rule is applicable
because none is necessary. Each vessel is free to direct its course as it deems
best without reference to the movement of the other vessel.
(B) SECOND DIVISION – covers the time between the moment when the risk of
collision begins and the moment when it has become a practical certainty. The
burden is on the vessel required to keep away and avoid the danger
(C) THIRD DIVISION – covers the time between the moment of actual contact. This is
the period where error in extremis may occur, and the rule is that the vessel
which has forced the privileged vessel into danger is responsible even if sthe
privileged vessel committed an error within that zone (A. Urrutia & Co. vs.
Baco River Plantation, Co., No. 7675, March 25, 1913).
WHAT IS ERROR IN EXTREMIS?
Where a navigator, suddenly realizing that a collision is imminent by no
fault of his own, in confusion and excitement of the moment does something which
contributes to the collision or omits to do something by which the collision might be
avoided, such act or omission is ordinarily considered in extremis and the ordinary
rules of strict accountability do not apply.
Thus, when it was during the time when the said vessel was passing
through the third zone that it changed its course to port in order to avoid, if
 Page 55
possible, the collision, the act may be said to have been done in extremis, and
even if wrong, the sailing vessel is not responsible for the result.
(A) CLASSES AND EFFECTS
WHAT ARE THE CLASSES OF COLLISION?
a. Fortuitous
b. Culpable
c. Inscrutable
A) FORTUITOUS - ARTICLES 830, 832
WHO BEARS THE DAMAGE IN CASE THE COLLISION IS THROUGH A FORTUITOUS
EVENT?
If a vessel should collide with another, through fortuitous event or force
majeure, each vessel and its cargo shall bear its own damages (Article 830).
WHAT KIND OF AVERAGE IS A DAMAGE CAUSED BY A COLLISION DUE TO A
STORM OR FORCE MAJEURE?
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 occasioned shall be considered as particular average of the
vessel run into (Article 832).
B) CULPABLE - ARTICLES 826, 827 AND 831
IF A VESSEL SHOULD BE FORCED BY A THIRD VESSEL TO COLLIDE WITH
ANOTHER, WHAT IS THE RESPONSIBILITY OF THE THIRD VESSEL?
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 (Article 831).
WHO BEARS THE DAMAGE IN CASE A VESSEL SHOULD COLLIDE WITH
ANOTHER, THROUGH THE FAULT, NEGLIGENCE, OR WANT OF SKILL OF THE CAPTAIN,
SAILING MATE, OR ANY OTHER MEMBER OF THE COMPLEMENT?
If a vessel should collide with another, through or the fault, negligence, or
lack of skill of the captain, sailing mate, or any other member of the complement,
By: Kathryn Pineda – Dela Serna
the owner of the vessel at fault shall indemnify the losses and damages suffered,
after an expert appraisal (Article 826).
WHO SHALL BEAR THE DAMAGE IN CASE THE COLLISION IS IMPUTABLE TO BOTH
VESSELS?
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 (Article 827).
NAUTICAL RULES IN DETERMINING WHETHER COLLISION IS FORTUITOUS OR DUE
TO THE NEGLIGENCE OF THE CAPTAIN:
 When two vessels collide while entering the port, the latter vessel is
presumed to be at fault.
 Smaller vessels should give right of way to large vessels.
 Vessels leaving the port should leave the way clear for another which may
be entering the same port.
 There is a presumption against the vessel which sets sail in the night.
 In case of collision between sailing vessel and a steamship, the latter is
presumed to be at fault.
 Steam vessels towing have a right of way over steam vessels not towing
C) INSCRUTABLE FAULT - ARTICLE 828
WHAT IS THE DOCTRINE OF “INSCRUTABLE FAULT”?
The doctrine of “inscrutable fault” means that the court can see that a fault
has been committed, but is unable, from the conflict of testimony, or otherwise to
locate it. Hence, when it is impossible to determine to what direct and specific acts
the collision is attributable, it is a case of damage arising from a cause that is
inscrutable.
WHO SHALL BEAR THE DAMAGE IN CASE IT CANNOT BE DETERMINED WHICH IF
THE TWO VESSELS CAUSED THE COLLISION?
The provisions of the preceding article are applicable to the use in which it
cannot be determined which of the two vessels has caused the collision (Article
828). This is an extension of Article 827, which applies when (a) both vessels are
shown to be blameworthy; or (b) there is no proof as to which vessel was at fault.
 Page 56
There is solidary liability of the vessels, despite the fact that one vessel is more
negligent than the other.
IS THE DOCTRINE OF LAST CLEAR CHANCE APPLICABLE IN THIS CASE?
The doctrine of last clear chance is not applicable in this case where both
vessels are blameworthy.
SUMMARY:
1. FORTUITOUS:
 Vessels collide with each other through fortuitous event or force
majeure – each vessel and each cargo bears its own damage.
 A vessel which is properly anchored and moored may collide with
those nearby by reason of storm or force majeure – vessel run into
suffers its own damage.
2. CULPABLE:
 Collision due to fault, negligence or lack of skill of the captain,
sailing mate, or any other member of the complement – owner of
the vessel at fault is liable for the losses and damages.
 Collision due to the fault of both vessels – each vessel suffers its
own loss; and both owners shall be jointly and severally liable for
loss or damage to cargoes.
 Two vessels collide with each other without their fault but by
reason of the fault if a third vessel – owner of the third vessel is
liable.
3. INSCRUTABLE:
 Where it cannot be determined which of the two vessels is at fault
– each of the vessel suffers its own loss and both shall be
solidarily liable for losses and damages to their cargoes.
(b) PRESUMPTION OF LOSS BY COLLISION - ARTICLE 833
WHEN IS LOSS BY COLLISION PRESUMED?
A vessel which, upon being run into, sinks immediately, as well as that
which, having been obliged to make a port to repair the damages caused by the
By: Kathryn Pineda – Dela Serna
collision, is lost during the voyage or is obliged to be stranded in order to be saved,
shall be presumed as lost by reason of collision (Article 833).
(C) LIABILITIES
(1) SHIP OWNER OR AGENT - ARTICLES 837, 838
WHAT IS THE LIMIT OF THE LIABILITY OF THE SHIP OWNER IN CASES OF
COLLISION?
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 (Article 837).
WHAT CLAIM SHALL BE PREFERRED WHEN THE VALUE OF THE VESSEL AND
HER APPURTENANCES SHOULD NOT BE SUFFICIENT TO COVER ALL LIABILITIES?
When the value of the vessel and her appurtenances should not be
sufficient to cover all the liabilities, the indemnity due by reason of the death or
injury of persons shall have preference (Article 838).
(2) CAPTAIN, PILOT, OTHERS - ARTICLES 829, 834
WHAT IS THE REMEDY OF THE OWNER AGAINST THE PERSONS CAUSING THE
INJURY?
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 829).
NOTES:
 Liability for negligence in the absence of contract is governed by
Article 2176 of the Civil Code – the provision on quasi-delict.
However, the liabilities of ship owners and ship agents as well as
the captain or crew in collision cases is still governed by the
provisions of the Code of Commerce on Collision (National
Development Company vs. The Court of Appeals, et al., Nos. L-
49407 and L-49469, August 19, 1988, 164 SCRA 593, 603).
 Although the liability with respect to collision is not governed by
quasi-delict, liability in collision cases are still negligence based. In
other words, courts are still called upon to determine the
negligence of the persons involved in order to impose liability. The
 Page 57
person who caused the injury is both criminally and civilly liable
under Article 829 of the Code of Commerce.
 In the determination of negligence, the same test of a reasonable
man in the position of an expert that applies in quasi-delict should
also be applied although with due consideration to the expertise of
the persons involved including the carrier itself, the captain,
officers and crew of the vessel. Thus, it is still required to
determine if a reasonable man with the same expertise would
have done what the party in question did under the circumstances.
It is still relevant to determine if the collision is sufficiently
foreseeable such that a reasonable man with the same expertise
could have avoided the impact.
 In some respect, however, the rules that apply to quasi-delict
cannot be applied in collision case like:
1. The doctrine of the last clear chance
2. The rule on contributory negligence of the other vessel
(Article 827)
3. Proof that the plaintiff was negligent will bar recovery
from the defendant in collision cases even if the
plaintiff’s negligence can be classified as merely
contributory (Gorgonio De Sarasola vs. Yu Biao Sontua,
G.R. No. 22630, January 31, 1925).
WILL THE PRESENCE OF A PILOT AT THE TIME OF THE COLLISION EXEMPT THE
CAPTAIN FROM LIABILITY?
If the vessels colliding with each other should have pilots on board
discharging their duties at the time of the collision, their presence shall not exempt
the captains from the liabilities they incur, but the latter shall have the right to be
indemnified by the pilots, without prejudice to the criminal liability which the latter
may incur (Article 834).
(3) CONDITIONS; PROTESTS - ARTICLES 835, 836, 839
WHAT FORMAL REQUIREMENT MUST BE FULFILLED TO BE ABLE TO RECOVER
DAMAGES CAUSED BY COLLISION? WHAT IS THE EFFECT OF FAILURE TO COMPLY
THEREWITH?
The action for the recovery of losses and damages arising from collisions
cannot be admitted if a protest or declaration is not presented within twenty-four
hours before the competent authority of the point where the collision took place, or
that of the first port of arrival of the vessel, if in Philippine territory, and to the
By: Kathryn Pineda – Dela Serna
consul of the Republic of the Philippines if it occurred in a foreign country (Article
835).
With respect to damages caused to persons or to the cargo, the absence
of protest may not prejudice the persons interested who were not on board or were
not in a condition to make known their wishes (Article 836).
NOTES:
 REASON FOR REQUIRING PROTEST: to prevent fictitious collisions or
improper indemnities.
 VESSELS TO WHICH RULES ON COLLISION APPLY: Collisions of sea-
going vessels; merchant vessels or merchant ships; those run by
masters having a special training, with elaborate apparatus of
crew and equipment.
 OFFICERS TO WHOM PROTEST MUST BE MADE: Competent authority
where the collision took place; or competent authority at first port
of arrival, if in Philippine territory, and to consul, if in a foreign port.
WHAT ARE THE INSTANCES WHERE PROTEST IS REQUIRED?
1. Vessel making arrival under stress (Article 612)
2. Vessel is shipwrecked (Articles 612, 624 and 843)
3. Vessel which has gone through a hurricane or when the captain believes
that the cargo has suffered damages or averages (Article 624)
4. Maritime collisions (Article 835)
WHAT ARE THE INSTANCES WHEN PROTEST AFTER A COLLSION IS NOT
NECESSARY?
1. In case the basis of the action is quasi-delict (Lopez vs. Duruelo, 52 Phil.
229).
2. In case of collision of a motor boat engaged in conveying passengers
between the ship and the shore, and a larger vessel, since the provision
on collision is intended to cover collisions of sea-going vessels (Lopez vs.
Duruelo, supra).
3. In case the person interested in the damage was not on board or was not
in a condition to make known his wishes (Article 836).
WHAT MUST THE PHILIPPINE CONSUL DO IN CASE A PHILIPPINE VESSEL
SHOULD HAVE A COLLISION IN FOREIGN WATERS OR OPEN SEAS?
 Page 58
If the collision should take place between Philippine vessels in foreign
waters, or if having taken place in the open seas, and the vessels should make a
foreign port, the Consul of the Republic of the Philippines in said port shall hold a
summary investigation of the accident, forwarding the proceedings to the Secretary
of the Department of Foreign Affairs for continuation and conclusion (Article 839).
4. SHIPWRECKS, ARTICLES 840 TO 843
DEFINE SHIPWRECK.
Shipwreck has been defined as the “demolition or shattering of a vessel
caused by her driving ashore or on rocks and shoals in the midseas, or by the
violence of winds and waves in tempests”.
WHO SHALL BEAR THE DAMAGE SUFFERED BY THE VESSEL AND HER CARGO
DUE TO SHIPWRECK OR STRANDING?
The losses and deteriorations suffered 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 840).
WHAT IS THE LIABILITY OF THE SHIP CAPTAIN IN CASE THE WRECK OR
STRANDING OF THE VESSEL IS CAUSED BY MALICE, NEGLIGENCE OR LACK OF SKILL OF
THE CAPTIAN?
The general rule is that the damage due to shipwreck or stranding shall be
borne by the respective owners (Article 840), except in case of malice, negligence
or lack of skill of the captain, or because the vessel put to sea was insufficiently
repaired and equipped, in which case the captain shall be liable for the damage
caused to the vessel or the cargo. Thus, Article 841 provides 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 841).”
WHO SHALL BEAR THE EXPENSES OF THE SALVAGE?
By: Kathryn Pineda – Dela Serna
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 842).
IN CASE THE SHIPWRECK OCCURS WHILE THE VESSEL IS IN A CONVOY, HOW
SHOULD STHE SAVED CARGO BE DISTRIBUTED?
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 the losses and damages resulting therefrom,
ratifying the protest within twenty-four 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 843).
( A) SALVAGE LAW (ACT NO. 2616)
WHAT IS SALVAGE AND ITS CONCEPT?
In general, salvage may be defined as a service which one person renders
to the owner of a ship or goods, by his own labor, preserving the goods or the ship
which the owner or those entrusted with the care of them have either abandoned in
distress at sea, or are unable to protect and secure (Erlanger & Galinger vs.
Swedish East Asiatic Co., Ltd., 34, Phil. 178 [1916]).
Salvage is founded on the equity of remunerating private and individual
services performed in saving, in whole or in part, a ship or its cargo from
impending peril, or recovering them after actual loss. It is a compensation for
actual services rendered to the property charged with it, and is allowed for
meritorious conduct of the salvor, and in consideration of a benefit conferred upon
the person whose property he has saved. A claim of salvage rests on the principle
that, unless the property is in fact saved by those who claim the compensation, it
cannot be allowed, however benevolent their intention and however heroic their
conduct (ibid).
 Page 59
WHAT IS A DERELICT?
It is a condition of a ship or her cargo which is abandoned and deserted at
sea by those who are in charged of it, without any hope of recovering it, or without
any intention of returning it. If those in charge of the property left it with the
intention of finally leaving it, it is derelict and the change of their intention and an
attempt to return to it will not change its nature.
WHAT ARE THE RIGHTS OF A FINDER OF A DERILICT?
The finder who takes possession, with the intention of saving the ship,
gains a right of possession over the same, which he can maintain against the true
owners. The owner thus abandons temporarily his right of possession, which is
transferred to the finder who becomes bound to preserve the property with good
faith and bring it to a safe place for the owner’s use; in return, he acquires a right
to be paid for his services a reasonable and proper compensation out of the
property itself. He is not bound to part with the possession thereof until he is paid
or the property is taken into the possession of the law preparatory to the amount of
salvage being legally asserted.
WHAT ARE THE KINDS OF SALVAGE?
1. Voluntary, wherein the compensation is dependent upon success. This is
the most ancient class of pure salvage.
2. Rendered upon a contract for a per diem or per horam wage, payable at
all events. This is the most common upon the Great Lakes.
3. Under a contract for a compensation payable only in case of success
(C.S. Robinson, et al. vs. The Ship “Alta”, et al., No. 3488, August 10,
1907).
WHEN CAN THERE BE A VALID SALVAGE?
1. When in case of shipwreck, the vessel or its cargo shall be beyond the
control of the crew, or shall have been abandoned by them, and picked up
and conveyed to a safe place by other persons, the latter shall be entitled
to a reward for the salvage. Those who, not being included in the above
paragraph, assist in saving a vessel or its cargo from shipwreck, shall be
entitled to a like reward (Section 1).
2. If the captain of the vessel, or the person acting in his stead, is present, no
one shall take from the sea, or from the shores or coast merchandise or
effects proceeding from a shipwreck or proceed to the salvage of the
vessel, without the consent of such captain or person acting in his stead
(Section 2).
By: Kathryn Pineda – Dela Serna
NOTES ON TOWAGE:
 A vessel, though not abandoned, may be the subject of a salvage, if at the
time the services were rendered, there was a probable, threatening danger
to the vessel and its cargo. If the vessel towed is aided in escaping a
present or prospective danger, the services is one of salvage and the
towage is merely incidental.
 Distinction between a salvage and towage is of importance to the crew of
the salvaging ship because if the contract is one of towage, the crew does
not have any interest or right to the remuneration pursuant to the contract;
but if the service rendered is one of salvage, the crew can look to the
salvaged vessel for its share.
 The towing vessel cannot invoke cannot invoke equity in quasi-contract of
towage. There is an express provision of law (Article 2124 NCC) that is
applicable to the relationship of quasi-contract of towage, where the crew
is not entitled to compensation separate from that of the vessel.
WHAT ARE THE ELEMENTS OF SALVAGE?
1. There must be a marine peril;
2. The service is voluntarily rendered and is not required as an existing duty
or from a special contract; and
3. There must be success in whole or in part or that the service rendered
contributed to such success (Barrios vs. Go Thong & Company, No. L-
17192, March 30, 1963, 7 SCRA 535);
4. The vessel is shipwrecked beyond the control of the crew or shall have
been abandoned (Section 1, Savage Law).
WHAT IS THE OBLIGATION OF A PERSON WHO HAS SAVED OR PICKED UP A
VESSEL OR MERCHANDISE AT SEA IN THE ABSENCE OF THE CAPTAIN OF THE VESSEL,
OWNER OR REPRESENTATIVE?
He who shall save or pick up a vessel or merchandise at sea, in the
absence of the captain of the vessel, owner, or a representative of either of them,
they being unknown, shall convey and deliver such vessel or merchandise, as
soon as possible, to the Collector of Customs, if the port has a collector, and
otherwise to the provincial treasurer or municipal mayor (Section 3).
WHAT IS THE RIGHT AND OBLIGATION OF THE OWNER AFTER THE SALVAGE?
 Page 60
After the salvage is accomplished, the owner or his representative shall
have a right to the delivery of the vessel or things saved, provided that he pays, or
gives a bond to secure, the expenses and the proper reward.
The amount and sufficiency of the bond, in the absence of agreement,
shall be determined by the Collector of Customs or by the Judge of the Court of
First Instance of the province in which the things saved may be found (Section 4).
If, while the vessel or things saved are at the disposition of the authorities,
the owner or his representative shall claim them, such authorities shall order their
delivery to such owner or his representative, provided that there is no controversy
over their value, and a bond is given by the owner or his representative to secure
the payment of the expenses and the proper reward. Otherwise, the delivery shall
nor be made until the matter is decided by the Court of First Instance of the
province (Section 6).
NOTES:
 The salvor has an interest in the property, a lien, though this is not
considered a debt due by the owner to the salvor for the services rendered
upon the principle that the service creates a property in the thing being
saved. The salvor becomes, for all intents and purposes, a joint owner,
and if the property is lost, he must bear his share like the other joint
owners.
 Where the ship or its cargo is saved together, payment of compensation
should be charged against the ship and cargo in the proportion of their
respective value, as in the case of general average.
WHAT ARE THE DUTIES OF THE COLLECTOR OF CUSTOMS, PROVINCIAL
TREASURER OR MUNICIPAL MAYOR AFTER THE SALVAGE?
The Collector of Customs, provincial treasurer, or municipal mayor, to
whom a salvage is reported, shall order:
1. That the things saved be safeguard and inventoried.
2. The sale at public auction of the things saved which may be in danger of
immediate loss or of those whose conservation is evidently prejudicial to
the interests of the owner, when no objection is made to such sale.
3. The advertisement within the thirty days subsequent to the salvage, in one
of the local newspapers or in the nearest newspaper published, of all the
details of the disaster, with a statement of the mark and number of the
effects requesting all interested persons to make their claims.
By: Kathryn Pineda – Dela Serna
WHAT IS THE PROCEDURE TO BE FOLLOWED IF THERE IS NO CLAIM OVER THE
SLAVAGED GOODS?
No claim being presented in the three months subsequent to the
publication of the advertisement prescribed in sub-section (c) of Section five, the
things save shall be sold at public auction, and their proceeds, after deducting the
expenses and the proper reward shall be deposited in the insular treasury. If three
years shall pass without anyone claiming it, one-half of the deposit shall be
adjudged to him who saved the things, and the other half to the insular government
(Section 7).
WHO ARE THE PERSONS WHO HAVE NO RIGHT TO A REWARD FOR A SALVAGE?
The following shall have no right to a reward for salvage or assistance:
1. The crew of the vessel shipwrecked or which was is danger of shipwreck;
2. He who shall have commenced the salvage in spite of opposition of the
captain or his representative; and
3. He who shall have failed to comply with the provisions of Section three
(Section 8).
WHAT ARE THE RULES AS TO REWARD?
1. If, during the danger, an agreement is entered into concerning the amount
of the reward for salvage or assistance, its validity may be impugned
because it is excessive, and it may be required to be reduced to an
amount proportionate to the circumstances (Section 9).
2. In a case coming under the last preceding section, as well as in the
absence of an agreement, the reward for salvage or assistance shall be
fixed by the Court of First Instance of the province where the things
salvaged are found, taking into account principally the expenditures made
to recover or save the vessel or the cargo or both, the zeal demonstrated,
the time employed, the services rendered, the excessive express
occasioned the number of persons who aided, the danger to which they
and their vessels were exposed as well as that which menaced the things
recovered or salvaged, and the value of such things after deducting the
expenses (Section 10).
3. From the proceeds of the sale of the things saved shall be deducted, first,
the expenses of their custody, conservation, advertisement, and auction,
as well as whatever taxes or duties they should pay for their entrance;
then there shall be deducted the expenses of salvage; and from the net
amount remaining shall be taken the reward for the salvage or assistance
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which shall not exceed fifty per cent of such amount remaining (Section
11).
4. If in the salvage or in the rendering of assistance different persons shall
have intervened the reward shall be divided between them in proportion to
the services which each one may have rendered, and, in case of doubt, in
equal parts. Those who, in order to save persons, shall have been
exposed to the same dangers shall also have a right to participation in the
reward (Section 12).
5. If a vessel or its cargo shall have been assisted or saved, entirely or
partially, by another vessel, the reward for salvage or for assistance shall
be divided between the owner, the captain, and the remainder of the crew
of the latter vessel, so as to give the owner a half, the captain a fourth, and
all the remainder of the crew the other fourth of the reward, in proportion to
their respective salaries, in the absence of an agreement to the contrary.
The express of salvage, as well as the reward for salvage or assistance,
shall be a charge on the things salvaged on their value (Section 13).
E. SPECIAL CONTRACTS OF MARITIME COMMERCE
1. CHARTER PARTIES
A. DEFINITION
WHAT IS CHARTER PARTY AND ITS CONCEPT?
A charter party is defined as a contract whereby an entire ship, or some
principal part of the ship, is let by the owner thereof to a merchant or other person
for a specified time or use for the conveyance of goods, in consideration of the
payment of freight (Caltex (Phil.), Inc. vs. Sulpicio Lines, Inc., G.R. No. 131166,
September 30, 1999, 315 SCRA 709).
The term charter party is taken from carta partita which literally means
“divided document”. Carta partita refers to the ancient practice of writing out the
terms and conditions of a contract in duplicate on one piece of parchment and then
dividing it down the middle thus providing each party with a copy.
The charter contract is often referred to as a form of “mercantile lease” for it
involves a charterer, who is most often a merchant himself, who desires to lease a
ship or vessel owned by another for the transport of his goods for commercial
purposes. The charter may also involve the transportation of persons from one port
to another. The parties thereto are therefore the charterer, or charter party, and the
ship owner.
B.KINDS
By: Kathryn Pineda – Dela Serna
WHAT ARE THE KINDS OF CHARTER PARTIES?
1. THE BAREBOAT OR DEMISE CHARTER
A bareboat, also known as demise, is one where the shipowner delivers
the vessel to the charterer with his crew who will get off the vessel upon delivery
thereof to the charterer. Thereafter, it is the charterer who will provide his own crew
for the operation of the vessel during the period of the charter. Thus the charterer
becomes the owner “pro hac vice” of the vessel since he mans the vessel with his
own set of master and crew, effectively becoming the owner for the voyage or
service stipulated, subject however to any liability for damages arising from
negligence.
WHAT ARE THE EFFECTS OF A BAREBOAT CHARTER?
The effect is that not only the entire capacity of the ship is leased, but the
ship itself, and the possession is passed on to the charterer. The entire control and
management of the vessel is given up to the charterer.
The shipowner loses his lien on the cargo, but the lien is not destroyed, as
it continues in favor of the charterer when the goods are taken on freight since the
vessel is leased in its entirety to the charterer.
The bareboat charterer assumes, to a large extent, the customary rights
and liabilities of the ship owner in relation to third persons who may have dealt with
him or with the vessel. In this latter instance, the master of the vessel is the agent
of the charterer or owner pro hac vice, and not the general owner of the vessel
who is liable for the expenses of the voyage including the wage of seamen.
WHAT IS “OWNER PRO HAC VICE” OF THE VESSEL? IN WHAT KIND OF CHARTER
PARTY DOES THIS OBTAIN?
It is a demise charterer to whom the owner of the vessel has completely
and exclusively relinquished possession, command, and navigation of the vessel.
In this kind of charter, the charterer mans and equips the vessel and
assumes all responsibility for its navigation, management and operation. He thus
acts as the owner of the vessel in all important aspects during the duration of the
charter.
2. CONTRACT OF AFFEIGHTMENT which is divided into:
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1. TIME CHARTER The charter party shall contain, besides the conditions freely stipulated,
2. VOYAGE CHARTER the following circumstances:

In time charter, the vessel is leased to the charterer for a fixed period of 1. The kind, name, and tonnage of the vessel.
time stipulated therein, while a voyage charter involves only a single or particular 2. Its flag and port of registry.
voyage. In both the time and voyage charters, the charterer hires the vessel only, 3. The name, surname, and domicile of the captain.
either for a determinate period of time or for a single or consecutive voyage, with 4. The name, surname, and domicile of the ship agent, if the latter should
the ship owner providing fosr the provisions of the ship, wages of the master and make the charter party.
crew, and the expenses for the maintenance of the vessel. 5. The name, surname, and domicile of the charterer; and if he states that he
is acting by commission, that of the person for whose account he makes
Generally, the character of the common carrier is not affected by the the contract.
charter party if the same is a contract of affreightment. It is only when the charter 6. The port of loading and unloading.
includes both the vessel and the crew, as in a bareboat or demise that a common 7. The capacity, number of tons or the weight or measurement which they
carrier becomes private, at least insofar as th particular voyage covering the respectively bind themselves to load and to transport, or whether the
charter party is concerned. charter party is total.
8. The freightage to be paid, stating whether it is to be a fixed amount for the
IN CASE THE CHARTER PARTY IS CONSIDERED AS A PRIVATE CARRIAGE, MAY voyage or so much per month, or for the space to be occupied, or for the
THE PARTIES STIPULATE ON THE LIABILIOTY FOR THE DAMAGE TO THE CARGO SHIPPED? weight or measure of the goods of which the cargo consists, or in any
other manner whatsoever agreed upon.
In case a charter party is considered as a private carriage, the parties 9. The amount of primage to be paid to the captain.
may freely contract respecting liability for damage to goods and other matters. The 10. The days agreed upon for loading and unloading.
basic principle is that the “responsibility for cargo loss falls on the one who agreed 11. The lay days and extra lay days to be allowed and the demurrage to be
to perform the duty involved.” When so agreed therefore, the charterer could be paid for each of them (Article 652).
responsible for the care of the cargo during the voyage (Maritime Agencies and
Services, Inc. vs. Court of Appeals, 187 SCRA 346). WHAT IS PRIMAGE?

C.FORMS AND EFFECTS - ARTICLES 652 – 657 It is the customary compensation given to the captain of the vessel for the
use of his ropes. Traditionally, it was the captain who provided the ropes for the
WHAT IS THE IMPORTANCE OF A CONTRACT OF CHARTER PARTY? use of the vessel which he commanded.

The contract of a charter party is important because the rights and

obligation of the parties are determined principally by the provisions of the charter WHAT IS DEMURRAGE?
party.
It is an amount stipulated in the charter party to be paid by the charterer or
The application of the Civil Code provisions on common carrier depends shipper to the shipowner for any delay in the sailing of his ship.
on the kind of charter party
IS A CONTRACT OF TOWAGE A CHARTER PARTY, A CONTRACT FOR THE
WHAT ARE THE FORMAL REQUISITES OF A CHARTER PARTY? CARRIAGE OF GOODS, OR A CONTRACT FOR LEASE OF SERVICES?

A charter party must be drawn in duplicate and signed by the contracting It is a contract for the hire of services, because what is towed is not
parties, and when either does not know how or is not able to do so, by two shipped or placed on board the towing vessel. However, if the barge towed and its
witnesses at his request. tugboat belongs to the same owner and the barge is used continuously in the
By: Kathryn Pineda – Dela Serna
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business of transporting another’s goods, then the contract is either one for the
carriage of goods or a charter party depending on the agreement of the parties.
WHAT IS THE EFFECT OF RECEIPT OF A CARGO WITHOUT THE CHARTER PARTY
BEING SIGNED?
If the cargo should be received without the charter party having been
signed, the contract shall be understood as executed in accordance with what
appears in the bill of lading, the sole evidence of title with regard to the cargo for
determining the rights and obligations of the ship agent, of the captain, and of the
charterer (Article 653).
WHAT IS THE PROBATIVE VAUE OF A CHARTER PARTY WHETHER DULY
CERTIFIED BY A BROKER OR NOT?
The charter parties executed with the intervention of a broker, who certifies
to the authenticity of the signatures of the contracting parties because they were
signed in his presence, shall be full evidence in court; and if they should be
conflicting, that which accords with one which the broker must keep in his registry,
if kept in accordance with law, shall govern.
The contracts shall also be admitted as evidence, even though a broker
has not taken part therein, if the contracting parties acknowledge the signatures to
be the same as their own.
If no broker has intervened in the charter party and the signatures are not
acknowledged, doubts shall be decided by what is provided for in the bill of lading
and in the absence thereof, by the proofs submitted by the parties (Article 654).
WHAT IS THE EFFECT OF CHARTER PARTIES EXECUTED BY THE CAPTAIN IN THE
ABSENCE OF THE SHIP AGENT AND IN VIOLATION OF THE INSTRUCTIONS OF THE
LATTER?
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
(Article 655).
WHAT IS THE DATE OF LOADING AND UNLOADING WHEN THE CHARTER PARTY
FAILS TO STATE THE SAME?
By: Kathryn Pineda – Dela Serna
If in the charter party the time in which the loading and unloading are to
take place is not stated, the usages of the port where these acts take place shall
be observed. After the stipulated or the customary period has passed, and there is
no express proviso in the charter party fixing the indemnity for the delay, the
captain shall be entitled to demand demurrage for the lay days and extra lay days
which may have elapsed in loading and unloading (Article 656).
WHAT IS THE OBLIGATION OF THE CAPTAIN SHOULD THE VESSEL BECOME
UNSEAWORTHY DURING THE VOYAGE? WHAT IS THE CONSEQUENCE OF FAILURE TO
FULFILL SUCH OBLIGATION ON THE PART OF THE CAPTAIN?
If during the voyage the vessel should be rendered unseaworthy, the
captain shall be obliged to charter at his expense another one in good condition to
receive the cargo and carry it to its destination, for which purpose he shall be
obliged to look for a vessel not only at the port of arrival but also in the
neighborhood within distance of 150 kilometers.
If the captain, through indolence or malice, should not furnish a vessel to
its destination, the shippers, after requiring the captain to charter a vessel within an
inextendible period, may charter one and petition the judicial authority to summarily
approve the charter party which they may have made.
The same authority shall judicially ("por la via de appremio") compel the
captain, to carry out, for his account and under his responsibility, the charter made
by the shippers.
If the captain, notwithstanding his diligence, should not find a vessel for
the charter, he shall deposit the cargo at the disposal of the shippers, to whom he
shall communicate the facts on the first opportunity which presents itself, the
freight being adjusted in such cases by the distance covered by the vessel, with no
right to any indemnification whatsoever (Article 657).
d) RIGHTS AND OBLIGATIONS OF SHIPOWNERS - ARTICLES 669 – 678
WHAT ARE THE OBLIGATIONS OF THE SHIP OWNER OR THE CAPTAIN IN
CHARTER PARTIES?
The shipowner or the captain shall observe in charter parties the capacity
of the vessel or that expressly designated in its registry, a difference greater than 2
per cent between that stated and her true capacity not being permissible.
If the shipowner or the captain should contract to carry a greater amount of
cargo than the vessel can carry in view of her tonnage, they shall indemnify the
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shippers whose contracts they do not fulfill for the losses they may have caused
when by reason of their default, according to the following cases, viz:
1. If the vessel has been chartered by one shipper only, and there should appear
to be an error or fraud in her capacity, and the charterer should not wish to
rescind the contract, when he has a right to do so, the freightage shall be
reduced in proportion to the cargo which the vessel can not receive, the
person from whom the vessel is chartered being furthermore obliged to
indemnify the charterer for the losses he may have caused him.
2. If, on the contrary there should be several charter parties, and by reason of
want of space all the cargo contracted for cannot be loaded, and none of the
charterers desires to rescind the contract, preference shall be given to the
person who has already loaded and arranged the freight in the vessel, and the
rest shall take the places corresponding to them in the order of the dates of
their contracts.
3. Should there be no priority, the charterers may load, if they wish, in proportion
to the amounts of weight or space for which each may have contracted, and
the person from whom the vessel was chartered shall be obliged to indemnify
them for losses and damages.
WHEN MY ANOTHER VESSEL BE SUBSTITUTED FOR THE ONE CHARTERED?
If the person from whom the vessel is chartered, after receiving a part of
the freight, should not find sufficient to make up at least three-fifths of the amount
which the vessel may hold, at the price he may have fixed, he may substitute for
the transportation another vessel inspected and declared suitable for the same
voyage, the expenses of transfer and the increase in the price of the charter,
should there be any, being for his account. Should he not be able to make this
change, he shall undertake the voyage at the time agreed upon; and should no
time have been fixed, within fifteen days from the time the loading began, unless
otherwise stipulated.
If the owner of the part of the freight already loaded should procure some
more at the same price and under similar or proportionate conditions to those
accepted for the freight received, the person from whom the vessel is chartered or
the captain can not refuse to accept the rest of the cargo; and should he do so, the
shipper shall have a right to demand that the vessel put to sea with the cargo
which it may have on board (Article 670).
WHEN IS SUBSTITUTION OF VESSELS NOT ALLOWED IN CHARTER PARTIES?
After three-fifths of the vessel has been loaded, the person from whom she
is chartered may not, without the consent of the charterers or shippers, substitute
By: Kathryn Pineda – Dela Serna
the vessel designated in the charter party by another one, under the penalty of
making himself thereby liable for all the losses and damages occurring during the
voyage to the cargo of those who did not consent to the change (Article 671).
WHEN THE WHOLE VESSEL HAS BEEN CHARTERED, MAY THE CAPTAIN ACCEPT
CARGO FROM OTHER PERSONS?
If the vessel has been chartered in whole, the captain may not, without the
consent of the charterer, accept cargo from any other person; and should he do so,
said charterer may oblige him to unload it and to indemnify him for the losses
suffered thereby (Article 672).
WHAT IS THE LIABILITY OF THE PERSON FROM WHOM THE VESSEL IS
CHARTERED FOR VOLUNTARY DELAY CAUSED BY THE CAPTAIN?
The person from whom the vessel is chartered shall be liable for all the
losses caused to the charterer by reason of the voluntary delay of the captain in
putting to sea, according to the rules prescribed, provided he has been requested,
notarially or judicially, to put to sea at the proper time (Article 673).
WHAT IS THE CONSEQUENCE SHOULD THE CHARTERER CARRY MORE CARGO THAN
THAT CONTRACTED FOR?
If the charterer should carry to the vessel more cargo than that contracted
for, the excess may be admitted in accordance with the price stipulated in the
contract, if it can be well stowed without injuring the other shippers; but if in order
to load it, the vessel would be thrown out of trim, the captain must refuse it or
unload it at the expense of its owner.
In the same manner, the captain may, before leaving the port, unload
merchandise clandestinely placed on board, or transport them, if he can do so with
the vessel in trim, demanding by way of freightage the highest price which may
have been stipulated for said voyage (Article 674).
WHAT SHOULD BE DONE IN CASE THE VESSEL HAS BEEN CHARTERED TO
RECEIVE CARGO IN ANOTHER PORT?
If the vessel has been chartered to receive the cargo in another port, the
captain shall appear before the consignee designated in the charter party; and,
should the latter not deliver the cargo to him, he shall inform the charterer and wait
his instructions, the lay days agreed upon or those allowed by custom in the port
beginning to run in the meantime, unless there is an express, agreement to the
contrary.
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Should the captain not receive an answer within the time necessary
therefor, he shall make efforts to find freight; and should he not find any after the
lay days and extra lay days have elapsed, he shall make a protest and return to
the port where the charter was made.
The charterer shall pay the freightage in full, discounting that which may
have been earned on the merchandise which may have been carried on the
voyage out or on the return trip, if carried for the account of third persons.
The same shall be done if a vessel, having been chartered for the round
trip, should not be given any cargo on its return (Article 675).
WHEN WILL THE CAPTAIN LOSE THE FREIGHT?
The captain shall lose the freightage and shall indemnify the charterers if
the latter should prove, even against the certificate of inspection, if one has been
made at the port of departure, that the vessel was not in a condition to navigate at
the time of receiving the cargo (Article 676).
WHAT IS THE EFFECT OF A DECLARATION OF WAR OR BLOCKADE ON THE
CHARTER PARTY?
The charter party shall subsist if a declaration of war or a blockade should
take place during the voyage, the captain not having any instructions from the
charterer.
In such case the captain must proceed to the nearest safe and neutral
port, requesting and awaiting orders from the shipper, and the expenses and
salaries paid during the detention shall be paid as general average.
If, by orders of the shipper, the cargo should be discharged at the port of
arrival, the freightage for the voyage out shall be paid in full (Article 677).
WHAT SHOULD BE DONE SHOULD THE CPATAIN FAIL TO RECEIVE INSTRUCTION
FROM THE SHIPPER DESPITE THE LAPSE OF TIME?
If the time necessary, in the opinion of the judge or court, to receive the
orders of the shipper should have elapse, without the captain having received any
instructions, the cargo shall be deposited, and it shall be liable for the payment of
the freightage and expenses on its account during the delay, which shall be paid
from the proceeds of the part first sold (Article 678).
SUMMARY:
By: Kathryn Pineda – Dela Serna
RIGHTS OF THE SHIPOWNER:
1. Where the cargo received is not sufficient to make up at least three-fifths of
the amount which the vessel may hold, he may substitute another vessel
inspected and declared suitable for the voyage. The expenses of transfer and
the increase in the price of the charter, if any, shall be paid by him. But the
shipowner does not have this right of substitution where three-fifths of the
vessel has been filled.
2. To collect freightage in accordance with the price stipulated for cargo in
excess if that agreed upon if such excess can be properly stowed.
3. To refuse and unload at the expense of the owner excess cargo that cannot be
properly stowed.
4. To unload merchandise clandestinely placed on board, o to transport them if
he can do so, demanding the highest freightage.
5. To find freight to take the place of freight not received if the vessel has been
chartered to receive cargo in another port, after he receives no cargo from the
consignee and after he receives no answer from the charterer.
6. To receive freightage in full, discounting that which may have been earned on
the merchandise carried as substitute.
7. To have the charter party subsist notwithstanding the declaration of war or a
blockade during the voyage, and to receive in such cases, the freightage in full
where the shipper orders that the cargo should be discharged at the port of
arrival.
OBLIGATIONS OF SHIPOWNERS:
1. To observe in the charter parties, the capacity of the vessel, and to indemnify
the shippers whose contracts are not fulfilled for the losses they may have
suffered by the failure of the shipowner to observe the capacity of the vessel.
In such cases, there may be one or more charterers.
2. To undertake the voyage at the time agreed upon with fifteen days from the
time the loading began if no time is stipulated, even if the shipowner should
not find cargo sufficient to make up at least three-fifths of the amount which
the vessel may hold, where he fails his right to change vessel.
3. Where the shipowner should not find cargo sufficient to make up at least
three-fifths of the amount which the vessel may hold to accept other cargo
procured by the owner of the freight already loaded under the same price and
conditions.
4. Not to change the vessel after three-fifths of the vessel has been loaded,
without the consent of the charterers or shippers. Otherwise, the shipowner
shall be liable for the losses and damages occurring during the voyage to the
cargo of those who did not give their consent.
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5. If the vessel has been chartered in whole, not to accept cargo from any other
person without the consent of the charterer. Otherwise, the captain shall
answer for the losses suffered and be required to unload.
6. To answer for losses arising from delay in putting to sea. But the charterer
must request the same, judicially or notarially.
7. To have the vessel in a condition to navigate at the time of receiving the cargo.
Otherwise, the captain shall lose the freightage and shall indemnify the
charterers.
8. In case of declaration of war or blockade during the voyage, where the captain
has not received any instructions form the chartrer for the captain to proceed
to the nearest safe and neutral port, requesting and awaiting orders from the
shipper.
E). OBLIGATIONS OF CHARTERERS - ARTICLES 679 – 687
MAY THE CHARTERER, AS A MATTER OF RIGHT, SUB CHARTER THE WHOLE OR
PART OF THE VESSEL?
The charterer of an entire vessel may sub-charter the whole or part thereof
on such terms as he may consider most convenient, the captain not being allowed
to refuse to receive on board the freight delivered by the second charterers,
provided that the conditions of the first charter are not change, and that the price
agreed upon is paid in full to the person from whom the vessel is chartered, even
though the full cargo is not embarked, with the limitation established in the next
article (Article 679).
WHAT IS THE LIABILITY IF THE CHARTERER WHO DOES NOT COMPLETE THE FULL
CARGO HE BOUND HIMSELF TO SHIP?
A charterer who does not complete the full cargo he bound himself to ship
shall pay the freightage of the amount he fails to ship, if the captain does not take
other freight to complete the load of the vessel, in which case the first charterer
shall pay the difference, should there be any (Article 680).
WHAT IS THE LIABILITY OF THE CHARTERER FOR LAODING GOODS DIFFERENT FROM
THOSE MENTIONED AT THE TIME OF THE EXECUTION OF THE SHARTER PARTY?
If the charterer should load goods different from those stated at the time of
executing the charter party, without the knowledge of the person from whom the
vessel was chartered or of the captain, and should thereby give rise to losses, by
reason of confiscation, embargo, detention, or other causes, to the person from
whom the vessel was chartered or to the shippers, the person giving rise thereto
By: Kathryn Pineda – Dela Serna
shall be liable with the value of his shipment and furthermore with his property, for
the full indemnity to all those injured through his fault (Article 681).
WHAT IS THE LIABILITY OF THE PARTIES FOR CARRYING GOODS FOR ILLICIT
COMMERCE?
If the merchandise should have been shipped for the purpose of illicit
commerce, and were taken on board with the knowledge of the person from whom
the vessel was chartered or of the captain, the latter, jointly with the owner of the
same, shall be liable for all the losses which may be caused the other shippers;
and even though it may have been stipulated, they can not demand any indemnity
whatsoever from the charterer for the damaged caused to the vessel (Article 682).
IN CASE THE VESSEL IS BEING REPAIRED, MY THE SHIPPER BE REQUIRED TO
WAIT UNTIL THE VESSEL IS REPAIRED? WHO SHOULD BEAR THE EXPENSES OF
UNLOADING THE CARGO?
In case of making a port to repair the hull, machinery, or equipment of the
vessel, the shippers must await until the vessel is repaired, being permitted to
unload it at their own expense should they deem it proper.
If, for the benefit of the cargo subject to deterioration, the shippers or the
court, or the consul, or the competent authority in a foreign country, should order
the merchandise to be unloaded, the expenses of unloading and reloading shall be
for the account of the former (Article 683).
WHAT IS THE RESPONSIBILITY OF THE CHARTERER FOR FREIGHT SHOULD HE
UNLOAD THE VESSEL BEFORE ARRIVING AT THE PORT OF DESTINATION?
If the charterer, without the occurrence of any of the cases of force
majeure mentioned in the foregoing article, should wish to unload his merchandise
before arriving at the port of destination, he shall pay the full freightage, the
expenses of the arrival made at his request, and the losses and damages caused
the other shippers, should there be any (Article 684).
WHAT MUST BE PAID BY THE SHIPPER SHOULD HE UNLOAD THE GOODS BEFORE
STARTING THE VOYAGE?
In charters for transportation of general freight, any of the shippers may
unload the merchandise before the beginning of the voyage, paying one-half of the
freightage, the expense of stowing and restowing the cargo, and any other
damage which for his reason he may cause the other shippers (Article 685).
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WHEN IS THE CAPTAIN ENTITLED TO THE PAYMENT OF THE FREIGHT AND OTHER
EXPENSES FOR THE CONSIGNEE?
After the vessel has been unloaded and the cargo placed at the disposal
of the consignee, the latter must immediately pay the captain the freightage due
and the other expenses for which said cargo may be liable.
The primage must be paid in the same proportion and at the same time as
the freightage, all the changes and modifications to which the latter should be
subject also governing the former (Article 686).
WHEN MAY NOT THE CHARACTERS AND SHIPPERS ABANDON THE GOODS FOR
THE PAYMENT OF FREIGHT AND OTHER EXPENSES? WHEN CAN THEY MAKE SUCH
ABANDONMENT?
The charterers and shippers may not abandon merchandise damaged on
account of inherent defect or fortuitous event, for the payment of the freightage
and other expenses.
The abandonment shall be proper, however, if the cargo should consist of
liquids and they have leaked out, nothing remaining in the containers but one-
fourth part of their contents (Article 687).
SUMMARY:
OBLIGATIONS OF THE CHARTERER:
1. To pay freightage in full even if the charterer does not complete the full cargo
he bound himself to ship.
2. To answer with the value of his shipment and other property for the losses
suffered by the shipowner, captain, or other shippers arising from confiscation,
embargo, detention, or other causes, where the charterer loads goods
different from those stated at the time of the execution of the charter party.
3. To be jointly liable with the captain for losses which may be caused to the
other shippers where the charterer ships goods for the purpose of illicit
commerce with the knowledge of the shipowner or captain.
4. In the case of making a port to repair the hull, machinery or equipment of the
vessel, to wait until the vessel is repaired or to pay for the expenses of loading
should the charterer choose to unload.
5. Where the charterer unloads goods before arriving at the port of destination
without the occurrence of the cases of force majeure mentioned in Article 683,
to pay (1) the expenses of arrival, (2) the freightage in full, and (3) for the
damages and losses caused to other shippers, if any.
By: Kathryn Pineda – Dela Serna
6. Where the charterer unloads before the beginning of voyage, (1) to pay one-
half of the freightage, (2) to pay for the expenses of stowing and restowing the
cargo, and (3) to pay any other damage which for this reason he may cause to
other shippers.
7. To pay freightage, other expenses and the primage after the vessel has been
unloaded abd the cargo placed at the disposal of the consignee.
8. Not to abandon merchandise damaged on account of inherent defect or
fortuitous event, for the payment of the freightage and other expenses.
F) RESCISSION - ARTICLE 688 TO 692
WHEN MAY THE CHARTER PARTY BE RESCINDED UPON REQUEST OF THE
CHARTERER?
A charter party may be rescinded at the request of the charterer:
1. If before loading the vessel he should not agree with that stated in
the certificate of tonnage, or if there should be an error in the statement of the flag
under which she sails.
2. If the vessel should not be placed at the disposal of the charterer
within the period and in the manner agreed upon.
3. If after the vessel has put to sea, she should return to the port of
departure, on account of risk from pirates, enemies, or bad weather, and the
shippers should agree to unload her.
In the second and third cases the person from whom the vessel was
chartered shall indemnify the charterer for the voyage out.
4. If the charter should have been made by the months, the
charterers shall pay the full freightage for one month, if the voyage is for a port in
the same waters, and for two months, if for a port in different waters.
From one port to another of the Philippines and adjacent islands, the
freightage for one month only shall be paid.
5. If the vessel should make a port during the voyage in order to
make urgent repairs, and the charterers should prefer to dispose of the
merchandise.
When the delay does not exceed thirty days, the shippers shall pay the full
freightage for the voyage out.
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Should the delay exceed thirty days, they shall only pay the freightage in
proportion to the distance covered by the vessel (Article 688).
WHEN MAY A CHARTER PARTY BE RESCINDED UPON REQUEST OF THE PERSON
FOR WHOM THE VESSEL IS CHARTERED?
At the request of the person from whom the vessel is chartered the charter
party may be rescinded:
1. If the charterer, at the termination of the extra lay days, does not
place the cargo alongside the vessel.
In such case the charterer must pay half the freight stipulated, besides the
demurrage due for the lay days and extra lay days.
2. If the person from whom the vessel was chartered should sell it
before the charterer has begun to load it, and the purchaser should load it for his
own account.
In such case the vendor shall indemnify the charterer for the losses he
may suffer.
If the new owner of the vessel should not load it for his own account, the
charter party shall be respected, and the vendor shall indemnify the purchaser if
the former did not inform him of the charter pending at the time of making the sale
(Article 689).
UPON WHAT GROUNDS MAY A CHARTER PARTY BE RESCINDED?
The charter party shall be rescinded and all actions arising therefrom shall
be extinguished, if, before the vessel puts to sea from the port of departure, any of
the following cases should occur:
1. A declaration of war or interdiction of commerce with the power to
whose ports the vessel was to make its voyage.
2. A condition of blockade of the port of destination of said vessel, or
the breaking out of an epidemic after the contract was executed.
3. The prohibition to receive at the said port the merchandise
constituting the cargo of the vessel.
By: Kathryn Pineda – Dela Serna
4. An indefinite detention, by reason of an embargo of the vessel by
order of the government, or for any other reason independent of the will of the ship
agent.
5. The inability of the vessel to navigate, without fault of the captain
or ship agent.
The unloading shall be made for the account of the charterer (Article 690).
WHO SHALL BE LIABLE FOR DAMAGES SHOULD THE VESSEL FAIL TO PUT TO
SEA BY REASON OF CLOSING OF THE PORT OF DEPARTURE OR OTHER TEMPORARY
CAUSE?
If the vessel cannot put to sea on account of the closing of the port of
departure or any other temporary cause, the charter shall remain in force, with
neither one of the contracting parties having a right to claim damages.
The subsistence and wages of the crew shall be considered as general
average.
During the interruption, the charterer may at the proper time and for his
own account, unload and load the merchandise, paying demurrage if he delays the
reloading after the cause for the detention has ceased (Article 691).
WHEN IS A CHARTER PARTY PARTIALLY RESCINDED? WHAT ARE THE
CONSEQUENCES THEREOF?
A charter party shall be partially rescinded, unless there is an agreement
to the contrary, and the captain shall only be entitled to the freightage for the
voyage out, if, by reason of a declaration of war, closing of ports, or interdiction of
commercial relations during the voyage, the vessel should make the port
designated for such a case in the instructions of the charterer (Article 692).
THE FOLLOWING CLAUSES IN CHARTER PARTIES, NOT BEING CONTRARY TO
LAW, MORALS, GOOD CUSTOMS, PUBLIC ORDER AND PUBLIC POLICY, ARE VALID
STIPULATIONS:
a. “Jason clause” – a stipulation in a charter party that in case of a
maritime accident for which the shipowner is not responsible by
law, contract or otherwise, the cargo shippers, consignees or
owners shall contribute with the shipowner in general average.
b. “Clause payment’ – a clause in a charter party providing that the
Carriage of Goods by Sea Act (COGSA) shall apply, subject to the
extent that any term of the bill of lading is repugnant to the
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COGSA or applicable law, then to the extent thereof (only) the
provision of the bill of lading is void.
(B)LOANS ON BOTTOMRY AND RESPONDENTIA
1. LOAN ON BOTTOMRY, DEFINED
WHAT IS BOTTOMRY AND ITS CONCEPT?
Bottomry, in maritime law, is a contract whereby the owner of the ship
borrows for the use, equipment or repair of the vessel, for a definite term, and
pledges the ship (or the keel or bottom of the ship pars pro toto) as security, with
the stipulation that if the ship is lost during the voyage or during the limited time on
account of the perils enumerated, the lender shall lose his money.
2. LOAN ON RESPONDENTIA, DEFINED
WHAT IS RESPONDENTIA?
A loan on respondentia is one made on the goods laden on board the ship,
and which are to be sold or exchanged in the course of the voyage, the borrower’s
personal responsibility being deemed the principal security for the performance of
the contract. The lender must be paid his principal and interest, although the ship
perishes, provided that the goods are saved. The goods, or some part thereof, are
hypothecated as security for a loan, the repayment of which is dependent upon
maritime risks. The usual form of a loan on respondentia is that of a bond. In this
kind of maritime loan, it is the borrower’s personally responsibility which is deemed
to be the principal security for the performance of the contract, hence the term
“respondentia”.
WHAT IS THE RATIONALE BEHIND THIS KIND OF LOANS?
The rationale is to encourage people to invest/participate in maritime
commerce (similar to the reason behind the doctrine of limited liability); such that if
the security for the loan (goods or vessel) is lost, the obligation to pay the loan is
extinguished.
HOW ARE LOANS ON BOTTOMRY AND RESPONDENTIA DISTINGUISHED FROM
SIMPLE LOAN?
The loan on bottomry or respondentia may be distinguished from simple
loan in the following manner:
By: Kathryn Pineda – Dela Serna
1. In bottomry or respondentia, the rate of interest is not subject to the Usury
Law on account of the extraordinary risks involved whereas in simple loan,
the rate of interest must not exceed the ceiling fixed by the Usury Law.
2. In bottomry or respondentia, there must necessarily be a marine risk the
existence of which must be duly established whereas in simple loan, there
need not be such risks involved.
3. The loan on bottomry or respondentia must be executed in accordance
with form and manner required in the Code of Commerce whereas in
simple loan, the formal requisites regarding contracts in general would
apply.
4. The loan on bottomry or respondentia must recorded in the registry of
vessels in order to bind third persons whereas no registration is required in
the case of a simple loan.
5. In the loan on bottomry or respondentia, preference is extended to the last
lender, then prior lenders would not have benefited from the preservation
of the security, whereas in a simple loan, the first lender, as a general rule,
enjoys preference over subsequent ones.
6. An ordinary loan or may not have collateral, while a loan on bottomry or
respondentia must have collateral.
7. The collateral of an ordinary loan may be any property, real or personal,
while the collateral of a loan on bottomry or respondentia must have a
vessel or cargo subject to maritime risks.
8. An ordinary loan is absolutely repayable, while payment of a loan on
bottomry or repondentia depends upon the safe arrival qat the port of the
collateral of the loan.
9. An ordinary loan need not to be writing but interest shall not be due unless
expressly stipulated in writing, while a loan on bottomry or respondentia
must be recorded in writing.
10. The loss of the collateral if any, in an ordinary loan does not extinguish the
same, while the loss of the collateral in loan on bottomry or respondentia
extinguishes the same.
SPECIAL FEATURES OF LOANS ON BOTTOMRY AND RESPONDENTIA:
c. These contracts must at least be in writing; otherwise, they can
not be the basis of judicial action. In order to affect third persons
and entitle it to preferential credit treatment, the contract should be
inscribed in the certificate of registry and seconded in the registry
of vessels.
d. The captain may not borrow on bottomry or respondentia except
on his own interest or portion thereof, otherwise, the contract is
void.
e. The usury laws are inapplicable to these contracts.
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f. Should the goods upon which the money is taken not be subjected 2. By means of a policy signed by the contracting parties and the broker
to risk, the contract shall be considered a simple loan. taking part therein.
g. More recent loans are preferred than prior loans. 3. By means of a private instrument.

3. CHARACTER OF LOAN - ARTICLE 719 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
WHAT IS THE CHARACTER OF A LOAN IN BOTTOMRY OR registry of vessels, without which requisites the credits of this kind shall not have,
RESPONDENTIA? 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.
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 The contracts made during a voyage shall be governed by the provisions
goods on which it is made, or of the price they may receive in case of accident, of Articles 583 and 611, and shall be effective with regard to third persons from the
shall be considered a loan on bottomry or respondentia (Article 719). date of their execution, if they should be recorded in the registry of vessels of the
port of registry of the vessel before the lapse of eight days following its arrival. If
The character of this kind of loan is that it is real, unilateral and aleatory said eight days should elapse without the record having been made in the
contract, thus: corresponding registry, the contracts made during the voyage of a vessel shall
1. Delivery of the amount loaned is necessary for the perfection of produce no effect with regard to third persons, except from the day and date of
the contract; their inscription.
2. Although there are reciprocal benefits, the contract produces
obligations only for one party, the borrower who must return the In order that the policy of the contracts executed in accordance with No. 2
amount borrowed plus premium; and may have binding force, they must conform to the registry of the broker who took
3. The lender really runs known risks. part therein. With respect to those executed in accordance with No. 3 the
acknowledgment of the signature shall be required.
WHAT IS THE REAL NATURE OF A LOAN ON BOTTOMRY OR LOAN ON
RESPONDENTIA? Contracts which are not reduced to writing shall not give rise to judicial
action (Article 720).
A loan on bottomry or a loan on respondentia is not merely a simple loan
of money called mutuum, but it is also in the nature of insurance. That is why the WHAT MUST BE STATED IN A CONTRACT ON BOTTOMRY OR RESPONDENTIA?
right on the part of the creditor to recover the loan is premised on the safe arrival of
the vessel or the cargo at the port of destination. If the vessel or cargo fails to In a contract on bottomry or respondentia the following must be stated:
reach the port of destination safely, the creditor loses his right to recover the loan.
The reason is that the creditor is acting not only as a lender, but at the same time, 1. The kind, name, and registry of the vessel.
also an insurer of the vessel or cargo given as collateral for the loan. 2. The name, surname, and domicile of the captain.
3. The names, surnames, and domiciles of the person giving and the person
4. FORMS AND REQUISITES - ARTICLES 720 – 722 receiving the loan.
4. The amount of the loan and the premium stipulated.
WHAT ARE THE FORMAL REQUIREMENTS OF LOANS ON BOTTOMRY OR 5. The time for repayment.
RESPONDENTIA? 6. The goods pledged to secure repayment.
7. The voyage during which the risk is run (Article 721).
Loans on bottomry or respondentia may be executed:
HOW MAY CONTRACTS ON BOTTOMRY OR RESPONDENTIA WHICH ARE MADE TO
1. By means of a public instrument. ORDER, BE TRANSFERABLE?

By: Kathryn Pineda – Dela Serna

 Page 71
The contract may be made to order, in which case they shall be WHAT MAY CONSTITUTE AS SECURITY FOR A LAON ON BOTTOMRY OR
transferable by indorsement, and the indorsee shall acquire all the rights and shall RESPONDENTIA?
incur all the risks corresponding to the indorser (Article 724).
The loans may be constituted jointly or separately:
5. ON WHAT CONSTITUTED - ARTICLES 724 – 725
1. On the hull of the vessel.
WHAT MAY CONSTITUTE AS SECUTIRY FOR A LOAN ON BOTTOMRY OR 2. On the rigging.
RESPONDENTIA? 3. On the equipment, provisions, and fuel.
The loans may be constituted jointly or separately: 4. On the engine, if the vessel is a steamer.
5. On the merchandise loaded.
1. On the hull of the vessel.
2. On the rigging. If the loan in constituted on the hull of the vessel, the rigging, equipment
3. On the equipment, provisions, and fuel. and other goods, provisions, fuel, steam engines, and the freightage earned during
4. On the engine, if the vessel is a steamer. the voyage on which the loan is made shall also be considered as included in the
5. On the merchandise loaded. liability for the loan. cdta

If the loan in constituted on the hull of the vessel, the rigging, equipment If the loan is made on the cargo, all that which constitutes the same shall
and other goods, provisions, fuel, steam engines, and the freightage earned during be subject to the repayment; and if on a particular object of the vessel or of the
the voyage on which the loan is made shall also be considered as included in the cargo, only the object concretely and specifically mentioned shall be liable (Article
liability for the loan. 724).

If the loan is made on the cargo, all that which constitutes the same shall No loans on bottomry may be made on the salaries of the crew or on the
be subject to the repayment; and if on a particular object of the vessel or of the profits expected.
cargo, only the object concretely and specifically mentioned shall be liable (Article
724). 7. BY WHOM - ARTICLES 728, 617, 611, 583

MAY LOANS ON BOTTOMRY BE MADE ON THE SALARIES OF THE CREW OR ON WHO SHALL BE BOUND BY THE LOAN OBTAINED BY THE CAPTAIN AT THE
PROFITS? PLACE OF RESIDENCE OF THE OWNERS OF THE VESSEL?

No loans on bottomry may be made on the salaries of the crew or on the
profits expected (Article 725).
The reason for this rule is that the salaries of the crew are not part of the
capital of the ship owner, nor are future profits or commercial effects that could be
given as collateral.
6. AMOUNT -ARTICLES 723, 726 –725
HOW SHALL THE VALUE OF THE PRINCIPAL LOAN BE DETERMINED?
Loans may be made in goods and in merchandise, fixing their value in
order to determine the principal of the loan (Article 723).
By: Kathryn Pineda – Dela Serna
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
twenty-four 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 728).
WHAT CONTRACTS ON BOTTOMRY OR RESPONDENTIA ARE PROHIBITED?
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The captain may not contract loans on respondentia secured by the cargo;
and should he do so, the contracts shall be void.
Neither may he borrow money on bottomry for his own transactions,
except on the portion of the vessel he owns, provided no money has been
previously borrowed on the whole vessel, and there does not exist any other kind
of lien or obligation chargeable against the vessel. If he may do so, he must state
what interest he has in the vessel.
In case of violation of this article, the principal, interest, and costs shall be
for the personal account of the captain, and the ship agent may furthermore
discharge him (Article 617).
IF THE CAPTAIN HAS NO FUNDS TO COMPLY WITH HIS OBLIGATION, HOW SHALL
HE OBTAIN FUNDS?
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 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.
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 611).
WHAT FORMALITIES SHOULD THE CAPTAIN FOLLOW IF THE CAPTAIN SHOULD
CONTRACT ONE OR MORE OF THE OBLIGATIONS MENTIONED IN SUBDIVISIONS 8 AND 9
OF ARTICLE 580?
If while on a voyage the captain should find it necessary to contract one or
more of the obligations mentioned in subdivisions 8 and 9 of Article 580, he shall
apply to the judge or court if he is in Philippine territory, and otherwise to the
consul of the Republic of the Philippines, should there be one, and, in his absence,
By: Kathryn Pineda – Dela Serna
to the judge or court or proper local authority, presenting the certificate of the
registration sheet treated of in Article 612 and the instruments proving the
obligation contracted.
The judge or court, the consul, or the local authority, as the case may be,
in view of the result of the proceedings instituted, shall make a temporary
memorandum of their result in the certificate, in order that it may be recorded in the
registry when the vessel returns to the port of its registry, or so that it can be
admitted as a legal and preferred obligation in case of sale before its return, by
reason of the sale of the vessel on account of a declaration of unseaworthiness.
The omission of this formality shall make the captain personally liable for
the credits prejudiced on his account (Article 583).
8. EFFECTS OF CONTRACT - ARTICLES 719, 729, 726, 727 AND 730
WHEN IS A LOAN CONSIDERED BOTTOMRY OR RESPONDENTIA?
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 (Article 719).
WHAT ARE THE INSTANCES WHERE THE CONSTRACT IS CONSIDERED A SIMPLE
LOAN AND NOT A LOAN ON BOTTOMRY OR RESPONDENTIA?
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 (Article 729).
WHAT IS THE CONSEQUENCE IF THE LENDER SHOULD PROVE THAT THE
AMOUNT OF THE LOAN IS LARGER THAN THE VALUE OF THE COLLATERAL?
If the lender should prove that he loaned an 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 726).
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WHATIS THE CONSEQUENCE IF THE FULL AMOUNT OF THE LOAN CONTRACTED
IS MORE THAN WHAT IS NECESSARY TO LOAD THE VESSEL?
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 clearing.
The same procedure shall be observed with regard to the goods taken as
loan, if they were not loaded (Article 727).
WHAT IS THE ORDER OF PREFERENCE OF LOANS ON BOTTOMRY?
Loans made during the voyage shall have preference over those made
before the clearing of the vessel, and they shall be graduated in the inverse order
of their dates.
The loans for the last voyage shall have preference over prior ones.
Should several loans have been made at the same port of arrival under
stress and for the same purpose, all of them shall be paid pro rata (Article 730).
F. BILL OF LADING
1. CONTENTS - ARTICLES 706, 707, 713, 714
WHAT MUST A BILL OF LADING CONTAIN:
The captain of the vessel and the shipper shall have the obligation of
drawing up the bill of lading in which shall be stated:
1. The name, registry, and tonnage of the vessel.
2. The name of the captain and his domicile.
3. The port of loading and that of unloading.
4. The name of the shipper.
5. The name of the consignee, if the bill of lading is issued in the name of a
specified person.
6. The quantity, quality, number of packages and marks of the merchandise.
7. The freightage and the primage stipulated (Article 706).
TO WHOSE ORDER MAY A BILL OF LADING BE ISSUED?
The bill of lading may be issued:
1. To bearer,
By: Kathryn Pineda – Dela Serna
2. to order,
3. or in the name of a specified person (Article 706).
WHAT IS THE OBLIGATION OF THE PERSON TO WHOSE ORDER THE BILL OF
LADING WAS ISSUED? WHAT IS THE RIGHT OF THE SHIPPER?
The person in whose name the bill of lading was issued must sign the same
within twenty-four hours after the cargo has been received on board, the shipper
being entitled to demand the unloading at the expense of the captain should the
latter not sign it, and, in every case, the losses and damages suffered thereby
(Article 706).
HOW MANY COPIES MUST THE BILL OF LADING BE MADE?
Four true copies of the original bill of lading shall be made, and all of them
shall be signed by the captain and the shipper. Of these, the shipper shall keep
one and send another to the consignee; the captain shall take two, one for himself
and another for the ship agent.
There may also be drawn up as many copies of the bill of lading as may
be considered necessary by the person interested; but when they are issued to
order or to bearer, they shall be stated in all the copies, be they the first four or the
subsequent ones, the destination of each one, stating whether it is for the agent,
for the captain, for the shipper, or for the consignee. If the copy sent to the latter
should have a duplicate, this circumstance and the fact that it is not valid except in
default of the first one must be stated therein (Article 707).
WHAT IS THE OBLIGATION OF THE CAPTAIN IF BEFORE THE DELIVERY OF THE
CARGO A NEW BILL OF LADING IS DEMANDED BECAUSE OF LOSS OF STHE PREVIOUS
ONE? WHAT IS THE CONDITION OF THE ISSUANCE OF THE NEW BILL OF LADING?
If before the delivery of the cargo a new bill of lading should be demanded
of the captain, on the allegation that the failure to present the previous ones is due
to their loss or to any other just cause, he shall be obliged to issue it, provided that
security for the value of the cargo is given to his satisfaction, but without changing
the consignment, and stating therein the circumstances prescribed in the last
paragraph of Article 707, under penalty, should he not so state, of being held liable
for said cargo if improperly delivered through his fault (Article 713).
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WHAT IS THE RIGHT OF THE SHIPPER IF BEFORE THE VESSEL IS PUT TO SEA,
THE CAPTAIN SHOULD DIE OR SHOULD CEASE TO HOLD HIS POSITION?
If before the vessel puts to sea the captain should die or should cease to
hold his position through any cause, the shippers shall have the right to demand of
the new captain the ratification of the first bills of lading, and the latter must do so,
provided that all the copies previously issued be presented or returned to him, and
it should appear from all examination of the cargo that they are correct (Article
714).
WHO BEARS THE EXPENSES ARISING FROM THE EXAMINATION OF THE CARGO IN
SUCH A CASE?
The expenses arising from the examination of the cargo shall be defrayed by
the ship agent, without prejudice to the right of action of the latter against the first
captain if he ceased to be such through his own fault. Should said examination not
be made, it shall be understood that the new captain accepts the cargo as it
appears from the bills of lading issued (Article 714).
2. PROBATIVE VALUE - ARTICLES 709, 710
WHAT IS THE PROBATIVE VALUE OF A BILL OF LADING DRAWN UP IN
ACCORDANCE WITH THE PROVISIONS OF THE CODE OF COMMERCE?
A bill of lading drawn up in accordance with the provisions of this title shall
be proof as between all those interested in the cargo and between the latter and
the insurers, proof to the contrary being reserved for the latter (Article 709).
IN CASE THE BILLS OF LADINGS DO NOT AGREE, WHICH BILL OF LADING SHALL
BE UPHELD?
If the bills of lading do not agree, and no change or erasure can be
observed in any of them, those possessed by the shipper or consignee signed by
the captain shall be proof against the captain or ship agent in favor of the
consignee or shipper; and those possessed by the captain or ship agent signed by
the shipper shall be proof against the shipper or consignee in favor of the captain
or ship agent (Article 710).
G. PASSENGERS ON SEA VOYAGE
1. NATURE OF CONTRACT - ARTICLE 695
WHAT IS THE NATURE OF A CONTRACT OF RIGHT TO PASSAGE?
By: Kathryn Pineda – Dela Serna
A contract of right to passage is personal in nature. Thus, the Code of
Commerce provides: The right to passage, if issued to a specified person, may not
be transferred without the consent of the captain or of the consignee (Article 695).
2. OBLIGATIONS OF PASSENGER - ARTICLES 693, 699, 704, 694,700
HOW SHALL THE PASSAGE PRICE BE DETERMINED IF THE SAME HAS NOT BEEN
AGREED UPON?
If the passage price has not been agreed upon, the judge or court shall
summarily fix it, after a declaration of experts (Article 693).
WHAT IS THE RIGHT OF THE CAPTAIN IF THE CONSTRACT IS RESCNDED BEFORE
OR AFTER THE COMMENCEMENT OF THE VOYAGE?
If the contract is rescinded, before or after the commencement of the
voyage, the captain shall have a right to claim payment of what he may have
furnished the passengers (Article 699).
WHAT IS THE RIGHT OF THE CAPTAIN IN ORDER TO COLLECT THE PASSAGE-MONEY
AND EXPENSES OF SUSTENANCE?
The captain, in order to collect the passage-money and expenses of
sustenance, may retain the goods belonging to the passenger, and in case of the
sale of the same he shall be given preference over other creditors acting the same
way as in the collection of freightage (Article 704).
WHAT MUST THE CAPTAIN DO IF THE PASSENGER SHOULD NOT ARRIVE ON BAORD
AT THE FIXED TIME OR SHOULD LEAVE THE VESSEL WITHOUT PERMISSION?
Should the passenger not arrive on board at the time fixed, or should leave
the vessel without permission from the captain when the latter is ready to leave the
port, the captain may continue the voyage and demand the full passage price
(Article 694).
WHO SHALL HAVE THE POWER TO PRESERVE ORDER AND DISCIPLINE ON
BOARD THE VESSEL?
In all matters pertaining to the preservation of order and discipline on
board the vessel passengers shall be subject to the orders of the captain, without
any distinction whatsoever (Article 700).
3. RIGHTS OF PASSENGERS -ARTICLES 697, 698
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WHAT ARE THE RIGHTS OF PASSENGERS IF THE VOYAGE IS NOT COMPLETED?
1. If before the voyage is begun it is suspended through the exclusive fault of
the captain or ship agent, the passengers shall have the right to a refund
of their fares and to recover losses and damages; but if the suspension is
due to fortuitous events, or to force majeure, or to any other cause
independent of the captain or ship agent, the passengers shall only be
entitled to the return of the fare (Article 697).
2. In case a voyage already begun should be interrupted, the passengers
shall be obliged to pay the fare in proportion to the distance covered,
without right to recover for losses and damages if the interruption is due to
fortuitous event or to force majeure, but with a right to indemnity if the
interruption should have been caused by the captain exclusively. If the
interruption should be caused by the disability of the vessel, and a
passenger should agree to await the repairs, he may not be required to
pay any increased price of passage, but his living expenses during the
stay shall be for his own account (Article 698).
3. In case of delay in the departure of the vessel, the passengers have the
right to remain on board and to be furnished with food for the account of
the vessel unless the delay is due to fortuitous events or to force majeure.
If the delay should exceed ten days, passengers requesting the same shall
be entitled to the return of the fare; and if it is due exclusively to the fault of
the captain or ship agent, they may also demand indemnity for losses and
damages (Article 698).
4. A vessel exclusively devoted to the transportation of passengers must take
them directly to the port or ports of destination, no matter what the number
of passengers may be, making all the stops indicated in its itinerary (Article
698).
4. RESPONSIBILITIES OF CAPTAIN - ARTS. 701, 702, 705, 612, 703;
ARTICLE 1754, CIVIL CODE
WHAT ARE THE OBLIGATIONS OF THE CAPTAIN WITH REGARD TO TO THE
CONVENIENCE AND SUBSISTENCE OF PASSENGERS DURING VOYAGE?
1. The convenience or the interest of the passengers shall not obligate or
empower the captain to stand in shore or enter places which may take the
vessel out of her course, or to remain in the ports he must or in under
necessity of touching for a period longer than that required by the needs of
navigation (Article 701).
2. In the absence of an agreement to the contrary, it shall be understood that
the subsistence of the passengers during the voyage is included in the
By: Kathryn Pineda – Dela Serna
price of the passage; but should it be for the account of the latter, the
captain shall be under obligation, in case of necessity, to furnish the supply
of food necessary for their sustenance at a reasonable price (Article 702).
3. In case of the death of a passenger during the voyage, the captain shall be
authorized, with regard to the body, to take the steps required by the
circumstances, and shall carefully take care of the papers and goods
which may be on board belonging to the passenger, observing the
provisions of case No. 10 of Article 612 with regard to members of the
crew (Article 705).
WHAT ARE THE INHERENT OBLIGATIONS IN THE OFFICE OF THE CAPTAIN?
The following obligations shall be inherent in the office of 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.
2. To have a copy of this code on board.
3. To have three folioed and stamped books, placing at the beginning of each
one a memorandum of the number of folios it contains, signed by the
maritime authority, and in his absence by the competent authority.
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
 Page 76
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
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 twenty-four 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
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.
By: Kathryn Pineda – Dela Serna
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
twenty-four hours, specifying therein all the incidents of 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 (Article 612).
HOW IS A PASSENGER CONSIDERED INSOFAR AS THE GOODS HE CARRIES ON
BOARD ARE CONCERNED?
A passenger shall be considered a shipper insofar as the goods he carries
on board are concerned, and the captain shall not be responsible for what the
former may keep under his immediate and special custody, unless the damage
arises from an act of the captain or of the crew (Article 703).
WHAT RULES SHALL APPLY TO THE PASSENGER’S BAGGAGE?
1. The provisions of Articles 1733 to 1753 shall apply to the
passenger’s baggage which is not under his custody or in that of
his employees. As to other baggage, the rules in Articles 1998 and
2000 to 2003 concerning the responsibility of hotel-keepers shall
be applicable (Article 1754 Civil Code).
H. CARRIAGE OF GOODS BY SEA ACT (COMMONWEALTH ACT NO. 65; PUBLIC ACT
NO. 521, 74TH US CONGRESS)
WHAT IS THE PRINCIPAL PURPOSE OF THE CARRIAGE OF GOODS BY SEA ACT?
The principal purpose of the COGSA is to bring about uniformity to ocean
bills of lading and to give effect to the Brussels Treaty (Preamble, Commonwealth
Act. No. 65).
WHAT CONTRACTS ARE COVERED BY THE COGSA?
 Page 77
COGSA is applicable to all contracts for the carriage of goods by sea to
and from Philippine ports in foreign trade (Section 1). COGSA does not apply to
purely domestic transport.
NOTES:
To know whether which law is applicable to a contract for the carriage of
goods by sea:
a. Distinguish whether the carrier is a common carrier or private
carrier;
b. Where the vessel is going:
1. From the Philippines to a foreign country: apply laws of
such foreign country (Article 1753, Civil Code);
2. From a foreign country to the Philippines:
 If common carrier:
- primarily governed by the Civil Code
- then COGSA if applicable (e.g., foreign trade)
- Code of Commerce
 If private carrier:
- COGSA –more specific
- Code of Commerce
- Civil Code (provisions not dealing with common
carriers, e.g., torts, contracts)
IN WHAT SITUATIONS DOES COGSA PRIMARILY APPLY?
Where the parties expressly stipulate that COGSA shall govern their
respective rights and obligations.
CAN COGSA APPLY TO DOMESTIC TRADE?
Generally, no, unless the parties agree otherwise.
WHAT APPLICATION DOES COGSA HAVE IN CARRIAGE OF PASSENGERS?
None, COGSA applies only to carriage of goods.
WHAT IS THE PRESCRIPTIVE PERIOD UNDER SECTION 3 (6)?
By: Kathryn Pineda – Dela Serna
The carrier and the agent shall be discharged from liability, in respect of
loss or damage unless suit is brought within year from:
1. In case of damaged goods: From the time the delivery of the goods was
made.
2. In case of non-delivery (i.e., lost goods): From the date the gods should have
been delivered.
WHAT RULES GOVERN CASES OF MISDELIVERY OR CONVERSION?
The one-year prescriptive period in Section 3 (6) applies only where there
is loss or damage. Loss contemplates only where no delivery at all was made by
the carrier of the goods because the same had perished, gone out of commerce,
or disappeared in such a way that their existence is unknown or they cannot be
recovered. Hence, in case of misdelivery (delivery to wrong persons) or conversion
of the goods, the rules on prescription found in the Civil Code shall apply, that is,
10 years for contracts; 4 years for tortious obligations.
IS THE PRESCRIPTIVE PERIOD UNDER THE COGSA INTERRUPTED FROM THE
TIME OF THE MAKING OF EXTRA-JUDICIAL DEMAND OR FILING OF JUDICIAL ACTION AS
PROVIDED BY ARTICLE 115 OF THE CIVIL CODE?
No. The one-year period provided under the COGSA is a special
prescriptive period, uniform worldwide.
WHAT IS THE RATIONALE BEHIND THE 3-DAY NOTICE AND RELATIVELY SHORT
PERIOD OF PRESCRIPTION?
1. To provide the carrier an opportunity to look for the lost goods;
2. To discover who is at fault;
3. In case of transshipment, to determine, when and where the damage
occurred.
NOTES:
- The shipper, consignee or legal holder of a bill of lading may invoke the
prescriptive period although the proviso in Section 3 (6) gives the impression
that it is the shipper alone who can invoke the same.
- The prescriptive period does not apply to the action by an insurer as subrogee
of the consignee.
- Stipulation in a bill limiting the carrier’s liability contrary to Section 3 (8) is void,
example: provision in the bill excepting the owner from liability for loss or
 Page 78
damage of cargo unless a written notice thereof was given to the carrier within
30 days.
- Such provision is contrary to the provision of the COGSA since Section 3
provides that even if a notice of loss or damage is not given as required, that
fact shall not prejudice the right of the shipper to bring a suit within 1 year after
delivery of the goods.
- Notice requirements:
COGSA: Section 3 (6) – If loss or damage is apparent: protest as
soon as the goods are received.
If not apparent – protest within 3 days after delivery.
Code of commerce: Article 366-
If apparent – protest at the time of the delivery
If not apparent – protest within 24 hours after receipt
WARSAW: Article 26:
In case of damage of baggage – protest within 3 days
from receipt
In case of damage of goods – protest within 7 days from
receipt
In case of delay – protest within 14 days from receipt.
- Failure to comply with the 3-day notice requirement under the COGSA does
not affect the right of the ship owner to bring action provided he brings the
same within 1 year.
- This must be distinguished from the notice requirement in the WARSAW
Convention and Code of Commerce, where notice requirement is a condition
precedent for the right of action against the ship owner to accrue.
- Amount recoverable in case of loss: $500.00 per package, even if not
stipulated.
- The plaintiff cannot dispute said limitation on the ground that it was not freely
and fairly agreed upon or that it is against public policy because the law itself
provides for said limitation; thus the same is deemed read into their contract.
- Package here means individual packaging of the goods (does not cover one
container van.
- Parties may agree to an amount of liability less than &500.00 under Section 4
(5). By providing that $500.00 is the maximum liability, the law does not
disallow an agreement for liability at a lesser amount. Moreover, Article 1749 of
the Civil Code expressly allows the limitation of the carrier’s liability.
WHEN SHALL A “SHIPPED BILL OF LADING” BE ISSUED?
By: Kathryn Pineda – Dela Serna
After the goods are loaded the bill of lading to be issued by the carrier,
master, or agent of the carrier to the shipper shall, if the shipper so demands, be a
"shipped" bill of lading Provided, That if the shipper shall have previously taken up
any document of title to such goods, he shall surrender the same as against the
issue of the "shipped" bill of lading, but at the option of the carrier such document
of title may be noted at the port of shipment by the carrier, master, or agent with
name or name the names of the ship or ships upon which the goods have been
shipped and the date or dates of shipment, and when so noted the same shall for
the purpose of this section be deemed to constitute a "shipped" bill of lading (No.
7, Section 3).
MAY THE CARRIER BE RELIEVED FROM LIABILITY FOR LOSS OR DAMAGE
CAUSED BY NEGLIGENCE, FAULT OR FAILURE IN THE FULFILLMENT OF ITS DUTIES AND
OBLIGATIONS?
Any clause, covenant, or agreement in a contract of carriage relieving the
carrier or the ship from liability for loss or damage to or in connection with the
goods, arising from negligence, fault, or failure in the duties and obligations
provided in this section, or lessening such liability otherwise than as provided in
this Act, shall be null and void and of no effect. A benefit of insurance in favor of
the carrier, or similar clause, shall be deemed to be a clause relieving the carrier
from liability (No. 8, Section 3).
RIGHTS AND IMMUNITIES:
FOR WHAT LOSSES AND DAMAGES ARE THE CARRIER AND THE SHIP NOT
LIABLE?
1. Neither the carrier nor the ship shall be liable for loss or damage arising or
resulting from unseaworthiness unless caused by want of due diligence on
the part of the carrier to make the ship seaworthy, and to secure that the
ship is properly manned, equipped, and supplied, and to make to the
holds, refrigerating and cool chambers, and all other parts of the ship in
which goods are carried fit and safe for their reception, carriage, and
preservation in accordance with the provisions of paragraph (1) of section
3. Whenever loss or damage has resulted from unseaworthiness, the
 Page 79
burden of proving the exercise of due diligence shall be on the carrier or deviation is for the purpose of loading cargo or unloading cargo or
other persons claiming exemption under the section. passengers it shall, prima facie, be regarded as unreasonable (Section 4).

2. Neither the carrier nor the ship shall be responsible for loss or damage WHAT ARE THE LOSSES OR DAMAGES FOR WHICH THE SHIPPER SHALL NOT BE
arising or resulting from — LIABLE?

1. Act, neglect, or default of the master, mariner, pilot, or the The shipper shall not be responsible for loss or damage sustained by the
servants of the carrier in the navigation or in the management of carrier or the ship arising from any cause without the act, fault, or neglect of the
the ship; shipper, his agents, or servants (Section 4, No. 3).
2. Fire, unless caused by the actual fault or privity of the carrier;
3. Perils, dangers, and accidents of the sea or other navigable WHAT IS THE LIMIT OF THE LIABILITY OF THE CARRIER OR THE SHIP FOR THE
waters; LOSS OR DAMAGE TO THE GOODS TRANSPORTED?
4. Act of God;
5. Act of war, Neither the carrier nor the ship shall in any event be or become liable for
6. Act of public enemies; any loss or damage to or in connection with the transportation of goods in an
7. Arrest or restraint of princes, rulers, or people, or seizure under amount exceeding $600 per package lawful money of the United States, or in case
legal process; of goods not shipped in packages, per customary freight unit, or the equivalent of
8. Quarantine restrictions; that sum in other currency, unless the nature and value of such goods have been
9. Act or omission of the shipper or owner of the goods, his agent or declared by the shipper before shipment and inserted in the bill of lading. This
representative; declaration, if embodied in the bill of lading, shall be prima facie evidence, but shall
10. Strikes or lockouts or stoppage or restraint of labor from whatever not be conclusive on the carrier.
cause, whether partial or general; Provided, That nothing herein
contained shall be construed to relieve a carrier from responsibility By agreement between the carrier, master, or agent of the carrier, and the
for the carrier's own acts; shipper another maximum amount than that mentioned in this paragraph may be
11. Riots and civil commotions; fixed: Provided, That such maximum shall not be less than the figure above
12. Saving or attempting to save life or property at sea; named. In no event shall the carrier be liable for more than the amount of damage
13. Wastage in bulk or weight or any other loss or damage arising actually sustained.
from inherent defect, quality, or vice of the goods;
14. Insufficiency of packing; Neither the carrier nor the ship shall be responsible in any event for loss or
15. Insufficiency of inadequacy of marks; damage to or in connection with the transportation of the goods if the nature or
16. Latent defects not discoverable by due diligence; and value thereof has been knowingly and fraudulently misstated by the shipper in the
17. Any other cause arising without the actual fault and privity of the bill of lading (Section 4, No. 5).
carrier and without the fault or neglect of the agents or servants of
the carrier, but the burden of proof shall be on the person claiming WHAT MAY BE DONE TO GOODS OF INFLAMMABLE, EXPLOSIVE, OR DANGEROUS
the benefit of this exception to show that neither the actual fault or NATURE IN CASE THE CARRIER, MASTER OR AGENT OF THE CARRIER HAS NOT
privity of the carrier nor the fault or neglect of the agents or KNOWLINGLY CONSENTED TO THE CARRIAGE THEREOF?
servants of the carrier contributed to the loss or damage.
Goods of an inflammable, explosive, or dangerous nature to the shipment
whereof the carrier, master or agent of the carrier, has not consented with
3. Any deviation in saving or attempting to save life or property at sea, or any knowledge of their nature and character, may at any time before discharge be
reasonable deviation shall not be deemed to be an infringement or breach landed at any place or destroyed or rendered innocuous by the carrier without
of this Act or of the contract of carriage, and the carrier shall not be liable compensation, and the shipper of such goods shall be liable for all damages and
for any loss or damage resulting therefrom: Provided, however, That if the expenses directly or indirectly arising out of or resulting from such shipment. If any
By: Kathryn Pineda – Dela Serna
 Page 80
such goods shipped with such knowledge and consent shall become a danger to
the ship or cargo, they may in like manner be landed at any place, or destroyed or
rendered innocuous by the carrier without liability on the part of the carrier except
to general average, if any (Section 4, No. 6).
SURRENDER OF RIGHTS AND IMMUNITIES AND INCREASE OF RESPONSIBILITIES
AND LIABILITIES:
MAY THE CARRIER SURRENDER ANY OF HIS RIGHTS AND IMMUNITIES OR
INCREASE HIS RESPONSIBILITIES?
A carrier shall be at liberty to surrender in whole or in part all or any of his
rights and immunities or to increase any of his responsibilities and liabilities under
this Act, provided such surrender or increase shall be embodied in the bill of lading
issued to the shipper.
The provisions of this Act shall not be applicable to charter parties; but if
bills of lading are issued in the case of a ship under charter party, they shall
comply with the terms of this Act. Nothing in this Act shall be held to prevent the
insertion in a bill of lading of any lawful provision regarding general average
(Section 5).
Note that what the law allows the carrier to do is to increase any of his
responsibilities but not to unilaterally diminish the same. He is also allowed to
surrender any of his rights and immunities but not to unilaterally increase his rights
and immunities.
SPECIAL CONDITIONS:
WHILE THE CARRIER CANNOT UNILATERALLY DIMINISH HIS RESPONSIBILITIES
NOR INCREASE HIS RIGHTS AND IMMUNITIES, MAY THE CARRIER AND THE SHIPPER
AGREE ON THE TERMS OF RESPONSIBILITY AND LIABILITY OF THE CARRIER AS WELL AS
THE RIGHTS AND IMMUNITIES OF THE CARRIER WITH RESPECT TO THE GOODS SHIPPED
OR HIS OBLIGATION AS TO SEAWORTHINESS?
Notwithstanding the provisions of the preceding sections, a carrier, master
or agent of the carrier, and a shipper shall, in regard to any particular goods be at
liberty to enter into any agreement in any terms as to the responsibility and liability
of the carrier for such goods, and as to the rights and immunities of the carrier in
respect of such goods, or his obligation as to seaworthiness (so far as the
stipulation regarding seaworthiness is not contrary to public policy), or the care or
diligence of his servants or agents in regard to the loading, handling stowage,
carriage, custody, care, and discharge of the goods carried by sea: Provided, That
By: Kathryn Pineda – Dela Serna
in this case no bill of lading has been or shall be issued and that the terms agreed
shall be embodied in a receipt which shall be a non-negotiable document and shall
be marked as such.
Any agreement so entered into shall have full legal effect: Provided, That
this section shall not apply to ordinary commercial shipments made in the ordinary
course of trade but only to other shipments where the character or condition of the
property to be carried or the circumstances, terms, and conditions under which the
carriage is to be performed are such as reasonably to justify a special agreement
(Section 6).
MAY THE CARRIER AND THE SHIPPER STIPULATE ON THE RESPONSIBILITY OF
THE CARRIER PRIOR TO THE LOADING OF THE CARGO AND SUBSEQUENT TO THE
DISCHARGE THEREOF FROM THE SHIP?
Nothing contained in this Act shall prevent a carrier or a shipper from
entering into any agreement, stipulation, condition, reservation, or exemption as to
the responsibility and liability of the carrier or the ship for the loss or damage to or
in connection with the custody and care and handling of goods prior to the loading
on and subsequent to the discharge from the ship on which the goods are carried
by sea (Section 7).
DOES THE COGSA AFFECT THE RIGHTS AND OBLIGATIONS OF THE CARRIER
UNDER SPECIFIC LAW?
The provisions of this Act shall not affect the rights and obligations of the
carrier under the provisions of the Shipping Act, 1916, or under the provisions of
section 4281 to 4289, inclusive, of the Revised Statutes of the United States, or of
any amendments thereto; or under the provisions of any other enactment for the
time being in force relating to the limitation of the liability of the owners of seagoing
vessels (Section 8).
MAY THE COMMON CARRIER DISCRIMINATE BETWEEN COMPETITING SHIPPERS?
Nothing contained in this Act shall be construed as permitting a common
carrier by water to discriminate between competing shippers similarly place in time
and circumstances, either (a) with respect to the right to demand and receive bills
of lading subject to the provisions of this Act; or (b) when issuing such bills of
lading, either in the surrender of any of the carrier's rights and immunities or in the
increase of any of the carrier's responsibilities and liabilities pursuant to section 6,
title I, of this Act or (c) in any other way prohibited by the Shipping Act, 1916, s
amended (Section 9).
 Page 81
WHEN IS THE WEIGHT STATED IN THE BILL OF LADING NOT A PRIMA FACIE
EVIDENCE OF ITS ACCURACY AGAINST THE CARRIER NOR DEEMED TO BE GUARANTEED
BY THE SHIPPER?
Where under the customs of any trade the weight of any bulk cargo
inserted in the bill of lading is a weight ascertained or accepted by a third party
other than the carrier or the shipper, and the fact that the weight is so ascertained
or accepted is stated in the bill of lading, then, notwithstanding any thing in this Act,
the bill of lading shall not be deemed to be prima facie evidence against the carrier
of the receipt of goods of the weight so inserted in the bill of lading, and the
accuracy thereof at the time of shipment shall not be deemed to have been
guaranteed by the shipper (Section 11).
TO WHAT CONTRACTS SHALL THE COGSA NOT APPLY?
This Act shall apply to all contracts for carriage of goods by sea to or from
ports of the United States in foreign trade. As used in this Act the term "United
States" includes its districts, territories, and possessions: Provided, however, That
the Philippine legislature may by law exclude its application to transportation to or
from ports of the Philippine Islands. The term "foreign trade" means the
transportation of goods between the ports of the United States and ports of foreign
countries. Nothing in this Act shall be held to apply to contracts for carriage of
goods by sea between any port of the United States or its possessions, and any
other port of the United States or its possession: Provided, however, That any bill
of lading or similar document of title which is evidence of a contract for the carriage
of goods by sea between such ports, containing an express statement that it shall
be subject to the provisions of this Act, shall be subjected hereto as fully as if
subject hereto as fully as if subject hereto by the express provisions of this Act:
Provided, further, That every bill of lading or similar document of title which is
evidence of a contract for the carriage of goods by sea from ports of the United
States, in foreign trade, shall contain a statement that it shall have effect subject to
the provisions of this Act (section 13).
WHEN MAY THE PROVISIONS OF COGSA BE SUSPENDED?
Upon the certification of the Secretary of Commerce that the foreign
commerce of the United States in its competition with that of foreign nations is
prejudiced the provisions, or any of them, of Title I of this Act, or by the laws of any
foreign country or countries relating to the carriage of goods by sea, the President
of the United States, may, from time to time, by proclamation, suspend any or all
provisions of Title I of this Act for such periods of time or indefinitely as may be
designated in the proclamation. The President may at any time rescind such
suspension of Title I hereof, and any provisions thereof which may have been
By: Kathryn Pineda – Dela Serna
suspended shall thereby be reinstated and again apply to contracts thereafter
made for the carriage of goods by sea. Any proclamation of suspension or
rescission of any such suspension shall take effect on a date named therein, which
date shall be not less than ten days from the issue of the proclamation.
Any contract for the carriage of goods by sea, subject to the provisions of this Act,
effective during any period when title I hereof, or any part thereof, is suspended,
shall be subject to all provisions of law now or hereafter applicable to that part of
Title I which may have thus been suspended (Section 14).
OTHERS TERMS:
1. WHAT IS BARRATRY?
These are destructive acts committed by the crew against the
vessel.
2. HOW DO YOU DISTINGUISH BARRATRY FROM MUTINY?
Mutiny is the act committed by the crew against the captain for the
purpose of taking over the command of the vessel, while barratry is
committed not for the purpose of taking over the command of the vessel.
3. WHAT IS A LOOKOUT?
It is a member of the crew who is assigned to serve as a lookout,
that is, to watch the direction where the vessel is heading for and to
observe the oncoming vessels for the guidance of the ship navigator.
4. WHAT IS TRANSSHIPMENT?
In maritime law, transshipment is defined as “the act of taking
cargo out of one ship and loading it in another”, or “the transfer of goods
from one vessel stipulated in the contract of affreightment to another
vessel before the place of destination named in the contract has been
reached,”, or “the transfer for further transportation from one ship or
conveyance to another.”
There is transshipment even if the two vessels belong to the same
owner.
-o00o-
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By: Kathryn Pineda – Dela Serna