TRANSPORTATION LAWS

CONTRACT OF TRANSPORTATION/ indifferently and thus is liable for

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

required required  Rationale:

3. As to regulation 1. From the nature of the business and
Subject to State Not subject to for reasons of public policy (Art.
regulation State 1733)
regulation 2. Relationship of trust
4. Stipulation limiting liability 3. Business is impressed with a special
Parties may not Parties may public duty
agree on limit the 4. Possession of the goods
limiting the carrier’s 5. Preciousness of human life
carrier’s liability liability,  A common carrier is not an absolute
except when provided it is insurer of all risks of travel.
provided by law not contrary to
law, morals or COVERAGE
good customs 1. Vigilance over goods (Arts. 1734-1754);
5. Exempting circumstance and
Prove caso fortuito, 2. Safety of passengers (Arts. 1755-1763).
extraordinary Art. 1174 NCC
diligence and PASSENGER
Art. 1733, NCC  A person who has entered into a contract
of carriage, express or implied, with the
6.Presumption of negligence
carrier. They are entitled to extraordinary
There is a No presumption
diligence from the common carrier.
presumption of of fault or
 The following are not considered
fault or negligence
passengers, and are entitled to ordinary
negligence
diligence only:
7.Governing law a. One who has not yet boarded any
Law on Law on part of a vehicle regardless of
common obligations and whether or not he has purchased a
carriers contracts ticket;
b. One who remains on a carrier for an
GOVERNING LAWS unreasonable length of time after he
A. Domestic/inter-island/coastwise has been afforded every safe
 Applicable to Land, Water, and Air opportunity to alight;
transportation c. One who has boarded by fraud,
1. Civil Code - primary stealth, or deceit;
2. Code of Commerce (Arts. 349, 379, d. One who attempts to board a moving
573-734, 580, 806-845) - suppletory vehicle, although he has a ticket,
unless the attempt be with the
B. International/foreign/overseas knowledge and consent of the
(Foreign country to Philippines) carrier;
 Applicable to Water/maritime and Air e. One who has boarded a wrong
transportation vehicle, has been properly informed
 The law of the country of destination of such fact, and on alighting, is
generally applies. injured by the carrier;
1. Civil Code - primary f. Invited guests and accommodation
2. Code of Commerce - suppletory passengers. (Lara vs. Valencia)
3. Others - suppletory g. One who rides any part of the vehicle
a. Water/maritime: Carriage of Goods which is unsuitable or dangerous or
by Sea Act (COGSA) which he knows is not designed or
b. Air: Warsaw Convention intended for passengers.
I. NEW CIVIL CODE DEFENSES OF A COMMON CARRIER IN
(Arts. 1732-1766) THE CARRIAGE OF GOODS
1. CASO FORTUITO/FORCE MAJEURE
REQUIREMENT OF EXTRAORDINARY  Requisites:
DILIGENCE a. Must be the proximate and only
 Rendition of service with the greatest cause of the loss
skill and utmost foresight. (Davao b. Exercise of due diligence to prevent
Stevedore Co. v. Fernandez) or minimize the loss before, during or
 TRANSPORTATION LAWS

after the occurrence of the disaster (Art.
1739)
c. Carrier has not negligently incurred
in delay in transporting the goods (Art.
1740)
 Fire is not considered a natural disaster
or calamity as it arises almost invariably
from some act of man. (Eastern Shipping
Lines Inc. vs. IAC)
 Mechanical defects are not force majeure
if the same was discoverable by regular
and adequate inspections. (Notes and
Cases on the Law on Transportation and
Public Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p.120-122)
2. ACTS OF PUBLIC ENEMY
 Requisites:
a. Must be the proximate and only
cause of the loss
b. Exercise of due diligence to prevent
or minimize the loss before, during or
after the act causing the loss,
deterioration or destruction of the goods
(Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR
OWNER
a. Sole and proximate cause: absolute
defense
b. Contributory: partial defense. (Art.
1741)
4. CHARACTER OF THE GOODS OR
DEFECTS IN THE PACKING OR IN THE
CONTAINER
 Even if the damage should be caused by
the inherent defect/character of the goods,
the common carrier must exercise due
diligence to forestall or lessen the loss.
(Art. 1742)
 The carrier which, knowing the fact of
improper packing of the goods upon
ordinary observation, still accepts the
goods notwithstanding such condition, is
not relieved of liability or loss or injury
resulting therefrom. (Southern Lines, Inc. v.
CA, 4 SCRA 258)
5. ORDER OR ACT OF PUBLIC AUTHORITY
 Said public authority must have the
power to issue the order (Art. 1743).
Consequently, where the officer acts
without legal process, the common carrier
will be held liable. (Ganzon v. CA 161 SCRA
646)
 Diligence in the selection and supervision
of employees under Article 2180 of the Civil
Code cannot be interposed as a defense by
the common carrier because the liability of
the carriers arises from the breach of the
contract of carriage. The defense under
said articles is applicable to negligence in
quasi-delicts under Art. 2176. (Del Prado v.
Manila Electric Co., 52 Phil 900)
LIABILITY OF A COMMON CARRIER FOR
DEATH OR INJURIES TO PASSENGERS
DUE TO ACTS OF ITS EMPLOYEES AND
OTHER PASSENGERS OR STRANGERS
FOR ACTS OF
FOR ACTS OF ITS OTHER
EMPLOYEES PASSENGERS OR
STRANGERS
Required diligence and defense
Extraordinary Ordinary diligence
diligence
Nature of liability
Tort; however, Not absolute;
The employee must limited by Art.
be on duty at the 1763
time of the act.
(Maranan v. Perez)
 The carrier is liable when its
personnel allowed a passenger to
drive the vehicle causing it to collide
with another vehicle resulting to the
injuries suffered by the other
passengers. (MRR vs. Ballesteros, 16
SCRA 641)

CARRIAGE OF GOODS CARRIAGE OF PASSENGERS

Parties
1. Common carrier 1. Common carrier
2. Shipper 2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss, destruction, or Death or injury to the passengers
deterioration of the goods
 TRANSPORTATION LAWS

Duration of liability

From the time the goods are unconditionally The duty of a common carrier to provide
placed in the possession of, and received by safety to its passengers so obligates it not
the carrier for transportation until the sameonly during the course of the trip, but for so
are delivered actually or constructively by long as the passengers are within its
the carrier to the consignee or to the personpremises and where they ought to be in
who has the right to receive them. (Art. pursuance to the contract of carriage. (LRTA
1736) v. Navidad, [2003])
 It remains in full force and effect even  All persons who remain on the premises
when they are temporarily unloaded or within a reasonable time after leaving the
stored in transit unless the shipper or ownerconveyance are to be deemed passengers,
has made use of the right of stoppage in and what is a reasonable time or a
transitu. (Art. 1737) reasonable delay within this rule is to be
 It continues to be operative even during determined from all the circumstances, and
the time the goods are stored in a warehouse includes a reasonable time to see after his
of the carrier at the place of destination until
baggage and prepare for his departure. (La
the consignee has bee advised of the arrival Mallorca v. CA, 17 SCRA 739 ; Abiotiz
of the goods and has had reasonable Shipping Corporation v. CA, 179 SCRA 95)
opportunity thereafter to remove them or  It is the duty of common carriers of
otherwise dispose of them. (Art. 1738) passengers to stop their conveyances a
 Delivery of goods to the custom authoritiesreasonable length of time in order to afford
is not delivery to the consignee. (Lu Do v. passengers an opportunity to enter, and
Binamira, 101 Phil 120) they are liable for injuries suffered from the
sudden starting up or jerking of their
conveyances while doing so. The duty
which the carrier of passengers owes to its
patrons extends to persons boarding the
cars as well as to those alighting therefrom
(Dangwa Trans Co., Inc. vs. CA 202 SCRA
574).
Presumption of negligence

Art.1735 Civil Code Art.1755 Civil Code

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

Defenses

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

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

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

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

 The diligence required in the carriage of

the goods may be reduced by only one
degree, from extraordinary to ordinary
diligence or diligence of a good father of a
family. (Art. 1744, Art. 1745, no. 4)
Void stipulations
5. That the carrier shall not be responsible
for the acts or omissions of his or its Dispensing with or lessening the
employees; extraordinary responsibility of a common
6. That the carrier’s liability for acts carrier for the safety of passengers imposed
committed by thieves or robbers who do not by law by stipulation, by posting of notices,
act with grave or irresistible threat, violence by statements on tickets or otherwise. (Art.
or force is dispensed with or diminished; 1757)
7. That the carrier is not responsible for the
 TRANSPORTATION LAWS

loss, destruction or deterioration of the

goods on account of the defective condition
of the car, vehicle, ship or other equipment
used in the contract of carriage. (Art. 1745)
Rules on Passengers’ Baggage LIABILITY
IN THE IN THE INVALID AS VALID &
CUSTODY OF CUSTODY OF BEING ENFORCEABL
THE THE CONTRARY TO E
PASSENGERS COMMON PUBLIC
(HAND- CARRIER POLICY
CARRIED) (CHECKED- 1. One 1. One limiting
IN) exempting the the liability of
Legal nature of the baggage carrier from any the carrier to
Necessary Considered as and all liability an agreed
deposit “goods” for loss or valuation,
Required diligence by the damage unless the
common carrier occasioned by shipper
Diligence of a Extraordinary its own declares a
depositary diligence negligence. higher value
(ordinary 2. An and pays a
diligence) unqualified higher rate of
Applicable rules limitation of freight
Arts. 1998 and Arts. 1733- liability to an (H.E. Heacock
2000-2003 1753 agreed Company vs.
valuation. Macondray &
CONCURRING CAUSES OF ACTION Company Inc.)
ARISING FROM THE NEGLIGENT ACT OF
THE COMMON CARRIER  However, the carrier cannot limit its
1. Culpa contractual (breach of contract) liability for injury to, or loss of, goods
 Only the carrier is primarily liable and not shipped where such injury or loss was
the driver, because there is no privity caused by its own negligence.
between the driver and the passenger. (Shewaram vs. PAL, 17 SCRA 606)
 Basis: Art.1759, NCC.
 No defense of due diligence in the SPECIAL RULES ON LIABILITES OF
selection and supervision of employees. AIRLINE CARRIERS
1. In case of flight diversion due to bad
2. Culpa aquiliana (quasi-delict) weather or other circumstances beyond the
 The carrier and driver are solidarily liable pilot’s control, the relation between the
as joint tortfeasors. carrier and the passenger continues until
 Basis: Art. 2180, NCC. the latter has been landed at the port of
 Defense of due diligence in the selection destination and has left the carrier’s
and supervision of employees is available. premises. The carrier should necessarily
Exception: maritime tort resulting in exercise extraordinary diligence in
collision. (See notes on Collision) safeguarding the comfort, convenience and
safety of its stranded passengers until they
3. Culpa criminal (criminal negligence) have reached their final destination.
 The driver is primarily liable. The carrier (Philippine Airlines vs. CA, 226 SCRA 423)
is subsidiarily liable only if the driver is 2. Even where overbooking of passengers is
convicted and declared insolvent. allowed as a commercial practice, the airline
 Basis: Art. 100, RPC. company would still be guilty of bad faith
and still be liable for damages if it did not
 In case of injury to a passenger due to the properly inform passenger that it could
negligence of the driver of the bus on which breach the contract of carriage even if they
he is riding and of the driver of another were confirmed passengers. (Zalamea vs.
vehicle, the drivers as well as the owners of CA, 228 SCRA 23)
the two vehicles are jointly and severally 3. An open-dated ticket constitutes a
liable for damages. It makes no difference complete contract between the carrier and
that the liability of the bus driver and owner passenger. Hence, the airline company is
springs from contract while that of the liable if it refused to confirm a passenger’s
owner and driver of the other vehicle arises flight reservation. (Singson vs. CA, 282
from quasi-delict. (Fabre vs. CA) SCRA 149)
4. An airline company which issued a
LIMITATIONS AS TO CARRIER’S confirmed ticket to a passenger covering
successive trips on different airlines can be
held liable for damages occasioned by
“bumping off” by one of the successive
airlines. (Lufthansa German Airlines vs. CA,
238 SCRA 290)
5. An airline ticket providing that carriage
by successive air carriers is to be regarded
as a “single operation” is to make the
issuing carrier liable for the tortuous
conduct of the other carrier. A printed
provision in the ticket limiting liability only
to its own conduct is not enough to rebut
that liability. (KLM Royal Dutch Airlines vs.
CA, 65 SCRA 237)
II. CODE OF COMMERCE
A. OVERLAND TRANSPORTATION
(Arts. 349-379)
Applicability
1. Domestic land and water/maritime
transportation. (Pandect of Commercial Law
and Jurisprudence, Justice Jose Vitug, 1997
ed.)
2. Domestic Air Transportation. (Commercial
Law Review, Cesar Villanueva, 2004 ed.)
IMPORTANT CONCEPTS:
1. Bill of lading
2. Obligations of the carrier
3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
BILL OF LADING
The written acknowledgment of receipt of
goods and agreement to transport them to a
specific place to a person named or to his
order.
Rules:
a. It is not indispensable for the creation
of a contract of carriage. (Compania
Maritima vs. Insurance Company of
North America, 12 SCRA 213)
b. Ambiguity is construed against the
carrier, the contract being one of
adhesion.
c. The consignee, although the
instrument is oftentimes drawn up only
by the consignor and carrier, becomes
bound by all the stipulations contained
therein by making a claim for loss on
the basis of said bill of lading. (Sea-
Land Services Inc. vs. IAC)
d. The right of a party to recover for loss
of shipment consigned to him under a
bill of lading drawn up only by and
between the shipper and the carrier,
springs from either a relation of agency
between him and the shipper, or his
status as stranger in whose favor some
stipulation is made in said contract,
and who becomes a party thereto
when he demands fulfillment of that
stipulation. (Art. 1311 (2), (Mendoza
vs. PAL Inc.)
e. Acceptance of the bill of lading without
dissent raises the presumption that all
the terms therein where brought to the
knowledge of the shipper and agreed
to by him and, in the absence of fraud
or mistake; he is estopped from
thereafter denying that he assented to
such terms. (Notes and Cases on the
Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p.261)
Kinds:
1. On board - issued when the goods have
been actually placed aboard the ship
with very reasonable expectation that
the shipment is as good as on its way.
2. Received - 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.
3. Negotiable - 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 therein.
4. Non-negotiable - One in which it is
stated that the goods referred to
therein will be delivered to a specified
person.
5. Clean – One which does not indicate
any defect in the goods.
6. Foul – One which contains a notation
thereon indicating that the goods
covered by it are in bad condition.
7. Spent – One which covers goods that
already have been delivered by the
carrier without a surrender of a signed
copy of the bill.
8. Through – One issued by the 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 bills.
9. Custody – One wherein the goods are
 already received by the carrier but the
vessel indicated therein has not yet
arrived in the port.
10.Port – One which is issued by the
carrier to whom the goods have been
delivered, and the vessel 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.
(PAL vs. CA)
B. Duty to deliver the goods
Not only to transport the goods safely but to
the person indicated in the bill of lading.
The goods should be delivered to the
consignee or any other person to whom the
bill of lading was validly transferred or
negotiated.

Functions: Time of delivery

1. Best evidence of the existence of the Stipulated in No stipulation
contract of carriage of cargo (Art. 353) Contract/Bill of
2. Document of title Lading
3. Receipt of cargo 1. Carrier is bound 1. Within a
4. Contract to transport and deliver goods to fulfill the contract reasonable time.
as stipulated and is liable for any 2. Carrier is bound
5. Symbol of the goods delay; no matter to forward them in
from what cause it the 1st shipment of
OBLIGATIONS OF THE CARRIER may have arisen. the same or similar
goods which he
A. Duty to accept the goods may make to the
GENERAL RULE: A common carrier cannot point of delivery.
ordinarily refuse to carry a particular class (ART. 358 Code of
of goods. Commerce)
EXCEPTION: For some sufficient reason the
discrimination against the traffic in such Effects of delay
goods is reasonable and necessary. (Fisher a. Merely suspends and generally does not
vs. Yangco Steamship Co. 31 Phil 1). terminate the contract of carriage
b. Carrier remains duty bound to exercise
Instances when the carrier may validly extraordinary diligence
refuse to accept the goods include the ff: c. Natural disaster shall not free the carrier
1.) Goods sought to be transported are from responsibility (Art.1740)
dangerous objects, or substances d. If delay is without just cause, the
including dynamite and other explosives contract limiting the common carrier’s
2.) Goods are unfit for transportation liability cannot be availed of in case of
3.) Acceptance would result in overloading loss or deterioration of the goods
4.) Contrabands or illegal goods (Art.1747)
5.) Goods are injurious to health
6.) Goods will be exposed to untoward RIGHT OF CONSIGNEE TO ABANDON
danger like flood, capture by enemies GOODS
and the like
7.) Goods like livestock will be exposed to Instances:
disease 1. Partial non-delivery, where the goods are
8.) Strike useless without the others (Art. 363);
9.) Failure to tender goods on time. (Notes 2. Goods are rendered useless for sale or
and Cases on the Law on Transportation consumption for the purposes for which
and Public Utilities, Aquino, T. & they are properly destined (Art. 365); and
Hernando, R.P. 2004 ed. p.68) 3. In case of delay through the fault of the
carrier (Art. 371).
In case of carriage by railway, the carrier is
exempted from liability if carriage is insisted NOTICE OF DAMAGE (ART. 366)
upon by the shipper, provided its objections
are stated in the bill of lading. Requisites for applicability:
1. Domestic/inter-island/coastwise
However, when a common carrier accepts transportation
cargo for shipment for valuable 2. Land/water/air transportation
consideration, it takes the risk of delivering 3. Carriage of goods
it in good condition as when it was loaded. 4. Goods shipped are damaged
 Prescriptive period
Rules: None provided; Civil One year from the
a. Patent damage: shipper must file a claim Code applies. date of delivery
against the carrier immediately upon (delivered but
delivery (it may be oral or written) damaged goods),
b. Latent damage: shipper should file a or date when the
claim against the carrier within 24 hours vessel left port or
from delivery. from the date of
delivery to the
Note: These rules does not apply to arrastre (non-
misdelivery of goods. (Roldan vs. Lim Ponzo) delivery or loss).

Purpose of notice: To inform the carrier that COMBINED CARRIER AGREEMENT (ART.
the shipment has been damaged, and it is 373)
charged with liability therefore, and to give GENERAL RULE: In case of a contract of
it an opportunity to make an investigation transportation of several legs, each carrier
and fix responsibility while the matter is is responsible for its particular leg in the
fresh. contract.
EXCEPTION: A combined carrier agreement
The filing of notice of claim is a condition where a carrier makes itself liable assuming
precedent for recovery. the obligations and acquiring as well the
rights and causes of action of those which
Shorter period may be stipulated by the preceded it.
parties because it merely affects the
shipper’s remedy and does not affect the B. MARITIME COMMERCE
liability of the carrier. (PHILAMGEN vs. (Arts. 573-869)
Sweetlines, Inc.)
IMPORTANT CONCEPTS:
Prescriptive Period 1. Merchant vessel
 Not provided by Article 366. Thus, in such 2. Maritime lien and Preference of Credit
absence, Civil Code rules on prescription 3. Doctrine of limited liability
apply. 4. Causes of revocation of voyage
 If despite the notice of claim, the carrier 5. Participants in maritime commerce
refuses to pay, action must be filed in court. 6. Charter party
1. No bill of lading was issued: within 6 7. Loans on bottomry and respondentia
years 8. Accidents in maritime commerce
2. Bill of lading was issued: within 10
years. MARITIME/ADMIRALTY LAW
 It is the system of laws which particularly
ARTICLE 366 COGSA Sec.3 (6) relates to the affairs and business of the
Applicability sea, to ships, their crews and navigation,
1. Domestic/i 1. International/ and to maritime conveyance of persons and
nter-island/ overseas/foreign property. (Notes and Cases on the Law on
coastwise (from foreign Transportation and Public Utilities, Aquino &
transportation country to Phils.) Hernando, citing Francisco, p.254)
2. Land, Note: subject to the
water, air rule on Paramount  Maritime laws apply only to maritime
transportation Clause trade and sea voyages. (Pandect of
3. Carriage 2. Water/maritime Commercial Law and Jurisprudence, Justice
of goods transportation Jose Vitug, 1997 ed.)
3. Carriage of
goods Arrastre service is not maritime in
Notice of damage character. It refers to a contract for the
1. Condition
1. Not a condition unloading of goods from a vessel. (ICTSI vs.
precedent precedent Prudential Guarantee, 320 SCRA 244)
2. 24-hour
2. 3-dayperiod
periodfor
for
claiming latent claiming latent CHARACTERISTICS OF MARITIME
damage damage TRANSACTION
1. Real - similar to transactions over real Effectivity date
property with respect to effectivity 1969 1978
against third persons which is done Applicability
through registration. (Rubiso vs. Rivera, Overseas shipping Both domestic and
37 Phil. 72). The evidence of real nature only overseas shipping
is shown by: 1) the limitation of the Kind of sale
liability of the agents to the actual value Judicial Judicial and
of the vessel and the freight money; and extrajudicial
2) the right to retain the cargo and Order of Preference
embargo and detention of the vessel A preferred The preferred
(Luzon Stevedoring Corp v. CA, 156 mortgage shall mortgage lien shall
SCRA 169); have priority over have priority over
all claims against all claims against
2. Hypothecary - the liability of the owner of the vessel, except the vessel, except
the value of the vessel is limited to the the following the following
vessel itself (Doctrine of Limited Liability). preferences in the preferences in the
order stated: order stated:
 The real and hypothecary nature of 1. Judicial costs of 1. Expenses and
maritime law simply means that the liability the proceedings; fees allowed and
of the carrier in connection with losses 2. Taxes due the costs taxed by the
related to maritime contracts is confined to Philippine court and taxes due
the vessel, which stands as the guaranty for Government; to the Government;
their settlement. (Aboitiz Shipping Corp. vs. 3. Salaries and 2. Crew’s wages;
General Accident Fire and Life Assurance wages of the 3. General average;
Corp. 217 SCRA 359). Captain and Crew of 4. Salvage,
the vessel during its including contract
MERCHANT VESSEL last voyage; salvage;
 Vessel engaged in maritime commerce, 4. General average 5. Maritime liens
whether foreign or otherwise. (Bar Review or salvage including arising prior in time
Materials in Commercial Law, Jorge Miravite, contract salvage, to the recording of
2002 ed.) bottomry loans, and the preferred
 Constitutes property which may be indemnity due mortgage;
acquired and transferred by any of the shippers for the 6. Damages arising
means recognized by law. They shall value of goods out of tort; and
continue to be considered as personal transported but 7. Preferred
property. (Arts. 573, 585) which were not mortgage
 They are susceptible to maritime liens delivered to the registered prior in
such as for the repair, equipping and consignee; time.
provisioning of the vessel in the preparation 5. Costs of repair
of a voyage, as well as mortgage liabilities, and equipment of
in satisfaction of which a vessel may be the vessel, and
validly arrested and sold. (Ship Mortgage provisioning of
Decree of 1978) food, supplies and
fuel during its last
MARITIME LIEN voyage; and
 It constitutes a present right of property 6. Preferred
in the ship, a jus in re, to be afterward mortgages
enforced in admiralty by process in rem. registered prior in
(PNB vs. CA, 337 SCRA 381) time.
 If the maritime lien arose prior to the
recording of a preferred mortgage, it shall  Effect of sale: All pre-existing claims in
have priority over the said mortgage lien. the vessel are terminated. They will then be
(PNB vs. CA, 337 SCRA 381) satisfied from the proceeds of the sale
subject to the order of preference.
ORDER OF PREFERENCE IN CASE OF SALE OF
VESSEL
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
R.A. 6106 P.D. 1521  Cases where applicable:
1. Art. 587 – civil liability for indemnities to What may be abandoned
third persons Vessel Goods shipped
2. Art. 590 – indemnities from negligent Instances
acts of the captain (not the shipowner or 1. In case of civil 1. Partial non-
ship agent) liability from delivery, where the
3. Art. 837 – collision indemnities to third goods are useless
4. Art. 643 – liability for wages of the persons (Art. 587); without the others
captain and the crew and for advances 2. Sec. 138, (Art. 363);
made by the ship agent if the vessel is Insurance Code; 2. Goods are
lost by shipwreck or capture 3. In case of leakage rendered useless
of at least ¾ of the for sale or
GENERAL RULE: The liability of shipowner contents of a cargo consumption for
and ship agent is limited to the amount of containing liquids the purposes for
interest in said vessel such that where (Art. 687) which they are
vessel is entirely lost, the obligation is properly destined
extinguished. (Luzon Stevedoring v. Escano, (Art. 365); and
156 SCRA 169) The interest extends to: 1) 3. In case of delay
the vessel itself; 2) equipments; 3) through the fault of
freightage; and 4) insurance proceeds. the carrier (Art.
(Chua v. IAC, 166 SCRA 183) 371).
Effects
EXCEPTIONS: 1. Transfer of 1. Transfer of
1. Claims under Workmen’s Compensation ownership of the ownership on the
(Abueg vs. San Diego 77 Phil 730); vessel from the goods from the
2. Injury or damage due to shipowner or to shipowner to the shipper to the
the concurring negligence of the shippers or insurer. carrier.
shipowner and the captain; 2. In case of (2), 2. Carrier should
3. The vessel is insured (Vasquez vs. CA the insurer must pay pay the shipper the
138 SCRA 553). the insured as if market value of the
4. Expenses for repair on vessel completed there was actual goods at the point
before loss; total loss of the of destination.
5. In case there is no total loss and the vessel.
vessel is not abandoned;
6. Collision between two negligent vessels; CAUSES OF REVOCATION OF VOYAGE
1. War or interdiction of commerce;
 Abandonment of the vessel is necessary 2. Blockade;
to limit the liability of the shipowner. The 3. Prohibition to receive cargo at
only instance were abandonment is destination;
dispensed with is when the vessel is entirely 4. Embargo;
lost (Luzon Stevedoring vs. CA 156 SCRA 5. Inability of the vessel to navigate. (Art.
169). 640)

RIGHT OF SHIPOWNER OR SHIP AGENT Terms:

TO ABANDON VESSEL 1. Interdiction of commerce – A
governmental prohibition of commercial
Instances: intercourse intended to bring about an
1. In case of civil liability from entire cessation for the time being of all
indemnities to third persons (Art. 587); trade whatever.
2. In case of leakage of at least ¾ of 2. Blockade – A sort of circumvallation of a
the contents of a cargo containing liquids place by which all foreign connection and
(Art. 687); and correspondence is, as far as human
3. In case of constructive loss of the power can effect it, to be cut off.
vessel (Sec. 138, Insurance Code). 3. Embargo – A proclamation or order of a
state, usually issued in time of war or
RIGHT OF ABANDONMENT threatened hostilities, prohibiting the
departure of ships or goods from some
SHIPOWNER OR CONSIGNEE or all the ports of such state until further
SHIP AGENT order.
PARTICIPANTS IN MARITIME
COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
 Person who has possession, control and
management of the vessel and the
consequent right to direct her navigation
and receive freight earned and paid, while
his possession continues.
Ship agent (naviero)
 Person entrusted with provisioning and
representing the vessel in the port in which
it may be found; also includes the
shipowner.
 Not a mere agent under civil law; he is
solidarily liable with the ship owner.
 Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject
to Art.609;
3. Contract in the name of the owners with
respect to repairs, details of equipment,
armament, provisions of food and fuel,
and freight of the vessel, and all that
relate to the requirements of navigation;
4. Order a new voyage, make a new charter
or insure the vessel after obtaining
authorization from the shipowner or if
granted in certificate of appointment.
Civil Liabilities of the Shipowner And
Ship Agent
1. All contracts of the captain, whether
authorized or not, to repair, equip and
provision the vessel; (Art. 586)
2. Loss and damage to the goods loaded on
the vessel without prejudice to their right
to free themselves from liability by
abandoning the vessel to the creditors.
(Art. 587)
Duty of Ship Agent to Discharge the
Captain and Members of the Crew
 If the seamen contract is not for a definite
period or voyage, he may discharge them at
his discretion. (Art. 603)
 If for a definite period, he may not
discharge them until after the fulfillment of
their contracts, except on the following
grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to its
cargo through malice or manifest or
proven negligence. (Art. 605)
B. CAPTAINS AND MASTERS
 They are the chiefs or commanders of
ships.
 The terms have the same meaning, but
are particularly used in accordance with the
size of the vessel governed and the scope of
transportation, i.e., large and overseas, and
small and coastwise, respectively.
 Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government of
the country under whose flag he
navigates.
 Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required
physical and mental examinations
required for licensing him as such.
(Art. 609)
 Inherent powers:
1. Appoint crew in the absence of ship
agent;
2. Command the crew and direct the
vessel to its port of destination;
3. Impose correctional punishment on
those who, while on board vessel, fail
to comply with his orders or are
wanting in discipline;
4. Make contracts for the charter of
vessel in the absence of ship agent.
5. Supply, equip, and provision the
vessel; and
6. Order repair of vessel to enable it to
continue its voyage. (Art. 610)
 Sources of funds to comply with the
inherent powers of the captain (in
successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
 Duties:
1. Bring on board the proper certificate
and documents and a copy of the
Code of Commerce;
2. Keep a Log Book, Accounting Book
and Freight Book;
3. Examine the ship before the voyage;
 4. Stay on board during the loading and
unloading of the cargo;
5. Be on deck while leaving or entering
the port;
6. Protest arrivals under stress and in
case of shipwreck;
7. Follow instructions of and render an
accounting to the ship agent;
8. Leave the vessel last in case of
wreck;
9. Hold in custody properties left by
deceased passengers and crew
members;
10.Comply with the requirements of
customs, health, etc. at the port of
arrival;
11.Observe rules to avoid collision;
12.Demand a pilot while entering or
leaving a port. (Art. 612)
 A ship’s captain must be accorded a
reasonable measure of discretionary
authority to decide what the safety of the
ship and of its crew and cargo specifically
requires on a stipulated ocean voyage
(Inter-Orient Maritime Enterprises Inc. vs.
CA).
 No liability for the following:
1. Damages caused to the vessel or to
the cargo by force majeure;
2. Obligations contracted for the repair,
equipment, and provisioning of the
vessel unless he has expressly bound
himself personally or has signed a bill
of exchange or promissory note in his
name. (Art. 620)
Solidary Liabilities of the Ship
Agent/Shipowner for Acts Done by the
Captain towards Passengers and
Cargoes
1. Damages to vessel and to cargo due
to lack of skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of
marine regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
 No liability under the following
circumstances:
1. If, before beginning voyage, captain
attempts to change it, or a naval war
with the power to which the vessel was
destined occurs;
2. If a disease breaks out and be officially
declared an epidemic in the port of
destination;
3. If the vessel should change owner or
captain. (Art. 647)
Sailing Mate/First Mate
 Second chief of the vessel who takes the
place of the captain in case of absence,
sickness, or death and shall assume all of
his duties, powers and responsibilities. (Art.
627)
 Duties:
1. Provide himself with maps and charts
with astronomical tables necessary
for the discharge of his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on
consultation with the captain and the
officers of the boat, following the
decision of the captain in case of
disagreement;
4. Responsible for all the damages
caused to the vessel and the cargo by
reason of his negligence. (Arts. 628 -
631)
Second Mate
 Takes command of the vessel in case of
the inability or disqualification of the captain
and the sailing mate, assuming in such case
their powers and responsibilities.
 Third in command
 Duties:
1. Preserve the hull and rigging of the
vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment
of the vessel, if laid up. (Art. 632)
Engineers
 Officers of the vessel but have no
authority except in matters referring to the
motor apparatus. When two or more are
hired, one of them shall be the chief
engineer.
 Duties:
1. In charge of the motor apparatus,
spare parts, and other instruments
pertaining to the engines;
 2. Keep the engines and boilers in good
condition;
3. Not to change or repair the engine
without authority of the captain;
4. Inform the captain of any damage to
the motor apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining
the engine. (Art. 632)
Crew
 The aggregate of seamen who man a
ship, or the ship’s company.
 Hired by the ship agent, where he is
present and in his absence, the captain
hires them, preferring Filipinos, and in their
absence, he may take in foreigners, but not
exceeding 1/5 of the crew. (Art. 634)
Classes of Seaman’s Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of
Seaman While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of
discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
 The seaman’s heirs are entitled to
payment as follows:
1. If death is natural:
a. compensation up to time of death if
engaged on wage
b. if by voyage - half of amount if death
occurs on voyage out; and full, if on
voyage in
c. if by shares - none, if before
departure; full, if after departure
2. if death is due to defense of vessel - full
payment;
3. if captured in defense of vessel - full
payment;
4. if captured due to carelessness - wages
up to the date of the capture. (Art. 645)
Complement of the Vessel
 All persons on board, from the captain to
the cabin boy, necessary for the
management, maneuvers, and service, thus
including the crew, the sailing mates,
engineers, stokers and other employees on
board not having specific designations.
 Does not include the passengers or the
persons whom the vessel is transporting.
D. SUPERCARGOES
 Persons who discharges administrative
duties assigned to him by ship agent or
shippers, keeping an account and record of
transaction as required in the accounting
book of the captain. (Art. 649)
E. PILOT
 A person duly qualified, and licensed, to
conduct a vessel into or out of ports, or in
certain waters.
 The term generally connotes a person
taken on board at a particular place for the
purpose of conducting a ship through a
river, road or channel, or from a port.
 Master pro hac vice for the time being in
the command and navigation of the ship.
 While in exercising his functions a pilot is
in sole command of the ship and supersedes
the master for the time being in the
command and navigation of the ship, the
master does not surrender his vessel to the
pilot and the pilot is not the master. There
are occasions when the master may and
should interfere and even displace the pilot,
as when the pilot is obviously incompetent
or intoxicated (Far Eastern Shipping
Company vs. CA).
 Compulsory Pilotage – States possessing
harbors have enacted laws or promulgated
rules requiring vessels approaching their
ports to take on board pilots licensed under
the local laws. (Notes and Cases on the Law
on Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.
518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage
grounds, the Harbor Pilot is responsible for
damage to a vessel or to life or property due
to his negligence.
EXCEPT:
1. Accident caused by force majeure or
natural calamity provided the pilot
exercised prudence and extra diligence to
prevent or minimize damages.
2. Countermand or overrule by the master
of the vessel in which case the registered
owner of the vessel is liable. (Sec.11, Art.III
PPA Admin Order 03-85)
SPECIAL CONTRACTS OF MARITIME
COMMERCE
1. Charter party
2. Bill of lading
 3. Contract of transportation of leased for one or series of voyages
passengers on sea voyages usually for purposes of transporting
4. Loan on bottomry goods for charterer.
5. Loan on respondentia
6. Marine insurance LEASE CHARTER PARTY
If for a definite Charterer may
CHARTER PARTY period, lessee rescind charter
 A contract by virtue of which the owner or cannot give up the party by paying half
agent binds himself to transport lease by paying a of the freightage
merchandise or persons for a fixed price. portion of the agreed upon.
 A contract by which an entire ship, or amount agreed
some principal part thereof is let/leased by upon.
the owner to another person for a specified If the leased The new owner is
time or use. (Planters Products, Inc. vs. CA, property is sold to not compelled to
226 SCRA 476) one who knows of respect the charter
the existence of the party so long as he
Parties: lease, the new can load the vessel
1. Ship owner or ship agent owner must respect with his own cargo.
2. Charterer the lease. (Art. 689)
Civil law concept Commercial law
Classes: concept
1. Bareboat or demise – The charterer
provides crew, food and fuel. The charterer CHARTER PARTY BILL OF LADING
is liable as if he were the owner, except An entire or More like a private
when the cause arises from the complete contract. receipt which the
unworthiness of the vessel. The shipowner captain gives to
leases to the charterer the whole vessel, accredit goods
transferring to the latter the entire received from
command, possession and consequent persons
control over the vessel’s navigation,
Consensual contract Real contract
including the master and the crew, who
thereby become the charter’s servants. It
BAREBOAT OR CONTRACT OF
transforms a common carrier into a private
DEMISE CHARTER AFFREIGHTMENT
carrier.
(TIME OR VOYAGE
CHARTER)
The charterer becomes the owner of the
vessel pro hac vice, just for that one Charterer becomes Owner remains
particular purpose only. Because the liable to others liable as carrier and
charterer is treated as owner pro hac vice, caused by its must answer for
the charterer assumes the customary rights negligence any breach of duty
and liabilities of the shipowner to third Charterer regarded Charterer is not
persons and is held liable for the expense of as owner pro hac regarded as owner.
the voyage and the wages of the seamen. vice for the voyage
Owner of vessel The vessel owner
2. Contract of Affreightment – A contract relinquishes retains possession,
whereby the owner of the vessel leases part possession, command and
or all of its space to haul goods for others. command and navigation of the
navigation to ship
The shipowner retains the possession, charterer
command and navigation of the ship, the Common carrier is Common carrier is
charterer merely having use of the space in converted to not converted to a
the vessel in return for his payment of the private carrier. private carrier.
charter hired.
PERSONS WHO MAY MAKE A CHARTER
Kinds: 1. Owner or owners of the vessel, either
a. Time charter – vessel is chartered for in whole or in majority part, who have
a fixed period of time or duration of legal control and possession of the
voyage. vessel
b. Voyage or trip charter – the vessel is 2. Charterer may subcharter entire
 vessel to 3rd person only if not 3. To unload cargo others for loading
prohibited in original charter. clandestinely uncontracted cargo
(Art.679) placed and illicit cargo;
3. Ship agent if authorized by the 4. To substitute 4. To wait if the
owner/s or given such power in the another vessel if vessel needs
certificate of appointment. (Art.598) load is less than 3/5 repair;
4. Captain in the absence of the ship of capacity; 5. To pay
agent or consignee and only if he acts 5. To leave the port expenses for
in accordance with the instructions of if the charterer deviation. (Arts.
the agent or owner and protects the does not bring the 679-687)
latter’s interests. (Art.609) cargo within the lay
days and extra lay
REQUISITES OF A VALID CHARTER days allowed;
PARTY 6. To place in a
1. Consent of the contracting parties vessel in a
2. Existing vessel which should be condition to
placed at the disposition of the navigate;
shipper 7. to bring cargo to
3. Freight nearest neutral port
4. Compliance with Art. 652 of the Code in case of war or
of Commerce blockade. (Arts.
Clauses Which May Be Included In a 669-678)
Charter Party
Jason clause Clause paramount
or paramount Rescission of a Charter Party
clause At At Fortuitous
A stipulation in a A clause in a charterer’s shipowner’ causes
charter party that in charter party request s request (Art. 690)
case of a maritime providing that the (Art 688) (Art. 689)
accident for which COGSA shall apply,
the shipowner is not even though the 1. By 1. If the 1. War or
responsible by law, transportation is abandoning extra lay interdiction
contract or domestic, subject to the charter days of
otherwise, the the extent that any and paying terminate commerce;
cargo shippers, term of the bill of half of the without the 2. Blockade;
consignees or lading is repugnant freightage; cargo being 3.
owners shall to the COGSA or 2. Error in placed Prohibition
contribute with the applicable law, then tonnage or alongside to receive
shipowner in to the extent flag; the vessel; cargo;
general average. thereof the 3. Failure to 2. Sale by 4. Embargo;
(Pandect of provision of the bill place the the owner of and
Commercial Law of lading is void. vessel at the the vessel 5. Inability of
and Jurisprudence, (Pandect of charterer’s before the vessel to
Justice Jose Vitug, Commercial Law disposal; loading by navigate.
1997 ed.) and Jurisprudence, 4. Return of the
Justice Jose Vitug, the vessel charterer;
1997 ed.) due to
pirates,
Rights and Obligations of Parties enemies or
bad
SHIPOWNER OR CHARTERER weather;
SHIP AGENT 5. Arrival at
1. If the vessel is 1. To pay the a port for
chartered wholly, agreed charter repairs.
not to accept cargo price;
from others; 2. To pay Terms:
2. To observe freightage on 1. Primage - bonus to be paid to the
represented unboarded cargo; captain after the successful voyage.
capacity; 3. To pay losses to
2. Demurrage – the sum fixed in the charter Loan made by Loan taken on
party as a remuneration to the owner of shipowner or ship security of the
the ship for the detention of his vessel agent guaranteed cargo laden on a
beyond the number of days allowed by by vessel itself and vessel, and
the charter party for loading or unloading repayable upon repayable upon safe
or for sailing. arrival of vessel at arrival of cargo at
3. Deadfreight – the amount paid by or destination. (Art. destination. (Art.
recoverable from a charterer of a ship for 719) 719)
the portion of the ship’s capacity the
latter contracted for but failed to occupy. Who may contract
4. Lay Days - days allowed to charter Shipowner or ship Only the owner of
parties for loading and unloading the agent. Outside of the cargo.
cargo. the residence of the
5. Extra Lay Days – days which follow after owners - the
the lay days have elapsed. captain.
Common elements:
USUAL FORMS OF CONSUMMATING 1. Exposure of security to marine peril;
CONTRACTS 2. Obligation of the debtor conditioned
1. C.I.F. – cost, insurance and freight; only upon safe arrival of the security at
2. F.O.B. - free on board; the point of destination.
3. F.A.S. - free alongside ship; and Forms:
4. C. & F. - cost and freight. 1. Public instrument
2. Policy signed by the contracting parties
TRANSSHIPMENT OF GOODS and the broker taking part therein
 The act of taking cargo out of one ship 3. Private instrument (Art. 720)
and loading it in another, or the transfer of Contents:
goods from the vessel stipulated in the 1. Kind, name and registry of the vessel;
contract of affreightment to another vessel 2. Name, surname and domicile of the
before the place of destination named in the captain;
contract has been reached, or the transfer 3. Names, surnames and domiciles of the
for further transportation from one ship or borrower and the lender;
conveyance to another. 4. Amount of the loan and the premium
 It is not dependent on the ownership of stipulated;
the transporting ships or in the change of 5. Time for repayment;
carriers, but rather on the fact of actual 6. Goods pledged to secure repayment;
physical transfer of cargo from one vessel to 7. Voyage during which the risk is run
another. (Art.721)
 If done without legal excuse, however
competent and safe the vessel into which
the transfer is made, is a violation of BOTTOMRY/ ORDINARY LOAN
contract and infringement of right of shipper RESPONDENTIA (MUTUUM)
and subjects carrier to liability if freight is
Not subject to Usury Subject to Usury
lost event by cause otherwise excepted.
Law Law
(Magellan Manufacturing vs. CA, 201 SCRA
Liability of the Not subject to any
102)
borrower is contingency
contingent on the (absolute liability)
LOAN ON BOTTOMRY AND
safe arrival of the
RESPONDENTIA
vessel or cargo at
 A real, unilateral, aleatory contract, by
destination
virtue of which one person lends to another
a certain amount of money or goods on The last lender is a The first lender is a
things exposed to maritime risks, which preferred creditor preferred creditor
amount, with its earnings, is to be returned
if the things are safely transported, and WHEN LOAN ON BOTTOMRY OR
which is lost if the latter are lost. RESPONDENTIA REGARDED AS SIMPLE
LOAN
1. Lender loaned an amount larger than
LOAN ON LOAN ON
the value of the object due to
BOTTOMRY RESPONDENTIA
fraudulent means employed by the
Definition
borrower. (ART.726)
 2. Full amount of the loan is not used for case of shipwreck shall be divided
the cargo or given on the goods if all between the lender and the insurer in
of them could not have been loaded, proportion to the interest of each one.
the balance will be considered a (Art. 735)
simple loan. (ART.727)
3. If the effects on which the money is Note: If a vessel is hypothecated by
taken is not subjected to any risk. bottomry only the excess is insurable, since
(ART.729) a loan on bottomry partakes of the nature
likewise of an insurance coverage to the
Note: Under existing laws, the parties to a extent of the loan accommodation. The
loan, whether ordinary or maritime, may same rule would apply to the hypothecation
agree on any rate of interest. (CB Circular of the cargo by respondentia. (Pandect of
905) Commercial Law and Jurisprudence, Justice
Jose Vitug, 1997 ed.)
MARINE INSURANCE LOAN ON
BOTTOMRY OR ACCIDENTS IN MARITIME COMMERCE
RESPONDENTI 1. Averages
A 2. Arrival Under Stress
Indemnity is paid after Indemnity is paid 3. Collision
the loss has occurred in advance by 4. Shipwreck
way of a loan
In case of loss of the In case of loss of AVERAGE
vessel due to a risk the vessel due to  An extraordinary or accidental expense
insured against, the a marine peril, incurred during the voyage in order to
obligation of the the obligation of preserve the cargo, vessel or both, and all
insurer becomes the borrower to damages or deterioration suffered by the
absolute pay is vessel from departure to the port of
extinguished destination, and to the cargo from the port
Consensual contract Real contract of loading to the port of consignment. (Art.
806)
Hypothecary Nature of Bottomry/  The person whose property has been
Respondentia saved must contribute to reimburse the
damage caused or expense incurred if the
GENERAL RULE: The obligation of the situation constitutes general average.
borrower to pay the loan is extinguished if  Classes:
the goods given as security are absolutely 1. Particular or Simple Average
lost by reason of an accident of the sea, 2. Gross or General Average
during the voyage designated, and if it is  Where both vessel and cargo are saved, it
proven that the goods were on board. is general average; where only the vessel or
only the cargo is saved, it is particular
EXCEPTIONS: average.
1. Loss due to inherent defect;  Expenses incurred to refloat a vessel,
2. Loss due to the barratry on the part of which accidentally ran aground, in order to
the captain; continue its voyage, do not constitute
3. Loss due to the fault or malice of the general average. Not only is there absence
borrower; of a marine peril, common safety factor, and
4. The vessel was engaged in contraband; deliberateness. It is the safety of the
and property, and not the voyage, which
5. The cargo loaded on the vessel be constitutes the true foundation of general
different in from that agreed upon. average. (A. Magsaysay, Inc. vs. Agan,
G.R.No. L-6393, Jan. 31, 1955)
Concurrence of Marine Insurance and
Loan on Bottomry/Respondentia
1. The insurable interest of the owner of PARTICULAR GROSS OR
a ship hypothecated by bottomry is OR SIMPLE GENERAL
only the excess of the value over the Definition
amount secured by bottomry. (Sec. Damages or Damages or
101, Insurance Code) expenses expenses
2. The value of what may be saved in caused to the deliberately
vessel or cargo caused in deliberation
that did not order to save 2. Resolution of
inure to the the vessel, its the captain
common cargo or both 3. Entry of the
benefit, and from real and resolution in
borne by known risk. the logbook
respective (Art. 811) 4. Detailed
owners. (Art. minutes
809) 5. Delivery of
Requisites the minutes to
1. common the maritime
danger; judicial
2. deliberate authority of
sacrifice; the first port,
3. success; within 24
4. proper hours from
formalities arrival,
and legal 6. Ratification
steps. by captain
Liability under oath.
The owner of All the persons (Arts. 813-814)
the goods having an
which gave rise interest in the GOODS NOT COVERED BY GENERAL
to the expense vessel and the AVERAGE EVEN IF SACRIFICED
or suffered the cargo therein 1. Goods carried on deck. (ART.855)
damage shall at the time of 2. Goods not recorded in the books or
bear this the occurrence records of the vessel. (ART.855 (2))
average. (Art. of the average 3. Fuel for the vessel if there is more
810) shall than sufficient fuel for the voyage.
contribute to (Rule IX, York-Antwerp Rule)
satisfy this
average. (Art. Jettison
812)  Act of throwing cargo overboard in order
 The insurers to lighten the vessel.
(Art.859) and  Order of goods to be cast overboard:
lenders on 1. Those which are on the deck,
bottomry and preferring the heaviest one with the
respondentia least utility and value;
shall likewise 2. Those which are below the upper
contribute. deck, beginning with the one with
(Art.732). greatest weight and smallest value.
Number of interests involved (Art. 815)
Only one Several
interest interests  Jettisoned goods are not res nullius nor
involved involved deemed “abandoned” within the meaning of
Share in the damage or civil law so as to be the object of occupation
expense by salvage. (Pandect of Commercial Law
100% share In proportion and Jurisprudence, Justice Jose Vitug, 1997
to the value of ed.)
the owner’s  In order that the jettisoned goods may be
property saved included in the gross or general average,
Right to recover the existence of the cargo on board should
No There may be be proven by means of the bill of lading.
reimbursement reimbursement (Art. 816)
Kinds (not exclusive)
Art. 809 Art. 811 York-Antwerp (Y-A) Rules on
Procedure for recovery Determining Liability for Averages With
Regard To Deck Cargo
1. Assembly
and
1. Deck cargo is allowed only in of the improper of a
domestic/coastwise/inter-island shipping, sea repair; lawful
and is prohibited in disabling and arrival.
international/overseas/foreign shipping. it to 4. Malice, (Art. 821)
2. If deck cargo is loaded with the consent navigate. negligenc
of the shipper on overseas trade, it must (Art. 819) e, lack of
always contribute to general average, but foresight
should the same be jettisoned, it would not or skill of
be entitled to reimbursement because there captain.
is violation of the Y-A Rules. (Art. 820)
3. If deck cargo is loaded with the consent
of the shipper on coastwise shipping, it must  It is the duty of the captain to continue
always contribute to general average and if the voyage without delay after the cause of
jettisoned would be entitled to the arrival under stress has ceased failing in
reimbursement. such duty renders him liable. However, in
 Reason: In domestic shipping, voyages are usually short case the cause has been risk of enemies,
and the seas are generally not rough. In overseas shipping, there must first be an assembly before
the vessel is exposed for many days to perils of the sea. departure. (Art. 825)
 Steps:
DOMESTIC INTERNATION 1. Captain should determine during the
AL voyage if there is well founded fear of
Deck cargo is Deck cargo is seizure, privateers and other valid
allowed not allowed grounds;
With shipper’s consent 2. Captain shall assemble the officers
General Particular and summon the persons interested
average average in the cargo who may attend the
Without shipper’s consent meeting but without a right to vote;
Captain is liable Captain is 3. The officers shall determine and
liable agree if there is well-founded reason
after examining the circumstances.
ARRIVAL UNDER STRESS (ARRIBADA) The captain shall have the deciding
 The arrival of a vessel at the nearest and vote;
most convenient port instead of the port of 4. The agreement shall be drafted and
destination, if during the voyage the vessel the proper minutes shall be signed
cannot continue the trip to the port of and entered in the log book;
destination. 5. Objections and protests shall likewise
be entered in the minutes.
When When Who
lawful unlawful bears COLLISION
expense  Impact of two vessels both of which are
s: moving.

The 1. Lack of The Allision

inability provisions shipowne  Impact between a moving vessel and a
to due to r or ship stationary one.
continue negligenc agent is
voyage is e to carry liable in Nautical Rules to Determine
due to according case of Negligence
lack of to usage unlawful 1. When two vessels are about to enter a
provision and arrival port, the farther one must allow the
s, well- customs; under nearer to enter first; if they collide, the
founded 2. Risk of stress. fault is presumed to be imputable to the
fear of enemy But they one who arrived later, unless it can be
seizure, not well shall not proved that there was no fault on its
privateer known or be liable part.
s, manifest for the 2. When two vessels meet, the smaller
pirates, 3. Defect damages should give the right of way to the larger
or of vessel caused one.
accidents due to by reason 3. A vessel leaving port should leave the
 way clear for another which may be
entering the same port.
4. The vessel which leaves later is
presumed to have collided against one
which has left earlier.
5. There is a presumption against the
vessel which sets sail in the night.
6. There is a presumption against the
vessel with spread sails which collides
with another which is at anchor and
cannot move, even when the crew of the
latter has received word to lift anchor,
when there was not sufficient time to do
so or there was fear of a greater damage
or other legitimate reason.
7. There is a presumption against an
improperly moored vessel.
8. There is a presumption against a vessel
which has no buoys to indicate the
location of its anchors to prevent
damage to vessels which may approach
it.
9. Vessels must have “proper look-outs” or
persons trained as such and who have
no other duty aside therefrom. (Smith
Bell v. CA)
Nautical Rules as to Sailing Vessel and
Steamship
1. Where a steamship and a sailing vessel
are approaching each other from
opposite directions, or on intersecting
lines, the steamship from the moment
the sailing vessel is seen, shall watch
with the highest diligence her course and
movements so as to be able to adopt
such timely means of precaution as will
necessarily prevent the two boats from
coming in contact.
2. The sailing vessel is required to keep her
course unless the circumstances require
otherwise.
Zones of Time in the Collision of
Vessels
1. First zone – all time up to the moment
when risk of collision begins.
 No rule is as yet applicable for none is
necessary.
2. Second zone – time between moment
when risk of collision begins and moment it
becomes a practical certainty.
 It is in this period where conduct of the
vessels is primordial. It is in this zone that
vessels must strictly observe nautical rules,
unless a departure therefrom becomes
necessary to avoid imminent danger.
3. Third zone – time when collision is
certain and time of impact.
 An error in this zone would no longer be
legally consequential.
 Error in Extremis - sudden movement
made by a faultless vessel during the third
zone of collision with another vessel which
is at fault during the 2nd zone. Even if such
sudden movement is wrong, no
responsibility will fall on said faultless
vessel. (Urrutia and Co. v. Baco River
Plantation Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
 Vessel at fault is liable for damage
caused to innocent vessel as well as
damages suffered by the owners of cargo of
both vessels. (Art. 826)
2. Both vessels at fault
 Each vessel must bear its own loss, but
the shippers of both vessels may go against
the shipowners who will be solidarily liable.
(Art. 827)
3. Vessel at fault not known
 Each vessel must bear its own loss, but
the shippers of both vessels may go against
the shipowners who will be solidarily liable.
(Art. 828)
 Doctrine of Inscrutable Fault – In case
of collision where it cannot be
determined which between the two
vessels was at fault, both vessels bear
their respective damage, but both should
be solidarily liable for damage to the
cargo of both vessels.
4. Third vessel at fault
 The third vessel will be liable for losses
and damages. (Art. 831)
5. Fortuitous event/force majeure
 No liability. Each bears its own loss. (Art.
830)
 The doctrine of res ipsa loquitur applies in
case a moving vessel strikes a stationary
object, such as a bridge post, dock, or
navigational aid. (Far Eastern Shipping v.
CA, Luzon Stevedoring vs. CA)
 Even if the cause of action against the
common carrier is based on quasi-delict, the
defense of due diligence in the selection
and supervision of employees is unavailing
in case of a maritime tort resulting in
collision. It is not a civil tort governed by the
Civil Code but a maritime one governed by
Arts. 826-839 of the Code of Commerce.
(Manila Steamship vs. Insa Abdulhaman)
 Doctrine of Last Clear Chance and Rule on
Contributory Negligence cannot be applied
in collision cases because of Art.827 of the
Code of Commerce. (Notes and Cases on
the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004
ed.)
MARITIME PROTEST
 Condition precedent or prerequisite to
recovery of damages arising from collisions
and other maritime accidents.
 It is a written statement made under oath
by the captain of a vessel after the
occurrence of an accident or disaster in
which the vessel or cargo is lost or
damaged, with respect to the circumstances
attending such occurrence, for the purpose
of recovering losses and damages.
 Excuses for not filing protest: 1) where
the interested person is not on board the
vessel; and 2) on collision time, need not be
protested. (Art. 836)
 Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a
hurricane or when the captain
believes that the cargo has suffered
damages or averages (Art. 624).
 Who makes: Captain
 When made: within 24 hours from the
time the collision took place.
 Before whom made: competent authority
at the point of collision or at the first port of
arrival, if in the Philippines and to the
Philippine consul, if the collision took place
abroad. (Art. 835)
SHIPWRECK
 It is the loss of the vessel at sea as a
consequence of its grounding, or running
against an object in sea or on the coast. It
occurs when the vessel sustains injuries due
to a marine peril rendering her incapable of
navigation.
 If the wreck was due to malice,
negligence or lack of skill of the captain, the
owner of the vessel may demand indemnity
from said captain. (Art. 841)
 The rules on collision or allision, as may
be pertinent, can equally apply to
shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
 A contract for the unloading of goods
from a vessel.
 Applicability: Overseas trade only.
(Commercial Law Review, C. Villanueva,
2004 ed.)
 Significance: When a person brings in
cargo from abroad, he cannot unload and
deliver the cargo by himself. The unloading
must be done by the arrastre operator,
which will then deliver the cargo to the
importer. (Commercial Law Review, C.
Villanueva, 2004 ed.)
 Nature of business: It is a public utility,
discharging functions which are heavily
invested with public interest.
 Liability:
1. Similar to a warehouseman (Lua Kian v.
Manila Railroad)
2. Similar to a common carrier (Northern
Motors v. Prince Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator
may be held liable, the consignee must
prove that the damage was due to the
negligence and while the goods are in the
custody of the arrastre operator. (Hartford
Fire Insurance v. E. Razon, Inc.)
STEVEDORING SERVICE
 The carriage of goods from the
warehouse or pier to the holds of the vessel.
(Chief of Staff vs. CIR)
 As understood in the port business, the
term consists of the handling of cargo from
the hold of the ship to the dock, in case of
pier-side unloading; or to a barge, in case of
unloading at sea. (Anglo-Fil Trading Corp.
vs. Lazaro)
 The loading on the ship of outgoing cargo
is also part of stevedoring work. (Ibid.)
CONTAINERIZATION/ “SAID-TO-
CONTAIN”/ “SHIPPER’S LOAD AND
COUNT” SYSTEM
 System whereby the shipper loads his
cargoes in a specially designed container,
seals the container and delivers it to the
carrier for transportation. The carrier does
not participate in the counting of the
merchandise for loading into the container,
the actual loading, and the sealing of the
container. (US Lines v. Comm. Of Customs,
ICTSI v. Prudential Guarantee)
 The matter of quantity, description and
conditions of the cargo inside the container
is the sole responsibility of the shipper,
unless there is stipulation to the contrary.
(US Lines vs. Comm. Of Customs, Reyma
Brokerage v. Phil. Home Assurance)
Note: In order to attribute to the carrier any
damage to the shipment that may be found,
inspection of the goods should be done at
pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA
ACT/COGSA (C.A. No. 65)
APPLICABILITY
 The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from
foreign port to Philippine port).
 It can be applied in domestic sea
transportation if agreed upon by the parties.
(Clause paramount or paramount clause)
IMPORTANT FEATURES:
1. Amount of carrier’s liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIER’S LIABILITY
 Under the Sec. 4(5), the liability limit is
set at $500 per package or customary
freight unit unless the nature and value of
such goods is declared by the shipper. This
is deemed incorporated in the bill of lading
even if not mentioned in it. (Eastern
Shipping vs. IAC, 150 SCRA 463)
 Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
 Rules:
a. Patent damage: shipper should file a
claim with the carrier immediately upon
delivery
b. Latent damage: shipper should file a
claim with the carrier within three days
from delivery.
Note: The filing of a notice of claim is not a
condition precedent.
PRESCRIPTIVE PERIOD
 Action for loss or damage to the cargo
should be brought within one year after:
a. Delivery of the goods (delivered but
damaged goods); or
b. The date when the goods should have
been delivered (non-delivery). (Sec.
3[6])
 “Loss or Damage” as applied to the
COGSA contemplates a situation where no
delivery at all was made by the shipper 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. Thus, it is
inapplicable in case of misdelivery or
conversion. (Ang vs. American Steamship
Agencies Inc.) and damage arising from
delay or late delivery (Mitsui O.S.K. Lines
Ltd. vs. CA). In such instance the, Civil Code
rules on prescription shall apply.
 The one-year prescriptive period is
suspended by:
1. The express agreement of the parties
(Universal Shipping Lines, Inc. vs. IAC,
188 SCRA 170)
2. The filing of an action in court until it
is dismissed. (Stevens & Co. vs.
Nordeutscher Lloyd, 6 SCRA 180)
 The one-year period shall run from
delivery of the last package and is not
suspended by extrajudicial demand. (Dole
Phils.,Inc. vs. Maritime Co.,148 SCRA 118)
 The one-year period shall run from
delivery to the arrastre operator and not to
the consignee. (Union Carbide Phils, Inc. vs.
Manila Railroad Co.,SCRA 359)
 The insurer exercising its right of
subrogation is bound by the one-year
prescriptive period. However, it does not
apply to the claim against the insurer for the
insurance proceeds. (Fil. Merchants Ins. Co.
vs. Alejandro; Mayer Steel Pipe Corp. vs. CA)
IV. WARSAW CONVENTION OF 1929
(WC)
PURPOSE: To protect the emerging air
transportation industry and to secure the
uniformity of recovery by the passengers.
APPLICABILITY
 The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or
goods.
 The WC shall also apply to fortuitous
transportation by aircraft performed by an
air transportation enterprise.
 International transportation - any
transportation in which the place of
departure and the place of destination are
situated either:
1. Within the territories of two High
Contracting Parties regardless of
whether or not there be a break in the
transportation or transshipment, or
2. Within the territory of a single High
 Contracting Party, if there is an agreed
stopping place within a territory subject
to the sovereignty, mandate or authority
of another power, even though that
power is not a party to the Convention.
(“round trip”, Am. Jur.)
 Transportation to be performed by
several successive air carriers shall be
deemed to be one undivided transportation,
if it has been regarded by the parties as a
single operation, whether it has been
agreed upon under the form of a single
contract or of a series of contracts, and it
shall not lose its international character
merely because one contract or a series of
contracts is to be performed entirely within
a territory subject to the sovereignty,
suzerainty, mandate, or authority of the
same High Contracting Party. (Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the
Convention are not complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSEN BAGGAG AIR
GER E CHECK WAYBILL
TICKET
Passenge Checked- Goods to
r in be
baggage shipped
LIABILITY OF CARRIER FOR DAMAGES
1. Death or injury of a passenger if the
accident causing it took place on board the
aircraft or in the course of its operations of
embarking or disembarking; (Art. 17)
2. Destruction, loss or damage to any
baggage or goods, if it took place during the
“transportation by air”; (Art. 18) and
 Transportation by air – The period during
which the baggage or goods are in the
charge of the carrier, whether in an airport
or on board an aircraft, or, in case of a
landing outside an airport, in any place
whatsoever.
It includes any transportation by land or
water outside an airport if such takes place
in the performance of a contract for
transportation by air, for the purpose of
loading, delivery, or transshipment.
3. Delay in the transportation of passengers,
baggage or goods. (Art. 19)
Note: The Hague Protocol amended the WC
by removing the provision that if the airline
took all necessary steps to avoid the
damage, it could exculpate itself completely
(Art. 20(1)). (Alitalia vs. IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as
amended by Guatemala Protocol, 1971;
Alitalia vs. IAC)
1. Passengers
GENERAL RULE: $100,000 per passenger
EXCEPTION: Agreement to a higher limit
2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration
of value and payment of a supplementary
sum by consignor, carrier is liable to not
more than the declared sum unless it
proves the sum is greater than actual value.
3. Hand-carried baggage
 $1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration
of value and payment of a supplementary
sum by consignor, carrier is liable to not
more than the declared sum unless it
proves the sum is greater than actual value.
 An agreement relieving the carrier from
liability or fixing a lower limit is null and
void. (Art. 23)
 Carrier is not entitled to the foregoing
limit if the damage is caused by willful
misconduct or default on its part. (Art. 25)
 Thus, the WC does not operate as an
exclusive enumeration of the instances of
an absolute limit of the extent of liability. It
does not preclude the application of the
Civil Code and other pertinent local laws. It
does not regulate or exclude liability for
other breaches of contract by the carrier, or
misconduct of its employees, or for some
particular or exceptional type of damage.
(Alitalia vs. CA)

 In PanAm v. IAC, the WC was applied as
regards the limitation on the carrier’s
liability, there being a simple loss of
baggage without any improper conduct on
the part of the officials or employees of the
airline or other special injury sustained by
the passenger.
 In KLM Royal v. Tuller, the WC has
invariably been held inapplicable, or as not
restrictive of the carrier’s liability, where
there was satisfactory evidence of malice or
bad faith attributable to its officers and
employees. (Alitalia vs. IAC)
ACTION FOR DAMAGES
1. Notice of claim
 A written complaint must me made
within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from receipt
of baggage/goods
 The complaint is a condition precedent.
Without the complaint, the action is barred
except in case of fraud on the part of the
carrier. (Art. 26)
2. Prescriptive period
 Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation
stopped. (Art. 29)
 In United Airlines vs. Uy the two-year
prescriptive period was not applied where
the airline employed delaying tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE
CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against
the carrier in which the accident or delay
occurred.
EXCEPTION: Agreement or contract
whereby the first carrier assumed liability
for the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an
action against the first carrier and the
carrier in which the damage occurred
b. Passenger or consignee can file an
action against the last carrier and the
carrier in which the damage occurred.
 These carriers are jointly and severally
liable. (Art. 30)
 A contract of international carriage by air,
although performed by different carriers
under a series of airline tickets constitutes a
single operation. Members of the
International Air Transportation Association
(IATA) are under a general pool partnership
agreement wherein they act as agent of
each other in the issuance of tickets to
contracted passengers to boost ticket sales
worldwide and at the same time provide
passengers easy access to airlines which
are otherwise inaccessible in some parts of
the world. (American Airlines vs. CA)
 Under a general pool partnership
agreement, the ticket-issuing airline is the
principal in a contract of carriage while the
endorsee-airline is the agent. The
obligation of the former remained and did
not cease even when the breach occurred
not on its own flight but on that of another
airline which had undertaken to carry the
passengers to one of their destinations.
(China Airlines vs. Chiok)
JURISDICTION
 At the option of the plaintiff, the action
for damages may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of business;
c. Court where it has a place of business
through which the contract has been
made; or
d. Court of the place of destination. (Art.
28(1))
NOTE: It is the passenger’s “ultimate
destination” not “an agreed stopping place”
that determines the country where suit is to
be filed.
 The forum of action provided in Art. 28(1)
is a matter of jurisdiction rather than of
venue. (Santos III vs. Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
 Two concepts:
1. Services 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 or secure.
2. Compensation allowed to persons by
whose voluntary assistance a ship at sea or
her cargo or both have been saved in whole
or in part from impending sea peril, or such  A contract whereby one vessel, usually
property recovered from actual peril or loss, motorized, pulls another, whether loaded or
as in cases of shipwreck, derelict or not with merchandise, from one place to
recapture. another, for a compensation. It is a contract
 Requisites: for services rather than a contract of
1. Valid object of salvage; carriage.
2. Object must have been exposed to
marine peril (not perils of the ship);
3. Services rendered voluntarily (neither SALVAGE TOWAGE
an existing duty nor out of a pre- Governed by Governed by
existing contract); special law Civil Code on
4. Services are successful, total or (Act No. 2616) contract of
partial. lease
 Subjects of Salvage: Requires Success is not
1. Ship itself; success, required
2. Jetsam – goods which are cast into the otherwise no
sea, and there sink and remain under water; payment
3. Floatsam or Flotsam – goods which float Must be done Only the
upon the sea when cast overboard; with the consent of the
4. Ligan or Lagan – goods cast into the sea consent of the tugboat owner
tied to a buoy, so that they may be found captain/crewm is needed
again by the owners (p.173, Judge Diaz). en
 Persons who have no right to a Vessel must Vessel need
reward for salvage: be involved in not be
1. Crew of the vessel saved; an accident involved in an
2. Person who commenced Salvage in spite accident
of opposition of the Captain or his Fees Fees belong to
representative; distributed the tugboat
3. In accordance with Sec. 3 of the among owner
Salvage Law, a person who fails to deliver a crewmen
salvaged vessel or cargo to the Collector of
Customs. RULES ON SALVAGE REWARD
1. The reward is fixed by the RTC judge in
 Derelict – a ship or her cargo which is the absence of agreement or where the
abandoned and deserted at sea by those latter is excessive. (Sec. 9)
who are in charge of it, without any hope of 2. The reward should constitute a sufficient
recovering it, or without any intention of compensation for the outlay and effort of
returning to it. the salvors and should be liberal enough
to offer an inducement to others to
 The intention of those in charge must be render services in similar emergencies in
ascertained. If those in charge left with the the future.
intention of returning, or of procuring 3. If sold (no claim being made within 3
assistance, the property is not derelict, but months from publication), the proceeds,
if they quitted the property with the after deducting expenses and the
intention of finally leaving it, it is derelict salvage claim, shall go to the owner; if
and a change of their intention and an the latter does not claim it within 3
attempt to return will not change its nature years, 50% of the said proceeds shall go
(Erlanger & Galinger vs. Swedish East to the salvors, who shall divide it
Asiatic Co. Ltd.). equitably, and the other half to the
government. (Secs. 11-12)
 If it is clear that the intention to return is 4. If a vessel is the salvor, the reward shall
slight, the salvage which was done be distributed as follows:
thereafter is considered valid. (Notes and a. 50% to the shipowner;
Cases on the Law on Transportation and b. 25% to the captain; and
Public Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p. 616)
c. 25% to the officers and crew in
CONTRACT OF TOWAGE proportion to their salaries. (Sec. 13)
 Taking passengers from a sinking ship,
without rendering any service in rescuing
the vessel, is not a salvage service, being a
duty of humanity and not for reward.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)
NOTE: The Public Service Commission
created under the Public Service Law has
already been abolished under P.D. No. 1 and
other issuances. It has been replaced by the
following government agencies: LTO; LTFRB;
ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and
MIA.

PURPOSES:
1. To secure adequate, sustained CERTIFICATE CERTIFICATE
service for the public at the least OF PUBLIC OF PUBLIC
possible cost; CONVENIENC CONVENIENC
2. To protect the public against E (CPC) E AND
unreasonable charges and poor, NECESSITY
inefficient service; (CPCN)
3. To protect and secure investments in An An
public services; authorization authorization
4. To prevent ruinous competition. issued by the issued by the
appropriate appropriate
AUTHORITY TO OPERATE PUBLIC government government
SERVICES agency for the agency for the
GENERAL RULE: No public service shall operation of operation of
operate without having been issued a public services public service
certificate of public convenience or a for which no for which a
certificate of public convenience and franchise, prior franchise
necessity. either is required by
EXCEPTIONS: municipal or law; e.g.
1. Warehouses; legislative, is telephone and
2. Animal drawn vehicles and bancas required by other services.
moved by oar or sail; law, e.g.,
3. Airships, except for the fixing of common
maximum rates for fare and freight; carriers.
4. Radio companies, except for rates
fixing;  A CPC or a CPCN constitutes neither a
5. Public services owned or operated by franchise nor a contract, confers no
the government, except as to rates property right, and is a mere license or a
fixing; privilege. The holder of said certificate does
6. Ice plants; and not acquire a property right in the route
7. Public markets. covered thereby. Nor does it confer upon
the holder any proprietary right or interest
PUBLIC SERVICE or franchise in the public highways.
 A person who owns, operates, manages Revocation of this certificate deprives him of
or controls in the Philippines for hire or no vested right. New and additional
compensation, with general or limited burdens, alteration of the certificate, or
clientele, whether permanent, occasional or even revocation or annulment thereof is
accidental, and done for general business reserved to the State. (Luque vs. Villegas,
purposes, any common carrier or public 30 SCRA 408)
utility, ice plants, power and water supplies,
communication and similar public services.  It is a “property” and has a considerable
(Sec. 13b, CA 146) value and can be the subject of sale or
 A casual or incidental service devoid of attachment. (Cogeo-Cubao Operators and
public character and interest is not brought Drivers Assn. vs. CA, 207 SCRA 343,
within the category. The question depends Raymundo vs. Luneta Motor Co.)
on such factors as the extent of services,
whether such person or company has held REQUREMENTS FOR GRANTING CPC OR
himself or itself out as ready to serve the CPCN
public or a portion of the public generally. 1. Applicant must be a citizen of the
(Luzon Stevedoring vs. PSC) Philippines or a corporation or entity 60%
of the capital of which is owned by such
 citizens; irreparable
2. Applicant must prove public necessity; damage or
3. Applicant must prove that the operation inconvenienc
of the public service proposed and the e to the
authorization to do business will promote public or
the public interest on a proper and private
suitable manner; interest, in
4. Applicant must have sufficient financial which case, a
capability to undertake the proposed suspension
services and meeting the responsibilities not more than
incident to its operation. 30 days may
be ordered,
prior to the
POWERS POWERS hearing.
REQUIRING EXERCISABLE (Soriano v.
PRIOR WITHOUT Medina, 164
NOTICE AND PRIOR SCRA 36)
HEARING NOTICE AND
HEARING UNLAWFUL ACTS OF PUBLIC UTILITY
COMPANIES
1. Issuance 1. Investigatio 1. Engagement in public service business
of CPC or n any matter without first securing the proper
CPCN; concerning certificate;
2. Fixing of public service; 2. Providing or maintaining unsafe,
rates, tolls, 2. Requiring improper or inadequate service as
and charges; operators to determined by the proper authority;
3. Setting up furnish safe, 3. Committing any act of unreasonable and
of standards adequate, and unjust preferential treatment to any
and proper service; particular person, corporation or entity
classifications 3. Requiring as determined by the proper authority;
; public services 4. Refusing or neglecting to carry public
4. Establishm to pay mail upon request. (Secs. 18 and 19)
ent of rules to expenses of
secure investigation; ACTS REQUIRING PRIOR APPROVAL
accuracy of 4. Valuation of 1. Establish and maintain individual or joint
all meters properties of rates;
and all public utilities; 2. Establish and operate new units;
measuring 5. Examinatio 3. Issue free tickets;
appliances; n and test of 4. Issue any stock or stock certificates
5. Issuance measuring representing an increase of capital;
of orders appliances; 5. Capitalize any franchise in excess of the
requiring 6. Grant of amount actually paid to the Government;
establishment special permits 6. Sell, alienate, mortgage or lease
or to make extra property, certificates or franchise.
maintenance or special trips
of extension in territories  Under Sec. 20(g) of C.A. No. 146, the sale,
of facilities; specified in the etc. may be negotiated and completed
6. Revocatio certificate; before the approval by the proper authority.
n, or 7. Uniform Its approval is not a condition precedent to
modification accounting the validity of the contract. The approval is
of CPC or system and necessary only to protect public interest.
CPCN; furnishing of
7. Suspension annual reports; PRIOR OPERATOR/OLD OPERATOR RULE
of CPC or 8. Compelling  The rule allowing an existing franchised
CPCN, except compliance operator to invoke a preferential right within
when it is with the laws the authorized territory as long as he
necessary to and renders satisfactory and economical service.
avoid serious regulations.  The policy is not to issue a certificate to a
and second operator to cover the same field and
in competition with a first operator who is
rendering sufficient, adequate and
satisfactory service. The prior operator
must first be given an opportunity to
improve its service, if inadequate or
deficient.
 Purpose: To prevent ruinous and wasteful
competition in order that the interests of the
public would be conserved and preserved.
 It subordinates the prior applicant rule
which gives the first applicant priority only if
things and circumstances are equal.
 Where the operator either fails or
neglects to make the improvement or effect
the increase in services, especially when
given the opportunity, new operators should
be given the chance to give the services
needed by the public.
one who possesses no property with which
to respond financially for the damage or
injury done. (Erezo, et al. vs. Jepte 102 Phil
103).
KABIT SYSTEM
 A system whereby a person who has been
granted a certificate of public convenience
allows other persons who own motor
vehicles to operate under such license, for a
fee or percentage of such earnings. It is void
and inexistent under Art. 1409, Civil Code.
 Effects:
1. The transfer, sale, lease or assignment of
the privilege granted is valid between
the contracting parties but not upon the
public or third persons. (Gelisan vs.
Alday, 154 SCRA 388)

PRIOR APPLICANT RULE

 Presupposes a situation when two
interested persons apply for a certificate to
operate a public utility in the same
community over which no person has as yet
granted any certificate. If it turns out, after
the hearing, that the circumstances
between the two applicants are more or less
equal, then the applicant who applied ahead
of the other, will be granted the certificate.

RATE-FIXING POWER
 The rate to be fixed must be just, founded
upon conditions which are fair and
reasonable to both the owner and the
public.
 A rate is just and reasonable if it
conforms to the following requirements:
1. One which yields to the carrier a fair
return upon the value of the property
employed in performing the service;
and
2. One which is fair to the public for the
service rendered. 2. The registered owner is primarily liable
for all the consequences flowing from the
REGISTERED OWNER RULE operations of the carrier.
 The registered owner of a certificate of  The public has the right to assume
public convenience is liable to the public for that the registered owner is the actual or
the injuries or damages suffered by third lawful owner thereof. It would be very
persons caused by the operation of said difficult and often impossible, as a
vehicle, even though the same had been practical matter, for the public to enforce
transferred to a third person. their rights of action that they may have
 The registered owner is not allowed to for injuries inflicted by the vehicle if they
escape responsibility by proving that a third should be required to prove who the
person is the actual and real owner Reason: actual owner is. (Benedicto vs. IAC, 187
It would be easy for him, by collusion with SCRA 547)
others or otherwise, to transfer the 3. The thrust of the law in enjoining the
responsibility to an indefinite person, or to kabit system is to identify the person
 upon whom responsibility may be fixed
with the end in view of protecting the
riding public (Lim vs. CA 373 SCRA 394).
4. The registered owner cannot recover
from the actual owner and the latter
cannot obtain transfer of the vehicle to
himself, both being in pari delicto. (Teja
Marketing vs. IAC)
5. For the better protection of the public,
both the registered owner and the actual
owner are jointly and severally liable
with the driver. (Zamboanga
Transportation Co. vs. CA)