What is the Doctrine of Limited Liability?

Also called the “no vessel, no liability doctrine,” it provides that liability of ship
owner is limited to ship owner’s interest over the vessel. Consequently, in case of
loss, the ship owner’s liability is also extinguished. Limited liability likewise extends
to ship’s appurtenances, equipment, freightage, and insurance proceeds. The ship
owner’s or agent’s liability is merely co-extensive with his interest in the vessel,
such that a total loss of the vessel results in the liability’s extinction. The vessel’s
total destruction extinguishes maritime liens because there is no longer any res to
which they can attach. (Monarch Insurance v. CA, G.R. No. 92735, June 8, 2000)

What are the exceptions to the doctrine of limited liability?

1. Repairs and provisioning of the vessel before the loss of the vessel; (Art. 586)
2. Insurance proceeds. If the vessel is insured, the proceeds will go to the persons
entitled to claim from the shipowner; (Vasquez v. CA, G.R. No. L-42926, Sept. 13,
1985)
3. Workmen’s Compensation cases (now Employees’ Compensation under the
Labor Code); (Oching v. San Diego, G.R. No. 775, Dec. 17, 1946)

Maritime affairs are something of great interest nowadays. Maritime laws are
greatly relevant to businesses, consumers and even governments given the role that
sea transport plays in the area of commerce, logistics, and international trade. It
provides a uniform way of dealing with sea-related incidents that impact the
financial position and legal obligations of many.
One of the distinctive features of maritime law is the limited liability rule which
allows the ship owner or his agent certain limitations on his/her liability for
damage caused to a third person.
The principle is enunciated in the Code of Commerce. Under Art. 587, the ship
owner or his agent shall indemnify those who may incur damage as a result of the
conduct of the captain in the care of goods which he loaded on the vessel. However,
such ship agent may exempt himself therefrom by abandoning the vessel with all
the equipment and the freight it may have earned during the voyage.
Co-owners of a vessel, on the other hand, are liable in the proportion of their
interests in the common fund for the results of the acts of the captain whose acts
may have caused damage to third persons. Each co-owner may exempt himself
from his liability by the abandonment, before a notary, of the part of the vessel
belonging to him (Art. 588).
These provisions provide the universal principle of limited liability in all cases. Art.
587 accords a shipowner or agent the right of abandonment. Necessarily, such
liability is limited to what he entitled as a matter of right to abandon which is the
vessel, the equipment, and freight earned during the voyage. There has been a
consensus to the effect that the benefit of limited liability under this Article applies
in all cases wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain, and not necessarily limited only to conduct
relating to the care of goods [Yangco vs Laserna, 73 Phil. 330 (1941)].
For events of a collision resulting in damage, Art. 837 provides that the civil liability
incurred by ship owners is limited to the value of the vessel with all its
appurtenances and the freightage served during the voyage. In other words, “no
vessel, no liability” is the name of the game.
The shipowner’s or agent’s liability corresponds only to the extent of his interest in
the vessel. A total loss of the vessel results in the extinction of his liability, justified
by the real and hypothecary nature of maritime law.
This doctrine recognizes the many hazards and perils faced by a maritime voyage,
hence it was deemed necessary to limit the liability of the owner or agent. While
there may already be advances in technology that would arguably make maritime
voyages relatively safer, the Supreme Court continues to apply the said rule in
appropriate cases subject to exceptions, such as:
(1) where the injury or death to a passenger is due either to the fault of the ship
owner, or to the concurring negligence of the shipowner and the captain;
(2) where the vessel is insured; and
(3) in workmen’s compensation claims. In other words, it is inapplicable in a
liability created by statute to compensate employees and laborers, or the heirs and
dependents, in cases of injury received by or inflicted upon them while engaged in
the performance of their work or employment.
For instance, in Phil-Nippon Kyoei Corp. vs Rosalia T. Gudelosao (G.R. 181375, 13
July 2016), a claim for death benefits was filed by the heirs of the crew members of
a vessel that had sunk due to extremely bad weather conditions. The Supreme
Court ruled that the claim for death benefits under the Philippine Overseas
Employment Administration Standard Employment Contract (POEA-SEC) is the
same species as the workmen’s compensation claims under the Labor Code — both
of which belong to a different realm from that of Maritime Law. Therefore, the
limited liability rule does not apply to liability under the POEA-SEC.

CHARTER
PARTIES CHARTER PARTY– A contract whereby an entire ship or some principal
part of said ship, is let by the owner thereof 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 Philippines, Inc. v. Sulpicio Lines, G.R. No. 131166, September
30, 1999) KINDS OF CHARTER PARTIES
1) Bareboat or Demise Charter2) Contract of Affreightment
a) Time Charter
b) Voyage Charter BAREBOAT OR DEMISE CHARTER– The shipowner leases to the
charterer the whole vessel, transferring to the later the entire command, possession
and consequent control over the vessel’s navigaton, including the master and the
crew, who thereby becomes the charterer’s “servants”.

IMPLICATIONS OF A BAREBOAT CHARTER

1. The charterer becomes the owner pro hac vice, as such, he is liable for the
expenses of the voyage including the wages of the seamen. (Litonjua v. NSB, G.R.
No. 51910, August 10, 1989)
2. Charterer assumes the customary rights and liabilities of the shipowner in
relation to third persons dealing with him or with the vessel. (id.)
3. The master of the vessel becomes the agent of the charterer. (id.)
4. The charterer of a common carrier is converted into a private carrier. (id.)
5. The charterer is also liable for damages arising from negligence (Coastwise
Lighterage Corp. v. CA, G.R. No. 11467, July 12, 1995)
CONTRACT OF AFFREIGHTMENT– A contract whereby the owner of the vessel
leases part or all of its space to haul goods for other.– It may either be:
a) TIME CHARTER – vessel is chartered for a fixed period of time or duration of
voyage.
b) VOYAGE OR TRIP CHARTER – the vessel is leased for one or series of voyages
usually for purposes of transporting goods for the charterer.
IMPLICATIONS OF A CONTRACT OF AFFREIGHTMENT
1. The charterer hires the vessel only.
2. Master and crew remain in the employ of the shipowner.
3. The charterer acquires the right to utilize the carrying capacity and facilities of
the vessel and to designate her destinations for the duration of the time or voyage
stipulated.
4. Shipowner remains as the owner of the vessel.5. Shipowner is liable for the
expenses of the voyage. (Planters Products, Inc. v. CA, G.R. No. 101503, Sept. 15,
1993)

BAREBOAT AFFREIGHTMENT As to liability Charterer becomes liable to others

caused Owner remains liable as carrier and must by its negligence answer for any
breach of duty. As to Owner Charterer regarded as owner pro hac vice for Charterer
is not regarded as owner the voyage As to Possession & Command of Vessel Owner
of vessel relinquishes possession, The vessel owner retains possession, command
and navigation to charterer command and navigation of the ship As to Conversion
Common carrier is converted to private Common carrier is not converted to acarrier
private carrier.

PERSONS WHO MAY MAKE CHARTER OWNER/ OWNERSCHARTERER – if not

prohibited in the original charter.
SHIP AGENT – only if properly authorized by the owner by virtue of an authority
given by a resolution of the majority of the co-ownersCAPTAIN OR MASTER – only
in the absence of the ship agent or consignee, and only if he acts in accordance
with the instructions of the agent or owner and protects the latter’s interests.

REQUISITES OF A VALID CHARTER PARTY

1) Consent of the contracting parties;
2) Existing vessel which should be placed at the disposition of the shipper;
3) Freight; and
4) Compliance with Art. 652 of the Code of Commerce:
a) In writing
b) Drawn in Duplicate
c) Signed by the parties; and
d) Containing the mandatory conditions in such contract.

MANDATORY CONDITIONS (Art. 625, Code of Commerce)

1) The kind, name, tonnage of the vessel.
2) Her flag and port of registry.
3) The name, surname and domicile of the captain.
4) The name, surname and domicile of the ship agent, if the latter should make the
charter party.
5) The name, surname and domicile of the of the charterer, and if he states that he
is acting by commission, that of the person for whose account he makes the
contract.
6) The port of loading and unloading.

MANDATORY CONDITIONS (Art. 625, Code of Commerce)

7) The capacity, number of tons or weight, or measurement which they respectively
bind themselves to load and transport, or whether the charter party is total.
8) The freight to be paid, stating whether it is to be a fixed amount for the voyage or
so much per month, or for the space to be occupied, or for the weight or
measurement of the goods making up the cargo, or in any other manner
whatsoever agreed upon
9) The amount of primage to be paid the captain.
10) The days agreed upon for loading and unloading.
11) The lay days and extra lay days to be allowed and the demurrage for each of
them to be paid.

TERMS TO REMEMBER PRIMAGE – bonus to be paid to the captain after the

successful voyage
DEMURRAGE – the sum of money due by express contract for the detention of the
vessel in loading or unloading, beyond the time allowed for that purpose in the
charter party.
DEADFREIGHT – the amount paid by or recoverable from a charterer of a ship for
the portion of the ship’s capacity the latter contracted for but failed to occupy.
LAY DAYS – days allowed to charter parties for loading and unloading the cargo
PERMISSIBLE CLAUSES IN A CHARTER PART
 JASON CLAUSEPARAMOUNT CLAUSE RIGHTS & OBLIGATIONS OF THE
SHIPOWNER OR CAPTAIN
1) If the vessel is chartered wholly, not to accept cargo from others;
2) To observe represented capacity;
3) To unload cargo clandestinely placed;
4) To substitute another vessel if load is less than 3/5 of capacity;
5) To leave the port if the charterer does not bring the cargo within the lay days and
extra lay days allowed;6) To place vessel in a condition to navigate; and7) To bring
cargo to nearest neutral port in case of war or blockage. (Arts. 669-678, Code of
Commerce)

RIGHTS & OBLIGATIONS OF THE CHARTERER

1) To pay the agreed charter price;
2) To pay freightage on unboarded cargo;
3) To pay losses to others for loading uncontracted cargo and illicit cargo;
4) To wait if the vessel needs repair; and
5) To pay expenses for deviation. (Arts. 679-687, Code of Commerce)

CASES WHEN FREIGHTAGE IS NOT DUE

1) Jettisoned goods that are considered general average loss;
2) Merchandise that are lost because of shipwreck or stranding; and
3) Goods that are lost due to seizure by pirates or enemies. (Arts. 660 & 661, Code
of Commerce)

REPLACEMENT OF VESSEL
The shipowner may replace the chartered vessel in the following instances:
a) If, after receiving a part of the freight, should not find sufficient to make up at
least 3/5 of the amount which the vessel may hold, at the price he may have fixed,
he may substitute for the transportation another vessel inspected and declared
suitable for the same voyage.
b) Substitution with consent of the charters or shippers.

RESCISSION OF A CHARTER PARTY

1) At Charter’s Request
a) By abandoning the charter and paying half of the freightage;
b) Error in tonnage or flag;
c) Failure to place the vessel at the charter’s disposal;
d) Return of the vessel due to pirates, enemies or bad weather; and
e) Arrival at a port for repairs. (Art. 688, Code of Commerce)

RESCISSION OF A CHARTER PARTY

2) At Shipowner’s Request
a) If the extra lay days terminate without the cargo being placed alongside the
vessel; and
b) Sale by the owner of the vessel before loading by the charterer. (Art. 689, Code of
Commerce)
RESCISSION OF A CHARTER PARTY
2) Fortuitous cases
a) War or interdiction of commerce;
b) Inability of the vessel to navigate;
c) Prohibition to receive cargo;
d) Embargo; and e) Blockade. (Art. 690, Code of Commerce)

COLLISION
Collision – an impact or sudden contact of a moving body with anobstruction in its
line of motion, whether both bodies are in motionor one stationary and the other, in
motion.
Allision – refers to the contact of one moving and the otherstationaryThe Code of
Commerce includes collision per se and allision.It is not necessary for one to be
liable for his vessel to have hitanother. A shipowner or ship agent may be made
liable even if hisvessel forced a vessel to hit another.

TIMES OR ZONES IN COLLISION:

• Covers all the time up to the moment when the risk of collision may be said to
have begun. Here, no rule is applicable because none is necessary. Each vessel free
to direct its course as it deems best without reference to the movements of the
other vessel.
• Covers the time between the moment when the risk of collision begins and the
moment when it has become a practical certainty. The burden is on the vessel
required to keep away and avoid the danger.
• Covers the time of actual contact. This is where errors in extemis occur and the
rule is that the vessel which has forced the privileged vessel into danger is
responsible even if the privileged vessel has committed an error within that zone.

ERROR IN EXTREMIS:
The sudden movement made by a faultless vessel during the third zone ofcollision
with another vessel which is at fault under the second zone. Even ifsudden
movement is wrong, no responsibility will fall on the faultless vessel. * If it was
during the time when the sail vessel was passing through the third zone that it
changed its course to port in order to avoid, if possible, the collision, the act may be
said to have been done in extremis, and, even if wrong, the sailing vessel is not
responsible for the result. • APPLICABLE LAW: The Code of Commerce on Collision.
Note: Collision falls among matters not specifically regulated by the Civil Code
• COLREGS: International Regulations for Preventing Collisions at Sea is the
existing international agreement with respect to collisions in high seas and waters
connected to high seas navigable by seagoing vessels. Formulated by the IMO
(International Maritime organizations) Rules being used by most of our trading
partners although Philippines have not yet acceded to COLREGS. RULES OF
LIABILITY: - Not governed by quasi-delict. - Liability in collision is negligence-based
- Wrong-doer is both civilly and criminally liable
Article 829. In the cases above mentioned the civil action of the owner against the
person causing the injury as well as the criminal liabilities, which may be proper,
are reserved.
Test to determine negligence; What would a reasonable man with the same
expertise have done given the same circumstances? It is still relevant to determine
if the collision is sufficiently foreseeable such that a reasonable man with the same
expertise could have avoided the impact.
Note: Contributory negligence and last clear chance is not applicable in collision.
SPECIFIC RULES UNDER THE CODE OF COMMERCE:
• When one vessel is at fault:
Art. 826 provides that. if a vessel should collide with another, through the fault,
negligence , or lack of skill of the captain, sailing mate , or any other member of the
complement , the owner of the vessel at fault shall indemnify the losses and
damages suffered, after an expert appraisal.
• When both vessels at fault:
Art. 827 provides that if the collision is imputable to both vessels, each one shall
suffer its own damages, and both shall be solidarily responsible for the losses and
damages occasioned to their cargoes. • When party fault cannot be determined:
Art. 828 provides that each party shall also bear his own damage in cases in which
it cannot be determined which of the two vessels has caused the collision. They are
also solidarily responsible for the losses and damages occasioned to their cargoes.
CAUSE IS FORTUITOUS EVENT: If a vessel should collide with another, through
fortuitousevent or force majeure, each vessel and its cargo shall bear its own
damages.
Note: The burden of proof is heavily upon the party asserting the defense to
affirmatively establish that the accident could not have been prevented by the use
of that degree of reasonable care and attention which the situation demanded and
that there was no intervening act of negligence on its part. THIRD PERSON AT
FAULT:
Art. 831 of the Code provides that if a vessel should be forced by a third vessel to
collide with another, the owner of the third vessel shall indemnify the losses and
damages caused, the captain thereof being civilly liable to said owner.
SINKING ON THE WAY TO PORT:
Art. 833 of the Code provides that a vessel which, upon being run into sinks
immediately, as well as that which, having been obliged to make a port to repair the
damages caused by the collision, is lost during the voyage or is obliged to be
stranded in order to be saved, shall be presumed as lost by reason of collision.
PRESENCE OF PILOTS:
Art. 834 provides that if the vessels colliding with each other should have pilots on
board discharging their duties at the time of the collision, their presence shall not
exempt the captains from the liabilities they incur, but the latter shall have the
right to be indemnified by the pilots, without prejudice to the criminal liability
which the latter may incur.

EXTENT OF LIABILITY:
Art. 838 provides that when the value of the vessel and her appurtenances should
not be sufficient to cover all the liabilities, the indemnity due by reason of the death
or injury of persons shall have preferences. COLLISION IN FOREIGN WATERS:
Art. 839 provides that if the collision should take place between Philippine vessels
in foreign waters, or if having taken place in the open seas, and the vessels should
make a foreign port, the Consul of the Republic of the Philippines in said port shall
hold a summary investigation of the accident, forwarding the proceedings to the
Secretary of the Department of Foreign Affairs for continuation and conclusion.
PROTEST:
Art. 835 provides that the action for the recovery of losses and damages arising
from collisions cannot be admitted if a protest or declaration is not presented
within 24 hours before the competent authority of the point where the collision
took place, or that of the first port of arrival of the vessel, if in Philippine territory,
and to the consul of the Republic of the Philippines if it occurred in a foreign
country. • Art. 835 does not apply to small boats engaged in river and bay traffic
and inland navigation. It applies only to ships and sea-going vessels.
Art. 836 provides that with respect to damages caused to persons or to thecargo,
the absence of protest may not prejudice the persons interested whowere not on
board or were not in a condition to make known their wishes.
• EXCUSES IN THE NON-FILING OF THE PROTEST UNDER ART. 836:
The persons interested were not on boardThe persons interested were not in a
condition to make know theirwishes. LIMITED LIABILITY RULE: The real and
hypothecary nature of maritimelaw limits the liability of the shipowner and ship
agent to the value of thevessel.
Art. 837 provides that the civil liability incurred by the shipowners In the case
prescribed in this section, shall be understood as limited to the value of the vessel
with all its oppurtenances and freightage earned during the voyage.
DOCTRINE OF INSCRUTABLE FAULT: Neither of the carriers may go afterthe other
since it cannot be determined as to which vessel is at fault.

ARRIVAL UNDER STRESS

the arrival of a vessel at the nearest and most convenient port instead ofthe port of
destination, if during the voyage the vessel can not continue the trip to the port of
destination on account of: lack of provisions well-founded fear of seizure,
privateers, or pirates any accident of the sea disabling it to navigate assemble the
the officers CAPTAIN officers shall have determined the call the persons and agree
if deciding interested in there is well- vote the cargo who founded may be present
reason after and who may examining attend the the meeting circumstance without
the s tight to vote
Persons interested in agreement the cargo may make shall be the objections and
drafted and protests they may the proper deem proper, which minutes shall shall
likewise be be signed and entered in the entered into UNLAWFUL ARRIVAL
UNDERSTRESS Lack of provisions due to negligence to carry according to usage
and customs
Risk of enemy not well known or manifest
Defect of vessel due to improper repair
Malice, negligence, lack of WHO SHALL BEAR THEEXPENSES? 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 the damages
caused to the cargoes by such arrival under stress UNLOADING OF CARGOES TO
MAKE REPAIRS Necessary unloading of cargoes captain must request
authorization from competent judge or court for removal, and carry it out with the
knowledge of the person having interest over the same * if in a foreign port
Philippine consul
EXPENSES vessel ship owner or agent cargo owners of the merchandise for whose
benefit the act was performed both expenses to be divided proportionately between
the value of the vessel and cargo CUSTODY OF CARGO -intrusted to the captain
(except in cases of force majeure)
If entire cargo or part thereof should appear to be damaged, or there should be
imminent danger of its being damaged
Captain may request the judge or court of competent jurisdiction, or of the consul
in a proper case, the sale of all or part of the former LIABILITY OF THE CAPTAIN
Damages caused by his delay
If after the cause of arrival has ceased, he should not continue the voyage
If cause of arrival should have been the fear of enemies, privateers, or pirates
deliberation and resolution in a meeting of the officers of the vessel and persons
interested in the cargo shall precede the departure

SHIPWRECK

ARTICLE 840 THE LOSSES AND DETERIORATIONS SUFFERED BY A VESSEL

AND HER CARGO BY REASON OFSHIPWRECK OR STRANDING SHALL BE
INDIVIDUALLY FOR THE ACCOUNT OF THE OWNERS,THE PART OF WHICH MAY
BE SAVED BELONGING TO THEM IN THE SAME PROPORTION. CODE OF
COMMERCE PROVISIONS
ARTICLE 841 IF THE WRECK OR STRANDING SHOULD BE CAUSED BY THE
MALICE, NEGLIGENCE, OR LACK OFSKILL OF THE CAPTAIN, OR BECAUSE THE
VESSEL PUT TO SEA WAS INSUFFICIENTLY REPAIREDAND EQUIPPED, THE
SHIP AGENT OR THE SHIPPERS MAY DEMAND INDEMNITY OF THE CAPTAINFOR
THE DAMAGES CAUSED TO THE VESSEL OR TO THE CARGO BY THE
ACCIDENT, INACCORDANCE WITH THE PROVISIONS CONTAINED IN ARTICLES
610, 612, 614, AND 621 CODE OF COMMERCE PROVISIONS
ARTICLE 842 THE GOODS SAVED FROM THE WRECK SHALL BE SPECIALLY
BOUND FOR THE PAYMENT OF THEEXPENSES OF THE RESPECTIVE SALVAGE,
AND THE AMOUNT THEREOF MUST BE PAID BY THEOWNERS OF THE FORMER
BEFORE THEY ARE DELIVERED TO THEM, AND WITH PREFERENCE OVERANY
OTHER OBLIGATION IF THE MERCHANDISE SHOULD BE SOLD. CODE OF
COMMERCE PROVISIONS
ARTICLE 843 IF SEVERAL VESSELS SAIL UNDER CONVOY, AND ANY OF THEM
SHOULD BE WRECKED, THE CARGO SAVED SHALLBE 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 SHALL ENTER A PROTEST AGAINST HIM, BEFORE TWO SEA
OFFICIALS,OF THE LOSSES AND DAMAGES RESULTING THEREFROM,
RATIFYING THE PROTEST WITHIN TWENTY-FOUR HOURSAFTER ARRIVAL AT
THE FIRST PORT, AND INCLUDING IT IN THE PROCEEDINGS HE MUST
INSTITUTE IN ACCORDANCEWITH THE PROVISIONS OF ARTICLE 612.IF IT IS
NOT POSSIBLE TO TRANSFER TO THE OTHER VESSELS THE ENTIRE CARGO OF
THE VESSEL WRECKED, THEGOODS OF THE HIGHEST VALUE AND SMALLEST
VOLUME SHALL BE SAVED FIRST, THE DESTINATION THEREOFTO BE MADE BY
THE CAPTAIN WITH THE CONCURRENCE OF THE OFFICERS OF HIS VESSEL.
CODE OF COMMERCE PROVISIONS
ARTICLE 844 A CAPTAIN WHO MAY HAVE TAKEN ON BOARD THE GOODS
SAVED FROM THE WRECK SHALL CONTINUE HISCOURSE TO THE PORT OF
DESTINATION, AND ON ARRIVAL SHALL DEPOSIT THE SAME, WITH
JUDICIALINTERVENTION, AT THE DISPOSAL OF THEIR LEGITIMATE OWNERS.IN
CASE HE CHANGES HIS COURSE, IF HE CAN UNLOAD THEM AT THE PORT OF
WHICH THEY WERE CONSIGNED,THE CAPTAIN MAY MAKE SAID PORT IF THE
SHIPPERS OR SUPERCARGOES PRESENT AND THE OFFICERS
ANDPASSENGERS OF THE VESSEL CONSENT THERETO; BUT HE MAY NOT DO
SO, EVEN WITH SAID CONSENT, IN TIMEOF WAR OR WHEN THE PORT IS
DIFFICULT AND DANGEROUS TO MAKE.THE OWNERS OF THE CARGO SHALL
DEFRAY ALL THE EXPENSES OF THIS ARRIVAL AS WELL AS THE PAYMENT
OFTHE FREIGHTAGE WHICH, AFTER TAKING INTO CONSIDERATION THE
CIRCUMSTANCES OF THE CASE, MAY BEFIXED BY AGREEMENT OR BY
JUDICIAL DECISION. CODE OF COMMERCE PROVISIONS
ARTICLE 845 IF ON THE VESSEL THERE SHOULD BE NO PERSON INTERESTED
IN THE CARGO WHO CAN PAY THEEXPENSES AND FREIGHTAGE
CORRESPONDING TO THE SALVAGE, THE COMPETENT JUDGE OR COURTMAY
ORDER THE SALE OF THE PART NECESSARY TO COVER THE SAME. THIS
SHALL ALSO BE DONEWHEN ITS PRESERVATION IS DANGEROUS, OR WHEN IN
A PERIOD OF ONE YEAR IT SHOULD NOTHAVE BEEN POSSIBLE TO ASCERTAIN
WHO ARE ITS LEGITIMATE OWNERS.IN BOTH CASES, THE PROCEEDINGS
SHALL BE WITH THE PUBLICITY AND FORMALITIES PRESCRIBED INARTICLE
579, AND THE NET PROCEEDS OF THE SALE SHALL BE SAFELY DEPOSITED, IN
THEDISCRETION OF THE JUDGE OR COURT, SO THAT THEY MAY BE
DELIVERED TO THE LEGITIMATE OWNERTHEREOF. OTHER PROVISIONS ON
SHIPWRECK
ARTICLE 643 IF THE VESSEL AND HER CARGO SHOULD BE TOTALLY LOST, BY
REASON OF CAPTURE OR WRECK, ALL RIGHTS SHALL BEEXTINGUISHED,
BOTH AS REGARDS THE CREW TO DEMAND ANY WAGES WHATSOEVER, AND
AD REGARDS THE SHIPAGENT TO RECOVER ADVANCES MADE.IF A PORTION
OF THE VESSEL OR OF THE CARGO, OR OF BOTH, SHOULD BE SAVED, THE
CREW ENGAGED ON WAGES,INCLUDING THE CAPTAIN, SHALL RETAIN THEIR
RIGHTS ON THE SALVAGE, SO FAR AS THEY GO, ON THE REMAINDER OFTHE
VESSEL AS WELL AS ON THE AMOUNT OF THE FREIGHTAGE OF THE CARGO
SAVED; BUT SAILORS WHO AREENGAGED ON SHARES SHALL NOT HAVE ANY
RIGHT WHATSOEVER ON THE SALVAGE OF THE HULL, BUT ONLY ONTHE
PORTION OF THE FREIGHTAGE SAVED.[IF THEY SHOULD HAVE WORKED TO
RECOVER THE REMAINDER OF THE SHIPWRECKED VESSEL THEY SHALL BE
GIVENFROM THE AMOUNT OF THE SALVAGE AS AN AWARD IN PROPORTION OF
THE EFFORTS MADE AND TO THE RISKSENCOUNTERED IN ORDER TO
ACCOMPLISH THE SALVAGE.] CHARTER PARTIES
ARTICLE 661 NEITHER MERCHANDISE LOST BY REASON OF SHIPWRECK OR
STRANDING NOR THOSE SEIZED BYTHE PIRATES OR ENEMIES, SHALL PAY
FREIGHTAGE.IF THE FREIGHTAGE SHOULD HAVE BEEN PAID IN ADVANCE, IT
SHALL BE RETURNED, UNLESS THEREIS AN AGREEMENT TO THE CONTRARY.
LOAN
ARTICLE 734 IN CASE OF SHIPWRECK, THE AMOUNT LIABLE FOR THE
PAYMENT OF THE LOAN SHALL BEREDUCED TO THE PROCEEDS OF THE
GOODS SAVED, AFTER DEDUCTING THE COSTS OF THESALVAGE.IF THE LOAN
SHOULD BE ON THE VESSEL OR ANY OF ITS PARTS, THE FREIGHTAGE
EARNEDDURING THE VOYAGE FOR WHICH THE LOAN WAS CONTRACTED
SHALL ALSO BE LIABLE FOR ITSPAYMENT, AS FAR AS IT MAY REACH. LOAN
ARTICLE 735 IF THE SAME VESSEL OR CARGO SHOULD BE THE OBJECT OF AN
LOAN ON BOTTOMRY ORRESPONDENTIA AND MARINE INSURANCE, THE VALUE
OF WHAT MAY BE SAVED IN CASE OFSHIPWRECK SHALL BE DIVIDED
BETWEEN THE LENDER AND THE INSURER, IN PROPORTION TOTHE
LEGITIMATE INTEREST OF EACH ONE, TAKING INTO CONSIDERATION, FOR
THIS PURPOSEONLY, THE PRINCIPAL WITH RESPECT TO THE LOAN, AND
WITHOUT PREJUDICE TO THE RIGHT OFPREFERENCE OF OTHER CREDITORS
IN ACCORDANCE WITH ARTICLE 580.

PRESCRIPTION
CA. No 65, Section 6. Notwithstanding the provisions of the preceding sections, a
carrier, master or agent of the carrier, and a shipper shall, in regard to any
particular goods be at liberty to enter into any agreement in any terms as to the
responsibility and liability of the carrier for such goods, and as to the rights and
immunities of the carrier in respect of such goods, or his obligation as to
seaworthiness (so far as the stipulation regarding seaworthiness is not contrary to
public policy), or the care or diligence of his servants or agents in regard to the
loading, handling stowage, carriage, custody, care, and discharge of the goods
carried by sea: Provided, That in this case no bill of lading has been or shall be
issued and that the terms agreed shall be embodied in a receipt which shall be a
non-negotiable document and shall be marked as such.

Code of Commerce
ARTICLE 366. Within the twenty-four hours following the receipt of the
merchandise, the claim against the carrier for damage or average be found therein
upon opening the packages, may be made, provided that the indications of the
damage or average which gives rise to the claim cannot be ascertained from the
outside part of such packages, in which case the claim shall be admitted only at
the time of receipt.
After the periods mentioned have elapsed, or the transportation charges have been
paid, no claim shall be admitted against the carrier with regard to the condition in
which the goods transported were delivered.

Salvage Law
Act No. 2616
1. Historical Background
 Laws of Oleron – before the year 1266.
 Salvage Law was enacted on February 4, 1916.
 Definition
 Salvage; defined.  It is a service which one person renders to the owner of as
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 unable to protect and secure. 

There is Salvage where a person (or persons) picks up and conveys to a safe place
a vessel or its cargo which is beyond the control of the crew or shall have been
abandoned by them. ( sec.1, SL) Note: there is also a contract of salvage that may
be voluntarily agreed upon by the parties.
 Compensation allowed to persons by whose voluntary assistance a ship at sea or
her cargo or both have been saved in whole or in part from an impending or actual
peril, shipwrecks, derelicts or recapture - Services one person render 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

 Salvage is founded on equity of remunerating private and individual services

performed in saving, in whole or in part, a ship or its cargo from impending peril, or
recovering them after actual loss.
 “Unless the property be in fact saved by those who claim the compensation, it
cannot be allowed, however, benevolent their intention and however heroic their
conduct.”
 Law on salvage is based on equitable principles and public policy and is not
contractual in origin.
 Historically, salvage is a right in law, when a person, acting as volunteer
preserves or contributes so to preserving at sea any vessel, cargo, freight, or other
recognized subject of salvage from danger.
 Derelict – Ship or her 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

1.2. PARTIES:  the salvor -The person rendering aid who must be acting
voluntarily and under no pre existing contract;  the owner- the owner of the vessel
that is needed to be saved

1.3. Purpose/ Objectivesa. To seek what is fair to both the property owners and the
salvors;b. To counter the temptation to misappropriate the property from
shipwrecks;

c. To provide incentive for salvage operation in order to save the property and
environment this has influenced the rules on reward and no reward without
success;
d. It aims to repair the vessel at a harbor or dry dock or to clear a channel for
navigation;
e. To prevent pollution or damage to the marine environment

1.4. Leading Principles

Salvage Law has a basis that a salvor should be rewarded for risking his life
and property to rescue the property of another from peril.

1.5. Regulatory Provisionsa.

Salvage only recognizes a ship or vessel, cargo on board, freight payableand
bunkers carried on board as the subject of property in danger;

b. The vessel must be in peril, danger needs to be real but not

necessarilyimmediate or absolute.

c. The person rendering aid (the salvor) must be acting voluntarily and under nopre
existing contract;

d. The salvor must be successful in his efforts, though payment for partial success
be granted in certain circumstances;

e. The salvor is entitled to special compensation if he has carried out salvage

operation on a vessel which by itself or its cargo threatens damage to the
environment;

f. If the ship is not saved and the loss was due to the salvor’s negligence, thetime
limit to bring action against the salvor will be based on the tort ofnegligence.

1.6 REQUIREMENTS FOR COMPENSATION

A salvage claim or compensation may be awarded to the salvor if the following
1. requirements are present:
2. there must be a marine peril;
3. the vessel is shipwrecked beyond the control of the crew or shall have been
abandoned;
4. the service of picking up and conveying the vessel of cargo in a safe place is
voluntarily done; and
5. the service must have been successful in whole or in part, or that the service
rendered contributed to such success.1
1.7 AMOUNT OF REWARD OR COMPENSATION
The amount of the compensation shall be fixed by the Court taking into account
the following:
a. the expenditures made to recover or save the vessel or he cargo or both;
b. the zeal demonstrated;
c. the time employed;
d. the service rendered;
e. the excessive express occasioned the number of persons who aided;1 Sec. 1, SL;
Barrios v. Go Thong, 7 SCRA 535)
f. the danger to which they and their vessels were exposed as well as that which
menaced the things recovered or salvaged; and g. The value of such things after
deducting the expenses. ( Sec. 10, SL)

1.8. WHO IS ENTITLED TO REWARD

The salvor is entitled to reward or compensation. The reward for salvage or
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 (Sec. 13,
SL)

a. If two or more persons- divide between them in proportion to the services which
each one may have rendered, and, in case of doubt, in equal parts (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. 12, SL).
1.9. RULES ON SALVAGE AWARD
1. Fixed by RTC in the absence of agreement or where the latter is excessive (Sec. 9)
2. If sold (no claim being made within 3 months from publication)
a. Proceeds, after deducting expenses and the salvage claim, shall go to the
owner
b. If he does not claim it within 3 years, 50% of the said proceeds shall go to
the salvors, 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 ship
owner b. 25% to captain c. 25% to officers and crew in proportion to their salaries
(Sec. 13)

2. PERSONS WITHOUT RIGHT TO A SALVAGE REWARD

1. Crew of the vessel saved 2. Persons who commenced salvage in spite of
opposition of the captain or his representative 3. Person who fails to deliver a
salvaged vessel or cargo to the Collector of Customs (Sec. 3)

2.1 SALVAGE AS COMPARED TO TOWAGE

Towage - contract whereby one vessel, usually motorized, pulls another fromone
place to another, for compensation. It is a contract for services rather thana
contract of carriage.
SALVAGE TOWAGE Governed by special law (Act No. Governed by NCC on 2616)
contract of lease Requires success, otherwise no Success not required payment

Must be done with the consent of Only the consent of the the captain/crewmen
tugboat owner is needed Vessel must be involved in an Vessel need not be involved
in accident an accident Fees distributed among crewmen Fees belong to the
tugboat owner Salvor takes possession and may Tower has no possessory lien;
retain possession until paid only an action for sum of money Court can reduce
amount of Court cannot change amount renumeration if unconscionable in towage
even if unconscionable

The Salvage Law Act No. 2616

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 safeguarded and inventoried.
b. The sale at public auction 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 newspaper 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 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
nor 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 subsection (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 is 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.
Those who, in order to save persons, shall have been exposed to the same dangers
shall also have a right to participate 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 theirrespective salaries, in the
absence of an agreement to the contrary. The expressof salvage, as well as the
reward for salvage or assistance, shall be a charge onthe things salvaged on their
value.
Sec. 14. This Act shall take effect on its passage.
Enacted: February 4, 1916