CONSOLIDATED LECTURE NOTES ON TRANSPORTATION

March 2010
PRELIMINARIES
1.
Transportation defined: Generally speaking, it has been referred to as the movement
of goods or persons from one place to another by a carrier.
1.1
Simply, it refers to the movement of persons or things from one place to another, and
is immaterial whether the carrying be over land, water or air. It includes waiting time,
loading or unloading, stopping in transit, and all other accessorial services in connection
with the loaded movement.
1.2
As a contract, it is one whereby a person, natural or juridical, obligates himself to
transport persons, goods or both, from one place to another, by land, water or air, for a price
or compensation.
1.3 It is also a contract whereby a certain person or association of persons obligate
themselves to transport persons, things or news from one place to another for a fixed price.
HISTORICAL ORIGIN OF THE LAW ON TRANSPORTATION
1.
If commerce has for its object the bringing of commodities to the consumer, it follows
that the merchant must transport his merchandise to the place where it is in demand. In
fact, he must even transport them to other countries. This requirement has thus made
transportation indispensable.
LAWS ON TRANSPORTATION THAT HAVE APPLICATION IN THE PHILIPPINES
1.
Whether transportation is by land, sea or air, the primary laws are Articles 1732 to
1766 of the New Civil Code. The secondary laws, particularly as to the rights and obligations
of a common carrier are the Code of Commerce and/or special laws.
1.1
The specific aspects that will be discussed are: (a) Public Utilities as covered by the
Public Service Act (b) Common carriers as covered by the Civil Code (c) Commercial
Contracts for Transportation Overland (d) Maritime Commerce
2.
Both the primary and secondary laws however are subject to the Constitution as the
supreme law.
2.1
Section 11, Article XII National Economy and Patrimony provides that the grant of
any franchise or any form of authorization to operate a public utility is limited to Filipinos or
Filipino corporations owned at least 60% by Filipinos. The participation of foreigners in the
equity and the governing body is this limited to 40% but it is required that all executive and
managing officers must be Filipino.
2.2
The Constitution does not prohibit the mere formation of a public utility corporation
without the required proportion of Filipino capital. What is prohibited is the grant of a
franchise or other form of authorization for the operation of a public utility to a corporation
already in existence but without the requisite proportion of Filipino capital.

3.
Note that the Public Service Commission has been replaced by the following
regulatory agencies: (a) Land Transportation Franchising Regulatory Board (LTFRB) for land
transportation (b) Maritime Industry Authority (MARINA) for water transportation (c) National
Telecommunications Commission (NTC) for communication utilities and services, radio
communications systems, wire or wireless telephone and telegraph systems, radio and
television broadcasting systems and other similar public utilities (d) Energy Regulatory
Board (ERB) for electric and power companies National Water Resources Council (NWRC)
for water resources (f) Civil Aeronautics Board (CAB) for air transportation
DEFINING A PUBLIC UTILITY
1.
Simply, a public utility is a business or service engaged in regularly supplying the
public with some commodity or service of public consequences such as electricity, gas,
water, transportation, telephone or telegraph service. The term implies public use and
service.
1.1
They are enterprises which specially cater to the needs of the public and conduce to
their comfort and convenience. AS such, public utility services are impressed with public
interest and concern.
1.2.
When, therefore, one devotes his property to a use in which the public has an
interest, he, in effect grants to the public an interest in that use, and must submit to the
control by the public for the common good, to the extent of the interest he has this created.
2.
A distinction must be made between the terms public service and public utility as
they do not have the same legal meaning, although are related:
2.1
The definition of public service in the Public Service Act, as last amended by
Republic Act No. 2677, includes every person who owns, operates, manages or controls, for
hire or compensation, and done for general business purposes, any common carrier railroad,
street railway, traction railway, subway motor vehicle, either for freight or passenger, or
both with or without fixed route and whatever may be its classification, freight or carrier of
any class, express service, steamboat, or steamship line, pontines, ferries, and water craft
engaged in the transportation of passengers or freight or both, shipyard, marine railway,
marine repair shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and power, petroleum, sewerage system,
wire or wireless communication systems, broadcasting stations and other similar public
services.
2.2
A public utility, on the other hand, is a business or service engaged regularly
supplying in the public with some commodity or service of public consequence such as
electricity, gas, water, transportation, telephone or telegraph service.
2.3.
Simply stated, a public utility provides a service or facility needed for present day
living wich cannot be denied to anyone who is willing to pay for it.
2.4
Another dissimilarity is that a public utility requires a franchise, aside from a
certificate of public necessity and convenience, for its operation, while a public service
which is not a public utility requires only a certificate of public convenience.
CERTIFICATE OF PUBLIC CONVENIENCE AND CERTIFICATE OF CONVENIENCE AND NECESSITY
DEFINED AND DISTINGUISHED

1.
A certificate of public convenience is any authorization to operate public service
issued by the Public Service Commission for which no franchise, either municipal or
legislative, is required by law.
1.1
The certificate of public convenience and necessity requires a franchise issued by the
legislative department.
1.2
Legislative franchise distinguished from a certificate of public convenience A
franchise is distinguished from a certificate of public convenience in that the former is a
grant or privilege from the sovereign power, while the latter is a form of regulations through
an administrative agency.
1.3
A legislative franchise is necessary before a public utility can be allowed to secure a
certificate of public convenience if there is a stature requiring it, otherwise, it would not be
required.
2.
A certificate of public convenience is a mere license or privilege and being neither a
franchise nor a contract, it confers no vested or property right or interest on the holder.
However, in its purely private aspect, it has value and may be considered property that can
be levied upon.
3.
The grant of a certificate of public convenience or a certificate of public convenience
and necessity requires the concurrence of the following: (a) the applicant must be a citizen
of the Philippines, or a corporation, partnership, or joint stock company constituted and
organized under the laws of the Philippines, at least sixty percent (60%) of its stock or paidup capital belongs entirely to Filipino citizens (b) the applicant must be financially capable of
undertaking the proposed service and meeting the responsibilities incident to its operation,
and (c) the applicant must prove that the operation of the business will promote the public
interest in a proper and suitable manner.
RULES OBSERVED IN THE GRANT OF CERTIFICATES OF PUBLIC CONVENIENCE/CERTIFICATES
OF PUBLIC CONVENIENCE AND NECESSITY
1.
The Prior Operator Rule contemplates that the first licensee will be protected in his
investments and will not be subjected to ruinous competition.
1.1
It is not therefore, the policy of the law for the Public Service Commission to issue a
certificate of public convenience to a second operator when a prior operator is rendering
sufficient, adequate and satisfactory service, and who in all things and respects is complying
with the rules and regulations of the Commission.
1.2
The rule will not apply if the public interest is served better by a new operator where:
(a) the old operator failed to make an offer to meet the increase in traffic (b) where the
Certificate of Public Convenience granted to a new operator is a maiden Certificate of Public
Convenience (c) where the application of the rule is conducive to a monopoly
1.3
Another form of the rule is the Old Operator Rule which mandates that before
permitting a new operator to invade the territory of another already established with a
certificate of public convenience, thereby entering into competition with it, the prior
operator must be given an opportunity to extend its service in order to meet the public.
1.4
Note that this rule only applies when the old operator offers to meet the increase in
the demand the moment it arises and not after another operator had offered to render the

additional service as was done in the present case. The rule protects those who are vigilant
in meeting the needs of the travelling public.
2.
The Prior Applicant Rule presupposes a situation where two or more interested
persons apply for a Certificate of Public Convenience in the same locality over which no
person has of yet been granted a Certificate of Public Convenience, the applications being
equal, the one who first applied will be preferred.
2.1
In relation to this rule, there is the Third Operator Rule which provides that where two
operators are more than serving the public, there is no reason to permit a third operator to
engage in competition with them. Thus, the fact that it is only one trip and of little
consequence, is not sufficient to grant the application. However, if later on, circumstances
would change requiring the operation of new units or extending existing facilities, the third
operator rule would be subject to the prior application rule and also as to who may best
subserve the public interests.
2.2
The rule where there are various applicants for a public utility over the same territory,
is that priority of application, while an element to be considered, does not necessarily
control the granting of a certificate of public convenience. The question to be considered in
such cases is which applicant can render the best service, considering the conditions and
qualifications of the applicant to furnish the same. But where other conditions are equal,
priority in the filing of the application for a certificate of public convenience becomes an
important factor in the granting or refusal of a certificate.
3.
Protection of Investment Rule is likewise considered as one of the primary purposes
of the law is to protect and conserve investments which have already been made for that
purpose by public service operators.
4.
The grounds for the revocation of a certificate are: (a) The holder violates or
contumaciously refuses to comply with any order, rule or regulations of the commission (b)
the holder is a mere dummy (c) The holder ceases operations or abandons the service.
REGULATION OF PUBLIC UTILITIES
1.
The regulation of public utilities is founded upon the police powers of the State and
statutes prescribing rules for the control and regulation of public utilities are considered
valid exercise thereof. When private property is used for public purpose and is affected with
public interest, it ceases to be juris privati only and becomes subject to regulation.
1.1 The regulation is to promote the common good. Submission to regulation may be
withdrawn by the owner by discontinuing use; but as long as use of the property is
continued, the same is subject to public regulation.
2.
In regulating rates charged by public utilities, the State seeks to protect the public
against arbitrary and excessive rates while maintaining the efficiency and quality of the
services rendered.
2.1
However, the power to regulate rate does not give the State the right to prescribe
rates which are so low as to deprive the public utility of a reasonable return on investment.
Thus, the rates prescribed by the State must be one that yields a fair return on the public
utility upon the value of the property performing the service and one that is reasonable to
the public for the service rendered. The fixing of just and reasonable rates involves a
balancing of the investor and the consumer interests.

2.2
The standard that should be used when an administrative body fixes the rates of
public utilities is that the rate be reasonable and just. It has been held that even in the
absence of an express requirement as to reasonableness, this standard may be implied.
2.3
What a just and reasonable rate is a question of fact calling for the exercise of
discretion, good sense, and a fair and independent judgment. The requirement of
reasonableness comprehends such rates which must not be so low as to be confiscatory, or
too high to be oppressive. In determining whether a rate is confiscatory, it is essential also
to consider the given situation, requirements and opportunities of the utility.
2.4
Determinative factors that should be considered in determining just and reasonable
rates are: (a) rate of return; (b) rate base; and (c) the return itself of the computed revenue
to be earned by the public utility based on the rate of return and rate base. The rate of
return is a judgment percentage, which if multiplied with the rate base, provides a fair return
on the public utility for the use of its property for service to the public. The rate of return of a
public utility is not prescribed by statute but by administrative and judicial pronouncements.
2.5
The Supreme Court has consistently adopted a 12% rate of return for public utilities.
The rate base, on the other hand, is an evaluation of the property devoted by the utility to
the public service or the value of invested capital or property which the utility is entitled to a
return.
3.
The Supreme Court ruled in a number of cases that an administrative agency may be
empowered by law to approve provisionally, when demanded by urgent public need, rates of
public utilities without a hearing. The reason is easily discerned from the fact that provisional
rates are by their nature temporary and subject to adjustment in conformity with the
definitive rates approved after final hearing. Thus, the Supreme Court sustained the
provisional approval of increase rates by the Energy Regulatory Board, Land Franchising and
Regulatory Board and Toll Regulatory Board.
COMMON CARRIERS:
COMMON CARRIER DEFINED
1.
A common carrier defined: They are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by land,
water or air, for compensation, offering their service to the public.
1.1
The elements of a common carrier are: (a) persons, corporations, firms or
associations (b) engaged in the business of carrying or transporting passengers or goods or
both (c) the means of carriage is by land, water or air (d) the carrying of passengers, goods
or both is for compensation (e) the service is offered to the public without distinction.
1.2
Engaged in the business is deemed to cover operations whether regular or
scheduled, occasional, episodic or unscheduled.
1.3 One is a common carrier even if he has no fixed and publicly known route, maintains no
terminals and issues no tickets.
1.4
The true test of whether the character of the use is whether the public may enjoy it
by right or permission. Note that the contract or transportation is a consensual contract.
Hence, a common carrier engages in a continuous offer. If you flag a common carrier down,
the contract becomes perfected and is consistent with the idea that entering with a contract

with the common carrier is a matter of right and not permission. You would know when the
carrier you are going to flag down is a common carrier because it should hold itself out
principally as such.
1.5
The distinction between a common or public carrier and a private or special carrier
lies in the character of the business, such that if the undertaking is a single transaction, not
a part of a general business or occupation, although involving the carriage of the goods for a
fee, the person or corporation offering such service is a private carrier.
1.6
To further distinguish: (a) The common carrier holds himself out in common, that is,
to all persons who choose to employ him, ready to carry for hire while the private carrier or
special carrier agrees in some special case with some private individual to carry for hire (b)
A private carrier is not bound to carry for any reason unless it enters a special agreement to
do so. A common carrier is bound to carry for all who offer such goods as it is accustomed to
carry and tender reasonable compensation for carrying them (c) A common carrier is subject
to regulation as it is a public service. A private carrier is not. (d) The common carrier is
bound to exercise extraordinary diligence while a private carrier owes only diligence of a
good father of a family A common carrier cannot stipulate that t is exempt from liability for
the negligence of its agents or employees. Such stipulation is void as it is against public
policy. A private carrier may validly enter into such stipulation.
1.7
Recovery from a contract or private carriage, requires a contract, that there was
negligence, and that the goods are lost. On the other hand, recovery from a contract with a
common carrier, only requires the contract and that the goods were lost. This is so because
of the presumption of negligence.
DEGREE OF DILIGENCE REQUIRED OF A COMMON CARRIER
1.
Regardless of whether the objects are goods or passengers, a common carrier must
observe extraordinary diligence.
1.1
While there is no expressed definition, it should mean greater than ordinary diligence
as may be required by the nature of the obligation and the circumstances of persons, time
and place.
1.2
The requirement is such because of the nature of the business and by reason of
public policy.
2.

The failure to exercise the required degree of diligence is a breach of the contract.

2.1
If loss, destruction or deterioration of the goods occurs or death or physical injuries is
suffered by a passenger, there is a presumption of negligence that arises.
2.2
If the damage does not fall within the instances stated, it does not mean that there is
no recovery against the common carrier. The grounds for recovery will have to be proven as
there is no presumption of negligence that arises. An example would be damage due to a
delay in delivery.
SPECIFIC OBLIGATION OF THE COMMON CARRIER
1.
As far as goods, a common carrier is responsible for its loss, destruction or
deterioration.

1.1

Hence, he must exercise vigilance in the care and custody of the goods. Unless the
exceptions apply, a common carrier is presumed to have been at fault or acted
negeligently.

2.

The list of exceptions is an exclusive list. They are:

2.1
Flood, storm, earthquake, or other natural disaster or calamity. For it to apply, the
following must be present: (a) such must be the proximate and only cause (b) due diligence
was exercised to prevent or minimize the loss, before, during and after its occurrence, and
(c) the common carrier is not guilty of delay in transporting the goods. Note that fire is not a
natural disaster or calamity unless caused by lightning or some other natural disaster.
2.2
Act of the public enemy in war, whether international, one that presupposes the
existence of an actual state of war, and refers to the government of a foreign nation at war
with the country to which the carrier belongs, or civil, when parties in rebellion occupy and
hold in a hostile manner a certain portion of the territory, when they have declared
independence and have in the field a regularly organized force in armed hostility. For it to
apply, the following must be present: (a) such must be the proximate and only cause (b) due
diligence was exercised to prevent or minimize the loss, before, during and after the act of
the public enemy. Note that pirates on the high seas stand as an exception as they are
considered as enemies of all civilized nations, and their depredations on a common carrier
will excuse him from liability.
2.3
Act or omission of the shipper or owner of the goods. For it to apply, such must be the
proximate cause and only cause. If the shipper or owner merely contributed to the loss,
destruction or deterioration, the proximate cause being the negligence of the common
carrier, it shall still be liable for damages but it shall be equitably reduced. An example
would be a misdirection of the shipment by the shipper or interference by the shipper with
the goods after acceptance. Note that a shipper who delivers the goods to the carrier during
a storm is not guilty of negligence so as to excuse the carrier, which consents to receive
them from liability for loss sustained as a result of the storm.
2.4
The character of the goods or defects in the packaging or in the containers. For it to
apply, such must be the proximate cause and only cause. The common carrier must have
protested of visible and still exercise due diligence to forestall or lessen the loss. If the
carrier accepts despite the condition, it is not relieved of liability for loss or injury.
2.5
Order or act of competent authority resulting in the seizure or destruction. For it to
apply, the public authority must have the power to issue the order and that the same be
lawful.
2.6
Proof of the exercise of extraordinary diligence. When the common carrier opts to file
a demurrer to the evidence instead of presenting evidence, the presumption that it was
negligent will stand.
3.
The law of the country to which the goods are to be transported shall govern the
liability of the common carrier for their loss, destruction or deterioration.
4.
Hijacking does not fall under any of the exempting causes, but in a case where the
goods were lost as a result of a robbery attended by a grave irresistible threat, violence or
force, the carrier was relieved from liability.
5.
For passengers, a common carrier is bound to carry them safely as far as human care
and foresight can provide, using utmost diligence of a very cautious person with regard for
all circumstance. In case of death or injury, common carriers are presumed to have been at
fault or to have acted negligently, unless they exercised extraordinary diligence.

5.1

Without death or injury, no presumption of negligence will arise.

5.2
The other known exception as to liability is when carriage is gratuitous where the
parties can stipulate against the presumption as liability for negligence may be limited, but
it should not include limitation of liability for willful acts or gross negligence. If the fare is just
reduced, it will not justify any limitation on liability.
5.3
The common carrier is also liable if the death or injury arises from the negligence or
willful acts of its employees, although the employees may have acted beyond the scope of
their authority or in violation of orders. The liability does not cease upon proof of the
exercise of diligence of a good father of the family in the selection and supervision of the
employees. This liability extends only to acts which the carrier could foresee or avoid
through the exercise of the degree of diligence required.
5.4
If the acts of the employee is not undertaken in the line of duty the carrier is not
liable. However, the rule on strangers or other passengers will apply. That is, the common
carrier shall be liable if through the exercise of the diligence of a good father of a family, it
could have prevented or stopped the act.
5.5
The contributory negligence of a passenger is not a defense that will excuse a carrier
from liability. The only effect of such is to mitigate the liability.
PROHIBITED AND ALLOWABLE STIPULATIONS IN A CONTRACT OF CARRIAGE
1.
The following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy: (a) that the common carrier shall not be responsible for the acts or
omissions of his or its employees (b) that the common carriers liability for acts committed
by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is
dispensed with or diminished (c) that the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the defective condition of the car,
vehicle, ship, airplane or other equipment used in the contract of carriage.
2.
In a contract for the carriage of goods, the parties can stipulate on the exercise of a
lesser degree of diligence, but not that below the diligence of a good father of a family,
provided: (a) the stipulation be in writing and signed by both parties (b) that it be supported
by valuable consideration other than the service rendered by the common carrier, and (c)
that it be just and reasonable, and not contrary to law.
2.1
A stipulation limiting the common carriers liability for delay on account of strikes or
riots is valid.
2.2 A stipulation fixing the amount that may be recovered is allowed provided: (a) it is
reasonable and just under the circumstances and (b) it is fairly and freely agreed upon.
2.3
A stipulation that the liability of the common carrier is limited to the value of the
goods as appearing in the bill of lading, unless the shipper or owner declares a greater value
is binding.
2.4
The absence of a competitor along the line or route to which the contract refers shall
be taken into consideration on the question of whether or not a stipulation limiting liability is
reasonable, just and in consonance with public policy.

2.5
Notwithstanding an agreement limiting liability in relation to vigilance over the goods,
the common carrier is still disputably presumed to be negligent in case of loss, destruction
or deterioration. Hence, he still has to prove the exercise of the required degree of diligence
to avoid liability.
2.6
The agreement limiting liability may be annulled by the shipper or owner if the
common carrier refused to carry the goods, unless the former agreed to the stipulation.
2.7
If the common carrier, without must cause, delays transportation or changes the
stipulated route, the contract limiting liability cannot be availed of in case of loss,
destruction or deterioration.
3.
In a contract for the carriage of passengers, there can be no stipulation dispensing
with responsibility or reducing the amount that may be recovered. This applies
notwithstanding the posting of notices or statements in the tickets.
WHEN THE CONTRACT AND EXERCISE OF DILIGENCE BEGINS AND ENDS
1.
In a contract for carriage for goods it commences from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation
until the same shall have been delivered actually or constructively by the carrier to the
consignee who has the right to receive them.
1.1
It remains in full force and effect even if they are temporarily off loaded or stored in
transit unless the shipper or owner has made use of the right of stoppage in transit.
1.2
It continues even during the time the goods are stored in a warehouse of the carrier
at the place of destination until the consignee has been advised of the arrival and has had a
reasonable opportunity thereafter to remove or otherwise dispose of them.
2.
In a contract for the carriage of passengers it commences the moment the person
who purchases the ticket from the carrier present himself at the proper place and in a proper
manner to be transported.
2.1
Such person must have a bona fide intention to use the facilities of the carrier,
possess sufficient fare with which to pay for his passage and present himself to the carrier
for transportation in the place and manner provided. If he does not do so, he will not be
considered a passenger and the carrier does not owe him extraordinary diligence.
2.2
It is the duty of carriers of passengers to stop their conveyances for a reasonable
length of time in order to afford passengers an opportunity to board and enter, and they are
liable for injuries suffered by boarding passengers resulting from the sudden starting up or
jerking of their conveyances. A public utility bus, once it stops, is in effect making a
continuous offer to bus riders.
2.3
The carrier was held liable for breach of the contract when a drunk Nicanor Navidad
died after he fell on the LRT tracks and was struck by a moving train.
2.4
The relationship will not ordinarily terminate until the passenger has, after reaching
his destination, safely alighted from the carriers conveyance or has had a reasonable
opportunity to leave the carriers premises.
2.5
A person, who, after alighting from a train, walks along the station platform or has
return or retrieve a piece of baggage he had left is still considered a passenger.

RECOVERABLE DAMAGES AND PENALTIES

1.
Damages may be recovered as provided for by the provisions on damages as found in
the Civil Code.
1.1
In case of death of a passenger or even if death does not result but the carrier is
guilty of fraud or bad faith, moral damages may be recovered. In the latter case, only the
injured may demand payment of the moral damages. If there is contributory negligence of
the passenger, moral damages cannot be recovered.
1.2
In addition, the carrier may also be liable for: (a) loss of earning capacity of the
deceased unless the deceased on account of a permanent physical disability not caused by
the defendant had no earning capacity at the time of his death (b) if the deceased was
obliged to give support according to Article 291 of the Civil Code, the recipient who is not an
heir, may demand support from the person causing death for a period not exceeding 5
years, the exact period to be fixed by the court (c) the spouse, legitimate or illegitimate
descendants and ascendants may demand payment of moral damages for mental anguish
by reason of death.
1.3

Prevailing jurisprudence has fixed indemnity for death at PHP 50,000.00

1.4
The computation of net earning capacity is life expectancy [80 less the age of the
deceased multiplied by 2/3] multiplied by [gross annual income necessary living expenses
(50% of gross annual income)].
1.5
Generally, exemplary damages will be adjudged against a common carrier when: (a)
he authorized the wrongful acts of his agents, or (b) he ratifies the same thereafter.
2.
The Public Service Commission (now the LTFRB) may on its motion or petition of an
interested party cancel the certificate of public convenience granted to a common carrier
that repeatedly fails to comply with the exercise of extraordinary diligence.
APPLICABILITY OF OTHER LAWS
1.
In all other matters not regulated by the Civil Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and by special laws.
OTHER RELATED ISSUES
1.
Registered Owner Rule provides that the person who appears as the registered owner
of a vehicle is liable for any damages caused by the negligent operation of the vehicle, even
if it has been sold or conveyed at the time of the accident, with recourse however against
the transferee or buyer.
1.1
The registered owner is also liable even if the vehicle was leased to another person. If
stolen, the registered owner has no liability.
1.2
Under the kabit system whereby a person granted a Certificate of Public
Convenience allows other person who one motor vehicles to operate them under his license
for a fee or percentage, it is the operator who appears as the registered owner who would be

liable. The status of the contract that embodies the arrangement is contrary to public policy
hence void. The vehicle may also be levied upon by creditors of the registered owner.
2.
Successive Carriers the second carrier shall assume the obligations of the first
carrier but shall have a right of action against the first carrier if the latter is directly
responsible for the fault giving rise to the claim of the shipper or consignee.
2.1
An airline ticket providing the carriage of successive air carriers is to be regarded as a
single operation is to make the issuer carrier liable for the tortious conduct of the other
carrier. A provision that limits liability only to its own conduct is not enough to rebut the
liability.
3. Passengers Baggages in the custody of the passenger will be considered as a necessary
deposit, where the carrier is responsible as a depository, provided that notice is given and
that the passenger took the necessary precautions which the carrier has advised him
relative to care and vigilance. Hence, if lost due to the passengers fault, the carrier is not
liable. The act of a thief or robber who entered the premises of the carrier is not force
majeure unless done with the use of arms or through an irresistible force.
3.1

If in the custody of the carrier, it will be required to exercise extraordinary diligence.

3.2
The carrier cannot be said to be remiss in the exercise of the required degree of
diligence when it does not cause to be opened the luggage or baggage of its passengers,
who upon an inquiry have disclosed the contents to the satisfaction of the carrier. However,
air carriers are given the power to open. Hence, their failure to exercise the power amounts
to a failure to exercise the required degree of diligence.

OVERLAND TRANSPORTATION AND BILLS OF LADING

PRELIMINARIES
1.
Definition of overland transportation the transport on land and on small bodies of
water, waterways, both natural and artificial, including transport on rivers which are not very
large.
1.1

If it involves transportation on sea, t will be referred to as maritime admiralty.

2.
The provisions of Articles 352 379 of the Code of Commerce involves commercial
contracts only. However, the applicability of laws shall be as follows:
2.1
Commercial contracts involving common carriers shall be governed primarily by the
Civil Code and supplemented by the Code of Commerce.
2.2
Commercial contracts involving private carriers shall be governed primarily by the
Code of Commerce and Supplemented by the Civil Code provisions.
3.
A contract of transportation by land or waterways of any kind shall be considered
commercial when: (a) it involves merchandise or any object of commerce (b) no matter what

its object may be, the carrier is a merchant or is customarily or habitually engaged in
transportation for the public or is a common carrier.
3.1
The transportation of persons or news will be deemed commercial only if it is
undertaken under (b).
3.2
A contract of air transportation may be regarded as commercial since it is analogous
to land and water transportation.
4.
Article 1766 of the Civil Code provides that all matters not regulated by this Code, the
rights and obligations of common carriers shall be governed by the Code of Commerce and
by special laws.
BILL OF LADING DEFINED
1.
A bill of lading may be defined as a written acknowledgment of the receipt of goods
and an agreement to transport and to deliver them at a specified place to a person named
or on his order. It comprehends all methods of transportation.
1.1
The nature of a Bill of Lading is as follows: (a) is a contract in itself and the parties are
bound by its terms (b) it is a receipt (c) it is a symbol of goods covered by it.
2.
Since it is also a symbol of the goods, it is considered a document of title to the
goods.
2.1
A document of title is any document used in the ordinary course of business in the
sale or transfer of goods, as proof of the possession or control of goods, or authorizing the
possessor of the document to transfer or receive, either by endorsement or delivery, goods
represented by such document.
3.

If negotiable in form, a Bill of Lading may be a negotiable document of title.

3.1
It is negotiable if it states that the goods referred to therein will be delivered to the
bearer or the order of any person named in such document.
3.2
A bill of lading stamped with the words non-negotiable but containing words that
the goods are deliverable to the order of the person named therein is a negotiable bill of
lading.
3.3
It is non-negotiable if it states that the goods referred to therein will be delivered to
persons specified or named in such document.
3.4

It is not a negotiable instrument because it is not payable in a sum certain in money.

3.5
A purchaser in good faith and for value of the goods covered by a negotiable bill of
lading is superior to the unpaid sellers right of stoppage in transit.
4.
The form of the bill of lading is not material. If it contains an acknowledgment by the
carrier of the receipt of goods for transportation, it is in legal effect, a bill of lading.
4.1
The bill of lading constitutes the legal evidence of the contract of transportation as all
disputes between the parties regarding the execution and performance of the contract shall
be decided by its contents. The law admits no exception other than falsity and material error
in its drafting.

4.2
But the execution of a bill of lading is not essential to a contract of transportation.
The making of such is not obligatory. The fact that a bill of lading is not issued does not
preclude the existence of a contract of transportation.
4.3
In the absence of a bill of lading, the respective claims of the parties shall be decided
by the legal proofs that each one may submit in support of his claims. However: (a) if the
value is PHP 300.00 or less, testimonial evidence is allowed (b) if the value exceeds PHP
300.00, testimonial evidence is not sufficient, there should be proof through other writing/s.
5.

If transport is by air, what is issued is an airway bill.

5.1
A ticket ordinarily refers to passengers but when it refers to a thing it covers
baggage, while a bill of lading always refers to goods that are denominated usually as cargo.
6.
A clean bill of lading is one in common form without any memorandum in the margin
or on its face showing that the goods are to be carried on deck.
6.1
On board bill of lading is one that states that the goods have been received on board
the vessel that will transport such goods.
6.2
A received for shipment bill of lading is one that states that the goods have been
received without specifying the vessel that will transport the goods.
PARTIES TO A BILL OF LADING
1.
The parties to a bill of lading are: (a) shipper/consignor a person to be transported
or owner of the goods to be transported; one who gives rise to the contract of transportation
(b) carrier one who binds himself to transport persons, things or news as the case may be;
one engaged in the business of carrying goods for other for hire; (c) consignee the party to
whom the carrier is to deliver the things being transported; one to whom the carrier may
lawfully make delivery in accordance with its contract of carriage.
2.
Note that the shipper and consignee may be 1 person.

COMMENCEMENT OF THE RESPONSIBILITY OF THE CARRIER

1.
Commencement of the responsibility of the carrier is upon receipt of the merchandise
from the shipper, either personally or through a person charged for that purpose, at the
palce indicated for their reception.
1.1
This responsibility shall endure and continue after the arrival of the goods at their
destination until they are ready to be delivered at the usual place of delivery, and the owner
or consignee has a reasonable opportunity, when such goods are delivered, of examining
them sufficiently to judge from their outward appearance of their identity, and whether they
are in a proper condition, and take them away.
1.2
A common carrier cannot refuse a particular class of goods to the prejudice of the
traffic in those goods.
1.3
The exception is when the goods are unfit for transportation but if transportation is
insisted upon, common carriers cannot refuse to carry them, but they shall be exempt from
all responsibility if their objections are made to appear in the bill of lading.

1.4
If by reason of well-founded suspicions of falsity in the declaration of the contents of
a package, the carrier should decide to examine it, he shall do so before witnesses, in the
presence of the shipper or the consignee. If the shipper or consignee does not appear, it
shall be done before a notary. Expenses for the examination and repackaging shall be
defrayed by the carrier if the declaration of the shipper be correct and in a contrary case for
the account of the shipper.
RESPONSIBILITIES OF THE CARRIER
1.
The responsibilities of a carrier are as follows: (a) if a common carrier, observe
extraordinary diligence (b) to deliver goods to the consignee without delay, otherwise, make
judicial deposit (c) to deliver goods in the same condition (d) not to deviate from the route
(e) to keep a registry (f) to comply with law and regulations during the whole course of the
trip and upon arrival at the port of destination, except when the failure shall arise on account
of a falsehood on the part of the shipper in the declaration of merchandise.
1.1
The responsibilities shall be equally applicable to those, who although do not
personally effect transportation, contract to do so through contractors for a particular and
definite operation or as agents for transportation and conveyances.
1.2
In such case, they are subrogated in the place of the carrier, with respect to
responsibilities and rights.
DELIVERY OF THE GOODS WITHOUT DELAY
1.
Where a period is fixed for delivery: the carrier must deliver the goods within the time
fixed.
1.1
For failure to do so, the carrier shall pay the indemnity stipulated in the bill, neither
the shipper nor the consignee being entitled to anything else.
1.2
If no indemnity has been stipulated and the delay exceeds the time fixed in the bill,
the carrier shall be liable for the damages that the delay may have caused.
1.3
Where no period was fixed: the carrier shall be bound to forward them in the first
shipment of the same or similar goods which he makes to the point where he must deliver
them.
1.4

Should he not do so, the damages caused by the delay shall be for his account.

2.
Concept of Conversion: Where property in the hands of a carrier is not delivered
within a reasonable time after it has reached its destination, the carrier in the absence of
any legal exemption and after demand has been made and delivery refused, is liable for a
conversion of the property.
2.1
The consignee may waive title to the property and sue for conversion and is entitled
to the value of the goods at the time they should have been delivered to him. Subsequent
tender of the goods by the carrier is not available as a defense.
2.2
If there has been demand and the carrier tenders the goods, the consignee cannot
refuse to receive the goods and sue for conversion. His sole remedy is an action for
damages on account of the delay. There can only be conversion if there has been demand
and the carrier refuses delivery.

3.

Note the remedy of judicial deposit when consignee cannot be found.

HOW AND TO WHOM DELIVERY IS MADE

1.
Where the bill of lading is issued to the order of the shipper, the carrier is under no
duty to deliver the merchandise mentioned in the bill of lading except upon the presentation
of the bill of lading duly indorsed by the shipper.
1.1
Prior to the appearance of the consignee or legitimate holder of the bill of lading, with
such bill before the carrier, the consignee or legitimate bill holder is not a party to the
contract.
2.

The carrier in the above-instance is still subject to the orders of the shipper.

2.1
Hence, the shipper may, without changing the place where the delivery is to be
made, change the consignment of the goods delivered to the carrier, and the latter must
comply with his orders, provided that at the time of making the change of the consignee, the
bill of lading subscribed by the carrier, if one was issued, be returned to him, exchanging it
for another containing the novation of the contract.
2.2
The expenses arising from the change of consignment shall be defrayed by the
shipper.
2.3
Hence, in case of conflicting orders of the shipper and the consignee, there is no
other recourse than to determine at what moment the right of the shipper countermand the
shipment terminates. This moment can be no other than the time when the consignee or
legitimate holder of the bill appears with such bill before the carrier and makes himself a
party to the contract as prior to that time, he is a stranger to the contract.
2.4
A misdelivery occurs when delivery to a person different from that indicated in the bill
is made.
3.
The carrier must deliver to the consignee without delay or obstruction, the goods
which he may have received, by the mere fact of being named in the bill of lading to receive
them, and if he does not do so, he shall be liable for damages which may be caused thereby.
3.1
If a consigned is not present upon arrival, he is entitled to reasonable notice from the
carrier of their arrival and a fair opportunity to take care of and remove them.
3.2
If the consignee is unknown to the carrier, the latter must use proper and reasonable
diligence to find him.
3.3
When the consignee cannot be found at the domicile indicated in the bill or should
refuse to pay the transportation charges and expenses, or to receive the goods, the deposit
of said goods shall be ordered by the municipal judge, to be placed at the disposal of the
shipper or sender, without prejudice to a person having a better right. This deposit shall
have all the effects of a delivery.
CONDITION OF THE GOODS UPON DELIVERY
1.
The general rule is that the merchandise shall be transported at the risk and venture
of the shipper, if the contrary has not been expressly stipulated.

1.1
As a consequence, all losses and deterioration which may be suffered by the goods
through (a) fortuitous event (b) force majeure or (c) the inherent nature and defect of the
goods are for the account of the shipper.
1.2

Proof of these accidents is however incumbent upon the carrier.

1.3
Note that while the Code of Commerce appears to allow a contrary stipulation, the
same has been repealed by Article 1745 of the Civil Code by the requirement that a common
carrier should exercise extraordinary diligence, qualified by a stipulation that can allow for a
lesser degree not below that of a good gather of a family under Article 1744 of the Civil
Code.
2.
The carrier is liable for losses or damages resulting from its negligence or by the
failure to take precautions which usage has established among careful persons.
2.1
This liability will no arise if there is fraud committed by the sipper in the bill of lading
when represented the goods to be of a kind or quality different from what they really were.
2.2 Note the power given to the carrier, who notwithstanding the exercise of the precautions
required, to sell the goods by placing them in the hands of judicial or appropriate authority
when they run the risk of loss due to their nature or unavoidable accident, there being no
time for their owners to sell them.
3. Consequently, with the exception of the causes mentioned in (1.1) and (2.1), the carrier
shall be obliged to deliver the goods transported in the same condition in which, according
to the bill of lading, they were at the time of their receipt, without any damage or
impairment, and should he not do so, he shall be obliged to pay the value of the goods not
delivered at the point where they should have been and at the time the delivery should have
taken place.
3.1
If only part of the goods transported should be delivered, the consignee may refuse
to receive them, when he proves that he cannot make use thereof without the others that
were not delivered.
3.2
The determination of the usefulness of the goods individually depends upon the
consignee, but he cannot be arbitrary and must justify his determination.
4.
If the effect of the damage due should only be a reduction in the value of the goods,
the obligation of the carrier shall be reduced to the payment of the amount of said reduction
in value, after appraisal by experts.
5.
If, on account of the damage, the goods are rendered useless for sale or consumption
for the use for which they are properly designed, the consignee shall not be bound to
receive them, and may leave them in the hands of the carrier, demanding payment of their
value at the current market price that day.
5.1
If among the goods damaged there should be some in good condition without any
defect whatsoever, the foregoing provision shall be applicable with regard to the damaged
ones, and the consignee shall receive those which are sound, this separation being made by
distinct and separate articles, no object being divided for the purpose, unless the consignee
proves the impossibility of conveniently making use thereof in this form.
5.2
The same provision shall be applied to merchandise in bales or packages with
distinction of the packages which appear sound.

TIME FOR MAKING A CLAIM FOR DAMAGES

1.
Within 24 hours following the receipt of the merchandise, a claim may be brought
against the carrier on account of damage or average found therein on opening the
packages, provided that the signs of the damage or average giving rise to the claim may not
be known from the exterior part of the packages, and in case that they may be so
ascertained, said claim shall only be admitted at the time of the receipt of the packages.
1.1

The periods prescribed shall commence to run only from the rime the consignee is in
actual possession.

1.2
The 24-hour rule is counted from the receipt of the goods except if: (a) the defect is
due to the packaging of the goods or may be seen from outside the goods, or (b)
owner/shipper never received the goods as there can be no question as to the right to bring
a claim.
1.3
The 24-hour rule of notice is not a prescriptive period, it is merely a condition
precedent before a complaint may be filed. Remember that failure to comply with a
condition precedent is a ground for dismissal, except when there is fraud. The prescriptive
period for an action based on written contracts is 10 years.
1.4
After the periods mentioned have elapsed or after the transportation charges have
been paid, no claim whatsoever shall be admitted against the carrier with regard to the
condition in which the goods transported were delivered.
1.5

The periods may be the subject of a stipulation extending them.

2.
If there should occur doubts and disputes between the consignee and the carrier with
regard to the condition of goods transported at the time of their delivery to the former, the
said goods shall be examined by experts appointed by the parties, and in case of
disagreement, a 3rd one appointed by the judicial authority.
2.1
The result of the examination being reduced to writing; and if the persons interested
should not agree to the report of the experts and could not settle the disputes, said judicial
authority shall order the deposit of the merchandise in a safe warehouse, and the parties
interested shall make use of their rights in the proper manner.
3.
Summary of steps in filing claims for damages: (a) if damages can be ascertained on
the face of the cargo protest immediately upon receipt (b) if it cannot be ascertained after
delivery and receipt file a claim within 24 hours after receipt.

EFFECT OF DEVIATION FROM AGREED ROUTE

1.
If there is an agreement, the carrier cannot change the route unless there is force
majeure.
2.
When there is no agreed route, the carrier must select 1 which may be the shortest,
least expensive and practically passable.

3.
Should the route be changed without such cause, the carrier is liable for any damage
suffered by the goods transported for any cause whatsoever, besides paying the amount
which may be stipulated for such cause.
3.1
On the other hand, if such cause exists causing an increase in the transportation cost,
the carrier shall be reimbursed for the increase after formal proof.
RIGHTS AND OBLIGATIONS OF SEVERAL CARRIERS
1.
The carrier who makes the delivery by virtue of combined agreements or services
shall assume the obligations of those who preceded him.
1.1
However, he has a right to proceed against those who preceded him if he was not the
party directly responsible.
2.
The carrier who makes the delivery shall also acquire all actions and rights of those
who preceded him.
3. The shipper and the consignee shall have an immediate right of action against the carrier
who executed the transportation contract, or against carriers who may have received the
goods without reservation.
3.1
However, the reservation shall not relieve them for responsibilities which they may
have incurred by their own acts.
RIGHTS OF THE SHIPPER OR CONSIGNEE
1.

A right to the payment of damages when goods are lost or mislaid.

1.1
The value of the goods stated in the bill is conclusive between the parties and the
shipper is not allowed to prove a higher value.
1.2
It is only when the carriers fault is so gross as to amount to actual fraud, that the
actual amount of the losses and damages suffered may be proved by the shipper against the
carrier.
2.
A right to abandon exists in cases of delay on account of the fault of the carrier as the
consignee may leave the goods transported in the hands of the carrier, informing him
thereof in writing before the arrival of the same at the point of the destination.
2.1
It also exists when: (a) there is of a partial non-delivery where the consignee proves
that he cannot make use of the goods capable of delivery independently of those now
delivered (b) where the goods are rendered useless for sale and consumption for the
purposes which they are properly destined.
2.2
When this abandonment occurs, the carrier shall satisfy the total value of the goods,
as if they had been lost or mislaid.
2.3
Should the abandonment not occur, the indemnity for loss and damages on account
of the delays cannot exceed the current price of the goods transported on the day and at the
place where the delivery was to have been made. The same provision shall be observed in
all cases where there is indemnity due.

OBLIGATION TO PAY FOR TRANSPORTATION CHARGES

1.
The consignees to whom the remittance may have been made may not defer the
payment of the expenses and transportation charges of the goods that they received after
24 hours have elapsed from the time of delivery.
1.1
In case of delay in making this payment, the carrier may demand the judicial stale of
the goods he transported to a sufficient amount to cover the transportation charges and the
expenses incurred.
2.
The goods transported shall be specifically bound to answer for the transportation
charges and for the expenses and fees caused by the same during their transportation, and
until the time of their delivery.
2.1
The special right shall be limited to 30 days after the delivery has been made and
after said prescription, the carrier shall have no further right of action than that
corresponding to an ordinary creditor.
3.
The preference of the carrier to the payment of what is due him for the transportation
and expenses of the goods delivered to the consignee shall not be affected by the
bankruptcy of the latter, provided the action is brought within the 30 days mentioned in the
foregoing article.
4.
In the enforcement by the carrier of the payment of the transportation charges, the
time limit rests on the necessity which the consignee must have for the alienation of the
goods that is why the carrier is given a period that is relatively urgent pertaining to the said
goods transported. After the time has prescribed, his preference prescribes and his only
remedy is by ordinary action.
OBLIGATION TO RETURN THE BILL OF LADING
1.
with.

The obligation to return the bill of lading arises after the contract has been complied

1.1
The bill of lading shall be returned to the carrier who may have issued it and by virtue
of the exchange of this title for the article transported, the respective obligations and actions
shall be considered cancelled, unless in the same act the claims which the parties may wish
to reserve are reduced to writing, with the exception of that provided by Article 366.
1.2
The claims referred to are those for damages that can be ascertained from the
outside of the packages at the time of the receipt.
2.
In case the consignee, upon receiving the goods, cannot return the bill of lading
because of its loss or of any other cause, he must give the latter a receipt for the goods
delivered, this receipt shall produce the same effects as the return of the bill of lading.
ADMIRALTY AND MARITIME COMMERCE
PRELIMINARIES
1.
Origin of Maritime Law is found on in the customary rules adopted and utilized by
ports and communities connected with the sea which eventually crossed boundaries
because of the merchants and shipowners who travelled the seas guided by the said rules.

1.1
They later came to be known as the law of the seas or the body of laws applied to
maritime cases.
2. Maritime law is distinguished from Civil Law and Mercantile Law in general by its real and
hypothecary nature which means that the liability of the agent or the ship owner in relation
to maritime contracts is limited to the res or the vessel.
REAL AND HYPOTHECARY NATURE OF MARITIME LAW
1.
The effect is that the vessel is hypothecated or is the guarantee for the settlement for
obligations under maritime contracts.
1.1
This originated in the prevailing conditions of the maritime trade and sea voyages
during the medieval ages. To offset against the adverse conditions and to encourage
shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the
owner or the agent arising from the operation of the vessel to the vessel, its equipment, and
freight or insurance, if any, so that if the ship owner or agent abandoned the ship,
equipment and freightage, his liability was extinguished.
1.2
As a rule, subject to limited exceptions, if the vessel is lost, the ship owner or ship
agent will have no liability. If the vessel is not lost, the ship owner or the ship agent may
abandon the vessel to the creditors in satisfaction of their claim.
2.
Distinguishing the ship owner from the ship agent. A ship agent is defined as the
person entrusted with provisioning or representing the vessel in the port where it is found.
2.1
Fundamentally, the term ship agent must be understood to refer to the person
undertaking the voyage, who, in one case may be the owner or a charterer.
2.2
This interpretation is notwithstanding the apparent conflict with the statutory
definition of a ship agent and under Article 587 of the Code of Commerce where it utilized in
manner that encompasses the term owner.
2.3
This distinction must be made when the one doing the work of a ship agent is the
ship owner himself.
3.
Under our laws, the ship owner and ship agent are primarily liable for the following
acts: (a) acts of the captain (b) contracts entered into by the captain to repair, equip and
provision the vessel, provided that the amount claimed was invested for the benefit of the
vessel (c) indemnities in favor of third persons which arise from the conduct of the captain in
the care of the goods as well as safety of the passengers (d) damages to third persons for
torts or quasi-delict committed by the captain, except in a collision with another vessel (e) in
case of collision due to the fault, negligence or want of skill of the captain, sailing mate or
any member of the complement. These are the liabilities that would be extinguished by loss
or abandonment of the vessel.
3.1
A ship agent is liable notwithstanding the insolvency of the principal/owner. But the
ship agent may exempt himself from liability by abandoning the vessel with all her
equipment and the freight it may have earned during the voyage.
3.2
The effect of abandonment is to extinguish the liability of the ship agent. The ship
agents liability is confined to that which he is entitled as matter of right to abandon: the
vessel with all her equipment and the freightage it may have earned during the voyage and

to the insurance thereof. The limited liability will not be applicable when no abandonment of
the vessel is made.
3.3
The abandonment of the vessel does not require any specific procedure. The ship
owner can just say he abandons the vessel in favor of the claimants. There is no prescriptive
period within which the ship owner can make an abandonment. He may do so for as long as
he is not estopped from invoking the same or do acts inconsistent with abandonment, like
salvage.
3.4
The effect of abandonment is that it amounts to an offer of the value of the vessel, of
her equipment, and freight money earned in satisfaction of the liabilities.
4.
The exceptions to the doctrine of liited liability: (a) where the ship owner is at fault as
the doctrine is premised on the condition that the death or injury to the passenger occurred
by reason of the fault or negligence of the captain only (b) in case of Workmens
Compensation as such compensation has nothing to do with maritime commerce, it is an
item in the cost of the production which must be included in the budget of nay wellmanaged industry (c) Total destruction of the vessel does not affect the liability of the owner
for repairs on the vessel completed before its loss as owners of a vessel are liable for
necessary repairs and it shall remain unaffected by the loss of the thing.
5.
Any maritime lien is also extinguished by the total loss of the vessel as there is no
longer any res to which it can attach.
5.1
A maritime lien is a privileged claim or change upon a ship, which claim or lien travels
with the ship secretively and unconditionally and may be enforced by an action in rem. Once
it attaches, it adheres to the res. Hence, any purchaser or charterer of the res takes title to it
subject to the maritime lien and he cannot plead want of notice to defeat the lien.
5.2
Examples of maritime liens are: (a) taxes, expenses, costs and fees imposed by the
state (b) wages of the crew (c) a general average (d) salvage (e) maritime liens prior in time
to the recording of a preferred ship mortgage (f) damages arising out of tort
6.
The persons entitled to invoke the protection of limitation on liability are the ship
owner or co-owners thereof and ship agents.
6.1

Hence, only the ship-owner or ship agent can make abandonment.

6.2
In case of a co-ownership, a co-owner may exempt himself from liability by the
abandonment of the part of the vessel belonging to him.
VESSELS
1.
Vessels are those engaged in navigation, whether coastwise or on the high seas,
including floating docks, pontoons, dredges, scows and any other floating apparatus
destined for the services of the industry or maritime commerce.
1.1
Vessels engaged in the business of carrying or transporting passengers or goods for
compensation, offering their services to the public are common carriers.
1.2
They are to be governed primarily by the Civil Code and suppletorily by the Code of
Commerce and special laws.
2.
Vessels which are governed by the Code of Commerce are those licensed to engage
in maritime commerce or commerce by sea, whether in foreign or coastwise trade.

2.1
These are merchant ships as they are engaged in the transportation of passengers
and freight from one port to another.
2.2
They do not include all ships, craft or floating structures of every kind without
limitation, and should not include minor craft engaged only in river and bay traffic. Neither
does it refer to pleasure ships, yachts, pontoons, health service and harbor, police vessels,
towboats and other craft destined to other uses, such as coast and geodetic survey,
scientific research and exploration, crafts engaged in the loading and the discharge of
vessels, or transshipments from one vessel to another.
3.
Vessels of a minor nature not engaged in maritime commerce, such as river boats
and those carrying passengers from ship to shore must be governed as to their liability to
passengers by the provisions of the Civil Code.
4.
If the vessel is of domestic ownership and of 15 tons gross or more, the taking of a
Certificate of Philippine Registry shall not be optional to the owner.
4.1
Purpose of a Certificate of Philippine Registry: to declare the nationality of a vessel
engaged in trade with foreign nations and to enable to her to assert that nationality
wherever found.
4.2
The vessels exempt from registration are: (a) AFP vessels (b) vessels owned by
foreign governments for military purposes (c) Bancas, sail boats and other water craft which
are not motorized of less than three gross tons capacity.
4.3
The privileges of a Certificate of Philippine Registry: (a) right to engage in Philippine
coastwise trade (b) protection of the authorities and the flag of the Philippines in all ports
and on the high seas (c) same privileges and subject the same disabilities pertaining to
foreign built vessels transferred abroad to citizens of the Philippines.
4.4
Registration is also determinative of: (a) determines ownership of the vessel, and (b)
to bind 3rd persons.
5.
The Philippine Registry is not an open registry: This means that we only allow the
registration of vessels of domestic ownership, or owned by Filipinos or Filipino corporations.
5.1
Provided that if it be the latter and it engages in coastwise trade it must have a
president or managing directors who are Filipinos.
5.2
Consequently, the Philippine flag is not a flag of convenience. This open registry
allows: (a) operating flexibility (b) ability to choose manning source (c) lower degree of
operating and safety standards (d) ability to choose beneficial taxation (e) ability to hide
ownership.
5.3
The disadvantages of an open registry are: (a) limited diplomatic support (b) boycott
by the International Transportation Workers Federation because of substandard working
conditions.

PERSONS PARTICIPATING IN MARITIME COMMERCE

SHIP OWNER AND SHIP AGENT

1.
A ship owner is the natural or juridical person who owns the vessel, while the ship
agent is the ship owners representative in all the places where his vessel makes port.
2.
In their matter of liability for the acts of the captain, it must be noted that the ship
owner, in the person of the captain, has complete and exclusive control of the crew and the
navigation of the ship, as well as the disposition of the cargo at the end of the voyage.
2.1
Consequently, any person would have a right of action directly against the ship owner
for breach of a duty which the law has imposed upon the captain.
2.2
Note also that the ship owner is liable for the death of or injuries to passengers which
are caused by the negligence or willful acts of his employees , although such employees
may have acted beyond the scope of their authority or in violation of orders.
3.
In enforcing the liability, the ship agent is the one primarily liable to the shippers and
owners of the cargo transported by it for losses and damages occasioned to such cargo
without prejudice to his rights against the owner of the ship, to the extent of the value of the
vessel, its equipment and the freight.
3.1
The captain shall be civilly liable to the ship agent and the latter is directly liable to
3rd persons for damages that may be incurred.
3.2

This direct liability is moderated and limited by the right of abandonment.

CAPTAINS
1.
Captains are those who govern vessels that navigate the high seas or ships of large
dimensions and importance, although they be engaged in coastwise trade.
2.
Masters are those who command smaller ships engaged exclusively in coastwise
trade.
2.1
In maritime commerce, they are both subject to the same rights and obligations
imposed by law.
3.
The 3-fold duties of the Captain are: (a) general agent of the ship owner (b)
commander and technical director of the vessel (c) represents the government of the
country under whose flag he navigats.
4.

Their powers and duties are:

4.1
Prior to the voyage: (a) to appoint or make contracts with the crew in the absence of
the ship agent and to propose said crew, should the said agent be present; but the ship
agent may not employ any member against the captains express refusal (b) to make
contracts for the charter of the vessel in the absence of the ship agent or of its consignee,
acting in accordance with the instructions received and protecting the interest of the owner
with utmost care (c) To adopt all proper measures to keep the vessels well supplied and
equipped, purchasing all that may be necessary for the purpose, provided there be no time
to request instructions from the ship agent.

4.2
During the voyage: (a) to command the crew and direct the vessels to the port of its
destination, in accordance with the instructions he may have received from the ship agent
(b) to impose, in accordance with the contracts and with the law and regulation of the
merchant marine, and when aboard the vessel, the correctional punishment upon those who
fail to comply with his orders or are wanting discipline holding a preliminary hearing on the
crime committed on board vessels on the seas, which crime shall be turned over the
authorities having jurisdiction over the same at the first port touched (c) to order in similar
urgent cases while on a voyage, the repairs in the hull and engines of the vessels and its
rigging and equipment, which are absolutely necessary to enable to continue and finish its
voyage but if he should arrive at a point where there is a consignee of the vessels, he shall
act in concurrence with the latter.
4.3
Upon arrival: (a) to appoint or make contracts with the crew in the absence of the
ship agent and to propose said crew, should the said agent be present but the ship agent
may not employ any member against the captains express refusal (b) to make contracts for
the charter of the vessel in the absence of the ship agent or of its consignee, acting in
accordance with the instructions received and protecting the interest of the owner with
utmost care (c) to adopt all proper measures to keep the vessels well supplied and
equipped, purchasing all thats may be necessary for the purpose, provided there be no time
to request instructions from the ship agent.
4.4
Should the captain receive the news of the appearance of privateers or those of men
of war against his flag, he is obliged to proceed to the nearest neutral port, inform his ship
agent or shippers, and await an occasion to sail under convoy or he has received express
orders from the ship agent or shippers. If he is attacked, after trying to avoid the encounter
or resisting delivery of the effects of the vessel or of her cargo, they are forcibly taken, he
shall make an entry of such fact in the freight book and prove the same before competent
authority at the first port he touched. After so proving the same, he shall then be exempt
from liability.
5.
A maritime protest will be required when the: (a) vessel goes through a hurricane (b)
the cargo has suffered damages or averages (c) vessel is wrecked and he is saved alone or
with a part of his crew.
5.1
The basic requirements are: (a) make the protest before the competent authority at
the first port he touched (b) protest must be made within 24 hours following arrival (c) the
captain must ratify it within the same period when the vessel arrives at its destination, and
(d) he must immediately proceed with proof of facts.
5.2
These are required because the causes constitutes and exemption in favor of the
party responsible for the loss. Hence, there is a duty to prove the existence of the
circumstances to be able to successfully protest liability.
OTHER OFFICERS AND CREW
1.

The Other Officers and Crew constitutes the complement of the vessel.

1.1
It covers all the persons on board from the Captain of the cabin boy who are
necessary for its management, maneuvers and service.
1.2

They include the sailing mates, engineers, stokers and other employees.

SUPERCARGO

1.
A supercargo is a person designated by the owner of goods to accompany the goods
on the vessel where the goods are loaded.
1.1
He is an agent of the owner of the goods shipped as cargo on a vessels. He has
charge of the cargo on board, sells them to the best advantage in the market, any buys
cargo to be brought back on the return voyage and comes home with it.
1.2
He is not an employee of the carrier nor a part of the crew. He is in effect a
passenger.
2.
Supercargoes shall discharge on board the vessel the administrative duties which the
agent or shippers may have assigned them.
2.1
They shall keep an account and record of their transactions in a book which shall
have the same conditions and requisites are required for the accounting book of the captain,
and shall respect the latter in his duties as chief of the vessel.
2.2
The powers and liabilities of the captain shall cease, when there is a supercargo, with
regard to that part of the administration legitimately conferred upon the latter, but shall
continue in force for all acts which are inseparable from his authority and office.
2.3
They may not, without special authorization on agreement: (a) make any transaction
for their account, with the exception of ventures which, in accordance with the custom at the
port of destination or (b) invest in the return trip more than the profits from the ventures.
3.
The presence of a supercargo modifies or varies the legal relation of the shipper and
the carrier and the degree of attention of the carrier to the cargo.
3.1
Consequently, it may be a defense of the ship owner or captain in case of loss,
damage or deterioration.
3.2
The carrier still has the duty to exercise extraordinary diligence as mandated by the
Civil Code over the goods and the supercargo. Note that the supercargo is also a passenger.
The mandate to exercise such degree of diligence is express.
RISKS, DAMAGES AND ACCIDENTS IN MARITIME COMMERCE
AVERAGES
1.

Averages in shipping and maritime insurance refer to a loss.

2.

An average may consist of either:

2.1
An expense to the carrier, in which case it must be: (a) extraordinary or accidental (b)
incurred during the voyage (c) incurred in order to preserve the vessel, cargo or both.
2.2
A damage or deterioration, in which case it must: (a) have been suffered from the
time the vessel puts to sea from the port of departure until it casts anchor in the port of
destination, and (b) have been suffered by the merchandise from the time they are loaded in
the port of shipment until they are unloaded in the port of consignment.
3.

The kinds of averages are:

3.1
Simple or particular which is an expense incurred or damages suffered which has not
inured to the common benefit and profit of all persons interested in the vessel and its cargo.
The effect is that no reimbursement is allowed.
3.2
General/Gross which is an expense or damages suffered deliberately in order to save
the vessel, its cargo or both from a real and known risk. It is the deliverance from an
immediate peril, by a common sacrifice, that constitutes the essence of general average.
The effect is that the person who incurred the damage/expense can ask reimbursement from
those who benefited, which of course, may include the ship owner.
3.3
The requisites of a General Average are: (a) there must be a common danger,
meaning that the ship and cargo are subject to the same danger and that danger arises from
accidents of the sea, dispositions of the authorities or faults of men, provided that the
circumstances producing the peril should be ascertained and imminent (b) for the common
safety, part of the vessel or the cargo or both is sacrificed deliberately (c) from the expenses
or damages caused follows the successful saving of the vessel and cargo (d) the expenses or
damages should have been incurred or inflicted after taking legal steps and authority. In
summary: The general average must: (a) deliberately incurred (b) intended to save the
vessel and cargo (c) real and known risk to which the shipper and the carrier must be
exposed to (d) success in saving the vessel and the remaining cargo.
3.4
The formalities for incurring gross average: (a) There must be an assembly of the
sailing mate and other officers with the captain including those with interests in the cargo
(b) There must be a resolution of the captain (c) The resolution shall be entered in the log
book, with the reasons and motives and the votes for and against the resolution (d) The
minutes shall be signed by the parties (e) Within 24 hours upon arrival at the 1 st port the
captain makes, he shall deliver one copy of these minutes to the maritime judicial authority
thereat.
3.5
The Jason Clause or Rule D, York-Antwero Rules, which is an international system of
rules, providing among others, for liquidation and payment of averages, provides that the
rights to contribution in general average shall not be affected, though the event which gave
rise to the sacrifice over expenditure may have been due to the fault of one of the parties to
the adventure. However, this shall not prejudice any remedies which may be open against
that party for such fault.
3.6
The distinctions between general or gross average and simple or particular averages
are as follows: (a) In general or gross average, both the ship and cargo are subject to the
same danger which is real and known, whereas in simple or particular averages, there is no
such common danger to both the vessel and the cargo; (b) In the former, part of the vessel
or of the cargo or both is sacrificed deliberately whereas in the latter, the expenses and
damage caused to the vessel or to her cargo are neither deliberately made nor subject to
any legal step or authority; (c) In the former, from the expenses or damage caused follows
the successful saving of the vessel and her cargo, whereas in the latter, the expenses or
damages suffered have not inured to such common benefit; (d) In the former, all the persons
having an interest in the vessel and cargo saved shall contribute to indemnify the expenses
or damages caused, whereas in the latter, the owner of the things, which gave rise to the
expenses or suffered the damages shall bear the same.
3.7
As when: Expenses incurred to refloating the vessel after it was intentionally run
aground to save it and the cargo is a general average. Compare with expenses incurred in
refloating the vessel after it accidentally ran aground in order to be able to proceed to its
destination, which is a particular average in the absence of imminent danger to the ship and
cargo.

ARRIVAL UNDER STRESS

1.
An Arrival Under Stress is the arrival of a vessel at the nearest and most convenient
port, if during the voyage of the vessel cannot continue the trip to the port of destination
due to: (a) lack of provisions, except if the failure to take the necessary provisions was a
failure to adequately determine what was required (b) well-founded fear of seizure of
privateers or pirates, except when the risk of privateers or pirates is well-known (c) by
reason of any accident of the sea disabling it to navigate except defect in vessel was due to
captains fault in failing to properly rig the vessel.
2.
The significance of determining whether the arrival is under stress or not is, because
the same is a deviation. Hence, if it will not constitute an arrival under stress it is an
improper deviation.
2.1
The general rule is that the captain and the ship owner are made liable for deviations
from their route during the voyage. However, if it is an arrival under stress, they are not
liable.
3.
The formalities for arrival under stress are: (a) assembly of the officers including all
interested parties (b) drafting and entering in the log book the proper minutes, which shall
be signed by all (c) entry in the log book of the objections and protests of the persons
interested in the cargo.
4.
The captain has the duty to continue the voyage without delay after the cause of the
arrival under stress has ceased. Otherwise, he shall be liable for damages caused by the
delay.
5.
If the entire cargo or part thereof should appear to be damaged, or there is an
imminent danger of its being damaged, the captain may request of a competent judge, court
or consul, the sale of all or part of the goods.
COLLISIONS
1.

A collision refers to the impact of two vessels both of which are moving.

1.1

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

2.

Cases of Collision and the Legal Effects:

Case

Effect

Due to the fault, negligence or lack of skill

of the captain or the complement of the
vessel

The ship owner shall be liable for the losses

and damages

Due to the fault of both vessels

Each vessel shall suffer its own losses, but

as regards the owners of the cargoes, both
vessels shall be jointly and severally liable.

Where it cannot be determined which of the

2 vessels is at fault

Each vessel shall suffer its own losses, and

both shall also be solidarily responsible for
the losses and damages caused to their

cargoes
Where two vessels collide with each other
without their fault but by reason of the fault
of a third vessel

The owner of the third vessel causing the

collision shall be liable for the losses and
damages

A vessel which is properly anchored and

moored may collide with those nearby by
reason of a storm or other cause of force
majeure

The vessel run into shall suffer its own

damages and expenses

2.

Rules to determine negligence:

2.1
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 his part.
2.2

When two vessels meet, the smaller should give the right of way to the larger one.

2.3
A vessel leaving port should leave the way clear for another which may be entering
the same port.
2.4
The vessel which leaves later is presumed to have collided against one which has left
earlier.
2.5

There is also a presumption against the vessel which sets sail at night.

2.6
The presumption also works against the vessel with spread sail 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.
2.7
The vessel which is not properly moored or does not observe the proper distances,
has the presumption against itself.
2.8
The vessel which is moored at a place not used for the purpose, or which is
improperly moored or does not have sufficient cables, or which has been left without watch,
has also against itself the presumption.
2.9
The same rule applies to those vessels which do not have buoys to indicate the
location of its anchors to prevent damage to these vessels which may approach it.
3.
Classes and Effects of Collisions: (a) Fortuitous when the vessels collide with each
other through a fortuitous event or force majeure. Each vessel and each cargo shall bear its
own damages or a vessel which is properly anchored and moored may collide with those
nearby by reason of a storm or other cause of force majeure vessels run into suffers its
own damages (b) Culpable when the collision is due to the fault, negligence or lack of skill of
the captain or the complement of the vessel owner of the vessel at fault shall be liable for
the losses and damages or due to the fault of both vessels each vessel suffers its own
losses regardless of degree of fault, hence rules on contributory negligence does not apply
with regard to the owners of the cargo, both vessels shall be jointly and severally liable even
if their cause of actions may be different or two vessels may collide with each other without
their fault but by reason of the fault of a third vessel owner of the third vessel will be liable

(c) Inscrutable, where it cannot be determined which of the two vessels is at fault each
vessel suffers its own losses and damages; both will be solidarily liable for losses and
damages caused to their cargoes. Hence the effect is that you treat it as a culpable collision.
SHIPWRECKS
1.
A Shipwreck is a loss of vessel at sea, either by being swallowed up by the waves, by
running against another vessel or thing at sea or on the coast which renders the ship
incapable of navigation or when the boat sinks or is abandoned or capsizes.
1.1

Note that there is no need for it to be wrecked.

2.
A Derelict is a ship or cargo which is abandoned or deserted at sea by those who are
in charge of it, without any hope of recovering it, or without any intention of returning it. If
those in charge of the property left it with the intention of finally leaving it, it is a derelict
and the change of their intention and an attempt to return to it will not change its nature.
3.
A shipwreck or derelict can give rise to salvage or the 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 peril, or such property is recovered from actual peril or
loss, in cases of shipwrecks, derelict or recapture.
3.1
Where a ship and its cargo are saved together, the salvage allowance should be in
charged against the ship and cargo in proportion to their respective values, the same as in
general averages and neither is liable for the salvage due from the other. Where a personal
action is brought by the salvor against the owner of the ship, the liability of the latter is
limited to such part of the salvage compensation due for the entire service as is
proportionate to the value of the ship.
3.2
The elements of a valid salvage: (a) marine peril it being essential that the property
saved was in danger of being lost and such danger to be real though not necessarily
immediate (b) service voluntarily rendered when not required as an existing duty or from
special contracts (c) success, in whole or in part, or that the services rendered contributed to
such success.
4.
Do not confuse with a Towage Contract which is one whereby one vessel pulls
another from one place to another form compensation. It is a contract for services, not a
contract of carriage.
4.1
The distinction between salvage and towage is of importance to the crew of the
salvaging ship: if the contract for towage is in fact towage, then the crew does not have any
interest or rights with the remuneration pursuant to the contract. But if it is of a salvage
nature, the crew of the salvaging ship is entitled to salvage, and can look to the salvaged
vessel for its share.
4.2
If all the elements are present, the salvor takes possession and may retain possession
until he is paid. In towage, there is no possessory lien, there is only an action for the sum of
money.
5.
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. The Salvage
Act, giving salvors of human life a fair share or remuneration offered to salvors of the vessel,

refers to a situation where both lives and property were simultaneously imperiled and both
are rescued at the same time.
SPECIAL CONTRACTS IN MARITIME COMMERCE
CHARTER PARTY
1.

A Charter Party is a contract whereby the owner of a vessel lets a part thereof and/or his
complement and crew to a person named as a charterer which contract can be for a specific
time, known as a time charter or for a specific voyage, known as voyage charter.
1.1
There are two kinds of charter parties: (a) contract of affreightment involves the use
of shipping space or vessels leased by the owner in part or as a whole, to carry goods for
others. Here the vessel is still a common carrier (b) charter by demise or bareboat charter
the whole vessel is let to the charterer with a transfer to him of its entire command and
possession and consequent control over its navigation, including the master and the crew,
who are his servants. The vessel in this case becomes a private carrier.
BOTTOMRY OR RESPONDENTIA
1.
Loans on Bottomry or Respondentia are contracts of loan whereby the ship owner
borrows money from a lender at an unusually high rate of interest whereby the ability of the
lender to recover depends on the safe return of the vessel. If the vessel is lost, the contract
is extinguished.
1.1
A loan on bottomry is a contract in the nature of a mortgage, by which the owner of
the ship borrows money for the use, equipment and repair of the vessel for a definite term,
and pledges the ship as a security for its repayment, with maritime or extraordinary interest
on account of the maritime risks to be borne by the lender, it being stipulated that if the ship
be lost in the course of the specific voyage or during the limited time, by any of the perils
enumerated in the contract, the lender shall also lose his money.
1.2
A loan on respondentia is one made on the goods on board the ship and which are to
be sold or exchanged in the course of the voyage, the borrowers personal responsibility
being deemed the principal security for the performance of the contract. The lender must be
paid his principal and interest, though the ship perishes, provided that the goods are saved.
CARRIAGE OF GOODS BY SEA ACT (COGSA)
PRELIMINARIES
1.
Since the objective of the law is bring our laws on cargo covered by bills of lading by
vessels engaged in foreign trade in harmony with the rest of the international shipping
community, once a vessel is engaged in foreign trade, the law should be applied regardless
of the destination of the vessel and whether it may be applied suppletorily.
1.2
This is justified by the fact that Article 1753 of the Civil Code when held to apply
would mean that a vessel coming to the Philippines would be subject to a higher standard of
care, while that destined for a foreign port would be subject to due diligence under COGSA.
2.
Accordingly, Articles 1753 regarding the applicability of the law of the country to
which the goods are shipped in case of loss, damage or deterioration or Article 1766, as to

the applicability of the Code of Commerce shall be limited to domestic carriage of goods
over water.
SALIENT FEATURES
1.

The important features of the Carriage of Goods by Sea Act includes:

1.1
Applicability to all contracts for the carriage of goods by sea to and from the
Philippine ports in foreign trade with suppletory force to the Civil Code.
1.2
Notice as to damage on goods should be given upon receipt of the goods, unless such
damage is not apparent or externally visible in which case notice should be given within
three days from receipt of the goods. Note that failure to give notice does not bar the filing
of the suit for loss or damage to the goods.
1.3
The carrier and the ship shall be discharged from liability in respect to loss or damage
unless suit is brought within one year after delivery of the goods or date when the goods
should have been delivered, provided: (a) The 1-year prescriptive period is counted from the
date of delivery of the carrier to the arrastre operator, not from the date of delivery by the
arrastre operator to the consignee; (b) it does not apply to cases of misdelivery of the goods
or delivery to a wrong person; (c) it is not interrupted by a written extrajudicial deamand or
claim by the consignee to the carrier; (d) it is interrupted in the following cases: (1) action
has been filed in court; or (2) express agreement that extrajudicial claim or demand for
damages will suspend the running of the prescriptive period.
2.
The maximum liability of the carrier is $500 per package or per customary freight,
unit, or its equivalent in other currency, unless the shipper or owner declares a greater
value. The parties, however, may stipulate a lesser amount in the bill of lading.
WARSAW CONVENTION
WHAT IS THE WARSAW CONVENTION
1.
The Warsaw Convention refers to the convention for the Unification of Certain Rules
Relating International Carriage by Air which was signed in Warsaw, Poland on October 12,
1929, and amended by the Hague Convention signed on September 28, 1955.
2.
The Philippines is a party to the convention and it became applicable in our country
on February 9, 1951.
3.
It applies to international carriage.
AIR WAY BILL
1.
An airway bill is a document serving as the prima facie evidence of the contract of
transportation and as the receipt of the goods carried by air carriers.
2.
It has three parts intended for the carrier, the consignor and the consignee of the
goods.
LIABILITY OF AN INTERNATION AIR CARRIER
1.
The carrier shall be liable for damages sustained in the event of death or bodily injury
suffered by a passenger on board the aircraft or in the course of embarkation or
disembarkation thereof, and of damage or loss of any checked baggage or any goods during
the transportation by air.

2.
The following are the limited liability of the carrier under the convention: (a) for each
passenger 125,000 French francs; (b) for checked baggage and of goods 250 French
francs per kilogram; (c) for objects that the passenger takes charge himself 5,000 French
francs per passenger.
2.1
The above limitations may be increased by agreement, but any provision tending to
relieve the carrier of its liability or to fix a lower limit shall be null and void. Provided, that
the limitations shall not apply if the damage is caused by the willful misconduct of the
carrier or his agents.

ALL RIGHTS RESERVED

Renato S. Rondez
College of Law
University of the Cordilleras