54

TRANSPORTATION LAWS
CONTRACT OF TRANSPORTATION/ CARRIAGE
A contract whereby a person, natural or juridical,
obligates to transport persons, goods, or both, from one
place to another, by land, air or water, for a price or
compensation.
Classifications:
1. Common or Private
2. Goods or Passengers
3. For a fee (for hire) or Gratuitous
4. Land, Water/maritime, or Air
5. Domestic/inter-island/coastwise or
International/foreign
It is a relationship which is imbued with the public
interest.
COMMON CARRIER
Persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation,
offering their services to the public (Art. 1732, Civil Code).
Art. 1732 of the New Civil Code avoids any distinction
between one whose principal business activity is the
carrying of persons or goods or both and one who does
such carrying only as an ancillary activity (sideline). It
also avoids a distinction between a person or enterprise
offering transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis.
Neither does the law distinguish between a carrier
offering its services to the general public that is the
general community or population and one who offers
services or solicits business only from a narrow segment of
the general population.
A person or entity is a common carrier even if he did
not secure a Certificate of Public Convenience (De Guzman
vs. CA, 168 SCRA 612).
It makes no distinction as to the means of transporting,
as long as it is by land, water or air. It does not provide
that the transportation should be by motor vehicle. (First
Philippine Industrial Corporation vs. CA)
One is a common carrier even if he has no fixed and
publicly known route, maintains no terminals, and issues
no tickets (Asia Lighterage Shipping, Inc. vs. CA).
Characteristics:
1. Undertakes to carry for all people indifferently and
thus is liable for refusal without sufficient reason
(Lastimoso vs. Doliente, October 20, 1961);
2. Cannot lawfully decline to accept a particular class
of goods for carriage to the prejudice of the traffic
in these goods;
3. No monopoly is favored (Batangas Trans. vs.
Orlanes, 52 PHIL 455);
4. Provides public convenience.
PRIVATE CARRIER
One which, without being engaged in the business of
carrying as a public employment, undertakes to deliver
goods or passengers for compensation. (Home Insurance
Co. vs. American Steamship Agency, 23 SCRA 24)
TESTS WHETHER CARRIER IS COMMON OR
PRIVATE:
The SC in First Philippine Industrial Corporation vs. CA
(1995) reiterated the following tests:
1. It must be engaged in the business of carrying
goods for others as a public employment and
must hold itself out as ready to engage in the
transportation of goods generally as a business
and not as a casual occupation;
2. It must undertake to carry goods of the kind to
which its business in confined;
3. It must undertake to carry by the method by
which his business is conducted and over its
established roads; and
4. The transportation must be for hire.
In National Steel Corp. vs. CA (1997) the SC held that
the true test of a common carrier is the carriage of goods
or passengers provided it has space for all who opt to avail
themselves of its transportation for a fee.
COMMON CARRIER

PRIVATE
CARRIER

1. As to availability
Holds himself out for Contracts

with

all
people particular individuals
indiscriminately
or groups only
2. As to required diligence
Extraordinary
Ordinary diligence is
diligence is required
required
3. As to regulation
Subject
to
State Not subject to State
regulation
regulation
4. Stipulation limiting liability
Parties may not agree Parties may limit the
on
limiting
the carriers
liability,
carriers
liability provided it is not
except when provided contrary
to
law,
by law
morals
or
good
customs
5. Exempting circumstance
Prove
extraordinary caso
fortuito,
Art.
diligence and Art. 1174 NCC
1733, NCC
6.Presumption of negligence
There
is
a No presumption of
presumption of fault fault or negligence
or negligence
7.Governing law
Law on common
Law on obligations
carriers
and contracts
GOVERNING LAWS
A. Domestic/inter-island/coastwise
Applicable to Land, Water, and Air transportation
1. Civil Code - primary
2. Code of Commerce (Arts. 349, 379, 573-734, 580,
806-845) - suppletory
B. International/foreign/overseas (Foreign country
to Philippines)
Applicable to Water/maritime and Air transportation
The law of the country of destination generally applies.
1. Civil Code - primary
2. Code of Commerce - suppletory
3. Others - suppletory
a. Water/maritime: Carriage of Goods by Sea Act
(COGSA)
b. Air: Warsaw Convention
I. NEW CIVIL CODE
(Arts. 1732-1766)
REQUIREMENT OF EXTRAORDINARY DILIGENCE
Rendition of service with the greatest skill and utmost
foresight. (Davao Stevedore Co. v. Fernandez)
Rationale:
1. From the nature of the business and for reasons
of public policy (Art. 1733)
2. Relationship of trust
3. Business is impressed with a special public duty
4. Possession of the goods
5. Preciousness of human life
A common carrier is not an absolute insurer of all risks of
travel.
COVERAGE
1. Vigilance over goods (Arts. 1734-1754); and
2. Safety of passengers (Arts. 1755-1763).
PASSENGER
A person who has entered into a contract of carriage,
express or implied, with the carrier. They are entitled to
extraordinary diligence from the common carrier.
The following are not considered passengers, and are
entitled to ordinary diligence only:
a. One who has not yet boarded any part of a
vehicle regardless of whether or not he has
purchased a ticket;
b. One who remains on a carrier for an
unreasonable length of time after he has been
afforded every safe opportunity to alight;
c. One who has boarded by fraud, stealth, or deceit;
d. One who attempts to board a moving vehicle,
although he has a ticket, unless the attempt be
with the knowledge and consent of the carrier;
e. One who has boarded a wrong vehicle, has been
properly informed of such fact, and on alighting,
is injured by the carrier;

55
f.

Invited guests and accommodation passengers.

(Lara vs. Valencia)
One who rides any part of the vehicle which is
unsuitable or dangerous or which he knows is not
designed or intended for passengers.

The carrier which, knowing the fact of improper packing

of the goods upon ordinary observation, still accepts the
goods notwithstanding such condition, is not relieved of
liability or loss or injury resulting therefrom. (Southern
Lines, Inc. v. CA, 4 SCRA 258)

DEFENSES OF A COMMON CARRIER IN THE

CARRIAGE OF GOODS
1. CASO FORTUITO/FORCE MAJEURE
Requisites:
a. Must be the proximate and only cause of the loss
b. Exercise of due diligence to prevent or minimize
the loss before, during or after the occurrence of the
disaster (Art. 1739)
c. Carrier has not negligently incurred in delay in
transporting the goods (Art. 1740)
Fire is not considered a natural disaster or calamity as it
arises almost invariably from some act of man. (Eastern
Shipping Lines Inc. vs. IAC)
Mechanical defects are not force majeure if the same
was discoverable by regular and adequate inspections.
(Notes and Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.120-122)

5. ORDER OR ACT OF PUBLIC AUTHORITY

Said public authority must have the power to issue the
order (Art. 1743). Consequently, where the officer acts
without legal process, the common carrier will be held
liable. (Ganzon v. CA 161 SCRA 646)
Diligence in the selection and supervision of employees
under Article 2180 of the Civil Code cannot be interposed
as a defense by the common carrier because the liability
of the carriers arises from the breach of the contract of
carriage. The defense under said articles is applicable to
negligence in quasi-delicts under Art. 2176. (Del Prado v.
Manila Electric Co., 52 Phil 900)

g.

LIABILITY OF A COMMON CARRIER FOR

DEATH OR INJURIES TO PASSENGERS DUE TO ACTS
OF ITS EMPLOYEES AND OTHER PASSENGERS OR
STRANGERS

2. ACTS OF PUBLIC ENEMY

Requisites:
a. Must be the proximate and only cause of the loss
b. Exercise of due diligence to prevent or minimize
the loss before, during or after the act causing the
loss, deterioration or destruction of the goods (Art.
1739)

FOR ACTS OF ITS

EMPLOYEES

Required diligence and defense

Extraordinary
Ordinary diligence
diligence
Nature of liability
Tort; however,
Not absolute; limited
The employee must by Art. 1763
be on duty at the
time of the act.
(Maranan v. Perez)

3. NEGLIGENCE OF THE SHIPPER OR OWNER

a. Sole and proximate cause: absolute defense
b. Contributory: partial defense. (Art. 1741)
4. CHARACTER OF THE GOODS OR DEFECTS IN THE
PACKING OR IN THE CONTAINER
Even if the damage should be caused by the inherent
defect/character of the goods, the common carrier must
exercise due diligence to forestall or lessen the loss. (Art.
1742)
CARRIAGE OF GOODS

FOR ACTS OF
OTHER
PASSENGERS OR
STRANGERS

The carrier is liable when its personnel allowed a

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

Parties
1.
2.
3.

Common carrier
Shipper
Consignee

Delay in delivery, loss, destruction, or

deterioration of the goods

1.
2.

Common carrier
Passenger

Cause of liability
Death or injury to the passengers
Duration of liability

From the time the goods are unconditionally

placed in the possession of, and received by the
carrier for transportation until the same are
delivered actually or constructively by the
carrier to the consignee or to the person who
has the right to receive them. (Art. 1736)
It remains in full force and effect even when
they are temporarily unloaded or stored in
transit unless the shipper or owner has made
use of the right of stoppage in transitu. (Art.
1737)
It continues to be operative even during the
time the goods are stored in a warehouse of the
carrier at the place of destination until the
consignee has bee advised of the arrival of the
goods and has had reasonable opportunity
thereafter to remove them or otherwise dispose
of them. (Art. 1738)
Delivery of goods to the custom authorities is
not delivery to the consignee. (Lu Do v.
Binamira, 101 Phil 120)

The duty of a common carrier to provide safety

to its passengers so obligates it not only during
the course of the trip, but for so long as the
passengers are within its premises and where
they ought to be in pursuance to the contract
of carriage. (LRTA v. Navidad, [2003])
All persons who remain on the premises within
a reasonable time after leaving the conveyance
are to be deemed passengers, and what is a
reasonable time or a reasonable delay within
this rule is to be determined from all the
circumstances, and includes a reasonable time
to see after his baggage and prepare for his
departure. (La Mallorca v. CA, 17 SCRA 739 ;
Abiotiz Shipping Corporation v. CA, 179 SCRA
95)
It is the duty of common carriers of
passengers to stop their conveyances a
reasonable length of time in order to afford
passengers an opportunity to enter, and they
are liable for injuries suffered from the sudden
starting up or jerking of their conveyances
while doing so. The duty which the carrier of
passengers owes to its patrons extends to
persons boarding the cars as well as to those
alighting therefrom (Dangwa Trans Co., Inc. vs.
CA 202 SCRA 574).

56
Presumption of negligence
Art.1735 Civil Code
Art.1755 Civil Code
Reason: As to when and how goods were Reason: The contract between the passenger
damaged in transit is a matter peculiarly within and the carrier imposes on the latter the duty
the knowledge of the carrier and its employees. to transport the passenger safely; hence the
(Mirasol v. Dollar, 53 PHIL 124)
burden of explaining should fall on the carrier.
Mere proof of delivery of goods to a carrier in
good order and the subsequent arrival of the
same goods at the place of destination in bad
order makes for a prima facie case against the
carrier. (Coastwise Lighterage Corp. v. CA, 245
SCRA 796)
Defenses
1.
2.

Ordinary circumstance: Exercise of

1. Exercise of extraordinary
extraordinary diligence (Art. 1735)
(Art. 1756)
Special circumstances:
2. Caso fortuito
a. Flood, storm, earthquake, lighting,
or
other natural disaster or
calamity (plus force majeure)
b. Act of the public enemy in war,
whether international or civil
c. Act or omission of the shipper or
the owner of goods
d. The character of the goods or
defects in the packing or in the
containers
e. Order or act of competent public
authority (Art. 1734)
Valid stipulations

1. Reduction of degree of diligence to ordinary

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

diligence

Stipulation limiting liability when a passenger is

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

The diligence required in the carriage of the

goods may be reduced by only one degree, from
extraordinary to ordinary diligence or diligence
of a good father of a family. (Art. 1744, Art.
1745, no. 4)

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

Dispensing with or lessening the extraordinary

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

RULES ON PASSENGERS BAGGAGE

IN THE CUSTODY OF
IN THE CUSTODY
THE PASSENGERS
OF THE COMMON
(HAND-CARRIED)
CARRIER
(CHECKED-IN)
Legal nature of the baggage
Necessary deposit
Considered
as
goods
Required diligence by the common
carrier
Diligence
of
a Extraordinary
depositary
(ordinary diligence
diligence)
Applicable rules
Arts. 1998 and 2000- Arts. 1733-1753
2003
CONCURRING CAUSES OF ACTION ARISING FROM
THE NEGLIGENT ACT OF THE COMMON CARRIER
1. Culpa contractual (breach of contract)
Only the carrier is primarily liable and not the driver,
because there is no privity between the driver and the
passenger.
Basis: Art.1759, NCC.
No defense of due diligence in the selection and
supervision of employees.
2. Culpa aquiliana (quasi-delict)
The carrier and driver are solidarily liable as joint
tortfeasors.
Basis: Art. 2180, NCC.
Defense of due diligence in the selection and supervision
of employees is available. Exception: maritime tort
resulting in collision. (See notes on Collision)
3. Culpa criminal (criminal negligence)
The driver is primarily liable. The carrier is subsidiarily
liable only if the driver is convicted and declared insolvent.
Basis: Art. 100, RPC.
In case of injury to a passenger due to the negligence of
the driver of the bus on which he is riding and of the driver
of another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for damages.
It makes no difference that the liability of the bus driver
and owner springs from contract while that of the owner
and driver of the other vehicle arises from quasi-delict.
(Fabre vs. CA)
LIMITATIONS AS TO CARRIERS LIABILITY
INVALID AS BEING
VALID &
CONTRARY TO
ENFORCEABLE
PUBLIC POLICY
1. One exempting the 1. One limiting the
carrier from any and liability of the carrier
all liability for loss or to
an
agreed
damage occasioned by valuation, unless the
its own negligence.
shipper declares a
2.
An
unqualified higher value and
limitation of liability to pays a higher rate of
an agreed valuation.
freight
(H.E.
Heacock
Company
vs.
Macondray
&
Company Inc.)
However, the carrier cannot limit its liability for injury to,
or loss of, goods shipped where such injury or loss was
caused by its own negligence.
(Shewaram vs. PAL, 17 SCRA 606)
SPECIAL RULES ON LIABILITES OF AIRLINE CARRIERS
1. In case of flight diversion due to bad weather or other
circumstances beyond the pilots control, the relation
between the carrier and the passenger continues until the
latter has been landed at the port of destination and has
left the carriers premises. The carrier should necessarily
exercise extraordinary diligence in safeguarding the
comfort, convenience and safety of its stranded
passengers until they have reached their final destination.
(Philippine Airlines vs. CA, 226 SCRA 423)
2. Even where overbooking of passengers is allowed as a
commercial practice, the airline company would still be
guilty of bad faith and still be liable for damages if it did
not properly inform passenger that it could breach the
contract of carriage even if they were confirmed
passengers. (Zalamea vs. CA, 228 SCRA 23)

3. An open-dated ticket constitutes a complete contract

between the carrier and passenger. Hence, the airline
company is liable if it refused to confirm a passengers
flight reservation. (Singson vs. CA, 282 SCRA 149)
4. An airline company which issued a confirmed ticket to a
passenger covering successive trips on different airlines
can be held liable for damages occasioned by bumping
off by one of the successive airlines. (Lufthansa German
Airlines vs. CA, 238 SCRA 290)
5. An airline ticket providing that carriage by successive
air carriers is to be regarded as a single operation is to
make the issuing carrier liable for the tortuous conduct of
the other carrier. A printed provision in the ticket limiting
liability only to its own conduct is not enough to rebut that
liability. (KLM Royal Dutch Airlines vs. CA, 65 SCRA 237)
II. CODE OF COMMERCE

A.

OVERLAND TRANSPORTATION
(Arts. 349-379)

Applicability
1. Domestic land and water/maritime transportation.
(Pandect of Commercial Law and Jurisprudence, Justice
Jose Vitug, 1997 ed.)
2. Domestic Air Transportation. (Commercial Law Review,
Cesar Villanueva, 2004 ed.)
IMPORTANT CONCEPTS:
1. Bill of lading
2. Obligations of the carrier
3. Right of abandonment
4. Notice of damage
5. Combined carrier agreement
BILL OF LADING
The written acknowledgment of receipt of goods and
agreement to transport them to a specific place to a
person named or to his order.
Rules:
1. It is not indispensable for the creation of a contract of
carriage. (Compania Maritima vs. Insurance Company of
North America, 12 SCRA 213)
2. Ambiguity is construed against the carrier, the contract
being one of adhesion.
3. The consignee, although the instrument is oftentimes
drawn up only by the consignor and carrier, becomes
bound by all the stipulations contained therein by making
a claim for loss on the basis of said bill of lading. (SeaLand Services Inc. vs. IAC)
4. The right of a party to recover for loss of shipment
consigned to him under a bill of lading drawn up only by
and between the shipper and the carrier, springs from
either a relation of agency between him and the shipper,
or his status as stranger in whose favor some stipulation is
made in said contract, and who becomes a party thereto
when he demands fulfillment of that stipulation. (Art. 1311
(2), (Mendoza vs. PAL Inc.)
5. Acceptance of the bill of lading without dissent raises
the presumption that all the terms therein where brought
to the knowledge of the shipper and agreed to by him and,
in the absence of fraud or mistake; he is estopped from
thereafter denying that he assented to such terms. (Notes
and Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p.261)
Kinds:
1. On board - issued when the goods have been
actually placed aboard the ship with very
reasonable expectation that the shipment is as
good as on its way.
2. Received - one in which it is stated that the goods
have been received for shipment with or without
specifying the vessel by which the goods are to be
shipped.
3. Negotiable - one in which it is stated that the goods
referred to therein will be delivered to the bearer or
to the order of any person named therein.
4. Non-negotiable - One in which it is stated that the
goods referred to therein will be delivered to a
specified person.
5. Clean One which does not indicate any defect in
the goods.
6. Foul One which contains a notation thereon

indicating that the goods covered by it are in bad

condition.
7.

Spent One which covers goods that already have

been delivered by the carrier without a surrender of
a signed copy of the bill.
8. Through One issued by the carrier who is obliged
to use the facilities of other carriers as well as his
own facilities for the purpose of transporting the
goods from the city of the seller to the city of the
buyer, which bill of lading is honored by the second
and other interested carriers who do not issue their
own bills.
9. Custody One wherein the goods are already
received by the carrier but the vessel indicated
therein has not yet arrived in the port.
10. Port One which is issued by the carrier to whom
the goods have been delivered, and the vessel
indicated in the bill of lading by which the goods are
to be shipped is already in the port where the goods
are held for shipment.
Functions:
1. Best evidence of the existence of the contract of
carriage of cargo (Art. 353)
2. Document of title
3. Receipt of cargo
4. Contract to transport and deliver goods as
stipulated
5. Symbol of the goods
OBLIGATIONS OF THE CARRIER
A. Duty to accept the goods
GENERAL RULE: A common carrier cannot ordinarily
refuse to carry a particular class of goods.
EXCEPTION:
For
some
sufficient
reason
the
discrimination against the traffic in such goods is
reasonable and necessary. (Fisher vs. Yangco Steamship
Co. 31 Phil 1).
Instances when the carrier may validly refuse to accept
the goods include the ff:
1.) Goods sought to be transported are dangerous objects,
or substances including dynamite and other explosives
2.) Goods are unfit for transportation
3.) Acceptance would result in overloading
4.) Contrabands or illegal goods
5.) Goods are injurious to health
6.) Goods will be exposed to untoward danger like flood,
capture by enemies and the like
7.) Goods like livestock will be exposed to disease
8.) Strike
9.) Failure to tender goods on time. (Notes and Cases on
the Law on Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed. p.68)
In case of carriage by railway, the carrier is exempted
from liability if carriage is insisted upon by the shipper,
provided its objections are stated in the bill of lading.
However, when a common carrier accepts cargo for
shipment for valuable consideration, it takes the risk of
delivering it in good condition as when it was loaded. (PAL
vs. CA)
B. Duty to deliver the goods
Not only to transport the goods safely but to the person
indicated in the bill of lading. The goods should be
delivered to the consignee or any other person to whom
the bill of lading was validly transferred or negotiated.
Time of delivery
Stipulated in
Contract/Bill of
Lading
1. Carrier is bound to
fulfill the contract
and is liable for any
delay;
no
matter
from what cause it
may have arisen.

No stipulation
1.
Within
a
reasonable time.
2. Carrier is bound to
forward them in the
1st shipment of the
same
or
similar
goods which he may
make to the point of
delivery. (ART. 358
Code of Commerce)

Effects of delay
a. Merely suspends and generally does not terminate the
contract of carriage
b. Carrier remains duty bound to exercise extraordinary
diligence
c. Natural disaster shall not free the carrier from

responsibility (Art.1740)
d. If delay is without just cause, the contract limiting the
common carriers liability cannot be availed of in case of
loss or deterioration of the goods (Art.1747)
RIGHT OF CONSIGNEE TO ABANDON GOODS
Instances:
1. Partial non-delivery, where the goods are useless
without the others (Art. 363);
2. Goods are rendered useless for sale or consumption
for the purposes for which they are properly destined (Art.
365); and
3. In case of delay through the fault of the carrier (Art.
371).
NOTICE OF DAMAGE (ART. 366)
Requisites for applicability:
1. Domestic/inter-island/coastwise transportation
2. Land/water/air transportation
3. Carriage of goods
4. Goods shipped are damaged
Rules:
a. Patent damage: shipper must file a claim against the
carrier immediately upon delivery (it may be oral or
written)
b. Latent damage: shipper should file a claim against the
carrier within 24 hours from delivery.
Note: These rules does not apply to misdelivery of goods.
(Roldan vs. Lim Ponzo)
Purpose of notice: To inform the carrier that the shipment
has been damaged, and it is charged with liability
therefore, and to give it an opportunity to make an
investigation and fix responsibility while the matter is
fresh.
The filing of notice of claim is a condition precedent for
recovery.
Shorter period may be stipulated by the parties
because it merely affects the shippers remedy and does
not affect the liability of the carrier. (PHILAMGEN vs.
Sweetlines, Inc.)
Prescriptive Period
Not provided by Article 366. Thus, in such absence, Civil
Code rules on prescription apply.
If despite the notice of claim, the carrier refuses to pay,
action must be filed in court.
1. No bill of lading was issued: within 6
years
2. Bill of lading was issued: within 10
years.
ARTICLE 366
COGSA Sec.3 (6)
Applicability
1.
Domestic/inter- 1. International/
island/coastwise
overseas/foreign
transportation
(from
foreign
2. Land, water, air country to Phils.)
transportation
Note: subject to the
3. Carriage of goods
rule on Paramount
Clause
2. Water/maritime
transportation
3. Carriage of goods
Notice of damage
1. Condition
1. Not a condition
precedent
precedent
2. 24-hour period for
2. 3-day period for
claiming latent
claiming latent
damage
damage
Prescriptive period
None provided; Civil One year from the
Code applies.
date
of
delivery
(delivered
but
damaged goods), or
date
when
the
vessel left port or
from the date of
delivery
to
the
arrastre
(nondelivery or loss).
COMBINED CARRIER AGREEMENT (ART. 373)
GENERAL RULE: In case of a contract of transportation of
several legs, each carrier is responsible for its particular
leg in the contract.
EXCEPTION: A combined carrier agreement where a
carrier makes itself liable assuming the obligations and
acquiring as well the rights and causes of action of those
which preceded it.

2.
(Arts. 573-869)

MARITIME
COMMERCE

IMPORTANT CONCEPTS:
1. Merchant vessel
2. Maritime lien and Preference of Credit
3. Doctrine of limited liability
4. Causes of revocation of voyage
5. Participants in maritime commerce
6. Charter party
7. Loans on bottomry and respondentia
8. Accidents in maritime commerce
MARITIME/ADMIRALTY LAW
It is the system of laws which particularly relates to the
affairs and business of the sea, to ships, their crews and
navigation, and to maritime conveyance of persons and
property. (Notes and Cases on the Law on Transportation
and Public Utilities, Aquino & Hernando, citing Francisco,
p.254)
Maritime laws apply only to maritime trade and sea
voyages. (Pandect of Commercial Law and Jurisprudence,
Justice Jose Vitug, 1997 ed.)
Arrastre service is not maritime in character. It refers to
a contract for the unloading of goods from a vessel. (ICTSI
vs. Prudential Guarantee, 320 SCRA 244)
CHARACTERISTICS OF MARITIME TRANSACTION
1. Real - similar to transactions over real property with
respect to effectivity against third persons which is done
through registration. (Rubiso vs. Rivera, 37 Phil. 72). The
evidence of real nature is shown by: 1) the limitation of the
liability of the agents to the actual value of the vessel and
the freight money; and 2) the right to retain the cargo and
embargo and detention of the vessel (Luzon Stevedoring
Corp v. CA, 156 SCRA 169);
2. Hypothecary - the liability of the owner of the value of
the vessel is limited to the vessel itself (Doctrine of
Limited Liability).
The real and hypothecary nature of maritime law simply
means that the liability of the carrier in connection with
losses related to maritime contracts is confined to the
vessel, which stands as the guaranty for their settlement.
(Aboitiz Shipping Corp. vs. General Accident Fire and Life
Assurance Corp. 217 SCRA 359).
MERCHANT VESSEL
Vessel engaged in maritime commerce, whether foreign
or otherwise. (Bar Review Materials in Commercial Law,
Jorge Miravite, 2002 ed.)
Constitutes property which may be acquired and
transferred by any of the means recognized by law. They
shall continue to be considered as personal property. (Arts.
573, 585)
They are susceptible to maritime liens such as for the
repair, equipping and provisioning of the vessel in the
preparation of a voyage, as well as mortgage liabilities, in
satisfaction of which a vessel may be validly arrested and
sold. (Ship Mortgage Decree of 1978)
MARITIME LIEN
It constitutes a present right of property in the ship, a jus
in re, to be afterward enforced in admiralty by process in
rem. (PNB vs. CA, 337 SCRA 381)
If the maritime lien arose prior to the recording of a
preferred mortgage, it shall have priority over the said
mortgage lien. (PNB vs. CA, 337 SCRA 381)
ORDER OF PREFERENCE IN CASE OF SALE OF VESSEL
R.A. 6106
P.D. 1521
Effectivity date
1969
1978
Applicability
Overseas shipping
Both domestic and
only
overseas shipping
Kind of sale
Judicial
Judicial and
extrajudicial
Order of Preference
A
preferred The
preferred
mortgage shall have mortgage lien shall

priority
over
all
claims against the
vessel, except the
following
preferences in the
order stated:
1. Judicial costs of
the proceedings;
2. Taxes due the
Philippine
Government;
3.
Salaries
and
wages
of
the
Captain and Crew of
the vessel during its
last voyage;
4. General average
or salvage including
contract
salvage,
bottomry loans, and
indemnity
due
shippers
for
the
value
of
goods
transported
but
which
were
not
delivered
to
the
consignee;
5. Costs of repair
and equipment of
the
vessel,
and
provisioning of food,
supplies and fuel
during
its
last
voyage; and
6.
Preferred
mortgages
registered prior in
time.

have priority over all

claims against the
vessel, except the
following
preferences in the
order stated:
1.
Expenses
and
fees allowed and
costs taxed by the
court and taxes due
to the Government;
2. Crews wages;
3. General average;
4. Salvage, including
contract salvage;
5. Maritime liens
arising prior in time
to the recording of
the
preferred
mortgage;
6. Damages arising
out of tort; and
7.
Preferred
mortgage registered
prior in time.

Effect of sale: All pre-existing claims in the vessel are

terminated. They will then be satisfied from the proceeds
of the sale subject to the order of preference.
DOCTRINE OF LIMITED LIABILITY
(HYPOTHECARY RULE)
Cases where applicable:
1. Art. 587 civil liability for indemnities to third
persons
2. Art. 590 indemnities from negligent acts of the
captain (not the shipowner or ship agent)
3. Art. 837 collision
4. Art. 643 liability for wages of the captain and
the crew and for advances made by the ship
agent if the vessel is lost by shipwreck or capture

GENERAL RULE: The liability of shipowner and ship agent

is limited to the amount of interest in said vessel such that
where vessel is entirely lost, the obligation is extinguished.
(Luzon Stevedoring v. Escano, 156 SCRA 169) The interest
extends to: 1) the vessel itself; 2) equipments; 3)
freightage; and 4) insurance proceeds. (Chua v. IAC, 166
SCRA 183)
EXCEPTIONS:
1. Claims under Workmens Compensation (Abueg vs.
San Diego 77 Phil 730);
2. Injury or damage due to shipowner or to the
concurring negligence of the shipowner and the
captain;
3. The vessel is insured (Vasquez vs. CA 138 SCRA 553).
4. Expenses for repair on vessel completed before loss;
5. In case there is no total loss and the vessel is not
abandoned;
6. Collision between two negligent vessels;
Abandonment of the vessel is necessary to limit the
liability of the shipowner.
The only instance were
abandonment is dispensed with is when the vessel is
entirely lost (Luzon Stevedoring vs. CA 156 SCRA 169).
RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON
VESSEL
Instances:
1. In case of civil liability from indemnities to third persons
(Art. 587);
2. In case of leakage of at least of the contents of a
cargo containing liquids (Art. 687); and
3. In case of constructive loss of the vessel (Sec. 138,
Insurance Code).

RIGHT OF ABANDONMENT
SHIPOWNER OR
CONSIGNEE
SHIP AGENT
What may be abandoned
Vessel
Goods shipped
Instances
1. In case of civil 1.
Partial
nonliability
from delivery, where the
indemnities to third goods are useless
persons (Art. 587);
without the others
2.
Sec.
138, (Art. 363);
Insurance Code;
2.
Goods
are
3. In case of leakage rendered useless for
of at least of the sale or consumption
contents of a cargo for the purposes for
containing
liquids which
they
are
(Art. 687)
properly
destined
(Art. 365); and
3. In case of delay
through the fault of
the
carrier
(Art.
371).
Effects
1.
Transfer
of 1. Transfer
of
ownership
of
the ownership on the
vessel
from
the goods
from
the
shipowner
to
the shipper
to
the
shippers or insurer.
carrier.
2. In case of (2), the 2. Carrier
should
insurer must pay the pay the shipper the
insured as if there market value of the
was actual total loss goods at the point of
of the vessel.
destination.
CAUSES OF REVOCATION OF VOYAGE
1. War or interdiction of commerce;
2. Blockade;
3. Prohibition to receive cargo at destination;
4. Embargo;
5. Inability of the vessel to navigate. (Art. 640)
Terms:
1. Interdiction of commerce A governmental prohibition
of commercial intercourse intended to bring about an
entire cessation for the time being of all trade
whatever.
2. Blockade A sort of circumvallation of a place by
which all foreign connection and correspondence is,
as far as human power can effect it, to be cut off.
3. Embargo A proclamation or order of a state, usually
issued in time of war or threatened hostilities,
prohibiting the departure of ships or goods from some
or all the ports of such state until further order.
PARTICIPANTS IN MARITIME COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot
A. SHIPOWNERS AND SHIP AGENTS
Shipowner (proprietario)
Person who has possession, control and management of
the vessel and the consequent right to direct her
navigation and receive freight earned and paid, while his
possession continues.
Ship agent (naviero)
Person entrusted with provisioning and representing the
vessel in the port in which it may be found; also includes
the shipowner.
Not a mere agent under civil law; he is solidarily liable
with the ship owner.
Powers and functions:
1. Capacity to trade;
2. Discharge duties of the captain, subject to Art.609;
3. Contract in the name of the owners with respect to
repairs, details of equipment, armament, provisions of
food and fuel, and freight of the vessel, and all that
relate to the requirements of navigation;
4. Order a new voyage, make a new charter or insure
the vessel after obtaining authorization from the
shipowner or if granted in certificate of appointment.
Civil Liabilities of the Shipowner And Ship Agent

1.
2.

All contracts of the captain, whether authorized or

not, to repair, equip and provision the vessel; (Art.
586)
Loss and damage to the goods loaded on the vessel
without prejudice to their right to free themselves
from liability by abandoning the vessel to the
creditors. (Art. 587)

Duty of Ship Agent to Discharge the Captain and

Members of the Crew
If the seamen contract is not for a definite period or
voyage, he may discharge them at his discretion. (Art.
603)
If for a definite period, he may not discharge them until
after the fulfillment of their contracts, except on the
following grounds:
a. Insubordination in serious matters;
b. Robbery;
c. Theft;
d. Habitual drunkenness;
e. Damage caused to the vessel or to its cargo
through malice or manifest or proven negligence. (Art.
605)
B. CAPTAINS AND MASTERS
They are the chiefs or commanders of ships.
The terms have the same meaning, but are particularly
used in accordance with the size of the vessel governed
and the scope of transportation, i.e., large and overseas,
and small and coastwise, respectively.
Nature of position (3-fold character):
1. General agent of the shipowner;
2. Technical director of the vessel;
3. Representative of the government of the country
under whose flag he navigates.
Qualifications:
1. Filipino citizen;
2. Legal capacity to contract;
3. Must have passed the required physical and
mental examinations required for licensing him as
such. (Art. 609)
Inherent powers:
1. Appoint crew in the absence of ship agent;
2. Command the crew and direct the vessel to its
port of destination;
3. Impose correctional punishment on those who,
while on board vessel, fail to comply with his
orders or are wanting in discipline;
4. Make contracts for the charter of vessel in the
absence of ship agent.
5. Supply, equip, and provision the vessel; and
6. Order repair of vessel to enable it to continue its
voyage. (Art. 610)
Sources of funds to comply with the inherent powers of
the captain (in successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)
Duties:
1. Bring on board the proper certificate and
documents and a copy of the Code of Commerce;
2. Keep a Log Book, Accounting Book and Freight
Book;
3. Examine the ship before the voyage;
4. Stay on board during the loading and unloading
of the cargo;
5. Be on deck while leaving or entering the port;
6. Protest arrivals under stress and in case of
shipwreck;
7. Follow instructions of and render an accounting to
the ship agent;
8. Leave the vessel last in case of wreck;
9. Hold in custody properties left by deceased
passengers and crew members;
10. Comply with the requirements of customs, health,
etc. at the port of arrival;
11. Observe rules to avoid collision;
12. Demand a pilot while entering or leaving a port.
(Art. 612)
A ships captain must be accorded a reasonable
measure of discretionary authority to decide what the
safety of the ship and of its crew and cargo specifically
requires on a stipulated ocean voyage (Inter-Orient
Maritime Enterprises Inc. vs. CA).

 No liability for the following:

1. Damages caused to the vessel or to the cargo by
force majeure;
2. Obligations contracted for the repair, equipment,
and provisioning of the vessel unless he has
expressly bound himself personally or has signed
a bill of exchange or promissory note in his name.
(Art. 620)
Solidary Liabilities of the Ship Agent/Shipowner for
Acts Done by the Captain towards Passengers and
Cargoes
1. Damages to vessel and to cargo due to lack of
skill and negligence;
2. Thefts and robberies of the crew;
3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of marine
regulations. (Art. 618)
C. OFFICERS AND CREW
1. Sailing Mate/First Mate
2. Second Mate
3. Engineers
4. Crew
No liability under the following circumstances:
1. If, before beginning voyage, captain attempts to
change it, or a naval war with the power to which the
vessel was destined occurs;
2. If a disease breaks out and be officially declared an
epidemic in the port of destination;
3. If the vessel should change owner or captain. (Art.
647)
Sailing Mate/First Mate
Second chief of the vessel who takes the place of the
captain in case of absence, sickness, or death and shall
assume all of his duties, powers and responsibilities. (Art.
627)
Duties:
1. Provide himself with maps and charts with
astronomical tables necessary for the discharge
of his duties;
2. Keep the Binnacle Book;
3. Change the course of the voyage on consultation
with the captain and the officers of the boat,
following the decision of the captain in case of
disagreement;
4. Responsible for all the damages caused to the
vessel and the cargo by reason of his negligence.
(Arts. 628 - 631)
Second Mate
Takes command of the vessel in case of the inability or
disqualification of the captain and the sailing mate,
assuming in such case their powers and responsibilities.
Third in command
Duties:
1. Preserve the hull and rigging of the vessel;
2. Arrange well the cargo;
3. Discipline the crew;
4. Assign work to crew members;
5. Inventory the rigging and equipment of the
vessel, if laid up. (Art. 632)
Engineers
Officers of the vessel but have no authority except in
matters referring to the motor apparatus. When two or
more are hired, one of them shall be the chief engineer.
Duties:
1. In charge of the motor apparatus, spare parts,
and other instruments pertaining to the engines;
2. Keep the engines and boilers in good condition;
3. Not to change or repair the engine without
authority of the captain;
4. Inform the captain of any damage to the motor
apparatus;
5. Keep an Engine Book;
6. Supervise all personnel maintaining the engine.
(Art. 632)
Crew
The aggregate of seamen who man a ship, or the ships
company.

Hired by the ship agent, where he is present and in his

absence, the captain hires them, preferring Filipinos, and
in their absence, he may take in foreigners, but not
exceeding 1/5 of the crew. (Art. 634)
Classes of Seamans Contracts
1. By the voyage;
2. By the month; and
3. By share of profits or freightage.
Just Causes for the Discharge of Seaman While
Contract Subsists
1. Perpetration of a crime;
2. Repeated insubordination, want of discipline;
3. Repeated incapacity and negligence;
4. Habitual drunkenness;
5. Physical incapacity;
6. Desertion. (Art. 637)
Rules in case of Death of a Seaman
The seamans heirs are entitled to payment as follows:
1. If death is natural:
a. compensation up to time of death if engaged on
wage
b. if by voyage - half of amount if death occurs on
voyage out; and full, if on voyage in
c. if by shares - none, if before departure; full, if
after departure
2. if death is due to defense of vessel - full payment;
3. if captured in defense of vessel - full payment;
4. if captured due to carelessness - wages up to the date
of the capture. (Art. 645)
Complement of the Vessel
All persons on board, from the captain to the cabin boy,
necessary for the management, maneuvers, and service,
thus including the crew, the sailing mates, engineers,
stokers and other employees on board not having specific
designations.
Does not include the passengers or the persons whom
the vessel is transporting.
D. SUPERCARGOES
Persons who discharges administrative duties assigned to
him by ship agent or shippers, keeping an account and
record of transaction as required in the accounting book of
the captain. (Art. 649)
E. PILOT
A person duly qualified, and licensed, to conduct a vessel
into or out of ports, or in certain waters.
The term generally connotes a person taken on board at
a particular place for the purpose of conducting a ship
through a river, road or channel, or from a port.
Master pro hac vice for the time being in the command
and navigation of the ship.
While in exercising his functions a pilot is in sole
command of the ship and supersedes the master for the
time being in the command and navigation of the ship, the
master does not surrender his vessel to the pilot and the
pilot is not the master. There are occasions when the
master may and should interfere and even displace the
pilot, as when the pilot is obviously incompetent or
intoxicated (Far Eastern Shipping Company vs. CA).
Compulsory Pilotage States possessing harbors have
enacted laws or promulgated rules requiring vessels
approaching their ports to take on board pilots licensed
under the local laws. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. & Hernando,
R.P. 2004 ed. p. 518)
Liablity of Pilot
GENERAL RULE: On compulsory pilotage grounds, the
Harbor Pilot is responsible for damage to a vessel or to life
or property due to his negligence.
EXCEPT:
1. Accident caused by force majeure or natural calamity
provided the pilot exercised prudence and extra diligence
to prevent or minimize damages.
2. Countermand or overrule by the master of the vessel in
which case the registered owner of the vessel is liable.
(Sec.11, Art.III PPA Admin Order 03-85)
SPECIAL CONTRACTS OF MARITIME COMMERCE
1. Charter party
2. Bill of lading
3. Contract of transportation of passengers on sea
voyages

4.
5.
6.

Loan on bottomry
Loan on respondentia
Marine insurance

CHARTER PARTY
A contract by virtue of which the owner or agent binds
himself to transport merchandise or persons for a fixed
price.
A contract by which an entire ship, or some principal part
thereof is let/leased by the owner to another person for a
specified time or use. (Planters Products, Inc. vs. CA, 226
SCRA 476)
Parties:
1. Ship owner or ship agent
2. Charterer
Classes:
1. Bareboat or demise The charterer provides crew, food
and fuel. The charterer is liable as if he were the owner,
except when the cause arises from the unworthiness of
the vessel. The shipowner leases to the charterer the
whole vessel, transferring to the latter the entire
command, possession and consequent control over the
vessels navigation, including the master and the crew,
who thereby become the charters servants. It transforms
a common carrier into a private carrier.
The charterer becomes the owner of the vessel pro
hac vice, just for that one particular purpose only.
Because the charterer is treated as owner pro hac
vice, the charterer assumes the customary rights and
liabilities of the shipowner to third persons and is held
liable for the expense of the voyage and the wages of
the seamen.
2. Contract of Affreightment A contract whereby the
owner of the vessel leases part or all of its space to haul
goods for others.
The shipowner retains the possession, command
and navigation of the ship, the charterer merely
having use of the space in the vessel in return for his
payment of the charter hired.
Kinds:
a. Time charter vessel is chartered for a fixed
period of time or duration of voyage.
b. Voyage or trip charter the vessel is leased for
one or series of voyages usually for purposes of
transporting goods for charterer.
LEASE
If for
a
definite
period, lessee cannot
give up the lease by
paying a portion of
the amount agreed
upon.
If the leased property
is sold to one who
knows
of
the
existence
of
the
lease, the new owner
must
respect
the
lease.
Civil law concept

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

CHARTER PARTY
An entire or complete
contract.

BILL OF LADING
More like a private
receipt which the
captain
gives
to
accredit
goods
received
from
persons
Real contract

Consensual contract
BAREBOAT OR
DEMISE CHARTER
Charterer
becomes
liable
to
others
caused
by
its
negligence
Charterer
regarded
as owner pro hac
vice for the voyage

The new owner is not

compelled to respect
the charter party so
long as he can load
the vessel with his
own cargo. (Art. 689)
Commercial
concept

Owner
of
vessel
relinquishes
possession,
command
and
navigation
to
charterer
Common carrier is
converted to private
carrier.

Common carrier is
not converted to a
private carrier.

PERSONS WHO MAY MAKE A CHARTER

1. Owner or owners of the vessel, either in whole or
in majority part, who have legal control and
possession of the vessel
2. Charterer may subcharter entire vessel to 3rd
person only if not prohibited in original charter.
(Art.679)
3. Ship agent if authorized by the owner/s or given
such power in the certificate of appointment.
(Art.598)
4.
Captain in the absence of the ship agent or
consignee and only if he acts in accordance with
the instructions of the agent or owner and
protects the latters interests. (Art.609)
REQUISITES OF A VALID CHARTER PARTY
1. Consent of the contracting parties
2. Existing vessel which should be placed at the
disposition of the shipper
3. Freight
4. Compliance with Art. 652 of the Code of
Commerce

Clauses Which May Be Included In a Charter Party

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

law

CONTRACT OF
AFFREIGHTMENT
(TIME OR VOYAGE
CHARTER)
Owner remains liable
as carrier and must
answer
for
any
breach of duty
Charterer
is
not
regarded as owner.

The vessel owner

retains
possession,
command
and
navigation of the ship

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

Rights and Obligations of Parties

SHIPOWNER OR
SHIP AGENT
1. If the vessel is
chartered wholly, not
to accept cargo from
others;
2. To
observe
represented capacity;
3. To unload cargo
clandestinely placed
4. To
substitute
another vessel if load
is less than 3/5 of
capacity;
5. To leave the port
if the charterer does
not bring the cargo
within the lay days
and extra lay days
allowed;

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

6. To place in a
vessel in a condition
to navigate;
7. to bring cargo to
nearest neutral port
in case of war or
blockade. (Arts. 669678)

LOAN ON
BOTTOMRY

Rescission of a Charter Party

At
At
charterers
shipowner
request
s request
(Art 688)
(Art. 689)
1.
By
abandoning
the
charter
and
paying
half of the
freightage;
2. Error in
tonnage
or
flag;
3. Failure to
place
the
vessel at the
charterers
disposal;
4. Return of
the
vessel
due
to
pirates,
enemies
or
bad weather;
5. Arrival at a
port
for
repairs.

1. If the extra
lay
days
terminate
without the
cargo being
placed
alongside the
vessel;
2. Sale by
the owner of
the
vessel
before
loading
by
the
charterer;

Fortuitous
causes
(Art. 690)
1. War or
interdiction
of commerce;
2. Blockade;
3. Prohibition
to receive
cargo;
4. Embargo;
and
5. Inability of
the vessel to
navigate.

Terms:
1. Primage - bonus to be paid to the captain after the
successful voyage.
2. Demurrage the sum fixed in the charter party as a
remuneration to the owner of the ship for the
detention of his vessel beyond the number of days
allowed by the charter party for loading or unloading
or for sailing.
3. Deadfreight the amount paid by or recoverable from
a charterer of a ship for the portion of the ships
capacity the latter contracted for but failed to occupy.
4. Lay Days - days allowed to charter parties for loading
and unloading the cargo.
5. Extra Lay Days days which follow after the lay days
have elapsed.
USUAL FORMS OF CONSUMMATING CONTRACTS
1. C.I.F. cost, insurance and freight;
2. F.O.B. - free on board;
3. F.A.S. - free alongside ship; and
4. C. & F. - cost and freight.
TRANSSHIPMENT OF GOODS
The act of taking cargo out of one ship and loading it in
another, or the transfer of goods from the vessel
stipulated in the contract of affreightment to another
vessel before the place of destination named in the
contract has been reached, or the transfer for further
transportation from one ship or conveyance to another.
It is not dependent on the ownership of the transporting
ships or in the change of carriers, but rather on the fact of
actual physical transfer of cargo from one vessel to
another.
If done without legal excuse, however competent and
safe the vessel into which the transfer is made, is a
violation of contract and infringement of right of shipper
and subjects carrier to liability if freight is lost event by
cause otherwise excepted. (Magellan Manufacturing vs.
CA, 201 SCRA 102)
LOAN ON BOTTOMRY AND RESPONDENTIA
A real, unilateral, aleatory contract, by virtue of which
one person lends to another a certain amount of money or
goods on things exposed to maritime risks, which amount,
with its earnings, is to be returned if the things are safely
transported, and which is lost if the latter are lost.

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

BOTTOMRY/
RESPONDENTIA

ORDINARY LOAN
(MUTUUM)

Not subject to Usury

Law

Subject
Law

to

Usury

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

Not subject to any

contingency
(absolute liability)

The last lender is a

preferred creditor

The first lender is a

preferred creditor

WHEN LOAN ON BOTTOMRY OR RESPONDENTIA

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

LOAN ON
BOTTOMRY OR
RESPONDENTIA
Indemnity is paid
in advance by
way of a loan
In case of loss of
the vessel due to
a marine peril,
the obligation of
the borrower to
pay
is
extinguished

Consensual contract

Real contract

Hypothecary Nature of Bottomry/ Respondentia

GENERAL RULE: The obligation of the borrower to pay
the loan is extinguished if the goods given as security are
absolutely lost by reason of an accident of the sea, during
the voyage designated, and if it is proven that the goods
were on board.
EXCEPTIONS:
1. Loss due to inherent defect;
2. Loss due to the barratry on the part of the captain;
3. Loss due to the fault or malice of the borrower;
4.
The vessel was engaged in contraband; and
5. The cargo loaded on the vessel be different in from
that agreed upon.
Concurrence of Marine Insurance and Loan on
Bottomry/Respondentia
1. The insurable interest of the owner of a ship
hypothecated by bottomry is only the excess of
the value over the amount secured by bottomry.
(Sec. 101, Insurance Code)
2. The value of what may be saved in case of
shipwreck shall be divided between the lender
and the insurer in proportion to the interest of
each one. (Art. 735)
Note: If a vessel is hypothecated by bottomry only the
excess is insurable, since a loan on bottomry partakes of
the nature likewise of an insurance coverage to the extent
of the loan accommodation. The same rule would apply to
the hypothecation of the cargo by respondentia. (Pandect
of Commercial Law and Jurisprudence, Justice Jose Vitug,
1997 ed.)
ACCIDENTS IN MARITIME COMMERCE
1. Averages
2. Arrival Under Stress
3. Collision
4. Shipwreck
AVERAGE
An extraordinary or accidental expense incurred during
the voyage in order to preserve the cargo, vessel or both,
and all damages or deterioration suffered by the vessel
from departure to the port of destination, and to the cargo
from the port of loading to the port of consignment. (Art.
806)
The person whose property has been saved must
contribute to reimburse the damage caused or expense
incurred if the situation constitutes general average.
Classes:
1. Particular or Simple Average
2. Gross or General Average
Where both vessel and cargo are saved, it is general
average; where only the vessel or only the cargo is saved,
it is particular average.
Expenses incurred to refloat a vessel, which accidentally
ran aground, in order to continue its voyage, do not
constitute general average. Not only is there absence of a
marine peril, common safety factor, and deliberateness. It
is the safety of the property, and not the voyage, which
constitutes the true foundation of general average. (A.
Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)

PARTICULAR OR
GROSS OR
SIMPLE
GENERAL
Definition
Damages or expenses Damages
or
caused to the vessel expenses
or cargo that did not deliberately caused
inure to the common in order to save the
benefit, and borne by vessel, its cargo or
respective
owners. both from real and
(Art. 809)
known risk.
(Art.
811)
Requisites
1. common
danger;
2. deliberate
sacrifice;
3. success;
4. proper
formalities and
legal steps.
Liability
The owner of the All
the
persons

goods which gave

rise to the expense or
suffered the damage
shall
bear
this
average. (Art. 810)

having an interest in
the vessel and the
cargo therein at the
time
of
the
occurrence of the
average
shall
contribute to satisfy
this average. (Art.
812)

The
insurers
(Art.859)
and
lenders on bottomry
and
respondentia
shall
likewise
contribute.
(Art.732).
Number of interests involved
Only
one
interest Several
interests
involved
involved
Share in the damage or expense
100% share
In proportion to the
value of the owners
property saved
Right to recover
No reimbursement
There
may
be
reimbursement
Kinds (not exclusive)
Art. 809
Art. 811
Procedure for recovery
1. Assembly
and
deliberation
2. Resolution of the
captain
3. Entry
of
the
resolution
in
the
logbook
4. Detailed minutes
5. Delivery of the
minutes
to
the
maritime
judicial
authority of the first
port, within 24 hours
from arrival,
6. Ratification
by
captain under oath.
(Arts. 813-814)
GOODS NOT COVERED BY GENERAL AVERAGE EVEN
IF SACRIFICED
1. Goods carried on deck. (ART.855)
2. Goods not recorded in the books or records of the
vessel. (ART.855 (2))
3. Fuel for the vessel if there is more than sufficient
fuel for the voyage. (Rule IX, York-Antwerp Rule)
Jettison
Act of throwing cargo overboard in order to lighten the
vessel.
Order of goods to be cast overboard:
1. Those which are on the deck, preferring the
heaviest one with the least utility and value;
2. Those which are below the upper deck, beginning
with the one with greatest weight and smallest
value. (Art. 815)
Jettisoned goods are not res nullius nor deemed
abandoned within the meaning of civil law so as to be
the object of occupation by salvage. (Pandect of
Commercial Law and Jurisprudence, Justice Jose Vitug,
1997 ed.)
In order that the jettisoned goods may be included in
the gross or general average, the existence of the cargo
on board should be proven by means of the bill of lading.
(Art. 816)
York-Antwerp (Y-A) Rules on Determining Liability
for Averages With Regard To Deck Cargo
1. Deck
cargo
is
allowed
only
in
domestic/coastwise/inter-island shipping, and is prohibited
in international/overseas/foreign shipping.
2. If deck cargo is loaded with the consent of the shipper
on overseas trade, it must always contribute to general
average, but should the same be jettisoned, it would not
be entitled to reimbursement because there is violation of
the Y-A Rules.
3. If deck cargo is loaded with the consent of the shipper
on coastwise shipping, it must always contribute to

general average and if jettisoned would be entitled to

reimbursement.
Reason: In domestic shipping, voyages are usually short
and the seas are generally not rough. In overseas
shipping, the vessel is exposed for many days to perils of
the sea.
INTERNATIONAL
Deck cargo is not
allowed
With shippers consent
General average
Particular average
Without shippers consent
Captain is liable
Captain is liable

4.
5.
6.

DOMESTIC
Deck cargo is allowed

ARRIVAL UNDER STRESS (ARRIBADA)

The arrival of a vessel at the nearest and most
convenient port instead of the port of destination, if during
the voyage the vessel cannot continue the trip to the port
of destination.
When
lawful

When
unlawful

Who bears
expenses:

The inability
to continue
voyage
is
due to lack
of provisions,
well-founded
fear
of
seizure,
privateers,
pirates,
or
accidents of
the
sea
disabling
it
to navigate.
(Art. 819)

1. Lack
of
provisions
due
to
negligence to
carry
according to
usage
and
customs;
2. Risk
of
enemy
not
well known or
manifest
3. Defect of
vessel due to
improper
repair; and
4. Malice,
negligence,
lack
of
foresight
or
skill
of
captain. (Art.
820)

The
shipowner or
ship agent is
liable in case
of
unlawful
arrival under
stress.
But
they shall not
be liable for
the damages
caused
by
reason of a
lawful arrival.
(Art. 821)

It is the duty of the captain to continue the voyage

without delay after the cause of the arrival under stress
has ceased failing in such duty renders him liable.
However, in case the cause has been risk of enemies,
there must first be an assembly before departure. (Art.
825)
Steps:
1. Captain should determine during the voyage if
there is well founded fear of seizure, privateers
and other valid grounds;
2. Captain shall assemble the officers and summon
the persons interested in the cargo who may
attend the meeting but without a right to vote;
3. The officers shall determine and agree if there is
well-founded
reason
after
examining
the
circumstances.
The captain shall have the
deciding vote;
4. The agreement shall be drafted and the proper
minutes shall be signed and entered in the log
book;
5. Objections and protests shall likewise be entered
in the minutes.
COLLISION
Impact of two vessels both of which are moving.
Allision
Impact between a moving vessel and a stationary one.
Nautical Rules to Determine Negligence
1. When two vessels are about to enter a port, the
farther one must allow the nearer to enter first; if they
collide, the fault is presumed to be imputable to the
one who arrived later, unless it can be proved that
there was no fault on its part.
2. When two vessels meet, the smaller should give the
right of way to the larger one.
3. A vessel leaving port should leave the way clear for
another which may be entering the same port.

7.
8.
9.

The vessel which leaves later is presumed to have

collided against one which has left earlier.
There is a presumption against the vessel which sets
sail in the night.
There is a presumption against the vessel with spread
sails which collides with another which is at anchor
and cannot move, even when the crew of the latter
has received word to lift anchor, when there was not
sufficient time to do so or there was fear of a greater
damage or other legitimate reason.
There is a presumption against an improperly moored
vessel.
There is a presumption against a vessel which has no
buoys to indicate the location of its anchors to
prevent damage to vessels which may approach it.
Vessels must have proper look-outs or persons
trained as such and who have no other duty aside
therefrom. (Smith Bell v. CA)

Nautical Rules as to Sailing Vessel and Steamship

1. Where a steamship and a sailing vessel are
approaching each other from opposite directions, or
on intersecting lines, the steamship from the moment
the sailing vessel is seen, shall watch with the highest
diligence her course and movements so as to be able
to adopt such timely means of precaution as will
necessarily prevent the two boats from coming in
contact.
2. The sailing vessel is required to keep her course
unless the circumstances require otherwise.
Zones of Time in the Collision of Vessels
1. First zone all time up to the moment when risk of
collision begins.
No rule is as yet applicable for none is necessary.
2. Second zone time between moment when risk of
collision begins and moment it becomes a practical
certainty.
It is in this period where conduct of the vessels is
primordial. It is in this zone that vessels must strictly
observe nautical rules, unless a departure therefrom
becomes necessary to avoid imminent danger.
3. Third zone time when collision is certain and time of
impact.
An error in this zone would no longer be legally
consequential.
Error in Extremis - sudden movement made by a
faultless vessel during the third zone of collision with
another vessel which is at fault during the 2nd zone. Even
if such sudden movement is wrong, no responsibility will
fall on said faultless vessel. (Urrutia and Co. v. Baco River
Plantation Co., 26 PHIL 632)
Cases Covered By Collision and Allision
1. One vessel at fault
Vessel at fault is liable for damage caused to innocent
vessel as well as damages suffered by the owners of cargo
of both vessels. (Art. 826)
2. Both vessels at fault
Each vessel must bear its own loss, but the shippers of
both vessels may go against the shipowners who will be
solidarily liable. (Art. 827)
3. Vessel at fault not known
Each vessel must bear its own loss, but the shippers of
both vessels may go against the shipowners who will be
solidarily liable. (Art. 828)
Doctrine of Inscrutable Fault In case of collision
where it cannot be determined which between the two
vessels was at fault, both vessels bear their
respective damage, but both should be solidarily
liable for damage to the cargo of both vessels.
4. Third vessel at fault
The third vessel will be liable for losses and damages.
(Art. 831)
5. Fortuitous event/force majeure
No liability. Each bears its own loss. (Art. 830)
The doctrine of res ipsa loquitur applies in case a
moving vessel strikes a stationary object, such as a bridge
post, dock, or navigational aid. (Far Eastern Shipping v. CA,
Luzon Stevedoring vs. CA)
Even if the cause of action against the common carrier
is based on quasi-delict, the defense of due diligence in
the selection and supervision of employees is unavailing in
case of a maritime tort resulting in collision. It is not a civil
tort governed by the Civil Code but a maritime one
governed by Arts. 826-839 of the Code of Commerce.

(Manila Steamship vs. Insa Abdulhaman)

Doctrine of Last Clear Chance and Rule on Contributory
Negligence cannot be applied in collision cases because of
Art.827 of the Code of Commerce. (Notes and Cases on
the Law on Transportation and Public Utilities, Aquino, T. &
Hernando, R.P. 2004 ed.)
MARITIME PROTEST
Condition precedent or prerequisite to recovery of
damages arising from collisions and other maritime
accidents.
It is a written statement made under oath by the captain
of a vessel after the occurrence of an accident or disaster
in which the vessel or cargo is lost or damaged, with
respect to the circumstances attending such occurrence,
for the purpose of recovering losses and damages.
Excuses for not filing protest: 1) where the interested
person is not on board the vessel; and 2) on collision time,
need not be protested. (Art. 836)
Cases applicable:
1. Collision (Art. 835);
2. Arrival under stress (Art. 612(8));
3. Shipwrecks (Arts. 612(15), 843);
4. Where the vessel has gone through a hurricane or
when the captain believes that the cargo has
suffered damages or averages (Art. 624).
Who makes: Captain
When made: within 24 hours from the time the collision
took place.
Before whom made: competent authority at the point of
collision or at the first port of arrival, if in the Philippines
and to the Philippine consul, if the collision took place
abroad. (Art. 835)
SHIPWRECK
It is the loss of the vessel at sea as a consequence of its
grounding, or running against an object in sea or on the
coast. It occurs when the vessel sustains injuries due to a
marine peril rendering her incapable of navigation.
If the wreck was due to malice, negligence or lack of
skill of the captain, the owner of the vessel may demand
indemnity from said captain. (Art. 841)
The rules on collision or allision, as may be pertinent,
can equally apply to shipwrecks.
SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from a vessel.
Applicability: Overseas trade only. (Commercial Law
Review, C. Villanueva, 2004 ed.)
Significance: When a person brings in cargo from
abroad, he cannot unload and deliver the cargo by himself.
The unloading must be done by the arrastre operator,
which will then deliver the cargo to the importer.
(Commercial Law Review, C. Villanueva, 2004 ed.)
Nature of business: It is a public utility, discharging
functions which are heavily invested with public interest.
Liability:
1. Similar to a warehouseman (Lua Kian v. Manila
Railroad)
2. Similar to a common carrier (Northern Motors v. Prince
Line)
3. Solidary liability with the common carrier
Note: In order that the arrastre operator may be held
liable, the consignee must prove that the damage was due
to the negligence and while the goods are in the custody
of the arrastre operator. (Hartford Fire Insurance v. E.
Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse or pier to the
holds of the vessel. (Chief of Staff vs. CIR)
As understood in the port business, the term consists of
the handling of cargo from the hold of the ship to the dock,
in case of pier-side unloading; or to a barge, in case of
unloading at sea. (Anglo-Fil Trading Corp. vs. Lazaro)
The loading on the ship of outgoing cargo is also part of
stevedoring work. (Ibid.)
CONTAINERIZATION/
SAID-TO-CONTAIN/
SHIPPERS LOAD AND COUNT SYSTEM
System whereby the shipper loads his cargoes in a
specially designed container, seals the container and
delivers it to the carrier for transportation. The carrier
does not participate in the counting of the merchandise for
loading into the container, the actual loading, and the

sealing of the container. (US Lines v. Comm. Of Customs,

ICTSI v. Prudential Guarantee)
The matter of quantity, description and conditions of the
cargo inside the container is the sole responsibility of the
shipper, unless there is stipulation to the contrary. (US
Lines vs. Comm. Of Customs, Reyma Brokerage v. Phil.
Home Assurance)
Note: In order to attribute to the carrier any damage to
the shipment that may be found, inspection of the goods
should be done at pier-side. (Bankers vs. CA)
III. CARRIAGE OF GOODS BY SEA ACT/COGSA (C.A.
No. 65)
APPLICABILITY
The transportation must be:
1. Water/maritime transportation;
2. for the carriage of goods; and
3. overseas/international/foreign (from foreign port
to Philippine port).
It can be applied in domestic sea transportation if
agreed upon by the parties. (Clause paramount or
paramount clause)
IMPORTANT FEATURES:
1. Amount of carriers liability
2. Notice of damage
3. Prescriptive period
AMOUNT OF CARRIERS LIABILITY
Under the Sec. 4(5), the liability limit is set at $500 per
package or customary freight unit unless the nature and
value of such goods is declared by the shipper. This is
deemed incorporated in the bill of lading even if not
mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA 463)
Note that Art. 1749, NCC applies to domestic/interisland/coastwise trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a. Patent damage: shipper should file a claim with the
carrier immediately upon delivery
b. Latent damage: shipper should file a claim with the
carrier within three days from delivery.
Note: The filing of a notice of claim is not a condition
precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo should be brought
within one year after:
a. Delivery of the goods (delivered but damaged
goods); or
b. The date when the goods should have been
delivered (non-delivery). (Sec. 3[6])
Loss or Damage as applied to the COGSA
contemplates a situation where no delivery at all was
made by the shipper of the goods because the same had
perished, gone out of commerce, or disappeared in such a
way that their existence is unknown or they cannot be
recovered. Thus, it is inapplicable in case of misdelivery or
conversion. (Ang vs. American Steamship Agencies Inc.)
and damage arising from delay or late delivery (Mitsui
O.S.K. Lines Ltd. vs. CA). In such instance the, Civil Code
rules on prescription shall apply.
The one-year prescriptive period is suspended by:
1. The express agreement of the parties (Universal
Shipping Lines, Inc. vs. IAC, 188 SCRA 170)
2. The filing of an action in court until it is
dismissed. (Stevens & Co. vs. Nordeutscher Lloyd,
6 SCRA 180)
The one-year period shall run from delivery of the last
package and is not suspended by extrajudicial demand.
(Dole Phils.,Inc. vs. Maritime Co.,148 SCRA 118)
The one-year period shall run from delivery to the
arrastre operator and not to the consignee.
(Union
Carbide Phils, Inc. vs. Manila Railroad Co.,SCRA 359)
The insurer exercising its right of subrogation is bound
by the one-year prescriptive period. However, it does not
apply to the claim against the insurer for the insurance
proceeds. (Fil. Merchants Ins. Co. vs. Alejandro; Mayer
Steel Pipe Corp. vs. CA)

IV. WARSAW CONVENTION OF 1929 (WC)

PURPOSE: To protect the emerging air transportation
industry and to secure the uniformity of recovery by the
passengers.
APPLICABILITY
The transportation must be:
1. International transportation;
2. Air transportation; and
3. Carriage of passengers, baggage or goods.
The WC shall also apply to fortuitous transportation by
aircraft performed by an air transportation enterprise.
International transportation - any transportation in
which the place of departure and the place of destination
are situated either:
1. Within the territories of two High Contracting
Parties regardless of whether or not there be a break
in the transportation or transshipment, or
2. Within the territory of a single High Contracting
Party, if there is an agreed stopping place within a
territory subject to the sovereignty, mandate or
authority of another power, even though that power is
not a party to the Convention. (round trip, Am. Jur.)
Transportation to be performed by several successive
air carriers shall be deemed to be one undivided
transportation, if it has been regarded by the parties as a
single operation, whether it has been agreed upon under
the form of a single contract or of a series of contracts,
and it shall not lose its international character merely
because one contract or a series of contracts is to be
performed entirely within a territory subject to the
sovereignty, suzerainty, mandate, or authority of the same
High Contracting Party. (Art. 1 Sec.3)
WHEN INAPPLICABLE
1. When public policy is contradicted;
2. If the requirements under the Convention are not
complied with.
IMPORTANT CONCEPTS:
1. Transportation documents
a. Passenger ticket
b. Baggage check
c. Air way bill
2. Liability of the carrier for damages
a. Death or injury to passengers
b. Loss or damage to baggage or goods
c. Delay
3. Successive carrier agreement
4. Jurisdiction
5. Combined transportation agreement
PASSENGER
TICKET
Passenger

BAGGAGE
CHECK
Checked-in
baggage

An agreement relieving the carrier from liability or fixing

a lower limit is null and void. (Art. 23)
Carrier is not entitled to the foregoing limit if the
damage is caused by willful misconduct or default on its
part. (Art. 25)
Thus, the WC does not operate as an exclusive
enumeration of the instances of an absolute limit of the
extent of liability. It does not preclude the application of
the Civil Code and other pertinent local laws. It does not
regulate or exclude liability for other breaches of contract
by the carrier, or misconduct of its employees, or for some
particular or exceptional type of damage. (Alitalia vs. CA)
In PanAm v. IAC, the WC was applied as regards the
limitation on the carriers liability, there being a simple
loss of baggage without any improper conduct on the part
of the officials or employees of the airline or other special
injury sustained by the passenger.
In KLM Royal v. Tuller, the WC has invariably been held
inapplicable, or as not restrictive of the carriers liability,
where there was satisfactory evidence of malice or bad
faith attributable to its officers and employees. (Alitalia vs.
IAC)

ACTION FOR DAMAGES

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

AIR
WAYBILL
Goods to be
shipped

LIABILITY OF CARRIER FOR DAMAGES

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

2. Checked-in baggage
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of value and
payment of a supplementary sum by consignor, carrier is
liable to not more than the declared sum unless it proves
the sum is greater than actual value.
3. Hand-carried baggage
$1000/passenger
4. Goods to be shipped
GENERAL RULE: $20 per kilogram
EXCEPTION: In case of special declaration of value and
payment of a supplementary sum by consignor, carrier is
liable to not more than the declared sum unless it proves
the sum is greater than actual value.

by

2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination
b. date of expected arrival
c. date on which the transportation stopped. (Art.
29)
In United Airlines vs. Uy the two-year prescriptive period
was not applied where the airline employed delaying
tactics.
RULE IN CASE OF VARIOUS SUCCESSIVE CARRIERS
1. Carriage of passengers
GENERAL RULE: Action is filed only against the carrier in
which the accident or delay occurred.
EXCEPTION: Agreement or contract whereby the first
carrier assumed liability for the whole journey.
2. Carriage of baggage or goods
a. Passenger or consignor can file an action against
the first carrier and the carrier in which the
damage occurred
b. Passenger or consignee can file an action against
the last carrier and the carrier in which the
damage occurred.
These carriers are jointly and severally liable. (Art.
30)
A contract of international carriage by air, although
performed by different carriers under a series of airline
tickets constitutes a single operation. Members of the
International Air Transportation Association (IATA) are

under a general pool partnership agreement wherein they

act as agent of each other in the issuance of tickets to
contracted passengers to boost ticket sales worldwide and
at the same time provide passengers easy access to
airlines which are otherwise inaccessible in some parts of
the world. (American Airlines vs. CA)

A contract whereby one vessel, usually motorized, pulls

another, whether loaded or not with merchandise, from
one place to another, for a compensation. It is a contract
for services rather than a contract of carriage.

Under a general pool partnership agreement, the ticketissuing airline is the principal in a contract of carriage
while the endorsee-airline is the agent. The obligation of
the former remained and did not cease even when the
breach occurred not on its own flight but on that of
another airline which had undertaken to carry the
passengers to one of their destinations. (China Airlines vs.
Chiok)
JURISDICTION
At the option of the plaintiff, the action for damages may
be filed in the:
a. Court of domicile of the carrier;
b. Court of its principal place of business;
c. Court where it has a place of business through
which the contract has been made; or
d. Court of the place of destination. (Art. 28(1))
NOTE: It is the passengers ultimate destination not an
agreed stopping place that determines the country where
suit is to be filed.
The forum of action provided in Art. 28(1) is a matter of
jurisdiction rather than of venue. (Santos III vs. Northwest;
2A C.J.S.)
V. SALVAGE LAW (Act No. 2616)
SALVAGE
Two concepts:
1. Services one person renders to the owner of a ship or
goods, by his own labor, preserving the goods or the ship
which the owner or those entrusted with the care of them
have either abandoned in distress at sea, or are unable to
protect or secure.
2. Compensation allowed to persons by whose voluntary
assistance a ship at sea or her cargo or both have been
saved in whole or in part from impending sea peril, or such
property recovered from actual peril or loss, as in cases of
shipwreck, derelict or recapture.
Requisites:
1. Valid object of salvage;
2. Object must have been exposed to marine peril
(not perils of the ship);
3. Services rendered voluntarily (neither an existing
duty nor out of a pre-existing contract);
4. Services are successful, total or partial.
Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea, and there
sink and remain under water;
3. Floatsam or Flotsam goods which float upon the sea
when cast overboard;
4. Ligan or Lagan goods cast into the sea tied to a buoy,
so that they may be found again by the owners (p.173,
Judge Diaz).
Persons who have no right to a reward for salvage:
1. Crew of the vessel saved;
2. Person who commenced Salvage in spite of opposition
of the Captain or his representative;
3.
In accordance with Sec. 3 of the Salvage Law, a
person who fails to deliver a salvaged vessel or cargo to
the Collector of Customs.
Derelict a ship or her cargo which is abandoned and
deserted at sea by those who are in charge of it, without
any hope of recovering it, or without any intention of
returning to it.
The intention of those in charge must be ascertained. If
those in charge left with the intention of returning, or of
procuring assistance, the property is not derelict, but if
they quitted the property with the intention of finally
leaving it, it is derelict and a change of their intention and
an attempt to return will not change its nature (Erlanger &
Galinger vs. Swedish East Asiatic Co. Ltd.).
If it is clear that the intention to return is slight, the
salvage which was done thereafter is considered valid.
(Notes and Cases on the Law on Transportation and Public
Utilities, Aquino, T. & Hernando, R.P. 2004 ed. p. 616)
CONTRACT OF TOWAGE

SALVAGE

TOWAGE

Governed by special
law (Act No. 2616)

Governed by Civil
Code on contract of
lease

Requires success,
otherwise no
payment

Success
required

Must be done with

the consent of the
captain/crewmen

Only the consent of

the tugboat owner
is needed

Vessel must be
involved in an
accident

Vessel need not be

involved
in
an
accident

Fees distributed
among crewmen

Fees belong to the

tugboat owner

is

not

RULES ON SALVAGE REWARD

1. The reward is fixed by the RTC judge in the absence of
agreement or where the latter is excessive. (Sec. 9)
2. The
reward
should
constitute
a
sufficient
compensation for the outlay and effort of the salvors
and should be liberal enough to offer an inducement
to others to render services in similar emergencies in
the future.
3. If sold (no claim being made within 3 months from
publication), the proceeds, after deducting expenses
and the salvage claim, shall go to the owner; if the
latter does not claim it within 3 years, 50% of the said
proceeds shall go to the salvors, who shall divide it
equitably, and the other half to the government.
(Secs. 11-12)
4. If a vessel is the salvor, the reward shall be
distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c.

25% to the officers and crew in proportion to their

salaries. (Sec. 13)

Taking passengers from a sinking ship, without

rendering any service in rescuing the vessel, is not a
salvage service, being a duty of humanity and not for
reward.
VI. PUBLIC SERVICE ACT
(C.A. No. 146)
PURPOSES:
1. To secure adequate, sustained service for the
public at the least possible cost;
2. To protect the public against unreasonable
charges and poor, inefficient service;
3. To protect and secure investments in public
services;
4. To prevent ruinous competition.
AUTHORITY TO OPERATE PUBLIC SERVICES
GENERAL RULE: No public service shall operate without
having been issued a certificate of public convenience or a
certificate of public convenience and necessity.
EXCEPTIONS:
1. Warehouses;
2. Animal drawn vehicles and bancas moved by oar
or sail;
3. Airships, except for the fixing of maximum rates
for fare and freight;
4. Radio companies, except for rates fixing;
5. Public services owned or operated by the
government, except as to rates fixing;
6. Ice plants; and
7. Public markets.
PUBLIC SERVICE
A person who owns, operates, manages or controls in the
Philippines for hire or compensation, with general or
limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any
common carrier or public utility, ice plants, power and
water supplies, communication and similar public services.

(Sec. 13b, CA 146)

A casual or incidental service devoid of public character
and interest is not brought within the category. The
question depends on such factors as the extent of
services, whether such person or company has held
himself or itself out as ready to serve the public or a
portion of the public generally. (Luzon Stevedoring vs.
PSC)
NOTE: The Public Service Commission created under the
Public Service Law has already been abolished under P.D.
No. 1 and other issuances. It has been replaced by the
following government agencies: LTO; LTFRB; ATO; BOE;
NTC; NEA; ERB; NWRC; CAB; and MIA.
CERTIFICATE OF
PUBLIC
CONVENIENCE
(CPC)

CERTIFICATE
OF
PUBLIC
CONVENIENCE
AND
NECESSITY
(CPCN)

An authorization
issued
by
the
appropriate
government agency
for the operation of
public services for
which no franchise,
either municipal or
legislative,
is
required by law,
e.g.,
common
carriers.

An authorization
issued
by
the
appropriate
government agency
for the operation of
public service for
which
a
prior
franchise is required
by
law;
e.g.
telephone and other
services.

A CPC or a CPCN constitutes neither a franchise nor a

contract, confers no property right, and is a mere license
or a privilege. The holder of said certificate does not
acquire a property right in the route covered thereby. Nor
does it confer upon the holder any proprietary right or
interest or franchise in the public highways. Revocation of
this certificate deprives him of no vested right. New and
additional burdens, alteration of the certificate, or even
revocation or annulment thereof is reserved to the State.
(Luque vs. Villegas, 30 SCRA 408)
It is a property and has a considerable value and can
be the subject of sale or attachment. (Cogeo-Cubao
Operators and Drivers Assn. vs. CA, 207 SCRA 343,
Raymundo vs. Luneta Motor Co.)
REQUREMENTS FOR GRANTING CPC OR CPCN
1. Applicant must be a citizen of the Philippines or a
corporation or entity 60% of the capital of which is
owned by such citizens;
2. Applicant must prove public necessity;
3. Applicant must prove that the operation of the public
service proposed and the authorization to do business
will promote the public interest on a proper and
suitable manner;
4. Applicant must have sufficient financial capability to
undertake the proposed services and meeting the
responsibilities incident to its operation.

POWERS
REQUIRING
PRIOR NOTICE
AND HEARING

POWERS
EXERCISABLE
WITHOUT PRIOR
NOTICE AND
HEARING

1. Issuance
of
CPC or CPCN;
2. Fixing of rates,
tolls, and charges;
3. Setting up of
standards
and
classifications;
4. Establishment
of rules to secure
accuracy
of
all
meters
and
all
measuring
appliances;
5. Issuance
of
orders
requiring

1. Investigation
any
matter
concerning
public
service;
2. Requiring
operators to furnish
safe, adequate, and
proper service;
3. Requiring public
services
to
pay
expenses
of
investigation;
4. Valuation
of
properties of public
utilities;

establishment
or
maintenance
of
extension
of
facilities;
6. Revocation, or
modification of CPC
or CPCN;
7. Suspension of
CPC
or
CPCN,
except when it is
necessary to avoid
serious
and
irreparable damage
or
inconvenience
to the public or
private interest, in
which
case,
a
suspension
not
more than 30 days
may be ordered,
prior
to
the
hearing. (Soriano v.
Medina, 164 SCRA
36)

5. Examination
and
test
of
measuring
appliances;
6. Grant of special
permits
to
make
extra or special trips
in
territories
specified
in
the
certificate;
7. Uniform
accounting
system
and furnishing of
annual reports;
8. Compelling
compliance with the
laws
and
regulations.

UNLAWFUL ACTS OF PUBLIC UTILITY COMPANIES

1. Engagement in public service business without first
securing the proper certificate;
2. Providing or maintaining unsafe, improper or
inadequate service as determined by the proper
authority;
3. Committing any act of unreasonable and unjust
preferential treatment to any particular person,
corporation or entity as determined by the proper
authority;
4. Refusing or neglecting to carry public mail upon
request. (Secs. 18 and 19)
ACTS REQUIRING PRIOR APPROVAL
1. Establish and maintain individual or joint rates;
2. Establish and operate new units;
3. Issue free tickets;
4. Issue any stock or stock certificates representing an
increase of capital;
5. Capitalize any franchise in excess of the amount
actually paid to the Government;
6. Sell, alienate, mortgage or lease property, certificates
or franchise.
Under Sec. 20(g) of C.A. No. 146, the sale, etc. may be
negotiated and completed before the approval by the
proper authority. Its approval is not a condition precedent
to the validity of the contract. The approval is necessary
only to protect public interest.
PRIOR OPERATOR/OLD OPERATOR RULE
The rule allowing an existing franchised operator to
invoke a preferential right within the authorized territory
as long as he renders satisfactory and economical service.
The policy is not to issue a certificate to a second
operator to cover the same field and in competition with a
first operator who is rendering sufficient, adequate and
satisfactory service. The prior operator must first be given
an opportunity to improve its service, if inadequate or
deficient.
Purpose: To prevent ruinous and wasteful competition in
order that the interests of the public would be conserved
and preserved.
It subordinates the prior applicant rule which gives the
first applicant priority only if things and circumstances are
equal.
Where the operator either fails or neglects to make the
improvement or effect the increase in services, especially
when given the opportunity, new operators should be
given the chance to give the services needed by the
public.
PRIOR APPLICANT RULE
Presupposes a situation when two interested persons
apply for a certificate to operate a public utility in the
same community over which no person has as yet granted
any certificate. If it turns out, after the hearing, that the
circumstances between the two applicants are more or
less equal, then the applicant who applied ahead of the
other, will be granted the certificate.

RATE-FIXING POWER
The rate to be fixed must be just, founded upon
conditions which are fair and reasonable to both the owner
and the public.
A rate is just and reasonable if it conforms to the
following requirements:
1. One which yields to the carrier a fair return upon
the value of the property employed in performing
the service; and
2. One which is fair to the public for the service
rendered.
REGISTERED OWNER RULE
The registered owner of a certificate of public
convenience is liable to the public for the injuries or
damages suffered by third persons caused by the
operation of said vehicle, even though the same had been
transferred to a third person.
The registered owner is not allowed to escape
responsibility by proving that a third person is the actual
and real owner Reason: It would be easy for him, by
collusion with others or otherwise, to transfer the
responsibility to an indefinite person, or to one who
possesses no property with which to respond financially for
the damage or injury done. (Erezo, et al. vs. Jepte 102 Phil
103).
KABIT SYSTEM
A system whereby a person who has been granted a
certificate of public convenience allows other persons who
own motor vehicles to operate under such license, for a
fee or percentage of such earnings. It is void and
inexistent under Art. 1409, Civil Code.
Effects:
1. The transfer, sale, lease or assignment of the privilege
granted is valid between the contracting parties but
not upon the public or third persons. (Gelisan vs.
Alday, 154 SCRA 388)

2.

3.

4.

5.

The registered owner is primarily liable for all the

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