TRANSPORTATION & PUBLIC UTILITY LAW
XAVIER UNIVERSITY - ATENEO DE CAGAYAN
“Work Hard in Silence, Let SUCCESS be your NOISE”
COMMON CARRIERS
“Long-distance trade is said to be both a symptom and a
motor of change”
“The imposition of a higher degree of care on common carriers
was calculated to protect the passengers from the tragic
mishaps that frequently occur in connection with rapid modern
transportation. This standard of care is imperatively
demanded by the preciousness of human life and by the
consideration that every person must in every way be
safeguarded against all injury.”
CHAPTER 1
GENERAL CONSIDERATIONS
What is a contract of transportation?
There is a contract of transportation when a person
obligates himself to transport persons or property from one
place to another for a consideration. The contract may involve
carriage of passengers or carriage of goods. The person who
obligates himself to transport the goods or passengers may
be a common carrier or a private carrier.
Who are the parties of the contract of transportation?
The parties would depend on whether it is for
carriage of passengers or carriage of goods. In carriage of
passengers – it is the common carrier and the passenger. In
carriage of goods – the parties are the shipper and the carrier,
and/or the consignee when he binds himself to the contract
upon acceptance.
Who is the consignee?
The consignee is the person to whom the goods are
to be delivered. The consignee may be the shipper himself as
in the case where the goods will be delivered to one of the
branch offices of the shipper.
When consignee is bound by contract?
A consignee, although not a signatory to the contract
of carriage between the shipper and the carrier, becomes the
party of the contract by reason of either:
a. the relationship of agency between the consignee
and the shipper/ consignor.
b. the unequivocal acceptance of the bill of lading
delivered to the consignee, with full knowledge of
its contents
c. availment of the stipulation pour autrui – when the
consignee, 3rd person, demands before the
carrier the fulfillment of the stipulation made by
the consignor/shipper in the consignee’s favor,
specifically the delivery of the goods/cargoes
shipped.
What is the effect if there is a gratuitous or reduced fare?
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
A passenger is still considered as such even if he is
carried gratuitously or under a reduced fare. Subject to the rule
in art. 1758 of the civil code that provides that when a
passenger is carried gratuitously, a stipulation limiting the
common carrier’s liability for negligence is valid.
What are the 2 types of contracts of carriage of passengers
and how perfected?
1. contract to carry – an agreement to carry the
passenger at some future date. This contract is
consensual and is therefore perfected by mere
consent.
2. contract of carriage or of common carriage itself –
that should be considered a real contract for not
until the facilities of the carrier are actually use
can the carrier be said to have already assumed
the obligation of the carrier.
How contract of carriage of goods perfected?
By the act of delivery of goods, that is, “when the
goods unconditionally placed in the possession and control of
the carrier, and upon their receipt by the carrier for
transportation, the contract of carriage is perfected.
Compania Martima v. Insurance Copany of the North America;
“The receipt of goods by the carrier has been said to
lie at the foundation of the contract to carry and
deliver, and if actually no goods are received there
can be no such contract. The liability and
responsibility of the carrier under the contract of
carriage of goods commences on their actual
delivery to, or receipt by, the carrier or an authorized
agent…”
British Airways, Inc. v. CA
An action for damages may be sustained for breach
of contract to carry. Even if no tickets were issued, a verbal
contract to carry is already binding consensual contract.
Is a written contract essential?
The presence of a ticket or bill of lading or any
written contract is not necessary for the perfection of the
contract of carriage. The code does not demand, as
necessary requisite in the contract of transportation, the
delivery of the bill of lading to the shipper, but gives right to
both the carrier and the shipper to mutually demand of each
other the delivery of the said bill. Nevertheless, the bill of
lading is juridically a documentary proof of the stipulations and
conditions agreed upon by both parties.
In aircraft, when can there be a perfected contract to carry
passengers?
There is a perfected contract to carry passengers
even if no tickets have been issued to said passengers so long
as there was already a meeting of minds with respect to the
subject matter and considerations.
What is a continuing offer rule?
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“Work Hard in Silence, Let SUCCESS be your NOISE”
Once a public utility bus stops, it is in effect making a
continuing offer to the bus riders. Under this rule, it is the duty
of the drivers to stop their conveyances for a reasonable
length of time in order to afford passengers an opportunity to
board and enter, and they are liable for injuries suffered by
boarding passengers resulting from the sudden starting up of
the common carrier. Liability of the carrier is already based on
contract. It fallows that the passenger is deemed to be
accepting the offer if he is already attempting to board the
conveyances and the contract of carriage is perfected from
that point.
In trains, when can a person be considered a passenger?
Such person must have a bona fide intention to use
the facilities of the carrier, possess sufficient fare with which
to pay for his passage, and present himself to the carrier for
the transportation in the place and manner provided. If he
does not do so, he will not be considered a passenger.
What is a common carrier?
Article 1732. Common carriers are persons,
corporations, firms or associations engage in the
business of carrying or transporting passengers or
goods or both, by land, water, or air, for
compensation, offering their service to the public.
It was also being defined as “one that holds itself out
as ready to engage in the transportation of goods for hire as a
public employment and not as a casual occupation.
What are the 3 tests in determining whether a party is a
common carrier of goods?
1. First Philippine Industrial Corporation v. CA
1. He must be engaged in the business of carrying
goods for others as a public employment, and
must hold himself out as ready to engage in the
transportation of goods for person generally as a
business and not as a casual occupation;
2. He must undertake to carry goods of the kind to
which his business is confined;
3. He must undertake to carry by the method by
which his business is conducted and over his
established roads; and
4. The transportation must be for hire.
2. National Steel Corporation v. CA
SC reiterated the ruling that the test of a common
carrier is the carriage of goods or passengers,
provided it has space for all who opt to avail
themselves of its transportation for a fee.
3. True Test (Sps. Perena v. Sps. Nicolas)
The true test for a common carrier is not the quantity
or extent of the business actually transacted, or the
number and character of the conveyances used in
the activity, but whether the undertaking is a part of
the activity engaged in by the carrier that he has held
out to the general public as his business or
occupation. If the undertaking is a single transaction,
not a part of the general business or occupation
engaged in, as advertised and held out to the general
public, the individual or the entity rendering such
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
service us a private, not a common carrier. The
question must be determined by the character of the
business actually carried on by the carrier, not by any
secret intention or mental reservation it may entertain
or assert when charged with the duties and
obligations that the law imposes.”
What are the characteristics of common carrier as
contemplated under article 1732 of civil code?
(1) no distinction between one whose principal business
is the transportation of persons/goods and one who
does such as an ancillary business (sideline)
(2) no distinction between regular or scheduled basis and
one offering such service on an occasional, episodic or
unscheduled business
(3) still a Common Carrier even if services offered to a
limited clientele (between the general public and a
narrow segment of the general population)
(4) Still considered a Common Carrier even if he did not
secure a Certificate of Public Convenience
(5) No distinction as to the means of transporting, as long
as it is by land, water or air
(6) The Civil Code does not provide that the
transportation should be by motor vehicle
(7) Still a Common Carrier even if he has no fixed and
publicly know route, maintains no terminals, and issues
no tickets
(8) still a common carrier even if the operator does not
own the vehicle or vessel that he or she operates.
(9) Still considered a common carrier even if a person or
entity may not be engaged in the business of public
transportation
Note: pipeline operators are Common Carriers – not
necessarily motor vehicles (Case: First Philippine
Industrial Corp. vs. CA, such operators are common
carriers even if the oil or petroleum products are being
transported not through motor vehicles but through
pipelines)
Note: Not common carrier by law – foreign vessels
engaging in carriage under sec. 7, ra. 10668.
Case: Jose Mendoza vs. Philippine Airlines Inc
“The test of whether one is a common carrier by air
is whether he holds out that he will carry for hire, so
long as he has room, goods of everyone bringing
goods to him for carriage, not whether he is carrying
as a public employment or whether he carries to a
fixed place”
What is a charter party?
Contract by which an entire ship or some principal
part thereof is let by the owner to another person for a
specified time or use.
What is the effect of charter party?
It 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.
What are the 2 types of Charter party?
 TRANSPORTATION & PUBLIC UTILITY LAW
XAVIER UNIVERSITY - ATENEO DE CAGAYAN

“Work Hard in Silence, Let SUCCESS be your NOISE”

1. Contract of Affreightment – involves the use of towing for the mere purpose of expediting her voyage without
shipping space on vessels leased by the owner in part or as a reference to any circumstances of danger. The party that
whole, to carry goods for another. Common carrier observes provides the service in a contract of towage is required to
extraordinary diligence; in case of loss, deterioration or observed the due diligence of a good father of the family. The
destruction of goods of goods, Common carriers are negligence of the obligor in the performance of the obligation
presumed to be at fault or have acted negligently. renders him liable for damages for resulting loss suffered by
2 types of contract of affreightment:
the oblige.
1. Time charter: vessel is leased to the
charterer for a fixed period of time
2. Voyage charter: ship is leased for a What is Arrastre? Is it a common carrier?
single voyage
A Spanish word that refers to hauling of cargo,
2. Charter by demise/ Bareboat Charter – whole comprehends the hauling of cargo on the wharf or between
vessel is let to the charterer with a transfer to him of its entire the establishment of the consignee or shipper and the ship’s
command and possession and consequent control over its tackle. The responsibility of the Arrastre operator last until the
navigation including the master and the crew who are his delivery of the cargo to the consignee. Longshoremen usually
servants. Charter includes both vessel and crew — Common performs the service.
Carrier becomes private carrier (PC) insofar as that particular
voyage is concerned. If it is already a Private Carrier - ordinary What are the functions of Arrastre operators?
diligence in the carriage of goods will suffice. Private Carrier
undertaking is a single transaction, not a part of the general
1. to receive, handle, care for, and deliver all
business or occupation, although involving the carriage of
goods for a fee; NO presumption of negligence applies – merchandise imported and exported, upon or
whosoever alleges damage to or deterioration of the goods passing over government-owned wharves and
carried has the burden of proving that the cause was the piers in the port.
negligence of the carrier. 2. to record or check all merchandise which may be
delivered to said port at shipside, and in general.
What are the distinctions between Common Carriers and 3. to furbish light, and water services and other
Private Carriers? incidental services in order to undertake its
Arrastre service.
COMMON CARRIER PRIVATE CARRIER The operation of Arrastre operator starts on and its
Extraordinary diligence in Ordinary diligence in the responsibility for the merchandise and goods begins from the
the vigilance over the goods carriage of goods will suffice time they are placed upon the wharves or piers or delivered
they carry along sides of ships. Being a custodian of the goods
In case of loss, destruction, No such presumption discharged from a vessel, the Arrastre operator’s duty is to
or deterioration of goods, applies to private carriers, take good care of the goods and turn over to the party entitled
they are presumed to have for whosoever alleges to their possession.
been at fault or to have damage to or deterioration n
acted negligently; burden of of the goods carried has the
What is the required diligence of Arrastre operators?
proving otherwise rests on onus of proving that the
them cause was the negligence
of the carrier Summa Insurance Corporation v. CA and Port Service Inc.,
Cannot stipulate that it is May validly enter into such An Arrastre operator should observe the same degree
exempt from liability for the stipulation of diligence as that required of a common carrier and a
negligence of its agents or warehouseman as enunciated under article 1733 of the
employees civil code and section 3(b) of the Warehouse Receipt
Law, respectively. Being the custodian of the goods
What are the factors to be considered whether a carrier is discharged from the vessel, an arrastre operator’s duty
common/private? is take good care of the goods and to turn them over to
the party entitled to their possession.
Law applicable
o Common  Civil Code Note: the liability of the carrier usually remains until delivery of
o Private  contract the goods to the consignee; thus, the custody of the
Diligence required
carrier remains while the goods are being unloaded.
o Common  extraordinary diligence
o Private  diligence of a good father of a
Note further: it may be validly stipulated that the liability of the
family
Burden of proof in relation to negligence arrastre operator is limited to a certain amount unless
o Common – the carrier the value of the importation is otherwise specified or
o Private – on the party having a claim communicated in writing together with the invoice
against the carrier value and supported by the certified packing list to the
arrastre operator by the interested party or parties
What is towage? Is it a common carrier? before the arrival of the goods. However, the degree of
diligence it must exercise is the same as that of the
One vessel is hired to bring another vessel to depository or warehouseman.
another place. Thus, a tugboat may be hired by the common
carrier to bring the barge to a port, however, the operator of What is Stevedoring and the diligence required? Is it a
the tugboat cannot be considered a common carrier. In common carrier?
maritime law, it refers to a service rendered to a vessel by
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
 TRANSPORTATION & PUBLIC UTILITY LAW
XAVIER UNIVERSITY - ATENEO DE CAGAYAN
“Work Hard in Silence, Let SUCCESS be your NOISE”
The function of stevedores involves the loading and
unloading of coastwise vessels calling at the port. The word
stevedoring originated from the Latin word “stipare,” meaning
to “stuff”. It started as a phonetic spelling of Spanish
escribador or Portuguese estivador that literally means “a man
who stuffs in the sense of a man who loads ships.
Stevedoring refers to the handling of the cargo in the
holds of the vessel or between the ship’s tackle and the holds
of the vessel. The responsibility of the stevedore ends upon
the loading and stowing of the cargo in the vessel.
The diligence required of a stevedore is a diligence
of a good father of the family. A stevedore is not a common
carrier for it does not transport goods or passengers; it is not
akin to a warehouseman for it does not store goods for profit.
What is travel agency? Is it a common carrier?
A travel agency is not a common carrier. The
contract between the travel agency and a passenger is a
contract of service and not a contract of carriage. The
diligence required of a travel agency is not extraordinary
diligence but of a good father of the family under article 1173
of the new civil code. However, the travel agency and the
carrier may be jointly liable.
What are the classifications of cargo operation?
1. Line Service – R.A. 9515 defines “Line Service” as the
operation of a common carrier which publicly offers
services without discrimination to any user, has regular
ports of call/destination, fixed sailing schedules and
frequencies and published freight rates and attendant
charges and usually carries multiple consignments.
Liners carry “general cargoes,” meaning whatever is
offered is accepted for shipment.
2. Tramp Service – R.A. 9515 defines “Tramp Service” as
the operation of a contract carrier which has no regular
and fixed routes and schedules but accepts cargoes
whenever and wherever the shipper desires, is hired in
a contractual basis, or chartered by any one or few
shippers under mutually agreed terms and usually
carries bulk or break-bulk cargoes.
Note: while R.A. 9515 refers to an entity engage in “Line
Service” as a common carrier, an entity that provides “Tramp
Service” is only referred to as a “contract carrier”.
Nevertheless, those engaged in “Trump Service” may also be
considered common carriers depending on the
circumstances.
What are the Governing Laws?
- read summary of rules on page 39 of the book (2016
edition)
Article 1766 (Civil Code). In all matters not regulated by
this Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce
and by special laws.
What is the nature of business of common carrier?
Common Carriers exercise a sort of public office and
consequently, common carriers are subject to regulation by
the State.
What is a Registered Owner Rule?
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
The rule in this jurisdiction is that the person who
is the registered owner of a vehicle is liable for any damage
caused by the negligent operation of the vehicle although
the same was already sold or conveyed to another person
at the same time of the accident. This rule is a matter of
public interest. The registered owner is liable to the injured
party subject to his right of recourse against the transferee
or the buyer. It is governed by the Land Transportation and
Traffic Code and administered by the Land Transportation
Office. As a matter of defense, the registered owner is not
liable if the vehicle was taken from his garage without
knowledge and consent or there is an unauthorized use
and/ or theft of the vehicle.
Note: the registered owner rule applies even if the
registered owner leased the vehicle to another who is
the actual operator. The registered owner is directly
available. In order to be free from liability, the lessor-
owner should register the lease contract with the Land
Transportation Office.
What is a KABIT System?
The “registered owner” rule is applicable to people
involved on a “kabit system”. Kabit system is the arrangement
whereby a person who has been granted a certificate of public
convenience allows other persons who own motor vehicles to
operate them under his license, sometimes for a fee or
percentage of the earnings --- contrary to public policy (thus
VOID and INEXISTENT).
Case: Dizon vs. Octavio
The primary factors considered in the granting of a
certificate of public convenience for the business of
public transportation is the financial capacity of the
holder of the license, so that liabilities arising from
accidents may be duly compensated. Thus, for the
safety of passengers and the public who may have
been wronged and deceived through the baneful
kabit system, the registered owner of the vehicle is
not allowed to prove that another person has become
the owner so that he may be thereby relived of
responsibility.
What is Pari Delicto Rule with regard to Kabit System?
The parties to the “kabit system” cannot invoke the
same as against each other either to enforce their illegal
agreement or to invoke the same to escape liability. This is
consistent with the time-honored maxim “ex pacto illicito non
oritur action” (No action arises out of the illicit bargain). That is
having entered into an illegal contract, neither can seek relief
from the courts and each must bear the consequences of his
acts. Also, applicable to aircrafts and vessels – basic rule that
no person can operate a common carrier without securing a
certificate of public convenience and necessity.
What is the land transportation rules?
The land transportation franchising regulatory board
(LTFRB) imposes similar rules that implement the Registered
Owner Rule and prohibits Kabit System.
What are the conditions for the issuance of Certificate of
Public Convenience in favor of carriers that are operating
public utility vehicles?
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“Work Hard in Silence, Let SUCCESS be your NOISE”
(1) The PUV operator shall not allow any motor vehicle
belonging to others to be registered and/or operated
under the certificate of public convenience granted;
(2) The PUV operator shall not allow any illegal transfer of
motor vehicle plate/s or illegally reproduce the same
(known as “kambal plaka” for the use by unauthorized
motor vehicle units;
(3) The PUV operator shall not allow the illegal use or
transfer of chassis or engine motor (known as “pukpok
chassis) for the use of unauthorized PUVs.
What is Boundary System?
In boundary system, the carrier cannot exempt
himself on the ground that he is a lessor because to tolerate
such position would not only abet flagrant violations of the
Public Service Law but also to place the riding public at the
mercy of reckless and irresponsible drivers – reckless
because the measure of their earnings depends largely upon
the number of trips they make and, hence, the speed at which
they drive, and irresponsible because most if not all of them
are in no position to pay the damages they might cause.
Note: In CDO, what is referred as boundary is the amount
due to the driver upon leasing the vehicle.
CHAPTER 2
OBLIGATIONS OF THE COMMON CARRIER
What are the basic obligations of the carrier?
The most basic obligation of the common carrier is
to transport the goods or passenger safely to the agreed
destination. The duties of the common carrier include:
(1) to accept passengers and goods without
discrimination.
(2) to seasonably deliver the goods or bring the
passenger to the destination.
(3) to deliver the goods or bring the passenger to the
proper place or destination.
(4) to deliver the goods to the proper person
(5) to exercise extraordinary diligence in the
performance of its duties.
What is the duty to accept goods for transport?
A common carrier granted a certificate of public
convenience is duty bound to accept passengers or cargo
without any discrimination. It is illegal for domestic ship
operators to refuse to accept or carry passengers or cargo
without just cause. (Section 16, RA 9295)
Note: In air transportation, passengers with confirmed tickets
who were not allowed to board are provided with denied
boarding compensation and priority boarding rules.
No compensation for refusal if it is because of:
1. government requisition of the space
2. substitution of equipment of lesser capacity when
required by operational and or safety and/or other
causes beyond the control of the carrier, and
3. if arrangements have been made for the passenger
to take another flight in a comparable air
transportation which will arrive not later than three
hours after the time of flight on which the confirmed
space is held is supposed to arrive. (Civil
Aeronautics Board Economic Regulation)
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
Note: Grounds for discrimination must be substantial ones,
such as will justify the courts in holding the discrimination
to have been reasonable and necessary under all
circumstances of the case.
In the case of Fisher v. Yangco Steamship company
The following are the factors in determining reasonable
discrimination:
i. suitability to the vessel for the transportation of
such products;
ii. reasonable possibility of danger or disaster
resulting from their transportation in the form and
under the conditions in which they are offered for
carriage; and
iii. the general nature of the business done by the
carrier.
What are the grounds for Valid Refusal to Accept Goods?
GR: common carriers cannot lawfully decline to accept a
particular class of goods
EXC: it appears that for some sufficient reason the
discrimination against the traffic in such goods is
reasonable and necessary:
(1) dangerous objects or substances including dynamites
and other explosives
Exc to the Exc:
If a carrier is specifically designed to carry
dangerous chemicals that are necessary for
certain manufacturing business and may
secure the appropriate authorization for such
purpose.
(2) goods are unfit for transportation
By nature, unfit for transportation or are unfit
because of the improper packaging or defects
in their containers. However, carrier may
choose to transport and limit its liability by
stipulation.
(3) acceptance would result in overloading
(4) contrabands or illegal goods
(5) goods injurious to health
(6) goods will be exposed to untoward danger like flood,
capture by enemies and the like
(7) goods like livestock will be exposed to diseases
(8) strike
(9) failure to tender goods on time
What is the duty of the carrier to special classes of
passengers?
Carriers are mandated to ensure that PWDs and
senior citizens shall have equal access to air transportation
services in accordance with the mandate of B.P. Blg. 344 and
the Expanded Senior Citizens Act of 2010.
What is the duty to make timely delivery of the goods?
The carrier is bound to deliver the goods within the
time agreed upon to the designated consignee. Where the
carrier has made an express contract to transport and
deliver property within a specified time, he is bound to fulfill
the contract is liable for any delay, no matter from what
cause it may have arisen. When a common carrier
undertakes to convey goods, the law implies a contract that
they shall be delivered at destination within a reasonable
time, in the absence, of any agreement as to the time of
delivery. What is considered a reasonable time may also
depend upon the nature of the goods.
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“Work Hard in Silence, Let SUCCESS be your NOISE”
What are the consequences of delay?
Each excusable delay in carriage suspend, but do not
generally terminate, the contract of carriage, and when the
cause is removed, the master must proceed with the voyage
and make delivery. During the detention or delay, the vessel
continuous to be liable as a common carrier, not a
warehouseman, and remains duty bound to exercise
extraordinary diligence. If the delay is inexcusable, the
fallowing consequences results:
(1) the carrier still liable even if natural disaster
caused the damage.
(2) the stipulation limiting the liability of the carrier is
inoperative;
(3) the carrier is liable for the damages caused by
the delay;
(4) the consignee may exercise his right to abandon
under article 371 of the code of commerce.
What is the right of abandonment?
In case of delay through the fault of the carrier, the
consignee may refuse to accept the goods or may leave the
goods in the hands of the carrier. It must be communicated to
the carrier in writing. This right must be exercised between
the time of delay and before the arrival of the goods at its
destination. The carrier must pay the full value of the goods as
if they had been lost or mislaid.
Note: If abandonment is not made, indemnification for the
losses and damages by reason of the delay cannot
exceed the current price which the goods would have on
the day and at the place they are to be delivered.
The value of the goods which the carrier must pay in case of
loss or misplacement shall be that what is declared in the bill
of lading. Consignee must not defer the payment of the
expenses and transportation charges of the goods otherwise
carrier may demand the judicial sale of the goods.
What is the right of passenger in case of delay?
As to the rights and duties of the parties strictly
arising out of delay, the Civil Code is silent. However, the
Code of Commerce provides for such a situation:
ARTICLE 698. In case a voyage already begun should
be interrupted, the passengers shall be obliged to pay
the fare in proportion to the distance covered, without
right to recover for losses and damages if the
interruption is due to fortuitous event of force majeure,
but with a right to indemnity if the interruption should
have been caused by the captain exclusively. If the
interruption should be caused by the disability of the
vessel and a passenger should agree to await the
repairs, he may not be required to pay any increased
price of passage, but his living expenses during the
stay shall be for his own account.
Note: the carrier is liable for any loss or damage, including any
pecuniary loss or loss of profit, which the passenger may
have suffered by reason thereof.
In case the vessel is not able to depart on time and
the delay is unreasonable, the passenger may opt to have
his/her ticket immediately refunded without any refund service
fee from the authorized issuing/ticketing office.
Where and to Whom Delivered?
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
a. Place of Delivery – Goods should be delivered to the
consignee in the place agreed upon by the parties.
The shipper may change the consignment of the
goods provided that at the time of ordering the change of the
consignee the bill of lading signed by the carrier be returned
to him, in exchange for another wherein the novation of the
contract appears. The expenses occasioned by the change
shall be for the account of the shipper.
b. Consignee – Delivery must generally be made to the
owner or consignee or to someone lawfully
authorized by him to receive the goods for his
account or to the holder of the negotiable instrument.
c. Delay to Transport Passengers – A carrier is duty
bound to transport the passenger with reasonable
dispatch
What are the Effects of ‘delayed and unfinished voyage’ in
inter-island vessels:
(1) vessel cannot continue or complete her voyage for
any cause – carrier is under obligation to transport
the passenger to his/her destination at the expense
of the carrier including free meals and lodging
before the passenger is transported to his/her
destination; the passenger may opt to have his/her
ticket refunded in full if the cause of the unfinished
voyage is due to the negligence of the carrier or to
an amount that will suffice to defray transportation
cost at the shortest possible route if the cause of
the unfinished voyage is fortuitous event.
(2) vessel is delayed in arrival at the port of destination
– free meals during mealtime
(3) delay in departure at the point of origin due to
carrier’s negligence; fortuitous event - free meals
during mealtime; carrier not obliged to serve free
meals
(4) carrier is not obliged to inform passengers of sailing
schedule of the vessel
What happen if there is conflict between consignee and
shipper?
An authority on commercial law, said that the right of
the shipper to countermand the shipment terminates when the
consignee or legitimate holder of the bill of lading appears with
such bill of lading before the carrier and makes himself a party
to the contract. Prior to that time, he is stranger to the contract.
What is the effect of the negotiable bill of lading?
It should also be recalled that a negotiable bill of lading
is a document of title that may be transferred to a holder for a
value. Under article 1513 of the civil code, that the person to
whom the negotiable document of title has been duly
negotiated requires:
(1) title to the goods as the person negotiating the
document to him had or had ability to convey to a
purchaser in good faith for value and also such title
to the goods as the person to whose order the
goods were to be delivered by the terms of the
document had or had ability to convey to a
purchaser in good faith for value
(2) the direct obligation of the bailee.
What is the rule if there is delay to transport passengers?
 TRANSPORTATION & PUBLIC UTILITY LAW
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“Work Hard in Silence, Let SUCCESS be your NOISE”
The basic rule that applies to the carriage of goods
shall also apply to carriage of passengers, that the carrier
must commence its trip within a reasonable time.
What is the meaning of extraordinary diligence?
The code commission explained extraordinary
diligence as “a common carrier is bound to carry the
passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons,
with due regard for all circumstances”
ARTICLE 1755. A common carrier is bound to carry the
passengers safely as far as human care and foresight
can provide, using the utmost diligence of very
cautious persons, with a due regard for all the
circumstances. (Civil Code)
What is the non-delegable duty?
The duty of seaworthiness, the duty of care of the
cargo is non-delegable, and the carrier is accordingly
responsible for the acts of the master, the crew, the stevedore,
and his other agents.
What are the requisites of Presumption of Negligence?
Two conditions for the birth of the presumption of negligence:
1. there exists a contract between the passenger or the
shipper and the common carrier
2. the loss, deterioration, injury or death took place
during the existence of the contract
What is a Doctrine of Proximate Cause?
There is presumption of negligence if the goods are
lost, destroyed or deteriorated, common carriers are
presumed to have acted negligently, unless they prove that
they observed extraordinary diligence. In case of death of or
injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence.
When the goods are deemed delivered to the carrier?
The goods are deemed delivered to the carrier when
the goods are ready for and have been placed in the exclusive
possession, custody and control of the carrier for the purpose
of their immediate transportation and the carrier has accepted
them. When the carrier has thus accepted the delivery, the
liability of the carrier commences eo instanti.
ARTICLE 1736. The extraordinary responsibility of the
common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received
by the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the
consignee or to the person who has a right to receive
them…
ARTICLE 1737. The common carrier’s duty to observe
extraordinary diligence over the goods remains in full force
and effect even when they are temporarily unloaded or
stored in transit, unless the shipper or owner has made
use of the right of stoppage in transitu. (common carrier
becomes a warehouseman – ordinary diligence)
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
ARTICLE 1738. The extraordinary liability of the common
carrier continues to be operative even during the time the
goods are stored in a warehouse of the carrier at the place
if destination, until the consignee has been advised of the
arrival of the goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose of them.
What is temporary unloading or storage?
Common carrier’s duty to observe extraordinary
diligence over the goods remains in full force and effect even
when they are temporarily unloaded or stored in transit. This
means that the goods have not yet been delivered to the
consignee and that the voyage of the carrier will resume.
What is stoppage in transitu?
The right of stoppage in transitu is the right of the
unpaid seller to resume possession of the goods at any time
while the goods are in transit, and he will then become entitled
to the same rights in regard to the goods as he would have
had if he had never parted with the possession. The right is
available only if:
(1) the buyer of goods is or becomes insolvent
(2) the unpaid seller has parted the possession of the
goods
(3) the goods are still in transit
The duty to exercise due diligence ends if the seller has
made use of his right of stoppage in transitu because in legal
effect, the contract of carriage terminates when the right is
exercised.
What is diligence up to delivery?
The extraordinary responsibility of the common carrier
lasts until the time the goods are actually or constructively
delivered by the carrier to the consignee or the person who
has the rights to receive them. There is actual delivery in
contracts for the transport of goods when possession has
been turned over to the consignee or to his duly authorized
agent and a reasonable time is given to remove the goods.
What is the effect of delivery to customs authorities?
The goods remain to be the responsibility of the carrier
if they are still in the hands of custom officials. The court
believes however that the parties may agree to limit the liability
of the carrier considering that the goods have still to go
through the inspection of the customs authorities before they
are actually turned over to the consignee. This is a situation
where we may say that the carrier losses control of the goods
because of a custom regulation and it is unfair that it be made
responsible for what may happen during the interregnum.
When is the commencement if duty in carriage of passengers?
With respect to trains – the extraordinary responsibility of
common carrier commences the moment the person
who purchases the ticket (or a ‘token’ or ‘card’) from
the carrier presents himself at the proper place and in
a proper manner to be transported with a bona fide
intent to ride the coach.
 TRANSPORTATION & PUBLIC UTILITY LAW
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“Work Hard in Silence, Let SUCCESS be your NOISE”
Mere purchase of a ticket does not of itself create the
relation of carrier and passenger but it is an element in
the inception of the relation.
A proper person who enters upon the carrier’s
premises (station, ticketing office, or waiting room) with
the intention of becoming a passenger will ordinarily be
viewed as assuming the status of a passenger.
One who goes to the railroad station to inquire as to
the possibility of securing passage on a freight train,
which he knows, by the rules of the company, is not
allowed to carry passengers, and to secure passage
thereon if possible, is not entitled to the rights of a
passenger but is a mere trespasser.
One who rides upon any part of the vehicle or
conveyance which is unsuitable or dangerous, or
which he knows is not intended for passengers, is not
presumed to be a passenger.
One who secures free passage by fraud or stealth is
precluded from recovery for injuries sustained through
the negligence of the carrier, for he has not assumed
the status of a passenger.
A person riding on a freight train, on a driver’s pass or
similar arrangement, to look after livestock being
transported and as incident to such transportation is,
generally regarded as a passenger for hire.
With regard to Motor vehicles like jeepneys and buses – are
duty bound to stop their conveyances for a reasonable
length of time in order to afford passengers an
opportunity to board and enter, and they are liable for
injuries suffered by boarding passengers resulting from
the sudden starting up or jerking of their conveyances
while they do so. Once a public utility bus or jeepney
stops, it is making a continuous offer to bus riders.
Dangwa Transportation Company vs. CA
When the bus is not in motion there is no necessity for
a person who wants to ride the same to signal his
intention to board. A public utility bus, once it stops, is
in effect making a continuous offer to bus riders. The
premature acceleration of the bus in this case was a
breach of such duty
La Mallorca vs. CA
Duty to exercise utmost diligence with respect to
passengers will not ordinarily terminate until the
passenger has, after reaching his destination, safely
alighted from the carrier’s conveyance or had a
reasonable opportunity to leave the carriers premises.
And what is reasonable time or a reasonable delay
within this rule is to be determined from all the
circumstances.
Case: Aboitiz Shipping Corporation vs. CA
That reasonableness of time should be made to
depend on the attending circumstances of the case,
such as the kind of common carrier, the nature of its
business, the customs of the place, and so forth, and
therefore precludes a consideration of the time element
per se without taking into account such other factors.
The primary factor to be considered is the existence of
a reasonable cause as will justify the presence of the
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
victim on or near the petitioner’s vessel. We believe
there exists such a justifiable cause (baggage was left).
How duty is complied with?
The law does not prescribe a formula that must be
used to determine if due diligence is complied with. The SC
explained in one case that “the source of a common carrier’s
legal liability is the contract of carriage, and by entering into
the said contract, it binds itself to carry the passengers safely
as far as human care and foresight can provide, using the
utmost diligence of a very cautious person, with a due regard
for all circumstances.
Is diligence of a good father of family enough?
Under the present laws, it is not enough for the
carrier to exercise ordinary diligence. More is required of the
carrier because the law mandates him to exercise
extraordinary diligence in the performance of his obligation.
What are the statutory duties to passengers?
The statutory duty of common carriers includes the
responsibilities provided for under article 1759 and 1763 of the
new civil code.
(1) article 1759 provides that “common carriers are liable
for the death of or injuries to passengers through the
negligence or willful acts of the former’s employees,
although such employees may have acted beyond the
scope of their authority or in violation of the orders of
the common carriers.”
(2) Article 1763 provides that a common carrier is
responsible for injuries suffered by a passenger on
account of the willful acts of negligence of other
passengers or of strangers, if the common carrier’s
employees through the exercise of diligence of a good
father of a family could have prevented or stopped the
act or omission.
What is the duty to 3rd persons?
There is authority for the view the extraordinary
diligence is owed not only to passengers or shippers but also
3rd persons as well.
Kapalaran Bus Lines v. Coronado
While the immediate beneficiary of the standard of
extraordinary diligence are, of course, the passengers
and owners of the cargo carried by a common carrier,
they are not only persons that the law seeks to benefit.
For if common carrier carefully observed the statutory
standard of extraordinary diligence in respect of their
own passengers, they cannot help but simultaneously
benefit pedestrians and the owners and passengers of
other vehicles who are equally entitled to the safe and
convenient use of our roads and highway.
What is the effect of stipulation on extraordinary diligence?
The party may voluntary modify the duty of the carrier
by expressly provision of their contract. However, in certain
instances, the stipulation may be considered invalid
With regard to goods, the parties cannot stipulate that the
carrier will not exercise any diligence in the custody of
goods. However, the law allows the stipulation
whereby the carrier will exercise a degree of diligence
that is less than extraordinary with respect to goods.
Such stipulation shall be valid provided:
 TRANSPORTATION & PUBLIC UTILITY LAW
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“Work Hard in Silence, Let SUCCESS be your NOISE”
(1) in writing, signed by the shipper or owner
(2) supported by the valuable consideration
other than the service rendered by the
common carrier; and
(3) reasonable, just and not contrary to public
policy
With regard to passengers, there can be no stipulation
lessening the utmost diligence that owed to
passengers.
With regard to gratuitous passenger, it is implied from article
1758 that the extraordinary diligence is also required
even if the passenger is carried gratuitously. A
common carrier should therefore exercise
extraordinary diligence even as to non-paying
passengers.
Lara v. Valencia
The rule is established by the weight of authority that
the owner or operator of an automobile owes the duty
to an invited guest to exercise reasonable care in its
operation, and not unreasonably to expose him to
danger and injury by increasing the hazard of travel.
What is seaworthiness?
Extraordinary diligence requires that the ship that will
transport the passengers and goods is seaworthy. For the
vessel to be seaworthy, it must be adequately equipped for
the voyage and manned with a sufficient number of competent
officers and crew.
“seaworthiness is that strength, durability and
engineering skill made a part of a ship’s construction and
continued maintenance, together with a competent and
sufficient crew, which would withstand the vicissitudes and
dangers of the elements which might reasonably be expected
or encountered during her voyage without loss or damage to
her particular cargo”
What is the warranty of seaworthiness of ship?
A passenger or a shipper of goods is under no
obligation to conduct an inspection of the ship and its crew;
the carrier is obliged by law to impliedly warrant its
seaworthiness. The warranty is implied because the failure of
a common carrier to maintain seaworthy condition the vessel
involved in its contract of carriage is a clear breach of its duty.
What is this “no duty to inquire”?
It fallows that because of the implied warranty of
seaworthiness, shippers of goods, when transacting with
common carriers, are not expected to inquire into the vessel’s
seaworthiness, genuineness of its licenses and compliance
with all maritime laws.
Where burden of proof rest?
It is the carrier that carries such burden of proving
that the ship is seaworthy. Sufficient evidence must be
submitted and the presentation of certificates of
seaworthiness is not sufficient to overcome the presumption
of negligence.
Note: the general test of seaworthiness in this respect is
therefore whether the ship and appurtenances are
reasonably fit to perform the service undertaken.
What is cargoworthiness?
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
Even if the vessel was properly maintained and is
free from the defect, the carrier must not accept goods that
cannot properly be transported in the ship. The ship must be
fit to carry the contemplated cargo as a carrying receptacle.
Cargoworthiness means in the first place that the vessel must
be sufficiently strong and equipped to carry the particular kind
of cargo that she has contracted to carry and her cargo must
be loaded that it is safe for her to proceed on her voyage.
What is proper manning?
For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number
of competent officers and crews.
What is overloading?
Duty to exercise due diligence likewise includes the
duty to take passengers or cargoes that are within the carrying
capacity of the vessel.
What is proper storage?
The vessel itself may be suitable for the cargo but
this is not enough because the cargo must also be properly
stored.
What is the effect of deck cargo?
The supreme court pointed out that carrying a deck
cargo raises the presumption of unseaworthiness unless it can
be shown that the cargo will not interfere with the proper
management of the ship.
What is the liability of the shipowner to negligence of captain
and crew?
Under the rule, the liability of the shipowner may be
limited to the value of the vessel. On the other hand, if the
negligence of the captain or crew can be traced to the fact that
they are really incompetent, the limited liability rule cannot be
invoked because the shipowner may be deemed negligent.
What is the rule on passenger safety?
The same rule provides that the passengers do not
merely contract for transportation because they have the right
to be treated by the carrier and its employees with kindness,
respect, courtesy and due consideration. They are entitled to
be protected against personal conduct, injurious language,
indignities and abuses from the said carrier and its employees.
What is duty to take proper route?
The carrier is obligated to follow the usual
reasonable commercial or customary route. If there is no
evidence of the usual route, the route is presumed to be the
direct geographical route. In addition, improper deviation may
also be valid ground to deny a marine insurance claim under
insurance code. There will be no improper deviation if the
voyage is customarily in stages to replenish ship’s fuel. It may
be reasonable that a voyage may be in stages to enable a
shipowner to start with fuel sufficient for a stage and
necessarily involves calling at a port for refueling to keep the
ship seaworthy.
What is transshipment?
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“Work Hard in Silence, Let SUCCESS be your NOISE”
The act of taking cargo out of one ship and loading it
in another, or the transfer of goods from the vessel stipulated
in the contract of affreightment to another vessel before the
place of destination named in the contract has been reached,
or the transfer for further transportation from one ship or
conveyance to another.
What is duty to inspect in carriage by sea?
It is the right of the carrier to require good faith on the
part of those persons who delivers goods to be carried, or
enter into contracts with it, and in as much as the freight may
depend on the value of the article to be carried, the carrier
ordinarily has the right to inquire as to its value. Ordinarily, too,
it is the duty of the carrier to make inquiry as to the general
nature of the article shipped and of their value before it
consents to carry them; and its failure to do so cannot defeat
the shipper’s right to recovery of the full value of the package
it lost, in the absence of showing of fraud or deceit on the part
of the shipper. However, where a common carrier has
reasonable ground to suspect that the offered goods are of
dangerous or illegal character, the carrier has the right to know
the character of such goods and to insist on an inspection, if
reasonable and practical under the circumstances, as a
condition of receiving and transporting such goods.
Note: the consequent duty to conduct an inspection thereof
arises in the event that there should be reason to doubt
the veracity of such representations.
What is roadworthiness?
Common carriers that offer transportation by land are
similarly required to make sure that the vehicles that they are
using are in good order and condition. Thus,
(a) explosion of tires is not considered fortuitous
event. This rule follows the rule on mechanical
defects.
(b) the carrier fails to exercise extraordinary diligence
if it will not comply with basic traffic rules.
Is diligence in the selection and supervision a matter of
defense?
Yes, it is a matter of defense that the employer can
invoke in order to escape liability in quasi-delict cases.
However, such defense is not available if the case is against
the carrier based on contract – culpa contractual.
What is duty to inspect, a right or privilege?
Neither., because there Is no unbending duty to
inspect each and every package or baggage that is being
brought inside the bus or jeepney. It is presumed however
that a passenger will not take with him anything dangerous to
the lives and limbs of his co – passengers not to speak of his
own.
What is the diligence required in carriage by train?
The carrier that operates trains must similarly
exercise extraordinary diligence in the performance of its
functions. The carrier must keep the train coaches, the
platform and other facilities in good order and safe condition.
(a) the carrier must hire competent engineers and
employees. The hiring of competent and well-
trained personnel necessarily includes the hiring of
competent security personnel not only for the trains
but for the facilities as well.
(b) platform must be safe
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
(c) the common carrier has the duty to make sure that
the vehicle or the means of transportation is in good
and safe working condition.
(d) the exercise of extraordinary diligence is required
in the transportation of passengers while in the
train, and also in giving intended passengers
reasonable opportunity to embark or disembark
from it.
(e) extraordinary diligence must be exercised in the
operation of the train. However, it is not the duty of
the engineer to stop the train every time that he
sees a person on or near the tracks. Indeed, a
person who is walking on the tracks must exercise
due care in avoiding his own death or injury.
(f) the railroad company must exercise due care in
preventing damage to the properties near the
tracks. The railroad company may be liable if, for
instance, its negligence caused the destruction of
neighboring properties through fire.
What is the duty of the train operator in railroad crossing?
Due diligence on the part of the train operator
includes due diligence in traversing railroad crossing and in
maintaining the same. The railroad companies owe to the
public a duty of exercising a reasonable degree of care to
avoid injury to persons and property at railroad crossing,
which duties pertain both in the operation of trains and in the
maintenance of the crossing.
(a) the train operator may be held liable if it did not
ensure the safety of others through placing of
crossbars, signal lights, warning signs and other
permanent safety barriers to prevent vehicles or
pedestrian from crossing there.
(b) running the train at excessive speed can be proof
of negligence
What is the obligation of 3rd persons approaching crossing?
The general rule is that “the rights and obligations
between the public and the railroad company at a railroad
crossing are mutual and reciprocal. Both are under mutual
obligation to exercise due care to avoid causing or receiving
injury. Each is in duty bound to exercise reasonable or
ordinary care commensurate with the risk and danger
involved.
Note: a railroad track is in itself a notice of warning of danger,
and that it is the duty of all persons approaching a
railroad track or rail road crossing to look and listen and
to take every precaution before venturing upon it.
What is “no imputed contributory negligence”?
The court explained that “as a general rule, the
negligence of the driver of a vehicle approaching a railroad
crossing, in failing to look and listen for approaching trains,
cannot be imputed to an occupant of the vehicle who is without
personal fault., unless:
(1) unless such driver is the servant or agent of the
occupant.
(2) unless they are engaged in a joint enterprise
whereby responsibility for each other’s acts exists,
(3) unless the occupant in under the driver’s care or
control or has the right to direct and control the
driver’s actions or where the driver is obvious or
known imprudence or incompetence.
This rule that negligence of the driver is not imputable
to an occupant only applies to cases in which the relationship
 TRANSPORTATION & PUBLIC UTILITY LAW
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“Work Hard in Silence, Let SUCCESS be your NOISE”
of master and servant or principal or agent does not exist
between the parties, or where the occupant has no right to
direct or control the driver’s action, as where the occupant is
passenger for hire or is the guest of the owner or driver and
has no reason to believe the driver careless or imprudent, or
where the occupant is seated away from the driver or is
separated from him by an enclosure so that he is without
opportunity to discover danger and inform the driver thereof.
What is baggage?
The term baggage has been defined to include
whatever articles the passenger usually takes with him for his
own personal use, comfort, and convenience according to the
habits or wants of the particular class to which he belongs,
either with reference to his immediate necessities or to the
ultimate purpose of his journey.
What is the duty of passenger with regard to hand-carried
baggage?
(1) to give notice to the common carrier or the carrier’s
employees, of the effects brought by the
passenger;
(2) to take the precautions which the common carrier
or their substitutes advised relative to the care and
vigilance of their effects.
CHAPTER 3
OBLIGATIONS OF THE PASSENGER AND SHIPPER
“The duty to comply with the terms and conditions of the
contract does not rest only on one of the parties. Hence, in a
contract of carriage, both the carrier and passenger or
shipper, as the case may be, have prestations to perform.”
What is duty to disclose on the part of the shipper?
The shipper must give proper information if there is a
need to store the cargoes in a separate place. A common
carrier is entitled to fair representation of the nature and value
of the goods to be carried, with the concomitant right to rely
thereon, and a carrier has no obligation to inquire into the
correctness or sufficiency of such information.
What is the liability of the shipper when there is damage
caused by cargoes?
The shipper may be held liable for any damage that
may have been caused solely by the dangerous nature of the
cargoes or the defect in the packaging of the cargoes.
What are the obligations of a shipper?
(a) duty to disclose
(b) payment of freight
(c) timely loading and unloading
(d) secure proper permits
(e) shipper’s load and count
What is payment of freight?
The regulation of rates of public of public utilities is
founded upon the police power of the state and statutes
prescribing rules for the control and regulation of public utilities
are a valid exercise thereof. The rates prescribed by the state
must be one that yields a fair return on the public utility upon
the value of the property performing the service and one that
is reasonable to the public for the services rendered.
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
Who will pay the freight?
Generally, it was the shipper who will pay for the
freight. However, the parties may also stipulate that the
consignee will pay for the freight at the point of destination.
The consignee is bound by such stipulation the moment he
accepts the goods.
When is the time to pay the freight?
The implication of the code of commerce provisions
on Overland Transportation is that in the absence of any
agreement, the consignee who is supposed to pay must do so
within 24 hours from the time of delivery.
What is carrier’s lien?
If the consignor or the consignee failed to pay the
consideration for the transportation of the goods, the carrier
may exercise his lien in accordance with article 375 of the
code of commerce. However, as modified by article 2241(9)
of the new civil code that gives the preference to the credits
for transportation upon the goods carried for the price of the
contract and incidental expenses until their delivery and for 30
days thereafter.
Why there is a need of timely loading and unloading?
The shipper must make sure that the goods are
delivered to the carrier on the date, time, and place agreed
upon. Otherwise, the shipper may either be still required to
pay the agreed fees and charges and/or to pay appropriate
damages and/or be rejected depending on the circumstances.
The consignee on the other hand, must likewise timely obtain
delivery from the carrier. The carrier must give notice of the
arrival of the goods to the consignee. After such notice, the
consignee – the legitimate holder of the bill of lading – must
present the bill of lading to the captain before the unloading
obliging the latter thereby to unload the cargo and place it in
deposit. Otherwise, the consignee shall be responsible for the
expenses of warehousing and other expenses arising
therefrom.
What is demurrage?
It is the amount to be paid by the shipper to the
carrier beyond loading and unloading. The parties may
stipulate the period within which to load and unload cargoes.
The period is known as lay days. Demurrage, in its strict
sense, is the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the time
agreed on for loading and unloading. Essentially, demurrage
is the claim for damages for failure to accept delivery.
Why there is a necessity to secure permits?
The passenger or shipper may also be required to
secure the necessary permits for the transportation of certain
goods. For instance, the shipper is required to get a clearance
from the environmental bureau.
What is shipper’s load and count?
It may be stipulated in the bill of lading that the
shipper has the sole responsibility for the quantity, description
and condition of the cargoes shipped in container vans. This
is known as “shipper’s load and count” arrangement. Under
this agreement, the contents are not required to be checked
and inventoried by the carrier by the port of loading or before
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said carrier enters the port of unloading in the Philippines
since it is the shipper who has the sole responsibility for the
quantity, description and condition of the cargoes shipped in
container vans.
What are the duties of the passenger?
The passenger must pay the proper fare for the
transportation of the said passenger. The amount and time of
payment would depend on the type of the carrier, the practice
and regulation in that particular carrier.
(a) the passenger must present himself in the proper
place.
(b) the passenger must also present himself at the
proper time
(c) with respect to his or her luggage, the passenger is
obligated not to bring such luggage that is in excess
of the weight and size prescribed by regulations or
contract. The passenger is also prohibited from
transporting prohibited materials or goods,
including animals.
(d) it is the obligation of the passenger, not he carrier,
to secure the appropriate travel documents.
CHAPTER 4
DEFENSES OF COMMON CARRIERS
Doctrine of proximate causation is inapplicable in the
contract of carriage
Passenger or shipper has no burden of proving that
the injury was caused by the negligence of the carrier or his
agents. However, common carrier may prove by way of
defense that the loss or damage cannot be traced to any act
of the circumstances mentioned in Art 1734 of the NCC.
What are the defenses of common carriers?
Defenses that can be raised by the common carrier
based on Articles 1734, 1742, and 1743 of the NCC (No other
defense may be raised - exclusive or closed list)
1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity
2) Act of the public enemy in war, whether international
or civil
3) Act or omission of the shipper or owner of the goods
4) The character of the goods or defects in the packing
or in the containers
5) Order or act of competent public authority
6) Exercise of extraordinary diligence
What is a need to be established to hold a “fortuitous event”
defense?
To be a valid defense must be established to be the
proximate cause of the loss
What are the requisites of fortuitous event?
1) The cause of the unforeseen and the unexpected
occurrence, or of the failure of the debtor to comply
with his obligation, must be independent of the
human will
2) It must be impossible to foresee the event which
constitutes the caso fortuito, or if it can be foreseen,
it must be impossible to avoid
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
3) The occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a
normal manner
4) The obligor (debtor) must be free from any
participation in or the aggravation of the injury
resulting to the creditor
In order for the common carrier to be exempted from
responsibility, the natural disaster must have been the
proximate and only cause of the loss. However, the common
carrier must exercise due diligence to prevent or minimize loss
before, during and after the occurrence of flood, storm or other
natural disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or
deterioration of the goods.
With regard to Fire, it is Not considered a natural
disaster or calamity. Force majeure only refers to natural
accident. However, if it is coupled with other natural disaster,
it shall qualify as a fortuitous event.
With regard to Storm, the presence of strong wind does
not by itself justify the conclusion that there is a storm.
Monsoon wind is NOT an unusual occurrence and is a normal
and foreseeable condition while navigating in the sea
EXN: however, in one case, strong winds may be
unforeseeable. Carrier is not liable when the
PROXIMATE AND ONLY cause of the loss was
unforeseeable strong winds and enormous waves
With regard to Hijacking, No among the five categories
of exempting causes.
EXN: when it is attended by GRAVE OR
IRRESISTIBLE THREAT, VIOLENCE OR FORCE
(considered as fortuitous event). Provided there is still
the duty of extraordinary diligence
Hijacking must be established by sufficient evidence.
Mere affidavits are not considered the best evidence if the
affiants are available as witnesses. It be Determined during
trial.
Mechanical Defects
• Not damage or injury cause by fortuitous event
• Carrier has the obligation toward the traveling public
demands ADEQUATE periodical tests to determine
the condition and strength of those vehicle portions
that failure of which may endanger the safety of
passengers
• Unless, carrier proves that ADEQUATE test was
made – may be considered fortuitous
• Rationale: passenger has neither choice nor control
over the carrier in the selection and use of the
equipment and appliances in use
Tire Blowouts
• Rule mechanical defects apply
What are Other Invalid Defenses?
• Explosion – not attributable to the peril of the sea or
accidents of navigation
• Worms and rats
• Water damage or damage by seawater
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• Barratry – act committed by the master or crew of the
ship for some unlawful or fraudulent purpose,
contrary to their duty to the owner (INTENTIONAL)
PUBLIC ENEMY
• GR: pre-supposes the existence of an actual state of
war and refers to the government of a foreign nation at
war with the country to which the carrier belongs (NOT
the country of the owner or shipper of goods)
• EXN: pirates on the high seas
Considered the enemies of all civilized nations and
indeed human race, and consequently their depredations on
a common carrier will excuse him from liability. Act of rebel
against the government not an act of public enemy. Art 1739
– to be exempted from responsibility, the natural disaster must
be the proximate and only cause of the loss. In addition, the
common carrier must exercise due diligence to prevent or
minimize the loss before, during and after the occurrence
NATURE OF GOODS AND IMPROPER PACKING
Under the COGSA, carrier not liable for
a. Wastage in bulk or weight or any other loss or
damage arising from inherent defect, quality or vice
of goods
b. Insufficiency of packing
c. Insufficiency or inadequacy of the marks
d. Latent defects not discoverable by due diligence
Art. 1742. Even if the loss, destruction, or deterioration
of the goods should be caused by the character of the
goods, or the faulty nature of the packing or of the
containers, the common carrier must exercise due
diligence to forestall or lessen the loss.
Carrier not responsible if the loss occurs because of
the inherent nature of the shipment. Defect – want or absence
of something necessary for completeness or perfection; lack
of something essential to completeness; a deficiency in
something essential to the proper use for the purpose for
which a thing is used. THERE MUST BE PRROF THAT THE
DEFECT IN THE PACKAGE ALREADY EXISTED AT THE
TIME THE CARRIER ACCEPTED THE SAME. The carrier
must receive the goods under protest. Acceptance with
reservation regarding such defect must be duly noted in the
bill of lading.
What is ORDER OF PUBLIC AUTHORITY?
The public authority who issued the order must be
duly authorized
Defense not available if:
1. Public authority has no authority to issue the
subject order
2. Public authority exceeded his authority
DEFENSES IN CARRIAGE OF PASSENGERS
• Primary defense: extraordinary diligence
• Even if there is a fortuitous event, the carrier must
also present proof of exercise of extraordinary
diligence
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
ACTS OF EMPLOYEES
• Carrier liable for acts of employees
Article 1759. Common carriers are liable for the death
of or injuries to passengers through the negligence or
willful acts of the former's employees, although such
employees may have acted beyond the scope of their
authority or in violation of the orders of the common
carriers.
This liability of the common carriers does not cease
upon proof that they exercised all the diligence of a good
father of a family in the selection and supervision of their
employees.
does the passenger has the duty to inquire?
Passenger has no duty to inquire. No duty to inquire
whether the driver or any other EE is authorized to drive the
vehicle or that said driver is acting within the scope of his
authority and observing the existing rules and regulations
required of him by management
What is the Rationale why carrier is liable?
1.Undertaking of the carrier requires that its passenger
that full measure of protection afforded by the
exercise of high degree of care prescribed by law,
inter alia from violence and insults at the hands of
strangers and other passengers, but above all, from
the acts of the carrier’s own servants.
2.The liability of the carrier for the servant’s violation of
duty to performance of his contract to safely transport
the passenger, delegating therewith the duty of
protecting the passenger with utmost care prescribed
by law.
3.As between the carrier and the passenger, the
former must bear the risk of wrongful acts or
negligence of the carrier’s employees against
passenger, since it, and not the passenger, has the
power to select and remove them
Theft by employees
Captain shall be civilly liable for the naviero and the
latter to third person for all the thefts committed by the crew,
reserving the right of action against the guilty party. But carrier
is not criminally liable
ACTS OF OTHER PASSENGERS AND THIRD PERSON
Article 1763. A common carrier is responsible for injuries
suffered by a passenger on account of the willful acts or
negligence of other passengers or of strangers, if the
common carrier's employees through the exercise of the
diligence of a good father of a family could have prevented
or stopped the act or omission.
Carrier not liable PROVIDED it/he exercise due
diligence to prevent or stop the act/omission.
ACTS OF THE SHIPPER OR THE PASSENGER
• If it is the PROXIMATE AND ONLY cause of the
damage – carrier not liable
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What is the effect of Contributory negligence of the shipper?
• Will not excuse the carrier from liability, but only
mitigate
• Contributory negligence – conduct on the part of the
injured party, contributing as a legal cause to the
harm he has suffered which falls below the standard
to which he is required to confirm for his own
protection
What is the effect of Contributory negligence of passenger?
Will bar recovery if the proximate and cause is
negligence of common carrier. Mitigate liability and that
Passenger is bound to observe due diligence to avoid injury
Causation
• If the negligence of the shipper or passenger is the
PROXIMATE AND ONLY cause of the loss – carrier
not liable
• Carrier prove that the only cause of loss is any of the
following acts:
a. Failure of the shipper to disclose the nature of
the goods
b. Improper marking or direction as to destination
c.Improper lading when he assumes such
responsibility
what is Doctrine of Avoidable consequences?
Even if carrier is responsible, passenger is required
to lessen the damage or injury
Assumption of risk
• Passenger must take risks incident to the mode of
travel
• Carriers not insurers of lives of passengers
What is a Doctrine of last clear chance?
When both parties involved in the accident were both
negligent, the negligence of the party will not be considered
the proximate cause if the other party has he last clear change
of avoiding the injury. CANNOT BE APPLIED AGAINST A
PASSENGER.
NOTICE OF CLAIM
In an action for damages due to breach of contract, it is
essential that the claimant will establish the following
requirements:
1.Existence of a perfected contract
2.Breach thereof by the other contracting party
3.Damages which he/she sustained due to the breach
Claim in overland transportation and coastwise
shipping. A condition precedent for an action against the
carrier in overland transport is the filling of a claim with the
carrier, w/n the period in Art. 366. Under art. 366, an action for
damages is barred if the goods arrived in damaged condition
and the shipper files no claim within the ff period:
1. The claim for damages must be filed immediately if
the damages are apparent; or
2. The claim for damages must be made within 24
hours from receipt of the merchandise if the
damage is not apparent, that is, the damages
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
cannot be ascertained merely from the outside
packaging of the cargo
Notice of claim – mandatory. The shipper or consignee
must allege and prove the fulfillment of the condition. Purpose:
give the carrier an opportunity to ascertain whether the claim
is a well-founded one before the goods leave his hands with
respect to damages which are observable upon the exterior of
the goods or of the packages in which they are contained and
before the goods have been consumed or their identity
destroyed in cases in which it is alleged that the damage has
been discovered after the goods were received by the
consignee. To inform that the shipment has been damaged
and that it is charged with liability therefore, and to give it an
opportunity to examine the nature and extent of the injury. The
period does not begin to run until the consignee has received
possession of the merchandise that he may exercise over it in
the ordinary control pertinent to ownership. There must be
delivery of the cargo
• If no delivery – the claim for damages arises
exclusively out of the failure to make delivery
• Art. 366 – applicable to coastwise shipping
• Art. 366 does not apply to misdelivery
Apply only to those goods actually turned over. The
period prescribed in Art. 366 may be subject to modification
by agreement of the parties, as provided in the bill of lading.
The stipulation merely affects the shipper’s remedy and does
not affect the liability of the carrier
Waiver – the carrier may waive the requirement that
there must be notice of claim. It is deemed waived if the
defendants failed to pleaded this defense in its answer to the
complaint. Another form of waiver: par. 2 of Art 366: payment
by the shipper of the transportation charges without protest
knowing that there is damage, precludes the presentation of
any claim against the carrier
If there is doubt:
ARTICLE 367. If doubts and disputes should
arise between the consignee and the carrier
with respect to the condition of the goods
transported at the time their delivery to the
former is made, the goods shall be examined by
experts appointed by the parties, and, in case
of disagreement, by a third one appointed by
the judicial authority, the results to be reduced
to writing; and if the interested parties should
not agree with the expert opinion and they do
not settle their differences, the merchandise
shall be deposited in a safe warehouse by order
of the judicial authority, and they shall exercise
their rights in the manner that may be proper.
Notice of claim in international carriage of goods by sea
• The provisions of the COGSA applies
• Period to file claim:
1. If damage is apparent – claim should be
filed immediately upon discharge of the
goods
2. The claim must be made within three days
from delivery if the damage is not apparent
Period is not mandatory. Failure to file a notice of
claim within the given period will not bar recovery. The shipper
can still bring an action to recover said loss or damage within
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one year after the delivery of the goods. In case of any actual
loss or apprehended loss or damage, the carrier and the
receiver shall give all reasonable facilities to each other for
inspecting and tallying the goods
PRESCRIPTION IN OVERLAND TRANSPORTATION AND
COASTWISE SHIPPING
• the general rule under the Civil Code on extinctive
prescription applies
• 6 years – if no written contract
• 10 years – if there is a written contract
What is the Prescription in international carriage of goods?
The action must be filed w/n 1 year from discharge
of goods.
Who can invoke: the carrier and the ship may put up
the defense of prescription. Shipper and the
consignee or legal holder of the bill may invoke
prescriptive period.
Carriage of goods – period from the time when the
goods are loaded to the time when they are
discharged from the ship
The COGSA does not mention that arrastre operator
may invoke the prescriptive period of one year. Effect of
demand: the period is not suspended by an extra-judicial
demand because matters affecting transportation of goods by
sea should be decided in as short time as possible. The period
does not apply to conversion or misdelivery. The applicable
prescriptive period is then that found in the CC, which is either
10 years for breach of written contract or 4 years for quasi-
delict
• Delay: 10 years
• Collision cases: the rule on prescription applies in
collision cases however the 1-year period starts
from the date when the goods should have been
delivered, had the cargoes been saved
• Extension by agreement: can be extended by
agreement
Prescription and subrogation
• The insurer who is exercising its right of
subrogation is also bound by the one-year
prescriptive period
• The prescriptive period should not be based on the
day the right of subrogation accrued but on the time
the cause of action accrued
NOTICE OF CLAIM AND PRESCRIPTION IN AIR
TRANSPORTATION
What are Rules under the Warsaw Convention?
• Claim must be filed:
1. Within 3 days from receipt of the baggage
2. Within 7 days in case of goods
3. In case of delay, 14 days after the baggage
was placed at the disposal of the passenger
Notice of the claim is a condition precedent. The
prescriptive period is 2 years from:
1. the date of arrival at the destination or
2. the date the aircraft ought to have arrived or
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
3. the date on which the transportation is
stopped
LIMITING STIPULATIONS
partial defense
Ex. the parties may expressly stipulate a fixed amount that
may be recovered by the shipper or owner of the goods
which requires that:
1. It is reasonable and just under the circumstances
and
2. It is fairly and freely agreed upon
CHAPTER 5
BILL OF LADING AND OTHER FORMALITIES
CONCEPTS
The obligation of the carrier to exercise extraordinary
diligence in transporting the goods or passengers is present
even if the carrier does not issue a bill of lading or ticket.
However, PUB and Taxi operators are required to issue
tickets/receipts to passengers.
What is Bill of lading?
It is a written acknowledgment, signed by the master
of a vessel or other authorized agent of the carrier, that he has
received the described goods form the shipper, to be
transported on the expressed terms, to the described place of
destination, and to be delivered there to the designed
consignee or parties.
What are the KINDS OF BILLS OF LADING?
(1) negotiable or non-negotiable,
(2) clean bill of lading or foul bill of lading,
(3) on board bill or received for shipment bill,
(4) spent bill of lading,
(5) through bill of lading,
(6) custody bill of lading,
(7) port bill of lading
1.Clean bill of lading – does not contain any notation
indicating any defect in the goods
2.Foul bill of lading - one that contains such notation
3.Spent bill of lading – if the goods were already
delivered but the bill of lading was not returned
4.Through bill of lading – Issued by a carrier who is
obliged to use the facilities of other carriers as well
as his own facilities for the purpose of transporting
the goods from the city of the seller to the city of the
buyer, which BOL is honored by the second and
other interested carriers who don’t issue their own
BOL.
5.On board bill of lading – states that the goods have
been received on board the vessel which is to carry
the goods apparently guarantees the certainty of
shipping as well as the seaworthiness of the vessel
to carry the goods. It basically means that the goods
are already inside the vessel
6.Received for shipment bill of lading – states that the
goods have been received for shipment with or
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without specifying the vessel by which the goods are
to be shipped. It is issued when conditions are not
normal and there is insufficiency of shipping space.
7.Custody bill of lading - The goods are already
received by the carrier but the vessel indicated
therein has not yet arrived in the port.
8.Port Bill of lading - The vessel indicated in the BOL
that will transport the goods is already in the port.
NATIURE OF BILL OF LADING
What are the Three-fold nature of a bill of lading?
1. Receipt – it recites the date and place of shipment,
describes the goods as quantity, weight,
dimensions, identification marks and condition,
quality, and value. If it contains an
acknowledgement by the carrier of the receipt of
goods for transportation, it is, in legal effect, a bill
of lading. Sometimes called: “shipping receipts,”
“forwarders receipts,” and “receipts for
transpiration”. The bill of lading is prima facie
evidence of the receipt of the goods by the carrier
2. Contract – names the contracting parties, which
include the consignee, fixes the route, destination,
and freight rates or charges, and stipulates the
rights and obligations assumed by the parties
3. Document of title that makes it a symbol of the
goods
WHEN EFFECTIVE?
Usually upon delivery and acceptance by the
shipper. A shipper is bound by his acceptance whether he
reads the bill or not.
What is BILL OF LADING AS CONTRACT?
The nature of a bill of lading as receipt and as
document of title can be applied only to a bill of lading that is
issued for goods and not to a passenger ticket. Nature of a bill
of lading as contract applied to tickets issued to passengers
Who are the Parties?
• The shipper and the carrier
• A consignee, although not a signatory the contract of
carriage, becomes a party by reason of either:
1. relationship of agency between the consignee
and shipper/consignor
2. unequivocal acceptance of the bill of lading
delivered to the consignee, with full knowledge
of its contents
3. availment of stipulation pour autrui
Contracts of adhesion
• bill of lading – a contract of adhesion
• construed liberally in favor of the shipper who
adhered to such bill as it is a contract of adhesion
• passengers/shippers cannot change the contract
and they are thus made to adhere thereto
• when the passenger/shipper receives the bill of
lading, it is tantamount to the passenger or shipper’s
adherence to the terms and conditions
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
• The shipper or passenger is bound by the terms and
conditions if there is no occasion to speak of
ambiguities or obscurities
• If the words appear to be contrary to the evident
intention of the parties, the latter shall prevail over the
former
What is Parol evidence rule?
Bill of lading is covered by the parole evidence rule.
The terms of the contract are conclusive upon the parties and
evidence aliunde is not admissible to vary or contradict a
complete enforceable agreement, subject to well defined
exceptions. The mistake contemplated as an exception to the
parol evidence rule is one which is a mistake of fact mutual to
the parties. In order that the parol evidence may be admitted,
said mistake must be put in issue by the pleadings, such that
if not raised inceptively in the complaint or in the answer, as
the case may be, a party cannot later on be permitted to
introduce parol evidence.
What is Bill of lading as evidence?
The BOL is the legal evidence of the contract and the
entries thereof constitutes prima facie evidence of the
contract. All the essential elements of a valid contract (cause,
consent, object) are present when such bill is issued.
What is Bill of lading as actionable document?
Hence, the bill of lading must be properly pleaded
either as causes of action or defenses; the genuiness and due
execution of which are deemed admitted unless specifically
denied under oath by the adverse party
What are the Shipment terms and its functions?
• FOB, FAS, CIF
• Functions:
1. Determine the point at which the risk of loss
passes from seller to buyer;
2. Determine what performance by the seller
amounts to a tender which will put the buyer, if
he thereafter refuses to accept delivery, in
breach; and
3. Used for quoting the price
FOB (Free on board) – the risk passes to the buyer at the FOB
point
“FOB Point of Destination” – seller still assumes the risk until
the goods reach the point of destination
FAS (Free Alongside) – the seller relinquishes the risk the
moment the goods are delivered alongside the vessel.
FAS Vessel – The seller is under no obligation to see the
loading and all that is required is delivery to the
wharf.
FOB Vessel – The seller must see to it that the goods are
loaded and his responsibility does not cease
until the loading is complete.
• On board bill of lading signifies the completion
of the lading of the goods
• CIF (Cost, Insurance, Freight) – the price
quoted by the seller includes the invoice price
plus insurance and freight. A “received for
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shipment” bill of lading is usually appropriate for
the purpose. Insurance is payable to the buyer.
Hence the buyer bears the risk of loss while the
goods are in transit.
• The ownership of the goods is not transferred
to the buyer even if the goods are already
delivered to the carrier if the bill of lading
provides that the goods are deliverable to the
seller or his agent or the order of the seller or
his agent
• The seller also retains the risk if the bill of lading
provides that the goods are deliverable to the
buyer or his agent but the seller or his agent
retains possession of the bill of lading
• International commercial terms or incoterms –
embodied in the rules published by the
International Chamber of Commerce (ICC) and
over which the latter has an intellectual property
rights
BASIC STIPULATIONS
Overland transportation
ARTICLE 350. The shipper as well as the carrier of
merchandise or goods may mutually demand that a bill
of lading be made, stating:
1. The name, surname and residence of the
shipper.
2. The name, surname and residence of the
carrier.
3. The name, surname and residence of the
person to whom or to whose order the goods
are to be sent or whether they are to be
delivered to the bearer of said bill.
4. The description of the goods, with a statement
of their kind, of their weight, and of the external
marks or signs of the packages in which they
are contained.
5. The cost of transportation.
6. The date on which shipment is made.
7. The place of delivery to the carrier.
8. The place and the time at which delivery to the
consignee shall be made.
9. The indemnity to be paid by the carrier in case
of delay, if there should be any agreement on
this matter.
ARTICLE 351. In transportation made by railroads or
other enterprises subject to regulation rate and time
schedules, it shall be sufficient for the bills of lading or
the declaration of shipment furnished by the shipper to
refer, with respect to the cost, time and special
conditions of the carriage, to the schedules and
regulations the application of which he requests; and if
the shipper does not determine the schedule, the
carrier must apply the rate of those which appear to be
the lowest, with the conditions inherent thereto, always
including a statement or reference to in the bill of lading
which he delivers to the shipper.
ARTICLE 352. The bills of lading, or tickets in cases
of transportation of passengers, may be diverse, some
for persons and others for baggage; but all of them
shall bear the name of the carrier, the date of shipment,
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
the points of departure and arrival, the cost, and, with
respect to the baggage, the number and weight of the
packages, with such other manifestations which may
be considered necessary for their easy identification
Maritime commerce
Please refer to book pages 276-280
COGSA provides that after receiving the goods into
his charge, the carrier or the master or agent of the carrier,
shall, on demand of the shipper, issue to the shipper the bill of
lading
Electronic documents
RA 8792
For law provisions refer to page 280-282
What are the PROHIBITED AND LIMITING STIPULATIONS?
Three kinds of limiting stipulations that have often
been made in a bill of lading:
1. Exculpatory contracts – exempting the carrier from
any and all liability for loss or damage occasioned
by its own negligence
2. Providing for an unqualified limitation of such
liability to an agreed valuation
3. Limiting the liability for the carrier to an agreed
valuation unless the shipper declares a higher
value and pays a higher rate of freight
First and second is invalid for being contrary to public
policy while the third is valid and enforceable
Prohibited stipulations
Article 1745. Any of the following or similar stipulations
shall be considered unreasonable, unjust and contrary
to public policy:
(1) That the goods are transported at the risk of
the owner or shipper;
(2) That the common carrier will not be liable for
any loss, destruction, or deterioration of the
goods;
(3) That the common carrier need not observe
any diligence in the custody of the goods;
(4) That the common carrier shall exercise a
degree of diligence less than that of a good
father of a family, or of a man of ordinary
prudence in the vigilance over the movables
transported;
(5) That the common carrier shall not be
responsible for the acts or omission of his or
its employees;
(6) That the common carrier's liability for acts
committed by thieves, or of robbers who do
not act with grave or irresistible threat,
violence or force, is dispensed with or
diminished;
(7) That the common carrier is not responsible
for the loss, destruction, or deterioration of
goods on account of the defective condition
of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage.
Limiting stipulations
Article 1746. An agreement limiting the common
carrier's liability may be annulled by the shipper or
 TRANSPORTATION & PUBLIC UTILITY LAW
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“Work Hard in Silence, Let SUCCESS be your NOISE”
owner if the common carrier refused to carry the goods
unless the former agreed to such stipulation.
Article 1747. If the common carrier, without just cause,
delays the transportation of the goods or changes the
stipulated or usual route, the contract limiting the
common carrier's liability cannot be availed of in case
of the loss, destruction, or deterioration of the goods.
Article 1748. An agreement limiting the common
carrier's liability for delay on account of strikes or riots
is valid.
Article 1749. A stipulation that the common carrier's
liability is limited to the value of the goods appearing in
the bill of lading, unless the shipper or owner declares
a greater value, is binding.
Article 1750. A contract fixing the sum that may be
recovered. by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has
been fairly and freely agreed upon.
What is the Purpose of limiting stipulations?
To Protect the common carrier. It obliges the
shipper/consignee to notify the common carrier of the amount
that the latter may be liable for in case of loss of the goods.
Presumption of negligence
Limiting stipulations does not remove the duty to
exercise extraordinary diligence in transportation of goods.
Under art. 1752, the presumption of negligence still applies
despite the presence of a limiting stipulation.
What are required in Stipulation reducing diligence?
The parties cannot stipulate to totally exempt the
carrier from exercising any degree of diligence whatsoever.
The parties cannot stipulate that the common carrier shall
exercise diligence less than the diligence of a good father of a
family
They may stipulate diligence less than extraordinary
diligence, provided:
1. That the stipulation be in writing signed by both
parties
2. That the stipulation be supported by a valuable
consideration other than the service rendered by
the common carrier
3. That the stipulation be reasonable, just, and not
contrary to law
• Reduction of diligence not allowed for carriage of
passengers
What are the requirement in Stipulations fixing the limit of
recovery?
The provision reducing the diligence should be
distinguished from Art. 1750 which involves a stipulation fixing
the amount that may be recovered which only requires that:
1. Reasonable and just under the circumstances; and
2. Fairly and freely agreed upon
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
What are Factors to Consider?
The determination whether the stipulation is just and
reasonable would depend on the prevailing circumstances.
Riots and Strikes
Carrier is still liable even if delay is caused by riots
and strikes but an agreement as to the limitation of its liability
is valid. It does not provide from escape from liability; it merely
allows limitation of liability. Provision relieving liability of carrier
is valid provided that extraordinary diligence is exercised in
preventing the aggravation of damage or injury.
What is Carriage of Goods by Sea Act (COGSA)?
It applies suppletorily to the New Civil Code if the
goods are to be shipped from a foreign port to the Philippines.
Liability of carrier is $500 per package in the absence of a
shipper’s declaration of a higher value in the bill of lading –
deemed part of the bill of lading even if not expressly stated.
What is the Meaning of package in COGSA?
If shipped in cartons, each carton is considered a
package even if stored in container vans. When what would
ordinarily be considered packages are shipped in a container
supplied by carrier and the number of such units is disclosed
in the shipping documents, each of those units constitutes
package
When the Limiting Stipulation cannot be invoked?
1. When the agreement limiting the common carrier’s
liability is annulled by the shipper or owner if the
common carrier refused to carry the goods unless
the former agreed to such stipulation
2. If the carrier delays in the transportation of goods
3. If the carrier changes the stipulated or usual route
What BILL OF LADING AS RECEIPT?
The presumption that the goods were delivered to
the carrier issuing the bill, for immediate shipment, and it is
nowhere questioned that a bill of lading is prima facie evidence
of the receipt of the goods by the carrier. Absence of
convincing testimony establishing mistake, recitals in the bill
of lading showing that carrier received the goods for shipment
on a specified date control. A bill of lading is a written
acknowledgment of the receipt of the goods and an
agreement to transport and deliver them at a specified place
to a person named or on his order. (Saludo, Jr. v. CA)
Shipping receipt, forwarder’s receipt, receipt for transportation
What is Said Weight Clause?
Nobody knows the actual weight of the cargo; the
weight written on the bill and on the manifest, is based only on
the declaration of the shipper. It is material when the
presumption of negligence is invoked because before the
presumption can operate, the shipper must prove the alleged
loss.
What is BILL OF LADING AS DOCUMENT OF TITLE?
 TRANSPORTATION & PUBLIC UTILITY LAW
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“Work Hard in Silence, Let SUCCESS be your NOISE”

It is a negotiable document of title. The goods are locked up
in the bill in the same way that the debt is merged in the
instrument. A seller who ships on an order bill can, by insisting
on payment before the bill is delivered to his buyer, protect
himself against an insolvent’s obtaining possession of the
goods much more effectually than by his remedy of stoppage
in transit.
What is Negotiability?
The presence of the words negotiability makes the
document of title negotiable. (delivered to bearer, or to the
order of any person named in such document)
What is the Effect of Stamp or Notation “Non-negotiable”?
The document remains to be negotiable even if the
words “not negotiable” or “non-negotiable” are placed.
person in blank, to bearer or to another specified
person. Subsequent negotiation may be made in a like
manner.
What if there is Incomplete Negotiation, what should be done?
Convert the plain transfer to negotiation by
compelling the transferor to complete the negotiation process.
Art. 1515 Where a negotiable document of title is
transferred for value by delivery, and the endorsement
of the transferor is essential for negotiation, the
transferee acquires a right against the transferor to
compel him to endorse the document unless a contrary
intention appears. The negotiation shall take effect as
of the time when endorsement is actually made.
What is the Effect of Negotiation?

How Negotiated? Negotiability of a document merely indicates that the

• mode of negotiation depends on the type of
document
• negotiation differs if the document of title is a bearer
instrument and if the instrument is an order
instrument
Note: Bearer Document – negotiated by delivery
transfer of a document of title through negotiation has the
effect of transferring possession of the goods. Negotiation has
the effect of manual delivery so as to constitute the transferee
the owner of the goods.
CHAPTER 6
ACTIONS AND DAMAGES IN CASE OF BREACH

Art. 1508 A negotiable document may be negotiated by

delivery: DISTINCTIONS
(1) Where by the terms of the document the carrier, Point of Culpa Culpa Aquilana
warehouseman or other bailee issuing the same distinction Contractual
undertakes to deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier, Source of Contract Quasi-Delict
warehouseman or other bailee issuing the same Obligation
undertakes to deliver the goods to the order of a Liability of No liability there Solidarily liable
specified person, and such person or a subsequent Employee being no privity of with the Employer
endorsee of the document has indorsed it in blank contract
or to the bearer. Availability of Due diligence in Due diligence in
Defense selection and the selection and
Where by the terms of a negotiable document of title
supervision of the supervision of the
the goods are deliverable to bearer or where a
employee is not a employee is a
negotiable document of title has been indorsed in blank defense defense under
or to bearer, any holder may indorse the same to Art. 2180
himself or to any specified person, and in such case In What Liable as a Liable as an
the document shall thereafter be negotiated only by the contracting party employer
Capacity Liable
endorsement of such endorsee.

Art. 1511 A document of title which is not in such form
that it can be negotiated by delivery may be transferred
by the holder by delivery to a purchaser or donee.
Order Document, how negotiated?
Negotiated by indorsement of the specified person
so named. Goods are to be delivered to the order of a person
specified therein
Sec 38. Negotiation of negotiable receipt by
indorsement. – A negotiable receipt may be negotiated
by the indorsement of the person to whose order the
goods are, by the terms of the receipt, deliverable.
Such indorsement may be in blank, to bearer or to a
specified person. If indorsed to a specified person, it
may be again negotiated by the indorsement of such
What is CONCURRENT CAUSES OF ACTION?
Same act that breaches the contract may also be
tort. A negligent act that breaches the contract may give rise
to a liability based on contract as well as quasi-delict under Art
2176.
employee of the carrier – civil liability may be based on
quasi-delict as well as criminal liability
Cause of action of passenger or shipper against
common carrier – can be culpa contractual or
culpa aquilana
Basis of liability on the part of driver – culpa delictual
or culpa aquilana
Concurrence with Third Persons

MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
 TRANSPORTATION & PUBLIC UTILITY LAW
XAVIER UNIVERSITY - ATENEO DE CAGAYAN
“Work Hard in Silence, Let SUCCESS be your NOISE”
If the negligence of third persons concurs with the
breach, the liability of the third person who was driving another
vehicle and/or his employer may be based on quasi-delict. In
case of injury to a passenger due to the negligence of the
driver of the vehicle on which he was riding and the driver of
another vehicle, the drivers and the owners of the two vehicles
are jointly and severally liable for damages.
Solidary Liability
In case the negligence of the carrier’s driver and a
third person concurs, the liability of the parties – carrier and
his driver, third person – is joint and several
What is the Alternative causes of action?
It was permissible for plaintiff to allege alternative
causes of action and join as many parties as may be liable on
such causes of action so long as the plaintiff does not recover
twice for the same injury.
What is the Alternative Compensation Scheme?
In order to provide the commuting public with an easier
way of recovering damages for the injuries sustained due to
the operation of common carriers, special laws provide for
mandatory insurance coverage for passengers and cargoes.
Marine Transportation and Motor Vehicles – mandatory
insurance coverage
What are the ELEMENTS OF CAUSE OF ACTION AGAINST
THE CARRIER?
1. right in favor of plaintiff by whatever means and
whatever law it arises
2. correlative obligation of the defendant to respect
such right
3. the act or omission of the defendant violates the
right of the plaintiff
Culpa contractual – all that is necessary is to allege presence
of the contract and the damage or injury to the plaintiff
because breach through negligence is already
presumed
What is RECOVERABLE DAMAGES?
Damages - pecuniary compensation, recompense or
satisfaction of an injury sustained, or as otherwise expressed,
the pecuniary consequences that the law imposes for the
breach of some duty or violation of some rights.
What is the Extent of Recovery?
Art 2201. In contracts and quasi-contracts, the
damages for which the obligor who acted in good faith
is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and
which the parties have foreseen or could have
reasonably foreseen at the time the obligation was
constituted.
In case of fraud, bad faith, malice or wanton attitude,
the obligor shall be responsible for all damages which
may be reasonably attributed to the non-performance
of the obligation.
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
What is Applied to Common Carrier?
Good faith - liable only to pay for damages that are the natural
and probable consequences of the breach of the
obligation and which the parties have foreseen or could
have reasonably foreseen at the time the obligation
was constituted.
Bad faith or gross negligence – all damages
What is the Carrier’s Right of Recourse?
The carrier who may be compelled to pay damages
has the right of recourse against employee who committed the
negligent, intentional or fraudulent act.
Kinds of Damages
1. Actual or Compensatory
2. Moral
3. Nominal
4. Temperate or Moderate
5. Liquidated
6. Exemplary or Corrective
Moral, nominal, temperate, liquidated or exemplary - no
proof of pecuniary loss is necessary in order that
damages may be adjudicated. Assessment is left
to the discretion of the court
Actual or compensatory – proof of pecuniary loss
What is ACTUAL OR COMPENSATORY DAMAGES
Except as provided by law or by stipulation, one is
entitled to an adequate compensation only for such pecuniary
loss suffered by him as he has duly proved. Comprehend the
value of the loss suffered and the profits that the obligee failed
to obtain.
What are the Kinds of Actual Damages?
1. Loss of what a person already possesses (daño
emergente)
2. The failure to receive as a benefit that would have
pertained to him (lucro cesante)
Art. 2205 Damages may be recovered:
(1) For loss or impairment of earning capacity in
cases of temporary or permanent personal
injury
(2) For injury to the plaintiff’s business standing or
commercial credit
What is the required Proof?
Burden of proof rests on plaintiff who is claiming
actual damages against the carrier.
What is the Determination of Amount of Liability in Carriage by
Sea?
In accordance with that declared in the bill of lading,
the shipper not being allowed to present proof that among the
goods declared therein there were articles of greater value
and money
What is the Valuation of Goods?
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“Work Hard in Silence, Let SUCCESS be your NOISE”
• Value at their time of destruction
• Profit earning chattels – value of the chattel to its
owner as a going concern at the time and place of
loss
What is the effect of Damages in Personal Injury Cases?
Entitles claimant to all medical expenses as well as
other reasonable expenses that he incurred to treat his or his
relatives’ injuries.
What is the effect of Damages in Case of Death?
Entitled to the amount he spent during the wake and
funeral of the deceased Fixed Damage. Php 50,000 – as
contemplated in Art 2206
How to compute Loss of Earning Capacity?
Net earning capacity = Life expectancy x [Gross Annual
Income – Living Expenses]
Life expectancy = 2/3 x (80 – age)
Amount of living expenses – fixed at 50% of the gross income
in the absence of proof of the amount of living expenses to be
deducted from the gross income
• Applicable to permanent incapacity
• Loss of earning capacity must be established by
documentary proof.
What is the Exception when documentary evidence is not
necessary?
1. Self-employed victim and earning less that
minimum wage
2. Daily wage earner earning less than minimum
Special Circumstances – indemnification for loss earning
capacity may be sustained although unemployed.
What are the exceptions to recover ATTORNEY’S FEES?
In the absence of stipulation, attorney’s fees and
expenses of litigation, other than judicial costs cannot be
recovered, except:
1. When exemplary damages are awarded;
2. When defendant’s act or omission has compelled
the plaintiff to litigate with third persons or to incur
expenses to protect his interest;
3. In case of a clearly unfounded civil action or
proceeding against the plaintiff;
4. Where the defendant acted in gross and evident
bad faith in refusing to satisfy the plaintiff’s plainly
valid, just and demandable claim
5. When at least double judicial costs are awarded
6. In any other case where the court deems it just and
equitable that attorney’s fees and expenses of
litigation should be recovered
What are the instances when attorney’s fees are available in
contract of carriage for breach of contract?
Award of Attorney’s fees
• The exception and not the general rule
• Court must state the factual, legal, or equitable
justification
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
What is the imposable rate of INTERESTS?
When an obligation, not constituting a loan or
forbearance of money is breached, an interest on the amount
of damages awarded may be imposed at the rate of 6% per
annum
What is MORAL DAMAGES?
Physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury. May be recovered
if they are the proximate result of the defendant’s wrongful act
or omission. To Compensate claimant’s actual injury
Breach of contract of air carriage, moral damages
may be recovered where:
1.The mishap results in the death of a passenger
2.Where the carrier is guilty of fraud or bad faith
3.Where the negligence of the carrier is so gross and
reckless as to virtually amount to bad faith
What does Gross negligence imply?
It implies a want or absence of or failure to exercise
even slight care or diligence, or the entire absence of care.
What are the Factors to Consider that could affect amount to
be recovered?
1. Extent of humiliation
2. Extent of pain and suffering
3. Official, political, social and financial standing of the
offended party and the business and financial
position of the offender
4. Age of claimant
What is NOMINAL DAMAGES?
Vindication or recognition of the plaintiff’s right is of
utmost important to him. Assessment is left to the discretion
of the court according to the circumstances of the case.
Justified in the absence of competent proof of the specific
amounts of actual damages suffered
What is TEMPERATE DAMAGES?
More than nominal but less that compensatory
damages. May be recovered when court finds that some
pecuniary loss has been suffered but its amount cannot, from
the nature of the case, be provided with certainty. Reasonable
under the circumstances.
What is a LIQUIDATED DAMAGES?
Agreed by the parties to a contract to be paid in case
of breach. Ordinarily, court cannot change the amount agreed
upon, however it shall be equitably reduced if iniquitous or
unconscionable
What are the requisites of EXEMPLARY OR CORRECTIVE
DAMAGES?
Requisites:
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“Work Hard in Silence, Let SUCCESS be your NOISE”
1. Imposed by way of example in addition to
compensatory damages, and only after the
claimant’s right to them has been established
2. Cannot be recovered as a matter of right, their
determination depending upon the amount of
compensatory damages that may be awarded to
the claimant
3. Act must be accompanied by bad faith or done in
wanton, fraudulent or malevolent manner
CHAPTER 7
THE AIRCRAFT AND CIVIL AVIATION
What are the APPLICABLE LAWS?
• New Civil Code provisions on Common Carriers
apply to transportation by air
• Civil Aviation - RA 9497 “Civil Aviation Authority Act
of 2008”
• Civil Aviation Regulations issued by Civil Aviation
Authority of the Philippines (CAAP)
• economic regulation – RA 776 and regulations by the
Civil Aviation Board (CAB)
• Warsaw Convention – international transportation by
air
• Chicago Convention
What is CIVIL AVIATION?
Aeronautics or aviation is a science and art of flight.
Civil Aviation is an operation of any civil aircraft for the purpose
of general aviation operations, aerial work or commercial air
transport operations.
What is an Aircraft?
Any machine that can derive support in the
atmosphere from the reactions of the air other than the
reactions of the air against the earth’s surface. Term “aircraft”
shall refer to civil aircraft only (not state or public)
REGISTRATION OF AIRCRAFT
Philippine Aircraft – aircraft registered in the
Philippines in accordance with the requirements of the Civil
Aviation Authority Act of 2008
• Aircraft has the nationality of the State in which they
are registered
• Every aircraft engaged in international air navigation
shall bear its appropriate nationality and registration
marks
• Aircraft cannot be validly registered in more than one
State, but its registration may be changed from one
State to another.
What is State of Registry?
State on whose register the aircraft is registered.
Certificate of Registration is deemed conclusive evidence of
nationality for international purposes and shall be carried
aboard in all its operations
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
Aircraft shall be eligible for registration if the following
requirements are present:
1.Aircraft is owned by or leased to a citizen or citizens
of the Philippines or corporations or associations
organized under the laws of the Philippines at least
60% of whose capital is owned by Filipino citizens;
and
2.The aircraft is not registered under the laws of any
foreign country
RECORDING OF CONVEYANCES
All conveyances made or executed, which affects
title to, or interest in, any aircraft of Philippine registry, or any
portion thereof shall be registered with CAAP. Requirements
are similar to land registration
MARINE INSURANCE
Insurance over aircrafts fall within the coverage of
Marine Insurance under the Insurance Code
.
What is AIR TRANSPORTATION IN GENERAL?
Air commerce or commercial air transport operation
refers to and includes scheduled or non-scheduled air
transport services for pay or hire, the navigation of aircraft in
furtherance of a business, the navigation of aircraft from one
place to another for operation in the conduct of business or an
aircraft operation involving the transport of passengers, cargo
or mail for remuneration or hire.
What is domestic air commerce and domestic air transport?
Domestic air commerce includes air commerce
within the limits of the Philippine territory while Domestic air
transport is an air transportation within the limits of the
Philippine territory.
What is foreign transportation?
Foreign air transportation the other hand, is an air
transportation between the Philippines and any place outside
it or wholly outside the Philippines.
What is International commerce air transport?
It is a carriage by aircraft of persons or property for
remuneration or hire or the carriage of mail between any two
or more countries
Who are PERSONS INVOLVED IN AIR
TRANSPORTATION?
Air carrier or operator. Air operators may either be:
1. Philippine Air Carrier
2. Foreign Air Carrier
Air Carrier or Operator is a person who undertakes,
whether directly or indirectly, or by a lease or any other
agreements, to engage in air transportation services or air
commerce.
What is Philippine Air Carrier v. Foreign air carrier?
An air carrier who is a citizen of the Philippines.
Foreign air carrier or foreign air operator is any operator, not
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being a Philippine operator, which undertakes, whether
directly or indirectly or by lease or any other agreements, to
engage in commercial air transport operations within the
borders or airspace of the Philippines, whether on a scheduled
or chartered basis.
What is an Airman?
It refers to any individual who engages, as the person
in command or as pilot, mechanic, aeronautical engineer,
flight radio operator or member of the crew, in the navigation
of aircraft while under way and any individual who is directly
in charge of inspection, maintenance, overhauling, or repair of
aircraft, aircraft engine, propellers, or appliances and
individual who serves in the capacity of aircraft dispatcher or
air traffic control operator.
What does CAB regulate?
It regulates persons and entities that are involved in
the economic aspects of air transportation.
1.Airline companies
2.General sales agent
3.Cargo sales agent
4.Air freight forwarders
5.Off-line carrier
6.Air Taxi Operator
What is CHARTER OF AIRCRAFT?
Charter trips are regulated by CAB. Charter trip or
charter flight means air transportation performed by an air
carrier where the entire capacity of one or more aircraft, or
less than the entire capacity of an aircraft, has been engaged
for the movement of persons and their personal baggage or
for the movement of property on a time, mileage or trip basis:
1. By a person for his own use (including a direct air
carrier when such aircraft is engaged solely for the
transportation of company personnel or
commercial traffic in cases of emergency);
2. By a representative (or representatives acting
jointly) of a group for the use of such group
(provided no such representative is professionally
engaged in the formation of groups for
transportation or in the solicitation or sale of
transportation services); or
3. By an airfreight forwarder holding a currently
effective permit.
What are the classification of the charter of air craft?
Charter of aircraft may be classified into:
1. On-route Charter - shall refer to service performed
by an air carrier between points between which
said carrier is authorized to provide service
pursuant to its certificate of public convenience and
necessity or foreign air carrier permit; Provided,
however, that passenger charter trips by any all-
cargo carrier are not considered to be on-route
whether or not performed between points designed
to receive service by such carrier in its certificate or
permit.
2. Off-route Charter – any charter that is not On-route
3. Pro-rata charter - a charter the cost of which is
divided among the passengers transported.
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
4. Single entity charter - a charter the cost of which is
borne by the charterer and not by individual
passengers, directly or indirectly.
5. Mixed charter - a charter the cost of which is borne,
or pursuant to contract may be borne, partly by the
charter participants and partly by the charterer.
What is SOVEREIGNTY AND AIR FREEDOMS?
Contracting States recognize that every State has
complete and exclusive sovereignty over the airspace above
its territory Consent is necessary for other States to operate
within the territory of another
What is an Air Services Agreement?
This means that 2 governments have negotiated a
bilateral treaty between them that will define the air traffic
rights each grant to the other during the life of the treaty
What is this Freedoms of the Air?
First Freedom of the Air - the right or privilege, in
respect of scheduled international air services, granted by one
State to another State or States to fly across its territory
without landing (also known as a First Freedom Right).
Second Freedom of the Air - the right or privilege, in
respect of scheduled international air services, granted by one
State to another State or States to land in its territory for non-
traffic purposes (also known as a Second Freedom Right).
Third Freedom of The Air - the right or privilege, in
respect of scheduled international air services, granted by one
State to another State to put down, in the territory of the first
State, traffic coming from the home State of the carrier (also
known as a Third Freedom Right).
Fourth Freedom of The Air - the right or privilege, in
respect of scheduled international air services, granted by one
State to another State to take on, in the territory of the first
State, traffic destined for the home State of the carrier (also
known as a Fourth Freedom Right).
Fifth Freedom of The Air - the right or privilege, in
respect of scheduled international air services, granted by one
State to another State to put down and to take on, in the
territory of the first State, traffic coming from or destined to a
third State (also known as a Fifth Freedom Right).
ICAO characterizes all "freedoms" beyond the Fifth
as "so-called" because only the first five "freedoms" have been
officially recognized as such by international treaty.
Sixth Freedom of The Air - the right or privilege, in
respect of scheduled international air services, of transporting,
via the home State of the carrier, traffic moving between two
other States (also known as a Sixth Freedom Right). The so-
called Sixth Freedom of the Air, unlike the first five freedoms,
is not incorporated as such into any widely recognized air
service agreements such as the "Five Freedoms Agreement".
Seventh Freedom of The Air - the right or privilege,
in respect of scheduled international air services, granted by
one State to another State, of transporting traffic between the
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territory of the granting State and any third State with no
requirement to include on such operation any point in the
territory of the recipient State, i.e. the service need not connect
to or be an extension of any service to/from the home State of
the carrier.
Eighth Freedom of The Air - the right or privilege, in
respect of scheduled international air services, of transporting
cabotage traffic between two points in the territory of the
granting State on a service which originates or terminates in
the home country of the foreign carrier or (in connection with
the so-called Seventh Freedom of the Air) outside the territory
of the granting State (also known as a Eighth Freedom Right
or "consecutive cabotage").
Ninth Freedom of The Air - the right or privilege of
transporting cabotage traffic of the granting State on a service
performed entirely within the territory of the granting State
(also known as a Ninth Freedom Right or "stand alone"
cabotage).
Who has the authority for Cancellation of Commercial
Agreement?
The government, through CAB, has the
indispensable authority to compel local air carriers to comply
with government determined policies, even at the expense of
economic rights. CAB has the ample power under its
organizing charter, to compel an airline, in proper cases, to
terminate whatever commercial agreements they may have
What are the types of Cabotage?
Two types:
1. Consecutive Cabotage – right or privilege, in
respect of scheduled international air services, of
transporting cabotage traffic between two points in
the territory of the granting State on a service which
originates or terminates in the home country of the
foreign carrier or outside the territory of the granting
State
2. Stand Alone Cabotage – right or privilege of
transporting cabotage traffic of the granting State
on a service performed entirely within the territory
of the granting State
Note: Philippines has not granted the right of cabotage in this
jurisdiction.
CHAPTER 8
OBLIGATIONS OF CARRIER IN AIR TRANSPORTATION
EXTRAORDINARY DILIGENCE IN AIR TRANSPORTATION
Due diligence in air transportation includes:
1.Make sure that aircraft is airworthy
2.Vessel has competent captain and crew
3.Captain and crew exercised extraordinary diligence
in operating the aircraft
Extraordinary diligence – requires that carrier provide a
competent carrier and well-trained crew
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
What is Airworthiness?
It means Fit to transport goods and passengers and
in a condition that it must withstand the rigors of the flight.
Airworthiness is that an aircraft, its engines, propellers, and
other components and accessories, are of proper design and
construction, and are safe for air navigation purposes, such
design and construction being consistent with accepted
engineering practice and in accordance with aerodynamic
laws and aircraft science. The registered owner or operator of
an aircraft is responsible for maintaining the airworthy
condition
What is TARIFF SYSTEM?
Tariff is a rule or condition of air travel that regulates
and bind the airline and passengers. It was developed and
imposed by air carriers with approval of CAB and provided for
in tickets that are binding although in the nature of contracts
of adhesion
CARE OF BAGGAGE
Air carriers are made liable in the following cases:
1.Baggage of their passengers were either damaged
or its contents were lost or stolen
2.The baggage was transported or diverted to another
place
3.In case of off-loading of baggage
4.When there was delay in the delivery of the baggage
5.If the baggage was lost altogether
What is the DUTY TO PASSENGER in air transport?
Accommodating towards customers, passengers
and general public. Attended with public duty or public interest
What is the rule in Denied Boarding Passengers?
GR: carrier is duty bound to accept and board a passenger
with confirmed tickets if the passenger presents himself
on time in the airline counter in the airport
Operator may deny transportation if passenger:
1. Refuses to comply with the instructions regarding exit
seating restrictions prescribed by the CAAP
2. Has handicap that can be physically accommodated
only by an exit row seat
The burden of proving that a passenger is a “no-show”
rests within the carrier.
When there is Overbooking?
Overbooking not exceeding 10% of the seating
capacity of the aircraft shall not be considered as a deliberate
and willful act of non-accommodation.
INSPECTION OF AIRCRAFT AND CARGO
R.A. 6235 mandates the inspection of aircrafts and
cargo. It prohibits acts which are inimical to civil aviation.
Aircraft companies are authorized to open and investigate
suspicious packages and cargoes in the presence of the
owner or shipper, or his authorized reps. if present. If the
owner, shipper or his/her reps refuse, the airline or air carrier
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is authorized to refuse the loading thereof. Every issued ticket
shall contain a provision which states that the Holder hereof
and his/her hand-carried luggage/s are subject to search for,
and seizure of, prohibited materials and substance. Should
the Holder refuse such search and seizer, s/he shall not be
allowed to board the aircraft. The Director General of the
CAAP (Civil Aviation Authority of the Philippines) is authorized
to have access to all civil aircraft for their inspection.
The Director General shall also have the power to detain civil
aircraft if:
a) The aircraft is NOT airworthy; or
b) The airman may not be qualified or physically or
mentally capable for the flight; or
c) The operation would cause imminent danger to
persons or property on the ground.
R.A. 6235 - AN ACT PROHIBITING CERTAIN ACTS
INIMICAL TO CIVIL AVIATION, AND FOR OTHER
PURPOSES. (pp. 384 – 387)
Under the above law, passenger and goods in
aircrafts are subject to rigorous inspection unlike in buses or
jeepneys. Dangerous goods refer to articles or substances
which are capable of posing a risk to the health, safety,
property, or the environment.
The nine (9) classes of dangerous goods are the following:
1 - Explosives
2 - Gases
3 – Flammable Liquids
4 – Flammable Solids
5 – Oxidizing substances and organic peroxides
6 – Toxic and infectious substances
7 – Radioactive
8 – Corrosive substances
9 – Miscellaneous dangerous substances and articles
CHAPTER 9
THE WARSAW CONVENTION
Does WARSAW CONVENTION have BINDING EFFECT in
Philippines?
The Philippines is a party to the Convention. It
applies to all international transportation of person, baggage
or goods performed by aircraft for hire.
CAB Economic Regulation No. 9, Sec. 14.2 – The WC shall
apply to cases of delayed, lost, and damaged baggage
What is its PURPOSE?
• To protect and promote the international airline
industry
• To accommodate or balance the interests of
passengers seeking recovery for personal injuries
and the interests of air carriers seeking to limit
potential liability
• To provide uniformity of rules governing claims
arising from int’t air travel
CONSTITUTIONALITY
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
The Convention is presumed constitutional by the
SC. The Treaty was joint legislative and executive act. The
presumption is that it was first carefully studied and
determined to be constitutional before it was adopted and
given the force of law in this country.
What is the COVERAGE WC?
The WC applies to INT’L AIR CARRIAGE.
What are the LIABILITY OF CARRIER FOR DAMAGES:
1.Death or injury of a passenger if the accident causing
it took place on board the aircraft or in the course of
its operations; (Art. 17)
2.Destruction, loss or damage to any luggage or
goods, if it took place during the carriage; (Art. 18)
and
3.Delay in the transportation of passengers, luggage or
goods. (Art. 19)
NOTE: The Hague Protocol amended the Warsaw Convention
by removing the provision that if the airline took all necessary
steps to avoid the damage, it could exculpate itself completely
(Art. 20(1)). (Alitalia v. IAC, 192 SCRA 9)
Remember: The said provisions 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 of carrier.
The Convention does not thus operate as an
exclusive enumeration of the instances of an airline’s liability,
or as an absolute limit of the extent of that liability. An
agreement relieving the carrier from liability or fixing a lower
limit is null and void. (Art. 23) Carrier not entitled to the
foregoing limit if the damage is caused by willful misconduct
or default on its part. (Art. 25)
China Airlines vs. Daniel Chiok:
The ticket-issuing airline acts as principal in a contract
of carriage and is thus liable for the acts and the
omissions of any errant carrier to which it may have
endorsed any sector of the entire, continuous trip.
What is Place of Destination as defined in the convention?
Within the meaning of the Warsaw Convention, is
determined by the terms of the contract of carriage, or
specifically the ticket between the passenger and the carrier.
It is the destination and not an agreed stopping place that
controls for the purpose of ascertaining jurisdiction under the
Convention. (Case: Santos III vs. Northwest Orient Airlines
and CA)
What is the MEANING OF INTERNATIONAL
TRANSPORTATION?
“International transportation” means any
transportation in which the place of departure and the place of
destination are situated either:
1) within the territories of two High Contracting
Parties regardless of whether or not there be a
break in the transportation or transshipment, or
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2) within the territory of a single High Contracting
Party, if there is an agreed stopping place within a
territory subject to the sovereignty, mandate or
authority of another power, even though that power
is not a party to the Convention.
PERIOD COVERED BY INT’L TRANSPORTATION
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. It does not cover any transportation by
land, sea, performed outside an airport.
WHEN THE INT’L CARRIER IS LIABLE?
With respect to passengers, the carrier is liable when
the injury was inflicted:
1) On board the aircraft;
2) In the course of any of the operations of embarking;
3) In the course of disembarking; or
4) When there was or because of delay.
• With respect to baggage or goods, when the damage
occurred:
1) During air transportation; or
2) When there is delay.
LIMIT OF LIABILITY
1. Passengers - limited to 250,000 francs;
except: agreement to a higher limit
2. Goods and checked-in baggage - 250 francs/kg •
except: consigner declared its value and paid a
supplementary sum, carrier liable to 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 (Liability was increased to 1000
by The Guatemala Protocol but the SC that such is
still ineffective)
MONTREAL AGREEMENT AND C.A.B. RULES ON LIMIT
OF LIABILITY
Sec. 15, Economic Regulation No. 9 of the CAB
…For an INT’L CARRIAGE PEFORMED UNDER THE
1966 MONTREAL INTER-CARRIAGE AGREEMENT
WHICH INCLUDES A POINT IN THE U.S.A. AS A POINT
OF ORIGIN, A POINT OF DESTINATION OR AGREED
STOPPING PLACE, the limit of liability for each passenger
for death, wounding or other bodily injury shall be the sum
of Seventy-Five Thousand Dollars ($75, 000.00) inclusive
of legal fees and costs, PROVIDED, in the case of a claim
brought in a state where a provision is made for a separate
award for legal fees and costs, the limit shall be the sum
of Fifty-Eight Thousand U.S. Dollars ($58, 000), exclusive
of legal fees and costs.
For DOMESTIC FLIGHTS, the compensation shall
be based on the stipulated amount in the relevant
convention which governs int’l flights, the same to be given
in Phil. Peso denominations.
The liability under the provision is independent of the
negligence of the carrier. Notice to the passengers
regarding the limit is required under the agreement. The
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
Agreement is APPLICABLE by operation of law even to
non-signatory inter-line carriers (like the Phils.) that
perform services in a sector of an over-all journey to which
the agreement is applicable.
TARIFF LIMITATIONS
Doctrine laid down by the SC in British Airways v. CA
regarding tariff limitations:
“An air carrier is NOT liable for the loss of baggage in
an amount in excess of the limits specified in the tariff
which was filed with the proper authorities, such tariff
being binding on the passenger regardless of the
passenger’s lack of knowledge thereof or assent
thereto.”
What are DEFENSES AGAINST LIMIT OF LIABILITY?
THE LIMIT OF LIABILITY IS NOT APPLICABLE IN
THE CASES OF:
a) Willful misconduct
3 Essential Elements for a Claim of Willful Misconduct
to be successful:
1. Intentional Act or Omission done with
conscious awareness that such an act or
omission was wrongful;
2. Awareness of the probable consequences
of an act or omission; and
3. Causal relationship between the act or
omission and the injury sustained
E.g. If a plane was lost without a trace, there is no willful
intention because there is no proof of the act or omission
or the proximate cause of the accident.
b) Gross negligence
Gross Negligence amounts to bad faith or
willful misconduct. There is GN if the carrier lost
baggage not just once but twice which emphasized
the wanton negligence and lack of care on the part
of the carrier.
c) Absence of Ticket
The carrier MUST deliver a passenger
ticket which contains all particulars regarding safety
and that the transportation is subject to the Warsaw
Convention and whatnot. Otherwise, the carrier is
subjected to unlimited liability if it accepts
passengers without a ticket having been delivered.
d) Absence of baggage check
The absence of a baggage check deprives
the carrier of its right to invoke the limited liability
provision of the Warsaw Convention. The carrier
cannot capitalize on the limited liability clause under
Article 22 (2) of the Convention.
e) Waiver on the part of the carrier
This occurs when the carrier was not able
to timely raise objections during the trial when
questions and answers regarding the actual claims
and damages sustained by the passenger were
asked.
f) Estoppel on the part of the carrier
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The Court ruled in PAL vs CA that a carrier
may be estopped from claiming the benefit of the
provision on limited liability as when Petitioner is
estopped from blaming private Respondent for not
declaring the value of the cargo shipped and which
would have otherwise entitled her to recover a higher
amount of damages.
What is TORT LIABILITY?
A complaint for quasi-delict can still be filed even if
the filing is beyond the prescriptive period provided for under
the Convention so long as it is within the prescriptive period of
four (4) years under the Civil Code.
What are the ACTION FOR DAMAGES?
1. Condition precedent
A written complaint must be made within:
- 3 days from receipt of baggage
- 7 days from receipt of goods - in case of delay,
14 days from receipt of baggage/goods, If
otherwise the action is barred except in case of
fraud on the part of the carrier. (Art. 26)
2. Jurisdiction – governed by domestic law
3. Venue – at the option of the plaintiff:
a. court of domicile of the carrier;
b. court of its principal place of business;
c. court where it has a place of business
through which the contract has been made;
d. court of the place of destination. (Art. 28)
4. Prescriptive period – 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation stopped.
(Art. 29)
NOTE: It is an ABSOLUTE BAR TO SUIT IF FILED
BEYOND 2 yrs.
What is the Rule in case of various successive carriers?
a. In case of transportation of passengers – the action
is filed only against the carrier in which the accident
or delay occurred unless there is an agreement
whereby the first carrier assumed liability for the
whole journey.
b. In case of transportation of baggage or goods. the
consignor can file an action against the first carrier
and the carrier in which the damage occurred ii. 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. (Art. 30)
Nota Bene: COGSA/WARSAW applies to foreign vessels
or airplane or international travel. Code of Commerce
applies to inter-island or domestic travel.
WHEN CONVENTION NOT APPLICABLE?
1. If there is willful misconduct on the part of the
carrier’s employees. The Convention does not
regulate, much less exempt, carrier from liability for
damages for violating the rights of its passengers
under the contract of carriage (PAL v. CA, 257
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
SCRA 33). --- if the damage is similarly caused by
any agent of the carrier acting within the scope of
his employment
2. When it contradicts public policy;
3. If the requirements under the Convention are not
complied with.
What is SUCCESSIVE CARRIERS?
Transportation to be performed by several
successive air carriers shall be deemed to be one undivided
transportation, if it has been regarded by the parties as a
single operation, whether it has been agreed upon under the
form of a single contract or of a series of contracts, and it shall
not lose its international character merely because one
contract or a series of contracts is to be performed entirely
within a territory subject to the sovereignty, suzerainty,
mandate, or authority of the same High Contracting Party.
(Art. 1)
NOTE: Warsaw prevails over the Civil Code, Rules of
Court and all laws in the Philippines since an
international law prevails over general law.
What is the LIABILITY OF AGENT?
The Agent is liable for its own negligent acts or
omission in the performance of its duties.
FORMALITIES
Articles 1-16 of the Warsaw Conventions (pp. 414 –
419) provide the basic contents of the Passenger Ticket, the
Baggage Check and the Air Way bill. Non-compliance with the
formalities may result in the non-application of the limit. Of
liability
CHAPTER 10
MARITIME LAW
GENERAL CONCEPTS
Maritime Law is the system of laws which particularly
relates to the affairs and business of the sea, to ships, their
crews and navigation and to marine conveyance of persons
and property
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)
REAL AND HYPOTHECARY NATURE OF MARITIME LAW
Philippine Shipping Company, et al. vs. Francisco Garcia
Vergara
• That which distinguishes the maritime from the civil
law and even from the mercantile law in general is
the real and hypothecary nature of the former
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• Evidence of this “real “nature of maritime law:
(1) The limitation of the liability of the agents to
the actual value of the vessel and the freight
money
(2) The right to retain the cargo and the
embargo and detention of the vessel even
cases where the ordinary civil law would not
allow more than a personal action against
the debtor or person liable
• This repeals the civil law to such extent that, in
certain cases where the mortgaged property is lost
no personal action lies against the owner or agent
of the vessel
• Two reasons why it is impossible to do away with
these privileges:
(1) The risk to which the thing is exposed
(2) The real nature of maritime law, exclusively
real, according to which the liability of the
parties is limited to a thing to which is at
mercy of the waves
Aboitiz Shipping Corporation vs. General Accident Fire and
Life Assurance Corporation, Ltd.
• The real and hypothecary nature of maritime law
simply means that the liability of the carrier in
connection with losses related to maritime
contracts is confined to the vessel, which is
hypothecated for such obligations or which stands
as the guaranty for their settlement
• Purpose: It was designed to offset such adverse
conditions and to encourage people and entities to
venture into maritime commerce despite the risks
and prohibitive cost of shipbuilding
• Thus, the liability of the vessel owner and agent
arising from the operation of such vessel were
confined to the (1) vessel itself, (2) its equipment,
(3) freight, (4) and insurance if any, which limitation
served to induce capitalists into effectively
wagering their resources against the consideration
of the large profits attainable in trade. Real – similar
to transactions over real property where to effect
against third persons, registration is necessary.
Hypothecary – the liability of the owner of the value
of the vessel is limited to the vessel itself
STATUTORY PROVISIONS
Article 837, 587, 590 and 643 – provide for limited liability
of shipowner.
Art. 837: Refers to the civil liability incurred by the ship
owner: liability limited to value of the vessel +
appurtenances + freightage earned during voyage
Art. 643: vessel and cargo 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 both, should be saved,
the crew engaged on wages, including the captain,
shall retain their rights on the salvage, so far as
they go, on the remainder of the vessel as well on
the amount of the freightage of the cargo saved; but
sailors who are engaged on shares shall not have
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
any right whatsoever on the salvage of the hull, but
only the portion of the freightage saved. If they
should have worded 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. 587: ship agent may exempt himself of the civil
liabilities for the indemnities in favor of third
persons by abandoning vessel with all equipment
and freight it earned during voyage
Art. 590: co-owners civilly liable in proportion to their
interest and may exempt liability by abandonment
of the part of the vessel belonging to him
What is the LIMITED LIABILITY RULE?
the liability of a shipowner for damages in case of
loss is limited to the value of his vessel.
• No vessel, no liability.
• The civil liability for collision is merely co-existent with
the interest in the vessel; if there was total loss,
liability is also extinguished.
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.
Monarch Insurance Co., Inc. vs. Court of Appeals
The total destruction of the vessel extinguishes
maritime liens because there is no longer any res to
which it can attach. This doctrine is based on the real
and hypothecary nature of maritime law.
Note: Since the Civil Code contains no provision regulating
liability of shipowners or agents in the event of total
loss or destruction of the vessel, Article 587 of the
Code of Commerce governs.
Article 837, 587 and 590 of Code of Commerce cover only:
1. Liability to third persons
2. Acts of the captain
3. Collisions
What are the EXCEPTIONS TO THE LIMITED LIABILITY
RULE?
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
(NEGLIGENCE)
GR: Shipowner is liable for the negligence of the captain
in collision cases. The liability is limited to value of
the vessel.
• Limited liability rule applies if the captain or
the crew caused the damage or injury as
when unseaworthiness of the vessel was
caused by the negligence of the captain or
crew during the voyage
• However, if the failure to maintain the
seaworthiness of the vessel can be ascribed
to the shipowner alone or the shipowner
concurrently with the captain, then the
limited liability principle cannot be invoked -
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-- LIABILITY FOR THE DAMAGES IS TO
THE FULL EXTENT (ex. Overloading,
unseaworthiness even at the time of
departure)
2. Where the vessel is insured (INSURANCE)
• Limited liability rule does not apply to
insurance claims
Vasquez vs. CA
The total loss of the vessel did not extinguish the
liability of the carrier’s insured - Despite the loss of the
vessel, therefore, its insurance answers for the
damages that a shipowner or agent, may be held liable
for by reason of the death of its passengers.
3. In the workmen’s compensation claims (WORKER’S
COMPENSATION)
• The provisions of the Code of Commerce
have no room in the application of the
Workmen’s Compensation Act which seeks
to improve, and aims at the amelioration of,
the condition of laborers and employees
• 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 • Liability under the
Workmen’s compensation Act, even if the
vessel was lost, is still enforceable against
the employer or shipowner.
4. Expenses for repairs and provisioning of the ship prior
to the departure thereof
5. The vessel is not abandoned (NO ABANDONMENT)
• Abandonment of the vessel, its
appurtenances and the freightage is an
indispensable requirement before the
shipowner or ship agent can enjoy the
benefits of the limited liability rule. If the
carrier does not want to abandon the vessel,
he is still liable even beyond the value of the
vessel
• The only instance where abandonment is
dispensed with is when the vessel was
entirely lost. In such case, the obligation is
extinguished.
• Only shipowner and ship agent can make
an abandonment
What is the PROCEDURE FOR ENFORCEMENT?
Aboitiz Shipping Corporation vs. General Accident Fire and
Life Assurance Corporation, Ltd.
Rights of the parties to claim against an agent or owner
of vessel may be compared to those of creditors
against an insolvent corporation whose assets are not
enough to satisfy the totality of claims as against it. -
Creditors must limit their recovery to what is left in the
name of the corporation - In the sinking of a vessel, the
claimants or creditors are limited in their recovery to
the remaining value of accessible assets. In the case
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
of lost vessel, these assets are the insurance proceeds
and pending freightage for the particular voyage
What is PROTESTS?
It is the written statement by the master of a vessel
or any authorized officer, attested by proper officer or a notary,
to the effect that damages has been suffered by the ship
A protest is required under the following cases:
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 believe that the cargo has suffered
damages or averages
4. Maritime collisions
When is it not required?
1. When it does not fall under the four cases mentioned
above
2. When what is involved is not a vessel
ADMIRALTY JURISDICTION (RTC)
Section 19 (3) of BP 129 as amended by RA 7691
(3) In all actions in admiralty and maritime jurisdiction where
the demand or claim exceeds 300, 000 or in Metro manila,
where such demand or claim exceeds 400,000. - If less, then
MTC.
3 concepts:
1. REAL AND HYPOTHECARY - The Supreme court did
not explain the literal meaning of it.
Real: refers to the risk in maritime that’s why there are
privileges for the shipowner. Risks are certain to
happen –
Hypothecary: remember guaranty and collateral which
is the vessel. For the particular voyage, the
guaranty is the vessel wherein if the vessel is lost,
the shipowner no longer has the liability
2. LIMITED LIABILILTY RULE - no literal explanation
Limited: it means that the liability is limited to the value
of the vessel
Liability: assumption that the shipowner is liable for the
losses. There are no valid defenses that shipowner
can invoke to escape liability. Same concept with
1479. The difference is that there is a fixed amount
and there is qualification
Under the limited liability rule – there is no fixed amount
but amount is confined on the vessel
Is this a right to limit the liability?
It is a right that only shipowner can exercise
How shall it be exercised?
By way of pleading. But do not follow the
way it was filed in Yangco. Here it was after judgment
that the shipowner sought to abandon the ship to
abandon liability. But right now, it is a matter of
procedure. To limit liability by abandoning the vessel;
IF it is a matter of procedure, check the rules of civil
procedure
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When does shipowner inform the court the right to limit
liability?
in a pleading and normally in an answer. It
will be raised as a defense. If shipowner cannot
allege, then that defense is deemed waived.
Therefore, you cannot seek abandonment after
judgment was been rendered.
Yangco vs. Lacerna
Even when the captain was aware of the typhoon
and the vessel capsized, The SC upheld limited
liability
Chua Hek Kong
There being no exceptions, the court upheld limited
liability
The more critical issue is on the EXCEPTIONS in the
Limited Liability Rule:
1. workmen’s compensation (Abueg case: the
repairs constitute maritime lient)
2. insurance coverage---
If the vessel is lost in the course of voyage and it is
insured, is it automatic that the limited liability rule does
not apply?
No. In Vasquez vs. CA. The Court stated
that if the vessel is insured, the insurance proceeds
shall answer the credit). If the plaintiff was injured or
heirs will file action from insurance company, and
since shipowner cannot avail of limited liability, this is
not advisable to the plaintiff because it has no privity
of contract with the insurance company
When does the insurance argument come in?
only when the shipowner will bring the
insurance company to the case filed by the plaintiff—
by way of third party complaint. Once insurance
company is impleaded then this can be used: that the
owner cannot avail of limited liability. But no
shipowner will ever implead the insurance. Because
they will be the one who will claim the insurance
without telling the plaintiffs. In the case, there is no
proof that the vessel is insured. Even if we know
outside court, it is insured because in the court, there
is no proof that the vessel is insured. Court will not
identify evidence not properly identified and recoded
in court.
Is it really an exception in its strict sense?
Not entirely.
What is the implication if you properly invoke the
Limited Liability Rule?
The plaintiff cannot avail beyond the value
of the vessel. If not apply – plaintiff will recover more
than the value of vessel subject to rules on claiming
of damages.
But if vessel is covered with insurance, does this mean
that plaintiff can recover to the amount applied?
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
No, they can only recover until the coverage
of the insurance proceeds.
NEGLIGENCE - common carrier is presumed
negligent if common carrier. However, this does not
apply when there is an invocation on limited liability. (in
all cases except MONARCH vs. CA) --- the rest of the
case, the court has found negligence based on the
facts presented. You cannot invoke presumption of
negligence so that limited liability rule will not apply.
Monarch _-- SC: since there is a presumption of
negligence then LLR will not apply. But SC also said
that if LLR is invoked, the initial burden to invoke
negligence shifts to the shipowner. They should prove
that there is no privity or knowledge on the negligence
of the ship captain.
What is the relationship of Civil Code and the Limited
Liability Rule?
There is none. Under 1766 in all matters not
provided by Civil Code, the Code of Commerce or
Special law will apply. There is no rule in Civil Code
in limited liability rule thus Code of Commerce will
apply. (But in the Monarch case, this was not
applied--- all the negligence was related to the
absence of exercising extraordinary diligence)
Note: that in the subsequent cases, Consolidated of
Aboitiz case: there were findings of facts of the negligence
of Aboitiz. The point is when it comes to Ltd. Liability Rule,
the Code of Commerce applies. You cannot invoke
presumption of negligence. In order to refute, petitioner
should prove negligence.
REMINDER: PROVE THE FACTS OF NEGLIGENCE.
There is no presumption.
Loadstar case
The shipowner is aware of the typhoon. There was
insufficient manning – negligent - Captain playing
mahjong – there was negligence. But SC said that
it was negligent because the shipowner did not
prove that it was the first. Supposedly facts are
established in court proceedings and not on
presumption.
3. NO VESSEL, NO LIABILITY
The liability of the shipowner for the losses
is confined to the value of the vessel and the freight,
if any.
What are INSTANCES WHEN MARITIME PROTEST ARE
REQUIRED (Refer above)?
INSTANCES WHEN PROTESTS DO NOT APPLY:
1. NOT based CODE OF COMMERCE AND BASED
ON QUASI-DELICT THEN NOT MARITIME
PROTEST
2. When what was involved is not a vessel
Lopez vs. Duruel:
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the motor boat is not a vessel under Maritime Law
since it is only engaged in bay traffic. A vessel in
maritime law, should be engaged in transporting
goods, persons, or both from one port to another. Since
a vessel is a personal property, it can be mortgaged.
Same concept with mortgage but a different rule - PD
1521:
What about process of extra judicial foreclosure of vessel?
chattel mortgage law should govern
What to remember under PD 1521?
Section 4 registration, non-waiver Section17: priority
of claims.
Are there claims in maritime law over and above preferred
mortgage?
Yes. Look at section 17.
Poliand Industrial case:
The facts show that the proceeds debted from
hardwood was for the modification of the vessel
(extended for vessels benefit), for crew’s wage
CHARACTERISTICS OF MARITIME LIEN:
1. It is a maritime property
2. It travels with the property--- it cannot be
extinguished
3. It is enforceable in an action in rem--- action directed
to the property
Under section 22:
PERSONS AUTHORIZE TO PROCURE REPAIRS
(PRESUMED):
1. Managing agent
2. Ship’s husband --- agent of the vessel
If the mortgagor does not pay:
1. Judicial foreclosure – file actual case and implead
the vessel as party defendant (served to captain or
authorized person); you can ask the court order to
arrest the vessel.
2. Extrajudicial foreclosure - the problem with vessel,
mortgagee is not in possession of the vessel. It is
with the mortgagor, you cannot sell the property not
in your possession.
In PD 1521—the order of arrest can be asked
Grounds to discharge:
1. Irregularly issued
2. Posting of a bond to discharge. The bond to be
posted is double the value of the claim.
Maritime lien on necessaries (5 requisites) *
CHAPTER 11
VESSELS
1. GENERAL CONCEPTS
GR: A vessel or watercraft is defined under PD No. 447 as
any barge, lighter, bulk carrier, passenger ship
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
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,
XPN:
1. Those owned and/or operated by the Armed Forces of
the Philippines and by the Foreign Government for its
Military Purpose.
2. Bancas, sailboat and other water bone contrivance of
less than three tons capacity and not motorized.
Yu Con vs. Ipil:
The word vessel serves to designate every kind of craft
by whatever particular or technical name it may not be
known or which nautical advancements may give it in
the future - The court held that a small vessel used for
the transportation of merchandise by sea and for the
making of voyages from one port to another of these
Islands, equipped and victualed for this purpose by its
owner, is a vessel, within the purview of the Code of
Commerce, for the determination of the character and
effect of the relations created between the owners of
the merchandise laden on it and its owner
• When the mercantile 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.
• Further, 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
• 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.
• 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
• The third book of the code of commerce, dealing
with maritime commerce, was evidently intended
to define laws relative to merchant vessels and
maritime shipping; and as appears from said
code, the vessel intended in that book are such
run by masters having special training with
elaborate apparatus of crew and equipment
indicated in the code.
• Only vessels engaged in what is ordinarily known
as maritime commerce are within the provision of
law conferring limited liability on the owner in
case of maritime disaster.
• Other vessel of minor nature not engaged in
maritime commerce, such as river boats and
those carrying passengers from ship to shore,
must be governed, as to their liability to
passenger, by the provision of the civil code or
other appropriate special provisions of law.
Augusto Lopez vs. Juan Duruelo, et. Al:
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• The code of commerce is not applicable to small craft
which are only subject to administrative (customs)
regulations in the matter of port service and in the
fishing industry
• Only vessels engaged in what is ordinarily known as
maritime commerce are within the provisions of law
conferring limited liability on the owner in case of
maritime disaster
• It is therefore clear that a passenger on a boat like
the Jison, in the case before use, is not required to
make protest as a condition precedent to his right of
action for the injury suffered by him in the collision
described in the complaint – article 835 of the Code
of Commerce does not apply CONSTRUCTION,
EQUIPMENT AND MANNING
The Construction, equipment and manning
of vessel are subject to the rules issued by the
Maritime Industry Authority (MARINA) and consistent
with Article 574 of the Code of Commerce
Article 574. Builders of vessels may employ the
materials and follow, with respect to their
construction and rigging, the systems most suitable
to their interests. Ship owners and seamen shall be
subject to what the laws and regulations of the public
administration on navigation, customs, health, safety
of vessels, and other similar matters.
PERSONAL PROPERTY
Vessels are considered personal property under the
Civil Law. The Code of Commerce likewise expressly
acknowledges the special nature of a vessel as personal
property.
Philippine Refining Company vs. Jargue
• Vessels are personal property although
occasionally referred to as a peculiar kind of
personal property
• They are subject to mortgage agreeably to the
provisions of the Chattel Mortgage Law
• The only difference between a chattel mortgage of
a vessel and a chattel mortgage of other
personality is that it is not now necessary for a
chattel mortgage of a vessel to be noted in the
registry of the register of deeds, but it is essential
that a record of documents affecting the title to a
vessel be entered in the record of the Collector of
Customs at the port of entry
Rubiso and Calixto vs. Rivera:
• Ships or vessels, whether moved by steam or by
sail, partake, to a certain extent, of the nature and
conditions of real property, on account of their
value and importance in the world of commerce
• Transfer of vessels should be in writing and must
be recorded in the appropriate registry
With regard to OWNERSHIP & ACQUISITION
• Vessel may be acquired or transferred by any
means recognized by laws. Thus, vessel may be
sold, donated and may even be acquired through
prescription.
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
• Under the present laws, vessels that are under the
jurisdiction of MARINA can be transferred only with
notice to said administrative agency.
A. Prescription (Code of Commerce)
Article 573. Merchant vessels constitute property
which may be acquired and transferred by any of the
means recognized by law. The acquisition of a vessel
must appear in a written instrument, which shall not
produce any effect with respect to third persons if not
inscribed in the registry of vessels.
The ownership of a vessel shall likewise be
acquired by possession in good faith, continued for
three years, with a just title duly recorded.
In the absence of any of these requisites,
continuous possession for ten years shall be
necessary in order to acquire ownership.
A captain may not acquire by prescription
the vessel of which he is in command.
ARTICLE 575. Co-owners of vessels shall have the
right of repurchase and redemption in sales made to
strangers, but they may exercise the same only within
the nine days following the inscription of the sale in the
registry, and by depositing the price at the same time.
B. Sale (Code of Commerce)
Article 576. In the sale of a vessel it shall always be
understood as included the rigging, masts, stores and
engine of a streamer appurtenant thereto, which at the
time belongs to the vendor.
The arms, munitions of war, provisions and
fuel shall not be considered as included in the sale.
The vendor shall be under the obligation to deliver to
the purchaser a certified copy of the record sheet of
the vessel in the registry up to the date of the sale.
Article 577. If the alienation of the vessel should be
made while it is on a voyage, the freightage which it
earns from the time it receives its last cargo shall
pertain entirely to the purchaser, and the payment of
the crew and other persons who make up its
complement for the same voyage shall be for his
account.
If the sale is made after the vessel has
arrived at the port of its destination, the freightage
shall pertain to the vendor, and the payment of the
crew and other individuals who make up its
complement shall be for his account, unless the
contrary is stipulated in either case.
Article 578. If the vessel being on a voyage or in a
foreign port, its owner or owners should voluntarily
alienate it, either to Filipinos or to foreigners domiciled
in the capital or in a port of another country, the bill of
sale shall be executed before the consul of the
Republic of the Philippines at the port where it
terminates its voyage and said instrument shall
produce no effect with respect to third persons if it is
not inscribed in the registry of the consulate. The
consul shall immediately forward a true copy of the
instrument of purchase and sale of the vessel to the
registry of vessels of the port where said vessel is
inscribed and registered. In every case the alienation
of the vessel must be made to appear with a statement
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of whether the vendor receives its price in whole or in
part, or whether he preserves in whole or in part any
claim on said vessel. In case the sale is made to a
Filipino, this fact shall be stated in the certificate of
navigation.
When a vessel, being on a voyage, shall be
rendered useless for navigation, the captain shall
apply to the competent judge on court of the port of
arrival, should it be in the Philippines; and should it
be in a foreign country, to the consul of the Republic
of the Philippines, should there be one, or, where
there is none, to the judge or court or to the local
authority; and the consul, or the judge or court, shall
order an examination of the vessel to be made.
If the consignee or the insurer should reside
at said port, or should have representatives there,
they must be cited in order that they may take part in
the proceedings on behalf of whoever may be
concerned.
REGISTRATION
• Vessels are now registered through MARINA. It is
a long-standing rule that the person who is the
registered owner of the vessel is presumed to be
the owner of the vessel.
• It is a settled rule that the sale or transfer of the
vessel is not binding on the third person unless the
same is registered.
SHIP'S MANIFEST
• Vessels are required to carry manifest coast-wise
trade.
• A manifest is a declaration of the entire cargo. The
object of a manifest is to furnish custom officers
with list of check against, to inform the revenue
officers what goods are being brought into a port of
the country on a vessel.
• The requirement that a vessel must carry a
manifest is not complied with even if a bill of lading
can be presented. A bill of lading is just a
declaration of a specific cargo rather than the entire
cargo
• Sec 906 of the Tariff and Custom Code provides
that “manifest shall be required for cargo and
passengers transported from one place to another
only when one or both of such place is a port of
entry.”
MORTGAGE
• Since the term personal property includes vessel,
they are subject to mortgage agreeably to the
provisions of the Chattel Mortgage Law.
• Mortgage and other encumbrances over vessels
are governed by the provisions of presidential
decree 1521 (Ship Mortgage Decree of 1978)
OTHER CODE OF COMMERCE PROVISIONS
• The provisions of the Code of Commerce
reproduced hereunder are deemed modified not
only by the Civil Code but also by special laws
SAFETY REGULATIONS
• On February 23, 2000, the Maritime Industry
Authority directed all domestic shipowners and
operators under Memorandum Circular No. 154 to
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
strictly comply with existing Safety-Related
Policies, Guidelines, Rules and Regulations
• Monitoring of compliances shall be undertaken by
the Authority and its Maritime Regional Offices,
together with the needed coordination with the
Philippine Coast Guard The MARINA shall have
the power to inspect vessels and all equipment on
board to ensure compliance with safety standards
CHAPTER 12
SHIP MORTGAGE AND MARITIME LIENS
CODE OF COMMERECE PROVISIONS
Articles 580-584 of the Code of Commerce likewise
deal with preferred credit. Article 580, while providing for the
order of payment of creditors in the event of sale of a vessel,
had been repealed by the pertinent provisions of P.D. 1521,
otherwise known as the Ship Mortgage decree of 1978
What is the MEANING OF PREFERRED MORTGAGE?
A preferred mortgage shall constitute a lien upon the
mortgaged vessel in the amount of the outstanding mortgage
indebtedness secured by such vessel. Upon the default of any
term or condition of the mortgage such lien may be enforced
by the mortgagee by suit in remaining admiralty wherein the
vessel itself may be made a party defendant and be arrested
in the manner as provided in Section 11 of the special law. the
preference is not absolute since there are other claims that
prevail over ship mortgage.
What are the REQUIREMENTS FOR PREFERRED
MORTGAGE?
1. The mortgage is recorded as provided in Section 3
of P.D. 1521
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
ADDITIONAL REQUIREMENTS
1. The mortgage should cover the whole of the vessel
2. The vessel must be of domestic ownership
What is MARITIME LIEN?
It is a special property right in a ship given to a
creditor by law as security for a debt or claim subsisting from
the moment the debt arises with right to have the ship sold
and debt paid out of the proceeds
What is PREFERRED CLAIMS?
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
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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.
The above-enumerated claims are therefore maritime
liens that attaches to the vessel.
What is EXECUTORY CONTRACT DOCTRINE?
A lien does not attach for breach of an executory
contract even though the contract is the type which normally
gives rise to a lien.
PRESCRIPTION AND LACHES
10 years (Civil Code)
MARITIME LIENS FOR NECESSARIES, what are the
REQUIREMENTS?
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 b=necessity for the extension of the
credit
5. The necessaries must be ordered by persons
authorized to contract on behalf of the vessel
a. 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
a. The managing owner
b. Ship’s husband
c. Master
d. Any person to whom the management of
the vessel at the port of supply is
entrusted
What is MARITIME TORT?
Defined as civil wrongs committed on navigable
waters. As a general principle, any conduct which is tortuous
under general law which is connected with the ship or its uses
creates a maritime lien. It includes collision claims and
personal injury claims.
What is SALVAGE LIEN?
Salvage claims may either be one arising ex
contractu or that imposed by Act no. 2616
What is SUBROGATION?
A third person who satisfies the obligation to an
original maritime lienor may claim from the debtor because the
third person is subrogated to the rights of the maritime lienor
over the vessel.
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
Subrogation is the transfer of all the rights of the
creditor to a third person, who substitutes him in all his rights.
WHEN PROCEEDS NOT SUFFICIENT?
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.
TESTS TO DETERMINE THE PRESENCE OF LIEN
1.Law of the place of supply
2.Multiple contract test; factors to consider:
a. Place of the wrongful act
b. Law of the flag
c. Allegiance or domicile of the injured
d. Allegiance of the defendant ship-owner
e. Place of contract
f. Inaccessibility of defendant shipowner
g. Place of contract
h. Inaccessibility of foreign forum
i. Law of the forum
3.Factors provided in restatement of conflicts of law
WHO MAY CONSTITUTE PREFERRED SHIP MORTGAGE?
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
PURPOSE
Must be for financing the construction, acquisition,
purchase of vessels or initial operation of vessels.
FORMAL REQUIREMENTS
The ship mortgage must be recorded or registered,
otherwise the same is void except as to the parties of their heir
and assigns or persons with actual notice. Shall be considered
preferred if no. 3 is complied with
ARREST AND FORECLOSURE
Upon default of the obligor, the preferred ship
mortgaged may be foreclosed in a suit in admiralty. Upon filing
of a person for foreclosure, the Court may order the arrest of
the vessel upon ex parte application duly supported by an
affidavit of a person who knows the facts and upon filing of a
bond
CHAPTER 13
PERSONS WHO TAKE PART IN MARITIME COMMERCE
What is the LIABILITY OF SHIP OWNERS AND SHIP
AGENTS?
The shipowner is the person who is primarily liable
for damages sustained in the operation of vessel. The code of
commerce uses the term Naviero to indicate the person who
is liable.
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What is a SHIP AGENT?
As the person entrusted with provisioning of the
vessel, or who represents her in the port in which she happens
to be. Code of commerce likewise makes the ship agent jointly
and severally liable with the owner. Extent of liability applies
both for breach of contract and extra-contractual obligation
WHEN CAPTAIN ACTS IN EXCESS OF AUTHORITY?
The shipowner and the ship agent are liable in
certain cases even if the captain has exceeded his authority if
the proceeds of an obligation redound to the benefit of the
vessel.
What are the POWERS AND FUNCTIONS OF SHIP AGENT?
The ship agent can enter into contracts to provision
the ship. Hence, he can purchase necessary supplies and fuel
that are necessary for a particular voyage. On the other hand,
representation of the vessel includes the right to represent the
vessel in any action in a court or tribunal.
DISCHARGE OF CAPTAIN AND CREW
Articles 603-608 of the civil code and the provisions
of the Labor code will govern
What are the powers and functions of CAPTAINS AND
MASTERS OF VESSEL?
A captain is a confidential and managerial employee
within the meaning of the above doctrine. A master or captain,
for purposes of maritime commerce, is one who has command
of a vessel. A captain commonly performs 3 distinct roles:
o He is a general agent of the shipowner
o He is also commander and technical director of the
vessel
o He is a representative of the country under whose
flag he navigates
DISCRETION OF CAPTAIN OR MASTER
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.
Liability of captains and masters
Articles 618-621 of the code of commerce
What is PILOTAGE
A pilot in marine law is a person duly qualified, and
licensed, to conduct a vessel into or out of ports, or in certain
waters. In a broad sense, the term “pilot” includes both:
o Those whose duty is to guide vessels into or out of
ports, or in particular waters
o Those entrusted with the navigation of vessels on
the high seas.
MASTER AND PILOT
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
Pilot supersedes the master for the time being in the
command and navigation of the ship, and his orders must be
obeyed in all matters connected with her navigation. He
becomes the master pro hac vice.
SHIPOWNER AND PILOT
In general, a pilot is personally liable for damages
caused by his own negligence or default to the owners of the
vessel, and to third parties for damages sustained in a
collision. Such negligence of the pilot in the performance of
duty constitutes a maritime tort.]
PILOT AND HIS ASSOCIATION
The fact that the pilot is a member of an association
does not make the association jointly and severally liable.
OFFICERS AND CREW OF VESSELS
The complement of a vessel shall be understood as
all the persons on board, from the captain to the cabin boy,
necessary for the management, maneuvers, and service, and
therefore, the complement shall include the crew, the sailing
mates, engineers, stokers and other employees on board not
having specific designations; but it shall not include the
passengers or the persons whom the vessel is transporting.
What is the meaning of MINIMUM SAFE?
It is not enough that the officers manning the
merchant vessel have all the qualifications imposed by the
Philippine Merchant Marine officer’s act and other special laws
or regulations. It is also required that there is sufficient number
of officers and crew that are serving in the vessel.
SECURITY OF TENURE
The labor code provisions apply to officers and crew
of merchant vessels engaged in domestic trade or coastwise
shipping.
Who are the OTHER OFFICERS AND CREW UNDER THE
CODE OF COMMERCE?
SAILING MATE
The second chief of the vessel. Second in
command to the captain
SECOND MATE AND MARINE ENGINEER
Obligations- art 632 of the Code of
commerce
CREW
the captain may make up the crew of his
vessel with such number of men as he may consider
proper (633-648 code of commerce)
SUPERCARGOES
Supercargoes shall discharge on board the
vessel the administrative duties which the ship agent
or the shippers may have assigned to them
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Chapter 14
CHARTER PARTIES
What is a charter party?
It is a contract whereby the entire ship, or some of
the principal part, is let by the owner to a merchant or other
person for a specified time or use for the conveyance of
goods, consideration of payment of freight. It is a contract;
hence, parties are free to stipulate upon such terms and
conditions that would suit their purposes subject to the caveat
that these should not be contrary to law or public policy
Who are the parties in a charter party?
1. Charterer- merchant or a person who desires to
lease ship or vessel owned by another by transport
of his or her goods for commercial purposes or
persons from one port to another
2. Shipowner (SO)
What are the kinds of charter party?
1. bareboat or demise charterer – shipowner leases to the
charterer the whole vessel, transferring to the charterer the
entire command, possession and consequent control over
the vessel’s navigation, including the master and the crew,
who becomes the charterer’s “servants”. Charterer
becomes an owner “pro hac vice”
2. Contract of affreightment – charterer hires the vessel only,
either for a determinate period of time or for a single or
consecutive voyage, with the SO providing for the
provision of the ship, wages of the master and crew, and
expenses for maintenance of the vessel
a. time charter – vessel is leased to a charterer for a
fixed period of time
b. voyage charter – vessel is leased for a single or
particular voyage
What are the requisites to constitute a valid charter party?
1. consent of the contracting parties
2. an existing vessel which should be placed at the
disposition of the shipper
3. the freight
4. compliance with requirements of art 652 of Code of
commerce
(Aticle 652 of the Code of Commerce provides that
the charter party shall contain, among others, the
name, surname, and domicile of the charterer, and if
he states that he is acting by commission, that of the
person for whose account he makes the contract.)
Jurisprudence:
Caltex v. Sulpicio Lines:
There was a voyage charter; collision between MT Vector
(tanker) and Doña Paz (owned by Sulpicio); breach of
contract filed by the passengers’ heirs against Sulpicio; 3rd
party complaint against registered owner of the tanker
including Caltex (that they were negligent and in bad faith
by not seeing to it that the tanker was seaworthy)
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
Issue: WON charterer shall be liable under Maritime Law?
Ruling: Liability cannot be attached to Caltex; the charter
did not affect the business of Sulpicio as a common carrier;
rights and responsibilities of ownership still rested on the
owner
Planters Product v CA
time charter; Planters purchased fertilizers from the US;
voyage to the Philippines; upon arrival, shortage in the
cargo was discovered; filed actions against carrier for
damages (breach of Contract); RTC ruled in favor of the
Planters; Ca reversed & absolved carrier as it was
converted from common carrier to private;
Ruling: It cannot become a private carrier; bareboat
charter can become a private carrier but in contract of
affreightment remains as common carrier (action based on
contract of carriage; presumption of negligence); carrier
was able to rebut the presumption of negligence (result the
inherent character of the fertilizers)
Coastwise Lighterage v. CA
- WON private carrier would convert to a common
carrier; contract of affreightment
- Ruling: reiterated Planters ruling; but was not able to
rebut presumption of negligence; did not exercise EO
diligence (hired unlicensed patron)
Home Insurance v. American Steamship
- case mostly used by the common carrier as defense;
Home Insurance is subrogee (paid SMC of loss
cargo shipped thru American Steamship; no
reference as to what contract but there was a
mention that it was in affreightment
- Ruling: Common Carrier undertaking to carry special
cargo (chartered to special person only) become a
private carrier and stipulation exempting owner from
liability for loss due to the negligence of its agents is
valid;
Shipowner can appoint senior officers for the vessel even if
bareboat contract. But technically it is an affreightment. Most
conflicts will occur if these various principles will have to be
mixed.
The whereabouts of the vessel is important to know the time
for loading and unloading…
Policy – marina
Implementing or enforcement --- Coastguard
What are the two conditions implied in a charter party?
1. seaworthiness (Caltex Phil Case) --- it need not be
written in the charter party
2. --- look at book (ala kaapas)
What is the jurisdiction of admiralty cases?
- depends on the jurisdictional amount
- important element of the contract = the subject
matter of the contract (nature and character)
Jurisprudence:
International Harvester v Aragon:
-involves loss of cargo shipped from LA to Manila;
cargo owner filed an action against common carrier
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-SC said liability of petitioner was predicated upon the
contract of carriage; admiralty would involve all
maritime contract in whatever form and wherever
made.
Macondry v Delgado Brothers
- Delgado was an operator of a pier service; WON
operator exercised its duty in loading and unloading of
cargos; no contract of carriage; obligation was only to
load the to the ship; no application of admiralty
What is freight or freightage?
- price of carriage
- shall accrue according to what is stipulated in the contract
- should there be no stipulation or if it is ambiguous, rules shall
be
a. freight shall begin to run from the day of loading
on the vessel
b. in charters with fixed period, the freight shall
begin to run upon that very day
c. If freight is charged according to weight,
payment shall be made according to gross
weight, including the weight of the containers
What is meant by lay days?
Period of time stipulated for loading and unloading
(provided for in charter party) ; if no lay days provided for in
the charter party, it is understood that the charterer will unload
and discharge cargoes within a reasonable time or with
reasonable diligence.
What is demurrage?
A sum of money due by express contract for
detention of the vessel in loading, beyond time allowed for that
purpose in that charter party; sum of which is usually fixed by
the parties in the charter party; liability for this exists only when
expressly stipulated
What is a deadfreight?
Where the charterer failed to occupy the leased
portion of the vessel, he may thereby be liable by the
shipowner for the deadfreight that occurred
What are the rules as to stipulations in charter parties?
GR: parties are free to stipulate subject to art 1744 t01754 0f
NCC
Art. 1744. A stipulation between the common carrier and the
shipper or owner limiting the liability of the former for the loss,
destruction, or deterioration of the goods to a degree less than
extraordinary diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than
the service rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.
Art. 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy:
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
(1) That the goods are transported at the risk of the
owner or shipper;
(2) That the common carrier will not be liable for any
loss, destruction, or deterioration of the goods;
(3) That the common carrier need not observe any
diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree
of diligence less than that of a good father of a family,
or of a man of ordinary prudence in the vigilance over
the movables transported;
(5) That the common carrier shall not be responsible
for the acts or omission of his or its employees;
(6) That the common carrier's liability for acts
committed by thieves, or of robbers who do not act
with grave or irresistible threat, violence or force, is
dispensed with or diminished;
(7) That the common carrier is not responsible for the
loss, destruction, or deterioration of goods on
account of the defective condition of the car, vehicle,
ship, airplane or other equipment used in the contract
of carriage.
Art. 1746. An agreement limiting the common carrier's liability
may be annulled by the shipper or owner if the common carrier
refused to carry the goods unless the former agreed to such
stipulation.
Art. 1747. If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual
route, the contract limiting the common carrier's liability cannot
be availed of in case of the loss, destruction, or deterioration
of the goods.
Art. 1748. An agreement limiting the common carrier's liability
for delay on account of strikes or riots is valid.
Art. 1749. A stipulation that the common carrier's liability is
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is
binding.
Art. 1750. A contract fixing the sum that may be recovered. by
the owner or shipper for the loss, destruction, or deterioration
of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
Art. 1751. The fact that the common carrier has no competitor
along the line or route, or a part thereof, to which the contract
refers shall be taken into consideration on the question of
whether or not a stipulation limiting the common carrier's
liability is reasonable, just and in consonance with public
policy.
Art. 1752. Even when there is an agreement limiting the
liability of the common carrier in the vigilance over the goods,
the common carrier is disputably presumed to have been
negligent in case of their loss, destruction or deterioration.
Art. 1753. 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.
Art. 1754. The provisions of Articles 1733 to 1753 shall apply
to the passenger's baggage which is not in his personal
custody or in that of his employee. As to other baggage, the
rules in Articles 1998 and 2000 to 2003 concerning the
responsibility of hotel-keepers shall be applicable.
ART. 653. if the cargo should be received without the charter
party having been signed, the contract shall be understood as
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executed in accordance with what appears in the bill of lading, 1. On the portion of the vessel he owns, provided no
the sole evidence of title with regard to the cargo for money has been previously borrowed on the whole
determining the rights and obligations of the ship agent, vessel, nor exists any other kind of lien or obligation
captain and charterer chargeable against her.
2. When he is permitted to do so, and he must
- If there is charter party or bill of lading (BOL) = no contract at necessarily state what interest he has in the vessel.
all; but according to Blanco, if there is delivery and receipt of
cargo combined with the GF and mutual consent = contract
present, better than BOL
What are the contents of the loan contract?
Chapter 15
LOANS ON BOTTOMRY AND RESPONDENTIA 1.kind, name and registry of the vessel;
2.name, surname and domicile of the captain;
3.names, surnames and domiciles of the borrower and
What is a loan on bottomry? the lender;
4.amount of the loan and the premium stipulated;
A loan made by shipowner or ship agent guaranteed 5.time for repayment;
6.goods pledged to secure repayment;
by vessel itself or portion thereof and repayable upon arrival
7.voyage during which the risk is run (Art.721)
of vessel at destination.
Who may contract?
What is a loan on respondentia?
1. Bottomry – the ship owner or ship agent; outside of
A loan taken on security of the cargo/goods laden on the residence of the owners, the captain.
a vessel, and repayable upon safe arrival of cargo at 2. Respondentia – only the owner of the cargo
destination.
What are the differences between a loan on
What are the common elements of loans on bottomry and bottomry/respondentia and an ordinary loan?
respondentia?
BOTTOMRY/ ORDINARY LOAN
1.Exposure of security to marine peril; RESPONDENTIA
2.Obligation of the debtor conditioned only upon safe 1. Not subject to Usury Law 1. Subject to Usury Law
arrival of the security at the point of destination.
2. Liability of the borrower is 2. Not subject to any
contingent on the safe arrival of contingency
What are the requisites of a Loan on Bottomry/Respondentia:
the vessel or cargo at
destination
1. Shipowner borrows money for use, equipment or repair
3. The last lender is a preferred 3. The first lender is a
of vessel
creditor preferred creditor
2. For a definite term and with extraordinary interest
called premium
4. Must have a collateral 4. May or may not have
3. Secured by pledged of vessel or portion thereof in the
collateral
case on loan on Bottomry; or pledge of goods in case
of Respondentia 5. Collateral is the vessel or 5. Maybe property, real or
4. Loan repayment depends or conditioned on the safe cargo subject to maritime risk personal
arrival of goods for respondentia and obligation to 6. Must be in writing 6. Need not be in writing but
repay is extinguished if pledged goods are lost interest shall not be due
(Respondentia) unless expressly stipulated
5. Obligation to repay is extinguished if vessel is lost due in writing
to specified marine perils in the course of voyage or 7. To be binding on third person 7. Need not be registered
within limited time (Bottomry) must be recorded in the registry
of vessels of port of registry of
What are the forms of a loan on bottomry/respondentia? the vessel
8. Loss of collateral 8. Does not extinguished if
 May be executed by means of: extinguishes the same there is a loss of the
collateral (if any)
1.public instrument
2.policy signed by the contracting parties and the
broker taking part therein What are the consequences of loss of effects of the loans?
3.private instrument (Art. 720)
1. If the effects of loans be lost due to accident of the sea
May a captain contract loans on bottomry/respondentia? during the time, and on the occasion of the voyage which has
been designated in the contract and it has been proven that
GR: The captain cannot contract loans on respondentia the cargo was on board, the lender loses the right to institute
secured by the cargo, and should he do so, the contract shall the action which would pertain to him, except when the loss
be void. Neither can he borrow money or Bottomry for his own was:
transactions.
1. caused by inherent defect of the thing
EXCEPTIONS - He can contract a loan: 2. through fault or malice of the borrower
3. through barratry on the part of the captain
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
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4. caused by damages suffered by the vessel as a
consequence of being engaged in a contraband
5. loaded the goods on a vessel different from that
designated in the contract unless the change was
caused by force majeure
2. 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.
3. In case of shipwreck, the amount for payment of the loan
shall be reduced 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
Preference:
1. loans made during the voyage over those made
before the clearing of the vessel: graduated in the
inverse order of their dates
2. loans for the last voyage over prior ones
3. if several loans have been made at the same port of
arrival under stress and for the same purpose, should
be pro rata
General provisions in contracts will govern
Basic provision you should not forget:
1. there should be a marine risk
2. the condition that the vessel or the goods has
perished then the right of the lender to collect
everything as well as stipulated interest is extinguished
(not sure if there are other more… basin ala ko kaapas)
What is a bottomry?
- It may refer to the vessel
- The bottom or the hull or the kill of the vessel can be
pledged in this case
- The whole vessel can be a subject of a security or
collateral
- PD. 1521: (is this different) --- loan is the principal,
mortgage is the accessory.
- The contract of bottomry is principal, the mortgage
under pd 1521 is merely a security
- In pd 1521 under section 4 it is a requirement that the
whole of the vessel must be mortgaged (no
jurisprudence on this matter whether a part of the
vessel can be mortgaged)
- In bottomry the whole or the part of the vessel can be
the subject
- IF the part of the vessel can be pledged, is it
necessary that there should be goods? No. no need
for goods.
What is respondentia?
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
- The vessel should have goods. The goods must be
laden in the vessel
- Is it necessary that the boat is on voyage? The vessel
must be in the actual course of voyage because this
is the objective of the law. Because if the vessel is
docked in the port the owner can simply obtain loans.
And besides there is no risk when the vessel is
docked (but no jurisprudence)
Chapter 16
AVERAGES
What are the accidents in maritime commerce?
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
What is an average?
An extra-ordinary or accidental expense incurred
during the voyage in order to preserve the cargo, vessel or
both; and 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. (Art. 806)
What are the classes of averages?
A. Particular or Simple Average
B. Gross or General Average
What is a Particular or Simple Average?
Refers to the damage or expenses caused to the
vessel or cargo that did not inure to common benefit, and
borne by respective owners. (809). Accordingly, the owner of
the goods which gave rise to the expense or suffered the
damage shall bear this average. (Art. 810) Res perit domino
applies. If the vessel or goods are hypothecated by loan on
bottomry and respondentia, the lender shall bear the loss in
proportion to his interest
Examples: see article 809 of the code of commerce
What are the rules on averages?
1.Average is defined as damage deliberately caused or an
expense deliberately incurred due to a marine peril and
which has resulted in saving both vessel and cargo or
only the vessel or cargo.
2.Where both vessel and cargo are saved, it is general
average; where only the vessel or only the cargo is
saved, it is particular average.
3.The person whose property has been saved must
contribute to reimburse the damage caused or
expense incurred if the situation constitutes general
average.
4.Does not apply when the common carrier is negligent.
What is a Gross or General Average?
Damage or expenses deliberately caused in order to
save the vessel, its cargo or both from real and known risk.
(Art. 811) All the persons having an interest in the vessel and
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the cargo therein at the time of the occurrence of the average
shall contribute to satisfy this average. (Art. 812)
What are the requisites of a Gross or General Average?
(Magsaysay vs. Agan)
1. common danger TO Both vessel and cargo
2. deliberate sacrifice
3. successful saving
4. compliance with the proper steps
What is meant by Common danger?
Means both the ship and the cargo, after has been
loaded, are subject to the same danger, whether during the
voyage, or in the port of loading or unloading, that the danger
arises from the accidents of the sea, disposition of authority,
or faults of men, provided that circumstances producing the
peril should be ascertained and imminent or may rationally be
said to be certain and imminent. When the measure of
precaution adopted solely and exclusively for the preservation
of the vessel from the danger of seizure or capture and not for
the common safety is not considered as common danger.
What is meant by deliberate sacrifice?
Voluntary sacrifice of a part for the benefit of the
whole in order to justify the average contribution
* voluntary jettison- the casting away of some portion of the
associated interests for the purpose of avoiding the
common peril from the whole to a particular portion of those
interests
The goods on board refer to in jettison should be
proven by means of bill of lading and with regards to those
belonging to vessel by means of inventory prepared before the
departure.
What are the 2 cases where there can also be general
averages even if the sacrifice was not made during the
voyage?
a. where the sinking of the vessel is necessary to
extinguish a fire in a port, roadstead, creek or bay
b. where cargo is transferred to lighten the ship on
account of a storm to facilitate entry into a port
Art. 816: in order that the goods jettisoned may be included in
the gross average and the owners entitled to indemnity – it is
necessary that the cargo’s existence on board be proven by a
bill of lading; and with regard to those belonging to the vessel,
by means of an inventory prepared before departure.
Art. 817: if in lightening of a vessel on account of a storm to
facilitate its entry to a port or roadstead, part of the cargo
should be transferred to barges or lighters and be lost, the
owner of the said part is entitled to indemnity as if the loss
originated from a gross average, the amount being distributed
between the vessel and cargo from which it came.
If on the contrary the merchandise transferred should be
saved and the vessel should be lost, no liability may be
demanded of the salvage.
Art. 818: if, as a necessary measure to extinguish a fire in a
port, roadstead, creek, or bay, it should be decided to sink any
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
vessel, this loss shall be considered gross average, to which
the vessels saved should contribute.
Note: the loss or damage sustained by cutting away wreck or
parts of the ship which have been previously carried away or
effectively lost by accident shall not be made good as general
average.
Do the Sacrifice need be successful?
Yes. no general contribution can be demanded if the
vessel and other cargo that are sought to be saved were in
fact not saved (art. 860). Owners of the goods saved shall be
liable for the indemnification of those jettisoned, lost or
damage. Hence when the sacrifice was not successful in
saving the ship, there will be no general contribution
What are the procedure for recovery? (in compliance with
legal steps) (Art. 813-814)
1. There must be a resolution of the captain, adopted after
a deliberation with the other officers of the vessel and
after hearing all persons interested in the cargoes. If the
latter disagree, the decision of the captain should prevail
but they shall register their objections.
2. The resolution must be entered in the logbook, stating
the reasons and motives for the dissent, and the
irresistible and urgent causes if he acted in his own
accord. It must be signed, in the first case, by all persons
present in the hearing. In the second case, by the captain
and all the officers of the vessel.
3. The minutes must also contain a detail of all the goods
jettisoned and those injuries caused to those on board.
4. The captain shall deliver it to the maritime judicial
authority of the first port he may make, within 24 hours
after his arrival, and to ratify it immediately under oath.
What is the order of goods to be cast overboard in case of
jettison?
1. those which are on the deck, preferring the heaviest one
with the least utility and value;
2. those which are below the upper deck, beginning with the
one with greatest weight and smallest value. (Art. 815)
What are the examples of General Average?
Read Art 811 of the Code of Commerce
By Whom Borne?
Shall be borne by those who benefited from the
sacrifice; the shipowner and the owner of the cargoes that
were saved
Who may be liable for contribution aside from the shipowner
and the owner of cargoes saved?
a. insurers (Insurance Code of the Philippines)
- they are obliged to pay for the indemnification of the
gross average provided that the liability shall be
limited to the proportion of contribution attaching to
his policy value where this is less than the
contributing value of the thing insured
b. lenders of bottomry and respondentia (Code of
Commerce)
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-obliged to pay in proportion to their respective interest,
the general average which may take place in the
goods which the loan is made
Who is entitled to indemnity?
Owner of the goods which were sacrificed is entitled to receive
the general contribution except:
1. goods carried on desk unless the rule special
law or customs of the place allow the same
2. goods that are not recorded in the books or
records of the vessel
3. fuel of the vessel if there is more than
sufficient fuel for the voyage
Jurisprudence:
American Home Insurance v. CA
Art 848 states that claims shall not be admitted if they
do not exceed 5% of the interest which the claimant
may have in the vessels or cargo if it is general
average, and 1% of the goods damaged if particular
average… deducting in both cases the expenses of
appraisal, unless there is an agreement to the contrary.
It is clear that the damage of the cargo is particular
average since the loss is less than 1% to the value of
the cargo and there appears to be no allegations as to
any agreement defendants and consignee of the
goods to the contrary, by express provision of law,
plaintiff is barred from suing for recovery.
YORK-ANTWERP RULES ON DETERMINING LIABILITY
FOR CONTRIBUTION ON AVERAGES
 Under the rule, deck cargo is permitted in coastwise
shipping but prohibited in overseas shipping.
1. If deck cargo is located with the consent of the shipper on
overseas trade, it must always contribute to general
average, but should the same be jettisoned, it would not
be entitled to reimbursement because there is violation of
the Y-A Rules.
2. If deck cargo is loaded with the consent of the shipper on
coastwise shipping, it must always contribute to general
average and if jettisoned would be entitled to
reimbursement.
- may also be used to solve controversies where no
provision of the code of commerce is in point
because the said rules embody the custom of
maritime states
AVERAGES
- the same concept that was existing in medieval times can be
applied at present
Relevance of averages (take note these ex. Connected to
expenses under 806)
under 806 --- averages are:
o Extraordinary expenses – 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. ---
assuming the engine of the vessel was
defective, can that be considered an
average? YES. (question now if it is
particular or general)
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
o Damages or deterioration suffered – refer to
the physical feature or attribute of the
goods.
- these two are different
What is the distinction between particular and general
averages?
Hernandez – averages are losses. If there is a loss incurred,
the loss will be shouldered on where it falls. (ex. If you have
goods transported from origin to destination but in process it
was damaged by sea water, the shipper or owner will shoulder
the loss. What will shipper do to recover loss? If insured, he
will go after insurance. Insurance then files action against
common carrier due to negligence) --- if general average,
there is special circumstance and the loss will not be
shouldered on where it falls but will be shouldered
proportionately by persons who have benefited the
circumstance. If there is no special circumstance, it is a
particular or simple average --- the owner of the vessel will be
the one who will shoulder the loss.
In case of the negligence of the captain, the owner of
the vessel will shoulder. But if there is special circumstance,
the loss will be shouldered proportionately by those who
benefited.
Jurisprudence (standard oil case):
The ship captain will not release goods to the shipper
unless the shipper will contribute their share. The issue
was the duty of the captain to liquidate – he did not file
for the appropriate proceeding; you should result to
legal liquidation. Captain here failed TO INITIATE
proper proceeding thus shipowner is liable for actions
of captain.
Is the duty of captain to initiate a condition precedent?
No. even if ship captain does not initiate, the
shipowner can still file the appropriate proceeding in court.
What is common danger?
Both to vessel and cargo. If one invokes general
average, then that person must prove what he alleges. In
standard oil since ship captain invoked gen aver – they should
be the one to prove. Failure to prove, they cannot ask for
contribution from owners of the goods.
It is also possible that there are no goods involved.
Only extraordinary expense Phil. Home assurance case ---
discussed also in chapter 3 --- when it exploded, vessel got
burned, another vessel came to the rescue to extinguish the
fire and towed the vessel to the nearest destination. Goods
were saved from the subject vessel. The shipowner asked for
contribution to the owner of the goods which were saved. SC
said, shipowner did not comply legal steps 813-815 thus you
cannot allege general averages.
If the averages are not general, it is particular. the
shipowner will be solely liable… in the case of Magsaysay,
there was no deliberate sacrifice.
What is successful saving?
- Both vessel and goods must be saved
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- If vessel not saved, no general averages. Even if
goods were saved
- You have to start with resolution, placing of reso in
the log book, accounting of goods thrown away
starting those on deck and to follow from those not
on deck (read 83-815)
American Home insurance (take note this case--- bar)
- Transportation of tv sets, the ship captain was
apprised of the typhoon. Still captain continued with
the journey. Then na abot ang typhoon captain
directed that the tv sets should be jettison. Saved
vessel. Reklamo owner. Is there general average?
No. if the shipowner is negligent, the law on general
averages does not apply.
- shall bear its own damage. (Art. 830)
Note that examples of the two types of averages are not
exclusive. There is a word “especially” thus there may be other
example that may fall under these two types of averages.
YORK AND TURP RULES
- THIS CAN be stipulated in a contract that this rule
will apply in respect to averages
- In the absence of stipulation in the contract in
applying this rule, such rule is inapplicable
Ordinary expenses are not averages because they are
foreseeable, are there instance that they can be considered to
be extraordinary average?
If the parties agree that the averages will cover
ordinary expenses. The code of commerce does not prohibit
the inclusion of other expenses under averages.
Chapter 17
COLLISIONS
What is collision?
- impact of 2 vessels both of which are moving.
What is allision?
- impact between a moving vessel and a stationary one.
What are the 3 Zones of Time in the Collision of vessels?
1. First zone – all time up to the moment when risk of
collision begins;
2. Second zone – time between moment when risk of
collision begins and moment it becomes a practical
certainty;
3. Third zone – time when collision is certain and time
of impact.
What is an Error in Extremis?
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 Co., 26 PHIL 632).
What are the rules on Collision of Vessels under Code of
Commerce?
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
1. The collision may be due to the fault, negligence or
lack of skill of the captain, sailing mate, or any other
member of the complement of the vessel. The
owner of the vessel at fault be liable for losses or
damage. (Art. 826)
2. The collision may be due to the fault of both
vessels. Each vessel shall suffer its own losses, but
as regards the owner of cargoes both vessels shall
be jointly and severally liable. (Art. 827)
3. If it cannot be determined which vessel is at fault.
Each vessel shall also suffer its own losses and
both shall be solidarily liable for losses o damages
on the cargoes. (Art. 828)
4. The vessels may collide with each other through
fortuitous event or force majeure. In this case each
5. Two vessels may collide with each other without their fault
by reason of a third vessel. The third vessel will be liable
for losses and damages. (Art. 831)
6. A vessel which is properly anchored and moored may
collide with those nearby reasons of storm or other cause
of force majeure. The vessel run into shall suffer its own
damage and expense. (Art. 832)
What are the cases covered by collision and allision?
1. One vessel at fault – such vessel is liable for
damage caused to innocent vessel as well as
damages suffered by the owners of cargo of both
vessels.
2. Both vessels at fault – each vessel must bear its
own loss, but the shippers of both vessels may go
against the ship owners who will be solidarily liable.
3. Vessel at fault not known – same as rule as (2).
(Doctrine of Inscrutable Fault)
4. Third vessel at fault – same rule as (1).
5. Fortuitous event – no liability. Each bear its own
loss.
What is the Prerequisite for recovery?
Protest should be made within 24 hours before the
competent authority at the point of collision or at the first port
of arrival, if in the Philippines and to the Philippine consul, if
the collision took place abroad. (Art. 835) Injuries to persons
and damage to cargo of owners not on board on collision time
need not be protested. (Art. 836)
Is the doctrine of last clear chance or contributory negligence
applicable in cases of collision?
- no
What is the doctrine of “inscrutable fault”?
Provides that in case of collision where it cannot be
determined which between the two vessels was at fault, both
vessels bear their respective damage, but both should be
solidarily liable for damage to the cargo of both vessels.
NOTE: The Doctrine of Limited Liability applies in
case of collisions, but it shall be limited only to the
value of the vessel with all its appurtenances and
freightage earned during the voyage. When the latter
is not sufficient to cover all the liabilities, the
indemnity due by reason of the death or injury of
persons shall have preference. (Arts. 837 and 838)
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Chapter 18
ARRIVAL UNDER STRESS
What is meant by arrival under stress?
Arrival of a vessel at a port of destination on account
of lack of provision, well-founded fear of seizure, privateers,
pirates, or accidents of sea disabling navigation. (Art. 819)
NOTE: Captain must make a protest
What are the 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
Note: Absence of one of the steps, can still be considered
arrival under stress.
When not lawful?
1. lack of provisions due to negligence to carry
according to usage and customs;
2. risk of enemy not well known or manifest
3. defect of vessel due to improper repair; and
4. malice, negligence, want of foresight or lack of skill
of captain. (Art. 820)
Who bears expenses?
- if arrival under stress is proper  shipowner or ship
agent will only be liable for the expenses of the arrival
- if arrival under stress is improper  shipowner and
ship agent will be liable for the same expenses and,
in addition, they shall be solidarily liable for damages
caused to the cargoes by such arrival under stress
(Art. 821)
NOTE: After cessation of the cause of the arrival under
stress, captain should continue voyage or else he shall be
liable.
What are the rules in unloading of cargoes to make repairs?
- in order to make repairs to the vessel or because
there is danger that cargo may suffer damage 
necessary to unload; captain must request
authorization from competent judge or court for
removal, and carry it out w/ knowledge of the person
interested in the cargo
- in a foreign port  Philippine Consul
- in case of the vessel  expenses shall be for the
account of the ship owner or agent
- in case of the cargo  chargeable against the owners
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
of the merchandise for whose benefit the act was
performed
- if both  expenses to be divided proportionately
between the value of the vessel and cargo (Art. 822)
Who shall have custody of the cargo?
- The captain (except in cases of force majeure) (Art. 823)
- if entire cargo or part thereof should appear to be damaged,
or there should be imminent danger of its being damaged
 captain may request judge of competent court /
consul, the sale of all or part of the cargo
 person taking cognizance shall authorize it (after
examination and declaration)
 captain shall justify the legality of his conduct,
answering to the shipper for the price of the
merchandise would have brought if they had arrived
in good condition (Art. 824)
What is the responsibility of the captain?
- captain responsible for the damages caused by his
delay
- if cause of arrival under stress ceases  he should
continue the voyage
- if cause of arrival should have been the fear of enemies
 deliberation and resolution (in a meeting of officers
of the vessel and persons interested in the cargo) shall
precede the departure (Art. 825)
What is shipwreck?
The demolition or shattering of a vessel caused by her
driving ashore or on rocks and shoals in the midseas, or by
the violence of winds or waves in tempests. Loss of the vessel
at sea as a consequence of its grounding, or running against
an object in sea or on the coast.
- Loss or deteriorations of vessel or cargo caused by
shipwreck or stranding  individually account of the
owners; part which may be saved belonging to them,
same proportion. (Art. 840)
- If the wreck was due to malice, negligence or lack of skill
of the captain, the owner of the vessel may demand
indemnity from said captain. (Art. 841)
- The goods saved from the wreck to be specially bound
for the payment of the expenses of the respective
salvage. (Art. 842)
- If several vessels sail under convoy, and any of them
should be wrecked, the cargo saved will be distributed
among the rest in proportion to the amount which each
one is able to take. … If any captain should refuse,
without sufficient cause, to receive what may correspond
to him, the captain of the wrecked vessel to enter a
marine protest against him. … If it is not possible to
transfer to the other vessels the entire cargo of the
vessel wrecked, the goods of the highest value and
smallest volume to be saved first. Designation to be
made by the captain with concurrence of his officers.
(Art. 843)
- The captain taking on-board the goods saved from the
wreck to continue his course to the port of destination
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and upon arrival he should deposit the goods for disposal
to their owners. … In case the captain changes his
course, and if he can unload them at the port of which
they were consigned, he may make said port if the
shippers or supercargoes present and the officers and
passengers of the vessel consent thereto. But he is not
required to do so even if he has the consent during time
of war or when the port is difficult and dangerous to
make. … The owners of the cargo to defray all the
expenses of this arrival and the payment of the
freightage. (Art. 844)
- If cannot be, proceed to judicial sale complying with the
formalities and on publicity. (Art. 845)
CHAPTER 19
SALVAGE
What is salvage?
Services one person renders to the owner of a ship
or goods, by his own labor, preserving the goods or the ship
which the owner or those entrusted with the care of them have
either abandoned in distress at sea, or are unable to protect
or secure.
What are the kinds of Salvage?
 Voluntary – compensation is dependent on the
success.
 Under contract for a per diem or per horam wage –
payable at all events.
 Under contract for compensation – payable only in
case of success.
Claim for valid salvage:
- Provides for a reward for voluntary salvage
- Other persons who assist in saving the vessel or its
cargo from shipwreck shall be entitled to a similar
award
-
Who are the persons not entitled to salvage compensation?
1. 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 of his representatives
3. He who shall have failed to comply with the
provisions of Section 3 (Section 3. The salvor who
saves or picks up a vessel or merchandise at sea, in
the absence of the ship captain, ship owner or a
representative of either of them, they being unknown,
shall convey and deliver the vessel or merchandise
ASAP to the collector of customs if the port has a
collector and otherwise to the provincial treasurer or
municipal mayor.)
What are the requisites of compensation or salvage reward?
1. Object must have been exposed to marine peril (fire,
acts of pirate, thieves)
2. Salvage services rendered voluntarily and is not
required as an existing duty or a form of contract
(See Sec. 8)
* Pilots are not entitled to a reward – (Atty.
Capanas)
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
3. Salvage services are successful in whole or in part
4. Valid vessel which is shipwrecked beyond the control
of the crew or shall have been abandoned (not
necessary)
Note: Courts will not interfere in the agreement of the
parties except but where there is no agreement or it
is excessive the reward is fixed by the RTC judge.
What is a derelict?
A ship or cargo which is abandoned and deserted at
sea by those who were in charge of it, without any hope of
recovering it or without any intention of returning to it.
Determined by ascertaining what was the intention and
expectation of those in charge of it when they quitted it. Boat
or vessel found entirely deserted or abandoned on the sea
without hope or intention of recovery or return by the master
or the crew, whether resulting from wreck, accident, necessity,
or voluntary abandonment
What are jetsam, flotsam, and ligan?
 Jetsam – goods that were thrown off a ship which
was in danger
 Flotsam – goods that floated off the ship while ship
was in danger or when it sank
 Ligan – goods left as sea on the wreck or tied to a
buoy so that they can be recovered later
What are the basis of entitlement to salvage reward?
(Circumstances to consider):
1. The labor expended by the salvors in rendering the
salvage service
2. The promptitude, skill and energy displayed in
rendering the service and saving the property
3. The value of the property employed by the salvors in
rendering the service, and danger to which such
property was exposed
4. The risk incurred by the salvors in rescuing the
property from the impending peril
5. The value of the property salved
6. The degree of danger which the property was
rescued
What are the rights and obligations of salvors and owners?
1. Salvor is entitled to compensation for services
rendered. He has, under the Salvage Law, a lien
upon the property salvaged.
2. On the other hand, the owner does not denounce
his right to the property. There is no presumption of
an intention to abandon such property rights.
What is a maritime lien?
A salvor, in maritime law, has an interest in the
property; called a lien, but it never goes, in the absence of a
contract expressly made, upon the idea of debt due from the
owner to the salvor but upon the principle that the service
creates a property in the thing saved.
What are the rules on salvage reward?
1. The reward is fixed by the RTC judge in the absence of
agreement or where the latter is excessive (Sec. 9).
2. If sold (no claim being made within 3 months from
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publication), the proceeds, after deducting expenses and
the salvage claim, shall go to the owner; if the latter does
not claim it within 3 years, 50% of the said proceeds shall
go to the salvors, who shall divide it equitably, and the
other half to the government (Secs. 11-12).
3. If a vessel is the salvor, the reward shall be distributed as
follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in proportion to their
salaries
Provisions relating to salvage:
Section 1. When in case of shipwreck, the vessel or its
cargo shall be beyond the control of the crew, or shall have
been abandoned by them, and picked up and conveyed to
a safe place by other persons, the latter shall be entitled to
a reward for the salvage.
Those who, not being included in the above paragraph,
assist in saving a vessel or its cargo from shipwreck, shall
be entitled to a like reward.
Sec. 2. If the captain of the vessel, or the person acting in
his stead, is present, no one shall take from the sea, or
from the shores or coast merchandise or effects
proceeding from a shipwreck or proceed to the salvage of
the vessel, without the consent of such captain or person
acting in his stead.
Sec. 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 of them, they
being unknown, shall convey and deliver such vessel or
merchandise, as soon as possible, to the collector of
customs, if the port has a collector, and otherwise to the
provincial treasurer or municipal mayor.
Sec. 4. After the salvage is accomplished, the owner or his
representative shall have a right to the delivery of the
vessel or things saved, provided that he pays, or gives a
bond to secure, the expenses and the proper reward.
The amount and sufficiency of the bond, in the absence of
agreement, shall be determined by the collector of
customs or by the judge of the court of first instance of the
province in which the things saved may be found.
Sec. 5. The collector of customs, provincial treasurer, or
municipal mayor, to whom a salvage is reported, shall
order:
A. That the things saved be safeguard and inventoried.
B. The sale at public option of the things saved which
may be in danger of immediate loss or of those whose
conservation is evidently prejudicial to the interests of the
owner, when no objection is made to such sale.
C. The advertisement within the thirty days subsequent
to the salvage, in one of the local newspapers or in the
nearest news-paper published, of all the details of the
disaster, with a statement of the mark and number of the
effects requesting all interested persons to make their
claims.
Sec. 6. If, while the vessel or things saved are at the
disposition of the authorities, the owner or his
representative shall claim them, such authorities shall
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
order their delivery to such owner or his representative,
provided that there is no controversy over their value, and
a bond is given by the owner or his representative to
secure the payment of the expenses and the proper
reward. Otherwise, the delivery shall not be made until the
matter is decided by the court of first instance of the
province.
Sec. 7. No claim being presented in the three months
subsequent to the publication of the advertisement
prescribed in sub-section (c) of section five, the things
save shall be sold at public auction, and their proceeds,
after deducting the expenses and the proper reward shall
be deposited in the insular treasury. If three years shall
pass without anyone claiming it, one-half of the deposit
shall be adjudged to him who saved the things, and the
other half to the insular government.
Sec. 8. The following shall have no right to a reward for
salvage or assistance:
A. The crew of the vessel shipwrecked or which was in
danger of shipwreck;
B. He who shall have commenced the salvage in spite of
opposition of the captain or his representative; and
C. He who shall have failed to comply with the provisions
of section three.
Sec. 9. If, during the danger, an agreement is entered into
concerning the amount of the reward for salvage or
assistance, its validity may be impugned because it is
excessive, and it may be required to be reduced to an
amount proportionate to the circumstances.
Sec. 10. In a case coming under the last preceding
section, as well as in the absence of an agreement, the
reward for salvage or assistance shall be fixed by the court
of first instance of the province where the things salvaged
are found, taking into account principally the expenditures
made to recover or save the vessel or the cargo or both,
the zeal demonstrated, the time employed, the services
rendered, the excessive express occasioned the number
of persons who aided, the danger to which they and their
vessels were exposed as well as that which menaced the
things recovered or salvaged, and the value of such things
after deducting the expenses.
Sec. 11. From the proceeds of the sale of the things saved
shall be deducted, first, the expenses of their custody,
conservation, advertisement, and auction, as well as
whatever taxes or duties they should pay for their
entrance; then there shall be deducted the expenses of
salvage; and from the net amount remaining shall be taken
the reward for the salvage or assistance which shall not
exceed fifty per cent of such amount remaining.
Sec. 12. If in the salvage or in the rendering of assistance
different persons shall have intervened the reward shall be
divided between them in proportion to the services which
each one may have rendered, and, in case of doubt, in
equal parts.
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Those who, in order to save persons, shall have been
exposed to the same dangers shall also have a right to
participation in the reward.
Sec. 13. If a vessel or its cargo shall have been assisted
or saved, entirely or partially, by another vessel, the
reward for salvage or for assistance shall be divided
between the owner, the captain, and the remainder of the
crew of the latter vessel, so as to give the owner a half, the
captain a fourth, and all the remainder of the crew the other
fourth of the reward, in proportion to their respective
salaries, in the absence of an agreement to the contrary.
The express of salvage, as well as the reward for salvage
or assistance, shall be a charge on the things salvaged on
their value.
CHAPTER 20
CARRIAGE OF GOODS BY SEA
HISTORY
The Carriage of Goods by Sea Act (COGSA) was
adopted in the Philippines on Oct. 22, 1936 through
Commonwealth Act No. 65. It was explained the COGSA
“Contains advanced legislation, which is in consonance with
modern maritime rules and practices of great shipping
countries of the world.
APPLICABLE TO INTERNATIONAL SHIPPING TO THE
PHILIPPINES
- COGSA applies suppletorily to the Civil Code if the
goods are to be shipped from a foreign port to the
Philippines.
- COGSA is applicable in international maritime
commerce. It can be applied in domestic sea
transportation if agreed upon by the parties.
(PARAMOUNT CLAUSE).
- The term “goods” includes goods, wares, merchandise
and articles of every kind whatsoever. “Goods” does
not include live animals and cargo which by the
contract of carriage is stated as being carried on deck
and is so carried.
Who are the PARTIES?
- The carrier who is covered by COGSA is not limited to
the shipowner. The carrier includes the charterer who
enters into a contract of carriage with the shipper.
- In the case of a charterer, the charterer charters a
vessel and conducts his own business for his own
account. After chartering the vessel, the charterer uses
the vessel to conduct a business of transportation
obtaining goods from third persons to transport the
latter’s goods.
DUTIES OF CARRIER
- Civil Code requires international carriers to exercise
extra-ordinary diligence in the performance of their
contractual obligations.
- Section 3, paragraph (1) and (2) expresses the two
overriding obligations of the carrier under prevailing
jurisprudence when COGSA was passed namely:
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
(1) The obligation to use due care with respect to
the cargo; and
(2) The obligation to provide a seaworthy vessel
at the beginning of the voyage.
DOCUMENT OF TITLE REQUIRED
- The contracts of Goods covered by COGSA are
evidenced by Bills of Lading.
- Section 1 (b) of COGSA provides that the term
“contract of carriage” applies only to contracts of
carriage by sea covered by a bill of lading or any similar
document of title, insofar as such document related to
the carriage of goods by sea, including any bill of lading
or similar document as aforesaid issued under or
pursuant to a charter party from the moment at which
such bill of lading or similar documents of title regulates
the relation between a carrier and a holder of the same.
- The BOL shall be the prima facie evidence of the
receipt by the carrier of the goods as therein described.
NOTICE OF CLAIM AND PRESCRIPTIVE PERIOD
(a) When to file a claim in carrier – NOT a condition
precedent
i. Upon discharge of goods, if the damage is
apparent, claim should be filed immediately;
or
ii. If the damage is not apparent, claim should
be filed within 3 days from delivery.
(Note: the filing of claim is not a condition
precedent)
(b) When to file court case – prescriptive period
i. Within a period of 1 year from discharge. The
one year starts after the delivery of the goods
or the dates of the goods should have been
delivered.
ii. A stipulation reducing the 1-year period is null
and void but the one-year prescriptive period
is suspended by:
1. Express agreement of the parties
(Universal Shipping Lines, Inc. v. IAC, 188
SCRA 170).
2. When an action is filed in court until it is
dismissed. (Stevens & Co. v. Nordeutscher
Lloyd, 6 SCRA 180). It is to ne noted
however, that the period is not suspended
by an extrajudicial demand (DOLE
Philippines v. Maritime Co., 148 SCRA 118
[1987]).
DEFENSES AND IMMUNITIES
- The immunities enumerated in Section 4(2) of COGSA
are not CONTROLLING except insofar as they are
embraced under any of the defenses in Art. 1734 of the
NCC. Hence, the carrier will not be liable only if it can
present proof that the unseaworthiness was caused
exclusively by any of the circumstances specified in
Art. 1734 of the New Civil Code.
WAIVER
The shipowner and the ship agent may waive the
benefit of any of the defenses in its favor provided not
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only under the COGSA but also under other laws. For
example, the carrier may assume liability even if the loss
was due to the defective packaging.
LIMITING PROVISIONS
- Under the Sec. 4 (5), the liability limit is set at $500 per
package unless the nature and value of such goods is
declared by the shipper. This is deemed incorporated
in the bill of lading even if not mentioned in it (Eastern
Shipping v. IAC, 150 SCRA 463).
- If by agreement, another maximum amount than that
mentioned may be fixed provided that such maximum
shall not be less than $500 and in no event shall the
carrier be liable for more than the amount of damage
actually sustained.
RIGHT TO DISCHARGE DANGEROUS CARGO
COGSA allows the carrier to discharge the good if the
carrier discovers that the goods are dangerous,
inflammable or are explosives. This is subject to the
condition that the carrier did not give its consent to the
carriage of cargoes of such nature.
CHAPTER 21
PUBLIC SERVICE REGULATIONS
CONCEPT
- A “public utility” is a business or service engaged in
regularly supplying the public with some commodity or
service of public consequence such as electricity, gas,
water, transportation, telephone or telegraph services.
- Elements of Public Service:
(a) The person must own, operate, manage or
control in the Philippines public services which
may include distribution of goods or rendering
services to the public;
(b) The ownership, operation, management or
control must be for hire or compensation; and
(c) The ownership, operation, management or
control must be done for general business
purposes.
- Characteristics of Public Service:
(a) It is not required that the business is permanent
because the operation maybe permanent,
occasional or accidental;
(b) The business may be general or limited
clientele.
- With respect to carriers, they are considered public
service if:
(a) They transport either freight of passenger or
both;
(b) Their service is with or without fixed route; and
(c) Their classification may be freight or carrier
service of any class, express service, steam
boat or steamship line, pontine, ferries, and
water craft.
CONSTITUTIONAL PROVISIONS
Article XII of the 1987 Constitution “National Economy
and Patrimony”, Sections 1, 6, 11, 17, 18, 19, 22 – based
on these sections, the limitation imposed by the
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
Constitution on public utilities include the following: (At
least three)
i. No franchise, certificate, or any other form of
authorization for the operation of a public utility
shall be granted except to citizens of the
Philippines or to corporations or associations
under the of the Philippines at least 60% of
whose capital is owned by such citizen;
ii. No franchise, certificate, or authority shall be
exclusive in character;
iii. No franchise, certificate, or authorization shall
be for a longer period than 50 years.
What are the REGULATORY AGENCIES?
DOTC, LTRFB, LTO, MARINA, PCG, NTC, ERC,
NWRC, CAB, CAAP, PPA, LWUA, TRB.
What is the BASES OF REGULATION OF PUBLIC
UTILITIES?
“POLICE POWER”
OWNERSHIP OF PUBLIC UTILITIES
- TIME WHEN OWNERSHIP MUST COMMENCE
Even the mere formation of a public utility corporation
does not ipso facto characterize the corporation as one
operating a public authority. The moment for
determining the requisite Filipino nationality is when
the entity applies for a franchise, certificate or any
other form of authorization for that purpose.
- VOTING CONTROL TEST AND BENEFICIAL
OWNERSHIP TEST
The requirement of ownership of at least 60% Filipino
ownership applies not only to voting control of the
corporation but also to the beneficial ownership of the
corporation, it is therefore imperative that such
requirement apply uniformly and across the board to
all classes of shares, regardless of nomenclature and
category, comprising the capital of the corporation.
- OWNERSHIP OF FACILITIES
The limit imposed by the Constitution on foreign equity
applies only to the operation of a public utility and not
to ownership of the facilities. Ownership is defined as
a relation in law by virtue of which a thing pertaining to
one person is completely subjected to his will in
everything not prohibited by law or the concurrence
with the right of another. The exercise of right
encompassed in ownership is limited by law so that a
property cannot be operated and used to serve the
public as a public utility unless the operator has a
franchise. Consequently, a corporation is not subject
to 60% Filipino equity requirement if it will just own the
equipment or properties that will be used by another
entity which shall operate as public utility.
DEFINITIVE TERM
- The term of the franchise to be given to public utilities
is fifty (50) years at any given time. However, the
appropriate government body may extend the
franchise.
- Requirement: the commission must necessarily be
satisfied that the operation of the service under said
certificate during a definite period fixed therein ‘will
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promote the public interest in a proper and suitable
manner’.
NON-EXCLUSIVITY
- The Constitution likewise provides that the franchise
cannot be exclusive. Hence, as held, “neither
Congress nor the NTC can grant an exclusive
‘franchise, certificate, or any other form of
authorization’ to operate a public utility”, any provision
to the contrary is null and void.
SUBJECT TO MODIFICATION OF AMMENDMENT
- The Constitution provides that a franchise or right be
granted only under the condition that it shall be subject
to amendment, alteration, or repeal by the Congress
when the common good so requires.
TAKE-OVER OF PUBLIC UTILITIES BY THE STATE:
“Permanent or Temporary”
- Permanent take-over involves cases when the public
utilities are expropriated subject to payment of just
compensation.
- Temporary take-over happens in times of national
emergency. Emergency Powers of the Congress is
subject to the following certain conditions:
(a) There must be a war or other emergency;
(b) The delegation must be for a limited period only;
(c) The delegation must be subject to such
restrictions as the Congress may prescribe;
(d) The emergency powers must be exercised to
carry out a national policy declared by Congress.
MONOPOLIES AND UNFAIR COMPETITION
- The Constitution provides that State shall regulate or
prohibit monopolies when the public interest so
requires. Basis: “Police Power”. Hence, in a case it was
ruled that the exercise of Police Power is paramount
over the right against non-impairment of contracts.
REGULATION OF RATES
- Basis is POLICE POWER and POLICY OF THE
STATE to protect the public against arbitrary and
excessive rates while maintaining the efficiency and
quality of services rendered.
a. Public interest v. Return of Investment – the power
of the state to prescribed rates does not give it the
right to prescribes rates that are so low as to
deprive the public utility of a reasonable return of
investment.
- NON-DELEGATION. The power to fix the rates of
public utilities is a power that has been delegated to
the regulatory administrative agency. As such, it
cannot be further delegated by the said administrative
agency. Principle: “Potestas delegata non delegari
potest”
- The Only Standard: REASONABLE AND JUST.
Thus, the rates prescribed by the state must be one
that yields a fair return on the public utility upon the
value of the property performing the service and one
that is reasonable to the public for the services
rendered.
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
AUTHORITY TO OPERATE AS PUBLIC UTILITY
The power to authorize and control the operation of a
public utility is admittedly a prerogative of the legislature, since
the congress is that branch of government vested with plenary
powers of legislation.
FRANCHISE
- The term “franchise” includes not only authorization
issuing directly from the Congress on a form of a
statute, but also those granted by administrative
agencies to which the power to grant franchises has
been delegated by Congress.
- When legislative franchise is necessary? The law
creating or authorizing the administrative body may still
require a legislative franchise. However, a Certificate
of Public Convenience (CPC for short) is not necessary
for the issuance of a legislative franchise. In other
cases, however, the requirement is not only a
legislative franchise but also a license or a CPC from
a government agency. Thus, in the case of
Divinagracia v. Consolidated Broadcasting System,
Inc. the Supreme Court reiterated that there is a dual
franchise/license CPC requirement with respect to
broadcast media.
- Is a legislative franchise necessary before a public
utility can be allowed to secure a CPC?
There is a need to qualify the answer. No, if there is
no statute requiring the same, but yes, if the pertinent
law requires such legislative franchise. For example,
P.D No. 576-A requires a franchise for the operation
of radio and televisions. In EO No. 30 is it not
necessary for Philippine Ports Authority to secure a
franchise to take over, manage and operate a port
complex. Similarly, no legislative franchise in
necessary for the operation of a domestic air
transport.
- How legislative franchise is distinguished from a CPC?
A legislative franchise is a grant or privilege from the
sovereign power, while a CPC is a form of regulation
through as administrative agency.
Certificate of Public Convenience and Necessity
- What conditions that must concur in the grant of
certificate of public convenience?
i. The grantee must be a citizen of the Philippines
or a corporation or entity 60% of which is owned
by such citizens;
ii. The grantee must have sufficient financial
capability to undertake the service; and
iii. The service will promote public interest and
convenience in a proper and suitable manner.
(Note: the overriding principle, still, is public
interest, necessity and convenience.)
Distinguish CPC from Certificate of Public Convenience and
Necessity (CPCN)?
CPC is distinct from CPCN. The former is any
authorization to operate public service issued by Public
Service Commission for which no franchise, either municipal
or legislative is required. The latter requires a franchise issued
by the legislative department.
Other Rules and Policies
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1. The Prior Operator Rule
To carry out the purpose and intent for which the
Public Service Commission was created, the law
contemplates that the first licensee will be
protected in his investment and will not be
subjected to ruinous competition. It not is
therefore, the policy of the law for the Public
Service Commission to issue a CPC to a second
operator when a prior operator is rendering
sufficient, adequate and satisfactory service and
who in all things and respects in complying with
the rules and regulations of the commission.
“Being old operators, unquestionably able and
ready to increase their units, the petitioners are
entitled to protection and priority as against new
operator.”
2. Prior Applicant Rule
It provides that, priority in the filing of the
application for a CPC is, other conditions being
equal, an important factor in determining the
rights of the public companies.
3. Third Operator Rule
Is just a variation of the prior operator rule;
instead of one prior operator, there are two prior
operators who are rendering sufficient service.
To that effect, “where two operators are more
than serving the public there is no reason to a
permit third operator to engage in competition
with them”.
4. Protection of Investment Rule
The law aims not only to protect the public but the
operators as well. Hence, it is the duty of the
government to protect the investment of the
operators of public utilities, particularly from
unfair, unjustified and ruinous competition.
What is the Nature of CPC?
A certificate of public convenience is a mere license or
a privilege and being neither a franchise nor a contract, it
confers no vested or property right or interest on the holder.
However, it its purely private aspect, it has value and maybe
considered property that can be levied upon.
What are instances when CPC is not required?
Section 14. The following are exempted:
a. Warehouses;
b. Vehicles drawn by animals and bancas
moved by oar or sail, and tugboats and
lighters;
c. Airships within the Philippines except as
regards the fixing of their minimum rates on
freight and passengers;
d. Radio companies except with respect to the
fixing of rates;
e. Public services owned or operated by any
instrumentality of the National Government or
by any GOCC, except with respect to the
fixing of rates.
TRANSFER OF CERTIFICATES
Under Sec. 20 (g) of the Public Service Act, the PSC has
the power and authority to approve a sale or transfer of a
certificate of public convenience if (1) there are just and
MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION
reasonable grounds for making the transfer; and (2) the sale
or transfer is not detrimental to public interest.
REVOCATION ON CANCELLATION OF CERTIFICATE
- Grounds for the revocation of certificate:
a. The holder violates or contumaciously refuses to
comply with any order, rule or regulation of the
commission.
b. The holder is a mere dummy.
c. The holder ceases operations or abandons the
service.
(Note: the NTC has no power to cancel CPC that is
issued to the holders of duly issued legislative
franchises in the broadcast industry. Divinagracia v.
Consolidated Broadcasting, Inc.)
DUE PROCESS
Notice and hearing:
a. When required?
1. Issuance of CPC and CPCN;
2. Fixing of standards and qualifications;
3. Fixing of standards for measuring quantity;
4. Establishment of rules to secure accuracy of
all meters and all measuring appliances;
5. Order to compel operators to furnish proper
service; and
6. Allowing extension of facilities.
b. When not required?
1. Investigation of public utility companies;
2. Valuation of properties of public utilities;
3. Examination and test of measuring
appliances;
4. Grant of special permits to make extra or
special trips in territories specified in the
certificate;
5. Investigation of accidents;
6. Compel compliance with the laws and
regulations.
ADMINISTRATIVE FINES
The PSC has authority to impose fines for a public
service utility’s violation or failure to comply with the terms and
conditions of any certificates issued by it.
CHAPTER 22
POWERS OF ADMINISTRATIVE AGENCIES
RULE MAKING AND QUASI-JUDICIAL FUNCTIONS
- Quasi-legislative or rule making power is the power to
make rules and regulations which results in delegated
legislation that is within the confines of the granting
statute and the doctrine of non-delegability and
separability of powers.
- Quasi-judicial or administrative adjudicatory power is
the power to hear and determine questions of fact to
which the legislative policy is to apply and to decide in
accordance with the standards laid down by law itself
in enforcing and administering the same law.
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“Work Hard in Silence, Let SUCCESS be your NOISE”

- Primary Jurisdiction – it is the basic rule in

administrative law that there should be fidelity to the
basic concept of exhausting the administrative
remedies. However, there are cases when the
jurisdiction of public services cannot be invoked. Thus,
if the scope and coverage of the franchise of a public
utility is not clear, a legal question arises which is more
appropriate for the judiciary that for an administrative
agency to resolve.

- Who are persons covered by the regulation? PSC had

jurisdiction only over persons engaged in public
utilities, or over a public utility that holds a CPC, and
not over persons who are not engaged in public
utilities, except perhaps those who may violate any
valid regulation it may promulgate under the law.

(Note: As regards to the regulatory agencies focused only to

the extent and limit of their powers and functions. Please refer
to the book as they are so many of them to type. Sorry
Hermanos .)

MICHAEL JAMES MADRID MALINGIN, DAN ANGELO ISRAEL CUTODIO, MICHAEL RIAN GABIA OKIT, MARC VAN ANDREW TORAYNO
ATTY. CASTA ÑOS
TIMOTEO B. AQUINO – RAMON PAUL L. HERNANDO, 2016, 4TH EDITION