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TRANSPORTATION LAWS

CONTRACT
OF
TRANSPORTATION/ CARRIAGE
A contract whereby a person,
natural or juridical, obligates to
transport persons, goods, or both, from
one place to another, by land, air or
water, for a price or compensation.
Classifications:
1. Common or Private
2. Goods or Passengers
3. For a fee (for hire) or Gratuitous
4. Land, Water/maritime, or Air
5. Domestic/inter-island/coastwise
or International/foreign
It is a relationship which is imbued
with the public interest.
COMMON CARRIER
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 (Art. 1732, Civil
Code).
Art. 1732 of the New Civil Code
avoids any distinction between one
whose principal business activity is the
carrying of persons or goods or both
and one who does such carrying only
as an ancillary activity (sideline). It
also avoids a distinction between a
person
or
enterprise
offering
transportation service on a regular or
scheduled basis and one offering such
service on an occasional, episodic or
unscheduled basis.
Neither does the law distinguish
between a carrier offering its services
to the general public that is the
general community or population and
one who offers services or solicits
business only from a narrow segment
of the general population.
A person or entity is a common
carrier even if he did not secure a

Certificate of Public Convenience (De


Guzman vs. CA, 168 SCRA 612).
It makes no distinction as to the
means of transporting, as long as it is
by land, water or air.
It does not
provide that the transportation should
be by motor vehicle. (First Philippine
Industrial Corporation vs. CA)
One is a common carrier even if he
has no fixed and publicly known route,
maintains no terminals, and issues no
tickets (Asia Lighterage Shipping, Inc.
vs. CA).
Characteristics:
1. Undertakes to carry for all people
indifferently and thus is liable for
refusal without sufficient reason
(Lastimoso vs. Doliente, October
20, 1961);
2. Cannot lawfully decline to accept
a particular class of goods for
carriage to the prejudice of the
traffic in these goods;
3. No monopoly is favored (Batangas
Trans. vs. Orlanes, 52 PHIL 455);
4. Provides public convenience.
PRIVATE CARRIER
One which, without being engaged
in the business of carrying as a public
employment, undertakes to deliver
goods or passengers for compensation.
(Home Insurance Co. vs. American
Steamship Agency, 23 SCRA 24)
TESTS WHETHER CARRIER IS
COMMON OR PRIVATE:
The SC in First Philippine Industrial
Corporation vs. CA (1995) reiterated
the following tests:
1. It must be engaged in the
business of carrying goods for
others as a public employment
and must hold itself out as ready
to engage in the transportation of
goods generally as a business

and not as a casual occupation;


2. It must undertake to carry goods
of the kind to which its business
in confined;
3. It must undertake to carry by the
method by which his business is
conducted
and
over
its
established roads; and
4. The transportation must be for
hire.
In National Steel Corp. vs. CA (1997)
the SC held that the true test of a
common carrier is the carriage of
goods or passengers provided it has
space for all who opt to avail
themselves of its transportation for a
fee.
COMMON
CARRIER

PRIVATE
CARRIE
R
1. As to availability
Holds himself Contracts
out for all with
people
particular
indiscriminat individuals or
ely
groups only
2. As to required diligence
Extraordinary Ordinary
diligence
is diligence is
required
required
3. As to regulation
Subject
to Not subject
State
to
State
regulation
regulation
4. Stipulation limiting
liability
Parties may Parties may
not agree on limit
the
limiting the carriers
carriers
liability,
liability
provided it is
except when not contrary
provided by to
law,
law
morals
or
good
customs
5. Exempting circumstance
Prove
caso fortuito,
extraordinary Art.
1174

diligence and NCC


Art.
1733,
NCC
6.Presumption of negligence
There is a No
presumption presumption
of fault or of fault or
negligence
negligence
7.Governing law
Law on
Law
on
common
obligations
carriers
and
contracts
GOVERNING LAWS
A. Domestic/inter-island/coastwise
Applicable to Land, Water, and Air
transportation
1. Civil Code - primary
2. Code of Commerce (Arts. 349,
379, 573-734, 580, 806-845) suppletory
B. International/foreign/overseas
(Foreign country to Philippines)
Applicable to Water/maritime and
Air transportation
The law of the country of destination
generally applies.
1. Civil Code - primary
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of
Goods by Sea Act (COGSA)
b. Air: Warsaw Convention
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT
OF
EXTRAORDINARY DILIGENCE
Rendition of service with the
greatest skill and utmost foresight.
(Davao Stevedore Co. v. Fernandez)
Rationale:
1. From the nature of the business
and for reasons of public policy
(Art. 1733)
2. Relationship of trust
3. Business is impressed with a
special public duty

4. Possession of the goods


5. Preciousness of human life
A common carrier is not an absolute
insurer of all risks of travel.
COVERAGE
1. Vigilance over goods (Arts. 17341754); and
2. Safety of passengers (Arts. 17551763).
PASSENGER
A person who has entered into a
contract of carriage, express or
implied, with the carrier. They are
entitled to extraordinary diligence from
the common carrier.
The following are not considered
passengers, and are entitled to
ordinary diligence only:
a. One who has not yet boarded any
part of a vehicle regardless of
whether or not he has purchased
a ticket;
b. One who remains on a carrier for
an unreasonable length of time
after he has been afforded every
safe opportunity to alight;
c. One who has boarded by fraud,
stealth, or deceit;
d. One who attempts to board a
moving vehicle, although he has
a ticket, unless the attempt be
with the knowledge and consent
of the carrier;
e. One who has boarded a wrong
vehicle,
has
been
properly
informed of such fact, and on
alighting, is injured by the carrier;
f. Invited
guests
and
accommodation
passengers.
(Lara vs. Valencia)
g. One who rides any part of the
vehicle which is unsuitable or
dangerous or which he knows is
not designed or intended for
passengers.
DEFENSES OF A COMMON CARRIER
IN THE CARRIAGE OF GOODS
CASO FORTUITO/FORCE MAJEURE

Requisites:
a. Must be the proximate and only
cause of the loss
b. Exercise of due diligence to prevent
or minimize the loss before, during or
after the occurrence of the disaster
(Art. 1739)
c. Carrier has not negligently incurred
in delay in transporting the goods (Art.
1740)
Fire is not considered a natural
disaster or calamity as it arises almost
invariably from some act of man.
(Eastern Shipping Lines Inc. vs. IAC)
Mechanical defects are not force
majeure if the same was discoverable
by regular and adequate inspections.
(Notes and Cases on the Law on
Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed.
p.120-122)
2. ACTS OF PUBLIC ENEMY
Requisites:
a. Must be the proximate and only
cause of the loss
b. Exercise of due diligence to prevent
or minimize the loss before, during
or after the act causing the loss,
deterioration or destruction of the
goods (Art. 1739)
3. NEGLIGENCE OF THE SHIPPER OR
OWNER
a. Sole and proximate cause:
absolute defense
b.
Contributory: partial defense.
(Art. 1741)
4. CHARACTER OF THE GOODS OR
DEFECTS IN THE PACKING OR IN THE
CONTAINER
Even if the damage should be
caused
by
the
inherent
defect/character of the goods, the
common carrier must exercise due
diligence to forestall or lessen the loss.
(Art. 1742)
The carrier which, knowing the fact
of improper packing of the goods upon
ordinary observation, still accepts the

goods notwithstanding such condition,


is not relieved of liability or loss or
injury resulting therefrom. (Southern
Lines, Inc. v. CA, 4 SCRA 258)
5. ORDER
OR
ACT
OF
PUBLIC
AUTHORITY
Said public authority must have the
power to issue the order (Art. 1743).
Consequently, where the officer acts
without legal process, the common
carrier will be held liable. (Ganzon v.
CA 161 SCRA 646)
Diligence in the selection and
supervision of employees under Article
2180 of the Civil Code cannot be
interposed as a defense by the
common carrier because the liability of
the carriers arises from the breach of
the contract of carriage. The defense
under said articles is applicable to
negligence in quasi-delicts under Art.
2176. (Del Prado v. Manila Electric Co.,
52 Phil 900)
LIABILITY OF A COMMON CARRIER
FOR
DEATH
OR
INJURIES
TO
PASSENGERS DUE TO ACTS OF ITS
EMPLOYEES
AND
OTHER

PASSENGERS OR STRANGERS
FOR ACTS
OF OTHER
PASSENGE
RS OR
STRANGER
S
Required diligence and
defense
Extraordinary Ordinary
diligence
diligence
Nature of liability
Tort;
Not
however,
absolute;
The
limited
by
employee
Art. 1763
must be on
duty at the
time of the
act.
(Maranan v.
Perez)
FOR ACTS
OF ITS
EMPLOYEES

The carrier is liable when its


personnel allowed a passenger to drive
the vehicle causing it to collide with
another vehicle resulting to the injuries
suffered by the other passengers.
(MRR vs. Ballesteros, 16 SCRA 641)

CARRIAGE OF GOODS

CARRIAGE OF
PASSENGERS

Parties
1. Common carrier
1. Common carrier
2. Shipper
2. Passenger
3. Consignee
Cause of liability
Delay in delivery, loss,
Death or injury to the
destruction, or deterioration
passengers
of the goods
Duration of liability
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 the right to
receive them. (Art. 1736)
It 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. (Art. 1737)

It
continues
to
be
operative even during the
time the goods are stored in
a warehouse of the carrier at
the place of destination until
the
consignee
has
bee
advised of the arrival of the
goods
and
has
had
reasonable
opportunity
thereafter to remove them or
otherwise dispose of them.
(Art. 1738)
Delivery of goods to the
custom authorities is not
delivery to the consignee. (Lu
Do v. Binamira, 101 Phil 120)

The duty of a common


carrier to provide safety to
its passengers so obligates it
not only during the course of
the trip, but for so long as
the passengers are within its
premises and where they
ought to be in pursuance to
the contract of carriage.
(LRTA v. Navidad, [2003])
All persons who remain on
the
premises
within
a
reasonable
time
after
leaving the conveyance are
to be deemed passengers,
and what is a reasonable
time or a reasonable delay
within this rule is to be
determined from all the
circumstances, and includes
a reasonable time to see
after
his
baggage
and
prepare for his departure.
(La Mallorca v. CA, 17 SCRA
739
;
Abiotiz
Shipping
Corporation v. CA, 179 SCRA
95)
It is the duty of common
carriers of passengers to
stop their conveyances a
reasonable length of time in
order to afford passengers
an opportunity to enter, and
they are liable for injuries
suffered from the sudden
starting up or jerking of their
conveyances while doing so.
The duty which the carrier of

passengers owes to its


patrons extends to persons
boarding the cars as well as
to those alighting therefrom
(Dangwa Trans Co., Inc. vs.
CA 202 SCRA 574).
Presumption of negligence
Art.1735 Civil Code
Art.1755 Civil Code
Reason: As to when and how Reason:
The
contract
goods were damaged in between the passenger and
transit is a matter peculiarly the carrier imposes on the
within the knowledge of the latter the duty to transport
carrier and its employees. the passenger safely; hence
(Mirasol v. Dollar, 53 PHIL the burden of explaining
124)
should fall on the carrier.
Mere proof of delivery of
goods to a carrier in good
order and the subsequent
arrival of the same goods at
the place of destination in
bad order makes for a prima
facie case against the carrier.
(Coastwise Lighterage Corp.
v. CA, 245 SCRA 796)
Defenses
1. Ordinary circumstance:
Exercise
of
extraordinary diligence
(Art. 1735)
2. Special circumstances:
a. Flood,
storm,
earthquake, lighting,
or
other natural
disaster or calamity
(plus force majeure)
b. Act of the public
enemy
in
war,
whether
international or civil
c. Act or omission of
the shipper or the
owner of goods
d. The character of the
goods or defects in
the packing or in the
containers
e. Order or act of
competent
public
authority (Art. 1734)

1. Exercise
of
extraordinary
diligence (Art. 1756)
2. Caso fortuito

Valid stipulations
1. Reduction of degree of
diligence
to
ordinary
diligence, provided it be:
a) In writing, signed by the
shipper or owner;
b) Supported by a valuable
consideration
other
than
the
service
rendered
by
the
carriers; and
c) Reasonable, just and
not contrary to public
policy. (Art. 1744)
2. Fixed amount of liability: A
contract fixing the sum to be
recovered by the owner or
shipper
for
the
loss,
destruction or deterioration
of the goods, if it is
reasonable and just under
the circumstances and has
been fairly and freely agreed
upon. (Art. 1750)
3. Limited liability for delay:
An agreement limiting the
common carriers liability for
delay on account of strikes or
riots (Art. 1748)
4. Stipulation limiting liability
to the value of the goods
appearing in the bill of lading,
unless the shipper or owner
declares a greater value. (Art.
1749)

Stipulation limiting liability


when a passenger is carried
gratuitously, but not for
willful
acts
or
gross
negligence. (Art. 1758)

The diligence required in


the carriage of the goods
may be reduced by only one
degree, from extraordinary to
ordinary
diligence
or
diligence of a good father of
a family. (Art. 1744, Art.
1745, no. 4)
Void stipulations
1. That
the
goods
are
transported at the risk of the
owner or shipper;
2. That carrier will not be liable

Dispensing with or lessening


the
extraordinary
responsibility of a common
carrier for the safety of

3.
4.

5.

6.

7.

for any loss, destruction or


deterioration of the goods;
That the carrier need not
observe any diligence in the
custody of the goods;
That
the
carrier
shall
exercise
a
degree
of
diligence less than that of a
good father of a family over
the movable transported;
That the carrier shall not be
responsible for the acts or
omissions of his or its
employees;
That the carriers liability for
acts committed by thieves or
robbers who do not act with
grave or irresistible threat,
violence
or
force
is
dispensed
with
or
diminished;
That the carrier is not
responsible for the loss,
destruction or deterioration
of the goods on account of
the defective condition of
the car, vehicle, ship or
other equipment used in the
contract of carriage. (Art.
1745)

passengers imposed by law


by stipulation, by posting of
notices, by statements on
tickets or otherwise. (Art.
1757)

RULES ON PASSENGERS BAGGAGE


IN THE
IN THE
CUSTODY
CUSTODY
OF THE
OF THE
PASSENGER
COMMON
S
CARRIER
(HAND(CHECKED
CARRIED)
-IN)
Legal nature of the
baggage
Necessary
Considered
deposit
as goods
Required diligence by
the common carrier
Diligence of a Extraordina
depositary
ry diligence
(ordinary
diligence)
Applicable rules
Arts.
1998 Arts. 1733and
2000- 1753
2003
CONCURRING CAUSES OF ACTION
ARISING FROM THE NEGLIGENT
ACT OF THE COMMON CARRIER
1. Culpa contractual (breach of
contract)
Only the carrier is primarily liable
and not the driver, because there is no
privity between the driver and the
passenger.
Basis: Art.1759, NCC.
No defense of due diligence in the
selection
and
supervision
of
employees.
2. Culpa aquiliana (quasi-delict)
The carrier and driver are solidarily
liable as joint tortfeasors.
Basis: Art. 2180, NCC.
Defense of due diligence in the
selection and supervision of employees
is available. Exception: maritime tort
resulting in collision. (See notes on
Collision)
3. Culpa criminal (criminal negligence)
The driver is primarily liable. The
carrier is subsidiarily liable only if the
driver is convicted and declared
insolvent.

Basis: Art. 100, RPC.


In case of injury to a passenger due
to the negligence of the driver of the
bus on which he is riding and of the
driver of another vehicle, the drivers as
well as the owners of the two vehicles
are jointly and severally liable for
damages. It makes no difference that
the liability of the bus driver and owner
springs from contract while that of the
owner and driver of the other vehicle
arises from quasi-delict. (Fabre vs. CA)
LIMITATIONS
LIABILITY
INVALID AS
BEING
CONTRARY
TO PUBLIC
POLICY
1.
One
exempting
the
carrier
from any and
all liability for
loss
or
damage
occasioned
by its own
negligence.
2.
An
unqualified
limitation of
liability to an
agreed
valuation.

AS

TO

CARRIERS

VALID &
ENFORCEA
BLE
1.
One
limiting the
liability
of
the carrier
to
an
agreed
valuation,
unless the
shipper
declares a
higher value
and pays a
higher rate
of freight
(H.E.
Heacock
Company
vs.
Macondray
& Company
Inc.)

However, the carrier cannot limit its


liability for injury to, or loss of, goods
shipped where such injury or loss was
caused by its own negligence.
(Shewaram vs. PAL, 17 SCRA 606)
SPECIAL RULES ON LIABILITES OF
AIRLINE CARRIERS
1. In case of flight diversion due to bad

weather
or
other
circumstances
beyond the pilots control, the relation
between the carrier and the passenger
continues until the latter has been
landed at the port of destination and
has left the carriers premises. The
carrier should necessarily exercise
extraordinary diligence in safeguarding
the comfort, convenience and safety of
its stranded passengers until they
have reached their final destination.
(Philippine Airlines vs. CA, 226 SCRA
423)
2.
Even
where
overbooking
of
passengers is allowed as a commercial
practice, the airline company would
still be guilty of bad faith and still be
liable for damages if it did not properly
inform passenger that it could breach
the contract of carriage even if they
were confirmed passengers. (Zalamea
vs. CA, 228 SCRA 23)
3. An open-dated ticket constitutes a
complete contract between the carrier
and passenger.
Hence, the airline
company is liable if it refused to
confirm
a
passengers
flight
reservation. (Singson vs. CA, 282 SCRA
149)
4. An airline company which issued a
confirmed ticket to a passenger
covering successive trips on different
airlines can be held liable for damages
occasioned by bumping off by one of
the successive airlines. (Lufthansa
German Airlines vs. CA, 238 SCRA 290)
5. An airline ticket providing that
carriage by successive air carriers is to
be regarded as a single operation is
to make the issuing carrier liable for
the tortuous conduct of the other
carrier. A printed provision in the ticket
limiting liability only to its own conduct
is not enough to rebut that liability.
(KLM Royal Dutch Airlines vs. CA, 65
SCRA 237)
II. CODE OF COMMERCE
A. OVERLAND TRANSPORTATION
(Arts. 349-379)

Applicability
1. Domestic land and water/maritime
transportation.
(Pandect
of
Commercial Law and Jurisprudence,
Justice Jose Vitug, 1997 ed.)
2.
Domestic
Air
Transportation.
(Commercial
Law
Review,
Cesar
Villanueva, 2004 ed.)
IMPORTANT CONCEPTS:
1. Bill of lading
2. Obligations of the carrier
3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
BILL OF LADING
The written acknowledgment of
receipt of goods and agreement to
transport them to a specific place to a
person named or to his order.
Rules:
1. It is not indispensable for the
creation of a contract of carriage.
(Compania Maritima vs. Insurance
Company of North America, 12 SCRA
213)
2. Ambiguity is construed against the
carrier, the contract being one of
adhesion.
3. The consignee, although the
instrument is oftentimes drawn up only
by the consignor and carrier, becomes
bound by all the stipulations contained
therein by making a claim for loss on
the basis of said bill of lading. (SeaLand Services Inc. vs. IAC)
4. The right of a party to recover for
loss of shipment consigned to him
under a bill of lading drawn up only by
and between the shipper and the
carrier, springs from either a relation of
agency between him and the shipper,
or his status as stranger in whose favor
some stipulation is made in said
contract, and who becomes a party
thereto when he demands fulfillment of
that stipulation. (Art. 1311 (2),
(Mendoza vs. PAL Inc.)

5. Acceptance of the bill of lading


without dissent raises the presumption
that all the terms therein where
brought to the knowledge of the
shipper and agreed to by him and, in
the absence of fraud or mistake; he is
estopped from thereafter denying that
he assented to such terms. (Notes and
Cases on the Law on Transportation
and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed. p.261)
Kinds:
1. On board - issued when the goods
have been actually placed aboard
the ship with very reasonable
expectation that the shipment is
as good as on its way.
2. Received - one in which it is stated
that the goods have been received
for shipment with or without
specifying the vessel by which the
goods are to be shipped.
3. Negotiable - one in which it is
stated that the goods referred to
therein will be delivered to the
bearer or to the order of any
person named therein.
4. Non-negotiable - One in which it is
stated that the goods referred to
therein will be delivered to a
specified person.
5. Clean One which does not
indicate any defect in the goods.
6. Foul One which contains a
notation thereon indicating that
the goods covered by it are in bad
condition.
7. Spent One which covers goods
that already have been delivered
by the carrier without a surrender
of a signed copy of the bill.
8. Through One issued by the
carrier who is obliged to use the
facilities of other carriers as well as
his own facilities for the purpose of
transporting the goods from the
city of the seller to the city of the
buyer, which bill of lading is
honored by the second and other

interested carriers who do not


issue their own bills.
9. Custody One wherein the goods
are already received by the carrier
but the vessel indicated therein
has not yet arrived in the port.
10. Port One which is issued by the
carrier to whom the goods have
been delivered, and the vessel
indicated in the bill of lading by
which the goods are to be shipped
is already in the port where the
goods are held for shipment.
Functions:
1. Best evidence of the existence of
the contract of carriage of cargo
(Art. 353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver
goods as stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier
cannot ordinarily refuse to carry a
particular class of goods.
EXCEPTION: For some sufficient
reason the discrimination against the
traffic in such goods is reasonable and
necessary.
(Fisher
vs.
Yangco
Steamship Co. 31 Phil 1).
Instances when the carrier may
validly refuse to accept the goods
include the ff:
1.) Goods sought to be transported are
dangerous objects, or substances
including
dynamite
and
other
explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in
overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward
danger like flood, capture by enemies
and the like
7.) Goods like livestock will be exposed
to disease
8.) Strike

9.) Failure to tender goods on time.


(Notes and Cases on the Law on
Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed.
p.68)
In case of carriage by railway, the
carrier is exempted from liability if
carriage is insisted upon by the
shipper, provided its objections are
stated in the bill of lading.
However, when a common carrier
accepts cargo for shipment for
valuable consideration, it takes the risk
of delivering it in good condition as
when it was loaded. (PAL vs. CA)
B. Duty to deliver the goods
Not only to transport the goods
safely but to the person indicated in
the bill of lading. The goods should be
delivered to the consignee or any other
person to whom the bill of lading was
validly transferred or negotiated.
Time of delivery
Stipulated
No
in
stipulation
Contract/Bil
l of Lading
1. Carrier is 1. Within a
bound
to reasonable
fulfill
the time.
contract and 2. Carrier is
is liable for bound
to
any
delay; forward
no
matter them in the
from
what 1st shipment
cause it may of the same
have arisen. or
similar
goods which
he
may
make to the
point
of
delivery.
(ART.
358
Code
of
Commerce)
Effects of delay
a. Merely suspends and generally does
not terminate the contract of carriage
b. Carrier remains duty bound to exercise

extraordinary diligence
c. Natural disaster shall not free the
carrier from responsibility (Art.1740)
d. If delay is without just cause, the
contract limiting the common carriers
liability cannot be availed of in case of
loss or deterioration of the goods
(Art.1747)
RIGHT
OF
CONSIGNEE
TO
ABANDON GOODS
Instances:
1. Partial non-delivery, where the goods
are useless without the others (Art.
363);
2. Goods are rendered useless for sale or
consumption for the purposes for
which they are properly destined (Art.
365); and
3. In case of delay through the fault of
the carrier (Art. 371).
NOTICE OF DAMAGE (ART. 366)
Requisites for applicability:
1. Domestic/inter-island/coastwise
transportation
2. Land/water/air transportation
3. Carriage of goods
4. Goods shipped are damaged
Rules:
a. Patent damage: shipper must file a
claim against the carrier immediately
upon delivery (it may be oral or
written)
b. Latent damage: shipper should file a
claim against the carrier within 24
hours from delivery.
Note: These rules does not apply to
misdelivery of goods. (Roldan vs. Lim
Ponzo)
Purpose of notice: To inform the
carrier that the shipment has been
damaged, and it is charged with
liability therefore, and to give it an
opportunity to make an investigation
and fix responsibility while the matter
is fresh.
The filing of notice of claim is a
condition precedent for recovery.
Shorter period may be stipulated by
the parties because it merely affects
the shippers remedy and does not

affect the liability of the carrier.


(PHILAMGEN vs. Sweetlines, Inc.)
Prescriptive Period
Not provided by Article 366. Thus, in
such absence, Civil Code rules on
prescription apply.
If despite the notice of claim, the
carrier refuses to pay, action must be
filed in court.
1. No bill of lading was issued:
within 6 years
2. Bill of lading was issued:
within 10 years.
ARTICLE
COGSA
366
Sec.3 (6)
Applicability
Domestic/int1. International
er/
island/coast
overseas/for
wise
eign
(from
transportatio foreign
n
country
to
Land, water, Phils.)
air
Note:
transportatio subject
to
n
the rule on
Carriage of Paramount
goods
Clause
2.
Water/mariti
me
transportati
on
3. Carriage
of goods
Notice of damage
1. Condition 1. Not a
precedent
condition
2. 24-hour
precedent
period for 2. 3-day period
claiming
for claiming
latent
latent
damage
damage
Prescriptive period
None
One
year
provided;
from
the
Civil
Code date
of
applies.
delivery
(delivered
but
damaged
goods),
or

date when
the
vessel
left port or
from
the
date
of
delivery to
the arrastre
(nondelivery or
loss).
COMBINED CARRIER AGREEMENT
(ART. 373)
GENERAL RULE: In case of a contract
of transportation of several legs, each
carrier is responsible for its particular
leg in the contract.
EXCEPTION: A combined carrier
agreement where a carrier makes itself
liable assuming the obligations and
acquiring as well the rights and causes
of action of those which preceded it.
B. MARITIME COMMERCE
(Arts. 573-869)
IMPORTANT CONCEPTS:
1. Merchant vessel
2. Maritime lien and Preference of
Credit
3. Doctrine of limited liability
4. Causes of revocation of voyage
5. Participants
in
maritime
commerce
6. Charter party
7. Loans
on
bottomry
and
respondentia
8. Accidents in maritime commerce
MARITIME/ADMIRALTY LAW
It is the system of laws which
particularly relates to the affairs and
business of the sea, to ships, their
crews and navigation, and to maritime
conveyance of persons and property.
(Notes and Cases on the Law on
Transportation and Public Utilities,
Aquino & Hernando, citing Francisco,
p.254)
Maritime laws apply
maritime trade and sea

only to
voyages.

(Pandect of Commercial Law and


Jurisprudence, Justice Jose Vitug, 1997
ed.)
Arrastre service is not maritime in
character. It refers to a contract for the
unloading of goods from a vessel.
(ICTSI vs. Prudential Guarantee, 320
SCRA 244)
CHARACTERISTICS OF MARITIME
TRANSACTION
1. Real - similar to transactions over
real property with respect to effectivity
against third persons which is done
through
registration.
(Rubiso
vs.
Rivera, 37 Phil. 72). The evidence of
real nature is shown by: 1) the
limitation of the liability of the agents
to the actual value of the vessel and
the freight money; and 2) the right to
retain the cargo and embargo and
detention of the vessel (Luzon
Stevedoring Corp v. CA, 156 SCRA
169);
2. Hypothecary - the liability of the
owner of the value of the vessel is
limited to the vessel itself (Doctrine of
Limited Liability).
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 stands as the guaranty for their
settlement. (Aboitiz Shipping Corp. vs.
General
Accident
Fire
and
Life
Assurance Corp. 217 SCRA 359).
MERCHANT VESSEL
Vessel engaged in maritime
commerce,
whether
foreign
or
otherwise. (Bar Review Materials in
Commercial Law, Jorge Miravite, 2002
ed.)
Constitutes property which may be
acquired and transferred by any of the
means recognized by law. They shall
continue to be considered as personal
property. (Arts. 573, 585)
They are susceptible to maritime

liens such as for the repair, equipping


and provisioning of the vessel in the
preparation of a voyage, as well as
mortgage liabilities, in satisfaction of
which a vessel may be validly arrested
and sold. (Ship Mortgage Decree of
1978)
MARITIME LIEN
It constitutes a present right of
property in the ship, a jus in re, to be
afterward enforced in admiralty by
process in rem. (PNB vs. CA, 337 SCRA
381)
If the maritime lien arose prior to
the recording of a preferred mortgage,
it shall have priority over the said
mortgage lien. (PNB vs. CA, 337 SCRA
381)
ORDER OF PREFERENCE IN CASE
OF SALE OF VESSEL
R.A. 6106
P.D. 1521
Effectivity date
1969
1978
Applicability
Overseas
Both
shipping
domestic
only
and
overseas
shipping
Kind of sale
Judicial
Judicial and
extrajudicial
Order of Preference
A preferred The
mortgage
preferred
shall
have mortgage
priority over lien
shall
all
claims have priority
against the over
all
vessel,
claims
except the against the
following
vessel,
preferences except the
in the order following
stated:
preferences
1.
Judicial in the order
costs of the stated:
proceedings 1. Expenses

;
2. Taxes due
the
Philippine
Government
;
3.
Salaries
and wages
of
the
Captain and
Crew of the
vessel
during
its
last voyage;
4.
General
average or
salvage
including
contract
salvage,
bottomry
loans,
and
indemnity
due
shippers for
the value of
goods
transported
but
which
were
not
delivered to
the
consignee;
5. Costs of
repair
and
equipment
of
the
vessel, and
provisioning
of
food,
supplies and
fuel during
its
last
voyage; and
6. Preferred
mortgages
registered
prior
in
time.

and
fees
allowed and
costs taxed
by the court
and
taxes
due to the
Government
;
2.
Crews
wages;
3. General
average;
4. Salvage,
including
contract
salvage;
5. Maritime
liens arising
prior in time
to
the
recording of
the
preferred
mortgage;
6. Damages
arising out
of tort; and
7. Preferred
mortgage
registered
prior
in
time.

Effect of sale: All pre-existing claims


in the vessel are terminated. They will

then be satisfied from the proceeds of


the sale subject to the order of
preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
Cases where applicable:
1. Art. 587 civil liability for
indemnities to third persons
2. Art. 590 indemnities from
negligent acts of the captain (not
the shipowner or ship agent)
3. Art. 837 collision
4. Art. 643 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
GENERAL RULE: The liability of
shipowner and ship agent is limited to
the amount of interest in said vessel
such that where vessel is entirely lost,
the obligation is extinguished. (Luzon
Stevedoring v. Escano, 156 SCRA 169)
The interest extends to: 1) the vessel
itself; 2) equipments; 3) freightage;
and 4) insurance proceeds. (Chua v.
IAC, 166 SCRA 183)
EXCEPTIONS:
1. Claims
under
Workmens
Compensation (Abueg vs. San Diego
77 Phil 730);
2. Injury or damage due to shipowner
or to the concurring negligence of
the shipowner and the captain;
3. The vessel is insured (Vasquez vs.
CA 138 SCRA 553).
4. Expenses for repair on vessel
completed before loss;
5. In case there is no total loss and the
vessel is not abandoned;
6. Collision between two negligent
vessels;
Abandonment of the vessel is
necessary to limit the liability of the
shipowner.
The only instance were
abandonment is dispensed with is
when the vessel is entirely lost (Luzon
Stevedoring vs. CA 156 SCRA 169).

RIGHT OF SHIPOWNER OR SHIP


AGENT TO ABANDON VESSEL
Instances:
1. In
case
of
civil
liability
from
indemnities to third persons (Art. 587);
2. In case of leakage of at least of the
contents of a cargo containing liquids
(Art. 687); and
3. In case of constructive loss of the
vessel (Sec. 138, Insurance Code).
RIGHT OF ABANDONMENT
SHIPOWNE CONSIGNE
R OR SHIP
E
AGENT
What may be abandoned
Vessel
Goods
shipped
Instances
1. In case of 1.
Partial
civil liability nonfrom
delivery,
indemnities
where
the
to
third goods
are
persons (Art. useless
587);
without the
2. Sec. 138, others (Art.
Insurance
363);
Code;
2. Goods are
3. In case of rendered
leakage of at useless for
least of sale
or
the contents consumptio
of a cargo n for the
containing
purposes for
liquids (Art. which they
687)
are properly
destined
(Art.
365);
and
3. In case of
delay
through the
fault of the
carrier (Art.
371).
Effects
1. Transfer of Transfer of
ownership of ownership
the
vessel on
the
from
the goods from

shipowner to
the shippers
or insurer.
2. In case of
(2),
the
insurer must
pay
the
insured as if
there
was
actual total
loss of the
vessel.

the shipper
to
the
carrier.
Carrier
should pay
the shipper
the market
value of the
goods at the
point
of
destination.

CAUSES
OF
REVOCATION
OF
VOYAGE
1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at
destination;
4. Embargo;
5. Inability of the vessel to navigate.
(Art. 640)
Terms:
1. Interdiction of commerce A
governmental
prohibition
of
commercial intercourse intended to
bring about an entire cessation for
the time being of all trade whatever.
2. Blockade A sort of circumvallation
of a place by which all foreign
connection and correspondence is,
as far as human power can effect it,
to be cut off.
3. Embargo A proclamation or order
of a state, usually issued in time of
war
or
threatened
hostilities,
prohibiting the departure of ships or
goods from some or all the ports of
such state until further order.
PARTICIPANTS
IN
MARITIME
COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who 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.
Ship agent (naviero)
Person entrusted with provisioning
and representing the vessel in the port
in which it may be found; also includes
the shipowner.
Not a mere agent under civil law; he
is solidarily liable with the ship owner.
Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain,
subject to Art.609;
3. Contract in the name of the owners
with respect to repairs, details of
equipment, armament, provisions of
food and fuel, and freight of the
vessel, and all that relate to the
requirements of navigation;
4. Order a new voyage, make a new
charter or insure the vessel after
obtaining authorization from the
shipowner or if granted in certificate
of appointment.
Civil Liabilities of the Shipowner
And Ship Agent
1. All contracts of the captain, whether
authorized or not, to repair, equip
and provision the vessel; (Art. 586)
2. Loss and damage to the goods
loaded on the vessel without
prejudice to their right to free
themselves
from
liability
by
abandoning the vessel to the
creditors. (Art. 587)
Duty of Ship Agent to Discharge
the Captain and Members of the
Crew
If the seamen contract is not for a
definite period or voyage, he may
discharge them at his discretion. (Art.
603)
If for a definite period, he may not
discharge
them
until
after
the
fulfillment of their contracts, except on
the following grounds:

a. Insubordination in serious matters;


b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to
its cargo through malice or manifest or
proven negligence. (Art. 605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders
of ships.
The terms have the same meaning,
but are particularly used in accordance
with the size of the vessel governed
and the scope of transportation, i.e.,
large and overseas, and small and
coastwise, respectively.
Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative
of
the
government of the country under
whose flag he navigates.
Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required
physical
and
mental
examinations
required
for
licensing him as such. (Art. 609)
Inherent powers:
1. Appoint crew in the absence of
ship agent;
2. Command the crew and direct
the vessel to its port of
destination;
3. Impose correctional punishment
on those who, while on board
vessel, fail to comply with his
orders
or
are
wanting
in
discipline;
4. Make contracts for the charter of
vessel in the absence of ship
agent.
5. Supply, equip, and provision the
vessel; and
6. Order repair of vessel to enable it
to continue its voyage. (Art. 610)
Sources of funds to comply with the
inherent powers of the captain (in
successive order):
1. From the consignee of the vessel;

2.
3.
4.
5.

From the consignee of the cargo;


By drawing on the ship agent;
By a loan on bottomry;
By sale of part of the cargo. (Art.
611)
Duties:
1. Bring on board the proper
certificate and documents and a
copy of the Code of Commerce;
2. Keep a Log Book, Accounting
Book and Freight Book;
3. Examine the ship before the
voyage;
4. Stay on board during the loading
and unloading of the cargo;
5. Be on deck while leaving or
entering the port;
6. Protest arrivals under stress and
in case of shipwreck;
7. Follow instructions of and render
an accounting to the ship agent;
8. Leave the vessel last in case of
wreck;
9. Hold in custody properties left by
deceased passengers and crew
members;
10.
Comply
with
the
requirements of customs, health,
etc. at the port of arrival;
11.
Observe rules to avoid
collision;
12.
Demand
a
pilot
while
entering or leaving a port. (Art.
612)
A ships captain must be accorded a
reasonable measure of discretionary
authority to decide what the safety of
the ship and of its crew and cargo
specifically requires on a stipulated
ocean voyage (Inter-Orient Maritime
Enterprises Inc. vs. CA).
No liability for the following:
1. Damages caused to the vessel or
to the cargo by force majeure;
2. Obligations contracted for the
repair,
equipment,
and
provisioning of the vessel unless
he has expressly bound himself
personally or has signed a bill of

exchange or promissory note in


his name. (Art. 620)
Solidary Liabilities of the Ship
Agent/Shipowner for Acts Done by
the Captain towards Passengers
and Cargoes
1. Damages to vessel and to cargo
due to lack of skill and
negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of
laws;
4. Damages due to mutinies;
5. Damages due to misuse of
power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance
of marine regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No liability under the following
circumstances:
1. If, before beginning voyage, captain
attempts to change it, or a naval
war with the power to which the
vessel was destined occurs;
2. If a disease breaks out and be
officially declared an epidemic in the
port of destination;
3. If the vessel should change owner or
captain. (Art. 647)
Sailing Mate/First Mate
Second chief of the vessel who takes
the place of the captain in case of
absence, sickness, or death and shall
assume all of his duties, powers and
responsibilities. (Art. 627)
Duties:
1. Provide himself with maps and
charts with astronomical tables
necessary for the discharge of his
duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage
on consultation with the captain

and the officers of the boat,


following the decision of the
captain in case of disagreement;
4. Responsible for all the damages
caused to the vessel and the
cargo
by
reason
of
his
negligence. (Arts. 628 - 631)
Second Mate
Takes command of the vessel in
case of the inability or disqualification
of the captain and the sailing mate,
assuming in such case their powers
and responsibilities.
Third in command
Duties:
1. Preserve the hull and rigging of
the vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory
the
rigging
and
equipment of the vessel, if laid
up. (Art. 632)
Engineers
Officers of the vessel but have no
authority except in matters referring to
the motor apparatus. When two or
more are hired, one of them shall be
the chief engineer.
Duties:
1. In charge of the motor apparatus,
spare
parts,
and
other
instruments pertaining to the
engines;
2. Keep the engines and boilers in
good condition;
3. Not to change or repair the
engine without authority of the
captain;
4. Inform the captain of any
damage to the motor apparatus;
5. Keep an Engine Book;
6. Supervise
all
personnel
maintaining the engine.
(Art.
632)
Crew
The aggregate of seamen who man
a ship, or the ships company.

Hired by the ship agent, where he is


present and in his absence, the captain
hires them, preferring Filipinos, and in
their absence, he may take in
foreigners, but not exceeding 1/5 of
the crew. (Art. 634)
Classes of Seamans Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of
Seaman While Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of
discipline;
3. Repeated
incapacity
and
negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a
Seaman
The seamans heirs are entitled to
payment as follows:
1. If death is natural:
a. compensation up to time of death
if engaged on wage
b. if by voyage - half of amount if
death occurs on voyage out; and
full, if on voyage in
c. if by shares - none, if before
departure; full, if after departure
2. if death is due to defense of vessel full payment;
3. if captured in defense of vessel - full
payment;
4. if captured due to carelessness wages up to the date of the capture.
(Art. 645)
Complement of the Vessel
All persons on board, from the
captain to the cabin boy, necessary for
the management, maneuvers, and
service, thus including the crew, the
sailing mates, engineers, stokers and
other employees on board not having
specific designations.

Does not include the passengers or


the persons whom the vessel is
transporting.
D. SUPERCARGOES

Persons
who
discharges
administrative duties assigned to him
by ship agent or shippers, keeping an
account and record of transaction as
required in the accounting book of the
captain. (Art. 649)
E. PILOT
A person duly qualified, and
licensed, to conduct a vessel into or
out of ports, or in certain waters.
The term generally connotes a
person taken on board at a particular
place for the purpose of conducting a
ship through a river, road or channel,
or from a port.
Master pro hac vice for the time
being in the command and navigation
of the ship.
While in exercising his functions a
pilot is in sole command of the ship
and supersedes the master for the
time being in the command and
navigation of the ship, the master does
not surrender his vessel to the pilot
and the pilot is not the master. There
are occasions when the master may
and should interfere and even displace
the pilot, as when the pilot is obviously
incompetent
or
intoxicated
(Far
Eastern Shipping Company vs. CA).
Compulsory Pilotage States
possessing harbors have enacted laws
or promulgated rules requiring vessels
approaching their ports to take on
board pilots licensed under the local
laws. (Notes and Cases on the Law on
Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.
518)
Liablity of Pilot
GENERAL RULE: On compulsory
pilotage grounds, the Harbor Pilot is
responsible for damage to a vessel or
to life or property due to his
negligence.

EXCEPT:
1. Accident caused by force majeure or
natural calamity provided the pilot
exercised prudence and extra diligence
to prevent or minimize damages.
2. Countermand or overrule by the
master of the vessel in which case the
registered owner of the vessel is liable.
(Sec.11, Art.III PPA Admin Order 03-85)
SPECIAL CONTRACTS OF MARITIME
COMMERCE
1. Charter party
2. Bill of lading
3. Contract of transportation of
passengers on sea voyages
4. Loan on bottomry
5. Loan on respondentia
6. Marine insurance
CHARTER PARTY
A contract by virtue of which the
owner or agent binds himself to
transport merchandise or persons for a
fixed price.
A contract by which an entire ship,
or some principal part thereof is
let/leased by the owner to another
person for a specified time or use.
(Planters Products, Inc. vs. CA, 226
SCRA 476)
Parties:
1. Ship owner or ship agent
2. Charterer
Classes:
1. Bareboat or demise The charterer
provides crew, food and fuel. The
charterer is liable as if he were the
owner, except when the cause arises
from the unworthiness of the vessel.
The shipowner leases to the charterer
the whole vessel, transferring to the
latter the entire command, possession
and consequent control over the
vessels navigation, including the
master and the crew, who thereby
become the charters servants. It
transforms a common carrier into a
private carrier.
The charterer becomes the owner
of the vessel pro hac vice, just for
that one particular purpose only.

Because the charterer is treated as


owner pro hac vice, the charterer
assumes the customary rights and
liabilities of the shipowner to third
persons and is held liable for the
expense of the voyage and the
wages of the seamen.
2. Contract of Affreightment A
contract whereby the owner of the
vessel leases part or all of its space to
haul goods for others.
The shipowner retains the
possession,
command
and
navigation of the ship, the charterer
merely having use of the space in
the vessel in return for his payment
of the charter hired.
Kinds:
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
charterer.
LEASE
If
for
a
definite
period,
lessee
cannot give
up the lease
by paying a
portion
of
the amount
agreed upon.
If the leased
property
is
sold to one
who knows
of
the
existence of
the
lease,
the
new
owner must
respect the
lease.
Civil
law
concept

CHARTER
PARTY
Charterer
may rescind
charter party
by
paying
half of the
freightage
agreed upon.

The
new
owner is not
compelled to
respect the
charter party
so long as he
can load the
vessel with
his
own
cargo. (Art.
689)
Commercial
law concept

CHARTER
BILL OF
PARTY
LADING
An entire or More like a
complete
private
contract.
receipt
which
the
captain gives
to
accredit
goods
received
from persons
Consensual
Real contract
contract
BAREBOAT
OR DEMISE
CHARTER

Charterer
becomes
liable
to
others
caused by its
negligence
Charterer
regarded as
owner
pro
hac vice for
the voyage
Owner
of
vessel
relinquishes
possession,
command
and
navigation to
charterer
Common
carrier
is
converted to
private
carrier.

CONTRACT
OF
AFFREIGHT
MENT
(TIME OR
VOYAGE
CHARTER)
Owner
remains
liable
as
carrier
and
must answer
for
any
breach
of
duty
Charterer is
not regarded
as owner.
The
vessel
owner
retains
possession,
command
and
navigation of
the ship
Common
carrier is not
converted to
a
private
carrier.

PERSONS WHO MAY MAKE A


CHARTER
1. Owner or owners of the vessel,
either in whole or in majority
part, who have legal control and
possession of the vessel
2. Charterer may subcharter entire
vessel to 3rd person only if not
prohibited in original charter.
(Art.679)
3. Ship agent if authorized by the
owner/s or given such power in
the certificate of appointment.
(Art.598)
4. Captain 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
latters
interests. (Art.609)
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
4. Compliance with Art. 652 of the
Code of Commerce

Clauses Which May Be Included In


a Charter Party
Jason
clause

Clause
paramount
or
paramount
clause

A stipulation
in a charter
party that in
case of a
maritime
accident for
which
the
shipowner is
not
responsible
by
law,
contract
or
otherwise,
the
cargo
shippers,
consignees
or
owners
shall
contribute
with
the
shipowner in
general
average.
(Pandect of
Commercial
Law
and
Jurisprudenc
e,
Justice
Jose
Vitug,
1997 ed.)

A clause in a
charter party
providing
that
the
COGSA shall
apply, even
though
the
transportatio
n
is
domestic,
subject
to
the
extent
that
any
term of the
bill of lading
is repugnant
to
the
COGSA
or
applicable
law, then to
the
extent
thereof the
provision of
the bill of
lading
is
void.
(Pandect of
Commercial
Law
and
Jurisprudenc
e,
Justice
Jose
Vitug,
1997 ed.)

Rights and Obligations of Parties


SHIPOWNE CHARTERER
R OR SHIP
AGENT
1. If the vessel1. To pay the
is chartered agreed
wholly,
not charter
to
accept price;
cargo
from2. To
pay
others;
freightage
2. To
observe on
represented
unboarded
capacity;
cargo;
3. To
unload3. To
pay
cargo
losses
to
clandestinely others
for
placed
loading

4. To substitute
another
vessel if load
is less than4.
3/5
of
capacity;
5. To leave the
port if the5.
charterer
does
not
bring
the
cargo within
the lay days
and extra lay
days
allowed;
6. To place in a
vessel in a
condition to
navigate;
7. to
bring
cargo
to
nearest
neutral port
in case of
war
or
blockade.
(Arts.
669678)

uncontracte
d cargo and
illicit cargo;
To wait if the
vessel
needs
repair;
To
pay
expenses for
deviation.
(Arts. 679687)

Rescission of a Charter Party


At
At
Fortuit
charter shipow
ous
ers
ners
causes
reques reques
(Art.
t
t
690)
(Art
(Art.
688)
689)
1.
By
abando
ning the
charter
and
paying
half of
the
freighta
ge;
2. Error
in

1. If the
extra
lay days
termina
te
without
the
cargo
being
placed
alongsi
de the

1. War
or
interdict
ion of
commer
ce;
2.
Blockad
e;
3.
Prohibiti
on to

tonnage
or flag;
3.
Failure
to place
the
vessel
at
the
charter
ers
disposal
;
4.
Return
of
the
vessel
due to
pirates,
enemie
s or bad
weather
;
5.
Arrival
at
a
port for
repairs.

vessel;
2. Sale
by the
owner
of
the
vessel
before
loading
by the
charter
er;

receive
cargo;
4.
Embarg
o; and
5.
Inability
of the
vessel
to
navigat
e.

Terms:
1. Primage - bonus to be paid to the
captain after the successful voyage.
2. Demurrage the sum fixed in the
charter party as a remuneration to
the owner of the ship for the
detention of his vessel beyond the
number of days allowed by the
charter
party
for
loading
or
unloading or for sailing.
3. Deadfreight the amount paid by or
recoverable from a charterer of a
ship for the portion of the ships
capacity the latter contracted for
but failed to occupy.
4. Lay Days - days allowed to charter
parties for loading and unloading
the cargo.
5. Extra Lay Days days which follow
after the lay days have elapsed.
USUAL FORMS OF CONSUMMATING
CONTRACTS
1. C.I.F. cost, insurance and freight;

2. F.O.B. - free on board;


3. F.A.S. - free alongside ship; and
4. C. & F. - cost and freight.
TRANSSHIPMENT OF GOODS
The act of taking cargo out of one
ship and loading it in another, or the
transfer of goods from the vessel
stipulated
in
the
contract
of
affreightment to another vessel before
the place of destination named in the
contract has been reached, or the
transfer for further transportation from
one ship or conveyance to another.
It is not dependent on the ownership
of the transporting ships or in the
change of carriers, but rather on the
fact of actual physical transfer of cargo
from one vessel to another.
If done without legal excuse,
however competent and safe the
vessel into which the transfer is made,
is a violation of contract and
infringement of right of shipper and
subjects carrier to liability if freight is
lost
event
by
cause
otherwise
excepted. (Magellan Manufacturing vs.
CA, 201 SCRA 102)
LOAN
ON
BOTTOMRY
AND
RESPONDENTIA
A real, unilateral, aleatory contract,
by virtue of which one person lends to
another a certain amount of money or
goods on things exposed to maritime
risks, which amount, with its earnings,
is to be returned if the things are
safely transported, and which is lost if
the latter are lost.
LOAN ON
BOTTOMRY

LOAN ON
RESPONDE
NTIA
Definition
Loan made Loan taken
by
on security
shipowner
of the cargo
or
ship laden on a
agent
vessel, and
guaranteed repayable
by
vessel upon
safe

itself
and arrival
of
repayable
cargo
at
upon arrival destination.
of vessel at (Art. 719)
destination.
(Art. 719)
Who may contract
Shipowner
Only
the
or
ship owner of the
agent.
cargo.
Outside
of
the
residence of
the owners the captain.
Common elements:
1. Exposure of security to
marine peril;
2. Obligation of the debtor
conditioned only upon
safe arrival of the
security at the point of
destination.
Forms:
1. Public instrument
2. Policy signed by the
contracting parties and
the broker taking part
therein
3. Private
instrument
(Art. 720)
Contents:
1. Kind, name and registry
of the vessel;
2. Name, surname and
domicile of the captain;
3. Names, surnames and
domiciles
of
the
borrower
and
the
lender;
4. Amount of the loan and
the premium stipulated;
5. Time for repayment;
6. Goods
pledged
to
secure repayment;
7. Voyage during which
the risk is run (Art.721)

BOTTOMRY
/

ORDINARY
LOAN

RESPONDE
NTIA

(MUTUUM)

Not subject Subject


to
to
Usury Usury Law
Law
Liability
of
the
borrower is
contingent
on the safe
arrival
of
the
vessel
or cargo at
destination

Not subject
to
any
contingency
(absolute
liability)

The
last
lender is a
preferred
creditor

The
first
lender is a
preferred
creditor

Consensual
contract

WHEN LOAN ON BOTTOMRY OR


RESPONDENTIA
REGARDED
AS
SIMPLE LOAN
1. Lender loaned an amount larger
than the value of the object due
to fraudulent means employed by
the borrower. (ART.726)
2. Full amount of the loan is not
used for the cargo or given on
the goods if all of them could not
have been loaded, the balance
will be considered a simple loan.
(ART.727)
3. If the effects on which the money
is taken is not subjected to any
risk. (ART.729)
Note: Under existing laws, the parties
to a loan, whether ordinary or
maritime, may agree on any rate of
interest. (CB Circular 905)
MARINE
INSURANCE

In case of loss
of the vessel
due to a risk
insured
against,
the
obligation
of
the
insurer
becomes
absolute

LOAN ON
BOTTOM
RY OR
RESPOND
ENTIA
Indemnity
is Indemnity
paid after the is paid in
loss
has advance
occurred
by way of

a loan
In case of
loss of the
vessel due
to
a
marine
peril, the
obligation
of
the
borrower
to pay is
extinguish
ed
Real
contract

Hypothecary Nature of Bottomry/


Respondentia
GENERAL RULE: The obligation of the
borrower
to
pay
the
loan
is
extinguished if the goods given as
security are absolutely lost by reason
of an accident of the sea, during the
voyage designated, and if it is proven
that the goods were on board.
EXCEPTIONS:
1. Loss due to inherent defect;
2. Loss due to the barratry on the part
of the captain;
3. Loss due to the fault or malice of
the borrower;
4.
The vessel was engaged in
contraband; and
5. The cargo loaded on the vessel be
different in from that agreed upon.
Concurrence of Marine Insurance
and
Loan
on
Bottomry/Respondentia
1. The insurable interest of the
owner of a ship hypothecated by
bottomry is only the excess of the
value over the amount secured
by bottomry. (Sec. 101, Insurance
Code)
2. The value of what may be saved
in case of shipwreck shall be
divided between the lender and
the insurer in proportion to the
interest of each one. (Art. 735)
Note: If a vessel is hypothecated by

bottomry only the excess is insurable,


since a loan on bottomry partakes of
the nature likewise of an insurance
coverage to the extent of the loan
accommodation. The same rule would
apply to the hypothecation of the
cargo by respondentia. (Pandect of
Commercial Law and Jurisprudence,
Justice Jose Vitug, 1997 ed.)
ACCIDENTS
IN
COMMERCE
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck

MARITIME

AVERAGE
An extraordinary or accidental
expense incurred during the voyage in
order to preserve the cargo, vessel or
both, and all damages or deterioration
suffered by the vessel from departure
to the port of destination, and to the
cargo from the port of loading to the
port of consignment. (Art. 806)
The person whose property has
been saved must contribute to
reimburse the damage caused or
expense incurred if the situation
constitutes general average.
Classes:
1. Particular or Simple Average
2. Gross or General Average
Where both vessel and cargo are
saved, it is general average; where
only the vessel or only the cargo is
saved, it is particular average.
Expenses incurred to refloat a
vessel, which accidentally ran aground,
in order to continue its voyage, do not
constitute general average. Not only is
there absence of a marine peril,
common
safety
factor,
and
deliberateness. It is the safety of the
property, and not the voyage, which
constitutes the true foundation of
general average. (A. Magsaysay, Inc.
vs. Agan, G.R.No. L-6393, Jan. 31,
1955)

PARTICULA
GROSS OR
R OR
GENERAL
SIMPLE
Definition
Damages or Damages or
expenses
expenses
caused
to deliberately
the vessel or caused
in
cargo
that order
to
did not inure save
the
to
the vessel,
its
common
cargo
or
benefit, and both
from
borne
by real
and
respective
known risk.
owners. (Art. (Art. 811)
809)
Requisites
1. common
danger;
2. deliberat
e
sacrifice;
3. success;
4. proper
formalitie
s and
legal
steps.
Liability
The owner of All
the
the
goods persons
which gave having
an
rise to the interest
in
expense
or the
vessel
suffered the and
the
damage shall cargo
bear
this therein
at
average.
the time of
(Art. 810)
the
occurrence
of
the
average
shall
contribute
to
satisfy
this
average.
(Art. 812)

The
insurers
(Art.859)

and lenders
on bottomry
and
respondenti
a
shall
likewise
contribute.
(Art.732).
Number of interests
involved
Only
one Several
interest
interests
involved
involved
Share in the damage or
expense
100% share
In
proportion
to the value
of
the
owners
property
saved
Right to recover
No
There may
reimburseme be
nt
reimbursem
ent
Kinds (not exclusive)
Art. 809
Art. 811
Procedure for recovery
1. Assembly
and
deliberation
2. Resolution
of
the
captain
3. Entry of the
resolution in
the logbook
4. Detailed
minutes
5. Delivery of
the minutes
to
the
maritime
judicial
authority of
the
first
port, within
24
hours
from arrival,
6. Ratification

by captain
under oath.
(Arts. 813814)
GOODS NOT COVERED BY GENERAL
AVERAGE EVEN IF SACRIFICED
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books
or
records
of
the
vessel.
(ART.855 (2))
3. Fuel for the vessel if there is
more than sufficient fuel for the
voyage. (Rule IX, York-Antwerp
Rule)
Jettison
Act of throwing cargo overboard in
order to lighten the vessel.
Order of goods to be cast overboard:
1. Those which are on the deck,
preferring the heaviest one with
the least utility and value;
2. Those which are below the upper
deck, beginning with the one with
greatest weight and smallest
value. (Art. 815)
Jettisoned goods are not res nullius
nor deemed abandoned within the
meaning of civil law so as to be the
object of occupation by salvage.
(Pandect of Commercial Law and
Jurisprudence, Justice Jose Vitug, 1997
ed.)
In order that the jettisoned goods
may be included in the gross or
general average, the existence of the
cargo on board should be proven by
means of the bill of lading. (Art. 816)
York-Antwerp
(Y-A)
Rules
on
Determining Liability for Averages
With Regard To Deck Cargo
1. Deck cargo is allowed only in
domestic/coastwise/inter-island
shipping,
and
is
prohibited
in
international/overseas/foreign
shipping.
2. If deck cargo is loaded with the
consent of the shipper on overseas

trade, it must always contribute to


general average, but should the same
be jettisoned, it would not be entitled
to reimbursement because there is
violation of the Y-A Rules.
3. If deck cargo is loaded with the
consent of the shipper on coastwise
shipping, it must always contribute to
general average and if jettisoned
would be entitled to reimbursement.
Reason: In domestic shipping,
voyages are usually short and the seas
are generally not rough. In overseas
shipping, the vessel is exposed for
many days to perils of the sea.
DOMESTIC

INTERNATI
ONAL
Deck cargo is Deck cargo
allowed
is
not
allowed
With shippers consent
General
Particular
average
average
Without shippers consent
Captain is
Captain is
liable
liable
ARRIVAL
UNDER
STRESS
(ARRIBADA)
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.
When
lawful

When
unlawf
ul

Who
bears
expens
es:

The
1.
inability
to
continu
e
voyage
is due
to lack
of

Lack of
provisio
ns due
to
negligen
ce
to
carry
accordin
g
to

The
shipow
ner or
ship
agent is
liable in
case of
unlawfu
l arrival

provisio
ns,
wellfounde
d fear2.
of
seizure,
private
ers,
pirates,
or
acciden3.
ts
of
the sea
disablin
g it to
navigat
e. (Art.
819) 4.

usage
and
customs
;
Risk of
enemy
not well
known
or
manifes
t
Defect
of
vessel
due to
imprope
r repair;
and
Malice,
negligen
ce, lack
of
foresigh
t or skill
of
captain.
(Art.
820)

under
stress.
But
they
shall
not be
liable
for the
damag
es
caused
by
reason
of
a
lawful
arrival.
(Art.
821)

It is the duty of the captain to


continue the voyage without delay
after the cause of the arrival under
stress has ceased failing in such duty
renders him liable. However, in case
the cause has been risk of enemies,
there must first be an assembly before
departure. (Art. 825)
Steps:
1. Captain should determine during
the voyage if there is well
founded
fear
of
seizure,
privateers
and
other
valid
grounds;
2. Captain shall assemble the
officers and summon the persons
interested in the cargo who may
attend the meeting but without a
right to vote;
3. The officers shall determine and
agree if there is well-founded
reason after examining the
circumstances. The captain shall

have the deciding vote;


4. The agreement shall be drafted
and the proper minutes shall be
signed and entered in the log
book;
5. Objections and protests shall
likewise be entered in the
minutes.
COLLISION
Impact of two vessels both of which
are moving.
Allision
Impact between a moving vessel
and a stationary one.
Nautical
Rules
to
Determine
Negligence
1. When two vessels are about to enter
a port, the farther one must allow
the nearer to enter first; if they
collide, the fault is presumed to be
imputable to the one who arrived
later, unless it can be proved that
there was no fault on its part.
2. When two vessels meet, the smaller
should give the right of way to the
larger one.
3. A vessel leaving port should leave
the way clear for another which may
be entering the same port.
4. The vessel which leaves later is
presumed to have collided against
one which has left earlier.
5. There is a presumption against the
vessel which sets sail in the night.
6. There is a presumption against the
vessel with spread sails which
collides with another which is at
anchor and cannot move, even
when the crew of the latter has
received word to lift anchor, when
there was not sufficient time to do
so or there was fear of a greater
damage or other legitimate reason.
7. There is a presumption against an
improperly moored vessel.
8. There is a presumption against a
vessel which has no buoys to
indicate the location of its anchors
to prevent damage to vessels which

may approach it.


9. Vessels must have proper lookouts or persons trained as such
and who have no other duty aside
therefrom. (Smith Bell v. CA)
Nautical Rules as to Sailing Vessel
and Steamship
1. Where a steamship and a sailing
vessel are approaching each other
from opposite directions, or on
intersecting lines, the steamship
from the moment the sailing vessel
is seen, shall watch with the highest
diligence
her
course
and
movements so as to be able to
adopt such timely means of
precaution
as
will
necessarily
prevent the two boats from coming
in contact.
2. The sailing vessel is required to
keep
her
course
unless
the
circumstances require otherwise.
Zones of Time in the Collision of
Vessels
1. First zone all time up to the moment
when risk of collision begins.
No rule is as yet applicable for none
is necessary.
2. Second zone time between moment
when risk of collision begins and
moment it becomes a practical
certainty.
It is in this period where conduct of
the vessels is primordial. It is in this
zone that vessels must strictly observe
nautical rules, unless a departure
therefrom becomes necessary to avoid
imminent danger.
3. Third zone time when collision is
certain and time of impact.
An error in this zone would no longer
be legally consequential.
Error in Extremis - sudden
movement made by a faultless vessel
during the third zone of collision with
another vessel which is at fault during
the 2nd zone. Even if such sudden
movement is wrong, no responsibility
will fall on said faultless vessel.
(Urrutia and Co. v. Baco River

Plantation Co., 26 PHIL 632)


Cases Covered By Collision and
Allision
1. One vessel at fault
Vessel at fault is liable for damage
caused to innocent vessel as well as
damages suffered by the owners of
cargo of both vessels. (Art. 826)
2. Both vessels at fault
Each vessel must bear its own loss,
but the shippers of both vessels may
go against the shipowners who will be
solidarily liable. (Art. 827)
3. Vessel at fault not known
Each vessel must bear its own loss,
but the shippers of both vessels may
go against the shipowners who will be
solidarily liable. (Art. 828)
Doctrine of Inscrutable Fault In
case of collision where it cannot be
determined which between the two
vessels was at fault, both vessels
bear their respective damage, but
both should be solidarily liable for
damage to the cargo of both
vessels.
4. Third vessel at fault
The third vessel will be liable for
losses and damages. (Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss.
(Art. 830)
The doctrine of res ipsa loquitur
applies in case a moving vessel strikes
a stationary object, such as a bridge
post, dock, or navigational aid. (Far
Eastern
Shipping
v.
CA,
Luzon
Stevedoring vs. CA)
Even if the cause of action against
the common carrier is based on quasidelict, the defense of due diligence in
the selection and supervision of
employees is unavailing in case of a
maritime tort resulting in collision. It is
not a civil tort governed by the Civil
Code but a maritime one governed by
Arts. 826-839 of the Code of
Commerce. (Manila Steamship vs. Insa
Abdulhaman)

Doctrine of Last Clear Chance and


Rule
on
Contributory
Negligence
cannot be applied in collision cases
because of Art.827 of the Code of
Commerce. (Notes and Cases on the
Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P.
2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite
to recovery of damages arising from
collisions
and
other
maritime
accidents.
It is a written statement made under
oath by the captain of a vessel after
the occurrence of an accident or
disaster in which the vessel or cargo is
lost or damaged, with respect to the
circumstances
attending
such
occurrence, for the purpose of
recovering losses and damages.
Excuses for not filing protest: 1)
where the interested person is not on
board the vessel; and 2) on collision
time, need not be protested. (Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone
through a hurricane or when the
captain believes that the cargo
has
suffered
damages
or
averages (Art. 624).
Who makes: Captain
When made: within 24 hours from
the time the collision took place.
Before whom made: competent
authority at the point of collision or at
the first port of arrival, if in the
Philippines and to the Philippine
consul, if the collision took place
abroad. (Art. 835)
SHIPWRECK
It is the loss of the vessel at sea as a
consequence of its grounding, or
running against an object in sea or on
the coast. It occurs when the vessel
sustains injuries due to a marine peril

rendering her 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)
The rules on collision or allision, as
may be pertinent, can equally apply to
shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of
goods from a vessel.
Applicability: Overseas trade only.
(Commercial
Law
Review,
C.
Villanueva, 2004 ed.)
Significance: When a person brings
in cargo from abroad, he cannot unload
and deliver the cargo by himself. The
unloading must be done by the
arrastre operator, which will then
deliver the cargo to the importer.
(Commercial
Law
Review,
C.
Villanueva, 2004 ed.)
Nature of business: It is a public
utility, discharging functions which are
heavily invested with public interest.
Liability:
1. Similar to a warehouseman (Lua
Kian v. Manila Railroad)
2. Similar to a common carrier
(Northern Motors v. Prince Line)
3. Solidary liability with the common
carrier
Note: In order that the arrastre
operator may be held liable, the
consignee must prove that the damage
was due to the negligence and while
the goods are in the custody of the
arrastre
operator.
(Hartford
Fire
Insurance v. E. Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the
warehouse or pier to the holds of the
vessel. (Chief of Staff vs. CIR)
As understood in the port business,
the term consists of the handling of
cargo from the hold of the ship to the
dock, in case of pier-side unloading; or

to a barge, in case of unloading at sea.


(Anglo-Fil Trading Corp. vs. Lazaro)
The loading on the ship of outgoing
cargo is also part of stevedoring work.
(Ibid.)
CONTAINERIZATION/
SAID-TOCONTAIN/ SHIPPERS LOAD AND
COUNT SYSTEM
System whereby the shipper loads
his cargoes in a specially designed
container, seals the container and
delivers
it
to
the
carrier
for
transportation. The carrier does not
participate in the counting of the
merchandise for loading into the
container, the actual loading, and the
sealing of the container. (US Lines v.
Comm. Of Customs, ICTSI v. Prudential
Guarantee)
The matter of quantity, description
and conditions of the cargo inside the
container is the sole responsibility of
the shipper, unless there is stipulation
to the contrary. (US Lines vs. Comm. Of
Customs, Reyma Brokerage v. Phil.
Home Assurance)
Note: In order to attribute to the
carrier any damage to the shipment
that may be found, inspection of the
goods should be done at pier-side.
(Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA
ACT/COGSA (C.A. No. 65)
APPLICABILITY
The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign
(from foreign port to Philippine
port).
It can be applied in domestic sea
transportation if agreed upon by the
parties.
(Clause
paramount
or
paramount clause)
IMPORTANT FEATURES:
1. Amount of carriers liability
2. Notice of damage

3. Prescriptive period
AMOUNT OF CARRIERS LIABILITY
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)
Note that Art. 1749, NCC applies to
domestic/inter-island/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a. Patent damage: shipper should file a
claim with the carrier immediately
upon delivery
b. Latent damage: shipper should file a
claim with the carrier within three
days from delivery.
Note: The filing of a notice of claim is
not a condition precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the
cargo should be brought within one
year after:
a. Delivery of the goods (delivered
but damaged goods); or
b. The date when the goods should
have
been
delivered
(nondelivery). (Sec. 3[6])
Loss or Damage as applied to the
COGSA contemplates a situation where
no delivery at all was made by the
shipper of the goods because the same
had perished, gone out of commerce,
or disappeared in such a way that their
existence is unknown or they cannot
be recovered. Thus, it is inapplicable in
case of misdelivery or conversion. (Ang
vs. American Steamship Agencies Inc.)
and damage arising from delay or late
delivery (Mitsui O.S.K. Lines Ltd. vs.
CA). In such instance the, Civil Code
rules on prescription shall apply.

The one-year prescriptive period is


suspended by:
1. The express agreement of the
parties (Universal Shipping Lines,
Inc. vs. IAC, 188 SCRA 170)
2. The filing of an action in court
until it is dismissed. (Stevens &
Co. vs. Nordeutscher Lloyd, 6
SCRA 180)
The one-year period shall run from
delivery of the last package and is not
suspended by extrajudicial demand.
(Dole Phils.,Inc. vs. Maritime Co.,148
SCRA 118)
The one-year period shall run from
delivery to the arrastre operator and
not to the consignee. (Union Carbide
Phils, Inc. vs. Manila Railroad Co.,SCRA
359)
The insurer exercising its right of
subrogation is bound by the one-year
prescriptive period. However, it does
not apply to the claim against the
insurer for the insurance proceeds.
(Fil. Merchants Ins. Co. vs. Alejandro;
Mayer Steel Pipe Corp. vs. CA)
IV. WARSAW CONVENTION OF 1929
(WC)
PURPOSE: To protect the emerging air
transportation industry and to secure
the uniformity of recovery by the
passengers.
APPLICABILITY
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage
or goods.
The WC shall also apply to fortuitous
transportation by aircraft performed by
an air transportation enterprise.
International transportation - any
transportation in which the place of
departure and the place of destination
are situated either:
1. Within the territories of two High

Contracting Parties regardless of


whether or not there be a break in
the transportation or transshipment,
or
2. Within the territory of a single
High Contracting Party, if there is an
agreed stopping place within a
territory subject to the sovereignty,
mandate or authority of another
power, even though that power is
not a party to the Convention.
(round trip, Am. Jur.)
Transportation to be performed by
several successive air carriers shall be
deemed
to
be
one
undivided
transportation, if it has been regarded
by the parties as a single operation,
whether it has been agreed upon
under the form of a single contract or
of a series of contracts, and it shall not
lose its international character merely
because one contract or a series of
contracts is to be performed entirely
within a territory subject to the
sovereignty, suzerainty, mandate, or
authority of the same High Contracting
Party. (Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When
public
policy
is
contradicted;
2. If the requirements under the
Convention are not complied
with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or
goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSE
NGER

BAGGA
GE

AIR
WAYBI

TICKET CHECK
Passeng Checke
er
d-in
baggag
e

LL
Goods
to be
shipped

LIABILITY
OF
CARRIER
FOR
DAMAGES
1. Death or injury of a passenger if the
accident causing it took place on board
the aircraft or in the course of its
operations
of
embarking
or
disembarking; (Art. 17)
2. Destruction, loss or damage to any
baggage or goods, if it took place
during the transportation by air; (Art.
18) and
Transportation by air 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.
It includes any transportation by
land or water outside an airport if such
takes place in the performance of a
contract for transportation by air, for
the purpose of loading, delivery, or
transshipment.
3. Delay in the transportation of
passengers, baggage or goods. (Art.
19)
Note: The Hague Protocol amended
the WC by removing the provision that
if the airline took all necessary steps to
avoid the damage, it could exculpate
itself completely (Art. 20(1)). (Alitalia
vs. IAC, 192 SCRA 9)
LIMIT OF LIABILITY (Art. 22, as
amended by Guatemala Protocol,
1971; Alitalia vs. IAC)
1. Passengers
GENERAL
RULE:
$100,000
per
passenger
EXCEPTION: Agreement to a higher
limit

2. Checked-in baggage

GENERAL RULE: $20 per kilogram


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.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
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.

officers and employees. (Alitalia vs.


IAC)

An agreement relieving the carrier


from liability or fixing a lower limit is
null and void. (Art. 23)
Carrier is not entitled to the
foregoing limit if the damage is caused
by willful misconduct or default on its
part. (Art. 25)

2. Prescriptive period
Action must be filed within 2 years
from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation
stopped. (Art. 29)

Thus, the WC does not operate as


an exclusive enumeration of the
instances of an absolute limit of the
extent of liability. It does not preclude
the application of the Civil Code and
other pertinent local laws. It does not
regulate or exclude liability for other
breaches of contract by the carrier, or
misconduct of its employees, or for
some particular or exceptional type of
damage. (Alitalia vs. CA)

In United Airlines vs. Uy the twoyear prescriptive period was not


applied where the airline employed
delaying tactics.

In PanAm v. IAC, the WC was applied


as regards the limitation on the
carriers liability, there being a simple
loss of baggage without any improper
conduct on the part of the officials or
employees of the airline or other
special injury sustained by the
passenger.
In KLM Royal v. Tuller, the WC has
invariably been held inapplicable, or as
not restrictive of the carriers liability,
where there was satisfactory evidence
of malice or bad faith attributable to its

ACTION FOR DAMAGES


1. Notice of claim
A written complaint must me made
within:
a. 3 days from receipt of baggage
b. 7 days from receipt of goods
c. In case of delay, 14 days from
receipt of baggage/goods
The complaint is a condition
precedent. Without the complaint, the
action is barred except in case of fraud
on the part of the carrier. (Art. 26)

RULE
IN
CASE
OF
VARIOUS
SUCCESSIVE CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only
against the carrier in which the
accident or delay occurred.
EXCEPTION: Agreement or contract
whereby the first carrier assumed
liability for the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file
an action against the first carrier
and the carrier in which the
damage occurred
b. Passenger or consignee can file
an action against the last carrier
and the carrier in which the
damage occurred.
These carriers are jointly and
severally liable. (Art. 30)

A contract of international carriage


by air, although performed by different
carriers under a series of airline tickets
constitutes
a
single
operation.
Members of the International Air
Transportation Association (IATA) are
under a general pool partnership
agreement wherein they act as agent
of each other in the issuance of tickets
to contracted passengers to boost
ticket sales worldwide and at the same
time provide passengers easy access
to airlines which are otherwise
inaccessible in some parts of the
world. (American Airlines vs. CA)
Under a general pool partnership
agreement, the ticket-issuing airline is
the principal in a contract of carriage
while the endorsee-airline is the agent.
The obligation of the former remained
and did not cease even when the
breach occurred not on its own flight
but on that of another airline which
had
undertaken
to
carry
the
passengers
to
one
of
their
destinations. (China Airlines vs. Chiok)
JURISDICTION
At the option of the plaintiff, the
action for damages may be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of
business;
c. Court where it has a place of
business
through
which
the
contract has been made; or
d. Court of the place of destination.
(Art. 28(1))
NOTE: It is the passengers ultimate
destination not an agreed stopping
place that determines the country
where suit is to be filed.
The forum of action provided in Art.
28(1) is a matter of jurisdiction rather
than of venue. (Santos III vs.
Northwest; 2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
Two concepts:

1. Services one person renders to the


owner of a ship or goods, by his own
labor, preserving the goods or the ship
which the owner or those entrusted
with the care of them have either
abandoned in distress at sea, or are
unable to protect or secure.
2. 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
impending sea peril, or such property
recovered from actual peril or loss, as
in cases of shipwreck, derelict or
recapture.
Requisites:
1. Valid object of salvage;
2. Object must have been exposed
to marine peril (not perils of the
ship);
3. Services
rendered
voluntarily
(neither an existing duty nor out
of a pre-existing contract);
4. Services are successful, total or
partial.
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into
the sea, and there sink and remain
under water;
3. Floatsam or Flotsam goods which
float upon the sea when cast
overboard;
4. Ligan or Lagan goods cast into the
sea tied to a buoy, so that they may be
found again by the owners (p.173,
Judge Diaz).
Persons who have no right to a
reward for salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in
spite of opposition of the Captain or his
representative;
3. In accordance with Sec. 3 of the
Salvage Law, a person who fails to
deliver a salvaged vessel or cargo to
the Collector of Customs.
Derelict a ship or her cargo which
is abandoned and deserted at sea by
those who are in charge of it, without

any hope of recovering it, or without


any intention of returning to it.
The intention of those in charge
must be ascertained. If those in charge
left with the intention of returning, or
of procuring assistance, the property is
not derelict, but if they quitted the
property with the intention of finally
leaving it, it is derelict and a change of
their intention and an attempt to
return will not change its nature
(Erlanger & Galinger vs. Swedish East
Asiatic Co. Ltd.).
If it is clear that the intention to
return is slight, the salvage which was
done thereafter is considered valid.
(Notes and Cases on the Law on
Transportation and Public Utilities,
Aquino, T. & Hernando, R.P. 2004 ed. p.
616)
CONTRACT OF TOWAGE
A contract whereby one vessel,
usually motorized, pulls another,
whether
loaded
or
not
with
merchandise, from one place to
another, for a compensation. It is a
contract for services rather than a
contract of carriage.
SALVAGE
Governed
by
special
law (Act No.
2616)
Requires
success,
otherwise
no payment
Must be
done with
the consent
of the
captain/cre
wmen
Vessel must
be involved
in an

TOWAGE
Governed
by
Civil
Code
on
contract of
lease
Success is
not required
Only
the
consent of
the tugboat
owner
is
needed
Vessel need
not
be
involved in

accident

an accident

Fees
distributed
among
crewmen

Fees belong
to
the
tugboat
owner

RULES ON SALVAGE REWARD


1. The reward is fixed by the RTC judge
in the absence of agreement or
where the latter is excessive. (Sec.
9)
2. The reward should constitute a
sufficient compensation for the
outlay and effort of the salvors and
should be liberal enough to offer an
inducement to others to render
services in similar emergencies in
the future.
3. If sold (no claim being made within
3 months from publication), the
proceeds, after deducting expenses
and the salvage claim, shall go to
the owner; if the latter does not
claim it within 3 years, 50% of the
said proceeds shall go to the
salvors,
who
shall
divide
it
equitably, and the other half to the
government. (Secs. 11-12)
4. If a vessel is the salvor, the reward
shall be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in
proportion to their salaries. (Sec.
13)
Taking passengers from a sinking
ship, without rendering any service in
rescuing the vessel, is not a salvage
service, being a duty of humanity and
not for reward.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)
PURPOSES:
1. To secure adequate, sustained
service for the public at the least
possible cost;

2. To protect the public against


unreasonable charges and poor,
inefficient service;
3. To
protect
and
secure
investments in public services;
4. To prevent ruinous competition.
AUTHORITY TO OPERATE PUBLIC
SERVICES
GENERAL RULE: No public service
shall operate without having been
issued
a
certificate
of
public
convenience or a certificate of public
convenience and necessity.
EXCEPTIONS:
1. Warehouses;
2. Animal
drawn
vehicles
and
bancas moved by oar or sail;
3. Airships, except for the fixing of
maximum rates for fare and
freight;
4. Radio companies, except for
rates fixing;
5. Public
services
owned
or
operated by the government,
except as to rates fixing;
6. Ice plants; and
7. Public markets.
PUBLIC SERVICE
A person who owns, operates,
manages or controls in the Philippines
for hire or compensation, with general
or
limited
clientele,
whether
permanent, occasional or accidental,
and done for general business
purposes, any common carrier or
public utility, ice plants, power and
water supplies, communication and
similar public services. (Sec. 13b, CA
146)
A casual or incidental service devoid
of public character and interest is not
brought within the category. The
question depends on such factors as
the extent of services, whether such
person or company has held himself or
itself out as ready to serve the public
or a portion of the public generally.
(Luzon Stevedoring vs. PSC)
NOTE: The Public Service Commission

created under the Public Service Law


has already been abolished under P.D.
No. 1 and other issuances. It has been
replaced by the following government
agencies: LTO; LTFRB; ATO; BOE; NTC;
NEA; ERB; NWRC; CAB; and MIA.
CERTIFICA
TE OF
PUBLIC
CONVENIE
NCE (CPC)
An
authorizatio
n issued by
the
appropriate
government
agency for
the
operation of
public
services for
which
no
franchise,
either
municipal or
legislative,
is required
by law, e.g.,
common
carriers.

CERTIFICA
TE
OF
PUBLIC
CONVENIE
NCE
AND
NECESSITY
(CPCN)
An
authorizatio
n issued by
the
appropriate
government
agency for
the
operation of
public
service for
which
a
prior
franchise is
required by
law;
e.g.
telephone
and
other
services.

A CPC or a CPCN constitutes neither


a franchise nor a contract, confers no
property right, and is a mere license or
a privilege. The holder of said
certificate does not acquire a property
right in the route covered thereby. Nor
does it confer upon the holder any
proprietary
right
or
interest
or
franchise in the public highways.
Revocation of this certificate deprives
him of no vested right. New and
additional burdens, alteration of the
certificate, or even revocation or
annulment thereof is reserved to the
State. (Luque vs. Villegas, 30 SCRA
408)

It is a property and has a


considerable value and can be the
subject of sale or attachment. (CogeoCubao Operators and Drivers Assn. vs.
CA, 207 SCRA 343, Raymundo vs.
Luneta Motor Co.)
REQUREMENTS
FOR
GRANTING
CPC OR CPCN
1. Applicant must be a citizen of the
Philippines or a corporation or entity
60% of the capital of which is owned
by such citizens;
2. Applicant
must
prove
public
necessity;
3. Applicant must prove that the
operation of the public service
proposed and the authorization to
do business will promote the public
interest on a proper and suitable
manner;
4. Applicant must have sufficient
financial capability to undertake the
proposed services and meeting the
responsibilities
incident
to
its
operation.
POWERS
REQUIRIN
G PRIOR
NOTICE
AND
HEARING

1.

Issuance1.
of CPC or
CPCN;
2.
Fixing of
rates, tolls,
and
charges; 2.
3.
Setting
up
of
standards
and
classificatio
ns;
3.
4.
Establish

POWERS
EXERCISAB
LE
WITHOUT
PRIOR
NOTICE
AND
HEARING
Investigat
ion
any
matter
concerning
public
service;
Requiring
operators to
furnish safe,
adequate,
and proper
service;
Requiring
public

ment
of
rules
to
secure
accuracy of
all meters
and
all4.
measuring
appliances;
5.
Issuance
of
orders5.
requiring
establishm
ent
or
maintenanc
e
of
6.
extension
of facilities;
6.
Revocati
on,
or
modificatio
n of CPC or
CPCN;
7.
Suspension
of CPC or
7.
CPCN,
except
when it is
necessary
to
avoid
serious and8.
irreparable
damage or
inconvenie
nce to the
public
or
private
interest, in
which case,
a
suspension
not
more
than
30
days may
be ordered,
prior to the
hearing.
(Soriano v.
Medina,
164 SCRA
36)

services to
pay
expenses of
investigatio
n;
Valuation
of properties
of
public
utilities;
Examinat
ion and test
of
measuring
appliances;
Grant of
special
permits
to
make extra
or
special
trips
in
territories
specified in
the
certificate;
Uniform
accounting
system and
furnishing of
annual
reports;
Compellin
g
compliance
with
the
laws
and
regulations.

UNLAWFUL
ACTS
OF
PUBLIC
UTILITY COMPANIES
1. Engagement
in
public
service
business without first securing the
proper certificate;
2. Providing or maintaining unsafe,
improper or inadequate service as
determined by the proper authority;
3. Committing any act of unreasonable
and unjust preferential treatment to
any particular person, corporation or
entity as determined by the proper
authority;
4. Refusing or neglecting to carry
public mail upon request. (Secs. 18
and 19)
ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or
joint rates;
2. Establish and operate new units;
3. Issue free tickets;
4. Issue any stock or stock certificates
representing an increase of capital;
5. Capitalize any franchise in excess of
the amount actually paid to the
Government;
6. Sell, alienate, mortgage or lease
property, certificates or franchise.
Under Sec. 20(g) of C.A. No. 146,
the sale, etc. may be negotiated and
completed before the approval by the
proper authority. Its approval is not a
condition precedent to the validity of
the contract. The approval is necessary
only to protect public interest.
PRIOR OPERATOR/OLD OPERATOR
RULE
The rule allowing an existing
franchised operator to invoke a
preferential right within the authorized
territory as long as he renders
satisfactory and economical service.
The policy is not to issue a
certificate to a second operator to
cover
the
same
field
and
in
competition with a first operator who is
rendering sufficient, adequate and
satisfactory service. The prior operator
must first be given an opportunity to

improve its service, if inadequate or


deficient.
Purpose: To prevent ruinous and
wasteful competition in order that the
interests of the public would be
conserved and preserved.
It subordinates the prior applicant
rule which gives the first applicant
priority
only
if
things
and
circumstances are equal.
Where the operator either fails or
neglects to make the improvement or
effect the increase in services,
especially when given the opportunity,
new operators should be given the
chance to give the services needed by
the public.
PRIOR APPLICANT RULE
Presupposes a situation when two
interested
persons
apply
for
a
certificate to operate a public utility in
the same community over which no
person has as yet granted any
certificate. If it turns out, after the
hearing,
that
the
circumstances
between the two applicants are more
or less equal, then the applicant who
applied ahead of the other, will be
granted the certificate.
RATE-FIXING POWER
The rate to be fixed must be just,
founded upon conditions which are fair
and reasonable to both the owner and
the public.
A rate is just and reasonable if it
conforms
to
the
following
requirements:
1. One which yields to the carrier a
fair return upon the value of the
property employed in performing
the service; and
2. One which is fair to the public for
the service rendered.
REGISTERED OWNER RULE
The registered owner of a certificate
of public convenience is liable to the
public for the injuries or damages

suffered by third persons caused by


the operation of said vehicle, even
though the same had been transferred
to a third person.
The registered owner is not allowed
to escape responsibility by proving that
a third person is the actual and real
owner Reason: It would be easy for
him, by collusion with others or
otherwise, to transfer the responsibility
to an indefinite person, or to one who
possesses no property with which to
respond financially for the damage or
injury done. (Erezo, et al. vs. Jepte 102
Phil 103).
KABIT SYSTEM
A system whereby a person who has
been granted a certificate of public
convenience allows other persons who
own motor vehicles to operate under
such license, for a fee or percentage of
such earnings. It is void and inexistent
under Art. 1409, Civil Code.
Effects:
1. The
transfer,
sale,
lease
or
assignment of the privilege granted
is valid between the contracting
parties but not upon the public or
third persons. (Gelisan vs. Alday,
154 SCRA 388)

2. The registered owner is primarily


liable for all the consequences
flowing from the operations of the
carrier.
The public has the right to
assume that the registered owner is
the actual or lawful owner thereof. It
would be very difficult and often
impossible, as a practical matter, for
the public to enforce their rights of
action that they may have for
injuries inflicted by the vehicle if
they should be required to prove
who the actual owner is. (Benedicto
vs. IAC, 187 SCRA 547)
3. The thrust of the law in enjoining
the kabit system is to identify the
person upon whom responsibility
may be fixed with the end in view of
protecting the riding public (Lim vs.
CA 373 SCRA 394).
4. The
registered
owner
cannot
recover from the actual owner and
the latter cannot obtain transfer of
the vehicle to himself, both being in
pari delicto. (Teja Marketing vs. IAC)
5. For the better protection of the
public, both the registered owner
and the actual owner are jointly and
severally liable with the driver.
(Zamboanga Transportation Co. vs.
CA)

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