Transportation Law Reviewer

San Beda College of Law
54
MEMORY AID IN COMMERCIAL LAW
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
CARRIER
1. As to availability
Holds himself out for all Contracts with particular
people indiscriminately
individuals or groups
only
2. As to required diligence
Extraordinary diligence is Ordinary diligence is
required
required
3. As to regulation
Subject
to
State Not subject to State
regulation
regulation
4. Stipulation limiting liability
Parties may not agree on Parties may limit the
limiting
the
carriers carriers
liability,
liability except when provided it is not
provided by law
contrary to law, morals
or good customs
5. Exempting circumstance
Prove
extraordinary caso fortuito, Art. 1174
diligence and Art. 1733, NCC
NCC
6.Presumption of negligence
There is a presumption
of fault or negligence
No presumption of fault
or negligence
7.Governing law
Law on common carriers
Law on obligations 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, 573734, 580, 806-845) - suppletory
B.
International/foreign/overseas (Foreign
COMMERCIAL LAW COMMITTEE

CHAIRPERSON: Garny Luisa Alegre ASST. CHAIRPERSON:Jayson OS Ramos EDP: Beatrix I. Ramos SUBJECT HEADS:
Marichelle De Vera (Negotiable Instruments Law); Jose Fernando Llave (Insurance); Aldrich Del Rosario (Transportation
Laws);
Shirley Mae Tabangcura, Bon Vincent Agustin (Corporation Law); Karl Steven Co (Special Laws); John Lemuel Gatdula
(Banking Laws); Robespierre CU (Law on Intellectual Property)
55
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)
1. 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
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.
Transportation and Public Utilities, Aquino, T. &

Hernando, R.P. 2004 ed. p.120-122)
COVERAGE
1. Vigilance over goods (Arts. 1734-1754); and
2. Safety of passengers (Arts. 1755-1763).
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)
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
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)
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 ITS
EMPLOYEES
FOR ACTS OF OTHER

PASSENGERS OR
STRANGERS

Laws);
56
Required diligence and defense

Extraordinary diligence
Ordinary diligence
Nature of liability
Tort; however,
Not absolute; limited
The employee must be by Art. 1763
on duty at the time of
the act. (Maranan v.
Perez)
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.
2.
3.
Common carrier
Shipper
Consignee
1.
2.
Common carrier
Passenger
Cause of liability
Delay in delivery, loss, destruction, or deterioration of
Death or injury to the passengers
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 goods were damaged in Reason: The contract between the passenger and the
transit is a matter peculiarly within the knowledge of carrier imposes on the latter the duty to transport the
the carrier and its employees. (Mirasol v. Dollar, 53 passenger safely; hence the burden of explaining
PHIL 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.
2.
Ordinary
circumstance:
Exercise
of
extraordinary diligence (Art. 1735)
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
1. Exercise of extraordinary diligence (Art.

1756)
2. Caso fortuito

Laws);
57
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)
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 for any loss,
destruction or deterioration of the goods;
3. That the carrier need not observe any diligence
in the custody of the goods;
4. That the carrier shall exercise a degree of
diligence less than that of a good father of a family
over the movable transported;
5. That the carrier shall not be responsible for the
acts or omissions of his or its employees;
6. 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;
7. 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)
Dispensing with or lessening the extraordinary

responsibility of a common carrier for the safety of
passengers imposed by law by stipulation, by posting
of notices, by statements on tickets or otherwise.
(Art. 1757)

Laws);
59
RULES ON PASSENGERS BAGGAGE

IN THE CUSTODY OF
IN THE CUSTODY
THE PASSENGERS
OF THE COMMON
(HAND-CARRIED)
CARRIER
(CHECKED-IN)
Legal nature of the baggage
Necessary deposit
Considered
as
goods
Required diligence by the common carrier
Diligence of a depositary Extraordinary
(ordinary diligence)
diligence
Applicable rules
Arts. 1998 and 2000-2003
Arts. 1733-1753
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 quasidelict. (Fabre vs. CA)
LIMITATIONS AS TO CARRIERS LIABILITY
INVALID AS BEING
VALID &
CONTRARY TO PUBLIC
ENFORCEABLE
POLICY
1. One exempting the 1. One limiting the
carrier from any and all liability of the carrier to
liability
for
loss
or an agreed valuation,
damage occasioned by its unless the shipper
own negligence.
declares a higher value
2.
An
unqualified and pays a higher rate
limitation of liability to an of freight
agreed valuation.
(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)
A.
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 only to maritime trade and

sea voyages. (Pandect of Commercial Law and

Laws);
60
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 shipping only
Both domestic and
overseas shipping
Kind of sale
Judicial
Judicial and
extrajudicial
Order of Preference
A preferred mortgage The
preferred
shall have priority over mortgage lien shall
all claims against the have priority over all
vessel,
except
the claims
against
the
following preferences in vessel,
except
the
following preferences
the order stated:
1. Judicial costs of the in the order stated:
proceedings;
1. Expenses and fees
2. Taxes due the allowed
and
costs
Philippine Government;
taxed by the court and
3. Salaries and wages taxes due to the
of the Captain and Government;
Crew of the vessel 2. Crews wages;
3. General average;
during its last voyage;
4. General average or 4. Salvage, including
salvage
including contract salvage;
contract
salvage, 5.
Maritime
liens
bottomry loans, and arising prior in time to
indemnity due shippers the recording of the
for the value of goods preferred mortgage;
transported but which 6. Damages arising out
were not delivered to of tort; and
the consignee;
7. Preferred mortgage
5. Costs of repair and registered prior in time.
equipment
of
the
vessel, and provisioning
of food, supplies and
fuel during its last
voyage; and
6. Preferred mortgages
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.
2.
3.
Claims under Workmens Compensation (Abueg

vs. San Diego 77 Phil 730);
Injury or damage due to shipowner or to the
concurring negligence of the shipowner and
the captain;
The vessel is insured (Vasquez vs. CA 138
SCRA 553).

Laws);
61
4.
5.
6.
Expenses for repair on vessel completed before

loss;
In case there is no total loss and the vessel is
not abandoned;
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).
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
An entire or complete
contract.
Consensual 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
converted
carrier.
carrier
is
to private
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
BILL OF LADING
More like a private
receipt
which
the
captain gives to accredit
goods received from
persons
Real contract
CONTRACT OF
AFFREIGHTMENT
(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

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62
3.
4.
Freight
Compliance with Art. 652 of the Code of
Commerce
Clauses Which May Be Included In a Charter

Party
Jason 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
Jurisprudence,
Justice
Jose Vitug, 1997 ed.)
Clause paramount or
paramount clause
A clause in a charter
party providing that the
COGSA shall apply, even
though
the
transportation
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
Jurisprudence,
Justice
Jose Vitug, 1997 ed.)
Rights and Obligations of Parties

SHIPOWNER OR
SHIP AGENT
1. If the vessel is
chartered wholly, not to
accept
cargo
from
others;
2. To
observe
represented capacity;
3. To unload cargo
clandestinely placed
4. To
substitute
another vessel if load is
less
than
3/5
of
capacity;
5. To leave the port if
the charterer does not
bring the cargo within
the lay days and extra
lay days allowed;
6. To place in a vessel
in
a
condition
to
navigate;
7. to bring cargo to
nearest neutral port in
case of war or blockade.
(Arts. 669-678)
CHARTERER
1. To pay the agreed
charter price;
2. To pay freightage
on unboarded cargo;
3. To pay losses to
others
for
loading
uncontracted cargo and
illicit cargo;
4. To wait if the
vessel needs repair;
5. To pay expenses
for deviation. (Arts.
679-687)
Rescission of a Charter Party

At charterers
At
request
shipowners
Fortuitous
causes
(Art 688)
1.
By
abandoning
the charter and
paying half of
the freightage;
2.
Error
in
tonnage
or
flag;
3. Failure to
place
the
vessel at the
charterers
disposal;
4. Return of
the vessel due
to
pirates,
enemies or bad
weather;
5. Arrival at a
port
for
repairs.
request
(Art. 689)
1. If the extra
lay
days
terminate
without
the
cargo
being
placed
alongside the
vessel;
2. Sale by the
owner of the
vessel before
loading by the
charterer;
(Art. 690)
1. War or
interdiction of
commerce;
2. Blockade;
3. Prohibition
to receive
cargo;
4. Embargo;
and
5. Inability of
the vessel to
navigate.
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)

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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
RESPONDENTIA
Definition
Loan
made
by Loan taken on security
shipowner
or
ship of the cargo laden on a
agent guaranteed by vessel, and repayable
vessel
itself
and upon safe arrival of
repayable upon arrival cargo at destination.
of
vessel
at (Art. 719)
destination. (Art. 719)
1.
2.
3.
LOAN ON
BOTTOMRY
Who may contract

Shipowner
or
ship Only the owner of the
agent. Outside of the cargo.
residence
of
the
owners - the captain.
1.
2.
1.
2.
3.
1.
2.
3.
4.
5.
6.
7.
Common elements:
Exposure of security to marine peril;
Obligation of the debtor conditioned only
upon safe arrival of the security at the point
of destination.
Forms:
Public instrument
Policy signed by the contracting parties and
the broker taking part therein
Private instrument (Art. 720)
Contents:
Kind, name and registry of the vessel;
Name, surname and domicile of the captain;
Names, surnames and domiciles of the
borrower and the lender;
Amount of the loan and the premium
stipulated;
Time for repayment;
Goods pledged to secure repayment;
Voyage during which the risk is run (Art.721)
BOTTOMRY/
RESPONDENTIA
ORDINARY LOAN
(MUTUUM)
Not subject to Usury

Law
Subject to Usury 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
WHEN
LOAN
ON
BOTTOMRY
OR
RESPONDENTIA REGARDED AS SIMPLE LOAN
Lender loaned an amount larger than the

value of the object due to fraudulent
means employed by the borrower.
(ART.726)
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)
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
Indemnity is paid after the
loss has occurred
In case of loss of the vessel
due to a risk insured
against, the obligation of
the
insurer
becomes
absolute
Consensual contract
Hypothecary
Respondentia
Nature
LOAN ON
BOTTOMRY OR
RESPONDENTIA
Indemnity is paid in
advance 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
extinguished
Real contract
of
Bottomry/
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.
2.
3.
4.
5.
Loss due to inherent defect;

Loss due to the barratry on the part of the
captain;
Loss due to the fault or malice of the borrower;
The vessel was engaged in contraband; and
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.)

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64
ACCIDENTS IN MARITIME COMMERCE

1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
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)
PARTICULAR OR
GROSS OR GENERAL
SIMPLE
Definition
Damages or expenses Damages or expenses
caused to the vessel or deliberately caused in
cargo that did not inure order to save the
to the common benefit, vessel, its cargo or
and borne by respective both from real and
owners. (Art. 809)
known risk. (Art. 811)
Requisites
1. common danger;
2. deliberate
sacrifice;
3. success;
4. proper formalities
and legal steps.
Liability
The owner of the goods All the persons having
which gave rise to the an interest in the
expense or suffered the vessel and the cargo
damage shall bear this therein at the time of
average. (Art. 810)
the occurrence of the
average
shall
contribute to satisfy
this average. (Art. 812)
The
insurers
(Art.859) and lenders
on
bottomry
and
respondentia
shall
likewise
contribute.
(Art.732).
Number of interests involved
Only
one
interest Several
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 reimbursement
There
may
be
reimbursement
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. 813-814)
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.

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65
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
Deck cargo is allowed
INTERNATIONAL
Deck cargo is not
allowed
With shippers consent
General average
Particular average
Without shippers consent
Captain is liable
Captain is 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
unlawful
Who
bears
expenses:
The inability to
continue
voyage is due
to
lack
of
provisions,
well-founded
fear of seizure,
privateers,
pirates,
or
accidents
of
the
sea
disabling it to
navigate. (Art.
819)
1. Lack
of
provisions due
to negligence to
carry according
to usage and
customs;
2. Risk
of
enemy not well
known
or
manifest
3. Defect of
vessel due to
improper
repair; and
4. Malice,
negligence, lack
of foresight or
skill of captain.
(Art. 820)
The shipowner
or ship agent
is liable in case
of
unlawful
arrival under
stress.
But
they shall not
be liable for
the damages
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
3.
4.
5.
without a right to vote;

The officers shall determine and agree if
there is well-founded reason after
examining the circumstances.
The
captain shall have the deciding vote;
The agreement shall be drafted and the
proper minutes shall be signed and
entered in the log book;
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 look-outs 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

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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 quasi-delict, 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

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67
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-TO-CONTAIN/
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 (non-delivery). (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.

Laws);
68
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
PASSENGER
TICKET
Passenger
BAGGAGE
CHECK
Checked-in
baggage
AIR
WAYBILL
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.
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)
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 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
officers and employees. (Alitalia vs. IAC)

Laws);
69
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)
b.
c.
Court of its principal place of business;

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.)
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)
In United Airlines vs. Uy the two-year prescriptive
period was not applied where the airline employed
delaying tactics.
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;

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Steamship Agency, 23 SCRA 24)

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1. CASO FORTUITO/FORCE MAJEURE

Transportation and Public Utilities, Aquino, T. &

4. CHARACTER OF THE GOODS OR DEFECTS IN

2. ACTS OF PUBLIC ENEMY

5. ORDER OR ACT OF PUBLIC AUTHORITY

FOR ACTS OF OTHER

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Required diligence and defense

The carrier is liable when its personnel allowed a

The duty of a common carrier to provide safety to its

Art.1735 Civil Code

1. Exercise of extraordinary diligence (Art.

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c. Act or omission of the shipper or the

Stipulation limiting liability when a passenger is

The diligence required in the carriage of the goods

Dispensing with or lessening the extraordinary

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RULES ON PASSENGERS BAGGAGE

However, the carrier cannot limit its liability for

Law on Transportation and Public Utilities, Aquino &

Maritime laws apply only to maritime trade and

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Jurisprudence, Justice Jose Vitug, 1997 ed.)

Commercial Law, Jorge Miravite, 2002 ed.)

Constitutes property which may be acquired and

ORDER OF PREFERENCE IN CASE OF SALE OF

GENERAL RULE: The liability of shipowner and

ship agent is limited to the amount of interest in

Claims under Workmens Compensation (Abueg

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Expenses for repair on vessel completed before

Abandonment of the vessel is necessary to limit

PERSONS WHO MAY MAKE A CHARTER

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Clauses Which May Be Included In a Charter

Rights and Obligations of Parties

Rescission of a Charter Party

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LOAN ON BOTTOMRY AND RESPONDENTIA

Who may contract

Not subject to Usury

Subject to Usury Law

Not subject to any

The last lender is a

The first lender is a

Lender loaned an amount larger than the

Note: Under existing laws, the parties to a loan,

GENERAL RULE: The obligation of the borrower to

Loss due to inherent defect;

Concurrence of Marine Insurance and Loan on

Law and Jurisprudence, Justice Jose Vitug, 1997

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