TRANSPORTATION LAW l Atty.
Glenn Capanas l For the exclusive use of EH 404 2016-2017
MARITIME LAW
CONCEPT
Doctrine of limited liability
Monarch Insurance Co. v. CA
Doctrine of limited liability
The liability of a shipowner for damages in case of loss is limited to the
value of his vessel. No vessel, no liability, expresses in a nutshell the
limited liability rule. The shipowners or agents’ liability is merely
coextensive with his interest in the vessel, such that a total loss thereof
results in its extinction.
Purpose of limited liability rule
This rule is based on the nature of maritime law which has its origin in
the prevailing conditions of the maritime trade and sea voyages during
the medieval ages, attended by innumerable hazards and perils. To
offset against these adverse conditions and to encourage shipbuilding
and maritime commerce, it was deemed necessary to confine the liability
of the owner or agent arising from the operation of a ship to the vessel,
equipment, and freight, or insurance, if any.
Relevant Provisions
Art. 587. The ship agent shall also be civilly liable for the indemnities in
favor of third persons which arise from the conduct of the captain in the
vigilance over the goods which the vessel carried; but he may exempt
himself therefrom by abandoning the vessel with all her equipment and
the freight he may have earned during the voyage.
Art. 590. The co-owners of the vessel shall be civilly liable in the
proportion of their contribution to the common fund for the results of
the acts of the captain, referred to in Article 587. Each co-owner may
exempt himself from this liability by the abandonment, before a notary,
of that part of the vessel belonging to him.
Art. 643. If the vessel and her cargo should be totally lost, by reason of
capture or wreck, all rights shall be extinguished, both as regards the
crew to demand any wages whatsoever, and as regards the ship agent
to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should be saved,
the crew engaged on wages, including the captain, shall retain their
rights on the salvage, so on the amount of the freightage of the cargo
saved; but sailors who are engaged on shares shall not have any right
whatsoever on the salvage of the hull, but only on the portion of the
freightage saved. If they should have worked to recover the remainder
of the shipwrecked vessel, they shall be given from the amount of the
salvage an award in proportion of the efforts made and to the risks,
encountered in order to accomplish the salvage.
Art. 837. The civil liability incurred by the shipowners in the cases
prescribed in this section, shall be understood as limited to the value of
the vessel with all her appurtenances and freight earned during the
voyage.
When applicable and when not applicable
GR: If the ship is totally lost, liability is extinguished. If the ship or part
thereof still exists, he can escape liability by abandoning the vessel, its
appurtenances and its freight.
Important: Abandonment of the vessel, its appurtenances and
freightage is an indispensable requirement before the shipowner or ship
agent can enjoy the benefits of the limited liability principle. If the carrier
does not want to abandon the vessel, then he is still liable even beyond
the value of the vessel.
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XPNs:
1. Where the injury or death to a passenger is due either to the fault
of the shipowner, or to the concurring negligence of the shipowner
and the captain.
2. Where the vessel is insured.
3. In the workmen’s compensation claims.
TN: If an accident is compensable under the Workmen’s
Compensation Act, it must be compensated even when the
workman’s right is not recognized by or is in conflict with other
provisions of the Civil Code or of the Code of Commerce.
4. Expenses for repairs and provisioning of the ship prior to the
departure thereof.
5. The vessel is not abandoned.
Take note:
(a) The only instance where abandonment is dispensed with is
when the vessel was entirely lost. In such case, the
obligation is extinguished.
(b) Only shipowner and ship agent can make an abandonment.
Applicability of limited liability rule to charterer
Charterer or sub charterer cannot invoke limited liability rule
against ship owner.
De la Torre v. Concepcion
Facts: Respondent Concepcion owned LCT–Josephine, a vessel
registered with the Philippine Coast Guard. He entered into a Preliminary
Agreement with de la Torre for the dry-docking and repairs of the said
vessel. Under said agreement, Concepcion agreed that after the dry-
docking and repairs, it be chartered for P10,000 per month.
Unfortunately, the vessel sank during voyage. Thus, Concepcion filed a
complaint for sum of money and damages against de la Torre, PTSC and
Agustin De la Torre who hired the crew which manned the vessel.
The lower courts ruled that the proximate cause of the sinking of the
vessel was the negligence of PTSC and the de la Torres. In their defense,
the latter argued that they should be relieved from liability based on the
limited liability rule.
Issue: Whether the limited liability rule is applicable.
Held: No.
Only the shipowner can avail of the limited liability rule.
The only person who could avail of the limited liability rule is the
shipowner, Concepcion. He is the very person whom the rule has been
conceived to protect. As the purpose of the law is to offset against these
adverse conditions and to encourage shipbuilding and maritime
commerce, it was deemed necessary to confine the liability of the owner
or agent arising from the operation of a ship to the vessel, equipment,
and freight, or insurance, if any.
Concepcion as the real ship owner is the one who is supposed to be
supported and encouraged to pursue maritime commerce. Thus, it
would be absurd to apply the Limited Liability Rule against him who, in
the first place, should be the one benefitting from the said rule.
Charterer does not completely step into the shoes of the owner.
In Yueng Sheng, it was further stressed that the charterer does not
completely and absolutely step into the shoes of the shipowner or even
the ship agent because there remains conflicting rights between the
former and the real shipowner as derived from their charter agreement.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Therefore, even if the contract is for a bareboat or demise charter where
possession, free administration and even navigation are temporarily
surrendered to the charterer, dominion over the vessel remains with the
shipowner. Ergo, the charterer or the sub-charterer, whose rights
cannot rise above that of the former, can never set up the Limited
Liability Rule against the very owner of the vessel. Indeed, where the
reason for the rule ceases, the rule itself does not apply.
Applicability of the Civil Code
Governing laws
1. New Civil Code – Primary law on maritime commerce
2. Book III Code of Commerce – Applied suppletorily
3. Special Laws
(a) Salvage Law (Act no. 2616)
(b) Carriage of Goods by Sea Act (CA no. 65)
(c) Ship Mortgage Decree of 1978 (PD 1521)
Important: In connection with Article 587 of the Code of Commerce,
the carrier cannot invoke Articles 1733, 1735 of the NCC. While the
primary law in maritime commerce is the NCC, in all matters not
regulated by said Code, the Code of Commerce and other special laws
shall govern.
Since the Civil Code contains no provision regulating the liability of ship
owners or agents in the event of total loss or destruction of the vessel,
it is the provisions of the Code of Commerce, particularly Article 587 that
governs.
Maritime Protest
Maritime protest
A written statement under oath, made by the ship captain or the master
of a vessel, attested by a proper officer or notary, after the occurrence
of an accident or disaster in which the vessel or cargo is lost or injured,
with respect to the circumstances attending such occurrence.
It is usually intended to show that the loss or damage resulted from a
peril of the sea, or from some other cause for which neither master nor
owner was responsible, and concludes with the protestation against any
liability of the owner for such loss or damage.
Condition precedent
A protest is a condition precedent to the filing of an action. Thus, it is
one of the material allegations that must be alleged in the complaint,
otherwise, the complaint will be dismissed for lack of cause of action.
When protest required
1. When the vessel makes an arrival under stress
2. Where the vessel is shipwrecked
3. Where the vessel has gone through a hurricane or the captain
believes that the cargo has suffered damages or averages
4. Maritime collisions.
Important: For maritime collisions, the protest must be made
within 24 hours from the collision, before the competent authority
of the point where the collision took place, or that of the first of
arrival of the vessel, if in Philippine territory, and to the consul of
the Republic of the Philippines if it occurred in a foreign country.
Who can file a maritime protest?
1. The captain, in cases of:
(a) Arrival under stress
(b) Shipwreck
(c) Where the vessel has gone through a hurricane xxx
2. The passenger or other persons interested, in cases of maritime
collisions.
2|U N I V E R S I T Y O F S A N C A R L O S
Verzosa and Ruiz v. Lim
In case of maritime collision, the passenger or other persons interested
who may be on board the vessel or who were in a condition who can
make known their wishes (Arts. 835- 836) or the captain himself.
When protest not required
1. When it does not fall under any of the four instances mentioned.
2. When tort is involved.
3. When no vessel is involved.
4. Where the interested person is not on board the vessel.
Vessel
A vessel or watercraft is defined under PD No. 474 as “any barge, lighter,
bulk carrier, passenger ship freighter, tanker, container ship, fishing
boats, or other artificial contrivance utilizing any source of motive power,
designed use or capable of being used as a means of transportation
operating either as a common carrier, including fishing vessels covered
under PD No. 43.
Except:
(a) Those owned and/or operated by the Armed Forces of the
Philippines and by the Foreign Government for its Military
purpose.
(b) Bancas, sailboat and other waterborne contrivance of less than
three tons capacity and not motorized.
Minor crafts like motorboats are not considered “vessels”
Lopez vs. Duruelo
The word "vessel" was not intended to include all ships, craft or floating
structures of every kind without limitation. Thus, it should not be held
to include minor craft engaged only in river and bay traffic.
Consequently, a passenger, on board a motor boat is not required to
make a protest as a condition precedent to his right of action for the
injury suffered by him in the collision, as the Code of Commerce does
not apply.
Yu Con v. Ipil
A. When the Code speaks of vessels, they refer solely and exclusively
to mercantile ships, as they do not include warships, and
furthermore, they almost always refer to craft which are not
accessory to another as in the case of launches, lifeboats and etc.
B. They refer exclusively to those which are engaged in the
transportation of passengers and freight from one port to another
or from one place to another.
C. They refer to merchant vessels and in no way can they or should
they be understood as referring to pleasure craft, yachts, pontoons,
health service and harbor police vessels, etc.
D. Ships ought to be understood in the sense of vessel serving the
purpose of maritime navigation or seagoing vessel, and not in the
sense of vessel devoted to the navigation of rivers.
E. Other vessels of minor nature not engaged in maritime commerce
such as river boats and those carrying passengers from ship to
shore, must be governed by the provisions of the Civil Code and
other appropriate special provisions of law.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
SHIP MORTGAGE AND OTHER LIENS
Preferred mortgage
Who may constitute a ship mortgage?
Section 2, PD 1521
Any citizen of the Philippines, or any association or corporation
organized under the laws of the Philippines, at least 60% of the capital
of which is owned by citizens of the Philippines may, for the purpose of
financing the construction, acquisition, purchase of vessels or initial
operation of vessels, freely constitute a mortgage or any other lien or
encumbrance on his or its vessels and its equipment with any bank or
other financial institutions, domestic or foreign.
Preferred mortgage and its requisites
1. Mortgage is constituted for the purpose of either construction,
acquisition purchase or initial operation of vessels
2. Compliance with Section 4 of PD 1521.
Section 4 of PD 152
(a) A valid mortgage which at the time it is made includes the whole
of any vessel of domestic ownership shall have, in respect to such
vessel and as of the date of recordation, the preferred status
given by the provisions of Section 17 hereof, if:
1. The mortgage is recorded as provided in Section 3 hereof.
2. An affidavit is filed with the record of such mortgage to the
effect that the mortgage is made in good faith and without
any design to hinder, delay, or defraud any existing or
future creditor of the mortgagor or any lien or of the
mortgaged vessel.
3. The mortgage does not stipulate that the mortgagee
waives the preferred status thereof.
(b) Any mortgage which complies with the above conditions is
hereafter called a "preferred mortgage". For purposes of this
Decree, a vessel holding a Provisional Certificate of Philippine
Registry is considered a vessel of domestic ownership such that it
can be subject of preferred mortgage.
The Philippine Coast Guard is hereby authorized to enter a vessel
holding a Provisional Certificate of Philippine Registry in the
Registry of Vessels and to record any mortgage executed thereon.
Such mortgage shall have the preferred status as of the date of
recordation upon compliance with the above conditions.
(c) There shall be endorsed upon the documents of a vessel covered
by a preferred mortgage:
1. The names of the mortgagor and mortgagee.
2. The time and date the endorsement is made.
3. The amount and date of maturity of the mortgage, and
4. Any amount required to be endorsed by the provisions of
paragraphs (e) or (f) of this Section.
(d) Such endorsement shall be made (1) by the Coast Guard District
or Station Commander of the port of documentation of the
mortgaged vessel, or (2) by the Coast Guard District or Station
Commander of any port in which the vessel is found, if such Coast
Guard District or Station Commander is directed to make the
endorsement by the Coast Guard District or Station Commander
of the port of documentation. The Coast Guard District or Station
Commander of the port of documentation shall give such direction
by wire of letter at the request of the mortgagee and upon the
tender of the cost of communication of such direction. Whenever
3|U N I V E R S I T Y O F S A N C A R L O S
any new document is issued for the vessel, such endorsement
shall be transferred to and endorsed upon the new document by
the Coast Guard District or Station Commander.
In the case of a vessel holding a provincial certificate of Philippine
Registry, the endorsement shall be made by the Philippine consul
abroad upon direction by wire or letter from the Maritime Industry
Authority at the request of the mortgagee and upon tender of the
cost of communication of such direction. A certificate of such
endorsement, giving the place, time and description of the
endorsement, shall be recorded with the records of registration to
be maintained at the Philippine Consulate.
(e) A mortgage which includes property other than a vessel shall not
be held a preferred mortgage unless the mortgage provides for
the separate discharge of such property by the payment of a
specified portion of the mortgage indebtedness. If a preferred
mortgage so provides for the separate discharge, the amount of
the portion of such payment shall be endorsed upon the
documents of the vessel.
(f) A preferred mortgage includes more than one vessel and provides
for the separate discharge of each vessel by the payment of a
portion of mortgage indebtedness, the amount of such portion of
such payment shall be endorsed upon the documents of the
vessel. In case such mortgage does not provide for the separate
discharge of a vessel and the vessel is to be sold upon the order
of a district court of the Philippines in a suit in rem in admiralty,
the court shall determine the portion of the mortgage
indebtedness increased by 20 per centum (1) which, in the
opinion of the court, the approximate value of all the vessels
covered by the mortgage, and (2) upon the payment of which the
vessel shall be discharged from the mortgage.
Preferred maritime liens
Maritime Liens
In general terms, maritime lien is a privileged claim on a vessel for some
service rendered to it to facilitate its use in navigation. It is a special
property right in a ship given to the creditor by law as security for a debt
or claim subsisting from the moment debts arise, with a right to have
the ship sold and debt paid out of the proceeds.
Nature of maritime lien
Poliand Industrial v. National Development Co.
A maritime lien is akin to a mortgage lien in that in spite of transfer of
ownership, the lien is not extinguished. The maritime lien is inseparable
from the vessel and until discharged, it follows the vessel. Hence, the
enforcement of a maritime lien is in the nature and character of a
proceeding quasi in rem.
The expression action in rem is, in its narrow application, used only with
reference to certain proceedings in courts of admiralty wherein the
property alone is treated as responsible for the claim or obligation upon
which the proceedings are based. Thus, a maritime lien subsists
notwithstanding the subsequent transfer of the vessel.
Preferred Maritime Lien, Priorities, Other liens
Section 17 of PD 1521
Upon the sale of any mortgaged vessel in any extra-judicial sale or by
order of a district court of the Philippines in any suit in rem in admiralty
for the enforcement of a preferred mortgage lien thereon, all pre-
existing claims in the vessel, including any possessory common-law lien
of which a lienor is deprived under the provisions of Section 16 of this
Decree, shall be held terminated and shall thereafter attach in like
amount and in accordance with the priorities established herein to the
proceeds of the sale.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Preferred claims > Preferred mortgage
Section 17 provides that preferred mortgage lien should have priority
over all claims against the vessel, except the following claims in the
order stated:
1. Expenses and fees allowed and costs taxed by the court and taxes
due to the Government.
2. Crew's wages.
3. General average.
4. Salvage; including contract salvage.
5. Maritime liens arising prior in time to the recording of the preferred
mortgage.
6. Damages arising out of tort, and
7. Preferred mortgage registered prior in time.
Important: The 7 preferred claims stated are over and above the
preferred mortgage in Section 4. Thus, if a vessel will be sold on auction,
and there are preferred claims, proceeds of the sale shall first be applied
to the preferred claims before they are applied to preferred mortgages.
Maritime liens are created by operation of law
Thus, notice of their existence is not necessary. These maritime liens do
not arise from specific agreement. Although they may arise out of
contract or in the absence of contract, they are imposed even in the
absence of specific contractual provision providing for a lien. Similarly,
the parties may not impose a maritime lien by agreement if one is not
provided by law. In other words, the claim must be one of those
enumerated under Section 17.
Possession of vessel not necessary
The claims are likewise not based on possession. Possession of the
vessel is not necessary for the maritime lien under Section 17 to attach
to the vessel. In other words, the nature of the claims does not
presuppose nor originate in possession.
PD 1521 is the applicable law
The provision of PD 1521 on the order of preference in the satisfaction
of the claims against the vessel is the more applicable statute to the
instant case compared to the Civil Code provisions on the concurrence
and preference of credit. General legislation must give way to special
legislation on the same subject, and generally be so interpreted as to
embrace only cases in which the special provisions are not applicable
Status of Frauds not applicable
The Statute of Frauds under Article 1403 (2) of the Civil Code is
inapplicable. The claim on the maritime lien is based on law, PD 1521,
and not on any contract or agreement
Maritime lien for necessaries
Two concepts of maritime lien on necessaries
1. Maritime lien on necessaries
Necessaries include those items required to facilitate the use of the
ship, save her from danger and enable her to perform those acts
currently demanded of her.
Ex: Supply of Fuel (use of the ship or to save her from danger)
2. Maritime lien on other necessaries
Ex: Expense incurred by travel agency for the transportation of
crew not directly related to the ship but indirectly necessary for the
ship.
Situation: One of the crew will have to disembark in Japan while
the vessel is in Japan and they need a new crew. The expense
incurred for transportation in flying to Japan by the new is
considered other necessaries.
4|U N I V E R S I T Y O F S A N C A R L O S
Important: Liquor, according to the Supreme Court, is not
considered as other necessaries.
Atty: According to the author, maritime liens also include maritime liens
on necessaries in Section 21 of PD 1521.
Section 21, PD 1521
Section 21. Maritime Lien for Necessaries; Persons entitled to such lien.
Any person furnishing repairs, supplies, towage, use of dry dock or
marine railway, or other necessaries to any vessel, whether foreign or
domestic, upon the order of the owner of such vessel, or of a person
authorized by the owner, shall have a maritime lien on the vessel, which
may be enforced by suit in rem, and it shall be necessary to allege or
prove that credit was given to the vessel.
Example: Advances.
Poliand Industrial v. National Development Co.
Asian Hardwood, Poliand's predecessor, extended a loan in favor of
Galleon, for the purpose of modifying the latter’s vessel and as payment
of the crew's wages. Without the knowledge of Asian Hardwood, Galleon
also contracted a loan with Japanese lenders, where DBP undertook to
guarantee Galleon’s prompt and punctual payment. In exchange for
DBP’s undertaking, Galleon promised to execute a chattel mortgage on
its vessel. Here, the advances made by Asian hardwood in favor of
Galleon is considered a maritime lien.
The maritime liens that are superior to the preferred mortgage
include maritime lien for necessaries
Section 21 of the Ship Mortgage Decree provides for the following
requirements for a maritime lien for necessaries which is enforceable by
suit in rem:
1. The "necessaries" must have been furnished to and for the benefit
of the vessel.
2. The "necessaries" must have been necessary for the continuation
of the voyage of the vessel.
3. The credit must have been extended to the vessel.
4. There must be necessity for the extension of the credit, and
5. The necessaries must be ordered by persons authorized to contract
on behalf of the vessel.
Examples of maritime liens for necessaries
1. Claims with respect to expenses for the payment of bunker oil/fuel,
unused stores and oil, bonded stores, provisions and repair and
docking of the vessel.
2. Ship modification cost.
Important: As long as an expense on the vessel is indispensable to the
maintenance and navigation of vessel, it may properly be treated as a
maritime lien for necessaries under Section 21 of PD 1521
When necessity of credit presumed
A necessity of credit will be presumed where it appears that the repairs
and supplies were necessary for the ship and that they were ordered by
the master. Hence, this presumption does not arise in a case where it
was established that the master did not order the fuels and there was
no proof of necessity of supplies.
How to enforce maritime lien:
1. Collection of sum of money (Poliand case)
2. To nullify a foreclosure, intervene (PNB case)
3. Collection suit with attachment (Crescent and Negros navigation
cases)
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Persons authorized to procure necessaries
Section 22, PD 1521
The following persons shall be presumed to have authority from the
owner to procure repairs, supplies, towage, use of dry dock or marine
railway, and other necessaries for the vessel:
1. The managing owner
2. The ship’s husband
3. Master or any person to whom the management of the vessel at
the port of supply is entrusted
Important: The officers and agents of a vessel shall be taken to include
such officers and agents when appointed by a character, by an owner
pro hac vice, or by an agreed purchase in possession of a vessel.
(Section 23 of PD 1521)
When no lien is conferred
1. When the person possesses the vessel tortuously or unlawfully.
2. When the furnisher knows, or by exercise of reasonable diligence
could have ascertained, that because of the terms of a charter
party, agreement for sale of the vessel, or for any other reason,
the person ordering the repairs, supplies, or other necessaries was
without authority to bind the vessel therefor.
Personal action against debtor and prescriptive period
Personal action against debtor
Section 17, PD 1521
If the proceeds of the sale should not be sufficient to pay all creditors
included in one number or grade, the residue shall be divided among
them pro rata.
All credits not paid, whether fully or partially shall subsist as ordinary
credits enforceable by personal action against the debtor. The record of
judicial sale or sale by public auction shall be recorded in the Record of
Transfers and Encumbrances of Vessels in the port of documentation.
Prescriptive Period
Under Article 1144 of the Civil Code, an action upon an obligation
created by law must be brought within 10 years from the time the right
of action accrues. Hence, the enforcement of maritime lien imposed by
special law prescribes in 10 years.
PERSONS WHO TAKE PART IN MARITIME COMMERCE
Ship owner, agent, captain, crew, supercargo
Atty: Persons who take part in maritime commerce
1. Shipowner
2. Ship agent
3. Captain or shipmaster
4. Officers or crew
5. Supercargo (not anymore relevant)
Important: We use these terms in the Code of Commerce:
A. Owner of the vessel refers to the ship owner (don’t confuse with
topics on common carriers).
B. Agent refers to the ship agent (don’t confuse with ordinary agent
under Civil Code).
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When agent not considered ship agent
When agent not considered ship agent
1. If his only function is limited to informing the consignee of the
arrival of the vessel in order for the latter to immediately take
possession of the cargoes.
2. If he has no hand in the provisioning of the vessel.
Ace Navigation Co. v. FGU Insurance Corp
An agent is not a ship agent if his only function is limited to informing
the consignee of the arrival of the vessel in order for the latter to
immediately take possession of the cargoes or has no hand in the
provisioning of the vessel.
The responsibilities of such agent is not governed by the Code of
Commerce but by the provisions of the New Civil Code including Article
1897, which provides that an agent is not personally liable to the party
with whom he contracts, unless:
1. He expressly binds himself, or
2. Exceeds the limits of his authority without giving such party
sufficient notice of his powers.
Here, both exceptions do not obtain in the said case. Records are bereft
of any showing that ACENAV, the agent, exceeded its authority in the
discharge of its duties as a mere agent of CARDIA. Neither was it alleged
that ACENAV’s limited obligation as agent of the shipper, CARDIA, was
not known to HEINDRICH.
Furthermore, since CARDIA was not impleaded as a party in the suit,
the liability attributed upon it by the Court of Appeals on the basis of
finding that the damage sustained by the cargo was due to improper
packing cannot be borne by ACENAV. As a mere agent, ACENAV cannot
be made responsible or held accountable for the damage supposedly
caused by its principal.
Triple roles of captain
A captain commonly performs three distinct roles:
(1) He is a general agent of the shipowner.
(2) He is also commander and technical director of the vessel.
(3) He is a representative of the country under whose flag he
navigates.
Important: Of these roles, the most important is the role performed
by the captain as commander of the vessel, for such role has to do with
the operation and preservation of the vessel during its voyage and the
protection of the passengers (if any), crew and cargo.
Role as general agent of the shipowner
In his role as general agent of the shipowner, he has the authority to:
1. Sign bills of lading
2. Carry goods aboard and deal with freight earned
3. Agree upon rates and decide whether to take cargo
4. Enter into contracts with respect to the vessel and the trading of
the vessel, subject to applicable limitations established by statute,
contract or instructions and regulations of the shipowner.
Management and fiduciary functions
The ship captain is committed to the governance, care and management
of the vessel. Clearly, the captain is vested with both management and
fiduciary functions.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Discretion of the captain
Discretionary authority
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. The discretionary
authority is recognized with respect to his right to exercise his best
judgment, with respect to navigating the vessel he commands.
Important: The captain has control of all departments of service in the
vessel, and reasonable discretion as to its navigation.
Presumption
There is a presumption that the captain is knowledgeable of the specific
requirements of seaworthiness and the particular risks and perils of the
voyage he is to embark upon.
Basic principle in Admiralty Law:
In navigating the vessel, the master must be left free to exercise his
own best judgment.
Master pro hac vice
Maritime Pilot
A person duly qualified and licensed to navigate a vessel into or out of
ports, or in certain waters.
Compulsory pilotage: In compulsory pilotage, states possessing harbors,
enacted laws or promulgated rules requiring vessels approaching their
ports to take on board pilots licensed under local law. In the Philippines,
compulsory pilotage is being implemented in the Port of Manila, the
latter being within the Manila Pilotage District.
Pilot is the master pro hac vice
There is a master pro hac vice when the pilot supersedes the master for
the time being in the command and the navigation of the ship, and his
orders must be obeyed in all matters connected with the ship’s
navigation. As master pro hac vice, he should give all directions as to
speed, course, stopping and reversing, anchoring, towing and the like.
When a licensed pilot is employed in a place where pilotage is
compulsory, it is his duty to insist on having effective control of the
vessel, or to decline to act as pilot.
Role of Captain or Master v. Role of Maritime Pilot
Far Eastern Shipping Co. v. Court of Appeals
Master is still in command of the vessel notwithstanding the
presence of the pilot
(a) The master is not wholly absolved from his duties while a pilot is
on board his vessel, and may advise or offer suggestions to him.
(b) He is still in command of the vessel, except so far as the vessel’s
navigation is concerned, and must cause the ordinary work of the
vessel to be properly carried on and the usual precaution taken.
(c) Thus, he is bound to see that there is sufficient watch on deck,
and that the men are attentive to their duties, also that engines
are stopped, towlines cast off, and the anchors clear and ready to
go at the pilot’s order.
Instances when the master may and should interfere and even
displace the pilot
A. When the pilot is obviously incompetent or intoxicated and the
circumstances may require the master to displace a compulsory
pilot because of incompetency or physical incapacity.
6|U N I V E R S I T Y O F S A N C A R L O S
B. When the pilot, in so navigating the vessel was going, or was likely
to go into danger.
Important: In sum, where a compulsory pilot is in charge of a ship,
the master being required to permit him to navigate it, if the master
observes that the pilot is incompetent or physically incapable, then it is
the duty of the master to refuse to permit the pilot to act. But if no such
reasons are present, then the master is justified in relying upon the pilot,
but not blindly.
CHARTER PARTIES
Slot charter party
Slot charter party
Slot charter parties or space charter agreements, is a charter party
whereby the shipper leases one or more “slots,” aboard a container ship.
Here, a space in the vessel was reserved for the exclusive use of the
charterer.
A voyage charter party includes a sub-category known as a slot charter,
where the owner or operator ‘rents’ or ‘hires’ container spaces or a
percentage of the space on the vessel for a hire fee based on the space
rented to the slot charterer, which is payable regardless of whether the
slot charterer fills the space or not. There may be no distinction between
a voyage charter and a slot charter as both involve chartering a space
on a ship.
Slot charter party is a contract of affreightment
A charter party has two types.
1. Contract of affreightment
The use of shipping space on vessels is leased in part or as a whole,
to carry goods for others. The charter-party provides for the hire
of vessel only, either for a determinate period of time or for a single
or consecutive voyage. Consequently, the voyage remains under
the responsibility of the carrier and it is answerable for the loss of
goods received for transportation. The charterer is free from
liability to third persons in respect of the ship.
2. Bareboat charter or charter by demise
The whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its
navigation, including the master and the crew, who are his
servants. The charterer mans the vessel with his own people and
becomes, in effect, the owner for the voyage or service stipulated
and hence liable for damages or loss sustained by the goods
transported.
Important: A slot charter party is a contract of affreightment. Take
note that charter party is governed by the actual circumstances and not
by the denomination of the contract. Thus, even if the contract says
affreightment, but the complete control and supervision over the vessel
is let to the charterer, the same is a bareboat or demise charter.
Effect on diligence of common carrier
The carrier is bound to exercise extraordinary diligence in conveying its
slot charter agreement. Being a contract of affreightment, it is the carrier
and not the charterer, who is liable for damages or losses sustained by
the goods transported.
Heung-A Shipping v. Philam Insurance Co.
As the carrier of the subject shipment, Heung-A was bound to exercise
extraordinary diligence in conveying the same. Its slot charter
agreement with Dongnama did not divest it of such characterization nor
relieve it of any accountability for the shipment.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Effect of charter party on carrier
Planter’s Products v. CA
A bareboat or demise charter converts a common carrier into a
private carrier
A charter party may transform a common carrier into a private carrier.
However, it must be a bareboat or demise charter where the charterer
mans the vessel with his own people and becomes, in effect, the owner
for the voyage or service stipulated.
The common carrier is not transformed into a private carrier if the
charter party is a contract of affreightment like a voyage charter or a
time charter. In a voyage charter, the carrier is answerable to the loss
of the goods received for transportation.
In this case, the contract between Mitsubishi and KKKK being merely a
time charter party, KKKK remained as common carrier and thus, the
presumption of fault and negligence in case of loss, destruction or
deterioration of goods applies.
Liability of charterer under a contract of affreightment
Caltex v. Sulpicio Lines
If the charter party is a contract of affreightment, the rights and the
responsibilities of ownership rests on the owner. The charterer is free
from liability to third persons in respect of the ship.
The charterer of a vessel has no obligation before transporting its cargo
to ensure that the vessel it chartered complied with all legal
requirements. The duty rests upon the common carrier simply for being
engaged in public service. The Civil Code demands diligence which is
required by the nature of the obligation and that which corresponds with
the circumstances of the persons, the time and the place.
Atty: In the case of Caltex v. Sulpicio Lines, a tanker was hit by a
vessel. The Supreme Court ruled that the charterer has no liability since
the contract entered into was a contract of affreightment. The common
carrier remains as a common carrier even if it is under a contract of
affreightment. However, if it will be bareboat or demise charter, then
the charterer is the one liable.
In reality, however, there is no distinction between affreightment and
bareboat because even if you have a bareboat charter, the ship owner
will never relinquish control over the vessel. This is because there is a
possibility that the charterer will place a captain or crew who do not
know the equipment, etc. No matter what name the contract is, the ship
owner will always want control over the vessel.
However, when faced with the issue of who shall be liable, be guided by
the ruling of the Supreme Court in this case. So distinguish whether the
contract is that of affreightment or bareboat. It is only in the latter where
the charterer is liable.
Owner pro hac vice
Charterer is the owner pro hac vice in a bareboat charter
Heung-A Shipping v. Philam Insurance Co.
In a bareboat or demise charter, the shipowner leases to the charterer
the whole vessel, transferring to the latter the entire command,
possession and consequent control over the vessel’s navigation,
including the master and crew, who thereby become the charterer’s
“servant.”
As the shipowner is not normally required to provide for a crew, the
charterer gains possession of the vessel “bare,” hence, the term
“bareboat.”
7|U N I V E R S I T Y O F S A N C A R L O S
Thus, the charterer becomes the owner “pro hac vice” of the vessel since
he mans the vessel with his own set of master and crew, effectively
becoming the owner for the voyage or service stipulated, subject
however to any liability for damages arising from negligence.
Moreover, the bareboat charterer assumes, to a large extent, the
customary rights and liabilities of the shipowner in relation to third
persons who may have dealt with him or with the vessel. In this latter
instance, the master of the vessel is the agent of the charterer, and not
of the shipowner, and therefore, it is the charterer or owner pro hac
vice, and not the general owner of the vessel, who is liable for the
expenses of the voyage including the wages of the seamen.
LOANS ON BOTTOMRY AND RESPONDENTIA
Bottomry v. Respondentia
Loan on bottomry
A contract whereby the owner of a ship borrows for the use, equipment
or repair of the vessel, for a definite term and pledges the ship as
security with a stipulation that if the ship is lost during the voyage or
during the limited time on account of the perils enumerated, the lender
shall lose his money.
Atty: It is a system of merchant insurance in which a ship is used as
security against a loan to finance a voyage, the lender losing the
investment if the ship sinks.
Loan on Respondentia
Where the goods or some part thereof are hypothecated as security for
a loan, and repayable upon the safe arrival of the cargo at destination.
Bottomry Loan respondentia
Pledge of the ship or Pledge of goods or
a portion thereof a portion thereof
Lender does not lose his capital
Lender loses his capital should should the ship perish due to
the ship perish due to marine
marine peril, so long as the
peril goods survive or are saved
Requisites of a loan on bottomry or respondentia
1. Shipowner borrows money for use, equipment or repair of the
vessel
2. For a definite term and with extraordinary interest called premium
3. Secured by pledge of vessel (bottomry) or pledge of goods
(respondentia)
4. Loan repayment is conditioned on the safe arrival of the vessel or
goods.
5. The obligation is extinguished if the ship is lost during the voyage
or during the limited time on account of the perils enumerated
Common elements of loans on bottomry and respondentia
1. Exposure of security to marine peril;
2. Obligation of the debtor conditioned upon safe arrival of the
security at the point of destination.
Important: There must be a marine risk upon which the loan is
predicated. Thus, there is neither bottomry nor respondentia if the
money borrowed is subject to repayment in any event.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

Distinguished from ordinary loan Authority to constitute bottomry or respondentia

Bottomry/respondentia Ordinary loan Bottomry Respondentia

Not subject to usury law
There must be a marine risk
which existence must be duly
established
Liability of borrower is contingent
on the safe arrival of the vessel
or cargo at destination
Must be executed in accordance
with the forms and manner
required in the Code of
Commerce
Must be recorded in the registry
of vessels to bind third persons
Last lender is preferred
Must have collateral
Loss of collateral extinguishes
the obligation
Subject to usury law
Risks need not be involved
Not subject to any contingency
Formal requisites regarding
contracts in general apply
No such registration is required
First lender is generally
preferred
May or may not have collateral
Loss of collateral does not
extinguish the obligation
Shipowner
XPN: Captain – on account of Only the cargo owner
extreme necessity and where he
is the owner or part owner of
the vessel
May the captain contract a loan on bottomry?
GR: The captain cannot contract loans on bottomry and should he do
so, the contract shall be void.
XPNs:
1. If captain is the owner or part owner of the vessel. Provided, that:
(a) No money has been previously owned on the whole vessel
(b) No lien or obligation is chargeable against the vessel
2. On account of extreme necessity

When simple loan applies

Instances where the loan on bottomry or respondentia may be regarded
as simple loan only:
1. If the lender should prove that he loaned an amount which is larger
than the value of the object liable for the bottomry loan due to
fraudulent means employed by the borrower.
Important: Loan is valid only for the amount at which the object
is appraised by experts. The surplus principal shall be repaid with
legal interest.
2. If the full amount of the loan contracted in order to load the vessel
is not used for the cargo. The balance will be considered as a simple
loan which should be returned prior to the commencement of the
voyage.
3. Other cases where the money taken is not subjected to any risk
Form of the loans
Form of the loans
The loans on bottomry and respondentia must be executed in
accordance with the form and manner prescribed in Art 720 of the Code
of Commerce:
1. Public instrument
2. Policy signed by the contracting parties and the broker taking part
therein
3. Private instrument
Important: In whichever form, the following requirements must be
met, otherwise, they cannot have preference over other credits.
(a) Entered in the certificate of registry of the vessel and
(b) Recorded in the registry of vessels
Atty: Remember that loans bottomry and respondentia should be in
writing before they can ripen into a judicial action. Whether it is a private
document or a public document, that is a requirement.
Consequences of loss of effects of the loans
General rule
If the effects of the loans is lost due to an accident of the sea designated
in the contract and the cargo was on board –
Effect: The lender loses his right to institute the action which would
pertain to him.
Exceptions: If the loss was caused by the:
1. Inherent defect of the thing
2. Fault or malice of the borrower
3. Barratry on the part of the captain
4. Damages suffered by the vessel as a consequence of being
engaged in a contraband
5. Loading the goods on a vessel different from that designated in the
contract (xpn: change was due to fortuitous event)
Other consequences:
1. The lenders on bottomry or respondentia shall suffer in proportion
to their respective interest, the general average which may take
place in the things upon which the loans were made.
2. In case of shipwreck, the amount for payment of the loan shall be
deduced to the proceeds of the effects which have been saved but
only after deducting the costs of the salvage.
4. If the loan should be on the vessel or any of her parts, the freight
earned during the voyage for which the loan was contracted shall
also be liable for its payment, as far as it may reach.
5. If the same vessel or cargo should be the object of the loan of
bottomry or respondentia and maritime insurance, the value of
what may be saved in case of shipwreck shall be divided between
the lender and the insurer, in proportion to the legitimate interest
of each one, taking in consideration, for this purpose only, the
principal with respect to the loan and without prejudice to the right
of preference of other creditors.

8|U N I V E R S I T Y O F S A N C A R L O S
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
AVERAGES
Definition of Averages
What are averages?
1. The extraordinary or accidental expenses incurred during the
voyage in order to preserve the cargo, vessel or both; and
2. All damages or deterioration suffered by the vessel from departure
to the port of destination, and to the cargo from the port of loading
to the port consignment.
Atty: Averages may be of two kinds, particular or general. (This will be
exhaustively discussed later)
Important: Pilotage are ordinary expenses. They are not averages,
unless stipulated.
Ordinary v. Extraordinary expenses
Important: Before determining whether the averages are particular or
general, determine first whether the expenses are ordinary or
extraordinary. Because if they are merely ordinary expenses, the rule on
averages will never apply, except if the parties stipulate otherwise.
Ordinary Expenses
Article 807, Code of Commerce
Petty and ordinary expenses incident to navigation, such as those of
pilotage of coasts and ports, those of lighterage and towage, anchorage,
inspection, health, quarantine, lazaretto, and other so-called port
expenses, costs of barges and unloading until the merchandise is placed
on the wharf, and any other usual expenses of navigation, shall be
considered ordinary expenses to be defrayed by the shipowner, unless
there is an express agreement to the contrary.
Important: Ordinary expenses are not averages because they are
foreseeable, unless the parties agree that averages will cover ordinary
expenses. The Code of Commerce does not prohibit the inclusion of
other expenses under averages.
Extraordinary Expenses
These are expenses which are not usually foreseen.
Ex. If machine does not work, you have to ask help of a tugboat. The
expenses on the use of tugboat is a question of averages. This is
extraordinary because it is not foreseen.
Atty: You have a vessel at present, we say present, because the book
makes a distinction about vessels during the medieval times and now.
If at present, your vessel is caught by fire, and to extinguish the fire, a
certain equipment was used, the owner of that equipment will have to
be paid for rescuing. The ship owner would have to pay the expense.
This is not an ordinary expense because it does not normally happen in
a voyage.
Two classes of averages
1. Particular averages – damages or expenses caused to the vessel
or cargoes which did not inure to common benefit of all persons
interest in the vessel or cargo. Here, loss will lie on where it falls.
Ex: If along the voyage, the vessel suffered damage, it is the
shipowner who bears the loss. Res perit domino.
2. General averages – damages or expenses deliberately caused to
save the vessel, its cargo, or both, from real and known risk. Here,
loss will be spread proportionately. All persons having an interest
in the vessel and cargo shall contribute to satisfy the coverage.
9|U N I V E R S I T Y O F S A N C A R L O S
Ex: Voluntary jettison – the casting away of some portion of the
cargo to lighten the vessel.
Requisites of general average:
1. There must be a danger common to both vessel and cargo.
2. That for the common safety, part of the vessel or of the cargo
or both is sacrificed deliberately.
3. That from the expenses or damages caused follows the
successful saving of the vessel and cargo.
4. That the expenses or damages should have been incurred or
inflicted after taking proper legal steps and authority.
Important: No general contribution can be demanded if the
vessel or the cargoes sought to be saved were in fact not saved.
Particular and General Averages distinguished
Particular/Simple Average General/Gross Average
Have not inured to the common Caused for the benefit of those
benefit of all persons interested interest in the vessel or cargoes
in the vessel or cargoes
May be due to causes other Deliberately caused in order to
than deliberate acts save the vessel or the cargoes
Borne proportionately by the
Borne by the owner of thing
vessel or cargoes damaged persons having interest in the
vessel or cargoes
Effect of presence of negligence
American Home Assurance v. CA
The law on averages in the Code of Commerce cannot be applied in
determining liability where there is negligence.
Atty: There is negligence here because the shipowner proceeded with
the voyage despite warning from PAG-ASA of a storm. This is the case
where almost 10,000 televisions were loaded on a vessel. The issue on
negligence must first be resolved before provisions on Code of
Commerce may be applied.
NDC vs. Court of Appeals
Two vessels collided because of negligence of the captain. When the
shipowner and ship agent were sued, they interposed the defense that
the law on averages must apply, so the loss must be proportionately
spread. However, the Supreme Court said that the law on averages finds
no application where there is negligence and where the cargoes are not
jettisoned.
Atty: During the medieval times, the concept of averages was limited
to instances where cargoes are jettisoned. At present, there can still be
averages even if the cargoes are not jettisoned.
Expenses to refloat a vessel
Magsaysay v. Agaan
Facts: A vessel, while unintentionally stranded inside a port, ran aground
at the mouth of the Cagayan River. Expenses were incurred in hiring a
company to refloat the vessel. The shipowner claims that the expenses
constitute general averages and thus the losses should be borne
proportionately.
Issue: Whether the expenses constitute general averages.
Ruling: No. For expenses for refloating a vessel to constitute general
averages, the vessel must be intentionally stranded and the expenses
were incurred for the purpose of saving both the vessel and the cargo.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Here, the stranding of the vessel was not intentional. Moreso, the
expenses were not incurred for the common safety of the vessel and the
cargo, since they, or at least the cargo, were not in imminent peril. The
cargoes could have been unloaded without need of an expensive salvage
operation.
In sum, where the expense sought to be recovered does not show that
it is intended to save the vessel or cargo from common danger, it cannot
be considered a general average.
Important: There is no proof that the vessel had to be put afloat to
save it from imminent danger. From the testimony of the shipowner, the
vessel had to be salvaged in order to enable it to proceed to its port of
destination. It is important to note that the true foundation of general
averages is the safety of the property and not of the voyage.
COLLISSIONS
Collision v. Allision
Collision
An impact or contact between two vessels, both of which are moving.
Allision
An impact between a moving vessel and a stationary one.
Zones in collision
Three divisions in time of collision:
1. First Division
This refers to all time up to the moment when risk of collision may
be said to have begun. Within this zone, no rule is applicable
because none is necessary. Each vessel is free to direct its course
as it deems best without reference to the movements of the other
vessel.
2. Second Division
This refers to the time between moment when risk of collision
begins and moment it becomes a practical certainty.
3. Third Division
This covers the time of actual contact. This is when the collision is
certain and time of impact.
Doctrine of Error in Extremis
This refers to the sudden movement made by a faultless vessel during
the 3rd 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
If a vessel having a right of way suddenly changes its course during the
3rd zone (time between the moment when collision has become a
practical certainty and the moment of actual contact), in an effort to
avoid an imminent collision due to the fault of another vessel, such act
may be said to be done in extremis, and even if wrong, cannot create
responsibility on the part of said vessel with the right of way.
Thus, it has been held that fault on the part of the sailing vessel at the
moment preceding a collision, that is, during the 3rd division of time,
does not absolve the steamship which has suffered herself and a sailing
vessel to get into such dangerous proximity as to cause inevitable harm
and confusion, and a collision results as a consequence.
The steamer having a far greater fault in allowing such proximity to be
brought about is chargeable with all the damages resulting from the
collision; and the act of the vessel sailing having been done in extremis,
even if wrong, is not responsible for the result.
10 | U N I V E R S I T Y O F S A N C A R L O S
Liability rules
Negligence-based
Although the liability with respect to collision is not governed by quasi-
delict, liability in collusion is still negligence based. Thus, the courts are
still called upon to determine the negligence of the persons involved in
order to impose liability.
Nature of liability
The person who caused the injury is both civilly and criminally liable.
Determination of negligence
In the determination of negligence, the same test of a reasonable man
in the position of an expert that applies in quasi- delict should also be
applied, although with due consideration to the expertise of the persons
involved including the carrier itself, the captain, officers and crew of the
vessels.
Doctrines of contributory negligence and last clear chance not
applicable
The doctrines of contributory negligence and last clear chance are not
applicable. Thus, if both vessels negligently operated, it does not matter
if the other has the last clear chance of avoiding the injury because
under Article 827, each must suffer its own damage if both of them are
negligent. Consequently, both shall be solidarily liable for losses and
damages.
Important: Proof that the plaintiff was negligent will bar recovery from
the defendant in collision cases even if the Plaintiff’s negligence can be
classified as merely contributory.
Defense of due diligence in selection and supervision of
employees not applicable
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.
Doctrine of limited liability rule applicable
The Doctrine of Limited Liability applies in case of collisions. The law
limits liability of the shipowner and ship agent to the value of the vessel
with all its appurtenances and freightage earned during the voyage.
Specific rules under the Code of Commerce
1. One vessel at fault
If a vessel should collide with another, through or the fault,
negligence, or lack of skill of the captain, sailing mate, or any other
member of the complement, the owner of the vessel at fault shall
indemnify the losses and damages suffered, after an expert
appraisal. (Art. 826)
2. Both vessels at fault
If the collision is both imputable to both vessels, each one shall
suffer its own damages, and both shall be solidarily responsible for
the losses and damages occasioned to their cargoes. The losses
rest where they falls.
With respect to the cargoes, the ship-owner and ship agents of the
vessels involved in the collision are liable to the shippers. The
liability is joint and several’ there will be no apportionment of
liability and each ship-owner or ship agent is liable for the whole
damage or injury. (Art. 827)
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
3. Party at fault cannot be determined
Each party shall also bear his own damage in cases in which it
cannot be determined which of the two vessels has caused the
collision. They are solidary responsible for the losses and damages
occasioned to their cargoes. (Art. 828)
Important: This is otherwise known as the doctrine of inscrutable
fault – where it cannot be determined which between the two
vessels was at fault, both shall bear their respective damage, but
both should be solidarily liable for damage to the cargo of both
vessels.
4. Cause is fortuitous event
If a vessel should collide with another, through fortuitous event or
force majeure, each vessel and its cargo shall bear its own
damages. (Art. 830)
If, by reason of a storm or other cause of force majeure, a vessel
which is properly anchored and moored should collide with vessels
nearby, causing the latter vessels damages, the injury occasioned
shall be considered as particular average of the vessel run into.
(Art. 832)
5. Third person at fault
The owner of the third vessel shall indemnify the losses and
damages caused, the captain thereof shall be civilly liable to said
owner. (Art. 831)
6. Sinking on the way to port
A vessel which upon being run into sinks immediately, as well as
that which, having been obliged to make a port to repair the
damages caused by the collision, is lost during the voyage or is
obliged to be stranded in order to be saved, shall be presumed as
lost by reason of collision. (Art. 833)
Liability of charterer under Maritime Law
Is a charterer liable under maritime law?
It depends if the charter party is a contract of affreightment or a
bareboat/demise charter.
A. Contract of affreightment
The use of shipping space on vessels is leased in part or as a whole,
to carry goods for others. Consequently, the voyage remains under
the responsibility of the carrier and it is answerable for the loss of
goods received for transportation. The charterer is free from
liability to third persons in respect of the ship.
B. Bareboat charter or charter by demise
The whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its
navigation, including the master and the crew, who are his
servants. The charterer becomes the owner for the voyage or
service stipulated and hence liable for damages or loss sustained
by the goods transported.
Important: It is only in bareboat or demise charter where the charterer
is liable for damages or losses sustained.
Note: Sir reiterated the concept of charterer being the owner pro hac
vice in cases of bareboat or demise charter, and the requirement of
maritime protest in cases of collisions. These have already been
exhaustively discussed in page 7 and 2 of this reviewer, respectively.
11 | U N I V E R S I T Y O F S A N C A R L O S
Rule 18 of the International Rules of the Road
Rule 18, International Rules of the Road
When two power-driven vessels are meeting end on, or nearly end on,
so as to involve risk of collision, each shall alter her course to starboard,
so that each may pass on the port side of the other.
Important note: This is actually Rule 14 the International Rules of the
Road. However, the Supreme Court, in the case of Smith Bell v. Go
Thong, referred to this as Rule 18. Maybe it was Rule 18 before and was
repealed, I don’t know. Tried my best to figure out why, but failed. But
it would seem that this is the rule referred to by Sir as per his discussion.
When applicable, when not applicable
This Rule only applies to cases where vessels are meeting end on or
nearly end on, in such a manner as to involve risk of collision, and does
not apply to two vessels which must, if both keep on their respective
course, pass clear of each other.
Smith Bell v. Go Thong (1991)
Atty: Go Thong was held responsible for collision in this case for
violation of Rule 18 of the International Rules of the Road. This is
because of the following:
1. It turned to portside (left), instead of turning to starboard (right)
2. There was no proper look-out
3. The second mate was the one in command of the vessel even if
there was a captain on board.
Mecenas v. Court of Appeals (1989)
Atty: This is a peculiar case because the Supreme Court did not apply
international rules. Instead, it applied the presumption of gross
negligence under the New Civil Code.
Facts: M/T Tacloban (barge-type oil tanker) and the M/V Don Juan
(passenger vessel) collided. When the collision occurred, the sea was
calm, the weather fair and visibility good. As a result of this collision, the
M/V "Don Juan" sank and hundreds of its passengers perished.
M/V Don Juan claimed that it should not be liable as it complied with
Rule 18 of the International Rules of the Road, while M/T Tacloban City
did not. It appears that when the two vessels were only three-tenths
(0.3) of a mile apart, M/T Tacloban turned to port side (in violation of
Rule 18, while the M/V Don Juan veered hard to starboard.
Ruling: The “Route observance” of the International Rules of the Road
will not relieve a vessel from responsibility if the collision could have
been avoided by proper care and skill on her part or even by a departure
from the rules.
Rule 18 like all other International Rules of the Road, are not to be
obeyed and construed without regard to all the circumstances
surrounding a particular encounter between two vessels.
In ordinary circumstances, a vessel discharges her duty to another by a
faithful and literal observance of the Rules of Navigation, and she cannot
be held at fault for so doing even though a different course would have
prevented the collision. This rule, however, is not to be applied where it
is apparent, as in the instant case, that her captain was guilty of
negligence or of a want of seamanship in not perceiving the necessity
for, or in so acting as to create such necessity for, a departure from the
rule and acting accordingly.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Circumstances that showed negligence:
(a) The "Don Juan" having sighted the "Tacloban City" on radar when
it was still a long way off was negligent in failing to take early
preventive action.
(b) M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing
mahjong before and up to the time of collision.
(c) After the collision, the captain failed to institute appropriate
measures to delay the sinking of MS Don Juan and to supervise
properly the execution of his order of abandonship.
(d) As regards the officer on watch, Senior 3rd Mate Rogelio Devera,
he admitted that he failed or did not call or inform Capt.
Santisteban of the imminent danger of collision and of the actual
collision itself.
(e) There is also evidence that the "Don Juan" was carrying more
passengers than she had been certified as allowed to carry.
(f) M/V Don Juan was twice as fast at M/T Tacloban.
There is, therefore, no question that the M/V Don Juan was at least as
negligent as the M/T Tacloban City in the events leading up to the
collision and the sinking of the M/V Don Juan.
Atty: In the total set of circumstances, had M/V Don Juan taken
seriously its duty of extraordinary diligence, could have easily avoided
the collision with the M/T Tacloban City.
ARRIVAL UNDER STRESS
Definition
Arrival under stress (AUS)
Article 819, Code of Commerce
The arrival at the nearest and most convenient port, if during the
voyage, the captain should believe that the vessel cannot continue the
trip to the port of destination on account of:
1. Lack of provisions
2. Well-founded fear of seizure
3. Privateers or pirates
4. By reason of any accident of the sea disabling it to navigate.
Important: The captain must make a protest.
Steps to be taken in the determination of the propriety of
arrival under stress:
1. Captain should determine during the voyage if there is a well-
founded fear of seizure, privateers of other valid grounds.
2. Captain shall then assemble the officers.
3. Captain shall summon the persons interested in the cargo who may
be present and who may attend but without right to vote.
4. The officers shall determine and agree if there is well-founded
reason after examining the circumstances; Captain shall have the
deciding vote.
5. Agreement shall be drafter and the proper minutes shall be signed
and entered into the log book.
6. Objections and protests shall likewise be entered in the minutes
12 | U N I V E R S I T Y O F S A N C A R L O S
When not lawful
Article 820
1. If the lack of provisions should arise from the failure to take the
necessary provisions for the voyage according to usage and
customs, or if they should have been rendered useless or lost
through bad stowage or negligence in their care.
2. If the risk of enemies, privateers, or pirates should not have been
well-known, manifest, and based on positive and provable facts.
3. If the defect of the vessel should have arisen from the fact that it
was not repaired, rigged, equipped, and prepared in a manner
suitable for the voyage, or from some erroneous order of the
captain.
4. When malice, negligence, want of foresight or lack of skill on the
part of the captain exists in the act causing the damage.
Atty: AUS means that the vessel can either go to the port of destination
or to the most convenient or nearest court because of several causes.
Examples of these causes are lack of provision, well-founded fear of
seizure, pirates, or accident along the voyage. But it becomes unlawful
when there is negligence on the part of the ship captain.
Unloading of cargo
Article 822
If in order to make repairs to the vessel or because there is danger that
the cargo may suffer damage, it should be necessary to unload, the
captain must request authorization from the competent judge or court
for the removal, and carry it out with the knowledge of the person
interested in the cargo, or his representative, should there be any. In a
foreign port, it shall be the duty, of the Philippine Consul, where there
is one, to give the authorization.
In the first case, the expenses shall be for the account of the ship agent
or owner, and in the second, they shall be chargeable against the
owners of the merchandise for whose benefit the act was performed. If
the unloading should take place for both reasons, the expenses shall be
divided proportionately between the value of the vessel and that of the
cargo.
Liability of Shipowner
Article 821, Code of Commerce
The expenses of an arrival under stress shall always be for the account
of the shipowner or agent, but they shall not be liable for the damages
which may be caused to the shippers by reason of the arrival provided
the latter is legitimate. Otherwise, the ship agent and the captain shall
be jointly liable.
Important: The shipowner will always be liable for the expenses of an
arrival under stress, whether lawful or unlawful. The only difference lies
in the liability for damages caused to the shipper’s cargoes:
4. If AUS is lawful – not liable
5. Is AUS is unlawful – liable (here, shipowner is liable for both
the expenses of arrival under stress and damages caused to
the shipper)
Article 825, Code of Commerce
The captain shall be liable for damages caused by his delay, if after the
cause of the arrival under stress has ceased, he should not continue the
voyage.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
SALVAGE
Right to salvage reward
Salvage
Salvage is the compensation allowed to persons by whose assistance a
ship or her cargo has been saved, in whole or in part, from impending
peril on the sea, or in recovering such property from actual loss, as in
case of shipwreck, derelict, or recapture.
Section 1, Salvage Law
When in case of shipwreck, the vessel or its cargo shall be beyond the
control of the crew, or shall have been abandoned by them, and picked
up and conveyed to a safe place by other persons, the latter shall be
entitled to a reward for the salvage.
Those who, not being included in the above paragraph, assist in saving
a vessel or its cargo from shipwreck, shall be entitled to a like reward.
When salvage reward may be had
1. Shipwreck
2. When the vessel or its cargo shall be beyond the control of the
crew
3. When the vessel or its cargo shall have been abandoned by them
Persons entitled to salvage reward
1. Those who picked up and conveyed the vessel or its cargo to a safe
place
2. Those who assist in saving a vessel or its cargo from shipwreck
Important: The salvor, under the Salvage Law must have no relation,
contractual or otherwise, upon the ship in distress.
Persons not entitled to salvage reward
Section 8
The following shall have no right to a reward for salvage or assistance:
1. The crew of the vessel shipwrecked or which was in danger of
shipwreck
2. He who shall have commenced the salvage in spite of opposition
of the captain or his representative, and
3. He who shall have failed to comply with the provisions of Sec. 3.
Important: While the crew of the vessel shipwrecked have no right to
a salvage reward, the crew of the salvaging ship is entitled to salvage.
Section 3
He who shall save or pick up a vessel or merchandise at sea, in the
absence of the captain of the vessel, owner, or a representative of either
or then, they being unknown, shall convey and deliver such vessel or
merchandise, as soon as possible, to the Collector or Customs, if the
port has a collector, and otherwise to the provincial treasurer or
municipal mayor.
Elements of a valid salvage claim
1. There exists a marine peril.
2. Service is voluntarily rendered and is not be required as an existing
duty or from a special contract.
3. Success in whole or in part, or that the service rendered
contributed to such success
4. The vessel is shipwrecked, ship or its cargo is beyond the control
of the crew or shall have been abandoned
Atty: At present, salvage law may not be as relevant, because expert
salvors don’t do salvage, unless covered by a salvage contract.
Consequently, this is a violation of the second requisite because the
same is no longer voluntary.
13 | U N I V E R S I T Y O F S A N C A R L O S
Why are expert salvors needed?
Because although it is not yet prevalent in our setting, in England,
salvors can be liable for damages if instead of salving or saving the
vessel, salvors would cause damage on the vessel.
Salvage is a preferred maritime time
Salvage is a maritime lien under Sec 17 of PD 1521, such that if in a
given contract, salvors are not paid, the salvage reward has priority over
other claims.
Towage v. Salvage
Towage
A contract whereby one vessel pulls another, whether loaded or not with
cargo, from one place to another, for a compensation. This is the service
rendered to a vessel by towing for the mere purpose of expediting her
voyage without reference to any circumstances of danger.
Salvage
A service rendered by one to the owner of a ship or goods, by his own
labor preserving the goods or the ship which the owner or those
entrusted with the care of them have either abandoned in distress at
sea or are unable to protect and secure.
Kinds of salvage:
1. Voluntary – compensation is dependent upon success
2. Rendered under a contract – payable at all events
3. Under a contract for a compensation – payable only in case of
success.
The main distinction lies in the element of peril.
Barrios v. Go Thong
Facts: Barrios was the master of MV Henry I. He received a distress
signal by blinkers from MV Don Alfredo, owned by Go Thong Co. Barrios
altered the course of his vessel and headed towards MV Don Alfredo.
The latter was in trouble due to engine failure and the loss of her
propeller. With the consent and knowledge of the master of MV Don
Alfredo, the vessel was caused to be tied and towed by MV Henry I.
Later however, at the sight of MV Don Alfredo’s sister ship, the latter’s
captain requested that the towlines be released. The parties now argue
whether the undertaking was a salvage or a mere towage.
Ruling: It was a mere towage. There was no marine peril in the case.
Although the vessel was in a helpless condition, it did not drift too far
from the place where it was. The weather was fair, clear, and good.
Although said vessel was drifting towards the open sea, there was no
danger of it floundering or being stranded, as it was far from any island
or rocks.
There was no danger that defendant's vessel would sink. The crew did
not even find it necessary to lower its launch and two motor boats, in
order to evacuate its passengers aboard. Neither did they find occasion
to jettison the vessel's cargo as a safety measure.
Importance of the distinction for members of the crew of the
salvaging ship
The distinction between salvage and towage is of importance to the
crew of the salvaging ship, for the following reasons:
(a) If it is in fact towage – It is the owner of the towing vessel and
not the crew who is entitled to remuneration.
(b) If it is in fact salvage – The crew of the salvaging ship is entitled
to salvage, and can look to the salvaged vessel for its share.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

CARRIAGE OF GOODS BY SEA ACT (COGSA) Notice of claim

When applicable Section 3 (6), COGSA

When applicable
A. Applies suppletorily to the Civil Code if the goods are to be shipped
form a foreign port to the Philippines
B. COGSA is applicable in international maritime commerce.
C. It can be applied in domestic sea transportation if agreed upon by
the parties (paramount clause).
Article 1753, NCC
The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or
deterioration.
Atty: Thus, the New Civil Code is the primary law on goods that are
being transported from a foreign port to the Philippines. Nevertheless,
the COGSA remains to be a suppletory law for such type of
transportation – international shipping.
Bill of lading necessary for COGSA to apply
Bill of lading or any other document, is needed for the application of
COGSA. It can be an acknowledgement receipt, received or signed by
the ship captain involving the goods.
If the loss or damage is not apparent, the notice must be given within
three (3) days of the delivery. Said notice of loss or damage may be
endorsed upon the receipt of the goods given by the person taking
delivery thereof. The notice in writing need not be given if the state of
the goods has at the time of their receipt been the subject of joint survey
or inspection.
In any event, carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after
delivery of the goods or the date when the goods should have been
delivered: Provided, that, if a notice of loss or damage, either apparent
or concealed, is not given as provided for in this section, that fact shall
not affect or prejudice the right of the shipper to bring suit within one
year after the delivery of the goods or the date when the goods should
have been delivered.
Notice of claim
A. If loss or damage is apparent – notice must be given immediately
B. If loss or damage is not apparent – notice must be given within 3
days from delivery.
Important: Non-compliance with the notice requirement shall not
prejudice the right of the shipper to bring suit within 1 year from delivery
of the goods or the date when the goods should have been delivered.

Reason: In international trade, other countries are also involved. A bill Distinguished from the NCC
of lading is the contract between the shipper and the carrier. Being so,
regardless of country, it shall be governing law between the two. COGSA NCC
Consequently, in case of suit, the law to be applied won’t be an issue (a) If damage is (a) If damage is
because it is the contract (bill of lading) that will govern. apparent – apparent –
immediately immediately
When COGSA not applicable Notice of
1. When liability is based on a contract of insurance claim
(b) If not apparent – (b) If not apparent –
2. In cases of misdelivery of goods within 3 days from within 24 hours
delivery
Delivery to arrastre operator for purposes of Sec. 3 (6)
Prescription 1 year 10-6-4 years
Section 3 (6), COGSA
Unless notice or loss or damage and the general nature of such loss or Prescriptive period, when reckoned
damage given in writing to the carrier or his agent at the port of
discharge or at the time of the removal of the goods into the custody of Section 3 (6), COGSA
the person entitled to delivery thereof under the contract of carriage,
such removal shall be prima facie evidence of the delivery by the carrier The carrier and the ship shall be discharged from all liability in respect
of the goods as described in the bill of lading. of loss or damage unless suit is brought within one year after delivery
of the goods or the date when the goods should have been delivered:
“Delivery” means delivery to arrastre operator Provided, that, if a notice of loss or damage, either apparent or
concealed, is not given as provided for in this section, that fact shall not
Union Carbide Phils v. Manila Railroad affect or prejudice the right of the shipper to bring suit within one year
“Delivery” within the meaning of Section 3 (6) of COGSA means delivery after the delivery of the goods or the date when the goods should have
to the arrastre operator. That delivery is evidenced by tally sheets which been delivered.
show whether the goods were landed in good order or in bad order, a
fact which the consignee or shipper can easily ascertain through the Prescriptive period
customs broker. Suit for loss or damage to the cargo must be brought within 1 year from:
(a) Delivery of the goods, or
Atty: To avoid confusion as to when and in whose hands the damage (b) The date when the goods should be delivered.
was caused, delivery shall mean delivery to the arrastre operator, and
not to the consignee. However, in cases of ports not covered by arrastre The one-year prescriptive period does not apply to cases of
operators, delivery shall mean delivery to consignee. misdelivery or conversion.
Philam Insurance v. Heung-a
Loss contemplates merely 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. It does not include a situation
where there was indeed delivery – but delivery to the wrong person, or
a misdelivery.

14 | U N I V E R S I T Y O F S A N C A R L O S
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
When prescription reckoned.
Union Carbide Phils v. Manila Railroad
Facts: On December 18, 1961 the vessel DaishinMaru arrived in Manila
with a cargo of 1,000 bags of synthetic resin consigned to General Base
Metals, Inc. which later sold the cargo to Union Carbide Philippines, Inc.
The following day, on December 19, 1961, the cargo was delivered to
the arrastre operation in good order and condition except for 25 bags
which were in bad order.
Of the 1,000 bags, only 898 bags were delivered to consignee.
Moreover, 50 of the 898 bags were damaged. Thus, consignee filed on
January 3, 1962, a provision claim against the arrastre operator, and
agent of the carrier, advising them that the shipment in question was
"short-landed, short-delivered and landed in bad order".
Later, on December 21, 1962, a case was filed against both the arrastre
operator and the agent of the carrier. It was however dismissed on the
ground that the action had already prescribed because it was not
brought within one year after delivery of the goods", as contemplated
in Section 3 (6) of COGSA.
Relevant dates:
1. December 19, 1961 – delivery of the goods to the arrastre operator
2. January 3, 1962 – provisional claim was filed
3. December 21, 1962 – case was filed in court
Issue: Whether the action filed by the consignee, Union Carbide, was
barred by the statute of limitations.
Ruling: Yes, with respect to the claim against the carrier’s agent, but
not with respect to the claim against the arrastre operator.
Claim against the carrier's agent has prescribed
The one-year period within which the consignee should sue the carrier
is computed from the delivery of the goods or the date when the goods
should have been delivered.
“Delivery” within the meaning of Section 3(6) of COGSA means delivery
to the arrastre operator. That delivery is evidenced by tally sheets which
show whether the goods were landed in good order or in bad order, a
fact which the consignee or shipper can easily ascertain through the
customs broker.
To use as basis for computing the one-year period, the date of delivery
to the consignee would be unrealistic and might generate confusion
between the loss or damage sustained by the goods while in the carrier's
custody and the loss or damage caused to the goods while in the
arrastre operator's possession.
Under the facts of this case, the one-year period was correctly reckoned
from December 19, 1961, when, as agreed upon by the parties and as
shown in the tally sheets, the cargo was discharged from the carrying
vessel and delivered to the arrastre operator. That one-year period
expired on December 19, 1962. Inasmuch as the action was filed on
December 21, 1962, it was barred by the statute of limitations.
Claim against the arrastre operator has not prescribed
The action against the arrastre operator to enforce liability for loss of
the cargo or damage thereto should be filed within one year from the
date when the claim for the value of such goods has been rejected or
denied by the arrastre operator.
However, before such action can be filed a condition precedent should
be complied with and that is, that a claim (provisional or final) shall have
been previously filed with the arrastre operator within 15 from the date
of the discharge of the last package from the carrying vessel.
15 | U N I V E R S I T Y O F S A N C A R L O S
In this case, the provisional claim was filed on January 3, 1962 or on
the 15th day following December 19, 1961, the date of the discharge of
the last package from the carrying vessel. That claim was never formally
rejected or denied by the arrastre operator.
Having complied with the condition precedent for the filing of a claim
within the fifteen-day period, Union Carbide could file the court action
within one year, either from December 19, 1961 or from December 19,
1962. This second date is regarded as the expiration of the period within
which the arrastre operator should have acted on the claim.
In other words, the consignee has a two-year prescriptive period,
counted from the date of the discharge of the goods, within which to
file the action in the event that the arrastre contractor, as in this case,
has not rejected nor admitted liability.
Since the action in this case against the arrastre operator was filed on
December 21, 1962, or within the two-year period expiring on December
19, 1963, that action was filed on time.
Meaning of delivery under Section 3 (6) on prescription
Liao v. American President Lines (1956)
Facts: Liao entered into a contract with Kent Sales of NYC for the
importation of fresh hen eggs. Kent Sales contracted with APL to have
the eggs shipped to Manila. Liao claims that the discharge of his cargo
at the port of San Francisco was wrongful and unjustified as the eggs
were exposed to the hot summer weather without having been placed
in refrigeration.
As a special defense, APL claimed that while Liao received the goods in
question on December 26, 1946, he filed a claim with APL for damages
only on July 25, 1947, and brought suit on May 25, 1948, more than a
year from the receipt of the goods, and so Liao’s action had prescribed
under Section 3 (6) of the COGSA.
Liao countered that there is a distinction between damage to the goods
and damages to the shipper. Consequently, damage to goods is
governed by COGSA, while damage to the shipper is governed by the
NCC. In the latter, the prescriptive period is 10 years.
Issue: Whether the claim has prescribed under COGSA.
Ruling: Yes. There is no difference between damage to goods and
damage to the shipper. Whatever damage or injury is suffered by the
goods while in transit would result in loss or damage to either the
shipper or the consignee. As long as it is claimed, therefore, as it is done
here, that the losses or damages suffered by the shipper or consignee
were due to the arrival of the goods in damaged or deteriorated
condition, the action is still basically one for damage to the goods, and
must be filed within the period of one year from delivery or receipt,
under COGSA.
Mitsui v. Court of Appeals
Facts: Mitsui, as common carrier, entered into a contract of carriage
with Lavine Co. to transport the latter’s goods from Manila to France.
Mitsui undertook to transport the goods to France 28 days from initial
loading. However, the goods were not transhipped immediately in
Taiwan. As a result, the shipment arrived later.
The consignee paid only half the value of the said goods on the ground
that they did not arrive in France until the off season in that country.
The remaining half was charged to the account of Lavine. Lavine now
sues Mitsui for damages, more than a year from delivery of the goods.
By way of special defense, Mitsui argued that Lavine’s claim has already
prescribed.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Issue: Whether Lavine’s claim has already prescribed.
Ruling: No, because in the first place, COGSA is not applicable in the
case at bar. “In respect of loss or damage” under COGSA means physical
damage to the goods (not economic and not including the depreciation
of the value of the goods upon arrival at the port of destination).
In the case at bar, there is neither deterioration nor disappearance nor
destruction of goods. What is in issue is not the liability of petitioner for
its handling of goods as provided by Section 3 (6) of the COGSA, but its
liability under its contract of carriage.
The suit instituted by Lavine in this case is not for loss or damage to
goods contemplated in Section 3 (6) of COGSA. Thus, the question of
prescription of action is governed not by the COGSA but by Art. 1144 of
the Civil Code which provides for a prescriptive period of ten years.
Meaning of “in respect of loss or damage”
Section 3 (6), COGSA
The carrier and the ship shall be discharged from all liability in respect
of loss or damage unless suit is brought within one year after delivery
of the goods or the date when the goods should have been delivered:
Provided, that, if a notice of loss or damage, either apparent or
concealed, is not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within one year
after the delivery of the goods or the date when the goods should have
been delivered.
Hague Rules v. Hague Visby
A. Hague Rules – physical damage to goods only.
B. Hague Visby – covers both physical damage to goods and damage
to the shipper with respect to the value of the goods by reason of
the delay.
Atty: But since we have not adopted the Hague Visby, we have to rely
on the Hague Rule. Apply the case of Mistui, unless the problem is
general, without referring to facts similar to the case of Mistui. In which
case, apply the two cases.
When to apply the Hamburg or Hague Rule or Hague Visby
It would depend on who is suing.
(a) If it is a suit by Philippine shipper or consignee of the goods, the
COGSA will apply, especially if the destination is the Philippines as
provided under Section 1753 of the New Civil Code.
(b) But if it is a suit by the owner of a foreign vessel against a Filipino
vessel – COGSA will not apply. If the foreign vessel owner will file
a case here in the Phils, that is tantamount to an admission that
the Phil. Law governs, the New Civil Code, on quasi-delict.
Suspension of prescriptive period by parties
1. Modification in the prescriptive period
Hamburg provision
Provision recognizing the party’s right to extend the prescriptive
period.
2. Exchange of correspondence
Universal Shipping v. IAC
This provision under Section 3 (6) of COGSA admits of an
exception, that is, if the one-year period is suspended by express
16 | U N I V E R S I T Y O F S A N C A R L O S
agreement of the parties for in such a case, their agreement
becomes the law for them.
In this case, the period was suspended because of the exchange
of communication by the parties. It was considered by the court
that they have mutual agreed to extend the time to file the suit.
TN: The circumstances in this are peculiar and cannot be applied
in all cases.
3. Implied admission
Cua v. Wallem
In the allegations of his complaint, petitioner alleged that they have
agreed to extend the prescriptive period. When the defendant
answered, it was not specifically denied. So the court said that it
was a presumed admission. Therefore, there was no prescription.
4. Amended complaint
Wallen Phils v. SR Farms
The one year prescriptive period is reckoned not from the filing of
the original complaint, but from the filing of the amended
complaint.
5. Fault attributable to insurer
New World v. Seaboard
In this case, the one year already prescribed. But the SC allowed
the filing of the action because there was fault on the part of the
insurance company, the subrogee:
(a) The insurer did not answer the claim.
(b) The insurer asked for an itemized list of the goods which
were damaged.
(c) There was no rejection of the claim
The Supreme Court said that the insurer cannot ask for an itemized
list because the claim was for total loss. So there’s no need for a
list of the goods damaged since the claim is total.
Package liability limitation
Package liability limitation
Under the COGSA, the liability of the carrier shall be limited to $500 per
package or pallet in the absence of declaration in the bill of lading of the
value of the shipped goods. Note further that COGSA applies only when
there is bill of lading or similar document.
Section 4 (5), COGSA
Neither the carrier nor the ship shall in any event be or become liable
for any loss or damage to or in connection with the transportation of
goods in an amount exceeding $500 per package lawful money of the
United States, or in case of goods not shipped in packages, per
customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the
shipper before shipment and inserted in the bill of lading. This
declaration, if embodied in the bill of lading shall be prima facie
evidence, but shall be conclusive on the carrier.
Philam Insurance v. Heung-a
Facts: Novartis imported from Jinsuk in South Korea plastic packaging
material. Jinsuk engaged the services of a freight forwarder to forward
the goods to the consignee, Novartis. The goods were then loaded on a
vessel owned by Heung-A. Wallem Phils Shipping is Heung-A’s agent in
the Philippines.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Based on the bill of lading issued, the cargo was on freight prepaid basis
and on "shipper’s load and count" which means that the container was
packed with cargo by one shipper where the quantity, description and
condition of the cargo is the sole responsibility of the shipper.
When the shipment reached Novartis, it was discovered that the boxes
of the shipment were wet and damaged. A complaint was thus filed
against Heung-A and Wallem for damages. The court ruled that Heung-
A and Wallem have the right to limit their liability under the package
limitation of liability of Section 4 (5) of the COGSA, in view of its
observation that nowhere in the bill of lading did that the lading did the
shipper declare the value of the subject cargo.
Issue: Whether the package liability limitation applies in favor of
Heung-A and Wallem.
Ruling: Yes. Pursuant to Section 4 (5) of COGSA, when there is loss or
damage to goods covered by a contract of carriage from a foreign port
to a Philippine port, the carrier’s liability is limited to $500 per package,
in the absence of a shipper’s declaration of the value of the goods in the
bill of lading.
Invocation of arrastre operator of prescription
Section 3 (6), COGSA
“In any event, carrier and the ship shall be discharged from all liability
in respect of loss or damage unless suit is brought within one year after
delivery of the goods or the date when the goods should have been
delivered.”
Insurance Co. of NA vs. Asian
COGSA does not apply to arrastre operators. Section 3 (6) of COGSA
applies only to carriers. Carrier under Section 1 of COGSA includes the
owner or the charterer who enters into a contract of carriage with a
shipper. Consequently, not being a common carrier, an arrastre operator
cannot invoke the prescriptive period of one year.
AVIATION LAW
WARSAW CONVENTION
International Transportation
Applicability of the Warsaw Convention
The Warsaw Convention applies to all international carriage of persons,
luggage or goods performed by aircraft for reward. It applies equally to
gratuitous carriage by aircraft performed by an air transport
undertaking.
International Transportation or Carriage (Under WARSAW)
Means any carriage in which, according to the contract made by the
parties, where:
1. The place of departure and the place of destination are within the
territories of two contracting countries regardless of whether or not
there was a break in the transportation or transhipment.
2. The place of departure and the place of destination are within the
territory of a single contracting country if there is an agreed
stopping place within a territory subject to the sovereignty,
mandate or authority of another power, even though the power is
not a party to the Convention.
Important: If there is International Transportation or International
Carriage, then the WARSAW Convention applies. Otherwise, other laws
will apply like the NCC.
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Atty: There is a need to emphasize the applicability of International
Transportation. Warsaw talked about the carriage of:
a. Passengers
b. Baggage
c. Cargo or Goods
The transportation documents to be issued by the carrier:
1. Passenger – ticket
2. Baggage – baggage check
3. Goods – airway bill
TN: If the carrier fails to carry transportation documents, the carrier
cannot limit liability; one of the defenses against limitation of liability.
Also, when you will be obtaining a ticket from the airline and it is
transportation outside the Philippines by air, there is always that
provision in the ticket that the WARSAW Convention, Guadalahara
Protocol, etc. will apply. Absent that stipulation, the common carrier
cannot avail of limited liability.
Important: Warsaw prevails over the Civil Code and the Rules of Court.
(a) COGSA/WARSAW – applies to foreign vessels or airplane or
international travel.
(b) Code of Commerce – applies to inter-island or domestic travel.
Relevant Warsaw Convention provisions
Important: These are the provisions tackled in the cases below. Refer
to these when Warsaw provisions are mentioned. Be guided accordingly.
Article 1 (3), Warsaw
A carriage to be performed by several successive air carriers shall be
deemed, for the purposes of this Convention, 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 a series of contracts, and it shall not lose its international
character merely because one contract or series of contracts is to be
performed entirely within the territory subject of the sovereignty,
suzerainty, mandate or authority of the same High Contracting Party.
Purpose: The evident purpose underlying this Article is to promote
international air travel by facilitating the procurement of a series of
contracts for air transportation through a single principal and obligating
different airlines to be bound by one contract of transportation.
Article 28 (1), Warsaw
An action for damages must be brought at the option of the plaintiff, in
the territory of one of the High Contracting Parties, either before the
court of the domicile of the carrier or of his principal place of business
or where he has a place of business through which the contract has
been made, or before the court at the place of destination.
Article 30, Sections 1 and 2, Warsaw
(1) In the case of transportation to be performed by various
successive carriers and falling within the definition set out in the
third paragraph of Article I, each carrier who accepts passengers,
baggage, or goods shall be subject to the rules set out in the
convention, and shall be deemed to be one of the contracting
parties to the contract of transportation insofar as the contract
deals with that part of the transportation which is performed
under his supervision.
(2) In the case of transportation of this nature, the passenger or his
representative can take action only against the carrier who
performed the transportation during which the accident or the
delay occurred, save in the case where, by express agreement,
the first carrier has assumed liability for the whole journey.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Article 25 (1), Warsaw
The carrier shall not be entitled to avail himself of the provisions of this
convention which exclude or limit his liability, if the damage is caused
by his willful misconduct or by such default on his part as, in accordance
with the law of the court to which the case is submitted, is considered
to be equivalent to willful misconduct.
Carriage to be performed by successive carriers
American airlines v. CA
Note: Only in American airline case where the one sued is the alleged
agent, meaning in the Guadalahara convention, the actual carrier. While
in the other three cases, the carrier which was sued was the contracting
carrier.
Facts: Mendoza purchased from Singapore Airlines in Manila
conjunction tickets for Manila-Singapore-Athens-Larnaca-Rome-Turin-
Zurich-Geneva-Copenhagen-New York (Wow sha na gyud). American
Airlines was not a participating airline in any of the segments in the
itinerary under the said conjunction tickets.
However, while in Geneva, Mendoza decided to forego his trip to
Copenhagen and go straight to New York. He exchanged the unused
portion of his conjunction ticket with American Airlines for a one-way
ticket from Geneva to New York. American Airlines then issued its own
ticket to Mendoza and claimed the value of the unused portion of the
conjunction ticket from the IATA clearing house in Geneva.
Upon arrival at the Geneva airport, Mendoza was prevented by security
guards from boarding the plane, detained him for almost an hour, and
allowed him to board only after all the passengers have boarded. Thus,
Mendoza filed a complaint for damages against American Airlines for the
embarrassment and mental anguish he suffered.
American Airlines filed a motion to dismiss for lack of jurisdiction of
Philippine courts to entertain the proceedings under Article 28 (1) of the
Warsaw Convention, basing its argument mainly on the ground that its
issuance of a new ticket in Geneva created a contract of carriage
separate and distinct from that entered by Mendoza with Singapore
Airlines.
Issue: Whether the contract of transportation between American
Airlines and Mendoza was a separate and distinct contract.
Ruling: No. The contract of carriage between Mendoza and Singapore
Airlines, although performed by different carriers under a series of airline
tickets, including that issued by American Airlines, constitutes a single
operation.
Warsaw Convention Article 1 (3) clearly states that a contract of air
transportation is taken as a single operation whether it is founded on a
single contract or a series of contracts. The number of tickets issued
does not detract from the oneness of the contract of carriage as long as
the parties regard the contract as a single operation.
When American Airlines accepted the unused portion of the conjunction
tickets, entered it in the IATA clearing house and undertook to transport
the Mendoza from Geneva to New York, it tacitly recognized its
commitment under the IATA pool arrangement to act as agent of the
principal contracting airline, Singapore Airlines, as to the segment of the
trip it agreed to undertake.
Atty’s discussion:
In the case, American Airlines is the actual carrier. It is the carrier which
issued the ticket to Mendoza in Geneva. Mendoza decided that he won’t
pass anymore to Copenhagen and go immediately to New York. He
showed his unused portion of his ticket to American Airlines and the
airline accepted it.
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This is very crucial because it is this acceptance by American Airlines of
the unused portion of the conjunction ticket that makes it everything a
single contract. The exchange of the ticket is part and parcel of the ticket
issued by Singapore Airlines to Mendoza.
You will note that the defense of American Airlines when it was sued
was lack of jurisdiction. Why?
Because it wanted to present an argument in court that what was issued
in Geneva was a separate contract. If it was treated as a separate
contract, then it is clear that the Philippine Court has no jurisdiction.
Take note that venue in Warsaw is jurisdictional.
There are four venues with respect to jurisdiction under Warsaw.
1. The court where the carrier is domiciled
2. The court where the carrier has its principal place of business
3. The court where the carrier has an establishment by which the
contract has been made
4. The court of the place of destination
Applying the facts in the case:
(a) American Airlines is not domiciled in the Philippines
(b) Where the contract was purchased – Geneva
(c) Point of Destination – New York
However, the Court saw a different angle because American Airlines
accepted and issued a separate contract.
The factual elements are:
(a) Presentation of the unused portion
(b) Acceptance by American Airlines
(c) American Airlines claimed the value of the unused portion from the
IATA clearing house
Lufthansa German Airlines v. CA
Facts: Antiporda, Sr. was contracted by SGV to be the institutional
financial specialist for the agricultural credit institution project of the
Investment and Development Bank of Malawi in Africa. For the
engagement, Antiporda would be provided one round-trip economy
ticket from Manila to Blantyre and back with a maximum travel time of
four days per round-trip. Lufthansa German Airlines then issued a ticket
for Antiporda's confirmed flights to Malawi, Africa.
Antiporda took the Lufthansa flight to Singapore from where he
proceeded to Bombay on board the same airline. He arrived in Bombay
as scheduled and waited at the transit area of the airport for his
connecting flight to Nairobi. However, he was informed that his seat in
Air Kenya Flight 203 to Nairobi had been given to a very important
person of Bombay who was attending a religious function in Nairobi. Air
Kenya Flight 203 left for Nairobi without him on board.
Antiporda finally arrived in Blantyre, more than a couple of days late for
his appointment. Thus, he filed a complaint against Lufthansa.
Issue: Whether Lufthansa which issued a confirmed Lufthansa ticket to
Antiporda should be held liable for damages occasioned by the
"bumping-off" of Antiporda by Air Kenya, one of the airlines contracted
to carry him to a particular destination of the five-leg trip.
Ruling: Yes. Lufthansa is clearly the principal in the contract of carriage
with Antiporda and remains to be so, regardless of those instances when
actual carriage was to be performed by various carriers. The issuance
of a confirmed Lufthansa ticket in favor of Antiporda covering his entire
five-leg trip abroad successive carriers concretely attests to this. This
also serves as proof that Lufthansa, in effect guaranteed that the
successive carriers, such as Air Kenya would honor his ticket, assure him
of a space therein and transport him on a particular segment of his trip
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Lufthansa cannot claim that its liability thereon ceased at Bombay
Airport and thence, shifted to the various carriers that assumed the
actual task of transporting said private respondent.
Bumping off is not equivalent to delay
In its ordinary sense, "delay" means to prolong the time of or before; to
stop, detain or hinder for a time, or cause someone or something to be
behind in schedule or usual rate of movement in progress.
"Bumping-off," which is the refusal to transport passengers with
confirmed reservation to their planned and contracted destinations,
totally forecloses said passengers' right to be transported, whereas
delay merely postpones for a time being the enforcement of such right.
Consequently, Section 2, Article 30 of the Warsaw Convention which
does not contemplate the instance of "bumping-off" but merely of simple
delay, cannot provide a handy excuse for Lufthansa as to exculpate it
from any liability to Antiporda. The payment of damages is, thus,
deemed warranted by this Court.
Kim Royal Dutch Airline v. Court of Appeals
Facts: The KLM Dutch Airlines secured seat reservation for respondents
and their two companions from carriers that would ferry them through
their world tour. Their itinerary included the Barcelona-Lourdes route,
serviced by only one airline, the Aer Lingus.
They were issued KLM tickets for their entire trip, but their coupon for
the Aer Lingus portion (Flight 861, June 22, 1965) was marked "RQ"
which means "on request."
At the KLM office in Frankfurt, Germany, respondents obtained a
confirmation from Aer Lingus of seat reservations on flight 861. In the
afternoon of June 22, 1965, the Aer Lingus manager at Barcelona Airport
directed respondents to check in. They did as instructed and were
accepted for passage. However, although their companions were
allowed to take the plane, respondents were brusquely off-loaded and
shoved aside on orders of the Aer Lingus manager with the aid of
policeman who shouted at them "Coños! Ignorantes Filipinos." As a
result they had to take a train to Lourdes.
Thus, respondents, referring to KLM as the principal of Aer Lingus, filed
a complaint for damages arising from breach of contract of carriage and
for the humiliating treatment received by them at the hands of the Aer
Lingus manager in Barcelona.
Issue: Whether KLM is liable to respondents.
Ruling: Yes. The applicability insisted upon by the KLM of Article 30 of
the Warsaw Convention cannot be sustained. That article presupposes
the occurrence of either an accident or a delay, neither of which took
place at the Barcelona airport. What is manifest, instead, is the willful
misconduct on the part of the KLM's agent, the Aer Lingus. As such, KLM
is precluded from limiting its liability pursuant to Section 25 (1) of the
Convention.
Moreover, the passage tickets of the respondents provide that the
carriage to be performed thereunder by several successive carriers "is
to be regarded as a single operation”. The respondents dealt exclusively
with the KLM which issued them tickets for their entire trip and which in
effect guaranteed to them that they would have sure space in Aer Lingus
flight 861. The respondents, under that assurance of the internationally
prestigious KLM, naturally had the right to expect that their tickets would
be honored Aer Lingus.
Atty’s discussion:
KLM was the contracting party and Aer Lingus Airlines was the actual
carrier. Three passenger suffered damages while in the hands of the Aer
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Lingus staff. So the time when KLM was sued, KLM used Art. 30 (2) and
argued that should be the actual carrier that should be responsible.
Article 30 (2) is not applicable because there was neither delay nor
accident. The SC said that it does not apply if the damage is caused by
wilful conduct misconduct on the part of carrier’s employee.
China airlines v. Chiok
Facts: China Airlines issued tickets to Chiok for his Manila-Taipei-
Hongkong-Manila tour. Said ticket was exclusively endorseable to PAL.
Here, the actual carrier was Philippine Airlines, and the contracting
carrier is China Airlines.
Chiok, in his return trip Manila, was prevented from boarding the aircraft
because his name did not appear from the computerized passenger list
despite his confirmed flight tickets.
When Chiok sued both China Airlines and PAL. By way of special
defense, China Airlines argued that it merely acted as an issuing agent
for the ticket covering the Hongkong-Manila leg and that PAL should be
liable for the actual carriage.
Issue: Whether China Airlines which merely acted as an issuing agent
for the ticket is solidarily liable with PAL.
Ruling: Yes. The contract of air transportation was between China
Airlines and Chiok, with the former endorsing to PAL the Hong Kong-
Manila trip. Such contract of carriage has always been treated in this
jurisdiction as a single operation. This is supported by the Warsaw
Convention and by the International Air Transportation Association.
As the principal in the contract of carriage, China Airlines is liable even
when the breach of the contract had occurred not on its own flight, but
on that of another. It was also held that the obligation of the ticket-
issuing airline remained and did not cease, regardless of the fact that
another airline had undertaken to carry the passengers to one of their
destinations.
Atty’s discussion:
To say that a contract of carriage should be treated as a single operation
is not always true, because Article 1 (3) the Warsaw Convention says:
“A carriage to be performed by several successive air carriers is deemed,
for the purposes of this Convention, to be one undivided carriage, if it
has been regarded by the parties as a single operation xxx”
This means that there should be no assumption out of this particular
kind of carriage. There must be factual evidence where you can deduce
that it has been regarded by the parties as a single operation.
You can actually look at the ticket if there are different legs of the trip,
there is a point of departure and a point of destination and there are
different carriers which will perform the different legs of the trip – that
will now fall under a “single operation”. But you cannot always right
away assume that it is a single operation under our jurisdiction.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Application of Articles 17, 18 and 19 of WARSAW
Article 17, Warsaw
The carrier shall be liable for damages sustained in the event of the
death or wounding of a passenger or any other bodily injury suffered by
a passenger, if the accident which caused the damage so sustained took
place on board the aircraft or in the course of any of the operations of
embarking or disembarking.
Article 18, Warsaw
(1) The carrier shall be liable for damage sustained in the event of the
destruction or loss of, or of damage to, any checked baggage, or
any goods, if the occurrence which caused the damage so
sustained took place during the transportation by air.
(2) The transportation by air within the meaning of the preceding
paragraph shall comprise the period during which the baggage or
goods are in charge of the carrier, whether in an airport or on board
an aircraft, or, in the case of a landing outside an airport, in any
place whatsoever.
(3) The period of the transportation by air shall not extend to any
transportation by land, by sea, or by river performed outside an
airport. If, however, such transportation takes place in the
performance of a contract for transportation by air, for the purpose
of loading, delivery, or transshipment, any damage is presumed,
subject to proof to the contrary, to have been the result of an event
which took place during the transportation by air.
Article 19, Warsaw
The carrier is liable for damage occasioned by delay in the carriage by
air of passengers, baggage or cargo.
Northwest Airlines v. Cuenca
Facts: Respondent Cuenco was then the Commissioner of Public
Highways of the Republic of the Philippines. Having boarded petitioner's
plane in Manila with a first class ticket to Tokyo, he was, upon arrival at
Okinawa, transferred to the tourist class compartment. Although he
revealed that he was traveling in his official capacity as official delegate
of the Republic to a conference in Tokyo, an agent of petitioner rudely
compelled him in the presence of other passengers to move, over his
objection, to the tourist class, under threat of otherwise leaving him in
Okinawa. In order to reach the conference on time, respondent had no
choice but to obey.
Consequently, respondent filed a case against petitioner airlines for
breach of contract and damages. By way of special defense, petitioner
airlines argued that pursuant to Articles 17-19 of the Warsaw
Convention, an air carrier is liable only in the event of death of a
passenger or injury suffered by him, or of destruction or loss of, or
damage to any checked baggage or any goods, or of delay in the
transportation by air of passengers, baggage or goods.
Issue: Whether respondent has a cause of action.
Ruling: Yes. Articles 17-19 merely declare the carrier liable for damages
in the enumerated cases, if the conditions therein specified are present.
Neither said provisions nor others in the aforementioned Convention
regulate or exclude liability for other breaches of contract by the carrier.
Under petitioner's theory, an air carrier would be exempt from any
liability for damages in the event of its absolute refusal, in bad faith, to
comply with a contract of carriage, which is absurd.
1
Supra. See page 18 for the facts.
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Atty: Here, Warsaw was not applied. The New Civil Code was used.
SC said Warsaw does not exclude NCC. Common carriers cannot just
be held liable based on Articles 17-19. The carrier can still be held
liable for other violations not necessarily covered under Art. 17, 18, 19.
Airline General Pool Agreement
American Airlines v. Court of Appeals1
Members of the International Air Transport 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.
IATA Clearing House
Booking and reservation among airline members are allowed even by
telephone and it has become an accepted practice among them. A
member airline which enters into a contract of carriage consisting of a
series of trips to be performed by different carriers is authorized to
receive the fare for the whole trip and through the required process of
interline settlement of accounts by way of the IATA clearing house an
airline is duly compensated for the segment of the trip serviced.
Thus, when the petitioner accepted the unused portion of the
conjunction tickets, entered it in the IATA clearing house and undertook
to transport the private respondent over the route covered by the
unused portion of the conjunction tickets, i.e., Geneva to New York, the
petitioner tacitly recognized its commitment under the IATA pool
arrangement to act as agent of the principal contracting airline,
Singapore Airlines, as to the segment of the trip the petitioner agreed
to undertake. As such, the petitioner thereby assumed the obligation to
take the place of the carrier originally designated in the original
conjunction ticket.
Limited Liability
WHEN APPLICABLE
1. Passengers – limited to 250,000 francs
Except: Agreement to a higher limit
2. Goods and checked-in baggage – 250 francs/kg
Except: Consignor declared its value and paid a supplementary
sum. Carrier is liable not more than the declared sum unless it
proves the sum is greater than its actual value.
3. Hand-carry baggage – limited to 5,000 francs/passenger
Important: An agreement relieving the carrier from liability or fixing a
lower limit is null and void. (Art. 23)
WHEN NOT APPLICABLE
1. Willful misconduct or default
Article 25, Warsaw
The carrier shall not be entitled to avail himself of the provisions of
this Convention which exclude or limit his liability, if the damage is
caused by his willful misconduct or by such default on his part.
Similarly the carrier shall not be entitled to avail himself of the said
provisions, if the damage is caused as aforesaid by any agent of
the carrier acting within the scope of his employment.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017
Important: It is the law of the forum who will determine whether
the damage is caused by willful misconduct.
2. If there is no delivery of the adequate transportation
documents.
Article 3 (2), Warsaw
The absence, irregularity or loss of the passenger ticket does not
affect the existence or the validity of the contract of carriage, which
shall nonetheless be subject to the rules of this Convention.
Nevertheless, if the carrier accepts a passenger without a
passenger ticket having been delivered, he shall not be entitled to
avail himself of those provisions of this Convention which exclude
or limit his liability.
3. Absence of luggage without luggage ticket
Article 4 (4), Warsaw
If the carrier accepts luggage without a luggage ticket having been
delivered, or if the luggage ticket does not contain the particulars
set out in this Convention, the carrier shall not be entitled to avail
himself of the provisions of this Convention which exclude or limit
his liability.
4. Acceptance of goods without air consignment note
Article 9, Warsaw
If the carrier accepts goods without an air consignment note having
been made out, or if the air consignment note does not contain all
the particulars set out in this Convention, the carrier shall not be
entitled to avail himself of the provisions of this Convention which
exclude or limit his liability.
5. Transportation outside the Convention.
6. If the passenger or shipper declares a higher value.
Notice of Claim
Article 26, Warsaw
In the case of damage, the person entitled to delivery must complain to
the carrier after discovery of the damage, within:
(a) 3 days from date of receipt – in case of luggage
(b) 7 days from date of receipt– in case of goods
(c) 14 days from the date on which the luggage or goods have been
placed at his disposal– in case of delay
Notice of claim with the carrier is a condition precedent to filing
an action in court. Failure to comply therefore bars recovery for
the loss or damage suffered.
Federal Express v. American Home
Facts: Smithkline Nebraska delivered to Burlington Air Express, an
agent of Federal Express, a shipment of 109 cartons of the veterinary
biological, for delivery to consignee Smithkline in Manila. In the Airway
Bill, the words: “Refrigerate when not in transit and perishable” were
stamped on its face. Burlington insured the cargoes with American Home
Assurance Company (AHAC).
Upon arrival of the goods, it was discovered that the vaccines were
unusable because it was merely stored in a room thus without proper
refrigeration. Hence, Smithkline declared a total loss for the goods,
abandoned the shipment and filed a claim against the insurer, AHAC.
Federal Express claims that Smithkline’s right of action are already
barred by reason of its failure to file a written notice or complaint with
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Federal regarding its claim for damage or loss to the subject cargo within
the period required by the Warsaw Convention and/or airway bill.
Issue: Whether Smithkline’s right of action is barred by reason of failure
to file a written notice or complaint with Federal Express.
Ruling: Yes. The filing of a claim with the carrier within the time
limitation constitutes a condition precedent to the accrual of a right of
action against a carrier for loss of or damage to the goods. The shipper
or consignee must allege and prove the fulfillment of the condition. If it
fails to do so, no right of action against the carrier can accrue in favor
of the former.
The requirement of giving notice of loss of or injury to the goods is not
an empty formalism. The reasons for such a stipulation are:
1. To inform the carrier that the cargo has been damaged, and that
it is being charged with liability therefor, and
2. To give it an opportunity to examine the nature and extent of the
injury.
This protects the carrier by affording it an opportunity to make an
investigation of a claim while the matter is fresh and easily investigated
so as to safeguard itself from false and fraudulent claims.
When an airway bill, or any contract of carriage for that matter has a
stipulation that requires a notice of claim for loss of or damage to goods
shipped and the stipulation is not complied with, its enforcement can be
prevented and the liability cannot be imposed on the carrier. To stress,
notice is a condition precedent, and the carrier is not liable if notice is
not given in accordance with the stipulation.
Jurisdiction in Article 28
Article 28, Warsaw
An action for damages must be brought at the option of the plaintiff, in
the territory of one of the High Contracting Parties, either before the
court of the domicile of the carrier or of his principal place of business
or where he has a place of business through which the contract has
been made, or before the court at the place of destination.
The plaintiff may bring the action for damages before:
1. The court where the carrier is domiciled
2. The court where the carrier has its principal place of business
3. The court where the carrier has an establishment by which the
contract has been made
4. The court of the place of destination
Important: Venue under the Warsaw Convention is jurisdictional in
character. It cannot be waived.
Allegations of tort immaterial
Filing of the case in the proper venues is still required even if there are
allegations of tortious conduct. Allegations of tort do not bring the case
outside the ambit of the Warsaw Convention.
TRANSPORTATION LAW l Atty. Glenn Capanas l For the exclusive use of EH 404 2016-2017

Prescriptive period

Article 29, Warsaw

The right to damages shall be extinguished if an action is not brought
within two (2) years, reckoned from either:
1. Date of arrival at the destination, or
2. Date on which the aircraft ought to have arrived, or
3. Date on which the carriage stopped.

Defense in Article 30

Article 30, Warsaw

1. In the case of carriage to be performed by various successive
carriers and falling within the definition set out in the third
paragraph of Article 1, each carrier who accepts passengers,
luggage or goods is subjected to the rules set out in this
Convention, and is deemed to be one of the contracting parties to
the contract of carriage in so far as the contract deals with that
part of the carriage which is performed under his supervision.

2. In the case of carriage of this nature, the passenger or his

representative can take action only against the carrier who
performed the carriage during which the accident or the delay
occurred, save in the case where, by express agreement, the first
carrier has assumed liability for the whole journey.

3. As regards luggage or goods, the passenger or consignor will have

a right of action against the first carrier, and the passenger or
consignee who is entitled to delivery will have a right of action
against the last carrier, and further, each may take action against
the carrier who performed the carriage during which the
destruction, loss, damage or delay took place. These carriers will
be jointly and severally liable to the passenger or to the consignor
or consignee.

Rule in case of various successive carriers

A. In case of transportation of passengers – the passenger can file an

action only against the carrier in whose carriage the accident or
delay occurred.

Except: Where there is an agreement whereby the first carrier

assumed liability for the whole journey.

B. In case of transportation of baggage or goods –

(1) The consignor can file an action against the first carrier and
the carrier in which the damage occurred. These carriers are
jointly and severally liable.

(2) The consignee can file an action against the last carrier and
the carrier in which the damage occurred. These carriers are
jointly and severally liable.

Important: According to Sir, only the actual carrier can invoke Article
30 and not the contracting carrier.

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