REPUBLIC OF THE PHILIPPINES

CAGAYAN STATE UNIVERSITY

COLLEGE OF LAW

1. Determine whether the following persons are common carriers:

a. Freight forwarder – (See Unsworth Transport Internation (Pihils.), Inc. vs. Court of Appeals)
A freight forwarder is a common carrier.

b. Shipowner - can be qualified. (In a bareboat or demise chapter, it is a private carrier. If not, a common
carrier) See Sun Plum Case.

There are two sets of rules for cargo claims in the Philippines. For claims arising out of
domestic carriage, meaning the carriage of cargo between the Philippine islands, the rules
are stated in the Code of Commerce and the New Civil Code.

For international carriage of goods, the applicable rules are set out in the Philippine COGSA.
For domestic carriage, notice of loss or damage to the goods must be provided by the cargo
owner to the carrier within 24 hours of delivery of the goods. The 24-hour notice is a
condition precedent, and provided such notice is given, the cargo owner has 10 years within
which to sue for the loss or damage to cargo. However, the 10-year time bar can be reduced
by contract.

The duty of care for common carriers is set out in the New Civil Code, and the threshold is
very high: extraordinary diligence. Under the New Civil Code, in the event of cargo loss or
damage, the carrier is presumed to be at fault, and the burden of proof shifts to the carrier,
which must show that it had discharged its duty to exercise extraordinary diligence.

Through judgments of the Supreme Court during the past 20 years, the lines between
private carriers and common carriers have been blurred to the point of being almost
indistinguishable: all cargo claims against carriers are treated as if they are common carriers.

Common carriers have only three defences available under the New Civil Code: (1) force
majeure, (2) inherent fault in the goods, and (3) defects in the packaging.

For the international carriage of goods to and from the Philippines in foreign trade, the
carrier’s liability is based on Philippine Carriage of Goods by the Sea Act. However, the
Philippine Supreme Court judgments in COGSA cases have applied the high threshold of care
as found in the New Civil Code, and the COGSA defences are being ignored. In the case of
Planters Products v. Court of Appeals (Sun Plum),which involved a cargo of fertiliser from an
overseas port to the Philippines, the Supreme Court applied the common carrier rules to the
ship, and that precedent has been reiterated in subsequent Supreme Court judgments. The
cargo of fertiliser was carried by the ship Sun Plum, and there was cargo shortage and
damage.

The ship was on time charter and the question arose whether the shipowner was a
common carrier or a private carrier. If the Sun Plum was a common carrier, then the ship
would be presumed to be at fault, and the burden would be on the shipowner to prove that
he discharged his duty of care. On the other hand, if the Sun Plum was a private carrier, then
the consignee would have the burden of proving the ship’s fault or negligence in order to
recover.

The Supreme Court ruled that a shipowner who had time-chartered its vessel should be
considered a common carrier, and therefore Sun Plum had the burden of proving that it
had exercised extraordinary diligence in the care of the cargo

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 REPUBLIC OF THE PHILIPPINES
CAGAYAN STATE UNIVERSITY
COLLEGE OF LAW

A time charter, upon the other hand, like a demise 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, however, the owner of a time-chartered vessel (unlike the owner of a vessel under
a demise or bareboat charter) 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.

c. Arraste Operator – (See Westwind case)

The functions of an arrastre operator involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and the ship’s tackle. Being the custodian of
the goods discharged from a vessel, an arrastre operator’s duty is to take good care of the goods and
to turn them over to the party entitled to their possession. Handling cargo is mainly the arrastre
operator’s principal work so its drivers/operators or employees should observe the standards and
measures necessary to prevent losses and damage to shipments under its custody

d. Customs Broker – (See Westwind case)

as held by this Court in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., 456
SCRA 557 (2005), a customs broker is also regarded as a common carrier, the transportation of
goods being an integral part of its business.

e. Trucking Company – Yes, a common carrier. ( See Loadmasters case )

2. What laws govern transportation contracts?

The transportation laws in the Philippines whether by land, sea or air are generally governed by the
New Civil Code (Art. 1732-1766).

In the absence of any provision of the New Civil Code on the rights and obligations of common
carriers, the Code of Commerce and other special laws such as the Carriage of Goods Sea Act,
Salvage Law and other special laws insofar as pertinent may be applied.

In case of international carriage in air transportation, (i) the Montreal Convention as ratified by the
Philippines in 2015; (ii) the Warsaw Convention (iii) Civil Aviation Authority Act, may be applicable.
If the goods are to be transported from the Philippines to a foreign country, the law of the latter country
shall govern the transportation contract (CC , Art. 1753; NDC. v. CA, G.R. No. L49407, August 19,
1988).

3. What is a private carrier?

A private carrier is one who, without making the activity a vocation, or without holding himself or
itself out to the public as ready to act for all who may desire his or its services, undertakes, by special
agreement in a particular instance only, to transport goods or persons from one place to another
either gratuitously or for hire (Sps Pereña v. Sps Zarate, supra).

A carrier which does not qualify under the requisites of a common carrier is deemed a private
carrier (National Steel Corporation v. CA, G.R. No. 112287, December 12, 1997).

4. May a common carrier be converted to private carrier by stipulation?

In a contract of affreightment a common carrier is not converted into a private carrier but remains as a
common carrier and still liable as such.

5. Distinguish between a common carrier from a private carrier

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 REPUBLIC OF THE PHILIPPINES
CAGAYAN STATE UNIVERSITY
COLLEGE OF LAW

Common Carrier Private Carrier

To whom the carrier caters its
service
Governing Laws
Degree of Diligence required
Presumption of Negligence
Undertakes to carry passengers or
goods for the public
Civil Code Provisions on
Common Carriers, Public Service
Act, and other special laws
relating to transportation
Extraordinary diligence
1. If the goods are lost, destroyed
or deteriorated.
A common carrier cannot stipulate
that it is exempt from liability for
negligence of its agents or
employees. Such stipulation is
void as it is against public policy
A common carrier cannot stipulate
that it is exempt from liability for
negligence of its agents or
employees. Such stipulation is
void as it is against public policy
Ordinary diligence or diligence of
a good father of the family
No presumption as to negligence

2. In case of death of or injuries to

Whether subject to regulation
or not
Exemption from Liability
passengers
Subject to regulation by a
regulatory agency
A common carrier cannot stipulate
that it is exempt from liability for
negligence of its agents or
employees. Such stipulation is
void as it is against public policy
NOT subject to regulation by a
regulatory agency
A private carrier may validly enter
into a stipulation exempting it
from liability.

6. What is the diligence required of common carriers?

Under Art. 1733, 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.

There are two types of extraordinary diligence.

a. Extraordinary diligence in vigilance over the goods – Art. 1734, 1735, and 1745
b. Extraordinary diligence for the safety of passengers – Art. 1755 – 1756.

Extraordinary diligence is that extreme care and caution which persons of unusual prudence and
circumspection use for securing or preserving their own property or rights.

This expecting standard imposed on common carriers in contract of carrier of goods is intended to tilt
the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been
lodged for the shipment. Hence, in case of loss of goods in transit, the common carrier is presumed
under the law to have been in fault or negligent.

General Rule: Moral damages are not recoverable for breach of contract of carriage in
view of Art. 2219-‐20 of the Civil Code.
 
Exceptions:
1. Where the mishap results in the death of the passenger
2. Where it is proved that the common carrier was guilty of fraud or bad faith, even if death
does not result.

7. Who is liable in case of breach of contract of carriage? The operator or the driver? Or both?

Fault or negligence consists in the omission of that diligence which is demanded by the nature of an obligation
and corresponds with the circumstances of the person, of the time, and of the place. When the source of an

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CAGAYAN STATE UNIVERSITY
COLLEGE OF LAW

obligation is derived from a contract, the mere breach or non-fulfillment of the prestation gives rise to the
presumption of fault on the part of the obligor. This rule is no different in the case of common carriers in the
carriage of goods, which indeed, are bound to observe not just the due diligence of a good father of a family but
that of “extraordinary” care in the vigilance over the goods.

Under domestic law and jurisprudence (the Philippines being the country of destination), the attendance of gross
negligence (given the equivalent of fraud or bad faith) holds the common carrier liable for all damages, which
can be reasonably attributed, although unforeseen, to the non-performance of the obligation, including moral
and exemplary damages.

8. What are the defenses available to common carrier in case of loss, destruction or deteroriation of the
goods?
The provisions of Article 1733, notwithstanding, common carriers are exempt from liability for loss,
destruction, or deterioration of the goods due to any of the following causes: (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; and (5) Order or act of competent public authority. (Philippine American General
Insurance Company vs. PKS Shipping Company)

9. What are the requisites for natural disaster to be considered as exempting circumstance in case of loss
or damage to goods?
it is required under Article 1739 of the same Code that the “natural disaster” must have been the “proximate and
only cause of the loss,” and that the carrier has “exercised due diligence to prevent or minimize the loss before,
during or after the occurrence of the disaster.”

To free the common carrier from liability in case of flood, storm or other natural disaster or an act of a public
enemy
1. The common carrier must exercise due diligence to prevent or minimize loss before, during, and after the
occurrence (NCC Art., 1739).
2. The natural disaster or the act of the public enemy is the proximate and only cause of the loss (NCC, Art.
1740). NOTE: If the common carrier negligently incurs delay in transporting the goods, a natural disaster shall
not free such carrier from responsibility

Common carriers bound to observe extraordinary diligence in the vigilance over goods according to all
circumstances of each case. Fire is not considered a natural disaster or calamity—Common carrier presumed at
fault or acted negligently in cases other than those mentioned in Article 1734 of the Civil Code. (Eastern
Shipping Line, Inc. vs. Intermediate Appellate Court, 150 SCRA 463.)

10. Who is a public enemy?

The Philippine Insurance Law (Act No. 2427, as amended,) in section 8, provides that "anyone except a public
enemy may be insured." It stands to reason that an insurance policy ceases to be allowable as soon as an
insured becomes a public enemy.

A public enemy is a nation at war with the Philippines and every citizen or subject of such nation. It does not
include mobs, thieves or robbers (Bouvier’s Law Dictionary).

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