PRELIMINARIES

(culled and lifted from Commercial law Review, 2012 Ed. and Revisiting Philippine
Commercial Law, both by Cesar L. Villanueva)
Coverage of Commercial Law
... the branch of private law that provides for the rules that govern the rights, obligations,
and relations of persons engaged in commerce or trade, and necessarily includes the
purchase, sale, exchange, traffic or distribution of goods, commodities, productions, services
or property, tangible or intangible, including the instrumentalities and agencies by which
they are promoted and the means and appliances by which they are carried on.
Likewise, the term includes both concept of laws relating to trade, which is the business
traffic within the limitations of a state, and commerce, which covers the intercourse with
foreign states.
Characteristics of Commercial Law
Principal characteristics of Commercial Law:
a. Universal - universal or international because it exist in every civilized
b. Progressive - progressive because as time passes by Commercial Law accumulates
new ideas and keeps abreast with contemporary developments
c. Equitable - since commercial transactions involve the exchange of values or
consideration.
d. Customary embodies rules that are followed from time to time or invoked in
everyday transactions.
Postulates:
a. Habitualness - transactions generally arise from the element of repetition (i.e. a
single act of sale does not make the seller a merchant within the law)
b. Time is of the essence if no period fixedm an obligation becomes demandable in 10
days, unlike in Civil Law where the courts must fix an unspecified period.
c. Delay and Demand - every debtor to a commercial contract would be in mora without
making demand (mora ex re), unlike in Civil Law where demand is necessary.
d. Independent branch of private laws mercantilist theory: commercial law is distinct
from civil law. However, what prevails is the mixed theory, in that civil and
commercial laws supplement one another.
Constitutional Provisions on Commerce and Trade
Section 1 of Article XII on National Economy and Patrimony, our present 1987 Constitution
maps out in broad details the national goal and the role of commerce and economy in the
national life, thus:
SECTION 1. THE GOALS OF THE NATIONAL ECONOMY ARE A MORE EQUITABLE DISTRIBUTION
OF OPPORTUNITIES, INCOME, AND WEALTH; A SUSTAINED INCREASE IN THE AMOUNT OF
GOODS AND SERVICES PRODUCED BY THE NATION FOR THE BENEFIT OF THE PEOPLE; AND
AN EXPANDING PRODUCTIVITY AS THE KEY TO RAISING THE QUALITY OF LIFE FOR ALL,
ESPECIALLY THE UNDERPRIVILEGED.
THE STATE SHALL PROMOTE INDUSTRIALIZATION AND FULL EMPLOYMENT BASED ON SOUND
AGRICULTURAL DEVELOPMENT AND AGRARIAN REFORM, THROUGH INDUSTRIES THAT MAKE

FULL AND EFFICIENT USE OF HUMAN AND NATURAL RESOURCES, AND WHICH ARE
COMPETITIVE IN BOTH DOMESTIC AND FOREIGN MARKETS. HOWEVER, THE STATE SHALL
PROTECT FILIPINO ENTERPRISES AGAINST UNFAIR FOREIGN COMPETITION AND TRADE
PRACTICES.
IN THE PURSUIT OF THESE GOALS, ALL SECTORS OF THE ECONOMY AND ALL REGIONS OF
THE COUNTRY SHALL BE GIVEN OPTIMUM OPPORTUNITY TO DEVELOP, PRIVATE
ENTERPRISES, INCLUDING CORPORATIONS, COOPERATIVES, AND SIMILAR COLLECTIVE
ORGANIZATIONS, SHALL BE ENCOURAGED TO BROADEN THE BASE OF THEIR OWNERSHIP.
Fr. Bernas enumerates the 3 constitutional directions mandated by the section, namely:
1. ...it sets the dual goal of dynamic productivity and a more equitable distribution of
what is produced.
2. ...it seeks complementarity between industrialization and agricultural development.
3. ...it is protective of things Filipino.
Commissioner Villegas, who introduced the section during the proceedings, admitted that
equity has been placed in first order, and economic growth being the last, to serve as
constitutional guidelines for the various branches of the government for the promotion of
the common good in the economic sphere.
The economic nationalism under Section 1, Article XII, is complemented by Sections 19
and 20, in Article II on Declaration of Principles and State Policies, thus
SEC. 19. THE STATE SHALL DEVELOP A SELF-RELIANT AND INDEPENDENT NATIONAL
ECONOMY EFFECTIVELY CONTROLLED BY FILIPINOS.
SEC. 20. THE STATE RECOGNIZES THE INDISPENSABLE ROLE OF THE PRIVATE SECTOR,
ENCOURAGES PRIVATE ENTERPRISE, AND PROVIDES INCENTIVES TO NEEDED INVESTMENTS.
Sections 19 and 20 are said to represent two of the pillars of the economic policy of the
Constitution, and together with Section 1 of Article XII, circumscribe the evolving Philippine
economic policy by which Filipino businessmen and entrepreneurs may fasten the support
they can expect from their Government, and by which foreign investors may determine the
legality and viability of their investments within Philippine territory. The same flagship
provisions of the 1987 Constitution also provide framework upon which it can be
determined whether the actions taken the Executive Department, or the laws enacted by the
Legislative Department, having a bearing on Philippine Commercial Law, may be adjudged
as being on a solid basis of reliance upon which to proceed with an investment opportunity
in the Philippines.
National Hierarchy of Values
We believe in being in a nation that cares first and foremost for its masses, rather than
emphasizing the individualistic rights to property and livelihood. This point is wellconceded in Sections 9 and 10, Article II of the 1987 Constitution, in our "Declaration of
Principles," thus:
SEC. 9. THE STATE SHALL PROMOTE A JUST AND DYNAMIC SOCIAL ORDER THAT WILL
ENSURE THE PROSPERITY AND INDEPENDENCE OF THE NATION AND FREE THE PEOPLE FROM
POVERTY THROUGH POLICIES THAT PROVIDE ADEQUATE SOCIAL SERVICES, PROMOTE FULL
EMPLOYMENT, A RISING STANDARD OF LIVING, AND AN IMPROVED QUALITY OF LIFE FOR ALL.

SEC. 10. THE STATE SHALL PRMOTE SOCIAL JUSTICE IN ALL PHASES OF NATIONAL
DEVELOPMENT.
In constitutional language, we declare that, above all else, equitable distribution of wealth
and opportunities should be the main goals of society, and all activities, resources and
equity shall be deployed to achieve such ends; that economic progress, although important,
when it benefits only the few would be an unwanted boon.
This socialist spirit of preferring the greater good versus individual rights is reinforced in
many other
provisions of the 1987 Constitution. This is really in stark contrast to the underlying
philosophy of the free enterprise system that business left to its own selfish end would
eventually work out well to the greater good of society by raising the standards of living.
Thus, although we recognize the institution of private ownership and property rights and
the indispensable role of the private sector, we nevertheless declare that property bears
a social function, and all economic agents shall contribute to the common good, and always
subject to the duty of the State to promote distributive justice and to intervene when the
common good so demands.
We therefore emphasize in our society the spiritual oneness that the members of our society
must achieve; that material blessings must be pursued not for individual ends but as a
contribution of what is good for the nation.
The emphasis on spiritual good over material blessings therefore is the signet of our society.
Whereas, the determination of what is successful is an mercantile society and easily
verifiable from the bottom lines of financial statements, what is the common good and the
measure of achieving the public interests are difficult to verify and often fluid in their
meaning and coverage, and therefore makes it difficult to pinpoint with certain degree of
reliability the guideposts in the playing field upon which businessmen and investors
make their business decisions.
When taken together with other provisions of the Constitution having to do with economic
and commercial matters, the constitutional declarations are a forthright admission of the
existing poverty and privation that pervades our present society; the inability of most of our
people to fend for themselves; of the distrust we bear against our local elite and foreign
business interests; and the pivotal role of Government and its agencies, to be the main
agent to effect such goals, and the bulwark against otherwise resultant exploitation of the
great majority of the Filipino people.
Judicial Review
By virtue of judicial review, the Constitution vests in the courts the final word on commercial
matters.

I.

Nationalized Activities and Undertakings

Activities which are reserved in part or in whole for Filipinos

1. Mass media (100% ownership, 100% management)
2. Advertising (75% capital)
3. All others, including BOT-scheme contractors (60%)
4. Those covered by Flag Laws (Filipino First; in bidding, 75% considered 100% Filipino,
although superfluous due to Grandfather Rule)

EXCEPTION: FTAAs, which allow for 100% foreign investment; exempt transactions provided
by law
Constitutional Provisions
Sec 10, Art XII: Congress, upon the recommendation of NEDA, can reserve to Filipinos certain
areas of investment, and can regulate foreign investment. (Filipino-first policy)
Sec 12, Art XII: preferential use of Filipino labour, domestic goods
Sec 19, Art II: self-reliant, independent economy
Sec 17, Art XII: in times of emergency, when dictated by public-interest, State may
temporarily take over or direct the operations of privately-owned public utilities or
businesses affected with public interest, under reasonable terms.
An aspect of the emergency powers clause
No just compensation needed, as this is not expropriation (there is no taking) and the
ownership does not transfer.
The Philippine Mining Act of 1995 [RA 7942]
Sec 2, Art XII: allows the state to enter into co-production, joint venture, or productionsharing agreements with Filipino citizens, or corporation or associations at least sixty
percentum of whose capital is owned by such citizens. Such agreements may be for a
period not exceeding twenty-five years, renewable for not more than twenty-five years...
25 + 25 years (exploration, development, utilization). However, this does not apply
to FTAAs, and government can always waive refusal of extension.
Mining law constitutional, FTAAs are allowed; laws provide for more than enough
Filipino control and supervision of mining operations.
FTAAs are service contracts.
Even if the FTAA is assailable for involving foreigners in mining, its transfer to
Filipinos cures the defect.
Constitution does not fix an iron-clad 60% share of profits for the State in mining,
unlike in petroleum. However, costs incurred by government in building roads to the
mine site cannot be deducted from its share.
Retail Trade Liberalization Act of 2000 [RA 8762 repealing Retail Trade law RA
1180]
Law adopts a liberal policy towards foreign investments to bring down prices for the Filipino
consumer, create jobs, promote tourism, assist small manufactures, stimulate economic
growth, and make Filipino goods and services globally-competitive. Aims for a retail sector
characterized by lower prices, better services, wider choices, and higher-quality goods to
empower the Filipino consumer.
Retail Trade
Retail trading is any act or occupation of habitually selling direct to the general public
merchandise, commodities, or goods for consumption. Retail trade includes sales to
employees and officers, if company does not regularly sell to the public.
EXCEPTIONS:

1.
2.
3.
4.

Manufacturer, processor, labourer, worker, if capital does not exceed PhP100K

Manufacturer in a single outlet
Farmer selling farm products
Restaurants incidental to hotel business

Consumer goods (for retail)

Consumption goods which directly satisfy human wants and desires, needed for daily life;
excludes raw materials and other producer goods (tools for production).
Categories and Capitalization:
Category
Reserved exclusively for Filipinos, former Filipinos who are residents, and
A
corporations which are wholly owned by Filipinos. EXCEPTION: Foreigners
may engage in exempt transactions if licensed.
EXEMPT TRANSACTIONS (foreigners can participate)
5. Manufacturer, processor, labourer, worker, if capital does not exceed
PhP100K
6. Manufacturer in a single outlet
7. Farmer selling farm products
8. Restaurants incidental to hotel business
Paid-up capital less than US$2.5M
Category
Foreign-owned groups may participate if organized under laws of the
B
Philippines but must obtain license from SEC for companies, or DTI if single
proprietorship
Before 2002, foreign ownership limited to 60%; April 2002, foreigners may
wholly-own
Minimum paid-up capital US$2.5 M but less than US$7.5M; the
establishment of a store must cost US$30K or greater
If foreign ownership exceeds 80% of equity, must offer 30% of equity
through stock exchange in the Philippines within 8 years from start of
operations.
Category
Foreign-owned groups may participate if organized under laws of the
C
Philippines but must obtain license from SEC for companies, or DTI if single
proprietorship
May be wholly foreign-owned
Paid-up capital greater than US$ 7.5M; the establishment of a store must
cost US$30K or greater
If foreign ownership exceeds 80% of equity, must offer 30% of equity
through stock exchange in the Philippines within 8 years from start of
operations.
Category
Foreign-owned groups may participate if organized under laws of the
D
Philippines but must obtain license from SEC for companies, or DTI if single
proprietorship
May be wholly foreign-owned
Specializing in high-end or luxury products (good not necessary for life
maintenance demand generated by higher-income groups)
Paid-up capital at least US$ 250K per store.
Use grandfather rule to determine if entity is local or foreign-owned.
Qualifications and requirements for foreign investors:

1. Minimum net worth of parent corporation: US$200M for categories B & C, US$50M for
category D
2. At least 5 branches worldwide, unless has one store capitalized at US$25M or more
3. 5 years track record in retailing
4. Only nationals from countries that also allow the entry of Filipino retailers
5. Must maintain full amount of capitalization in Philippines unless notifies SEC/DTI of
cessation of operations. Failure to maintain capitalization prior to notice makes
foreign trader vulnerable to penalties or future trade restrictions.
Safeguards from foreign domination of retail trade
1. Follow the categories delineated
2. Only nationals or parent corporations formed in countries that allow the entry of
Filipino retailers
3. Not allowed to retail outside their accredited stores through the use of:
a. Mobile or rolling stores, or carts
b. Sales representatives
c. Door to door selling
d. Restaurants and sari-sari stores
e. Other similar retailing activities
Common-law wife of foreigner may engage in retail trade but must use exclusively her own
paraphernal property; allowing the husband to take part in managing the business is a
violation of the law.
An Act Limiting the Right to Engage in the Rice and Corn Industry to Citizens of
the Philippines; or Rice and Corn law [RA 3018]
The rice and corn industry is limited to Filipino citizens, and to partnerships, associations,
corporations which are wholly Filipino-owned.
Rice and corn industry
1. Acquiring rice and corn and their by-products (includes acquisition as raw materials)
for manufacturing or processing of other finished products
2. Engaging in:
a. Culture
b. Production
c. Milling
d. Processing
e. Trading, including wholesale, export, import (excludes retailing, which is covered
by Retail Law)
This law allows for the participation of foreigners in all rice and corn industry activities
(except retailing which is governed by the Retail Law), if authorized by the National Grains
Authority, when:
1. NGA certifies an urgent need for foreign investment, and the same will not promote
monopolies or restraint of trade
2. Alien has necessary finances and technical expertise; and
3. Alien submits an acceptable developmental plan to the NGA.
Flag Laws
May only be invoked against non-domestic bidders; or against domestic bidders if such
domestic bidder uses imported articles, or local articles made from imported materials.

Merely dealing exclusively in foreign materials does not make the company an alter-ego of a
foreign entity.
a. An Act to Give Native Products and Domestic Entities the Preference in the
Purchase of Articles for the Government [CA138]
In government (including local/GOCC) biddings, if the difference in bid price between the
native products and foreign entities is only 15%, preference shall be given to the Filipino.
b. An Act to Require the Use, Under Certain Conditions, of Philippine Made
Materials or Products in Government Projects or Public Works Construction,
Whether Done Directly by the Government or Awarded thru Contracts [RA
912]
Sec 1. In construction or repair work undertaken by the government, whether done directly
or through contract awards, Philippine-made materials and products, whenever available,
practicable and usable... shall be used... upon proper certification of availability, practicality,
usability and durability... by the [DPWH].
Sec. 3. No contract may be awarded... unless the contractor agrees to comply... an award
may be rescinded for unjustifiable failure to comply.
Requiring Government Offices, Agencies, Instrumentalities and Government
Owned or Controlled Corporations, Persons and Entities Enjoying Tax Exemption,
Incentive or Subsidy from the Government to Utilize in International
Transportation Services of the Philippine Flag Air Carrier and Shipping Lines; or
Philippine Flag Carriers law [PD 894]
Requires government and persons enjoying tax incentives to utilize Philippine flag carriers.
Act to Punish Acts of Evasion of the Laws on the Nationalization of Certain Rights,
Franchises or Privileges; or Anti-Dummy law [CA 108 aa RAs 134 and 6084, and PD
715]
Law penalizes Filipinos who allow themselves to be used by aliens as dummies in order to
avail of certain Filipino-only privileges. The law specifically bans the participation of aliens in
the management of nationalized businesses, whether as employees, labourers, officers,
whether paid or not.
EXCEPTION: Aliens may participate in technical aspects if:
1. No Filipino can do the technical work
2. Authorized by the President of the Philippines
PD 715 later allowed aliens to be voted as directors (not officers) in corporations engaged in
partially-nationalized activities in proportion to their allowable share in the capitalization of
such corporation. Thus, the Anti-Dummy Law covers only nationalized businesses and not
partially-nationalized undertakings.
Important Concepts
a. Exploitation of Natural Resources

b. Retail Trade
Retail trading is any act or occupation of habitually selling direct to the general public
merchandise, commodities, or goods for consumption. Retail trade includes sales to
employees and officers, if company does not regularly sell to the public.
EXCEPTIONS:
1. Manufacturer, processor, labourer, worker, if capital does not exceed PhP100K
2. Manufacturer in a single outlet
3. Farmer selling farm products
4. Restaurants incidental to hotel business
c. Foreign Ownership
Ownership by aliens of equity in Filipino enterprises. Generally allowed, but prohibited in
nationalized undertakings and limited in partially-nationalized businesses, subject to
exceptions allowed by law. The restrictions on foreign ownership are founded on
Constitutional policies of a nationalized economy and Filipino-first.
d. Grandfather Rule
If 60% or more of the equity in an entity is Filipino-owned, the entity in question is 100%
Filipino. If it is less than 60%, it is Filipino only to the exact percentage of ownership of
Filipinos. Same goes if equity is owned by another juridical entity (hence, grandfather),
check first the percentage of Filipino ownership in the parent corporation.

II.

Laws to Protect Small and Domestic Enterprises

Constitutional Provisions
Magna Carta for Micro, Small and Medium Enterprises (MSMEs) [RA6977 aa RAs
8289 and 9501]
Seeks to promote the growth and development of micro-small-medium enterprises by:
1. Facilitating access to funds
2. Removing stringent collateral registration requirements
Principles:
1. Simplification on requirements and procedures
2. Encouragement of private sector participation
3. Coordination of government efforts
4. Decentralization of administration through regional and provincial offices
Micro
Small
Medium

Capitalized at not more than P 3M

More than P 3M up to P 15M
More than P 15M up to P 100M

Eligibility for Government Assistance

1. Registered (micro enterprises, register with municipal/city treasurer)
2. 100% Filipino capital; of juridical, 60% of equity Filipino-owned

3. Sectors: industry, trade, services (including practice of profession), tourism-related

establishments, agri-business (manufacturing, processing, production of produce)
4. Not a branch or subsidiary of large-scale enterprise; must not be controlled by largescale enterprise or 3rd parties. (May accept subcontracts, partner with large
enterprises, and join cooperatives.)
Eligible MSMEs shall be granted at least 10% of the procurements of government for
products and services annually
SB Corporation (attached to DTI).
Magna Carta for Countryside and Barangay Business Enterprises (Kalakalan 20)
[RA 6810]
Barangay Micro Business Enterprises (BMBEs) Act of 2000 [RA 9178]
Economic development through entrepreneurship and integration of the informal sector.
A BMBE is:
1. A business entity / enterprise
2. Engaged in production, processing (including agro-processing, manufacturing of
products, trading, services (excluding professional services pursuant to government
licensing)
3. Total assets (including loans, exclusive of land where situated): P 3M
Benefits of registration as BMBE: (registration with municipal / city treasurer, free certificates
good for 2 years, renewable)
Exempt from income tax
Minimal requirements
LGUs encouraged to reduce amount of taxes / fees imposable on BMBEs
Exempt from minimum wage (SSS / PhilHealth still required)
Special credit windows
Creation of P 300M BMBE development fund from PAGCOR
DTI matching up BMBEs with other enterprises for incentives
Embroidery Law [RA 3137]
Allows for sub-contracting to sub-contractors or home workers of other processes or completion in the
manufacture of garments. (Dispenses with complete assembly line requirement.) Required only to
ensure that goods released from its bonded warehouse for embroidery has been stamped or cut in the
pattern to be manufactured.

Countervailing Duties on Imported Subsidized Products [302, Part 2, Title II, Book
I, TCCP aa RA 8751]
A countervailing duty equal to the amount of subsidy, which is in addition to regular duties,
taxes, and charges, will be imposed whenever:
1. A subsidized foreign product is imported into the Philippines
2. Tending to cause material damage to a domestic industry or retarding the
establishment of a domestic industry

Anti-Dumping Act of 1999 [301, Part 2, Title II, Book I, TCCP aa RA 8752]
An anti-dumping duty equal to the margin, which is in addition to regular duties, taxes, and
charges, will be imposed whenever:
1. A product is imported at less than normal value in the exporting country
2. Tending to cause material damage to a domestic industry or retarding the
establishment of a domestic industry.
Safeguard Measures Act [RA 8800]

III.

Laws on Consumer Protection

Constitutional Provisions
Consumer Act of the Philippines [RA 7394]
The Meat Inspection Code of the Philippines [RA 9296 aa RA 10536]
Food, Drug and Cosmetic Act [RA 3720]
Adopting a National Code of Marketing of Breastmilk Substitutes, Breastmilk
Supplements and Related Products; or Milk Code [EO 51]
Act to Penalize Fraudulent Advertising, Mislabeling or Misbranding of Any
Product, Stock Bond, Etc.; or Law on Mislabeling [Act 3740 aa CA46]
An Act to Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks,
Kegs, Barrels and Other Similar Containers; or Law on Stamped or Marked
Containers [RA 623 aa RA 5700]
An Act Requiring Price Tags or Labels to be Affixed on All Articles of Commerce
Offered for Sale at Retail and Penalizing Violations of Such Requirement; or Price
Tag law [RA 71 aa RA 1074]
Acts Providing for the Fixing of the Maximum Selling Price of Essential Articles or
Commodities, Creating the Price Control Council; or Price Control laws [RAs 6124
and 6361]
Metric System laws
a. Act Defining the Metric System and its Units, Providing for its
Implementation; or Metric System law [BP 8]

b. Prescribing the Use of the Metric System of Weights and Measures as the
Standard easurement for All Products, Commodities, Materials, Utilities and
Services and in All Business and Legal Transactions [PDs 187 aa 748]
Laws against Monopolies and Restraint of Trade
a. An Act to Prohibit Monopolies and Combinations in Restraint of Trade [Act
3247]
b. Monopolies and Combinations in Restraint of Trade [Art. 186 RPC aa RA
1956; and Art. 28, CC]
Downstream Oil Industry Deregulation Act of 1998 [RA 8479]
IV.

Maritime Commerce

Real
A vessel is essentially movable property; nevertheless, maritime transactions are similar to
real property transactions in that registration is required to bind 3rd persons.
Hypothecary
Limited liability rule confines liability to the value of the vessel itself (liability co-extensive
with vessel), such that when the vessel is lost the liability is extinguished. Vessels total
destruction extinguishes all maritime liens, subject to exceptions.
EXCEPTIONS:
1. Damage caused by negligence of ship owner (ship owners fault) or concurring
negligence of ship owner and captain.
2. Expenses for the repair/provisions of the ship before its loss.
3. Vessel made collateral and lost before public sale.
4. Vessel is insured. (up to extent insured)
5. Liabilities under the Labour Code / Workmens Compensation Act.
1. No total loss or vessel was not abandoned. (Total loss and abandonment of the
vessel, to be a limitation on liability, must be SOLELY through the fault or negligence
of the captain. If ship owner is to blame / equally to blame, exception #1 to limited
liability rule governs.)

By nature and place of performance of their functions (loading/unloading/custody of

cargo at port), arrastre operations are not maritime transactions. (akin to warehouse
deposit)
Admiralty jurisdiction Philippine law follows the American rule (subject matter test):
local court has jurisdiction over maritime transactions is subject matter is in the
Philippines (i.e. ship docked in Philippines).
Common carriers impliedly warrant the seaworthiness of their vessels.
Charter Party
A contract whereby an entire ship or some principal part thereof is let (leased) by the owner
to another for a specified time or use for the conveyance of goods or passengers in
consideration for the payment of freight.

A charterer has no obligation to check if the boat is seaworthy or has complied with
legal requirements because such are presumed of a common carrier for being
engaged in public service.
If the vessel is under a charter party and controlled by the charterers own captain
and crew, and the captain was negligent, the owner of the ship cannot be made liable
for its sinking just because it gave the sailing order.
Charterer remains holder of Bill of Lading, which operate as a receipt of goods, and
does not vary the contract between the charterer and ship owner.
Even if the charter party has a condition against sub-chartering and was in fact subchartered without knowledge on the part of the sub-charterer of the prohibition:
1. No cause of action accrues in favour of the owner of the vessel
2. No lien on the cargo of sub-charterer, since the owner of the vessel only has alien
on goods he has in possession, and by the contract, he relinquished possession of
the entire ship.

Primage
Bonus to be paid to the captain for a successful voyage.
Demurrage
The sum fixed in the charter party as renumeration to the ship owner for the detention of his
ship beyond the number of days allowed by the contract for loading, unloading, sailing. It is
a penal clause to compensate owner for non-use.

Demurrage must be stipulated in the contract.

Loading and unloading must be for a reasonable amount of time or customary quick
dispatch
demurrage/dispatch: NONE means right to demurrage has been waived
Delay in loading/unloading for the purpose of demurrage runs from the moment the
ship is detained for an unreasonable time, if the circumstances of delay were brought
about by the fault or negligence of the charterer.
A claim for demurrage is an obligation NOT arising from a loan or forbearance of
money; interest rate 6%. If cost of demurrage not stipulated, interest runs from the
moment the court imposes the proper demurrage charges.

Contract of affreighment
A contract for the use of space on vessels leased in part or in whole, for the carriage of
goods of others.
Rules for common carriers still govern.
Contract for special services rendered by the ship owner, who retains possession,
command, and navigation of the ship. Charterer merely has use of space contracted
for.
Ship owner must provision the ship, pay the master and crews wages, answer for
maintenance costs of the ship. Carrier is still a common carrier.
It is the charterers obligations under the contract of affreightment to exercise
ordinary diligence in ensuring berthing (loading/unloading) space for the vessel.
Time charter- leased for a particular or fixed period of time
Voyage charter- leased for a single voyage, regardless of number of stops and connecting
trips stipulated.
Bareboat of demise charter
A contract where the entire vessel is leased to the charterer; includes the relinquishment of
the command, possession, control, and navigation by the ship owner to the charterer. The
master and crew are considered servants of the charterer.

Undertaking is private in character; contract governs, not law on common carriers.

Turnes common carrier into private character.
Charterer mans the vessel with his own people, and in effect becomes the owner pro
hac vice (for the voyage or service stipulated), subject to liability for damages caused
by negligence.
Owner must completely relinquish command, possession, control, and navigation of
the ship; anything short of a complete transfer is a contract of affreightment, not a
bareboat or demise charter.

Charter party rules

If cargo of charterer is not sufficient to fill 3/5 the capacity of the vessel, carrier may
put it on a smaller vessel at the expense of charterer.
Chartered in whole by one party, carrier cannot receive cargo of other persons.
Owner liable for damage because of undue delay by captain.
If cargo is more than contracted for, carrier may accept and require additional
freightage as long as vessel is not overloaded.
Upon arrival at port where cargo is to be loaded, in the absence of cargo, captain
may look for other cargo OR return in ballast (no cargo; loaded with weight for
stability) if the lay days have expired and charterer is still obliged to pay in cost of
freightage full.
If charterer can prove that vessel is not in condition to navigate, he does not have to
pay freightage.
Charterer may sub-charter unless expressly prohibited (sub-lease principle)
Full freightage even if charterer cannot fill the vessel.
Carrier can open packages to find out if the cargo may subject the vessel to forfeiture
/ confiscation. If vessel is forfeited / confiscated due to cargo, charterer is liable for
damages.
If ship agent / captain know that merchandise for illicit commerce have been loaded,
they become jointly liable with the ship owner for losses caused to other shippers.
Charterer must wait until necessary repairs are completed.
Charterer may unload vessel before destination but must pay full freightage.
Before the trip, charterer may unload the vessel and pay of freightage.
The obligation to pay freightage accrues after discharge of cargo.
Liquid cargo, leaks out because of inherent defect: charterer / shipper cannot
abandon if more than still remains.
If charter party is only partial, charterer has no right to fix the date of departure.
Rescission of charter party
By charterer:
Before loading, cancel unilaterally by paying of freight agreed upon. Mere notice is
sufficient; consent of ship owner.
When vessel is does not have capacity agreed upon, or flag is different than
stipulated.
When vessel not placed at the disposal of charterer within agreed-upon period.
If the vessel returns due to pirates or bad weather, charterer may decide to unload
but must pay of freightage.
If vessel stops for repairs for less than 30 days, full freightage must be paid. If more
than 30 days, freightage paid in proportion to distance covered.
Total rescission by ship owner:

When charterer fails to load vessel and lay days expire, but charterer must still pay
freightage.
Owner sells vessel, and the new owner decides to load the vessel with his own cargo
despite knowledge of the charter party.

Total rescission by due to fortuitous event: (mere occurrence of any)

War
Blockade
Prohibition to receive cargo
Embargo of vessel by government
Inability of vessel to navigate through no fault of captain or ship agent
Vessel
Vessel is considered personal property regardless of value.
Co-owners
If the ship is co-owned, a co-owner desiring to sell his aliquot share must first offer the same
to the other co-owners (right of pre-emption). If the sale is made to 3 rd parties without
offering the same first to the co-owners, co-owners may buy back the original share of the
seller within 30 days (right of redemption).
Co-ownership gives rise to a partnership by operation of law.
Ship Agent (Naviero)
When the ship owner is absent, liability is imposed upon the ship agent as if he were the
owner because he can exercise acts of ownership (i.e. abandonment; termination of ship
employees for just cause) over the vessel. The naviero represents the owner and the courts
may acquire jurisdiction over him.
The ship owner and the ship agent are liable for the debts incurred by the captain for the
repair and provisioning of the vessel.
A naviero:
Is entrusted with the provisioning a ship / representing it in the port where it is
located; must reimburse captain for legitimate advances.
May be a local corporation
Is liable solidarily with the ship owner to owners of cargo for losses and damage,
whithout prejudice to his rights against the ship owner
Is liable when cargo is damaged or a collision occures and the ship owner is absent
Is liable for taxes if ship owner is not within the taxing jurisdiction
Unlicensed Persons
An unlicensed person does not possess the skill to navigate.
Captain
The captain acts as an agent of the vessel and acts by him exceeding his authority will
absolve the ship owner or ship agent from liability, except to the extent of his own
investment in the ship, if any. (position of captain is agency coupled with interest)
The captain also holds the position of a trustee, such that there is no acquisition by
prescription in his favour.
The captain is liable for the cargo from the time it is turned over to him (at the dock or afloat
alongside the vessel) at the port of loading, until he delivers the same (on the shore or

wharf) at the port of unloading, unless otherwise stipulated. As a representative of the ship
owner, the captains liability is ultimately that of the ship owner.
Roles of a captain
1. General agent of shipowner
2. Commender / technical director of vessel
3. Representative of the country under whose flag he sails
Powers of the captain
1. Contract with, command and discipline the crew
2. Enter into a charter party
3. Contract for fuel/provisions
4. Contract for needed repairs
Duties of the captain
In port:
1. Equipment inventory
2. Report to ship agent on arrival
3. Marine survey of vessel before loading
4. Remain on board while loading
5. Record loan on bottomry with customs
6. Demand for a pilot on departure and arrival at every port
During Voyage:
7. Keep a copy of Code of Commerce on board
8. Keep a log book (prima facie evidence if made by person required), freight book,
accounting book
9. Stay on the ships bridge when sighting land
10. Keep papers / properties of deceased crew
11. Comply with rules / regulations of navigation
Arrival under stress: (lack of provisions / fuel, pirates, inability to navigate)
12. File a marine protest within 24 hours for arrivals under stress
Destruction:
13. File a marine protest within 24 hours shipwreck
Captain is liable to ship agent, if ship agent is made liable for the following:
1. Damages because of neglect or lack of skill of captain
2. Theft or robbery by crew
3. Mutiny
4. Effects of failure to comply with rules of navigation, customs, health
5. Misuse of captains powers
6. Unjustified deviation
If voyage is diverted due to instructions of management to captain, ship owner / ship agent
liable for the damage caused.
If cargo has to be unloaded, the same shall be the responsibility of the captain, who shall
also be liable for undue delay in the re-commencement of the voyage.
Succession
1. Captain
2. 1st mate
3. 2nd mate

Grounds for rescission of contract of employment by captain or crew

1. War
2. Change of destination
3. Outbreak of disease
4. New ship owner
*vessels complement is from captain to cabin boy
Freightage and merchandise
Owner of merchandise sold to make necessary repairs should still pay freightage
Merchandise jettisoned, no freightage, considered general average
Lost at sea / seized by pirates, no freightage
Freightage may be paid by merchandise recovered by salvage
Full freightage even if merchandise damaged, if damage is cause by inherent defect
If freightage is based on weight and cargo increases in weight (i.e. live cargo
producing young) during the voyage, charterer must pay for the weight increase
Ship has retaining lien on cargo carried; such lien may be waived by surrender of
cargo, but the lien subsists for 30 days after surrender. This lien is independent of
the transactions of 3rd persons.
Carrier may demand payment in cash and refuse a surety bond.
2% greater than capacity not allowed; if beyond capacity, 1 st come, 1st served, unless
all are present in which case shippers will be allowed to load in proportion they have
contracted for
Action to recover undelivered cargo:
1. 10 years with bill of lading (because bill of lading is a written contract; may be
reduced by carrier if reasonable)
2. 6 years if no bill of lading
3. 1 year for overseas trade (COGSA)
Delay
If the vessel cannot sail for temporary causes not attributable to the vessel, the ship owner
or ship agent cannot be made liable for damages.
If the voyage has begun and was interrupted by:
1. Force majeure / fortuitous event - passengers are obliged to pay fares in proportion to
the distance covered, without right to recover.
2. Fault of captain exclusively passengers have right to indemnity
3. Disability of vessel, and passengers agree to wait not required to pay increased
fares, but must shoulder their own living expenses
Desertion
Act of seaman in abandoning the vessel, without leave, before the expiration of his time; an
unauthorized absence from the ship with no intention to return to her service. (animo non
revertendi)
Philippine Coast Guard laws
a. Amending Section 808 of the TCCP, as amended, by Allowing the
Registration of Vessels the Ownership of which is Vested in Corporations or
Associations, at least 60% of the Capital Stock or Capital of Which Belong to
Citizens of the Philippines [PD 761]

A certificate of Philippine registry shall be issued only to a vessel of domestic ownership of

more than 15 tons gross. Domestic ownership means ownership vested in Filipino citizens
or juridical entities organized under Philippine laws, at least 60% of which is owned by
Filipino citizens.
b. Transferring the Functions of Registration and Documentation of Philippine
Vessels to the Philippine Coast Guard [PD 1064]
PD 1604 vests registration and documentation duties with the Coast Guard. Registry with
the Coast Guard of vessels 15 tons gross or over makes the vessel of Philippine registry
(registered under Philippine flag) and allows vessel to engage in coastwise (domestic) trade.
Reorganizing the Ministry of Transportation and Communications, Defining its
Powers and Functions [EO 125 aa EO 125-A]

EO 125 has, by law, transferred the duty of registration to MARINA (Maritime Industry
Authority, under the DOTC) from the Coast Guard; HOWEVER the Coast Guard has
NOT RELINQUISHED its registration functions.
MARINA issues certificates of competency.

The Ship Mortgage Decree of 1978 [PD 1521]

Allows the mortgage of a ship or its equipment with any financial institution, for the purpose
of financing the operation, construction, acquisition of vessels. If such mortgage is taken for
these purposes, the mortgage is a preferred mortgage if it complies with the formal
requisites under law.
1. Mortgage must be registered with Coast Guard
2. Mortgage lien must be prioritized over all claims, EXCEPT:
- Fees taxed by court
- Taxes
- Crews wages
- General average
- Salvage
- Maritime liens prior to mortgage
- Damages from tort
- Preferred mortgage prior
Unpaid portion after sale enforceable by personal action against the debtor. (not really a
maritime transaction, otherwise deem as exception to hypethecary nature)
A vessel may be attached.
Maritime lien under ship mortgage decree
A maritime lien is a present right of property in a ship. From the moment it attaches, it is
inchoate until brought into legal effect in admiralty by a proceeding in rem, at which point it
relates back to the time when it first attached.
The Ship Mortgage Decree provides that any person furnishing repairs or provisions for the
ship shall have a maritime lien on such vessel. If such maritime lien is prior to the recording
of the preferred mortgage, it shall have priority over the mortgage lien.
A person who extends credit for the discharge a maritime lien becomes entitled to the said
lien, if:

1. The funds were furnished to the ship on order of the master; and
2. There is evidence that the funds were actually used to pay the debts secured by the
lien.

A local RTC can assume jurisdiction over a maritime case involving foreign elements if
the ship is docked in the Philippines because the Philippines follows the American rule
(subject matter test) as opposed to a purely English rule (locational test, or where the
contract is made or to be performed).

A foreign company cannot avail of the provisions of PD 1521 which was decreed
specifically for the protection of Filipino suppliers. The foreign company must therefore
prove that the maritime lien was constituted in its favour under applicable foreign law.

Requisites of a maritime for the supplying of necessaries:

1. necessaries are furnished to the vessel for its benefit
2. necessaries are necessary for continuation of vessels voyage
3. Credit must have been extended to the vessel
4. A necessity for the extension of credit
5. necessaries were ordered by persons authorized to contract for the vessel

Bottomry and Respondentia

Loans secured by ship (bottomry) or cargo (respondentia). Hypothecary in nature (limited
liability). EXCEPTIONS to hypothecary nature:
1. Loss due to inherent defect
2. Loss due to barratry on part of captain
3. Loss due to fault of malice of the borrower
4. Vessel engaged in contraband
5. Cargo loaded is different from agreed upon
Common elements:
1. Exposure of security to marine peril
2. Debtors obligation is conditioned on the safe arrival at destination of security
Bottomry
Loan using vessel
as security
Not available for
crews salary

Loan availed of
by owner; in his
absence, by
captain

Respondentia
Loan using
cargo as
security
Loan not all
used for cargo,
excess must be
returned.
Loan availed of
only by owner
of cargo

Both
Loan in excess because of overvaluation by borrower
to be returned with legal interest

Several; last is
preferred in
payment

Insurable interest is only on the excess of value of loan

(if concurring with insurance)

If not subjected to marine peril, becomes ordinary

loan. Failure to pay loans on time gives rise to liability
for legal interest.
Loss due to marine peril extinguishes obligation
(hypothecary, general rule)

Lenders must contribute to general average

Exposure to marine peril: from time anchors are
weighed at departure to the time anchors are dropped

at destination
In case of shipwreck and salvage is undertaken,
repayment will depend on what may be salvaged
Averages
Average is damage or loss deliberately caused (i.e. jettison) to successfully save the vessel
and/or cargo from a marine peril.
General average inures to the benefit of all. Thus, when both vessel and cargo are saved, it
is general average, and all persons whose property were saved by the deliberate sacrifice
made must contribute to reimburse the loss of the person whose cargo or part of the vessel
was sacrificed in the process.
If the average is particular, such as only the vessel or cargo is saved, or only part of the
cargo is saved, the owner must bear the loss.
General average procedure
1. Before the sacrifice, captain must call a meeting of officers and cargo owners on
board
2. They shall decide by voting, but the captain has the final say. Decision to be made is
on the sacrifice to be made.
If the captain does not call a meeting before the sacrifice, it cannot be considered general
average, and no claim for contribution can be made, UNLESS the meeting cannot be called
(i.e. dangerous storm, no time to meet).
If cargo is jettisoned, begin with those on deck, of bigger bulk, of smaller value. The cargo
must be covered by a bill of lading to be reimbursable as constituting general average.
Arrivals under stress, if justified and not attributable to the neglect or fault of the crew,
constitute particular average. No damage need be paid to the shippers, who must wait
patiently. But if the arrival under stress is occasioned by bad faith, damages must be paid to
the shippers, and the vessel must bear its own losses.
Following York-Antwerp rules
Overseas Trade
Prohibition on deck loading
Deck cargo, with consent of owner, if saved:
Must contribute to general average
Deck cargo, with consent of owner, if
jettisoned:
Owner NOT entitled to reimbursement

Coastwise Shipping (interisland; domestic)

Deck cargo permitted
Deck cargo, with consent of owner, if saved:
Must contribute to general average
Deck cargo, with consent of owner, if
jettisoned:
Owner entitled to reimbursement

Collision
Guilty vessel must pay for the damage caused by the collision.
EXCEPTION: If the guilty vessel sinks or is completely lost. (hypothecary nature)
One vessel at fault OR
third vessel at fault
Both vessels at fault OR

Vessel at fault liable for damage, unless such vessel is completely

lost.
Vessels must bear their own losses; shippers may go after ship

vessel at fault not

known
Fortuitous event

owners who are solidarily liable for the shippers losses.

No liabilities; each must bear own loss.

The ship owner may proceed against those responsible for civil and criminal liability. Within
24 hours upon reaching the nearest post, the captain of innocent ship must file a marine
protest, otherwise there can be no recovery. However, such failure to file the protest on time
will not prejudice the rights of cargo owners, innocent vessels without decks, and small
crafts in the bay or river.
There is a presumption of loss if vessel sinks and cannot be salvaged.
Last Clear Chance
Inapplicable as under the Code of Commerce, if both vessels are negligent (negligence on
both parties is a requirement for the invocation of last clear chance), both must bear their
own losses, and are solidarily liable for the damage sustained by the shippers.
Overtaking or Crossing
It is the duty of the crossing or overtaking vessel to stay out of the way even if the distance
cannot be determined. In case of collision, overtaking vessel is liable since it is the one that
can avoid the collision.
Striking a stationary object
The presumption is that the moving vessel is at fault. The presumption is rebuttable if the
moving vessel can prove that it was without fault, the stationary object was at fault, or it
was an inevitable accident.
Pilotage
The fact that a vessel has a pilot on board will not exempt it from liability.
Pilot is a person licensed to conduct a vessel in and out of ports or through rivers and
channels. He becomes the master of the ship pro hac vice. If pilotage is compulsory, it is
the pilots duty to insist on effective control of the ship, otherwise he should decline to act as
a pilot. As a pilot, he must exercise the ordinary care required by the circumstances.
(Extraordinary care if circumstances dictate.)
Occasions when master should interfere or even displace the pilot:
1. Pilot is incompetent, intoxicated, is not aware of dangers, and in cases of great
necessity
2. Advice or offer suggestions to the pilot
3. Ensure that there is sufficient watch on deck and that the men are attentive of their
duties, engines stopped, tow lines cast off, anchors clear, ready to go on pilots order
The Salvage Law [Act 2616]
Provides for compulsory reward to those who brave the perils of the sea to save cargoes or
vessels. Owner of property saved must give reward, the max of which is 50% the value of
the property saved.
Requisites:
1. Valid object of salvage
2. Exposure to marine peril
3. Voluntary salvage service
4. Effort must be successful

Derelict
A vessel or cargo badly damaged and abandoned to the mercy of the sea. It is not res
nullius.
Procedure:
1. Salvor must tow it to nearest port where it will be delivered to municipal treasurer or
customs who will advertise the fact of salvage.
2. If owner appears, he may take possession of vessel but must pay a reward not more
than 50% of the value of the vessel.
3. Reward is determined by:
Value of property saved
Zeal employed by salvor
Danger to the lives of participants in the salvage
Number of persons who took part
Services rendered
Exoenses incurred
4. No claim made within 3 months after publication, sell at public auction. Salvor gets
his reward, expenses will be deducted from the proceeds, balance is deposited with
treasury.
5. No claim on the balance is made after 3 years, half goes to salvor, half to
government.
6. If a vessel saves another vessel, the reward shall be divided:
ship owner
captain
crew
*there is no salvage if there is no marine peril; differentiate salvage from towage; towage
can be waived
Domestic Shipping Development Act of 2004 [RA 9295 and its Revised RRs]
The law recognizes the
Allowing the Temporary Registration of Foreign-Owned Vessels under Time
Charter or Lease to Philippine Nationals for Use in the Philippine
Coastwise Trade Subject to Certain Conditions [PD 760]
Important Concepts in Maritime Transactions
a. Characteristics of Maritime Transactions
Real- vessels are personal, movable property, but has the nature of a real property, because
maritime transactions, to be effective against third parties, requires registration. Also,
jurisprudence has provided other aspects of the real nature of maritime transactions: the
limitation of liability to actual value of the ship, and the right to retain the cargo, embargo of
the vessel and the vessel itself.
Hypothecary- the liability of a ship owner is limited to the value of the vessel itself. The
vessel stands as the guaranty for the settlement of the losses; thus said losses are confined
to the vessel. Applies in all cases, from loss of goods to injury of passengers.

b. Exceptions to Hypothecary Nature of Maritime Transactions

General Rule: No vessel, no liability.
EXCEPTIONS:
1. Damage caused by negligence of ship owner (ship owners fault) or concurring
negligence of ship owner and captain.
2. Expenses for the repair/provisions of the ship before its loss.
3. Vessel made collateral and lost before public sale.
4. Vessel is insured. (up to extent insured)
5. Liabilities under the Labour Code / Workmens Compensation Act.
6. No total loss or vessel was not abandoned. (Total loss and abandonment of the
vessel, to be a limitation on liability, must be SOLELY through the fault or negligence
of the captain. If ship owner is to blame / equally to blame, exception #1 to limited
liability rule governs.)
c. Charter Party
A contract whereby an entire ship or some principal part thereof is let by the owner to
another for a specified time or use for the conveyance of goods or passengers in
consideration for the payment of freight.
Obligations of Charterer
1. Pay the agreed-upon charter price
2. Pay freightage on unloaded cargo
3. Pay for losses to others for loading uncontracted or illicit cargo
4. To wait if the vessel needs repair
5. Pay for deviation expenses
Obligations of ship owner / ship agent
1. Not to accept cargo from others if vessel is chartered wholly
2. Observe represented capacity
3. Unload clandestinely-placed cargo
4. Substitute another vessel if load is less than 3/5 of the capacity
5. Lave port if charterer does not bring cargo within the lay days / extra lay days
allowed
6. Place vessel in condition to navigate
7. Bring cargo to nearest neutral port in case of war / blockade
Seaworthiness is implied! No need for charterer to inquire.
Classification of Charter Parties
1. Contract of affreightment
- Time charter
- Voyage or trip charter
2. Bareboat/Demise charter
d. Contract of Affreightment
A contract where the ship owner leases part or all of its space to haul goods for others.
Generally does not affect character as common carrier.
- Only the vessel is hired
- Master and crew remain employees of the ship owner

ship owner remains the owner of the vessel and is liable for the expenses of the
voyage
charterer acquires right to use the carrying capacity and facilities of the vessel
and to designate destinations during the time or vovage stipulated

2 kinds:
1. Time charter vessel is chartered for a fixed period
2. Voyage or trip charter vessel is chartered for a specific voyage / set of voyages.
e. Bareboat / Demise Charter
Ship owner leases to the charterer the whole vessel, transferring the command, possession,
and control over the vessels navigation, including the master and his crew who become the
charterers servants.
- Charterer becomes owner of the vessel pro hac vice (for this occasion)
- Charterer is liable for the expenses of the voyage including wages of seamen
- Charterer is liable for damages arising from negligence
- Charterer assumes customary rights / liabilities of ship owner with respect to 3 rd
parties
- Master of the vessel becomes agent of the charterer
- Ship is converted from common to private carrier
f.

Primage, Demurrage, Lay Days, and Deadfreight

Primage - bonus due captain for a successful voyage

Demurrage - sum fixed in the charter party as renumeration to the ship owner for the
detention of his ship beyond the number of days allowed by the contract for loading,
unloading, sailing. (penal clause to compensate owner for non-use; must be stipulated in
the contract; loading and unloading must be for a reasonable amount of time or customary
quick dispatch; demurrage/dispatch: NONE means right to demurrage has been waived)
Lay Days - days allowed for loading / unloading cargo
Deadfreight - the amount paid by or recoverable from a charterer for the portion of ships
capacity the charterer contracted for but failed to occupy.
g. Bottomry and Respondentia
Bottomry: A loan taken by the ship owner or ship agent guaranteed by the ship itself,
payable only upon the arrival of the ship at the destination. This loan can also be taken by
the ship captain outside the residence of the ship owner or ship agent.
Respondentia: A loan taken by the owner of the cargo payable upon the safe arrival of the
cargo at the destination. Only the cargo owner can take out this loan.
Hypothecary nature of bottomry/respondentia: Obligation to pay the loan is extinguished if
the goods given as security (vessel/cargo) are absolutely lost by reason of an accident of the
sea.
EXCEPTIONS:
1. Loss due to inherent defect
2. Barratry on the part of the captain

3. Fault or malice of borrower

4. Contraband
5. Cargo loaded is different than agreed upon
Concurrence with Marine Insurance: There is insurable interest only on the excess of the
value secured and hypothecated by bottomry or respondentia. Value of what may be saved
in case of shipwreck divided pro rtate between lender and insurer.
h. Averages
Averages are the extraordinary or accidental expenses (damages and deterioration) which
may be incurred during the voyage to save the vessel, cargo, or both, from the time it puts
to sea until it casts anchor at the destination (vessel) or from the time of loading until
unloading at the post of destination (cargo).
General Average: (Gross Average) Inured to the common benefit, thus all persons having an
interest in the vessel and cargo must contribute pro rata, as well as the insurers and lenders
on bottomry and respndentia.
1. Common danger to both ship and cargo
2. Deliberate sacrifice/jettison during voyage (exceptions: cargo transferred to lighten a
ship during a storm for port entry, or ship is deliberately sunk to extinguish a fire in
port, bay, creek, roadsteads)
3. Success
Extra fuel for the vessel and goods not recorded in the vessels books are not covered by
general average.
Particular Average: (Simple Average) Did not inure to the common benefit; borne by
respective owners.
i.

Collision and Allision

Collision: both vessels moving

Allision: 1 vessel moving, 1 stationary
V.
Transportation Law
Constitutional Provisions
Arts. 1732-1763 CC
349-379, 573-736, and 806-869 Code of Commerce
Common Carriers
a. Definition
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 without discrimination.
b. Diligence Required of Common Carriers

Extraordinary diligence required. (utmost diligence)

c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.

Liabilities of Common Carriers

Vigilance over Goods
Exempting Causes
Requirement of Absence of Negligence
Absence of Delay
Due Diligence to Prevent or Lessen the Loss
Contributory Negligence
Duration of Liability
Delivery of Goods to Common Carrier
Actual or Constructive Delivery
Temporary Unloading or Storage

Stipulation for Limitation of Liability

a. Void Stipulations
b. Limitation of Liability to Fixed Amount
c. Limitation of Liability in Absence of Declaration of Greater Value
Liability for Baggage of Passengers
a. Checked-in Baggage
b. Baggage in Possession of Passengers
Safety of Passengers
a. Void Stipulations
b. Duration of Liability
c. Waiting for Carrier or Boarding of Carrier
d. Arrival at Destination
Liability for Acts of Others
a. Employees
b. Other Passengers and Strangers
c. Extent of Liability for Damages
Bill of
a.
b.
c.
d.
e.
f.
g.

Lading
Three-Fold Character
Delivery of Goods
Period of Delivery
Delivery Without Surrender of Bill of Lading
Refusal of Consignee to Take Delivery
Period for Filing Claims
Period for Filing Actions

Maritime Commerce
a. Charter Parties
b. Bareboat/Demise Charter
c. Time Charter
d. Voyage/Trip Charter
e. Liability of Ship Owners and Shipping Agents
f. Liability for Acts of Captain
g. Exceptions to Limited Liability
Accidents and Damages in Maritime Commerce
a. General Average
b. Collisions

Carriage of Goods by Sea Act (COGSA)

a. Application
b. Notice of Loss or Damage
c. Period of Prescription
d. Limitation of Liability
Warsaw Convention
a. Applicability
b. Limitation of Liability
c. Liability to Passengers
d. Liability for Checked Baggage
e. Liability for Hand-Carried Baggage
f. Wilful Misconduct

VI.
Public Service Laws
A. Constitutional Provisions
B. Laws and Other Issuances
1. Public Service Act [CA 146 aa]
2. Reorganizing the Executive Branch of the National Government [PD 1]
3. The Civil Aeronautics Act of the Philippines [RA 776 aa PD 1462 and
EO 217]
4. Public Telecommunications Policy Act of the Philippines [RA 7925]
5. Electronic Commerce Act of 2000 [RA 8792]
6. National Electrification Administration Decree [PD 269]
7. National Electrification Administration Reform Act of 2013 [RA 10531]
8. Electric Power Industry Reform Act of 2001 [EPIRA, RA 9136 aa RA
10150]
9. Anti-Electricity and Electric Transmission Lines/Materials Pilferage Act
of 1994 [RA 7832]
10. Biofuels Act of 2006 [RA 9367]
11. Anti-Cable Television and Cable Internet Tapping Act of 2013 [RA
10515]
C. Important Concepts
1. Public Service
2. CPC
a. Requisites for Issuance
b. When Notice and Hearing Not Required
3. Public Utilities
4. Mass Media
VII. BOT Law
A. Constitutional Provisions
B. Laws and Other Issuances
1. An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector [RA 6957]
2. The Philippine BOT law and its IRR [RA 7718 amending RA 6957]
C. Important Concepts
1. Schemes Recognized
2. Common Provisions and Conditions Imposed on All Schemes
VIII. Insurance Code [4th Week June 20, 2013]
5 of 20 Pages

A. Constitutional Provisions
B. Laws and Other Issuances

1. Art. 2011 CC
2. A Decree to Consolidate and Codify All the Insurance Laws of the
Philippines; or Insurance Code of 1978 [PD 1460 aa]
3. Insurance Code [PD 612]
4. Family Code [EO 209 aa]
5. Amending the Law on Arson [PD 1613]
6. Amending Certain Sections of PD 612 [PD 1455]
C. Concept of Insurance
D. Elements of an Insurance Contract
E. Characteristics/Nature of Insurance Contracts
F. Classes
1. Marine
2. Fire
3. Casualty
4. Suretyship
5. Life
6. Compulsory Motor Vehicle Liability Insurance
G. Insurable Interest
1. In Life/Health
2. In Property
3. Double Insurance and Over Insurance
4. Multiple or Several Interests on Same Property
H. Perfection of the Contract of Insurance
1. Offer and Acceptance/Consensual
a. Delay in Acceptance
b. Delivery of Policy
2. Premium Payment
3. Non-Default Options in Life Insurance
4. Reinstatement of a Lapsed Policy of Life Insurance
5. Refund of Premiums
I. Rescission of Insurance Contracts
1. Concealment
2. Misrepresentation/Omissions
3. Breach of Warranties
J. Claims Settlement and Subrogation
1. Notice and Proof of Loss
2. Guidelines on Claims Settlement
a. Unfair Claims Settlement and Sanctions
b. Prescription of Action
c. Subrogation
IX. Pre-Need Code
A. Constitutional Provisions
B. Laws and Other Issuances
1. The Securities Regulation Code [RA 8799]
2. Pre-Need Code of the Philippines [RA 9829 and its IRRs]
X. Negotiable Instruments Law [5th Week June 27, 2013]
A. Constitutional Provisions
B. Laws and Other Issuances
1. The Negotiable Instruments Law [Act 2031]
2. BSP Manual of Regulations for Banks and Non-Bank Financial
Institutions
C. Forms and Interpretation
1. Requisites of Negotiability
2. Kinds of Negotiable Instruments
D. Completion and Delivery

1. Insertion of Date
6 of 20 Pages

2. Completion of Blanks
3. Incomplete and Undelivered Instruments
4. Complete but Undelivered Instruments
E. Signature
1. Signing in Trade Name
2. Signature of Agent
3. Indorsement by Minor or Corporation
4. Forgery
F. Consideration
G. Accommodation Party
H. Negotiation
1. Distinction from Assignment
2. Modes of Negotiation
3. Kinds of Indorsements
I. Rights of the Holder
1. Holder in Due Course
2. Defenses Against the Holder
J. Liabilities of Parties
1. Maker
2. Drawer
3. Acceptor
4. Indorser
5. Warranties
K. Presentment for Payment
1. Necessity of Presentment for Payment
2. Parties to Whom Presentment for Payment Should be Made
3. Dispensation with Presentment for Payment
4. Dishonor by Non-Payment
L. Notice of Dishonor
1. Parties to be Notified
2. Parties Who May Give Notice and Dishonor
3. Effect of Notice
4. Form of Notice
5. Waiver
6. Dispensation with Notice
7. Effect of Failure to Give Notice
M. Discharge of Negotiable Instrument
1. Discharge per se
2. Discharge of Parties Secondarily Liable
3. Right of Party who Discharged Instrument
4. Renunciation by Holder
N. Material Alteration
1. Concept
2. Effect
O. Acceptance
1. Definition
2. Manner
3. Time
4. Rules
P. Presentment for Acceptance
1. Time/Place/Manner of Presentment
2. Effect of Failure to Make Presentment
3. Dishonor by Non-Acceptance

Q. Promissory Notes
R. Checks
1. Definition
2. Kinds
3. Presentment for Payment
a. Time
b. Effect of Delay
7 of 20 Pages

XI. Laws on Bouncing Checks [6th Week July 4, 2013]

A. Constitutional Provisions
B. Laws and Other Issuances
1. Law on swindling (estafa) [Art. 315 RPC aa RA 4885]
2. An Act Penalizing the Making or Drawing and Issuance of a Check
Without Sufficient Funds or Credit; or Bouncing Checks law [BP 22]
XII. Providing for the Regulation of Trust Receipts Transactions; or Trust Receipts
Law [PD 115]
A. Constitutional Provisions
B. Definition
1. Loan/Security Feature
2. Ownership of Goods, Documents, and Instruments
C. Rights of the Entruster
D. Obligations of the Entrustee
1. Payment/Delivery of Proceeds or Disposition of Goods, Documents or
Instruments
2. Return of Goods, Documents, or Instruments in Case of Sale
3. Liability for Loss of Goods, Documents, or Instruments
4. Penal Sanction if Offender is a Corporation
E. Remedies Available
F. Warehousemans Lien
XIII. Letters of Credit
A. Constitutional Provisions
B. Laws and Other Issuances
1. Arts. 567-572 Code of Commerce
2. Uniform Customs and Practice for Documentary Credits
C. Definition and Nature
D. Parties, Rights, and Obligations
E. Principles
1. Doctrine of Independence
2. Fraud Exception
3. Doctrine of Strict Compliance
XIV. Warehouse Receipts
A. Constitutional Provisions
B. Laws and Other Issuances
1. An Act Concerning Warehouse Receipts [Act 2137]
2. Bonded Warehouse Act [Act 3893 aa]
3. Arts. 706-718 Code of Commerce
4. Arts.
1507--1520,
and
1636
Civil
Code
C. Important Concepts
1. Definition of Warehouseman
2. Nature and Function of Warehouse Receipt

3. Assignment and Negotiation of Warehouse Receipt