Mercantile Law – Law on Transportation

TRANSPORTATION LAW

1. Define and differentiate Common Carrier from Private Carrier

Answer: Common Carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the
public. (Art 1732, NCC); while, Private Carriers are persons, corporations,
firms or association wherein the undertaking is to engage in an isolated
transaction, which does not hold itself out to carry the goods for the general
public or to a limited clientele. (Philippine-American General Insurance
Company v. PKS Shipping Company, 401 SCRA 222, April 9, 2003)

2. What is the test for determining whether a party is a common carrier of

goods?

Answer: The test for determining whether a party is common carrier of good
is:

a. He must be engaged in the business of carrying goods for others as

a public employment, and must hold himself out as ready to
engaged in the transportation of goods or person generally as a
business and not a casual occupation;
b. He must undertake to carry goods of the kind to which his business
is confined;
c. He must undertake to carry by the method by which his business is
conducted and over his established roads; and
d. The transportation must for hire. ( First Philippine Industrial
Corporation v CA, G.R. No. 125948, December 29, 1998)

3. Is Certificate of Public Convenience a requirement to operate business of

public carrier?

Answer: No. Certificate of Public Convenience is not necessary for the

Carrier to engage its business in public by the fact that the carriage of
good was periodic, occasional, episodic or unscheduled. (Loadstar
Shipping Co., Inc., v CA, G.R. No, 131621, September 28, 1991)

4. What is the diligence required of common carriers?

Answer: Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in

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the vigilance over the goods and for the safety of the passengers
transported by them, according to all circumstances of each case.

5. What are the liabilities of Common Carriers over the Goods?

Answer: General Rule: The following are the liabilities of Common

Carriers engaged in business of transporting goods:

a. Common carriers are responsible for the loss, destruction, or

deterioration of the goods; (Art 1734)
b. Breach of contract; and
c. If goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have act negligently. (Art.
1735)

Exceptions:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.

6. What are the liabilities of Common Carriers over the Passengers?

Answer: A common carrier is bound to carry the passengers safely as far

as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances. (Art
1755) In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence.

3Go Travel Inc., a corporation engaged in a business of carriers goods and

passengers received on board its M/V “Victoria” 50 boxes of steel products. On
February 14, 2014, due to the “habagat” the M/V “Victoria” sank resulting loss of
steel products. ABC Corp. demanded payment for the loss of the said steel
products but 3Go travel Inc., refused and failed to pay contending that they
should not be liable for the loss of steel products was due to force majeure.

7. Is the contention of 3Go Travel correct?

Answer: Yes. Art. 1734 provides that the Common carriers are
responsible for the loss, destruction, or deterioration of the goods, unless

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the same is due to any of the following causes only (Limited Liability
Doctrine):

(1) Flood, storm, earthquake, lightning, or other natural disaster or

calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.

Provided, the 3Go Travel Inc., proved that they exercised due diligence to
prevent or minimize the loss during and after the occurrence of “habagat”

8. What if the M/V “Victoria”, due to the celebration of “Valentines Day” was
not sufficiently manned at the time of voyage. Is the contention of 3Go
Travel still correct?

Answer: No. For a vessel to be seaworthy, it must be adequately

equipped for the voyage and manned with a sufficiently number of
competent officers and crew. The failure of a common carrier to maintain
in seaworthy condition its vessel involved in a contract of carriage is a
clear breach of its duty to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them.
Since the 3Go Travel Inc., remiss in the performance of its duties, it
cannot hide behind the “limited liability” doctrine to escape responsibility
for the loss of steel products. (Loadstar Shipping Co., Inc., v CA, G.R. No,
131621, September 28, 1991)

9. What is the liability of the shipper or owner if it contributed to the loss,

destruction or deterioration of goods?

Answer: None. The contributory negligence of the shipper or owner of

goods is just a mitigating circumstance on the part of the common carrier
that the damages revocable from the common carrier should be equitable
reduced by the Court. If the shipper or owner merely contributed to the
loss, destruction or deterioration of the goods, the proximate cause
thereof being the negligence of the common carrier, the latter shall be
liable in damages, which, however, shall be equitably reduced. (Art 1741)

10.What is negligence?

Answer: Negligence is a conduct that creates undue risk of harm to

another. It is the failure to observe the degree of care, precaution and

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vigilance that the circumstances justly demand, whereby that other

person suffers injury. (Smith Bell Dodwell Shipping Agency Corporation v
Borja, 383 SCRA 341, June 10, 2002)

11.What is proximate cause?

Answer: Proximate cause is the cause, which in natural and continuous

sequence, unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have occurred. (Raynera
v.Hiceta, 306 SCRA 695)

12.What is Contributory Negligence?

Answer: Contributory negligence is a conduct on the part of the injured

party, contributing as a legal cause to the harm he has suffered, which
falls below the standard to which he is required to conform for his own
protection. (Valenzuela v. Court of Appeals, 253 SCRA 303)

Vin Vessel Inc., is corporation engaged in business of carrier in public. Vin Vessel
Inc., transported 300 Fire Extinguishers in Aklan. While it was stored in Vin
Vessel’s hardware, the fire occurred which affected the 300 Fire extinguishers.
The owner of 300 Fire Extinguishers demand payment for the loss of the said fire
extinguishers but Vin Vessel Inc., refused to pay contending that the loss was
due to force majeure.

13.Is the contention correct?

Answer: No. Fire cannot be considered a natural disaster or calamity. It

does not fall within the category of an act of God unless caused by other
natural disaster or calamity. Hence the Common Carrier shall be presumed
to have been at fault unless it proves observance of extraordinary
diligence, which in this case, Vin Vessel failed to do so. (Eastern Shipping
Lines V. CA)

7. How to consider circumstances as a natural disaster?

Answer: The natural disaster must have been the (1) proximate and
only cause of the loss, and (2) the common carrier must exercise due
diligence to prevent or minimize loss before, during and after the
occurrence of flood, storm or other natural disaster.

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Rural Rail Road, Inc. provides train services, for a fee, to commuters from Bicol-
Albay to Manila. Commuters are required to purchase tickets and then proceed
to designated loading and unloading facilities to board the train. Ricardo Dalisay
purchased a ticket for Manila and entered the station. While waiting, he had an
altercation with the security guard. Ricardo Dalisay fell on the railway and run
over by the train. The heirs of Ricardo Dalisay filed action for damages. Rural
Rail Road interposed lack of action, contending that the mishap occurred before
Ricardo Dalisay boarded the train.

14.Is contention correct?

Answer: Rural Rail Road, Inc. is liable for the death of Ricardo Dalisay
because it failed to exercise extraordinary diligence. The contract of
carriage began when the passenger purchased his ticket and proceeded to
the designated loading facilities to the board the train. (Dangwa Trans.
Co. Inc., v CA)
15.What if there was a stipulation in the ticket stating that the Rural Rail
Road, Inc. will not be held liable for any incident while inside its premises.
Is Rural Rail Road shall be free from any liability?

Answer: No. the responsibility of the common carrier cannot be

eliminated or limited by stipulation, by the posting of notices or by
statements on the tickets. (Article 1757)

Juan Dela Cruz, a paying passenger, boarded a bus bound for Famy, Laguna. He
chose a seat at the front row, near the bus driver and told he told the bus driver
that he had valuable items in his hand carried bag which he then placed beside
the driver’s seat. Not having slept for 24 hours, he requested the conductor to
keep an eye on the bag should he doze off during the trip. While Juan Dela Cruz
was asleep, another passenger took the bag away and alighted at Sta. Rosa,
Laguna.

16.Could the Common Carrier be held liable by Juan Dela Cruz loss?

Answer: Yes. Ordinarily, the common carrier is not liable for acts of
other passengers. But the common carrier cannot relieve itself from
liability if the common carrier’s employees could have prevented the act or
omission by exercising due diligence. In this case, the passenger asked
the conductor to keen an eye on the bag. If the conductor observed due
diligence, he could have prevented the loss of the bag.

17.When does the carrier’s extraordinary responsibility begin?

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Answer: It begins from the time the goods are unconditionally placed in
the possession of and received by the carrier for transportation. (Art.
1736)

18.When does carrier’s extraordinary responsibility terminate?

Answer: (1) Until the goods are delivered actually or constructively by

the carrier to the consignee or to the person who has a right to receive
them; (Art 1736)
(2) When the goods are temporarily unloaded or store in transit by
reason of the exercise of the shipper or owner of his right of stoppage
in transit; and
(3) Until the consignee has been advised of the arrival of goods at the
place of destination and has had reasonable opportunity to remove
them or dispose of them from the warehouse of the carrier at the
place of destination.

19. What is right of stoppage in transit?

Answer: Act by which the unpaid vendor of goods stops their progress
and resumes possession of them constructively while they are in the
course of transit from him to the purchaser, and not yet actually delivered
from the latter (Agbayani) The common carrier holds the goods in the
capacity on an ordinary warehouseman therefrom. Hence, only ordinary
diligence is required.

20.Is stipulation between the common carrier and shipper limiting the liability
of the loss, destruction or deterioration of the goods to a degree less than
extraordinary diligence valid?

Answer: Yes. A stipulation between the common carrier and shipper or

owner limiting the liability of the loss, destruction or deterioration of the
goods to a degree less than extraordinary diligence is valid, provided it
be:

a. In writing, signed by the shipper or owner;

b. Supported by a valuable consideration other than the service
rendered by the common carrier; and
c. Reasonable, just and not contrary to public policy.

E. Salvador Trucking entered into a hauling contract with Freshfoods Co.,

whereby the former bound itself to haul the latter’s 3000 sacks of hotdog from
Quezon City to Quinta Market. To carry out faithfully its obligation, Salvador
subcontracted with Pelagio the delivery of 1,500 sacks of hotdog. Aside from the

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driver, three male employees of Pelagio rode on the truck with the cargo. While
the ruck was on its way to Quinta Market two strangers suddenly stopped the
truck and hijacked the cargo. Investigation by the police disclosed that one of
the hijackers was armed with a bladed weapon while the other was unarmed.
For failure to deliver the 1,500 sacks, Freshfoods Co sued Salvador for damages.
Salvador in turn set up a 3rd party complaints against Reyes which the later
registered on the ground that the loss was due to force majeure.

21.Did the hijacking constitute force majeure to exculpate Pelagio from any
liability to Salvador?

Answer: No. to exculpate the carrier from liability arising from hijacking,
the carrier must prove that the robbers or the hijackers acted with grave
or irresistible threat, violence, or force. In the case at bar, only one of the
two hijackers was armed with a bladed weapon against the four
employees of Pelagio. Hence, there was no act with grave or irresistible
threat, violence of force.

22.Can limitation on liability be availed of by a common carrier, which

delayed the transportation of the goods or change the stipulated or usual
route because they decided to attend the fiesta in the other barrio?

Answer: No. If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual route, the
contract limiting the common carrier’s liability cannot be availed of in case
of the loss, destruction, or deterioration of the goods.

23.A and B entered into stipulation limiting the sum that may be recovered
by B, shipper, to 90% of the value of the goods in case of loss due to
theft. Whether or not the stipulation is valid.

Answer: The stipulation is considered unreasonable, unjust and contrary

to public policy under Article 1745 (6) of the Civil Code, the common
carrier’s liability for acts committed by thieves, or of robbers who do not
act with grave or irresistible threat, violence or force, is dispensed with or
diminished.

24.A and B entered into stipulation that in event of loss, destruction or

deterioration of goods on account of the defective condition of the vehicle
used in the contract of carriage, the A’s liability is limited to the value of
the goods appearing in the bill of lading unless B declares a higher value.
Whether or not the stipulation is valid.

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Answer: The stipulation is valid. A stipulation that the common carrier’s

liability is limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value is binding. (Article
1749)

25.When the stipulation can be considered unreasonable, unjust and contrary

to public policy?

Answer: Any of the following or similar stipulations shall be considered

unreasonable, unjust and contrary to public policy:

a. That the goods are transported at the risk of the owner or shipper;
b. That the common carrier will not be liable for any loss, destruction,
or deterioration of the goods;
c. That the common carrier need not observe any diligence in the
custody of the goods;
d. That the common carrier shall exercise a degree of diligence less
than of a good father of a family, or of a man of ordinary prudence
in the vigilance over the movables transported;
e. That the common carriers shall not be responsible for the acts or
omission of his or its employees;
f. That the common carrier’s liability for acts committed by thieves, or
of robbers who do not act with grave or irresistible threat, violence
or force, is dispensed with or diminished;
g. That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the defective
condition of the car, vehicle, ship, airplane or other equipment used
in the contract of carriage.

A,B and C were the passenger of bus No. 143 when the front wheels swerved to
the right; the driver lost control, and after wrecking the bridge, the bus fell on its
right side into a creek where water was deep. A,B and C died immediately. After
the investigation, it was found out that the steering knuckle was defective.

26.Whether or not the carrier is liable for the manufacturing defect of the
steering knuckle?

Answer: Yes. A common carrier is bound to carry the passengers safely

as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances. (Art.
1755) A carrier is liable to its passenger for damages caused by
mechanical defects of the conveyance. (Prescillano Necesito, etc. v
Natividad Paras, G.R. No. L-10605, June 30, 1958)

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27.Why is it necessary for the common carrier to exercise extraordinary

diligence in contract of carriage of passengers?

Answer: A common carrier is engaged to a business, which is offered to

public. This business is vested with public interest. Hence, instead or
being required to exercise mere ordinary diligence, a common carrier is
exhorted to carry the passengers safely as human care and foresight can
provide. (Art 1755) Once a passenger in the course of travel is injured, or
does not reach his destination safely, the carrier and driver are presumed
to be at fault.

28.What is air carriage?

Answer: Air Carriage is a business engaged mainly with the traveling

public. It invites people to avail comforts and advantages it offers. The
contract generates a relation attended with a public duty. (Singson v CA,
282 SCRA 149)

29.In a court case involving claims for damages arising from death and injury
of bus passengers, counsel for the bus operator files a demurrer to
evidence arguing that the complaint should be dismissed because the
plaintiff did not submit any evidence that the operator or its employees
were negligent. If you were the judge, would you dismiss the complaint?

Answer: No. In the carriage of passengers, the failure of the common

carrier to bring the passengers safely to their destination immediately
raises the presumptions that such failure is attributable to the carrier’s
fault or negligence. In the case at bar, the fact of death and injury of the
bus passenger raises the presumption of fault or negligence on the part of
the carrier. The carrier must rebut such presumption. Otherwise, the
conclusion can be properly made that the carrier failed to exercise
extraordinary diligence as required by law.

30.A, a 4 year old boy and a non-paying passenger was injured during the
trip. A’s mother demand for damages contending that the carrier was still
liable since A, non-paying passenger is accompanied by his father who is
paying passenger. Is A’s mother contention correct?

Answer: Non-payment of fare will not exempt the common carrier from
liability due to injuries to passengers as a result of the common carrier’s
negligence.

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31.B, a security guard of the common carrier happens to come across an old
enemy and shot him while boarding the truck of the common carrier. Is
the common carrier still liable for the act of its security guard?

Answer: Yes. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former’s
employees, although such employees may have acted beyond the scope
of their authority or in violation of the orders if the common carriers. (Art
1759)

32.A taxicab passenger was deliberately killed by the driver. Is the operator
of the taxicab liable?

Answer: Yes, the taxicab operator is civilly liable on the basis of breach
of contract of carriage. Common carriers are liable for the death of or
injuries to passengers through the negligence or willful acts of the
former’s employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders if the common
carriers. This liability does not cease upon proof that the common carrier
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.

33.What is the obligation of the passenger to avoid the injury while engaged
in contract of carrier?
Answer: The passenger must observe the diligence of a good father of a
family to avoid injury to himself. Common Carrier is not an insurer against
all risk of travel.

34.Is the doctrine of proximate cause applicable in actions involving breach

of contract?

Answer: The doctrine of proximate cause is applicable only in actions for

quasi-delict, not in actions involving breach of contract. The doctrine is a
device for imputing liability to a person where there is no relation between
him and another party. In such case, the obligation is created by law
itself. (Calalas v. CA, 332 SCRA 356)

35.What are the instances when a common carrier becomes liable for the
death of or injury to a passenger or passengers?

Answer: The statutory provisions render a common carrier liable for

death of or injury to passengers (a) through the negligence or willful acts
of its employees; (Art 1759) or (b) on account of willful acts of negligence
of other passengers or of strangers if the common carrier’s employees

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through the exercise of due diligence could have prevented or stopped the
act or omission. (Art 1763)

36.Suppose a passenger of a public utility bus was injured due to the driver’s
recklessness, what case or cases can passenger file against the common
carrier and the driver?

Answer: The injured passenger can file a civil case for breach of contract
of carriage against the common carrier and not against the driver because
the contract of carriage is between the common carrier and the
passenger. The driver was acting merely as an agent of the common
carrier. In this case of breach of contract of carriage, the liability of the
common carrier is direct and primary.

For driver, the injured passenger can file criminal case for reckless
imprudence resulting in physical injuries.

37.What are the factors to be considered in the award of damages to

accident victim?

Answer: The determination of the indemnity to be awarded to the heirs

of a deceased perso therefore no fixed basis. Much is left to the discretion
of the court considering the moral and material damages involved, and so
it has been said that there can be no exact of uniform rule for measuring
the value of human life and the measure of damages cannot be arrived at
by precise mathematical calculation, but the amount recoverable depends
on the particular facts and circumstances of each case. The life
expectancy of the deceased or of the beneficiary, whichever is shorter, is
and important factor, the pecuniary loss, loss of support, loss of service,
loss of society, mental suffering of beneficiaries, and medical and funeral
expenses.

38.When are attorney’s fees recoverable?

Answer: These are only recoverable only in the concept of actual

damages, not as moral damages nor judicial costs. Hence, the merit such
an award, it is settled that the amount thereof must be proven. Moreover,
such must be specifically prayed for and may not be deemed incorporated
within a general prayer for such other relief and remedy as this court may
deem just and equitable

39.What are the damages recoverable from common carriers?

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Answer: Under Art 1764, the following shall also apply to the death of a
passenger caused by the breach of contract by a common carrier:

(1) Actual or compensatory;

(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated; or
(6) Exemplary or corrective.

MARITIME COMMERCE (ART. 573-869)

40.Enumerate the important concept of this code

Answer: The following are the important concepts:

1. Merchant Vessel;
2. Maritime lien and Preference of Credit;
3. Doctrine of limited liability;
4. Causes of revocation of voyage;
5. Participants in maritime commerce;
6. Charter party;
7. Loans on bottomry and respondentia;
8. Accidents in maritime commerce

41.What is Maritime/Admiralty Law?

Answer: It is the system of laws which particularly relates to the affairs

and business of the sea, to ships, their crews and navigation, and to
maritime conveyance of persons and property. (Notes and Cases on the
Law on Transportation and Public Utilities, Aquino & Hernando, citing
Francisco, p.254)

42.What are the Characteristics of Maritime Transaction?

Answer: Real - similar to transactions over real property with respect to

effectivity against third persons which is done through registration.
(Rubiso vs. Rivera, 37 Phil. 72). The evidence of real nature is shown by:
1) the limitation of the liability of the agents to the actual value of the

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vessel and the freight money; and 2) the right to retain the cargo and
embargo and detention of the vessel (Luzon Stevedoring Corp v. CA, 156
SCRA 169); and Hypothecary - the liability of the owner of the value of
the vessel is limited to the vessel itself (Doctrine of Limited Liability).

43.What is merchant vessel?

Answer: Vessel engaged in maritime commerce, whether foreign or

otherwise. It constitutes property, which may be acquired and transferred
by any of the means recognized by law. They shall continue to be
considered as personal property. It is susceptible to maritime liens such as
for the repair, equipping and provisioning of the vessel in the preparation
of a voyage, as well as mortgage liabilities, in satisfaction of which a
vessel may be validly arrested and sold.

44.What id Maritime Lien?

Answer: It constitutes a present right of property in the ship, a jus in re,

to be afterward enforced in admiralty by process in rem. (PNB vs. CA, 337
SCRA 381)

45.Enumerate the Causes of Revocation of Voyage.

Answer: The following are the causes of revocation of voyage:

1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art. 640)

46.What is “Interdiction of commerce”?

Answer: A governmental prohibition of commercial intercourse intended

to bring about an entire cessation for the time being of all trade whatever.

47.What is Blockade?

Answer: A sort of circumvallation of a place by which all foreign

connection and correspondence is, as far as human power can effect it, to
be cut off.

48.What is Embargo

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Answer: A proclamation or order of a state, usually issued in time of war

or threatened hostilities, prohibiting the departure of ships or goods from
some or all the ports of such state until further order.

49.Enumerate the duty of Ship Agent to Discharge the Captain and Members
of the Crew

Answer: 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;

50.Who are the captains and masters?

Answer: 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.

51.What are the qualifications to be the captains and masters?

Answer: The following are the qualifications to be captains and masters:

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)

52.Enumerate the inherent powers of the captains and masters

Answer: The following are the inherent power of the captains and
masters:
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)

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53.Identify the officers and crew of a maritime vessel.

Answer: The following are the officers and crew of a maritime vessel:
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew

54.What is “Jason Clause”?

Answer: A stipulation in a charter party that in case of a maritime

accident for which the shipowner is not responsible by law, contract or
otherwise, the cargo shippers, consignees or owners shall contribute with
the shipowner in general average.

55.What is Jettison?

Answer: Act of throwing cargo overboard in order to lighten the vessel.

56.What is the order of goods to be cast overboard?

Answer: Order of goods to be cast overboard:

1. Those which are on the deck, preferring the heaviest one with the least
utility and value;
2. Those which are below the upper deck, beginning with the one with
greatest weight and smallest value. (Art. 815)

SALVAGE LAW (Act No. 2616)

57.What is salvage?

Answer: 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.
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 property recovered from actual peril or loss,
as in cases of shipwreck, derelict or recapture.

58.What are the requisite to avail salvage?

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Answer: The following are the requisites under Salvage Law:

a. Valid object of salvage;
b. Object must have been exposed to marine peril;
c. Services rendered voluntarily (neither an existing duty nor of a pre-
existing contract)
d. Services are successful, total or partial

59.What are the subjects of salvage?

Answer: The following are the subjects of salvage:

a. Ship itself;
b. Jetsam;
c. Floatsam;
d. Liga or Lagan

60.What is Jetsam?

Answer: Jetsam refers to the goods which are cast into the sea, and
there sink and remain under water.

61.What is Floatsam or Flotsam?

Answer: Floatsam refers to the goods which floar upon the sea when
cast overboard

62.What is Ligan or Lagan?

Answer: This refers to the goods cast into the sea tied to a buoy, so that
they may be found again by the owners

63.Who are not entitled to reward for salvage?

Answer: The following are the person who have no right to a reward for
salvage:
a. Crew of the vessel saved;
b. Person who commenced Salvage in spite opposition of the Captain
or his representative;

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c. A person who fails to deliver a salvaged vessel or cargo to the

Collector of Customs.

64.What is Derelict?

Answer: Derelict is a ship or its cargo which is abandoned and deserted

at sea by those who are in charge of it, without any hope of recovering it,
or without any intention of returning to it.

65.What is contract of towage?

Answer: A contract whereby on vessel, usually motorized, pulls another,

whether loaded or not with merchandise, from one place to another, for a
compensation. It is a contract for services rather than a contract of
carriage.

66.What are the rules on salvage reward?

Answer:
[1] The reward is fixed by the RTC judge in the absence of agreement or
where the latter is excessive. (Sec. 9)
[2] The reward should constitute a sufficient compensation for the outlay
and effort of the salvors and should be liberal enough to offer an
inducement to others to render services in similar emergencies in the
future.
[3] If sold (no claim being made within 3 months from publication), the
proceeds, after deducting expenses and the salvage claim, shall go to the
owner; if the latter does not claim it within 3 years, 50% of the said
proceeds shall go to the salvors, who shall divide it equitably, and the
other half to the government. (Secs. 11-12)
[4] If a vessel is the salvor, the reward shall be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in proportion to their salaries. (Sec.
13)

67.Is rescuing a passenger from a sinking ship a salvage service?

Answer: No, 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.

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CARRIAGE OF GOOD BY SEA ACTS (Commonwealth Act. No. 65)

68.When the Carriage of Goods by Sea Act (COGSA) will apply?

Answer: The Carriage of Goods by Sea Act will apply in carriage goods
from foreign ports to the Philippines. It can be applied in domestic sea
transportation if agreed upon by the parties.

69.What are the important features of COGSA?

Answer: the following are the important features of COGSA:

a. Amount of carrier’s liability;
b. Notice of damage; and
c. Prescriptive period

70.How much is the liability of carriers?

Answer: 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 good is
declared by the shipper. This is deemed incorporated in the bill of lading
even if not mentioned in it. (Eastern Shipping v IAC, 150 SCRA 463)

71.When the Notice for loss or damage shall be given?

Answer: If the damage is extremely apparent; the notice of the damage

should be given on the receipt of the goods. But, if the damage is not
extremely visible; then within three days from receipt of the goods.

72.What is the prescriptive period for action for loss or damage of cargo
under COGSA?

Answer: 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])

73.What is loss under COGSA?

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Answer: Loss is where there is no delivery of goods because the same:

a. Had perished;
b. Gone out of commerce; or
c. Disappeared in such a way that their existence is unknown or they
cannot be recovered.

It is inapplicable in case of misdelivery or conversion. (Ang v

American Steamship Agencies Inc.)

74.How will the one-year prescriptive period be suspended?

Answer: The one-year prescriptive period is suspended by:

a. The express agreement if the parties. (Universal Shipping Line, Inc.
v IAC, 188 SCRA 170)
b. The filing of an action in court until it is dismissed. (Setvens & Co.
v. Nordeutscher Lloyd, 6 SCRA 180)

75.When will the one-year prescription run?

Answer: The one-year period shall run:

a. from the deliver of the last package and is not suspended by
extrajudicial demand. (DOLE Phil., Inc. v Maritime Co. 148 SCRA
118)
b. from delivery to arrastre operator and not to the consignee. (Union
Carbide Phils. Inc. v. Manila Rail Co.,)

WARSAW CONVENTION OF 1929

76.What is the purpose of Warsaw Convention?

Answer: To protect the emerging air transportation industry and to

secure the uniformity of recovery by the passengers.

77.When the Warsaw Convention will apply?

Answer: The Warsaw Convention will apply if the transportation is:

a. International Transportation;
b. Air Transportation;
c. Carriage of passengers, baggage or goods; and
d. Fortuitous Transportation by aircraft performed by an air
transportation enterprise.

78.What is International Transportation?

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Answer: International Transportation is any transportation in which the

place of departure and the place of destination are situated either:
1. Within the territories of two High Contracting Parties regardless of
whether or not there be a break in the transportation or
transshipment; or
2. Within the territory of a single High Court 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 of the Convention.

79.Enumerate the categories of International Transportation?

Answer: There are two categories of international transportation, viz:

(1) where the place of departure and the place of destination are situated
within the territories of two High Contracting Parties regardless of
whether or not there be a break in the transportation or a
transshipment; and
(2) where the place of departure and the place of destination are 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, ven though the power is not a party to
the convention.

80.What is High Contracting Parties?

Answer: The High Contracting Parties referred to in the Convention are

the signatories thereto and those which subsequently adhered to it.

81.Does the Philippine recognition of Warsaw Convention preclude the

operation of the Civil Code and other pertinent laws in the determination
of extent of liability of common carriers in cases of breach of contract of
carriage, particularly for willful conduct of their employees?

Answer: Although the Warsaw Convention has the force and effect of law
in this country, being a treaty commitment assumed by the Philippine
government, said convention does not operate as an exclusive
enumeration of the instances for declaring a carrier liable for breach of
contract of carriage or as an absolute limit of the extent of that liability.
The Warsaw Convention declares the carrier liable for damages in the
enumerated cases and under limitations. However, it must not be
construed to preclude the operation of the Civil Code and other pertinent
laws. It does not regulate, much less exempt, the carrier from liability for
damages for violating the rights of its passengers under the contract of

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carriage, especially if willful misconduct on the part of the carrier’s

employees is found and established. (Cathay Pacific Airways, Ltd. V CA,
G.R. No. 60501, March 5, 1993)

82.When the Warsaw Convention will be inapplicable?

Answer: When public policy is contradicted and if the requirements under

the Convention are not complied with

83.What are the important concepts under Warsaw Convention?

Answer: The following are the important concepts under Warsaw

Convention:
1. Transportation documents:
a. Passenger ticket - Passenger
b. Baggage check- Checked-in baggage
c. Air way bill- Good to be shipped
2. Liability of the carrier for damages
a. Death of or injury to passengers;
b. Loss or damage to baggage or goods;
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined Transportation Agreement

84.What are the liabilities of carrier for damages

Answer: (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;
[Art 17]
(2) Destruction, loss or damage to any baggage or goods, if it took place
during the “transportation by air”; (Art 18) and
(3) Delay in the transportation of passengers, baggage or goods. [Art 19]

85.What is Transportation by air?

Answer: 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.

86.What is the limit of liability under Warsaw Convention, as amended by

Guatemala Protocol?

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Answer:
1. For Passenger:
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
$1,000 per 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.

87.When and How to file action for Damages?

Answer: The filing of Notice of claim and a written complaint must be

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

88.What is the prescriptive period for filing an action for damages?

Answer: Action must be filed within 2 years from:

a. Date of arrival at the destination;
b. Date of expected arrival; and
c. Date on which the transportation stopped.

89.Under the Warsaw Convention, where the plaintiff may bring the action
for damages?

Answer: Under Article 28(1) of the Warsaw Convention, the plaintiff may
bring the action for damages before:
(1) the court where the carrier is domiciled;
(2) the court where the carries has its principal place of business;
(3) the court where the carrier has an establishment by which the contract
has been made; and
(4) the court of the place of destination.

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PUBLIC SERVICE ACT (Commonwealth Act No. 146)

90.What are the purposes of Public Service Act?

Answer: The following are the purposes of Public Service Act:

a. to secure adequate, sustained service for the public at the least
possible cost;
b. to protect the public against unreasonable charges and poor,
inefficient service;
c. To protect and secure investments in public services;
d. To prevent ruinous competition

91.Who are authorized to operate public service?

Answer: As a general rule, no public service shall operate without having

been issued a certificate of public convenience or a certificate of public
convenience and necessity, except the following:
a. Warehouse;
b. Animal drawn vehicles and bancas moved by oar or sail;
c. Airship, except for the fixing of maximum rates for fare and freight;
d. Radio companies, except for rates fixing;
e. Public services owned or operated by the government, except as to
rates fixing;
f. Ice plants; and
g. Public markets

92.What is public service?

Answer: A person who owns, operates, manages or controls in the

Philippines for hire or compensation, with general or limited clientel,
whether permanent, occasional or accidental, and done for general
business purposes, any common carrier or public utility, ice plants, power
and water supplies, communication and similar public services. (Sec 13b)

93.Defined and differentiate Certificate of Public Convenience to Certificate of

Public Convenience and Necessity.

Answer: Certificate of Public Convenience is an authorization by the

appropriate government agency for the operation of public services for
which no franchise, either municipal or legislative, is required by law, e.g.,
common carriers; while the Certificate of Public Convenience and
Necessity is an authorization issued by the appropriate government
agency for the operation of public service for which a prior franchise is
required by law, e.g., telephone and other services.

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94.What are the requirements for granting Certificate of Public Convenience

or Certificate of Public Convenience and Necessity?

Answer: The following are the requirements for granting Certificate of

Public Convenience or Certificate of Public Convenience and Necessity:
1. Applicant must be a citizen of the Philippines or a corporation or entity
60% of the capital of which is owned by such citizens;
2. Applicant must prove public necessity;
3. Applicant must prove that the operation of the public service proposed
and the authorization to do business will promote the public interest on a
proper and suitable manner;
4. Applicant must have sufficient financial capability to undertake the
proposed services and meeting the responsibilities incident to its
operation.

95.Enumerate the unlawful acts of public utility companies.

Answer: The following are the unlawful acts of public utility companies:
1. Engagement in public service business without first
securing the proper certificate;
2. Providing or maintaining unsafe, improper or
inadequate service as determined by the proper authority;
3. Committing any act of unreasonable and unjust
preferential treatment to any particular person, corporation or entity as
determined by the proper authority;
4. Refusing or neglecting to carry public mail upon
request. (Secs. 18 and 19)

96.Enumerate the acts requiring prior approval.

Answer: The following are the acts requiring prior approval:

1. Establish and maintain individual or joint rates;
2. Establish and operate new units;
3. Issue free tickets;
4. Issue any stock or stock certificates representing an increase of capital;
5. Capitalize any franchise in excess of the amount actually paid to the
Government;
6. Sell, alienate, mortgage or lease property, certificates or franchise.

97. What is “Prior Operator/Old Operator Rule”?

Answer: This refers to the rule allowing an existing franchised operator

to invoke a preferential right within the authorized territory as long as

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renders satisfactory and economical service. This rule is not to issue a

certificate to a second operator to cover the same field 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.

98. What is the purpose of “Prior Operator/Old Operator Rule”?

Answer: To prevent ruinous and wasteful competition in order that the

interests of the public would be conserved and preserved.

99.What is the “Prior Applicant Rule”?

Answer: 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.

100. What is “Rate-Fixing Power”?

Answer: 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.

101. What is “Registered Owner Rule”?

Answer: The registered owner of a certificate of public convenience is

liable to the public for the injuries or damages suffered by third persons
caused by the operation of said vehicle, even though the same had been
transferred to a third person. The registered owner is not allowed to
escape responsibility by proving that a third person is the actual and real
owner Reason: It would be easy for him, by collusion with others or
otherwise, to transfer the responsibility to an indefinite person, or to one
who possesses no property with which to respond financially for the
damage or injury done. (Erezo, et al. vs. Jepte 102 Phil 103).

102. What is “Kabit System”?

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Answer: 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.

103. What are the effects of this system?

Answer: The following are the effects of Kabit System:

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)
2. The registered owner is primarily liable for all the consequences
flowing from the operations of the carrier.
3. The thrust of the law in enjoining the kabit system is to identify the
person upon whom responsibility may be fixed with the end in view of
protecting the riding public (Lim vs. CA 373 SCRA 394).
4. The registered owner cannot recover from the actual owner and the
latter cannot obtain transfer of the vehicle to himself, both being in
pari delicto. (Teja Marketing vs. IAC)

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