ACCIDENTS AND DAMAGES IN MARITIME COMMERCE AVERAGES NATURE AND KINDS What are considered averages under the

Code of Commerce? 1) All extraordinary or accidental expenses which were incurred during the voyage for the preservation of the vessel or cargo, or both 2) All damages or deterioration which the vessel may suffer from the time she puts to sea from the port of departure until she casts anchor in the port of destination, and those suffered by the merchandise from the time it is loaded in the port of shipment until it is unloaded in the port of destination. (Art. 806) Art807: The petty and ordinary expenses incident to navigation, such as those of pilotage of costs and ports, lighterage and towage, anchorage, inspection, health, quarantine, lazaretto, and other so-called port expenses, costs of barges and unloading until the merchandise is place on the wharf, and any other expenses common to navigation shall be considered ordinary expenses to be defrayed by the shipowner, unless there is a special agreement to the contrary. Art808: Averages shall be: 1. Simple or particular; 2. General or gross. Averages consist of 2 items: 1. Expenses to constitute an average, it must be: a. extraordinary or accidental b. incurred during the voyage c. incurred in order to preserve the vessel, cargo or both 2. Damages or deterioration to constitute an average, 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 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. Simple or Particular Defined Simple or particular averages shall be, as a general rule, all the expenses and damages caused to the vessel or to her cargo which have not inured to the benefit and common profit of all the persons interested in the vessel and her cargo, especially the following: 1. The losses suffered by the cargo from the time of its embarkation until it is unloaded, either on account of the inherent defect of the goods or by reason of an accident at the sea or force majeure, and the expenses incurred to avoid and repair the same. 2. The losses and expense suffered by the vessel in her hull, rigging, arms, and equipment, for the same causes and reasons, from the time she puts to sea from the port of departure until she anchors in the port of destination. 3. The losses suffered by the merchandise loaded on deck, except in coastwise navigation, if the maritime ordinances allow it. 4. The wages and victuals of the crew when the vessel is detained or embargoed by a legitimate order or force majeure, if the charter has been contracted for a fixed sum for the voyage. 5. The necessary expense on arrival at a port, in order to make repairs or secure provisions. 6. The lowest value of the goods sold by the captain in arrival under stress for the payment of provisions and in order to save the crew, or to cover any other requirements of the vessel against which the proper amount shall be charged. 7. The victuals and wages of the crew while the vessel is in quarantine. 8. The loss suffered by the vessel or cargo by reason of an impact or collision with another, if it were accidental and unavoidable. If the accident should occur through the fault or negligence of the captain, the latter shall be liable for all the losses caused. 9. Any loss suffered by the cargo through the fault, negligence, or barratry of the captain or of the crew, without prejudice to the right of the owner to recover the corresponding indemnity from the captain, the vessel, and the freightage. Effects Who shall bear the simple and particular averages? The owner of the goods which gave rise to the expense or suffered the damage shall bear the simple or particular average. (Art. 810) Gross and General Defined

What are general or gross averages? General or gross averages shall be, as a general rule, all the damages and expenses which are deliberately caused in order to save the vessel, her cargo or both at the same time, from a real and known risk, and particularly the following: 1. The goods or cash invested in the redemption of the vessel or the cargo captured by enemies, privateers, or pirates, and the provisions, wages, and expenses of the vessel detained during the time the arrangement or redemption is taking place. 2. The goods jettisoned to lighten the vessel, whether they belong to the vessel, to the cargo, or to the crew, and the damage suffered through said act by the goods which are kept on board. 3. The cables or masts which are cut or rendered useless, the anchors and the chains which are abandoned, in order to save the cargo, the vessel, or both. 4. The expenses of removing or transferring a portion of the cargo in order to lighten the vessel and place her in condition to enter a port of roadstead, and the damage resulting therefrom to the goods removed or transferred. 5. The damage suffered by the goods of the cargo through the opening made in the vessel in order to drain her and prevent her sinking. 6. The expenses caused through floating a vessel intentionally stranded for the purpose of saving her. 7. The damage caused to the vessel which had to be opened, scuttled or broken in order to save the cargo. 8. The expenses of curing and maintaining the members of the crew who may have been wounded or crippled in defending or saving the vessel. 9. The wages of any member of the crew detained as hostage by enemies, privateers or pirates, and the necessary expenses which he may incur in his imprisonment, until he is returned to the vessel or to his domicile, should he prefer it. 10. The wages and victuals of the crew of a vessel chartered by the month during the time it should be embargoed or detained by force majeure or by order of the government, or in order to repair the damage caused for the common good. 11. The loss suffered in the value of the goods sold at arrivals under stress in order to repair the vessel because of gross average. 12. The expenses of the liquidation of the average. Other special instances of general average 1) If a vessel is lightened in case of a storm to facilitate her entry to a port or roadstead and part of the cargo was transferred to lighters or barges and the cargo was lost the owner of the lost cargo is entitled to indemnity as if the loss had originated from a gross average, the amount is distributed between the vessel and cargo from which the lost cargo came. But if the cargo transferred was saved and the vessel was lost, no liability can be demanded of the salvage. (Art817) 2) If it is necessary to extinguish a fire in a port, roadstead, creek or bay and it should be decided to sink a vessel this loss shall be considered general average, the vessel saved shall contribute (Art. 818) Requisites for General Average: 1. There must be a common danger the ship and cargo are subject to the same danger and that the 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 2. For the common safety part of the vessel or the cargo or both is sacrificed deliberately 3. From the expenses or damages caused follows the successful saving of the vessel and cargo The expenses or damages should have been incurred or inflicted after taking legal steps and authority. Essential Requisites What is the procedure before incurring expenses corresponding to gross average? There must be a resolution of the captain, adopted after deliberation with the sailing mate and other officers of the vessel, and after hearing the persons interested in the cargo who may be present. (Art. 813) The resolution must be entered in the log book stating the motives and reasons therefore, the votes against it, and the reason for disagreement if any, and irresistible and urgent causes which moved the captain if he acted on his own accord. In the first case, the minutes shall be signed by all the persons present who could do so before the action was taken if possible, if not, at the first opportunity. In the second case, it shall be signed by the captain and officers. The minutes shall state in detail all the goods jettisoned and shall mention al injuries caused to those kept on board. A copy of the minutes shall be delivered to the maritime judicial authority of the first port he may make, within 24 hours after his arrival, and to ratify it immediately under oath. (Art. 814) If the persons interested should object, and the captain and officer or the captain, if opposed to the majority, should consider certain measures necessary these measures may be executed under the captains liability, without prejudice to the right of the shippers to proceed against the captain before the court, if they can prove that he acted with malice, lack of skill or negligence.

If the persons interested in the cargo who were on board the vessel were not heard, they shall not contribute to the general average, and their share will be charged to the captain UNLESS the urgency of the case should be such that the time necessary for previous deliberation was lacking. (Art. 813) Formalities for incurring gross average: 1. There must be an assembly of the sailing mate and other officers with the captain including those with interests in the cargo 2. There must be a resolution of the captain 3. The resolution shall be entered in the log book, with the reasons and motives and the votes for and against the resolution 4. The minutes shall be signed by the parties 5. Within 24hours upon arrival at the first port the captain makes, he shall deliver one copy of the minutes to the maritime judicial authority thereat Art860: If, notwithstanding the jettison of the merchandise, breakage of masts, ropes, and equipment, the vessel should be lost running same risk, no contribution whatsoever by reason of gross average shall be proper. The owners of the goods saved shall not be liable for the indemnification of those jettisoned, lost, or damaged. Notes: The goods that were not sacrificed shall not be liable for the indemnification of those sacrificed one of the requisites of general average is lacking, that is success in saving the vessel and the remaining cargo. MAGSAYSAY v. AGAN: The law on averages is in the Code of Commerce. Averages are classified into simple or particular and general or gross. Generally, simple or particular averages include all expenses & damages caused to the vessel or cargo w/c have not inured to the common benefit (809) & are therefore, to be borne only by owner of property (810); while general or gross averages include all the damages & expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real & known risk (811). Being for the common benefit, gross averages are to be borne by the owners of the articles saved (812). The code also specifies cases under the classifications. While the expenses in floating the vessel may come under 809 (2) expenses suffered by vessel because of force majeure & therefore should be classified as particular average, the said expenses do not fit into any of specific cases of general average in 811. Number 6 of 811 does not mention expenses caused to float a vessel but it specifically refers to a vessel intentionally stranded for the purpose of saving it & would have no application where the stranding was not intentional. REQUISITES FOR GENERAL AVERAGE: 1. There must be a common danger to both ship & cargo. It is the safety of the property not the voyage which constitutes true foundation of general voyage. 2. Cargo is sacrificed deliberately for the common safety of part of vessel or cargo or both. 3. From the expenses or damages caused follows from the successful saving of the vessel or cargo. 4. Expenses or damages should have been incurred or inflicted after taking proper legal steps & authority. INTERNATIONAL v. HAMBURG: It is not claimed that said cargo was contraband of war; and being neutral goods, they were not liable to forfeiture in the event of capture by the enemies of the ships flag. If follows that when the master of the vessel decided to take refuge in Manila, he acted exclusively with a view to the vessels protection. There was no common danger to the ship and cargo; and therefore, it was not a case for a general average. COMPAGNIE v. HAMBURG: Claim cannot be sustained under the provisions of the York-Antwerp Rules. An examination of the entire body of these rules disclosed that general average is never allowed thereunder UNLESS the loss or damage sought to be made good as general average has been incurred for the common safety. It is very clear that in fleeing from the port of Saigon and taking refuge in Manila, the master of the vessel was not acting for the common safety of the vessel and her cargo. The French cargo was absolutely secure from danger of seizure or confiscation so long as it remained in the port of Saigon, and there can be no question that the flight of the vessel was a measure of precaution adopted solely and exclusively for the preservation of the vessel from danger of seizure or capture. AMERICAN HOME ASSURANCE v. CA: NMC claims that AHA is barred from suing recovery because damage to cargo is less than 1% and under the Code of Commerce, claims for particular average shall not be entertained if they do not exceed 1%.

However, common carriers cannot limit their liability for injury or loss of goods where such injury or loss was caused by its own negligence. The law of averages under the Code of commerce cannot be applied in determining liability where there is negligence. The issue of negligence must first be addressed before the proper provisions of the Code of Commerce to extent of liability may be applied. PHILIPPINE HOME ASSURANCE v. CA: ESLI loaded on board SS Eastern Explorer shipment for carriage to Manila and Cebu freight pre-paid and in good order and condition. Fire broke out in the ship and the SS Eastern Explorer was found to be a constructive total loss. Cargoes were saved and loaded to another vessel for delivery to their original ports of destination. ESLI charged consignees several amounts corresponding to additional freight and salvage charges claiming that such was occasioned by fire which is force majeure. ESLI may not properly charge consignees additional amounts. Fire may not be considered a natural disaster or calamity since it almost arises from some act of man or by human means. It cannot be an act of God. There was strong evidence of negligence on the part of the ship captain and crew of ESLI Effects Who shall satisfy the amount of general or gross averages? All the persons having an interest in the vessel and cargo therein at the time of the occurrence of the average shall contribute. (Art. 812) Jettison What is the order of goods to be jettisoned? 1) First, those which are on deck, beginning with those which embarrass the maneuvers or damage the vessel, preferring if possible, the heaviest ones and those of least utility and value 2) Next, those which are below the upper deck, always beginning with those of greatest weight and smallest value, to the amount and number absolutely indispensable. (Art. 815) What is required before jettisoned goods may be included in the gross average and its owners entitled to indemnity? The existence of the goods on board must first be proven by means of the bill of lading. With regard to those belonging to the vessel, it shall be proven by means of the inventory made before departure, as required by Art. 612. (Art. 816) Jason Clause Rule D (York-Antwerp Rules) Rights to contribution in general average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure; but this shall not prejudice any remedies which may be open against that party for such fault. ARRIVALS UNDER STRESS Arrival Under Stress arrival of a vessel at the nearest and most convenient port, if during the voyage the vessel cannot continue the trip to the port of destination due to: (1) lack of provisions, (2) well-founded fear of seizure, privateers, or pirates, (3) by reason of any accident of the sea disabling it to navigate. CAUSES What are the grounds for arrival under stress? 1) Iack of provisions 2) Well-founded fear of seizure, privateers or pirates 3) Any accident of the sea disabling her to navigate (Art 819) When is the arrival under stress not considered legal? 1) If lack of provisions arose from the failure to take the necessary provisions for the voyage, according to usage and custom OR if they have been rendered useless or lost through bad stowage or negligence in their care. 2) If the risk of enemies, privateers or pirates was not well known, manifest and based on positive and justifiable facts. 3) If the defect of the vessel was caused by reason of her not being repaired, rigged, equipped and arranged in a convenient manner for voyage or by reason of some erroneous order of the captain. 4) When malice, negligence, want of foresight or lack of skill on the part of the captain exists in the act of causing the damage. (Art. 820) EXPENSES Who shall shoulder the expenses of arrival under stress? The expenses shall always be for the account of the ship owner or ship agent, but they shall not be liable for the damages which may be caused by the shippers by reason of the arrival, provided the arrival is legitimate. If the arrival is not legitimate, the ship agent and the captain shall be jointly liable. (Art. 821)

Who shall shoulder the expenses in unloading the cargo when arriving under stress? If unloading is necessary for the repairs of the vessel, expenses shall be defrayed by ship agent or owner. If unloading is necessary to prevent damage on cargo, it shall be for the account of the owners of the cargo who benefited. If unloading is for both reasons, expenses shall be defrayed in proportion to the value of vessel and of cargo. (Art822) COLLISIONS Collision impact of 2vessels both of which are moving Allision striking of a moving vessel against one that is stationary Cases of collision: 1. due to the fault, negligence or lack of skill of the captain, sailing mate or the complement of the vessel under 826, the shipowner shall be liable for the losses and damages 2. due to the fault of both vessels under 827, each vessel shall suffer its own losses, but as regards the owners of the cargoes, both vessels shall be jointly and severally liable. 3. where it cannot be determined which of the 2vessels is at fault under 828, each vessel shall suffer its own losses, and both shall also be solidarily responsible for the losses and damages caused to their cargoes 4. collision due to fortuitous event or force majeure under 830, each vessel shall bear its own damages 5. where 2vessels collide with each other without their fault but by reason of the fault of a 3 rd vessel under 831, the owner of the 3rd vessel causing the collision shall be liable for the losses and damages 6. a vessel which is properly anchored and moored may collide with those nearby by reason of a storm or other cause of force majeure under 832, the vessel run into shall suffer its own damages and expenses. CLASSES AND EFFECTS FORTUITOUS CULPABLE INSCRUTABLE FAULT Who shall be liable for losses and damages in Situation Vessel collides with another through fault, negligence or lack of skill of captain, sailing mate or member of the complement (Culpable) If both vessels may be blamed for the collision (Culpable) If it cannot be decided which of the two vessels caused the collision (Doctrine of inscrutable fault) Collision due to fortuitous event or force majeure (Fortuitous) Vessel is forced to collide with another vessel by a third vessel (Culpable)

By reason of storm or force majeure, a vessel properly anchored and moored collides with those nearby, causing them damage (Fortuitous) NOTE: In the first three cases, the civil action of the owner against the person causing the injury as well as the criminal liabilities, are reserved. (Art829) Relation of Art827 to Art828: Art828 must be considered an extension of 827. The rule of liability under 827 is applicable not only to the case where both vessels may be shown to be actually blameworthy but also to the case where it is obvious that only one was at fault but the proof does not show which. Under 827 and 828, in case of collision between 2 vessels at sea, both are solidarily liable for the loss of cargo carried by either to the full extent of the value thereof, not only in the case where both vessels may be shown to be actually blameworthy but also in the case where it is shown that only one was at fault but the proof does not show it it makes no difference that the negligence imputable to the two vessels may have differed somewhat in character and degree and that the negligence of the sunken ship was somewhat more marked than that of the other.

case of collisions (Art. 826-833)? Liability Owner of the vessel at fault shall indemnify the losses and damages suffered, after an expert appraisal (Art826) Each one shall suffer its own damages, and both shall be solidarily responsible for the losses and damages suffered by their cargoes (Art827) Each one shall suffer its own damages, and both shall be solidarily responsible for the losses and damages suffered by their cargoes (Art828) Each vessel and cargo shall be liable for its own damage (Art830) Owner of the third vessel shall indemnify the losses and damages caused, the captain thereof is civilly liable to the owner (Art831) Injury occasioned shall be considered as particular average of the vessel run into (Art832)

The doctrine of last clear chance cannot be raised under the express provisions of 827, under which the evidence disclosing that both vessels are blameworthy, the owners of neither can successfully maintain an action against the other for the loss or injury to his vessel. PRESUMPTION OF LOSS BY COLLISION When is a vessel presumed lost by reason of collision? 1) When a vessel, upon being run into, sinks immediately 2) When a vessel which was obliged to make a port to repair the damages caused by collision is lost during the voyage or is obliged to be stranded in order to be saved (Art. 833) 4. SHIPWRECKS SHIPWRECK loss of a vessel at sea, either by being swallowed up by the waves, by running against another vessel or thing at sea, or an coast renders the ship incapable of navigation Under 841, in case the wreck or stranding is due to the (1) malice, negligence or lack of skill of the captain, or (2) because the vessel put to sea was insufficiently repaired and equipped the captain shall be liable. Where a ship and its cargo are saved together, the salvage allowance should be charged against the ship and cargo in proportion of 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 salver 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. Who shall be liable for losses and damages in case of shipwrecks? The losses and deteriorations suffered by a vessel and her cargo by reason of shipwreck or stranding shall be individually for the account of the owners, the part of the wreck which may be saved belonging to them in the same proportion. (Art. 840) But if the wreck or stranding was caused by the malice, negligence or lack of skill of the captain OR because the vessel put to sea is insufficiently repaired and prepared the ship agent or shippers may demand indemnity of the captain for the damages caused to the vessel or to the cargo by the accident. (Art. 841) Who shall be liable for expenses of salvage of the cargo? The owners of the goods saved from the wreck must pay the expenses of salvage before goods are delivered to them. If the goods are sold, the expenses of salvage shall be preferred over any other obligation with respect to the proceeds of the sale. (Art. 842) If there should be no person interested in the cargo who can pay the expenses and freightage corresponding to the salvage, the court may order the sale of the goods necessary to cover the expenses. This shall also be done when: 1) the preservation of the goods is dangerous or 2) when in the period of one year it has not been ascertained who are the legitimate owners of the goods. The proceedings shall follow procedure in Art. 579. The net proceeds shall be deposited and shall be turned over to the legitimate owners. (Art. 845) What happens if one of the vessels navigating under convoy becomes shipwrecked? The cargo saved from the shipwreck shall be distributed among the rest of the vessels in proportion to the amount which each vessel can receive. If the captain refuses without sufficient cause to receive the cargo corresponding to his vessel, the captain of the wrecked vessel shall make a protest against him, before two sea officials, of the losses and damages resulting therefrom, ratifying the complaint within 24 hours after arrival at the first port. This protest must be included in the protest required for shipwrecks under Art. 612. (Art. 843) Is protest required in case of collisions? Yes. The captain shall make the proper protest in due form at the first port reached, before the competent authority or the Philippine consul, within 24 hours, stating therein all the incidents of the wreck. (Art. 612) What should the captain do, after taking on board goods saved from the wreck? The captain shall continue his course to the port of destination, and on arrival he shall deposit the goods with judicial intervention, at the disposal of their legitimate owners. If the captain changes his course and he is able to unload the goods at the port of which they were consigned, the captain may make such port if the shippers or supercargoes and officers and passengers consent thereto. But he cannot do so even with consent, in time of war or when the port is difficult and dangerous to make. If the captain makes the port, the expenses of arrival and freightage shall be paid by the owner of the goods. The freightage may be fixed by agreement or by a judicial decision. (Art. 844)