CHAPTER 1 a.
Aircraft
GENERAL CONCEPTS
I. DEFINITION AND CONCEPTS
A. Contract of Transportation
There is a contract of transportation where a person obligates himself to transport
persons or property from one place to another for consideration.
B. Parties
a. Carriage of Passengers
The parties in a contract of carriage of passengers are the common carrier and the
passenger.
Passenger – is one who travels in a public conveyance by virtue of a contract,
express or implied, with the carrier as to the payment of fare or that which is
accepted as an equivalent thereof.
b. Carriage of Goods
When the contract is for the carriage of goods, the parties are the shipper and
carrier.
Shipper – is the person who delivers the goods to the carrier for transportation. He
pays the consideration or on whose behalf payment is made.
Consignee – is the person to whom the goods are to be delivered. He may be the
shipper himself or may be a third person who is not actually a party to the contract.
Nevertheless, there are instances when the third party consignee is bound by the
agreement between the shipper and the carrier.
C. Perfection
There are two types of contracts of carriage of passengers:
1. Contract to Carry – an agreement to carry the passenger at some future time. This
contract is consensual and is therefore perfected by mere consent.
2. Contract of Carriage or of Common Carriage Itself – considered as the real
contract for not until the facilities of the carrier are actually used can the carrier be
said to have already assumed the obligation of the carriage.
1
There is a perfected contract to carry passengers even if no tickets have been issued
to said passengers so long as there was already a meeting of minds with respect to
the subject matter and the consideration.
There is a perfected contract of carriage between a passenger and an airline if it was
established that the passenger had checked in at the departure counter, passed
through customs and immigration, boarded the shuttle bus and proceeded to the
ramp of the aircraft.
b. Buses, Jeepneys, and Street Cars
With respect to buses, jeepneys, or street cars, the Supreme Court explained in one
case that once a public utility bus (or jeepney) stops, it is in effect making a
continuous offer to bus riders. Hence, it is the duty of the drivers to stop their
conveyances for a reasonable length of time in order to afford passengers an
opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from sudden starting up of the carrier. It follows that the
passenger is deemed to be accepting the offer if he is already attempting to board
the conveyances and the contract of carriage is perfected from that point.
c. Trains
A person who wants to board a train in a railway station must purchase a ticket and
must present himself at the proper place and in a proper manner to be transported.
If he does not do so, he will not be considered a passenger.
II. CARRIER
Article 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.
The concept of “common carrier” under 1732 may be seen to coincide neatly with
the notion of “public service” under the Public Service Act.
a. Tests
1. He must be engaged in the business of carrying goods for others as a public
employment xxxx not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry goods of the kind to kind to which his business is
conducted and over his established roads; and
4. The transportation must be for hire.
b. Characteristics
The concept of common carriers contemplated under the Public Service Act results
in the application of the following rules or principles:
III. DISTINGUISHED FROM PRIVATE CARRIER
The distinction between a “common or public carrier” and a private or special
carrier lies in the character of the business, such that if the undertaking is a single
transaction, not a part of a general business or occupation, althougn involving the
carriage of the goods for a fee, the person or corporation offering such service is a
private carrier.
While a common carrier is bound to exercise extraordinary diligence, a private
carrier owes only diligence of a good father of a father of a family.
Moreover, while a common carrier cannot stipulate that it is exempt from liability
for negligence of its agents or employees, a private carrier may validly enter into
such stipulation.
IV. DISTINGUISHED FROM TOWAGE, ARRASTRE AND STEVEDORING
In towage, one vessel is hired to bring another vessel to another place.
2
On the other hand, the functions of arrastre operator usually include: to receive,
handle, care for, and deliver all merchandise; to record or check all merchandise;
and to furnish light, and water services and other incidental services.
The function of stevedores involve the loading and unloading of coastwise vessels
calling at the port.
V. GOVERNING LAWS
Article 1766 of the Civil Code expresses: “In all matters not regulated by this Code,
the rights and obligations of common carriers shall be governed by the Code of
Commerce and by special laws.”
Article 1753: “The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or
deterioration.”
IV. NATURE OF BUSINESS
Common carriers are public utilities. As such, they are impressed with public
interest and concern.
V. REGISTERED OWNER RULE AND KABIT SYSTEM
a. Registration Laws
Registration of motor vehicles is now government by Republic Act 4136 otherwise
known as “The Land Transportation and Traffic Code”
b. Registered Owner Rule
The rule in this jurisdiction is that the person who is the registered owner of a
vehicle is liable for any damage caused by the negligent operation of the vehicle
although the same was already sold or conveyed to another person at the time of the
accident.
The registered owner is liable to the injured party subject to his right or recourse The instances when the carrier may validly refuse to accept goods include:
against the transferee or the buyer.
When the goods sought to be transported are dangerous objects, or substances
c. Kabit System including dynamites and other explosives;

The “registered owner” rule is applicable whenever the persons involved are The goods are unfit for transportation;
engaged in what is known as the “kabit system.”
Acceptance would result in overloading;
The Kabit System is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to The goods are considered contrabands or illegal goods;
operate them under his license, sometimes for a fee or percentage of the earnings.
Goods are injurious to health;
a. Pari Delicto Rule
Goods will be exposed to untoward danger like flood, capture by enemies and the
Both parties are at fault. Having entered into an illegal contract, neither party cannot like;
invoke the same as against each other either to enforce their illegal agreement or to
invoke the same to escape liability. Both parties cannot seek relief from the courts, Goods like livestock will be exposed to diseases;
and each must bear the consequences of his acts.
Strike; and
b. Aircraft and Vessels
Failure to tender goods on time.
Kabit System may also be applied to vessels and aircrafts that are covered by the
certificates of convenience and necessity. b. Duty to Deliver the Goods

a. Time of Delivery
CHAPTER 2
OBLIGATIONS OF THE PARTIES Article 358 of the Code of Commerce: “If there is no period fixed for the delivery of
the goods the carrier shall be bound to forward them in the first shipment of the
I. OBLIGATIONS OF THE CARRIER same or similar goods which he may make to the point of delivery; and should he
not do so, the damages caused by the delay should be for his account.”
a. Duty to Accept
b. Consequences of Delay
A common carrier that is granted a certificate of public convenience is duty bound
to accept passengers or cargo without any discrimination.
3
Article 1747 of the Civil Code: “If the common carrier, without just cause, delays the
transportation of the goods or changes the stipulated or usual route, the contract
limiting the common carrier’s liability cannot be availed of in case of the loss,
destruction, or deterioration of the goods.
In cases of delay on account of the fault of the shipper, the consignee may leave the
goods transported in the hands of the carrier, informing him thereof in writing
before the arrival of the same at the point of destination.
Right of Passengers in Case of Delay is specifically provided in Article 698 of the
Code of Commerce: “In case a voyage already begun should be interrupted, the
passenger shall be obliged to pay the fare in proportion to the distance covered,
without right to recover for losses and damages if the interruption is due to
fortuitous event or force majeure, but with a right to indemnity if the interruption
should have been caused by the captain exclusively.
Memorandum Circular No. 112 issued by Maritime Industry Authority provides:
“In case the vessel is not able to depart on time and the delay is unreasonable, the
passenger may opt to have his/her ticket immediately refunded without any refund
service fee….”
c. Where and to Whom Delivered
a. Place
The goods should be delivered to the consignee in the place agreed upon by the
parties. If the specific place or warehouse is designated in the bill of lading, the
goods must be delivered in such place.
b. Consignee
The goods should be delivered to the consignee or any other person to whom the
bill of lading was validly transferred or negotiated.
4
Article 369 of the Code of Commerce provides: “If the consignee cannot be found at
the residence indicated in the bill of lading, or if he refuses to pay the transportation
charges and expenses, or if he refuses to receive the goods, the municipal judge,
where there is none of the first instance, shall provide for their deposit at the
disposal of the shipper, this deposit producing all the effects of delivery without
prejudice to third parties with a better right.
c. Delay to Transport Passengers
The basic rule that applies to carriage of goods shall also apply to carriage of
passengers.
d. Duty to Exercise Extraordinary Diligence
The goods should be delivered in the same condition that they were received and to
transport passengers without encountering any harm or loss. In the exercise of this
obligation, the common carrier is obligated to exercise extraordinary diligence.
Article 1755 of the Civil Code explains extraordinary diligence: “A common carrier
is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious person, with due regard for all
circumstances.
a. Presumption of Negligence
In case of loss of effects or cargo or passengers or death or injuries to passengers, the
common carrier is presumed to be at fault or have acted negligently unless he had
observed extraordinary diligence in the vigilance thereof.
b. Duration of Duty

Article 1736 of the Civil Code provides: “The extraordinary responsibility of the
common carrier lasts 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 a right to receive them….”
A fortuitous event is an event that is unforeseen, but if foreseen, is inevitable.
Requisites:
(1) The cause of the unforeseen and unexpected occurrence, or of the failure of the
debtor to comply with his obligation, must be independent of the human will.

With respect to carriage of passengers by trains, the extraordinary diligence
commences the moment the person who purchases the ticket presents himself at the
proper place and in a proper manner to be transported with a bona fide intent to
ride the coach.
With respect to carriage of passengers by sea, the duty of the carrier commences as
soon as the person with bona fide intention of taking passage places himself in the
care of the carrier or its employees and is accepted as passenger.
(2) It must be impossible to foresee the event which constitutes the caso fortuito, or
if it can be foreseen, it must be impossible to avoid.
(3) The occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner.
(4) The obligor (debtor) must be free from any participation in or the aggravation of
the injury resulting to the creditor.

Motor vehicles like passenger jeepneys and buses are duty bound to stop their Fortuitous event, to be a valid defense, must be established to be the proximate case
conveyances for a reasonable length of time in order to afford passengers an of the loss. (Art. 1739)
opportunity to board and enter. The rule is that once a public utility bus or jeepney
stops, it is making a continuous offer to bus riders. Invalid Defenses:
1. Fire
e. Defenses of Common Carriers 2. Hijacking
3. Mechanical Defects
The defenses that can be raised by common carriers for the loss, destruction, 4. Other Invalid Defenses
deterioration of the goods are: a) Explosion
b) Worms and Rats
(1) Flood, storm, earthquake, lightning and other natural disaster and calamity; c) Water Damage
(2) Acts of the public enemy at war, whether international or civil; d) Barratry
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the packing of the goods in the packing or in the containers; Public Enemy
(5) Order or act of the competent authority;
(6) Exercise of extraordinary diligence. The term ‘public enemy,’ in its general acceptation presupposes the existence of an
actual state of war, and refers to the government of a foreign nation at war with the
country to which the carrier belongs xxxx
Fortuitous Event

5
Improper Packing
It is also the rule that if the carrier accepts the goods knowing the fact of improper
packing of the goods upon ordinary observation or notwithstanding such condition,
it is not relieved of liability for loss or injury resulting therefrom.
Order of Public Authority
Article 1743: If through the order of public authority the goods are seized or
destroyed, the common carrier is not responsible, provided said public authority
had power to issue the order.
f. Defenses in Carriage of Passengers
The primary defense of the carrier in transporting passengers is exercise of
extraordinary diligence. Thus, even if there is a fortuitous event, the carrier must
also present proof of exercise of extraordinary diligence.
a. Employees
Article 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the former’s employees although such
employees may have acted beyond the scope of their authority or in violation of the
orders of the common carriers.
b. Other Passengers and Third Persons
Article 1763. A common carrier is responsible for injuries suffered by a passenger on
account of the willful acts or negligence of other passengers or strangers, if the
common carrier’s employees through the exercise of the diligence of a good father
of a family could have prevented or stopped the act or omission.
g. Passenger’s Baggages
6
Baggage that are checked in or delivered to the carrier are governed by the rules
discussed above requiring extraordinary diligence.
II. OBLIGATIONS OF SHIPPER, CONSIGNEE AND PASSENGER
a. Negligence of Shipper or Passenger
Contributory negligence on the part of the passenger is not a defense that will
excuse the carrier from liability. It will only mitigate such liability. However, the
negligence of the shipper or the passenger may be the proximate and only cause of
the loss, in which case, the carrier should not be made liable.
In Article 1761 of Civil Code provides: “The passenger must observe the diligence of
a good father of a family to avoid injury to himself.
Thus, the carrier may be able to prove that the only cause of the loss of the goods is
any of the following acts of the shipper:
(1) Failure of the shipper to disclose the nature of the goods;
(2) Improper marking or direction as to destination; and
(3) Improper loading when he assumes that responsibility.
Doctrine of avoidable consequences
Even if the carrier is responsible for the loss or injury, the passenger is also required
to lessen the damage or injury.
Doctrine of Last Clear Chance
A negligent defendant is held liable to a negligent plaintiff, if he, aware of the
plaintiff’s peril, or according to some authorities, should have been aware of it in the
reasonable exercise of due care, had in fact an opportunity later than that of the
plaintiff to avoid an accident.

The Supreme Court reiterated the rule that passengers must take such risks incident
to the mode of travel.
b. Freight
When private property is used for public purpose and is affected with public
interest, it ceases to be juris privati only and becomes subject to regulation.
The shipper may pay the necessary freight before or at the time he deliver the goods
to the carrier for shipment. However, the parties may also stipulate that the freight
will be paid by the consignee at the point of the destination.
In the absence of any agreement, the consignee who is supposed to pay must do so
within twenty-four (24) hours from the time of delivery.
With respect to carriage of goods by sea, the tickets are purchased in advance from
ticket outlets or booking offices. Carriers are not supposed to allow passengers
without tickets.
The carrier shall collect/inspect passenger’s ticket within one (1) hour from the
vessel’s departure so as not to disrupt passengers who are either sleeping or resting.
If the consignor or the consignee failed to pay the consideration for the
transportation of the goods, this special right shall prescribe eight days after the
delivery has been made, and once prescribed, the carrier shall have no other action
than that corresponding to him as an ordinary creditor.
Demurrage
It is the compensation provided for in the contract of affreightment for the detention
of the vessel beyond the time agreed on for loading and unloading.
It is the claim for damages for failure to accept delivery.
7
CHAPTER 3
EXTRAORDINARY DILIGENCE
I. RATIONALE
Article 1755 of the Civil Code explains extraordinary diligence: “A common carrier
is bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious person, with due regard for all
circumstances.”
The Code Commission explained why extraordinary diligence must be complied
with the performance of the functions of a common carrier: “This high standard of
care is imperatively demanded by the preciousness of human life and by the
consideration that every person must be in every way be safeguarded against all
injury.”
II. HOW DUTY IS COMPLIED WITH
There is no hard and fast rule in the exercise of extraordinary diligence. The law
does not prescribe formula. Thus, the Supreme Court explained in one case that “it
is sufficient to reiterate that the source of a common carrier's legal liability is the
contract of carriage, and by entering into said contract, it binds itself to carry the
passengers safely as far as human care and foresight can provide, using the utmost
diligence of a very cautious person, with a due regard for all the circumstances.
A. Duty to Third Persons
The duty to exercise extraordinary diligence is primarily owed to the passengers
and the goods that are being transported.
However, it was ruled in one case that the duty even extends to the members of the
crew or complement operating the carrier.
Additionally, there is authority for the view that extraordinary diligence is owed not
only to passengers or shippers but also to third persons as well. Thus, the Supreme
Court ruled in Kapalaran Bus Lines v. Coronado: “... The passengers and owners of
cargo carried by common carrier, they are not only persons that the law seeks to
benefit. For if common carriers carefully observed the statutory standard of
extraordinary diligence in respect of their own passengers, they cannot help but
simultaneously benefit pedestrians and the owners and passengers of other vehicles
who are equally entitled to the safe and convenient use of our roads and highways.”
III. EFFECT OF STIPULATION
A. Goods
The parties cannot stipulate that the carrier will not exercise any diligence in the
custody of goods. Neither can it be stipulated that the goods are at the shipper's
risk. However, the law allows a stipulation whereby the carrier will exercise a
degree of diligence less than extraordinary with respect to goods.
B. Passenger
There can be no stipulation lessening the utmost diligence that is owed to
passengers. The responsibility to observe extraordinary diligence cannot be
dispensed with or lessened through stipulation or posting of notices Art. 1757 of the
Civil Code).
a. Gratuitous passenger
When a passenger is carried gratuitously, a stipulation limiting the common
carrier's liability for negligence is valid, but not for willful acts or gross negligence.
The reduction of fare does not justify any limitation of the common carrier's liability
(Art. 1758 of the Civil Code).
The provision implies that the same degree of diligence is required even if the
passenger is carried gratuitously.
8
In Lara v. Valencia however, the view expressed by the Supreme Court is to the
effect that the diligence owed to accommodation passenger is only ordinary
diligence. The defendant in the said case was not a common carrier. It was a private
carrier who accommodated the deceased passenger.
IV. EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA
A. Seaworthiness
a. Warranty of seaworthiness of ship
The first step that must be undertaken by the common carrier in complying with the
duty to exercise extraordinary diligence in transporting goods or passengers by sea
or any other body of water is to make the vessel seaworthy. Seaworthiness of the
vessel is a rule found in the carriage of Goods by Sea Act, Sec.3.(1).
b. No duty to inquire
It follows that because the implied warranty of seaworthiness, shippers of the
goods, when transacting with common carriers, are not expected to inquire into the
vessels seaworthiness, genuineness of its licenses, and compliance with all maritime
laws.
By the same token, passengers cannot be expected to inquire every time they board
a common carrier, whether the carrier possesses the necessary papers or that all the
carrier's employees are qualified. Such a practice would be an absurdity.
c. Meaning of Seaworthiness
The concept of seaworthiness was explained by the Supreme Court: “ (1) Generally,
seaworthiness is that strength, durability and engineering skill made a part of a
ship's construction and continued maintenance, together with a competent and
sufficient crew, which would withstand the vicissitudes and dangers of the
elements which might reasonably be expected or encountered during her voyage
without loss or damage to her particular cargo.”

(1) Fitness of the vessel itself
It is necessary that the vessel can be expected to meet the normal hazards of the
journey.
(2) The ship must be “cargoworthy”
Even if vessel was properly maintained and is free from defect, the carrier must not
accept goods that cannot properly be transported in the ship.
(3) The vessel must be adequately equipped and properly manned
The ship must be manned with sufficient number of competent officers and crew.
(4) Adequate equipment
With respect to vessels that carries passengers, the Maritime Industry Authority
prescribes rules which provide for indispensable equipment and facilities.
B. Overloading
Duty to exercise due diligence likewise includes the duty to take passengers or
cargoes that are within the carrying capacity of the vessel.
C. Proper Storage
The vessel may be suitable for the cargo but this is not enough because the cargo
must also be properly stored.
D. Negligence of Captain and Crew
a. Rules on passenger safety
9
Memorandum Circular No. 12 issued by MARINA provides that “have the right to
be treated by the carrier and its employees with kindness, respect, courtesy and due
consideration. They entitled to be protected against personal conduct, injurious
language, indignities and abuses from the said carrier and its employees.”
E. Deviation and Transshipment
a. Deviation
Art. 359 of the Code of Commerce:
“If there is an agreement between the shipper and the carrier as to the road over
which the conveyance is to be made, the carrier may not change the route, unless it
be by reason of force majeure; and should he do so without this cause, he shall be
liable for all losses which the goods he transports may suffer from any other cause,
beside paying the sum which may have been stipulated for such case.
When on account of said cause of force majeure, the carrier had to take another
route which produced an increase in transportation charges, he shall be reimbursed
for such increase upon formal proof thereof.”
b. Transshipment
Transshipment of freight without legal excuse is a violation of the contract and an
infringement of the right of the shipper, and subjects the carrier to liability if the
freight is lost even by a cause otherwise excepted.
Transshipment, in maritime law, is defined as “the act of taking cargo out of one
ship and loading it in another,” or “the transfer of goods from vessel stipulated in
the contract of affreightment to another vessel before the place of destination named
in the contract has been reached.”
V. EXTRAORDINARY DILIGENCE IN CARRIAGE BY LAND
A. Condition of vehicle
Common carriers that offer transportation by land are similarly required to make
sure that the vehicles that they are using are in good order or condition.
B. Traffic Rules
The carrier fails to exercise extraordinary diligence if it will not comply with basic
traffic rules.
C. Duty to Inspect
There is no unbending duty to inspect each and every package or baggage that is
being brought inside the bus or jeepney. The carrier is duty bound to conduct such
inspection depending on the circumstances.
A carrier is ordinarily not liable for injuries to passengers from fires or explosions
caused by articles brought into its conveyances by other passengers, in the absence
of any evidence that the carrier, through its employees, was aware of the nature of
the article or had any reason to anticipate danger therefrom.
It should be noted that in overland transportation, the common carrier is not bound
nor empowered to make an examination on the contents of packages or bags
particularly those handcarried by passengers.
VI. EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR
Like vessels, aircrafts that are used by common carriers must also be fit to transport
goods and passengers. The aircraft must be in such a condition that it must be able
to withstand the rigors of the flight. The law that governs the Civil Aeronautic
Board calls this “airworthiness.”
Republic Act 779 defines airworthiness means that “an aircraft, its engines,
propellers, and other components and accessories, are of proper design and
construction, and are safe for air navigation purposes, such design and construction
being consistent with accepted engineering practice and in accordance with
aerodynamic laws and aircraft science.”
10
Extraordinary diligence likewise requires the carrier provide competent and well
trained crew.
The carrier is likewise deemed to have failed to exercise extraordinary diligence if
the plane did not take the designated route and the tragic crash could have been
avoided had it taken said designated route.
It is the duty of airlines to strictly require their personnel to be more
accommodating towards customers, passengers and the general public.
A. Inspection
An airline company is duty bound to inspect each and every cargo that is brought
into the aircraft (Sec. 8 of RA 6235).
CHAPTER 4
BILL OF LADING AND OTHER FORMALITIES
I. CONCEPTS
A bill of lading or a ticket is not necessary for the perfection of a contract of carriage.
Thus, the obligation of the carrier to exercise extraordinary diligence in transporting
the goods or passengers is present even if no bill of lading or ticket was issued by
the carrier.
Additionally, Sections 25 and 26 of the Electronic Commerce Act (RA No. 8792)
allow data messages or electronic documents to be used in lieu of transport
documents in writing or paper documents.
A. Definition
Bill of Lading – is a written acknowledgment, signed by the master of a vessel or
other authorized agent of the carrier, that he has received the described goods from
the shipper, to be transported on the expressed terms to the described place of
destination, and to be delivered there to the designated consignee or parties.
B. Kinds
A bill of lading may be either: (1) negotiable or non-negotiable, (2) clean bill of
lading or foul bill of lading, (3) “on board bill” or “received for shipment bill”, (4)
spent bill of lading, (5) through bill of lading, (6) custody bill of lading, or (7) port
bill of lading.
a. Clean bill of lading and foul bill of lading
A clean bill of lading is one which does not contain any notation indicating any
defect in the goods. A foul bill of lading is one that contains such notation.
b. Spent bill of lading
Where the goods are already delivered by the carrier, the carrier is supposed to have
retrieved the covering bill of lading that he issued for the goods. If the goods were
already delivered but the bill of lading was not returned, the bill of lading is called
“spent bill of lading.”
c. Through bill of lading
A “through bill of lading” is one issued by a 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 bill
of lading.
d. On board bill v. received for shipment bill
An on board bill of lading is one in which it is stated that the goods have been
received on board the vessel which is to carry the goods, whereas a received for
shipment bill of lading is one in which it is stated that the goods have been received
with or without specifying the vessel by which the goods are to be shipped.
e. Custody bill of lading
In this type of bill of lading, the goods are already received by the carrier but the
vessel indicated therein has not yet arrived in the port.
f. Port bill of lading
In a port bill of lading, the vessel indicated in the bill of lading that will transport
the goods is already in the port.
II. NATURE OF BILL OF LADING
It is a long standing jurisprudential rule that a bill of lading operates both: (1) as a
receipt and (2) as a contract. A third characteristic may be added – (3) it is a
document of title.
It is a receipt for the goods shipped and a contract to transport and deliver the same
as therein stipulated.
11
As a contract, it stipulates the rights and obligations assumed by the parties. Being a
contract, it is the law between the parties who are bound by its terms and conditions
provided that these are not contrary to law, morals, good customs, public order, and
public policy.
III. WHEN EFFECTIVE
A bill of lading usually becomes effective upon its delivery to and acceptance by the
shipper. It is presumed that the stipulations of the bill were, in the absence of fraud,
concealment or improper conduct, known to the shipper, and he is generally bound
by his acceptance whether he reads the bill or not.
The holding in most jurisdictions has been that a shipper who receives a bill of
lading without objection after an opportunity to inspect it is presumed to have
accepted it as correctly stating the contract and to have assented to its terms.
IV. BILL OF LADING AS CONTRACT
The three-fold nature of a bill of lading is obviously applicable only to carriage of
goods. However, the nature of bill of lading as a contract applies to tickets issued to
passengers.
A. Contract of Adhesion
Bills of lading, as well as tickets, constitute a class of contracts of adhesion. Hence,
they are normally construed liberally in favor of the passenger or shipper who
adhered to such bill of lading or ticket.
Contracts of adhesion are contracts wherein almost all the provisions of which have
been drafted only by one party. The only participation of the other party is the
signing of his signature or his 'adhesion' thereto. Examples are: insurance contracts,
bills of lading, contracts of make of lots on the installment plan.
Under which contracts, the passenger/shippers cannot change terms and they are
thus made to adhere thereto on the “take it or leave it” basis. Thus, certain
guidelines in the determination of their validity and enforceability have been
formulated in order that justice and fair play characterize the relationship of the
contracting parties.
Consequently, the parties, whether the carrier or shipper, cannot escape liability by
adverting to the bill of lading as a contract of adhesion, if the bill of lading has no
ambiguities or obscurities.

B. Parol Evidence Rule
A bill of lading is covered by the parol evidence rule. Under the parol evidence rule,
the terms of a contract are rendered conclusive upon the parties, and evidence
aliunde is not admissible to vary or contradict a complete and enforceable
agreement embodied in a document, subject to well defined exceptions.
As an exception to the parol evidence rule is one which is a mistake of fact mutual
to the parties. However, in order that parol evidence may be admitted, said mistake
must be put in issue by the pleadings, such that if not raised inceptively in the
complaint or in the answer, as the case may be, a party cannot later on be permitted
to introduce parol evidence thereon.
Parol evidence cannot be admitted where the mistake adverted to was supposedly
committed by one party only and was raised by the former rather belatedly.
C. Bill of Lading as Evidence
Bill of lading is the legal evidence of the contract.
All the essential elements of a valid contract are present in a bill of lading or ticket,
i.e. consent, cause or consideration and object.
D. Bill of Lading as Actionable Document
When a shipper enforces contractual obligation under the contract of carriage as
stated in the bill of lading, such bill of lading can be categorized as an actionable
document under the Rules of Court. Hence, the bill of lading must be properly
pleaded either as causes of action or defenses; the genuineness and due execution of
which are deemed admitted unless specifically denied under oath by the adverse
party.
E. Basic Stipulations
The stipulations that must be stated in the bill of lading are provided for in the Code
of Commerce.
F. Prohibited and Limiting Stipulations
a. Civil Code
Three kinds of limiting stipulations have often been made in bill of lading:
1. exempting the carrier from any and all liability for loss or damage occasioned by
its own negligence
2. providing for an unqualified limitation of such liability of the carrier to an agreed
valuation
12
3. limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight
The first and second kinds of stipulations are invalid. The third is valid and
enforceable.
(1) Purpose
The purpose of the limiting stipulation in the Bill of Lading is to protect the
common carrier. Such stipulation obliges the shipper/consignee to notify the
common carrier of the amount that the latter may be liable for in case of loss of the
goods. The common carrier can then take appropriate measures--- getting insurance,
if needed, to cover or protect itself.
(2) Stipulation reducing diligence
The parties cannot stipulate so as to totally exempt the carrier from exercising any
degree of diligence; and the parties cannot stipulate that the common carrier shall
exercise diligence less than the diligence of a good father of a family. However, the
parties may stipulate that diligence to be exercised by the common carrier in the
carriage of goods be less than the extraordinary diligence provided that the
following requisites are complied with:
1. that the stipulation be in writing signed by both parties
2. that the stipulation be supported by a valuable consideration other than the
service rendered by the common carrier, and
3. that the stipulation be reasonable, just and not contrary to law
However, no such stipulation is allowed for carriage of passengers. The
responsibility of a common carrier to exercise utmost diligence for the safety of the
passengers cannot be dispensed with or lessened by stipulation or statement on
tickets or otherwise (Art. 1757 of the Civil Code).
A contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction, or deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been fairly and freely agreed upon (Art. 1750 of
the Civil Code).
Moreover, Art. 1749 of the Civil Code provides that a stipulation that the common
carrier's liability is limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater, is binding.
b. Carriage of Goods by Sea Act (COGSA)
COGSA applies suppletorily to the Civil Code if the goods are to be shipped from a
foreign port to the Philippines. Under COGSA, the liability of the carrier is US$500
per package in the absence of a shipper's declaration of a higher value in the bill of
lading.
Each carton is considered a package, or that would be considered package shipped
in a container supplied by the carrier.
V. BILL OF LADING AS RECEIPT
The issuance of a bill of lading carries the presumption that the goods were
delivered to the carrier issuing the bill, for immediate shipment.
VI. BILL OF LADING AS DOCUMENT OF TITLE
The Bill of Lading, until complete delivery of the cargo has been made on someone
rightfully claiming under it, remains in force as a symbol, and carries with it not
only the full ownership of the goods, but also all rights created by the contract of
carriage between the shipper and the ship owner.
Art. 1507 of the Civil Code states: “A document of title 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 in such document is negotiable document of title.”
How negotiated? (a) bearer document; (b) order document – a document which
states that the goods are to be delivered to the order of a person name therein.
Effect of Negotiation: Art. 1513 of the Civil Code provides:
“A person to whom a negotiable document of title has been duly negotiated
acquires thereby:
(1) Such title to the goods xxx;
(2) The direct obligation of the bailee issuing the document to hold possession of the
goods for him xxx
CHAPTER 5
ACTIONS AND DAMAGES IN CASE OF BREACH
I. DISTINCTIONS
Passengers and shippers who suffered damages because of the breach of the
contractual obligation of the carrier may sue the latter for damages. The source of
13
obligation is culpa contractual. This source of obligation is separate and distinct
from quasi-delict under Art. 2176 of the Civil Code.
II. CONCURRENT CAUSES OF ACTION
The same act that breaches the contract may also be tort. Hence, a negligent act that
breaches the contract may give rise to a liability based on contract and quasi-delict
under Art. 2176 of the Civil Code. In fact, with respect to the employee of the
carrier, civil liability may be based on quasi-delict as well as on criminal liability
under Art. 100 of the Revised Penal Code.
Hence, the cause of action of a passenger or shipper against the common carrier can
be culpa contractual or culpa aquiliana while the basis on the part of the driver is
either culpa delictual or culpa aquiliana.
A. Solidary Liability
In case the negligence of the carrier's driver and a third person concurs, the
liabilities of the parties – carrier and his driver, third person – is joint and several.
e.g. While docking the vessel, “Taurus”, the master, through negligence, damaged
the wharf and the merchandise loaded on the deck. The owner of the wharf and the
owner of the merchandise sued the owner of the vessel and master of the vessel for
the damage.
a) What is the basis of the liability of the owner of the vessel with respect to the
damage of the wharf?
b) With respect to the damage to the merchandise?
Ans: a) The shipowner may be made liable based on quasi-delict under Art. 2176 of
the Civil Code with respect to the damage of the wharf. The master of the vessel
caused damage to the wharf through negligence without any preexisting
contractual relations between the parties.
b) The shipowner may be liable for breach of contract for the damage to the
merchandise. The carrier has an obligation safely to their destination. The carrier
failed to do so because of the negligence of his employees.
III. NOTICE OF CLAIM AND PRESCRIPTIVE PERIOD
A. Overland Transportation of Goods and Coastwise Shipping
a. When to file a claim with carrier
A condition precedent for an action against the carrier in overland transportation is
the filing of claim with the carrier within the period prescribed under Art. 366 of the
Code of Commerce. Non-filing of the claim bars recovery. Before an action can
properly be commenced all the essential elements of the cause of action must be in
existence, that is, the cause of action must be complete.
Under Art. 366 of the Code of Commerce, an action for damages is barred if the
goods arrived in damaged condition and no claim is filed by the shipper within the
following period: (1) immediately if damage is apparent; or (2) within twenty four
(24) hours from delivery if damage is not apparent.
The period does not begin to run until the consignee has received possession of the
merchandise that he may exercise over it the ordinary control pertinent to
ownership.
1) Effect of stipulation
The period prescribed in Art. 366 of the Code of Commerce may be subject to
modification by agreement of the parties. The parties may stipulate in the bill of
lading a period that is different from the period provided by Art. 366.
b. Extinctive Prescription
There being no special rules with respect to the contract of carriage, the general rule
under the Civil Code, the extinctive period is six (6) years if there is no written
contract and ten (10) years if there is a written contract.
B. International Carriage of Goods by Sea
A claim must be filed with the carrier within the following period: (1) if the damage
is apparent the claim should be filed immediately upon discharge of the goods; or
(2) within three (3) days from delivery if damage is not apparent. Nevertheless, it
has been settled that the filing of claim is not condition precedent. Sec. 3 of the
Carriage of Goods by Sea Act provides that “such fact shall not affect or prejudice
the right of the shipper to bring suit.” The shipper can still bring an action to recover
said loss or damage within one (1) year after the delivery of goods.
a. Prescription
The action for damages under COGSA must be filed within a period of one (1) year
from discharge of the goods. In other words, the prescriptive period of one (1) year
commences from discharge.
The period is not suspended by an extra-judicial demand. Art. 1155 of the Civil
Code cannot be applied because matters affecting transportation of goods by sea
should be decided in as short a time as possible.
14
If the damage sustained by the cargo is not apparent, notice should be given within
three (3) days to the carrier, and action for damages should be filed within one (1)
year from date of delivery.
The period does not apply to misdelivery. The applicable rule is the Civil Code
provisions on prescriptive period, including Art. 1155 thereof. The goods are not
actually lost or damaged. The applicable period is 10 years.
The rule applies in collision cases. However, the one (1) year period starts not from
the date of collision but when the goods should have been delivered, had the
cargoes been saved.
1) Insurance
The insurer who is exercising its right of subrogation is also bound by the one (1)
year prescriptive period. However, it does not apply to the claim against the insurer
for the insurance proceeds. The claim against the insurer is based on contract that
expires in ten (10) years.
IV. RECOVERABLE DAMAGES
Damages – is the pecuniary compensation, recompense, or satisfaction for injury
sustained.
Other definition: Damages is pecuniary consequences which the law imposes for the
breach of some duty or violation of some rights.
The Code Commission saw that the old civil code had “but few general principles
on the measure of damages.”
A. Extent of Recovery
The extent of recovery in case of contractual breach is expressly provided for in Art.
2201 of the New Civil Code. Applying the provisions to a contract of carriage, the
carrier in good faith is liable only to pay for the damages that are the natural and
probable consequence of the breach of obligation, and which the parties have
foreseen or could have reasonably foreseen at the time the obligation was
constituted. However, if the carrier is in bad faith or gross negligence, the carrier is
liable for all damages, whether the same can be foreseen or not.
It should be noted, however that the carrier who may be compelled to pay damages
for the loss or damage to the goods or passengers has the right of recourse against
the employee who committed the negligent, willful or fraudulent act.
B. Kinds of Damages
a. Actual or compensatory damages
Art. 2199 of the Civil Code provides that”except as provided by law or by e. Liquidated damages
stipulation, one is entitled to an adequate compensation only for such pecuniary It is that is agreed upon by the parties to a contract, to be paid in case of breach
loss suffered by him as he has duly proved. thereof.
Two kinds of actual or compensatory damages: f. exemplary or corrective damages
(a) the loss of what the person already possesses (dano emergente) It may be imposed by way of example in addition to compensatory damages.
(b) the failure to receive as a benefit that would have pertained to him (lucro
cesante) PART II
In case of a person's death caused by a crime or quasi-delict, under Art.2206 of the MARITIME LAW
Civil Code, the plaintiff is entitled to at least three thousand pesos (P3,000.00). In
addition:
(a) loss of the earning capacity of the deceased
CHAPTER 6
GENERAL CONCEPTS
(b) support to the recipient whom the deceased was obliged to giveaccording to the
provisions of Art. 291 of the Civil Code
(c) moral damages for mental anguish of the spouse, legitimate and illegitimate
I. MARITIME LAW: DEFINED
descendants and ascendants of the deceased by reason of the death of the deceased
It is the system of laws which particularly relates to the affairs and business of the
1) Loss of earning capacity
sea, to ships, their crews and navigation, and to marine conveyance of persons and
The amount of loss of earning capacity that should be awarded is:
property.
Net Earning Capacity = Life Expectancy x (Gross Annual Income less Necessary
This system of laws includes Book III of the Code of Commerce entitled Maritime
Living expenses)
Commerce Act, Act No. 2616 otherwise known as the “Salvage Law,”
Life expectancy is computed by applying the formula: 2/3 x 80 – age at death
Commonwealth Act No. 65 otherwise known as the “Carriage of Goods by Sea
(adopted in the American Expectancy Table of Mortality)
Act,” Presidential Decree No. 1521 known as the “Ship Mortgage Decree of 19978”
2) Attorney's Fees
and other special laws relating to maritime commerce.
3)Interests
However, the primary law on maritime commerce is still the New Civil Code
b. Moral damages
provisions on common carriers.
The Civil Code provides that moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury.
Moral damages may be recovered if they are the proximate result of the defendant's
II. REAL AND HYPOTHECARY NATURE
wrongful act or ommission.
A. Naturale and Rationale
Generally, no moral damages where the breach of contract is not malicious.
The real and hypothecary nature of maritime laws means that the liability of the
c. Nominal damages
carrier in connection with losses related to maritime contracts is confined to the
It is adjudicated to vindicate the right of the plaintiff.
vessel, which is hypothecated for such obligations or which stands as the guaranty
d. Temperate or moderate damages
for their settlement. The liability of the vessel owner and agent arising from the
It may be recovered when the court finds that some pecuniary loss has been
operation of such vessel were confined to the vessel itself, its equipment, freight,
suffered but its amount cannot be provided with certainty.
and insurance.
15
Philippine maritime law is of Anglo-American extraction, and is governed by
adherence to both international maritime conventions. This is highlighted by the
following excerpts on the limited liability of vessel owners and/or agents:
“Section 183. The liability of the owner of any vessel xxx for any embezzlement, loss
or destruction by any person or any property xxx or for any loss, damage xxx
without the privity or knowledge of such owner or owners shall not exceed the
amount or value of the interest of such owner in such vessel xxx.” (US federal
Limitation of Liability Act).
B. Statutory Provisions
The statutory provisions that provide for the limited liability rule are Arts. 587, 590,
643 and 837 of the Code of Commerce
· Art. 587: “The ship agent shall also be civilly liable for the indemnities in favor of
third persons xxx but he may exempt himself therefrom by abandoning the vessel
with all her equipments xxx.”
· Art. 590: “The co-owners of the vessel shall be civilly liable in the proportion of
their contributions xxx for the results of the acts of the captain xxx.
Each co-owner may exempt himself from this liability by the abandonment xxx.”
· Art. 643: “If the vessel and her cargo should be totally lost by reason of capture or
wreck, all rights shall be extinguished xxx
· Art. 837: “The civil liability incurred by the shipowners in the case prescribed in
this section, shall be understood as limited to the value of the vessel with all her
appurtenances and freight earned during the voyage.”
C. Coverage
Art. 837 applies the principle of limited liability in cases of collision. While Arts. 587
and 590 embody the universal principle of limited liability in all cases. However,
taken together, Arts. 837, 587, and 590 cover only: (1) liability to third persons, (2)
acts of the captain, and (3) collisions.
D. Exceptions
Exceptions to the limited liability rule:
(a) where the injury or death to a passenger is due either to the fault of the
shipowner, or to the concurring negligence of the shipowner and the captain
(b) where the vessel is insured
(c) in workmen's compensation claim
16
a. Negligence
The limited liability rule applies if the captain or the crew caused the damage or
injury.
However, if the failure to maintain in the seaworthiness of the vessel can be ascribed
to the shipowner alone or the shipowner concurrently with the captain, then the
limited liability principle cannot be invoked.
b. Insurance
The limited liability rule does not apply to insurance claims. The Supreme Court
explained that the total loss of a vessel does not extinguish the liability of the
carrier's insurer. Its insurance answers for the damages that a shipowner or agent,
may be held liable for by reason of the death of its passengers.”
c. Worker's compensation
The Supreme Court held that the limited liability rule have no room in the
application of the Worker's Compensation Act which seeks to improve, and aims at
the amelioration of, the condition of laborers and employees. Such compensation
has nothing to do with the provisions of the Code of Commerce. It is an item in the
cost of production which must be included in the budget of any well-managed
industry.
E. Abandonment
Abandonment of the vessel, its appurtenances and the freightage is an
indispensable requirement before the shipowner or shipagent can enjoy the benefits
of the limited liability principle. If the carrier does not want to abandon the vessel,
then he is still liable even beyond the value of the vessel.
The only instance where such abandonment is dispensed with is when the vessel
was entirely lost. In such case, the obligation is thereby extinguished.
F. Procedure for Enforcement
The Supreme Court stated that “more to the point, the rights of parties to claim
against an agent or owner of a vessel may be compared to those of creditors against
an insolvent corporation whose assets are not enough to satisfy the totality of claims
as against it... Creditors must limit their recovery to what is left in the name of the
corporation.”

III. PROTESTS
Protest is the written statement by the master of a vessel or any authorized officer,
attested by proper officer or a notary, to the effect that damages has been suffered
by the ship.
Protest is required under the Code of Commerce in the following cases:
(a) when the vessel makes an arrival under stress
(b) where the vessel is shipwrecked
(c) where the vessel has gone through a huricane or the captain believes that the
cargo has suffered damages or averages
(d) maritime collisions
(di)
IV. ADMIRALTY JURISDICTION
The Regional Trail Court has jurisdiction in all actions in admiralty and maritime
jurisdiction where the demand or claim exceeds P300,000 or, in Metro Manila,
where such demand or claim exceeds P400,000. (Sec. 19(3) of BP Blg. 129.
It means that all other cases where the amount of the demand or claim is less than
the jurisdictional amount in the Regional Trail Court, the jurisdiction are with the
metropolitan Trial Court, Municipal Trial Court or Municipal Circuit Trial Court as
the case may be.
CHAPTER 7
VESSELS
I. GENERAL CONCEPTS
A. Definitions
A Vessel or watercraft is defined under Presidential Decree No. 474 as “any barge,
lighter, bulk carrier, passenger ship freighter, tanker, container ship, fishing boats,
or other artificial contrivance utilizing any source of motive power, designed, used
or capable of being used as a means of transportation operating either as a common
contract carrier, including fishing vessels covered under Presidential decree No. 43,
except: (i) those owned and/or operated by the Armed Forces of the Philippines
and by foreign governments for military purposes, and (ii) bancas, sailboats and
other waterbone contrivance of less than three gross tons capacity and not
motorized.”
17
B. Construction, Equipment and Manning
The construction, equipment and manning of vessels are subject to the rules issued
by the Maritime Industry Authority. This rule is consistent with the provisions of
Code of Commerce particularly Art. 574.
C. Personal Property
Vessels are personal property under Art. 416 of the Civil Code. The same rule can be
found in Art. 585 of the Code of Commerce.
II. OWNERSHIP
A. Acquisition
Vessels may be acquired or transferred by any means recognized by law. Thus,
vessels may be sold, donated, and may even be acquired through prescription.
B. Registration
Vessels are now registered through the Maritime Industry Authority.
It is a long standing rule that the person who is the registered owner of the vessel is
presumed to be the owner of the vessel. Moreover, it is likewise a settled rule that
the sale or transfer of the vessel is not binding on third persons unless the same is
registered.
III. SHIP'S MANIFEST
Vessels are required to carry manifests in coastwise trade as provided in Section 906
of the Tariff and Customs Code. This requirement is likewise imposed on every
vessel from foreign port under Section 1005 of the same Code.
A manifest is a declaration of the entire cargo. Hence, the requirement is not
complied even if a bill of lading can be presented. A bill of lading is just a
declaration of a specific cargo rather than the entire cargo.
IV. MORTGAGE
Mortgage and other encumbrances over vessels are governed by the provisions of
presidential Decree 1521, otherwise known as the Ship mortgage Decree of 1978.
The same law as well as Section 12 of Executive Order 125 as amended is being
implemented with respect to annotation/cancellation of mortgages and transfer of
rights and other encumbrances of vessels by Memorandum Circular No. 100 which
was issued by MARINA in April 1995.
V. OTHER CODE OF COMMERCE PROVISIONS
The provisions of the Code of Commerce are deemed modified not only by the Civil
Code but also by special laws.
VI. SAFETY REGULATIONS
On February 23, 2000, MARINA under Memorandum Circular No. 154 reiterated
the rules in line with the continuing thrust of government to foster maritime safety.
CHAPTER 8
PERSONS WHO TAKE PART IN MARITIME COMMERCE
I. SHIPOWNERS AND SHIP AGENTS
The Code of Commerce at times uses the term “naviero” to indicate the person who
is liable. The “naviero” has been construed to include: the shipowner, ship agent
and even the charterer who is considered as owner pro hac vice.
Shipowner – is the person who is primarily liable for damages sustained in the
operation of the vessel.
Ship agent – is the person entrusted with provisioning of the vessel, or who
represents her in the port in which she happens to be.
The Code of Commerce makes the ship agent jointly and severally liable with the
owner. The joint and several liability applies both breach of contract and extra-
contractual obligation such as tort. The ship agent, eventhough he is not the owner,
is liable in every way to the creditor for losses and damages, without prejudice to
his right against the owner, the vessel and its equipment and freight.
A. Part Owners
Art. 586 of the Code of Commerce states that “if two or more persons should be part
owners of a merchant vessel, a partnership shall be presumed as established by the
co-owners.
Art. 590 of the Code of Commerce states further that “the co-owners of vessel shall
be civilly liable in the proportion of their interests in the common fund....”
B. Ship Agent
a. Powers.
The ship agent may discharge the duties of captain of the vessel.
b. Limitation on Power,
18
The ship agent may not order a new voyage, or make contracts for a new charter, or
insure the vessel, without the authorization of its owner.
c. Duty to Account.
The ship agent managing for an association shall render to his associates an account
of the results of each voyage of the vessel.
d. Reimbursement and Liabilities
The co-owners shall pay the expenses in proportion to their interest. In order to
enforce the payment, the managing agent shall be entitled to an executory action
(“accion ejecutiva”), which shall be instituted by virtue of a resolution of the
majority.
The ship agent shall indemniify the captain for all the expenses he may have
incurred with funds of his own or of others, for the benefit of the vessel.
e. Discharge of Captain and Crew
The provisions of the Code of Commerce on discharge of the captain of the crew is
subject to the provisions of the Labor Code of the Philippines for those who are
employed for domestic transportation or commerce as well as rules promulgated
the Philippine Overseas Employment Administration (POEA) for seamen who are
hired for overseas employment.
II. CAPTAINS AND MASTERS OF VESSELS
A. Concept
The name of captain or master is given according to the kind of vessel the person is
in charge of.
Captain - as a denomination is applied to those who govern vessels that navigate
the high seas or ships of large dimensions and importance, although they be
engaged in the coastwise trade.
Master – are those who command smaller ships engaged exclusively in the
coastwise trade.
Nevertheless, for the purposes of maritime commerce, the words “captain” and
“master” have the same meaning; both being the chiefs or commanders of ships.
B. Qualifications
Art.609 of the Code of Commerce states that “Captains, amsters or patrons of
vessels must be Filipinos, have legal capacity to contract in accordance with this
code, and prove the skill, and qualifications necessary to command and direct the
vessel, as established by marine and navigation laws, ordinances, or regulations...”
C. Powers and Functions
A captain commonly performs three (3) distinct roles:
(1) he is a general agent of the shipowner;
(2) he is also commander and technical director of the vessel; and
(3) he is a representative of the country under whose flag he navigates
Of these roles, the most important role is being the commander of the vessel---
operation and preservation of the vessel during its voyage and the protection of
passengers, crew and cargo.
In his role as general agent of the shipowner, the captain has authority to sign bills
of lading, carry goods aboard and deals with the freight earned, agree upon rates
and decide whether to take cargo. He has legal authority to enter into contracts with
respect to the vessel subject to applicable limitations by statute, contract, or
instructions and regulations of shipowner.
D. Discretion of Captain or Master
A ship's captainmust be accorded a reasonable measure of discretionary authority to
decide what the safety of the ship and of its crew and cargo. The captain is held
responsible for such safety, presumed to be knowledgeable as to the specific
requirements of seaworthiness and the particular risks and perils of the voyage he is
to embark on.
Indeed, if the ship captain is convinced that the ship owner's or ship agent's
instructions will result in imposing unacceptable risks or loss or serious danger to
ship or crew, he cannot casually seek absolution from his responsibility, if a marine
casualty occurs, in following such instructions.
E. Pilotage
Pilot - in maritime law, is a person duly qualified, and licensed, to conduct a vessel
into or out of ports, or in certain waters.
States possessing harbors have enacted laws or promulgated rules requiring vessels
approaching their ports to take on board pilots licensed under the local law. This is
known as compulsory pilotage.
In this juridiction, compulsory pilotage is being implemented in the Port of Manila.
19
A pilot shall be held responsible for the direction of a vessel from the time he
assumes his work as a pilot thereof until he leaves it anchored or berthed safely.
However, his responsibility shall cease at the moment the Master neglects or refuses
to carry out his order.
a. Master and Pilot
Generally, the pilot supersedes the master for the time being in the command and
navigation of the ship, and his orders must be obeyed in all matters connected with
her navigation. He becomes the master pro hac vice and should give all directions as
to speed, course, stopping and reversing, anchooring, towing and the like.
b. Shipowner and Pilot
In general, a pilot is personally liable for damages caused by his own negligence or
default to the owners of the vessel, and to third parties for damages sustained in
collision. Such negligence of the pilot in the performance of duty constitutes a
maritime tort.
The owners of the vessel are responsible to the injured party for the acts of the pilot.
c. Pilot and His Association
The fact that the pilot is a member of an association does not make the association
jointly and severally liable. It is because there is no employer-employee relationship.
F. Code of Commerce Provisions on Captains
A shipowner would only be liable for contracts made by the captain (a) when duly
authorized or (b) even when authorized, for ship repairs, or for equipping or
provisioning the vessel when the proceeds are invested therein.
III. OFFICERS AND CREW OF VESSELS
Art. 648 of the Code of Commerce provides that “the complement of a vessel shall
be understood all the persons on board, from the captain to the cabin boy, necessary
for the management, maneuvers, and service....”
The officers who are named in the regulation issued by MARINA in connection
with safe manning for international trade are: Master, Deck Officer, Chief Engineer,
Engineer Officer, Radio Officer, Ratings Man.
Memorandum Circular No. 148 issued by MARINA for domestic trade specifies the
following officers: Officer, Master, Chief Mate, Deck Officer, Chief Engineer Officer,
Second Engineer Officer, Engineer Officer, Medical Practitioner, Radio Officer,
Paramedic, Major Patron, Minor Patron, Boat Captain, Marine Diesel
Mechanic,Electrician, Ratings Man.
A. Regulation of Merchant Marine Profession
The practice of marine profession is now governed by special laws and pertinent
rules issued by MARINA and the Board of Marine Deck Officers and Board of
Marine Engineer Officers. In particular, the “Philippine Merchant Marine Officers
Act of 1998” was passed in order to regulate Merchant Marine Profession in the
Philippines.
The law declares that “it is the policy of the State to promote and insure the safety of
life and property at sea, protect and serve the marine environment and ecology...”
B. Minimum Safe Manning
It is not enough that the officers manning the merchant vessel have all the
qualifications imposed by the Philippine Merchant Marine Officers Act and other
special laws or regulations. It is also required that there is sufficient number of
officers and crew that are serving in the vessel.
No foreign officers shall be allowed on board unless approved by the
administration.
C. Security of Tenure
Every worker in the Philippines has a constitutionally protected right to security of
tenure. Consequently, an employee cannot be dismissed without just or lawful
cause and without affording the employee with due process.
The Labor Code provisions apply to officers and crew of merchant vessels engaged
in domestic trade or coastwise shipping.
CHAPTER 9
CHARTER PARTIES
I. DEFINITION AND CONCEPT
Charter Party – a contract whereby an entire ship, or some principal part of the said
ship, is let by the owner thereof to a merchant or other person for a specified time or
use for the conveyance of goods, inconsideration of the payment of freight.
The charter contract is often to as a form of “mercantile lease” for it involves a
charterer who desires to lease a ship or vessel owned by another for transport of his
or her goods for commercial purposes.
II. DIFFERENT KINDS OF CHARTER PARTIES
(1) The Bareboat or Demise Charter; and
20
(2) Contract of Affreightment
A. Bareboat Charter
In a bareboat or demise charter, the shipowner leases to the charterer the whole
vessel. The charterer becomes the owner “pro hac vice” of the vessel since he mans
the vessel with his own set of master and crew, effectively becoming the owner for
the voyage or service stipulated, subject however to any liability for damages
arising from negligence.
Moreover, the bareboat charterer assumes the customary rights and liabilities of the
shipowner in relation to third persons who may have dealt with him or with the
vessel.
B. Contract of Affreightment
The contract of Affreightment is subdivided into:
(1) Time Charter, and
(2) Voyage Charter
Time Charter – the vessel is leased to the charterer for a fixed period of time.
Voyage Charter – the vessel is leased for a single or particular voyage.
In the contract of affreightment, the charterer hires the vessel only, either for a
determinate period of a time or for a single or consecutive voyage, with the
shipowner providing for the provisions of the ship, the wages of the master and
crew, and the expenses and maintenance of the vessel.
III. EFFECT OF CHARTER ON CHARACTER OF CARRIER
Generally, the character of the common carrier as such is not affected by the charter
party if the same is a contract of affreightment. The rights and responsibilities of
ownership still rested on the owner, and the charterer was thereby freed from any
liabiltiy to third persons in respect of the vessel.
IV. PERSONS WHO MAY MAKE CHARTER
The owner or owners of the vessel, either in whole or in majoority part, who have
legal control and possession of the vessel, may validly enter into charter parties with
a charterer.
A third person called a broker may, however, intervene in the execution of the
charter between the principals.
The charterer, by himself, may subcharter the entire vessel to a third person but
only in the event that there is no prohibition in the original charter. The subcharter,
where entered into, is an independent contract by itself involving only the charterer
and the subcharterer and therefore does not give rise to any contractual relation
between the general owner and the subcharterer.
V. REQUISITES OF A VALID CHARTER PARTY
As the charter party is a contract, it is therefore to be governed by the general
principles governing ordinary contracts. Hence, the aprties therein are free to
stipulate upon such terms and conditions that would suit their purposes, subject to
the caveat that these should not be contrary to law or public policy.
The requisites of a charter may be enumerated thus:
(1) consent of the contracting parties;
(2) an existing vessel which should be placed at the disposition of the shipper;
(3) the freight; and,
(4) compliance with the requirements of Art. 652 of the Code of Commerce
VI. FREIGHT
The parties themselves may fix the manner or form in which the charter price or
money shall be satisfied.
If there should be no stipulation, the rules should be that: (1) the freight shall begin
to run from the day of loading of the vessel; (2) in charters with a fixed period, the
freight shall begin upon that very day; and (3) if the freight is charged according to
weight, the payment thereof shall be made according to the gross weight, including
the weight of the containers.
VII. DEMURRAGE AND DEADFREIGHT
Art. 652 of the Code of Commerce (par. 10) provides that the time for loading and
unloading shall be provided for in the Charter Party. The period so stipulated is
what is known as the “lay days.”
Demurrage – a sum of money due by express contract for the detention of the vessel
in loading or unloading, beyond the time allowed for that purpose in the charter
party.
21
Deadfreight – the charterer may be made liable by the shipowner where the
charterer failed to occupy the leased portion of the vessel.
In connection with demurrage, it has been observed that unless the contrary
intention appears in the charter party, the stipulate dlay days do not begin to run
against the consignee until the vessel has arrived at berth or other usual and
customary place for loading or unloading, and is in actual readiness to discharge its
cargo in accordance with its legal obligation.
VIII. RIGHTS AND OBLIGATIONS OF THE CHARTER PARTIES
A. Shipowner or Captain
The evident failure or refusal on the part of the shipowner or of his agents to receive
cargo which had been contracted to be transported under the charter party
constituted a sure breach of the charter party, as to warrant a suit for damages by
the charterer for such breach.
Some of the primary rights and obligations of shipowners or captain:
(a) the shipowner is bound to observe the capacity of the vessel...;
(b) generally, any loss incurred by the shipper whose cargo is refused on account of
the receipt by the shipowner of a greater amount of cargo belonging to other
persons shall be for the account of the shipowner in the form of indemmnity;
(c) if there should be several charter parties, and due to lack of space, preference
shall be given to the person who is first in loading his cargo;
(d) the shipowner may effect a substitution in respect of the vessel so long as the
substitute vessel had been duly inspected and seaworthy;
(e) after three-fifths of the vessel is loaded, the shipowner may not substitute the
chartered vessel, unless he procures the consent of the charterers;
(f) the captain may not, if the vessel has been chartered in whole, accept cargo from
any other persons unless the consent of the charterer is obtained;
(g) the shipowner may also be generally held liable for damages incurred by the
charterer due to the voluntary delay of the captain in putting to sea.
A shipowner may ask for rescission of the charter party in the case the owner sold
the vessel before the charter has begun to load the vessel. However, the charterer
may recover damages to the extent of its losses.
B. Charterer
The rights and obligations of the charterer may be summarized as follows:
(a) the charterer shall have the right to subcharter the vessel to a third person only if
he is authorized by the owner;
(b) a charterer who loads goods different from that contracted upon, without the
knowledge of the shipowner or captain, or which results to damage shall be liable to
indemnify the parties injured thereby;
(c) should illicit cargo be shipped by the charterer with the knowledge of the
shipowner or captain, the said charterer shall be jointly liable with the shipowner
for all damages caused to other shippers;
(d) the charterers and shippers may not abandon the goods damaged due to
inherent defects or fortuitous events.
IX. EFFECT OF BILL OF LADING
If a bill of lading was issued by the shipowner to the charterer, the charter party still
governs their rights and the bill of lading may be used as proof of receipt of the
goods.
CHAPTER 10
LOANS ON BOTTOMRY AND RESPONDENTIA
I. DEFINITIONS AND CONCEPT
Bottomry – is a contract whereby the owner of a ship borrows for the use,
equipment or repair of the vessel, for a definite term, and pledges the ship as
security, with the stipulation that if the ship is lost during the voyage or during the
limited time on account of perils enumerated, the lender shall lose his money.
Where the goods, or some part thereof, are hypothecated as security for a loan, the
payment of which is dependent upon maritime risks, what ensues is a loan on
respondentia.
Loan on Respondentia – it is the borrower's personal responsibility which is deemed
to be the principal security for the performance of the contract.
II. DISTINGUISHED FROM SIMPLE LOAN
(a) in bottomry or respondentia, the rate of interest is not subject to the Usury Law
on account of extraordinary risks involved whereas in simple loan, the rate of
interest must not exceed the ceiling fixed by the Usury Law;
22
(b) in bottomry or respondentia, there must be a marine risk, whereas in simple
loan, there need not be risks involved;
(c) the loan on bottomry or respondentia must be executed in accordance with form
and manner required in the Code of Commerce, whereas in a simple loan, the
formal requisites regarding contracts in general would apply;
(d) the loan on bottomry or respondentia must be recorded in the registry of vessels,
whereas in simple loan, no such registration is required;
(e) in the loan on bottomry or respondentia, preference is extended to the last
lender, whereas in simple loan, the first lender, as a general rule, enjoys preference.
There may be events where the loan on bottomry or respondentia may be regarded
as simple loan only.
III. PARTIES TO THE LOANS
The shipowner may secure a loan on bottomry upon his ship.
In the case where the shipowner is only a part owner, any bottomry that he may
contract shall be limited only to the extent of his interest in the vessel.
There are instances when the captain, although he has no interest in the ship, may
enter into a loan on bottomry on account of extreme necessity under Arts. 583 and
611 of the Code of Commerce.
The cargo owner on the other hand shall have the right to enter into loan on
respondentia involving his cargo.
IV. CONSEQUENCES OF LOSS EFFECTS OF THE LOANS
If the effects of the loans be lost due to an accident of the sea during the time, and on
the occasion of the voyage which has been designated in the contract and it is
proven that the cargo was on board, then the lender loses the right to institute the
action which would pertain to him as such.
The lender, however, retains such right of action if the loss was caused by the
inherent defect of the thing, or through the fault or malice of the borrower, or
through barratry on the part of the captain, or if it was caused by the damages
suffered by the vessel.
If what transpires is a shipwreck, the amount fot the payment of the loan shall be
reduced to the proceeds of the effects which have been saved but only after
deducting the costs of the salvage.
If the loan should be on vessel or any of her parts, the freight earned during the (a) there must be a common danger
voyage for which the loan was contracted shall also be liable for its payment, as far (b) that for the common safety, part of of the vessel or of the cargo or both is
as it may reach. sacrificed deliberately
(c) that from the expenses or damages caused follows the successful saving of the
vessel and cargo
(d) that the expenses or damages should have been incurred or inflicted after taking
proper legal steps and authority
CHAPTER 11 a. Common danger
It means that both the ship and the cargo are subject to the same danger, whether
AVERAGES
during the voyage, or in the port of loading or unloading.
I. AVERAGES IN GENERAL
b. Deliberate sacrifice
Art. 806 of the Code of Commerce considered averages as:
There must be a voluntary sacrifice of a part for the benefit of the whole in order to
(a) all extraordinary or accidental expenses which may be incurred during the
justify general average contribution.
voyage in order to preserve the vessel, the cargo, or both;
c. Sacrifice must be successful
(b) any damages or deteriorations which the vessel may suffer from the time it
No general contribution can be demanded if the vessel and other cargo that are
ppputs to sea from the port of departure until it casts anchor in the port of
sought to be saved were in fact not saved.
destination, and those suffered by the merchandise from the time they loaded in the
d. Compliance with legal steps
port of shipment until they are unloaded in the port of their consignment.
The expenses or damages should have been incurred or inflicted after taking proper
Petty or ordinary expenses incident to navigation shall be considered ordinary
legal steps and authority as prescribed in Arts. from 813 to 815 of the Code of
expenses to be defrayed by the shipowner, unless there is an express agreement to
Commerce:
the contrary.
Art. 813 – there must be resolution of the captain
Art. 814 – the resolution must be entered in the log book
II. SIMPLE AVERAGE
Art. 815 – the captain shall direct the jettison, and shall order the goods cast
Simple average – include all the expenses and damages caused to the vessel or to
overboard
her cargo whci have not inured to the common benefit and profit of all the persons
The Code of Commerce expressly provides that gross or general average shall be
interested in the vessel and her cargo.
borne by those who benefited from the sacrifice: the shipowners and the owners of
Since simple or particular averages do not inure to the common benefit, the owner
the cargoes that were saved. Contribution may also be imposed on the insurers of
of of the goods that suffered the damage bears the loss.
the vessel or cargoes that were saved as well as lenders on bottomry or
e.g. losses suffered by the cargo either on account of inherent defect of the goods or
respondentia.
by reason of an accident of the sea or force majeure.
The owner of the goods which were sacrificed is entitled to receive the general
average contribution. However, the following goods even if sacrificed are not
III. GENERAL AVERAGE
covered: 1) goods carried on deck; 2) goods that are not recorded in the books or
General or gross average – include all damages and expenses which are deliberately
records of the vessel; and 3) fuel for the vessel if there is more than sufficient fuel for
caused in order to save the vessel, its cargo or both at the same time, from real and
the voyage.
known risk.
The Supreme Court adopted the following requisites of general averages:
23
IV. YORK – ANTWERP RULES
Although the Code of Commerce provisions on averages are still in force, the parties
may, by stipulation in the charter party or any written agreement, agree that the
York-Antwerp Rules shall be applied.
The York-Antwerp Rules may also be used to solve controversies where no
provision in the Code of Commerce is in point because the said rules embody the
custom of maritime states.
CHAPTER 12
COLLISIONS
I. CONCEPT
Collision – as applied to Maritime Commerce, is an impact or sudden contact of a
vessel with another whether both are in motion or one stationary.
Zones of collision:
(a) all the time up to the moment when the risk of collision may be said to have
begun. Within this zone, no rule is applicable because none is necessary
(b) the time between the moment when risk of collision begins and the moment
when it has become a practical certainty. The burden is on the vessel required to
keep away and avoid the danger
(c) the time between the moment of actual contact. The rule is that the vessel which
has forced the privileged vessel into danger is responsible even if the privileged
vessel has committed an error within that zone
II. APPLICABLE LAW
Liabilities of shipowners and ship agents as well as the captain or crew in collision
cases is governed by the provisions of the Code of Commerce on Collision.
III. RULES ON LIABILITY
Although the liability with respect to collision is not governed by quasi-delict,
liability in collision cases are still negligence based.
In the determination of negligence, the same test of reasonable man in the position
of an expert that applies in quasi-delict. In some respect, however, the rules that
apply to quasi-delict cannot be applied in collision cases. For example, the view is
24
that the doctrine of last clear chance and the rule on contributory negligence cannot
be applied in collision cases.
If two vessels collided each other due to fault imputable to both, each vessel must
bear its own damages, and both shall be solidarily responsible for the losses and
damages occasioned to their cargoes (Art. 827 of the Code of Commerce).
If it cannot be determined which of the two vessels was at fault resulting in
collision, each of the vessels should bear their respective damages under the
doctrine of “inscrutable fault.” Neither of the carrier may go after the other. The
shipper may claim damages against the ship owners and the captains of both
vessels, having been both negligent. Their liability is solidary.
The shipowners have the right to recover damages from the masters of the vessels
who were both guilty of negligence.
Art. 835 of the Code of Commerce states that “the action for recovery of damages
and losses arising from collisions cannot be admitted without a previous protest or
declaration presented by the captain within 24 hours before the competent authority
of the point where the collision took place, or of the first port of arrival.” A maritime
protest is required to be made by the master of the vessel not by the passenger or
shipper.
IV. LIMITED LIABILITY RULE
In collision cases, the law limits the liability of the shipowner and ship agent:
Art. 837 of the Code of Commerce states that “the civil liability incurred by the ship
owners... shall be understood as limited to the value of the vessel with all its
appurtenances and freightage earned during the voyage.”
CHAPTER 13
ARRIVAL UNDER STRESS AND SHIPWRECKS
I. ARRIVAL UNDER STRESS
Arrival Under Stress – under Art. 819, is the arrival of the vessel at the nearest and
most convenient port which was decided upon after determining that there is a
well-founded fear of seizure, privateers, or pirates or reason of any accident of the
sea disabling it to navigate.
Steps to be taken in the determination of the propriety of an arrival under stress:
(a) the captain should determine during the voyage if there is well-founded fear of
seizure, privateers and other valid grounds;
(b) the captain shall then assemble the officers;
(c) the captain shall summon the persons interested in the cargo who may be
present and who may attend but without right to vote;
(d) the officers shall determine and agree if there is well-founded reason after
examining the circumstances. The captain shall have the deciding vote;
(e) the agreement shall be drafted and proper minutes shall be signed and entered
into the log book;
(f) objections and protests shall likewise be entered in the minutes.
II. SHIPWRECKS
Shipwreck – the demolition or shattering of the vessel caused by her driving ashore
or on rocks and shoals in the midseas, or by the violence of winds and waves in
tempest.
If several vessels sail under convoy, and any of them should be wrecked, the cargo
saved shall be distributed among the rest in proportion to the amount which each
one is able to take. If any captain should refuse, without sufficient cause, the captain
of the wrecked vessel shall enter a protest against him before two sea officials of the
losses and damages resulting therefrom, ratifying the protest within 24 hours after
arrival at the first port.
CHAPTER 14
SALVAGE
I. GOVERNING LAW
The law that governs salvage in this jurisdiction is Act No. 2616, otherwise known
as the “Salvage Law.”
II. DEFINITION AND CONCEPT OF SALVAGE
Salvage – a service which 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
25
with the care of them have either abandoned in distress at sea, or are unable to
protect and secure.
Salvage is founded on equity of remunerating private and individual services
performed in saving, whole or in part, a ship or its cargo from impending peril, or
recovering them after actual loss.
Kinds of salvage services:
(a) voluntary, wherein the compensation is dependent upon success
(b) rendered under a contract for a per diemor per horam wage payable at all events
(c) under a contract for compensation payable only in case of success
III. CLAIM FOR VALID SALVAGE AND ITS ELEMENTS
(a) there must be a marine peril
(b) the service is voluntarily rendered and is not required as an existing duty or
from special contract
(c) and, there must be success in whole or in part or that the service rendered
contributed to such success
Additionally, Section 1 of the Salvage Law makes clear of requirement that
(d) the vessel is shipwrecked beyond the control of the crew or shall have been
abandoned
Under Section 8 of the law, the following persons shall have no right to a reward:
(a) the crew of the vessel shipwrecked or which was in danger of shipwreck
(b) he who shall have commenced the salvage in spite of opposition of the captain of
of his representatives
(c) he who shall have failed to comply with the provisions of Sec. 3 of the Salvage
Law.
A. Abandonment
The requirement of section 1 of the salvage Law that the vessel sought to be
salvaged is shipwrecked beyond the control of the crew or abandoned, is present
when the vessel is considered a derelict.
IV. BASIS FOR ENTITLEMENT TO SALVAGE REWARD
A salvage reward should neither be too liberal nor too stingy. It should constitute a
sufficient compensation for the outlay and effort of the salvors.
V. RIGHTS AND OBLIGATIONS OF SALVORS AND OWNERS
The salvor is of course entitled of compensation for services rendered, and in the
enforcement of that right, he has, under the Salvage Law, a lien upon the property
salvaged whereby he is not bound to part with the possession of the vessel salvaged
or of the cargo saved until he is paid his due compensation.
When a vessel is found at sea, deserted, and has been abandoned by the master and
crew without the intention of returning and resuming possession, she is, in the
sense of the law, derelict, abandoned, and the finder who takes possession with the
intention of saving her gains a right of possession which he can maintain against the
true owner.
On the other hand, the owner of the vessel which is a derelict, does not renounce his
right to the property. There is no presumption of an intention to abandon such
property rights. What the owner abandons temporarily is his right of possession,
which is thereby transferred to the salvor who becomes bound to preserve the
property with good faith and bring it to a place of safety for the owner's use.
In Sec. 3 of the Salvage Law, the salvor shall convey and deliver the vessel or
merchandise as soon as possible to the collector of customs, if the port has a
collector, and otherwise to the provincial treasurer or municipal mayor.
If the owner does not make any claim within 3 months after the publication by the
authorities of a salvage report, the thing saved shall be sold at a public auction, the
proceeds shall be deposited in the National Treasury after deducting the expenses
and the proper reward to which the salvor is entitled.
CHAPTER 15
CARRIAGE OF GOODS BY SEA
I. HISTORY
COGSA was originally passed by the Congress of the United States on April 16,
1936 as Public Act. No. 521. It was later adopted on October 22, 1936 through
Commonwealth Act No. 65.
II. EXTENT OF APPLICATION
26
When the New Civil Code took effect on August 30, 1950, the said Code became the
primary law on carriage of goods by sea.
Nevertheless, the COGSA remains to be a suppletory law for such type of
transportation – international shipping.
III. THE LAW
The most important provisions of COGSA were already discussed and cited in the
earlier chapters.
· The term “goods” includes goods, wares, merchandise, and articles of every kind
whatsoever, except live animals cargo being carried on deck.
PART III
PUBLIC UTILITIES
CHAPTER 16
PUBLIC SERVICE REGULATIONS
I. CONCEPT
Public Utility – business or service engaged in regularly supplying the public with
some commodity or service of public consequence such as electricity, gas, water,
transportation, telephone or telegraph service.
As such, public utility services are impressed with public interest and concern,
hence they cease to juris privati only.
The term “public service” is therefore included in the broad concept of public
utilities.
Section 13 of the Public Service Act provides the definition of public service as the
term which “includes every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or compensation xxx and done for
general business purpose any common carrier xxx.”
II. REGULATORY AGENCIES
(a) Dept. of Transportation and Communication – for operation of national railroad
carriers
(b) Land Transportation Franchising Regulatory Board (LTFRB) – land
transportation
(c) The Land Transportation Office (LTO) – registration of drivers and motor
vehicles
(d) Maritime Industry Authority (MARINA) – water transportation
(e) Philippine Coast Guard – safety in water transportation
(f) National Telecommunications Commission – communication utilities and
services
(g) Energy Regulatory Board – electric or power companies
(h) National Water and Resource Council – water resources
(i) Civil Aeronautics Board – air transportation
(j) The Air Transportation Office – maintenance and operation of airports; registers
aircrafts; provides safety regulations in air transportation
(k) Philippine Ports Authority – wharves and ports
III. BASES OF REGULATION OF PUBLIC UTILITIES
The police power of the State justifies the regulation of public utilities. Whenever
private property is used for a public purpose and is affected with public interest, it
ceases to be juris privati only and becomes subject to regulation.
IV. OWNERSHIP OF PUBLIC UTILITIES
Ownership of public utilities is subject regulation by the State.
Under Sec. 11 of Art. XII of the Constitution states that “no franchise, certificate or
any other form of authorization for the operation of public utility shall be granted
except to citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines at least sixty per centum (60%) of whose capital is
owned by such citizens xxx.”
The Supreme Court clarified that the limit imposed by the Constitution on foreign
equity applies only to the operation of a public utility and not to ownership of the
facilities.
V. REGULATIONS OF RATES
27
The regulation of public utilities include the regulation of rates that they are
charging to the public. This aspect of regulation is in line with the policy of the State
to protect the public against arbitrary and excessive rates while maintaining the
efficiency and quality of services rendered.
A. Non-Delegation
The power to fix the rates of public utilities is a power that has been delegated to the
regulatory administrative agencies. As such, it cannot be further delegated by the
said administrative agencies.
· It should be noted, however, that EO no. 213 issued by the President of the
Republic of the Philippines on Nov. 28, 1994, instituted the deregulation of domestic
shipping rates.
B. Discrimination
Discrimination in the charging of rates is not allowed under existing law and rules.
C. Standard in Fixing Rates
The only standard which the legislature is required to prescribe for the guidance of
the administrative authority is that the rate be reasonable and just.
a. Factors to Consider
The Supreme Court ruled three major factors in determining the just and reasonable
rates to be charged by a public utility:
(a) rate of return
(b) rate base
(c) the rate itself or the computed revenue to be earned based on the rate of return
and rate base
VI. AUTHORITY TO OPERATE AS PUBLIC UTILITY
The power to authorize and control the operation of a public utility is admittedly a
prerogative of the legislature, since Congress is that branch of government vested
with plenary powers of legislation.
A. Issuance of Certificate of Public Convenience
A certificate of public convenience is different from a certificate of public
convenience and necessity in that the former requires prior issuance of municipal
franchise while the latter does not.
Basic requirements in the issuance of certificate of public convenience:
(a) the applicant must be a citizen of the Philippines, or corporations or associations
organized under the laws of the Philippines at least sixty per centum (60%) of
whose capital is owned by such citizens
(b) the applicant must be financially capable of undertaking the proposed service
and meeting the responsibilities incident to its operations
(c) the applicant must prove that the operation of the public service proposed and
the authorization to do business will promote the public interest in a proper and
suitable manner
Policies that may be used by the administrative body concerned in determining who
among the number of applicants is entitled to a certificate, aside from public
interest, convenience and necessity as controlling factor:
(a) Prior operator rule – protection of the first licensee's investment not to be
subjected to ruinous competition.
(b) Prior applicant rule – provides priority in the filing of application.
(c) Third operator rule – just a variation of the “prior operator rule”; instead of one
prior operator, there are two prior operators who are rendering sufficient service.
(d) Protection of investment rule – related to prior operator rule, the law aims not
only to protect the public but the operators as well.
B. Nature and Certificate of Public Convenience
Insofar as the State is concerned a certificate of public convenience constitutes
neither a franchise nor a contract, confers no property right, and is a mere license or
privilege.
C. Instances When Certificate of Public Convenience is not Required:
(a) warehouses
(b) vehicles drawn by animals and bancas moved by oar, and tugboats and lighters
(c) airships within the Philippines
(d) radio companies
(e) public services owned or operated by any instrumentality of the National
Government or by any government-owned or controlled corporations
Note, however, that airlines and radio companies are now under the Civil
Aeronautics Board and the National Telecommunications Commission.
D. Transfer of Certificate
28
The law really requires the approval of the Public Service Commission in order that
a franchise, or any privilege pertaining thereto, may be sold or leased without
infringing the certificate issued to the grantee.
The “Registered Owner Rule” applies if the transfer of the franchise was not
approved by the regulating agency.
The Supreme Court sustained the cancellation of the certificate of public
convenience:
(1) where the holder is a mere dummy;
(2) where the operator ceased operations and placed his vehicles on storage; and,
(3) where the operator totally abandoned the service.
VII. DUE PROCESS
The Public Service Commission and its successor regulatory agencies are acquired
to accord parties before them their right to administrative due process. This includes
the right to give the parties concerned notice and hearing.
CHAPTER 17
POWERS OF THE ADMINISTRATIVE AGENCIES
I. DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS
The Department of Transportation and Communications has the following powers
under EO No. 125-A:
· formulate and recommend national policies and guidelines for the preparation and
implementation of integrated and comprehensive transportation and
communication systems at national, regional and local levels.
· Establish and administer comprehensive and integrated programs for
transportation and communication.
· Assess and review and provide direction to transportation and communications
research and development programs.
· Administer and enforce all laws, rules and regulations in the field of transportation
and communications
· etc.
II. LAND TRSNPORTATION FRANCHISING AND REGULATORY BOARD
The powers of the LTFRB as provided for in EO No. 202 are:
· prescribe and regulate routes of service provided by motorized vehicles in
accordance with the public land transportation development plans and programs
approved by the department of Transportation and Communications.
· issue, amend, revise, suspend or cancel Certificates of Public Convenience
· determine, prescribe and approve and periodically review and adjust, reasonable
fares, rates and other related charges.
· etc.
III. LAND TRANSPORTATION OFFICE
The law that governs registration of motor vehicles in the Philippines is republic Act
No. 4136, otherwise known as the “Land Transportation and Traffic Code” (as
amended) which was enacted on June 20, 1964. The Code provides that the Land
Transportation Commission shall “control as far as they apply, the registration and
operation of motor vehicles and the licensing of owners, dealers, conductors,
drivers, and similar matters.”
The main functions of LTO are:
1. inspection and registration of motor vehicles
2. Issuance of licenses and permits
3. enforcement of Land Transportation Rules and Regulations
4. adjudication of traffic cases
IV. CIVIL AERONAUTICS BOARD
The CAB as mandated under republic Act No. 776 and amended by PD No. 1462 is
the agency charged with the power to regulate the economic aspects of air
transportation in the Philippines. It shall have the general supervision and
jurisdiction over air carriers as well as their properties, property rights, equipment,
and franchise.
V. AIR TRANSPORTATION OFFICE
The Air Transportation Office through its Air Safety Division has the following
main functions:
1. establishes minimum safety standards on the operating methods, flight
operations and maintenance activities of foreign and domestic carrier;
29
2. issues certificate of registration and airworthiness of aircraft; air carrier operating
certificate, air agency certificates, and certificate of airmen licenses.
There are two(2) services in the Air Transportation Office:
1. Airways Navigation Service
2. Air Traffic Service
VI. MARITIME INDUSTRY AUTHORITY
The powers of the MARINA as defined under EO No. 125 as amended by EO No.
125-A are:
· develop and formulate plans, policies, programs, projects, standards, promotions
and development of the maritime industry
· establish, prescribe and regulate routes, zones and/or areas of operations of
particular operators of public water services
· issue certificate of public convenience for the operation of domestic and overseas
water carriers
· register vessels as well as issue certificates, licenses or document necessary or
incident thereto
· undertake the safety regulatory functions pertaining to vessel construction and
operation
· enforce laws, prescribe and enforce rules and regulations, including penalties for
violations thereof, governing water transportation and the Philippine merchant
marine
· undertake the issuance of license to qualified seamen and harbor bay river pilots
· etc.
VII. PHILIPPINE COAST GUARD
PD No. 601 issued on Dec. 09, 1974 otherwise known as the “Revised Coast Guard
Law of 1974” provides the objectives and basic functions of the Philippine Coast
Guard. However, this is subject to the changes brought about by EO No. 125 and EO
No. 125-A and other special laws.
The objectives and powers of the Coast Guard are found in Sec. 2 and 5 of PD No.
601 which provide as follows:
· enforce or assist in the enforcement of all applicable laws upon the high seas and
territorial waters of the Philippines
· enforce laws, promulgate and administer regulations for the promotion of safety of
life and property within the maritime jurisdiction of the Philippines
· develop, establish, maintain and operate with due regard to the requirements of
national defense aids to maritime navigation for the promotion of safety on and
over high seas and territorial waters of the Philippines
· etc.

VIII. PHILIPPINE PORTS AUTHORITY

PD No. 857 issued in Dec. 1975 organized the Philippine Ports Authority. The law
recognized the need to integrate and coordinate port planning, development,
control and operations at the national level, and at the same time promote the
growth of regional port bodies responsive to the needs of their individual localities.

IX. NATIONAL TELECOMMUNICATIONS COMMISSION

The NTC is the government agency created under EO No. 546 and conferred with
regulatory and quasi-judicial functions.
Primarily, the NTC is the sole body that exercises supervision, adjudication and
control over telecommunications services. It adopts and promulgates guidelines,
rules, and regulations relative to the establishment, operation and maintenance of
various telecommunications facilities and services nationwide.
NTC remains under the administartive supervision of the Department of
Transportation and Communication as an attached agency. However, with respect
to its quasi-judicial functions, NTC's decisions are appealable only and directly to
the Supreme Court.

30