V.

Transportation Laws
A. Common Carriers

Concept of Common Carriers

Art. 1732, Civil Code. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public.

1. Diligence Required of Common Carriers

Art. 1733, Civil Code. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is further expressed
in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary
diligence for the safety of the passengers is further set forth in Articles 1755 and
1756.

DILIGENCE REQUIRED
Extraordinary diligence

DEFINITION
a. Rendering service with the greatest skill and utmost foresight (Agbayani)

b. Carrying passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard for
all the circumstances (Art 1755)

c. Does not require common carriers to exercise all the care, skill, and
diligence of which the human mind can conceive. Nor such as will free the
transportation of passengers from all possible perils.

Note: A common carrier is not an insurer of the safety of the passengers and is not
absolutely and at all events to carry them safely and without injury.

REASONS
Nature of business of common carriers and the exigencies of public policy.

2. Liabilities of Common Carriers

GOODS
General rule:
a. Common carriers are responsible for the loss, destruction, or deterioration
of the goods. (Art. 1734) In fact, they are liable even in those cases where
the cause of the loss or damage is unknown. (Agbayani)
b. Cause of action: breach of contract (culpa contractual)
c. Moreover, if the goods are lost, destroyed, or deteriorated, common
carriers are presumed to have been at fault or to have acted negligently.
(Art 1735)

Exceptions (common carrier not liable):

a. If loss, destruction, or deterioration of goods is due to any of the following
causes:
i. Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
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 ii. Act of the public enemy in war, whether international or civil;
iii. Act of omission of the shipper or owner of the goods;
iv. The character of the goods or defects in the packing or in the
containers;
v. Order or act of competent public authority (Art. 1734).
Note: The presumption of negligence DOES NOT apply in these cases.

b. If it exercised extraordinary diligence.

PASSENGERS

General rule:

Art. 1755, Civil Code. A common carrier is bound to carry the passengers safely
as far as human care and foresight can provide, using the utmost diligence of very
cautious persons, with a due regard for all the circumstances.

Art. 1756, Civil Code. In case of death of or injuries to passengers, common

carriers are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as prescribed in Arts 1733
and 1755.

Common carriers are also responsible for the safety of the following persons
(even though they are not passengers):

a. For the safety of members of the crew or the complement operating the
carrier since any omission, lapse, or neglect on the part of the common
carrier will certainly result to the damage, prejudice, injuries, and even
death to all aboard, passengers and crew members alike. (PAL v. CA)
b. For the safety of stevedores if their presence onboard was called for by the
contract of carriage. It is liable if it knew and consented to the stevedores’
presence. (Sulpicio v. CA (1995))

Exception (common carrier not liable):

If accident was caused by force majeure AND the common carrier exercised
extraordinary diligence in safeguarding the passengers (or goods) (Bachelor
Express v. CA)

PRINCIPLES AS TO THE LIABILITY OF COMMON CARRIERS

a. The liability of a carrier is contractual and arises upon breach of its

obligation. There is breach if it fails to exert extraordinary diligence
according to all circumstances of each case;
b. A carrier is obliged to carry its passenger with the utmost diligence of a
very cautious person, having due regard for all the circumstances;
c. A carrier is presumed to be at fault or to have acted negligently in case of
death of, or injury to, passengers, it being its duty to prove that it exercised
extraordinary diligence; and
d. The carrier is not an insurer against all risks of travel. (Isaac v. A.L.
Ammen)

PRESUMPTION OF NEGLIGENCE

The mere proof of delivery of goods in good order to a carrier, and of their arrival
at the place of destination in bad order, makes out a prima facie case against the
carrier, so that if no explanation is given as to how the injury occurred, the carrier
must be held responsible. It is incumbent upon the carrier to prove that the loss
was due to accident or some other circumstance inconsistent with its liability.
(Ynchausti Steamship v Dexter and Unson, 1920)
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 KABIT SYSTEM

A person who has been granted a certificate of public convenience allows another
person who owns motor vehicles to operate under such franchise for a fee.

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 relieved of responsibility. (Lim v. CA, 2002)

B. Vigilance over Goods

1. Exempting Causes

a. Natural disaster

Requisites:

1. The natural disaster must have been the proximate and only cause
of the loss (Art 1739)
2. The common carrier must exercise DUE diligence to prevent or
minimize the loss before, during and after the occurrence of the
flood, storm or natural disaster (Art 1739)
3. The common carrier must not have negligently incurred delay (Art
1740)
4. The shipment was at shipper’s risk (Art 361, Code of Commerce)

The master is responsible for the safe & proper stowage of the cargo, &
there is no doubt that by the general maritime law he is bound to secure
the cargo safely under deck. If the master carries goods on deck without
the consent of the shipper, he does it at his own risk. If they are damaged
or lost in consequence of their being thus exposed, he cannot protect
himself from responsibility by showing that they were damaged or lost by
the dangers of the seas. But, when the shipper consents to his goods being
carried on deck, he takes the risks of any damage or loss sustained as a
consequence of their being so carried. (Martini v. Macondray, 1919).

Fire may not be considered a natural disaster/calamity. This must be so as

it arises almost invariably from some act of man or by human means. It
does not fall within the category of an act of God unless caused by
lightning or by other natural disaster/calamity. It may even be caused by
the actual fault or privity of the carrier. (Eastern Shipping Lines v. IAC,
1987)

If between the delay or refusal of the common carrier to transport the

goods and the loss of the goods due to an act of God there intervened the
shipper’s negligence, thus causing a break in the chain of causation
between the act of God which caused the loss and the common carrier’s
fault, the act of God is the proximate cause of the loss and the carrier’s
delay or refusal is merely the remote cause. (Agbayani) (In this case, the
natural disaster is not the only cause, therefore, not an exempting cause)

b. Act of public enemy

Requisites:

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 1. The act of the public enemy was committed either in an
international or civil war. (Art. 1734)
2. The act of the public enemy must have been the proximate and
only cause (Art. 1739)
3. The common carrier must exercise due diligence to prevent or
minimize the loss before, during and after the act of the public
enemy causing the loss, destruction or deterioration of the goods.
(Art. 1739)

c. Act or omission of shipper

Requisites:

The act or omission of the shipper must have been the proximate
and only cause of the loss, destruction, or deterioration of the
goods (Art 1741)

If the shipper owner merely contributed to the loss, destruction or

deterioration of the goods, the proximate cause being the
negligence of the common carrier, then the common carrier shall
be liable for the damages, which shall, however, be equitably
reduced. (Art 1741)

d. Character of goods

Requisites:
1. The loss, destruction, or deterioration of the goods is due to the
character of the goods or defects in the packing or in the containers
(Art 1739)
2. The common carrier must exercise due diligence to forestall or
lessen the loss (Art 1739)

DAMAGE WHEN TO CLAIM

Ascertainable from package Upon receipt of goods

Not ascertainable from

Within 24 hours upon receipt
package

What happens if no claim has been brought after the lapse of the periods
mentioned or after payment of transportation charges? NO claim shall be
admitted against the carrier with regard to the condition in which the
goods transported were delivered. (Art 366, Code of Commerce)

If the fact of improper packing is known to the carrier or its servants or

apparent upon ordinary observation, but (the carrier) accepts the goods
notwithstanding such condition, it is not relieved of liability for loss or
injury resulting therefrom. (Southern Lines v. CA, 1962)

e. Order of competent authority

Requisites:

1. There must be an order or act of competent public authority (Art.

1734)
2. The said public authority must have had the power to issue the
order. (Art. 1743)

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 The intervention of the municipal officials was not of a character that
would render impossible the fulfillment by the carrier of the obligation.
The petitioner was not duty bound to obey the illegal order (of the mayor)
to dump into the sea the scrap iron. There is absence of sufficient proof
that the issuance of the order was attended with such force or intimidation
as to completely overpower the will of petitioner’s employees. The mere
difficulty in the fulfillment of the obligation is not force majeure. (Ganzon
v. CA, 1988)

J. Melencio-Herrera, Dissent: Through the “order or act” of “competent

public authority,” the performance of the contractual obligation was
rendered impossible. Apparently, the seizure and destruction of the goods
was done under legal process or authority so that petitioner should be
freed from responsibility.

a. Requirement of Absence of Negligence

Art. 1739, Civil Code. In order that the common carrier may be exempted
from responsibility, the natural disaster must have been the proximate and
only cause of the loss.

Loss of a ship and of its cargo, in a wreck due to accident or force majeure
must, as a general rule, fall upon their respective owners, except in cases
where the wrecking or stranding of the vessel occurred through the malice,
carelessness, or lack of skill on the part of the captain or because the
vessel put to sea is insufficiently repaired and prepared.

The carrier is exempt from liability if he is able to prove that the loss or
destruction of the merchandise was due to accident and force majeure and
not to fraud, fault, or negligence on the part of the captain or owner of the
ship. (Tan Chiong Sian v Inchausti, 1912)

b. Absence of Delay

Art. 1740, Civil Code. If the common carrier negligently incurs in delay in
transporting the goods, a natural disaster shall not free such carrier from
responsibility.

c. Due Diligence to Prevent or Lessen the Loss

Art. 1739, Civil Code. In order that the common carrier may 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. The same duty is incumbent upon the
common carrier in case of an act of the public enemy referred to in Article
1734, No. 2.

Art. 1742, Civil Code. 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.

1. For natural disasters and acts of public enemy, the common carrier
must have exercised due diligence to prevent or minimize loss,
before, during and after the occurrence of flood, storm, or other
natural disaster to be exempted from liability. (Art. 1739)

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 2. For faulty nature of packing or loss due to the character of the
goods, the common carrier must have exercised due diligence to
forestall or lessen the loss. (Art. 1742)

2. Contributory Negligence

Art. 1741, Civil Code. If the shipper or owner merely contributed to the loss
destruction or deterioration of the goods the proximate cause thereof being the
negligence of the common carrier the latter shall be liable in damages which
however shall be equitably reduced.

3. Duration of Liability

When is the contract of transportation perfected? A contract of transportation is

consensual in nature; therefore it is perfected upon the meeting of the minds of the
parties.
(Art. 1305)

But, when does the carrier’s extraordinary responsibility begin? It only begins
from the time the goods are unconditionally placed in the possession of and
received by the carrier for transportation. (Art 1736)

When does carrier’s extraordinary responsibility terminate?

 Until the same are delivered actually or constructively by the carrier to the
consignee or to the person who has a right to receive them (without
prejudice to the provisions of Article 1738) (Art. 1736)
 When the goods are temporarily unloaded or stored in transit by reason of
the exercise of the shipper or owner of his right of stoppage in transitu.
 Until the consignee has been advised of the arrival of the goods at the
place of destination and has had reasonable opportunity to remove them or
dispose of them from the warehouse of the carrier at the place of
destination (Art. 1738)

a. Delivery of Goods to Common Carrier

The liability of the carrier as common carrier begins with the actual
delivery of the goods for transportation and not merely with the formal
execution of a receipt or bill of lading; the issuance of a bill of lading is
not necessary to complete delivery and acceptance. Even where it is
provided by statute that liability commences with the issuance of the bill
of lading actual delivery and acceptance are sufficient to bind the carrier.
(Compania Maritima v. Insurance Company of North America, 1964).

The liability and responsibility of the carrier commence on their actual

delivery to, or receipt by the carrier or an authorized agent, of the goods.
(Cia. Maritima v. Insurance Co. of NA)

b. Actual or Constructive Delivery

Art. 1736, Civil Code. 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 without prejudice to the
provisions of Article 1738.

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 Delivery: Unconditionally placing the goods in the possession of the
carrier AND the carrier receiving them for transportation

What if the goods are only for safekeeping? If the common carrier
received the goods not for transportation but only for safekeeping, where
the goods have already been purchased by the shipper and ready for
transportation, then the duty of extraordinary diligence has not yet started.

What does “unconditionally placed” in Art. 1736 mean? It means that the
shipper cannot get the goods back from the common carrier at will.

To whom should the goods be delivered?

 Consignee
 Person who has a right to receive them – includes agents, brokers,
and the like.

Delivery of the cargo to the customs authorities is not delivery to the

consignee or “to the person who has a right to receive them” as
contemplated in Article 1736 because in such case the goods are still in
the hands of the Government and the owner cannot exercise dominion
over them. However, the parties may agree to limit the liability of the
carrier considering that the goods still have 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. (Lu Do
v. Binamira, 1957)

c. Temporary Unloading or Storage

Art. 1737, Civil Code. 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.

General rule: Extraordinary diligence over the goods remains even when
the goods are temporarily unloaded or stored in transit.

Exception: Shipper or owner made use of the right of stoppage in transit.

What is stoppage in transitu? Act by which the unpaid vendor of goods

stops their progress and resumes possession of them constructively while
they are in the course of transit from him to the purchaser, and not yet
actually delivered to the latter (Agbayani)

Basis: Art. 1530, Civil Code. When the buyer of the goods becomes
insolvent, the unpaid seller who has parted with the possession of the
goods at any time while they are in transit, may resume the possession of
the goods as he would have had if he had never parted with the possession.

When the right of stoppage in transitu is exercised, the common carrier

holds the goods in the capacity of an ordinary bailee or warehouseman
upon the theory that the exercise of the right of stoppage in transitu
terminates the contract of carriage. Hence, only ordinary diligence is
required. (Agbayani)

4. Stipulation for Limitation of Liability

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Art. 1747, Civil Code. 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.

Can limitation on liability be availed of by a common carrier which delayed the

transportation of the goods or changed the stipulated or usual route?
 If with just cause, YES.
 If without just cause, NO.

Art. 1748, Civil Code. An agreement limiting the common carrier's liability for
delay on account of strikes or riots is valid.
Art. 1752, Civil Code. 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.

a. Void Stipulations

Art. 1744, Civil Code. 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, Civil Code. 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.

Art. 1751, Civil Code. 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.

Kinds of Stripulations Limiting Liability

(Heacock v. Macondray, 42 Phil 205)

Exempting the common carrier from any and all Void

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 liability for loss or damage occasioned by its own
negligence
Providing for an unqualified limitation of such
Void
liability to an agreed stipulation

Limiting the liability of the common carrier to an

agreed valuation unless the shipper declares a Valid
higher value and pays a higher rate of freight

Stipulations on Degree of Diligence

No diligence to be observed Void

Less than Diligence of a good father of a family Void

Valid, if 3
Less than Extraordinary diligence requisites in Art.
1744 are satisfied

b. Limitation of Liability to Fixed Amount

Art. 1749, Civil Code. 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. 1734, Civil Code. 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.

There are two requisites that must be fulfilled in order that the liability of
PAL be limited according to the stipulations behind the ticket stub:
1. That the contract is just and reasonable under the circumstances
2. That the contract was fairly and freely agreed upon (Art. 1750)

The fact that the conditions are printed at the back of the ticket stub in
letters so small that they are hard to read would not warrant the
presumption that plaintiff was aware of those conditions such that he had
“fairly and freely agreed” to those conditions. (Shewaram v. PAL, 1966)

While the passenger had not signed the plane ticket, he is nevertheless
bound by the provision thereof; such provisions have been held to be part
of the contract of carriage and valid and binding upon the passenger
regardless of the latter’s lack of knowledge or assent to the regulation. It is
what is known as a contract of adhesion wherein one party imposes a
ready-made form of contract on the other. The one who adheres to the
contract is in reality free to reject it entirely. A contract limiting liability
upon an agreed valuation does not offend against the policy of the law
forbidding one from contracting against his own negligence. (Ong Yiu v.
CA, 1979)

c. Limitation of Liability in Absence of Declaration of Greater Value

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 Art. 1749, Civil Code. 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.

4. Liability for Baggage of Passengers

What is a passenger baggage? Things that a passenger will bring with him
consistent with a temporary absence from where he lives. Passenger baggage must
have a direct relationship with the passenger who is traveling.

E.g., A balikbayan box or suitcase is passenger baggage. However, “10,000 cans

of corned beef”, for example, is not considered as passenger baggage. They are
considered as goods. If you carry goods with you, you cannot bring them with you
as part of your (passenger) contract of carriage. You will need to get a separate
contract of carriage (“bill of lading”) in order to transport them. These goods will
then be transported whether or not you are physically traveling with them.
(Agbayani)

What are the kinds of passenger baggage and the laws applicable to them?

 Passenger baggage in the custody of the passenger (e.g. carry-on luggage):

These are considered as necessary deposits. Arts. 1998, 2000-2003 apply.
 Passenger baggage not in the custody of the passenger (e.g. checked-in
luggage): Arts. 1733-1753 on extraordinary diligence apply.

The liability is greater for baggage that is in the custody of the carrier in contrast
if such is in the possession of the passenger.

d. Checked-In Baggage

Art. 1754, Civil Code. 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.

e. Baggage in Possession of Passengers

Art. 1998, Civil Code. The deposit of effects made by the travellers in
hotels or inns shall also be regarded as necessary. The keepers of hotels or
inns shall be responsible for them as depositaries, provided that notice was
given to them, or to their employees, of the effects brought by the guests
and that, on the part of the latter, they take the precautions which said
hotel-keepers or their substitutes advised relative to the care and vigilance
of their effects.

Under Art. 1998, the baggage of passengers in their personal custody or in

that of their employees while being transported shall be regarded as
necessary deposits. The common carrier shall be responsible for such
baggage as depositaries (i.e. like hotel-keepers), provided that:
1. Notice was given to them or to their employees, AND that
2. The passengers take the precautions which said carriers advised
relative to the care and vigilance of their baggage. (Agbayani)

Art. 2000, Civil Code. The responsibility referred to in the two preceding
articles shall include the loss of, or injury to the personal property of the
guests caused by the servants or employees of the keepers of hotels or inns
as well as strangers; but not that which may proceed from any force
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 majeure. The fact that travellers are constrained to rely on the vigilance of
the keeper of the hotels or inns shall be considered in determining the
degree of care required of him.

Art. 2001, Civil Code. The act of a thief or robber, who has entered the
hotel, is not deemed force majeure, unless it is done with the use of arms
or through an irresistible force.

Art. 2002, Civil Code. The hotel-keeper is not liable for compensation if
the loss is due to the acts of the guest, his family, servants or visitors, or if
the loss arises from the character of the things brought into the hotel.

Art. 2003, Civil Code. The hotel-keeper cannot free himself from
responsibility by posting notices to the effect that he is not liable for the
articles brought by the guest. Any stipulation between the hotel-keeper
and the guest whereby the responsibility of the former as set forth in
articles 1998 to 2001 is suppressed or diminished shall be void.

In case of loss or injury to the baggage of passengers in their personal

custody or in that of their employees while being transported:

1. The carrier is LIABLE if the loss or injury is caused by:

a. his servants OR
b. employees OR
c. strangers (Art. 2000)
d. thief or robber done without the use of arms or irresistible
force (Art 2001)
2. The carrier is NOT LIABLE, if loss or injury is caused by:
a. force majeure (Art. 2000),
b. theft or robbery by a stranger with the use of arms or
irresistible force (Art 2001),
c. the acts of the guests, his family, servants, or visitors (Art
2002)
d. the character of the things brought into the hotel (Art 2002)

C. Safety of Passengers

1. Void Stipulations

Art. 1757, Civil Code. The responsibility of a common carrier for the safety of
passengers as required in Articles 1733 and 1755 cannot be dispensed with or
lessened by stipulation by the posting of notices, by statements on tickets, or
otherwise.

Art. 1758, Civil Code. When a passenger is carried gratuitously, a stipulation

limiting the common carrier's liability for negligence is valid, but not for willful
acts or gross negligence.

The reduction of fare does not justify any limitation of the common carrier's
liability.

General rule: Stipulations limiting liability are void.

Exception: Gratuitous carriage except for willful acts or gross negligence.

Under Art. 1758, the common carrier and the passenger may validly stipulate to
limit the carrier’s liability for negligence in cases of gratuitous carriage, but the
parties cannot stipulate to entirely eliminate liability of common carrier.
(Agbayani)

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2. Duration of Liability

Art. 17, Warsaw Convention. The carrier is liable for damage sustained in the
event of the death or wounding of a passenger or any other bodily injury suffered
by a passenger, if the accident which caused the damage so sustained took place
on board the aircraft or in the course of any of the operations of embarking or
disembarking.

Art. 698, Code of Commerce. In case a voyage already begun should be

interrupted, the passengers shall be obliged to pay the fare in proportion to the
distance covered, without right to recover for losses and damages if the
interruption is due to fortuitous event or to force majeure, but with a right to
indemnity if the interruption should have been caused by the captain exclusively.
If the interruption should be caused by the disability of the vessel, and a passenger
should agree to await the repairs, he may not be required to pay any increased
price of passage, but his living expenses during the stay shall be for his own
account. In case of delay in the departure of the vessel, the passengers have the
right to remain on board and to be furnished with food for the account of the
vessel unless the delay is due to fortuitous events or to force majeure. If the delay
should exceed ten days, passengers requesting the same shall be entitled to the
return of the fare; and if it is due exclusively to the fault of the captain or ship
agent, they may also demand indemnity for losses and damages. A vessel
exclusively devoted to the transportation of passengers must take them directly to
the port or ports of destination, no matter what the number of passengers may be,
making all the stops indicated in its itinerary.

Does the duty of extraordinary diligence occur right at the perfection of the
contract of transportation? The perfection of the contract of carriage does not
necessarily coincide with the commencement of the duty of extraordinary
diligence. It may occur at the same time or later.

a. Waiting for Carrier or Boarding of Carrier

It is the duty of common carriers of passengers to stop their conveyances

at 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 are doing so. (Dangwa Transportation v. CA
(1991)

A person boarding a moving car must be taken to assume the risk of injury
from boarding the car under the conditions open to his view, but he cannot
fairly be held to assume the risk that the motorman, having the situation in
view, will increase the peril by accelerating the speed of the car before he
is planted safely on the platform.

The duty that the carrier of passengers owes to its patrons extends to
persons boarding the cars as well as those alighting therefrom. (Del Prado
v. Manila Railroad, 1929)

b. Arrival at Destination

When does relationship of common carrier and passenger terminate? It

does not cease at the moment that the passenger alights from the common
carrier’s vehicle at a place selected by the carrier at the point of
destination, but continues until the passenger has had reasonable time or a
reasonable opportunity to leave the carrier’s premises. What is a
reasonable time or a reasonable delay within this rule is to be determined
from all the circumstances. (La Mallorca v. CA, 1966)

12
 The 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 victim
on or near the petitioner’s vessel.

It is of common knowledge that by the very nature of petitioner's business

as a shipper, the passengers of vessels are allotted a longer period of time
to disembark from the ship than other common carriers such as a
passenger bus. Such vessels are capable of accommodating a bigger
volume of both passenger and baggage as compared to the capacity of a
regular commuter bus (as in the La Mallorca case). Consequently, a ship
passenger will need at least an hour as is the usual practice, to disembark
from the vessel and claim his baggage whereas a bus passenger can easily
get off the bus and retrieve his luggage in a very short period of time.
(Aboitiz v. CA)

Does the duty of extraordinary diligence get interrupted? What we said in

one case once again must be stressed, i.e., the relation of carrier and
passenger continues until the latter has been landed at the port of
destination and has left the carrier's premises. Hence, PAL necessarily
would still have to exercise extraordinary diligence in safeguarding the
comfort, convenience and safety of its stranded passengers until they have
reached their final destination. (PAL v CA,
1993)

3. Liability for Acts of Others

a. Employees

Art. 1759, Civil Code. 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.

Art. 1760, Civil Code. The common carrier's responsibility prescribed in

the preceding article cannot be eliminated or limited by stipulation, by the
posting of notices, by statements on the tickets or otherwise.

It is enough that the assault happens within the course of the employee's
duty. It is no defense for the carrier that the act was done in excess of
authority or in disobedience of the carrier's orders. The carrier's liability
here is absolute in the sense that it practically secures the passengers from
assaults committed by its own employees. (Note: The employee must be
on duty at the time of the act.)

Accordingly, it is the carrier’s strict obligation to select its drivers and

similar employees with due regard not only to their technical competence
and physical ability, but also, no less important, to their total personality,
including their patterns of behavior, moral fibers, and social attitude.
(Maranan v. Perez, 1967)

Reason for making the common carrier liable for acts of employees: The
servant is clothed with delegated authority and charged with the duty to
execute the carrier’s undertaking to carry the passenger safely. (Agbayani)
13
 Diligence in the selection and supervision of employees: NOT a defense.
Liability is based on culpa contractual.

What is the common carrier’s responsibility for acts of employees? The

common carrier is responsible even beyond the scope of authority and in
violation of orders, different from the rule in quasi-delicts under Art. 2180,
which exempts the employer if it was done outside of employment.
However, there must be a reasonable connection between the act and the
contract of carriage.

b. Other Passengers and Strangers

Art. 1763, Civil Code. 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.

Notice that the law speaks of injuries suffered by the passenger but not his
death. However, there appears to be no reason why the common carrier
should not be held liable under such circumstances. The word “injuries”
should be interpreted to include death. (Agbayani)

In consideration of the right granted to it by the public to engage in the

business of transporting passengers and goods, a common carrier does not
give its consent to become an insurer of any and all risks to passenger and
goods. It merely undertakes to perform certain duties to the public as the
law imposes, and holds itself liable for any breach thereof.

Under Art. 1763, a tort committed by a stranger which causes injury to a

passenger does not accord the latter a cause of action against the carrier.
The negligence for which a common carrier is held responsible is the
negligent omission by the carrier's employees to prevent the tort from
being committed when the same could have been foreseen and prevented
by them. Further, when the violation of the contract is due to the willful
acts of strangers, as in the instant case, the degree of care essential to be
exercised by the common carrier for the protection of its passenger is only
that of a good father of a family. (Pilapil v. CA, 1989)

What is the common carrier’s responsibility for acts of strangers? In

Pilapil v. CA (1989), referring to the act of a stranger causing the death of
a passenger, the standard of diligence is only ordinary diligence. In
Bachelor Express v. CA (1990), the Court held that the common carrier
has a duty of extraordinary diligence for the injury caused by the act of a
co-passenger.

Culpa Aquiliana
Culpa Contractual
(Quasi-Delict)
Art. 1759 Art. 2180

Carrier and employee are

Carrier is directly and primarily
solidarily liable as joint
liable
tortfeasors

14
 No defense of due diligence in the Defense of due diligence in the
selection and supervision of selection and supervision of
employees employees is available

4. Extent of Liability for Damages

Art. 1761, Civil Code. The passenger must observe the diligence of a good father
of a family to avoid injury to himself.

Art. 1762, Civil Code. The contributory negligence of the passenger does not bar
recovery of damages for his death or injuries, if the proximate cause thereof is the
negligence of the common carrier, but the amount of damages shall be equitably
reduced.

When a passenger dies or is injured, the presumption is that the common carrier is
at fault or that it acted negligently (Article 1756). This presumption is only
rebutted by proof on the carrier's part that it observed the "extraordinary
diligence" required in Article 1733 and the "utmost diligence of very cautious
persons" required in Article 1755 (Article 1756). (Spouses Landingin v.
PANTRANCO, 1970)

It is negligence per se for a passenger on a railroad voluntarily or inadvertently to

protrude his arm, hand, elbow, or any other part of his body through the window
of a moving car beyond the outer edge of the window or outer surface of the car,
so as to come in contact with objects or obstacles near the track; no recovery can
be had for an injury which but for such negligence would not have been sustained.
(Isaac v. A. L. Ammen Transportation, 1975)

While the carrier is not an insurer of the safety of the passengers, it should
nevertheless be held answerable for the flaws of its equipment, if such flaws were
discoverable. The rationale for the common carrier’s liability for manufacturing
defects is the fact that the passenger has neither choice nor control over the carrier
in the selection and use of the equipment and appliances in use by the carrier.
Having no privity whatever with the manufacturer or vendor of the defective
equipment, the passenger has no remedy against him. (Necesito v. Paras, 1958)

Art. 1764, Civil Code. Damages in cases comprised in this Section shall be
awarded in accordance with Title XVIII of this Book, concerning Damages.
Article 2206 shall also apply to the death of a passenger caused by the breach of
contract by a common carrier.

D. Bill of Lading

Definition: It is a written acknowledgement, signed by the master of a vessel or other

authorized agent of the carrier, that he has received the described goods from the shipper,
to be transported on the expressed terms to the described place of destination, and to be
delivered there to the designated consignee or parties. (70 Am Jur 2d 924)

It is not indispensable for the creation of a contract of carriage. (Compania Maritima v.

Insurance Company of North America, 12 SCRA 213)

When effective: Usually upon its delivery to and acceptance by the shipper (Aquino,
Essentials of Transportation & Public Utilities Law)

It is presumed that the stipulations of the bill are, in the absence of fraud, concealment, or
improper conduct, known to the shipper, and he is generally bound by his acceptance
whether he reads the bill or not. (Magellan Mfg. Marketing Corp. v. CA (1991))

15
1. Three-Fold Character

a. Receipt as to the quantity and description of the goods shipped;

b. Contract to transport and deliver the goods to the consignee or other
person therein designated, on the terms specified in such instrument; and
c. Document of title, which makes it a symbol of the goods

2. Delivery of Goods

The goods should be delivered to the consignee or any other person to whom the
bill of lading was validly transferred or negotiated.

a. Period of Delivery

Rule: Period fixed for the delivery of the goods as stipulated in the Bill of
Lading. (Art. 370, Code of Commerce)

If there is no stipulation:
1. Within a reasonable time (Art. 370, Code of Commerce)
2. Carrier is bound to forward the goods in the first shipment of the
same or similar goods which he may make to the point of delivery
(Art. 358, Code of Commerce)

Effect of non-compliance: The carrier shall pay the indemnity agreed upon
in the bill of lading. If no indemnity is fixed, the carrier shall be liable for
the damages which may have been caused by the delay. (Art. 370, Code of
Commerce)

b. Delivery Without Surrender of Bill of Lading

If in case of loss or for any other reason whatsoever, the consignee cannot
return, upon receiving the merchandise, the bill of lading subscribed by
the carrier, he shall give said carrier a receipt for the goods delivered, this
receipt producing the same effects as the return of the bill of lading. (Art.
353. (2) (3), Code of Commerce)

c. Refusal of Consignee to Take Delivery

When consignee may refuse to receive goods?

1. When the consignee proves that he cannot make use of the goods
without the others (partial delivery) (Art. 363, Code of Commerce)
2. When goods are rendered useless for purposes of sale or
consumption in the use for which they are properly destined.
(Effect: consignee may demand payment of the goods at current
market prices) (Art. 365, Code of Commerce)
3. In case part of the goods is in good condition, the consignee may
refuse to receive only the damaged goods if separation is possible.
(Art. 365, Code of Commerce)
4. Where the delay is through the fault of the carrier. (Art. 371, Code
of Commerce)

In case of dispute as to the condition of the goods, the same shall be

examined by experts appointed by the parties, and the third one, in case of
disagreement, appointed by the judicial authority.

If the persons interested should not agree with the report, said judicial
authority shall order the deposits of the merchandise in a safe warehouse,
and the parties interested shall make use of their rights in the proper
manner. (Art. 367, Code of Commerce)

16
 3. Period for Filing Claims

Damage When to Claim

Claim for damages must be made
Patent damage (Ascertainable from
upon receipt of delivery (oral or
package)
written)

Latent damage (Only upon opening the Claim for damages may be made
within 24 hours upon receipt of
package) delivery.

After such periods OR transportation charges have been paid, no more claims for
damages will be entertained. (Art. 366, Code of Commerce)

Non-filing of the claim bars recovery. (Aquino)

Art. 366 is limited to cases of claims for damage to goods actually turned over by
the carrier and received by the consignee. It does not apply to misdelivery of
goods. (Aquino)

Purpose: The rule protects the carrier by affording it an opportunity to make an

investigation of a claim while the matter is still fresh and easily investigated so as
to safeguard itself from false and fraudulent claims. (UCPB General Insurance
Co., Inc. vs. Aboitiz Shipping, 2009)

The period prescribed in Art. 366 may be subject to modification by agreement of

the parties. (PHILAMGEN v. Sweetlines, Inc.)

Commencement of period: Upon delivery of cargo to the consignee at the place of

destination. (Aquino)

4. Period for Filing Actions

OVERLAND TRANSPORTATION AND COASTWISE SHIPPING

The general rule under the Civil Code on extinctive prescription applies. Action
for damages must be filed in court:
a. Within 6 years, if bill of lading was not issued (Art. 1145, Civil Code)
b. Within 10 years, if bill of lading was issued (Art. 1146, Civil Code)

INTERNATIONAL CARRIAGE OF GOODS BY SEA

In any event, the carrier and the ship shall be discharged from all liability in
respect of loss or damage unless suit is brought within one year after delivery of
the goods or the date when the goods should have been delivered.

The absence of a notice shall not affect or prejudice the right of the shipper to
bring suit within one year after the delivery of the goods or the date when the
goods should have been delivered. (Sec. 3 (6), Carriage of Goods by Sea Act)

The period for filing the claim is one year, in accordance with the Carriage of
Goods by Sea Act. This was adopted and embodied by our legislature in Com.
Act No. 65 which, as a special law, prevails over the general provisions of the
Civil Code on prescription of actions. (Maritime Agencies & Services, Inc. v. CA)

E. Maritime Commerce

17
1. Charter Parties

What is a charter party? A charter party is a contract by virtue of which the

owner or agent of a vessel binds himself to transport merchandise or persons for a
fixed price.

It is a contract by which the owner or agent of the vessel leases for a certain price
the whole or portion of a vessel for the transportation of the goods or persons
from one port to another.

Is towage considered a charter party? Towage is not a charter party. It is a

contract for the hire of services by which a vessel is engaged to tow another
vessel from one port to another for consideration.

A contract whereby the whole or part of the ship is let by the owner to a merchant
or other person for a specified time or use for the conveyance of goods, in
consideration of the payment of freight. (Caltex v. Sulpicio Lines, 1999)

a. Bareboat/Demise Charter

In a bareboat or demise charter, the shipowner leases to the charterer the

whole vessel, transferring to the latter the entire command, possession and
consequent control over the vessel's navigation, including the master and
the crew, who thereby become the charterer's "servants." (Aquino)

To create a demise, the owner of a vessel must completely and exclusively

relinquish possession, command and navigation thereof to the charterer,
anything short of such a complete transfer is a contract of affreightment
(time or voyage charter party) or not a charter party at all. (Puromines v.
CA)

Although a charter party may transform a common carrier into a private

one, the same however is not true in a contract of affreightment on account
of the distinctions between a contract of affreightment and a demise or
bareboat charter. (Puromines, Inc. v. Court of Appeals)

Note: In a bareboat or demise charter, the common carrier is converted to

private carrier.

Owner Pro Hac Vice – demise charter to whom the owner of the vessel
has completely and exclusively relinquished possession, command and
navigation of the vessel. In this kind of charter, the charterer mans and
equips the vessel and assumes all responsibility for navigation,
management and operation. He thus acts as the owner of the vessel in all
important aspects during the duration of the charter.

b. Time Charter

A time charter is a contract for the use of a vessel for a specified period of
time or for the duration of one or more specified voyages.

In this case, the owner of a time-chartered vessel retains possession and

control through the master and crew, who remain his employees. What the
time charterer acquires is the right to utilize the carrying capacity and
facilities of the vessel and to designate her destinations during the term of
the charter. (Litonjua Shipping Co., Inc. vs. National Seamen Board
(1989))

c. Voyage/Trip Charter

18
 In a voyage charter, the vessel is leased for a single or particular voyage.
The master and crew remain the employ of the owner of the vessel.
(Litonjua Shipping Co., Inc. vs. National Seamen Board)

Note: Both time and voyage charters are said to be contracts of

affreightment.

A contract of affreightment is one in which the owner of the vessel leases

part or all of its space to haul goods for others. It is a contract for special
service to be rendered by the owner of the vessel and under such contract
the general owner retains the possession, command and navigation of the
ship, the charterer or freighter merely having use of the space in the vessel
in return for his payment of the charter hire. (Puromines vs. CA)

Note: In a contract of affreightment, the common carrier is NOT converted

into a private carrier.

2. Liability of Ship Owners and Shipping Agents

The shipowner has possession, control and management of the vessel and the
consequent right to direct her navigation and receive freight earned and paid,
while his possession continues; he is the person who is primarily liable for
damages sustained in the operation of the vessel, based on the provisions of the
Code of Commerce. (Aquino)

Ship agent is the person entrusted with the provisioning of a vessel, or who
represents her in the port in which she happens to be. (Art. 595, Code of
Commerce)

Extent of Liability: The ship agent, even though he is not the owner, is liable in
every way to the creditor for losses and damages, without prejudice to his right
against the owner, the vessel and its equipment and freight. (Aquino)

a. Liability for Acts of Captain

1. The owner of a vessel and the agent shall be civilly liable for the
acts of the captain and for the obligations contracted by the latter to
repair, equip, and provision the vessel. (Art. 586, Code of
Commerce)
2. The agent shall also be civilly liable for the indemnities in favor of
third persons which arise from the conduct of the captain in the
care of the goods which the vessel carried.
3. Damages to vessel and to cargo due to lack of skill and negligence.
4. Losses, fines, and confiscations imposed an account of violation of
customs, police, health, and navigation laws and regulations.
5. Those caused by the misuse of the powers.
6. For those arising by reason of his voluntarily entering a port other
than that of his destination.
7. For those arising by reason of non-observance of the provisions
contained in the regulations on situation of lights and maneuvers
for the purpose of preventing collisions. (Art. 618)

Exception: Abandonment of the vessel (Art. 587, Code of Commerce)

Note: The owner or agent shall not be liable for the obligations contracted
by the captain if the latter exceeds his powers and privileges. However, if
the amounts claimed were made use of for the benefit of the vessel, the
owner or agent shall be liable. (Art. 588, Code of Commerce)

b. Exceptions to Limited Liability

19
Doctrine of limited liability (Hypothecary Rule)

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.

It has its origin by reason of the conditions and risks attending maritime
trade in its earliest years when such trade was replete with innumerable
and unknown hazards since vessels had to go through largely uncharted
waters to ply their trade. It was designed to offset such adverse conditions
and to encourage people and entities to venture into maritime commerce
despite the risks and the prohibitive cost of shipbuilding.

Thus, the liability of the vessel owner and agent arising from the operation
of such vessel were confined to the vessel itself, its equipment, freight,
and insurance, if any, which limitation served to induce capitalists into
effectively wagering their resources against the consideration of the large
profits attainable in the trade. (Aboitiz Shipping Corp. vs. General
Accident Fire and Life Assurance Corp. (1993))

Applicable in the following cases: The agent shall be civilly liable for the
indemnities in favor of third persons which arise from the conduct of the
captain in the care of the goods which the vessel carried; but he may
exempt himself therefrom by abandoning the vessel with all her equipment
and the freight he may have earned during the voyage. (Art. 587, Code of
Commerce)

The owners of a vessel shall be civilly liable in the proportion of their

contribution to the common fund, for the results of the acts of the captain,
referred to in Article 587.

Each part owner may exempt himself from this liability by the
abandonment before a notary of the part of the vessel belonging to him.
(Art. 590, Code of Commerce)

In case of collision, the liability of the shipowner shall be understood as

limited to the value of the vessel with all her appurtenances and all the
freight earned during the voyage. (Art. 837, Code of Commerce)

Liability for wages of the captain and the crew and for advances made by
the ship agent if the vessel is lost by shipwreck or capture (Art. 643, Code
of Commerce)

If the shipowner or agent may in any way be held civilly liable at all for
injury to or death of passengers arising from the negligence of the captain
in cases of collisions or shipwrecks, his liability is merely co-extensive
with his interest in the vessel such that a total loss thereof results in its
extinction. In arriving at this conclusion, the fact is not ignored that the ill-
fated S.S. Negros, as a vessel engaged in interisland trade, is a common
carrier, and that the relationship between the petitioner and the passengers
who died in the mishap rests on a contract of carriage. But assuming that
petitioner is liable for a breach of contract of carriage, the exclusively
"real and hypothecary nature" of maritime law operates to limit such
liability to the value of the vessel, or to the insurance thereon, if any. In
the instant case it does not appear that the vessel was insured. (Yangco v.
Laserna et al., 1941)

Exceptions to the Doctrine of Limited Liability

20
 1. Claims under the Workmen’s Compensation (Abueg vs. San
Diego)
2. Expenses for repairing, provisioning and equipping the vessel
3. There is an actual finding of negligence on the part of the vessel
owner or agent (Aboitiz Shipping vs. General Accident Fire and
Life Assurance Corp.)
4. Vessel is insured (Vasquez vs. CA)
5. Vessel is not abandoned or there was no total loss.
6. Collision between two negligent vessels

8. Accidents and Damages in Maritime Commerce

AVERAGES

The following shall be considered averages:

 All extraordinary or accidental expenses incurred during the navigation for

the preservation of the vessel or cargo, or both.
 All damages or deterioration the vessel may suffer from the time she puts
to sea from the port of departure until she casts anchor in the port of
destination, and those suffered by the merchandise from the time it is
loaded in the port of shipment until it is unloaded in the port of
consignment. (Art. 806, Code of Commerce)

KINDS

 Particular or Simple Average

 Gross or General Average

c. General Average

SIMPLE AVERAGE

Particular or simple Averages shall include all damages and expenses

caused to the vessel or cargo that did not inure to the common benefit and
profit of all persons interested in the vessel and her cargo. (Art. 809, Code
of Commerce)

The owner of the goods which gave rise to the expense or suffered the
damage shall bear this average. (Art. 810, Code of Commerce)

GENERAL AVERAGE

General or gross averages shall include all the damages and expenses
which are deliberately caused in order to save the vessel, her cargo, or
both at the same time, from a real and known risk. (Art. 811, Code of
Commerce)

Requisites for general average

1. There must be a common danger. This means, that both the ship
and the cargo, after it has been loaded, are subject to the same
danger, whether during the voyage, or in the port of loading or
unloading, that the danger arises from the accidents of the sea,
dispositions of the authority, or faults of men, provided that the
circumstances producing the peril should be ascertained and
imminent or may rationally be said to be certain and imminent.
This last requirement excludes measures undertaken against a
distant peril.

21
 2. That for the common safety, part of the vessel or of the cargo or
both is sacrificed deliberately.
3. That from the expenses or damages caused follows the successful
saving of the vessel and cargo.
4. That the expenses or damages should have been incurred or
inflicted after taking proper legal steps and authority. (Magsaysay,
Inc. v. Agan, 1955)

The gross or general average shall be borne by those who benefited from
the sacrifice. These include the shipowner and the owners of the cargoes
that were saved. Contribution may also be imposed on the insurers of the
vessel or cargoes that were saved, as well as lenders on bottomry or
respondentia. (PD 1460, as amended)

Cases of general average

1. The goods or cash invested in the redemption of the vessel or cargo
captured by enemies, privateers, or pirates, and the provisions,
wages, and expenses of the vessel detained during the time the
arrangement or redemption is taking place.
2. The goods jettisoned to lighten the vessel, whether they belong to
the vessel, to the cargo, or to the crew, and the damage suffered
through said act by the goods kept.
3. The cables and masts which are cut or rendered useless, the
anchors and the chains which are abandoned in order to save the
cargo, the vessel, or both.
4. The expenses of removing or transferring a portion of the cargo in
order to lighten the vessel and place her in condition to enter a port
or roadstead, and the damage resulting therefrom to the goods
removed or transferred.
5. The damage suffered by the goods of the cargo through the
opening made in the vessel in order to drain her and prevent her
sinking.
6. The expenses caused through floating a vessel intentionally
stranded for the purpose of saving her.
7. The damage caused to the vessel which it is necessary to break
open, scuttle, or smash in order to save the cargo.
8. The expenses of curing and maintaining the members of the crew
who may have been wounded or crippled in defending or saving
the vessel.
9. The wages of any member of the crew detained as hostage by
enemies, privateers, or pirates, and the necessary expenses which
he may incur in his imprisonment, until he is returned to the vessel
or to his domicile, should he prefer it.
10. The wages and victuals of the crew of a vessel chartered by the
month during the time it should be embargoed or detained by force
majeure or by order of the Government, or in order to repair the
damage caused for the common good.
11. The loss suffered in the value of the goods sold at arrivals under
stress in order to repair the vessel because of gross average.
12. The expenses of the liquidation of the average. (Art. 811, Code of
Commerce)
13. If in lightening a vessel on account of a storm, in order to facilitate
her entry into a port or roadstead, part of her cargo should be
transferred to lighters or barges and be lost, the owner of said part
shall be entitled to indemnity, as if the loss has originated from a
gross average (Art. 817, Code of Commerce)
14. If, as a necessary measure to extinguish a fire in a port; roadstead;
creek, or bay, it should be decided to sink any vessel, this loss shall
be considered gross average, to which the vessels saved shall
contribute.
22
 Procedure for recovery

1. Assembly and deliberation with the sailing mate and other officers
2. Resolution of the captain adopted
3. Hearing of the persons interested. In case an interested person
should not be heard, he shall not contribute to the gross average.
(Art. 813, Code of Commerce)
4. Resolution to be entered in the log book, stating the motives and
reasons therefore as well as the votes and reason for disagreement.
(Art. 814, Code of Commerce)
5. Minutes to be signed by all the persons present or in urgent cases,
the captain.
6. Captain shall deliver one copy of the minutes to the maritime
judicial authority of the first port he may make within 24 hours
(Art. 814, Code of Commerce)
7. Captain shall ratify the minutes under oath. (Art. 814, Code of
Commerce)

d. Collisions

Collision is an impact or sudden contact between two moving vessels.

(Aquino)

Allision is the striking of a moving vessel against one that is stationary.

Zones in collision

1. First Division covers all the time up to the moment when the risk
of collision may be said to have begun. Here, each vessel is free to
direct its course as it deems best.
2. Second Division covers the time between the moment when the
risk of collision begins and the moment when it has become a
practical certainty. Burden is on the vessel required to keep away
and avoid the danger.
3. Third Division covers the time of actual contact. The vessel which
has forced the privileged vessel into danger is responsible even if
the privileged vessel has committed an error within that zone. (A.
Urrutia & Co. vs. Baco River Plantation Co.)

NOTE: Liability in collision cases is negligence-based. The person who

caused the injury is both civilly and criminally liable. (Aquino)

Specific rules under the Code of Commerce

1. One vessel at fault. The owner of the vessel at fault shall

indemnify the losses and damages suffered, after an expert
appraisal. (Art. 826, Code of Commerce)
2. Both vessels at fault. Each shall suffer its own damages, and both
shall be solidarily responsible for the losses and damages
occasioned to their cargoes. (Art. 826, Code of Commerce)
3. Inscrutable fault. (If it cannot be decided which of the two vessels
was the cause of the collision). Each shall bear his own damage
and both shall be jointly responsible for the losses and damages
suffered by their cargoes. (Art. 828, Code of Commerce) (Asked in
the ‘97)
4. Due to fortuitous event. Each vessel and its cargo shall bear its
own damages. (Art. 830, Code of Commerce)

23
 5. By reason of fortuitous event, vessel properly anchored and
moored collides with another. The injury occasioned shall be
looked upon as particular average to the vessel run into. (Article
832, Code of Commerce)
6. Third vessel at fault. The owner of the third vessel shall indemnify
the losses and damages caused, the captain thereof being civilly
liable to said owner. (Art. 831, Code of Commerce)

What is arrival under stress? Arrival under stress is the arrival of a vessel
at the nearest and most convenient port instead of the port of destination, if
during the voyage the vessel cannot continue the trip to the port of
destination.

It is lawful when the inability to continue voyage is due to lack of

provisions, well-founded fear of seizure, privateers, pirates, or accidents of
the sea disabling it to navigate. (Art. 819, Code of Commerce)

It is unlawful when:

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, lack of foresight or skill of captain. (Art. 820,
Code of Commerce)

What is shipwreck? Shipwreck denotes loss/wreck of a vessel at sea as a

consequence of running against another vessel or thing at sea or on coast
where the vessel is rendered incapable of navigation.

If the wreck was due to malice, negligence or lack of skill of the captain,
the owner of the vessel may demand indemnity from said captain. (Art.
841)

5. Carriage of Goods by Sea Act

a. Application

COGSA is a special law that governs all contracts of carriage of goods by

sea between or to and from the Philippine ports.

Application of laws

1. If the common carrier is coming to the Philippines:

First: Civil Code
Second: COGSA (in foreign trade)
Third: Code of Commerce
2. If the private carrier is coming to the Philippines:
First: COGSA
Second: Code of Commerce
Third: Civil Code (excluding rules on common carriers)
3. If the private or common carrier is from the Philippines to a
foreign country: Apply the law of the foreign country (Art. 1753,
CC) UNLESS the parties make COGSA applicable.

Hierarchy of laws

1. Art. 1766, CC (COGSA as only in matters not regulated by this

Code) this notwithstanding the fact that COGSA is a special law.

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 Goods in a foreign country shipped to the Philippines are governed
by the Civil Code.
2. Art. 1753, CC

b. Notice of Loss or Damage

Notice of claim and the general nature of the loss or damage must be given
in writing to the carrier or his agent at the port of discharge before or at the
time of the removal of the goods. (Sec. 3 (6), COGSA)

If damage is not patent or cannot be ascertained from the package, the

shipper should file the claim with the carrier within three days from
delivery (compare with Code of Commerce rules, see discussion on Period
for Filing Claims above).

First, the provision of COGSA provides that the notice of claim need not
be given if the state of the goods, at the time of their receipt, has been the
subject of a joint inspection or survey. Prior to unloading the cargo, an
Inspection Report as to the condition of the goods was prepared and
signed by representatives of both parties. Second, as stated in the same
provision, a failure to file a notice of claim within three days will not bar
recovery if it is nonetheless filed within one year. This one-year
prescriptive period also applies to the shipper, the consignee, the insurer of
the goods or any legal holder of the bill of lading. "Inasmuch as the neither
the Civil Code nor the Code of Commerce states a specific prescriptive
period on the matter, the COGSA—which provides for a one-year period
of limitation on claims for loss of, or damage to, cargoes sustained during
transit-- may be applied suppletorily to the case at bar." (Belgian Overseas
v. Philippine First Insurance, 2002)

c. Period of Prescription

In any event the carrier and the ship shall be discharged from all liability
in respect of loss or damage unless suit is brought within one year after
delivery of the goods or the date when the goods should have been
delivered.

The absence of a notice shall not affect or prejudice the right of the
shipper to bring suit within one year after the delivery of the goods or the
date when the goods should have been delivered. (Sec. 3 (6))

Clearly, the coverage of the Act includes the insurer of the goods.
Otherwise, what the Act intends to prohibit after the lapse of the one-year
prescriptive period can be done indirectly by the shipper or owner of the
goods by simply filing a claim against the insurer even after the lapse of
one year. (Filipino Merchants Insurance, Inc. v. Alejandro, 1986):

The period for filing the claim is one year, in accordance with the Carriage
of Goods by Sea Act. This was adopted and embodied by our legislature in
Com. Act No. 65 which, as a special law, prevails over the general
provisions of the Civil Code on prescription of actions. (Maritime
Agencies & Services, Inc. v. CA, 1990)

d. Limitation of Liability

Under Sec. 4(5), the limit is set at a maximum of $500 per package or
customary freight unit.

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 The declaration made by the shipper stating an amount bigger than $500
per package will make the carrier liable for such bigger amount, but only
if the amount so declared is the real value of goods. (Aquino)

Under the Sec. 4(5), the liability limit is set at $500 per package or
customary freight unit unless the nature and value of such goods is
declared by the shipper. This is deemed incorporated in the bill of lading
even if not mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA 463).

The Civil Code does not limit the liability of the common carrier to a fixed
amount per package. In all matters not regulated by the Civil Code, the
right and the obligations of common carriers shall be governed by the
Code of Commerce and special laws. Thus, the COGSA, which is
suppletory to the provisions of the Civil Code, supplements the latter by
establishing a statutory provision limiting the carrier's liability in the
absence of a shipper's declaration of a higher value in the bill of lading. In
the case before us, there was no stipulation in the Bill of Lading limiting
the carrier's liability. Neither did the shipper declare a higher valuation of
the goods to be shipped. Petitioners' liability should be computed based on
US$500 per package and not on the per metric ton price declared in the
Letter of Credit. (Belgian Overseas v. Philippine First Insurance, 2002)

F. The Warsaw Convention

1. Applicability

a. All international carriage of persons, baggage, or cargo performed by

aircraft for reward.
b. Gratuitous carriage by aircraft performed by an air transport undertaking
(Art. 1, No. 1, WC)

INTERNATIONAL AIR TRANSPORTATION

Transportation by air between points of contact of two high contracting parties, or

those countries that have acceded to the Convention, wherein the place of
departure and the place of destination are situated:

a. Within the territories of two High Contracting Parties regardless of

whether or not there be a break in the transportation or a transshipment;
OR
b. 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 the power is not a party to the
Convention. (Sec. 1, No. 2, WC)

A carriage to be performed by several successive air carriers is deemed, for the

purposes of this Convention, to be one undivided carriage, if it has been regarded
by the parties as a single operation, whether it had been agreed upon under the
form of a single contract or of a series of contracts. (Sec. 1, No. 3, WC)

PERIOD COVERED

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. (Sec. 18, WC)

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 LIABILITY OF CARRIER FOR DAMAGES

a. Death or injury of a passenger if the accident causing it took place

i. on board the aircraft,
ii. in the course of the operations of embarking,
iii. in the course of disembarking, or
iv. when there was delay (Sec. 17 and 19, WC);

b. Destruction, loss, or damage to any baggage or goods that are checked in,
if damage occurred
i. during the transportation by air, or
ii. when there was delay (Sec. 18 and 19, WC)

Transportation by air is the period during which the baggage or goods are
in the charge of the carrier whether in an airport or on board an aircraft, or
in case of a landing outside an airport, in any place whatsoever. (Sec. 18,
WC)

c. Delay in the transport by air of passengers, baggage or goods.

2. Limitation of Liability

a. Liability to Passengers

General rule: 250,000 francs per passenger

Exception: Agreement to a higher limit (Art. 22(1), WC)

b. Liability for Checked Baggage

General rule: 250 francs per kg

Exception: In case of special declaration of value and payment of a

supplementary sum by consignor, carrier is liable to not more than the
declared sum unless it proves the sum is greater than actual value. (Art.
22(2), WC)

c. Liability for Handcarried Baggage

General rule: 5,000 francs per passenger (Art. 22(3), WC)

1. An agreement relieving the carrier from liability or fixing a lower

limit is null and void. (Art. 23, WC)
2. Carrier is not entitled to the foregoing limit if the damage is caused
by willful misconduct or default on its part. (Art. 25)
3. The right to damages under the WC is extinguished after 2 years
from the date of arrival at the destination or from the date on which
the aircraft ought to have arrived, or from the date on which the
carriage stopped. (Art. 29(1), WC)

Note: The Guatemala Protocol of 1971 increased the limit for passengers
to $100,000 and $1,000 for baggage. However, the Supreme Court noted
in Santos III v. Northwest Orient Airlines, G.R. No. 101538, June 23,
1992, that the Guatemala Protocol is still ineffective. (Sundiang and
Aquino)

The WC should be deemed a limit of liability only in those cases where

the cause of death or injury to person, or destruction, loss or damage to
property or delay in its transport is not attributable to or attended by any
willful misconduct, bad faith, recklessness, or otherwise improper conduct
27
 on the part of any official or employee for which the carrier is responsible;
and there is otherwise no special or extraordinary form of resulting injury.
(Alitalia v. CA)

4. Willful Misconduct

When can a common carrier not avail itself of this limitation?

a. Willful misconduct (Art. 25, WC)
b. Default amounting to willful misconduct (Art. 25, WC)
c. Accepting passengers without ticket (Art. 3, No. 2, WC)
d. Accepting goods without airway bill or baggage without baggage check.
Carrier guilty of willful misconduct cannot avail of the provisions
limiting liability but may still invoke other provisions of the WC. (see
Art. 25)

Receipt by the person entitled to the delivery of baggage or cargo without

complaint is prima facie evidence that the same have been delivered in good
condition and in accordance with the document of carriage. (Art. 26, WC).

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