UP LAW BOC TRANSPORTATION LAW MERCANTILE LAW

MERCANTILE LAW
TRANSPORTATION
LAW

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I. Common Carriers
(Reference is to the Civil Code, unless
otherwise indicated)
A. CONCEPT
A contract of transportation is one
whereby a certain person or association of
persons obligate themselves to transport
persons, things, or news from one to
another for a fixed price.
Parties to the contract:
(1) Shipper - one who gives rise to the
contract of transportation by agreeing
to deliver the things or news to be
transported, or to present his own
person or those of other or others in the
case of transportation of passengers.
(2) Carrier or conductor - one who binds
himself to transport person, things, or
news, as the case may be, or one
employed in or engaged in the business
of carrying good for others for hire.
(3) Consignee - the party to whom the
carrier is to deliver the things being
transported; to whom the carrier may
lawfully make delivery in accordance
with its contract of carriage. The shipper
and the consignee may be the same
person.
Carriers are persons or corporations who
undertake to transport or convey goods,
property or persons, from one place to
another, gratuitously or for hire, and are
classified as:
(1) Private or special carriers, who
transport or undertake to transport in a
particular instance for hire or reward
[Agbayani, Commercial Laws of the
Philippines (1987)]; and
(2) Common or public carriers, defined in
Art. 1732.
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Common carriers are:
(1) Persons, corporations, firms or
associations;
(2) Engaged in the business of carrying or
transporting;
(3) Passengers or goods or both;
(4) By land, water, or air;
(5) For compensation;
(6) Offering their services to the public [Art.
1732].
Art. 1732 makes no distinction:
(1) Between one whose principal business
activity is the carrying of persons or
goods or both, and one who does such
carrying only as an ancillary activity
[Fabre v. CA (1996)];
(2) Between a person or enterprise offering
transportation service on a regular or
scheduled basis and one offering such
service on an occasional, episodic, or
unscheduled basis [Loadstar Shipping
Co., Inc. v. CA (1999)];
(3) Between a carrier offering its services to
the general public and one who offers
services or solicits business only from a
narrow segment of the general
population [De Guzman v. CA (1988)].
The true test for a common carrier is not the
quantity or extent of the business actually
transacted, or the number and character of
the conveyances used in the activity, but
whether the undertaking is a part of the
activity engaged in by the carrier that he has
held out to the general public as his
business or occupation. If the undertaking is
a single transaction, not a part of the
general business or occupation engaged in,
as advertised and held out to the general
public, the individual or the entity rendering
such service is a private, not a common,
carrier. The question must be determined by
the character of the business actually
carried on by the carrier, not by any secret
intention or mental reservation it may
entertain or assert when charged with the
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duties and obligations that the law imposes Common carrier Private carrier
[Teodoro v. Nicolas (2012)].
Governing law
A common carrier need not have fixed and
Civil Code; Code of Law on obligations
publicly known routes. Neither does it have
Commerce and and contracts
to maintain terminals or issue tickets [Asia
special laws, if not
Lighterage and Shipping v. CA (2003)].
regulated by the
One engaged in the business of Civil Code (Art.
transporting petroleum products from 1766); law of the
refineries via pipeline is a common carrier. country to which the
It is engaged in the business of transporting goods are to be
or carrying goods, i.e., petroleum products, transported, if
for hire as a public employment. It regarding liability
undertakes to carry for all persons for loss, destruction,
indifferently, that is, to all persons who or deterioration of
choose to employ its services, and goods
transports the goods by land and for Regulation
compensation. The fact that it has a limited
clientele does not exclude it from the A public service, Not subject to
definition of a common carrier [First Phil. therefore subject to regulation as a
Industrial v. CA (1998)]. provisions common carrier
governing common
A travel agency is not a common carrier. carriers and public
It is not an entity engaged in the business of utilities.
transporting either passengers or goods
and is therefore neither a private nor a
common carrier. Its covenant with its It is not necessary that the carrier be issued
customers is simply to make travel a certificate of public convenience [Loadstar
arrangements on their behalf [Crisostomo v. Shipping Co., Inc. v. CA (1999)].
CA (2003)].

Kabit system:
Common carrier Private carrier (1) It is an arrangement whereby a person
Availability who has been granted a certificate of
convenience allows another person who
Holds himself out in Agrees in some
owns motor vehicles to operate under
common, that is, to special case with
such franchise for a fee [Lita Enterprises,
all persons who some private
Inc. v. IAC (1984)].
choose to employ individual to carry
him, as ready to for hire (2) It is invariably recognized as being
carry for hire contrary to public policy and therefore
Binding effect void and inexistent under Art. 1409.
Thus, for the safety of passengers and
Bound to carry all Not bound to carry the public, the registered owner of the
who offer and for any reason, such vehicle is not allowed to prove that
tender reasonable goods as it is another person has become the owner
compensation for accustomed to so that he may be thereby relieved of
carrying them carry, unless it responsibility [Lim v. CA (2002)].
enters into a special
agreement to do so (3) One of the primary factors considered in
the granting of a certificate of public
Diligence required convenience for the business of public
Extraordinary Ordinary transportation is the financial capacity

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of the holder of the license, so that
liabilities arising from accidents may be
duly compensated. The kabit system
renders illusory such purpose and,
worse, may still be availed of by the
grantee to escape civil liability caused
by a negligent use of a vehicle owned by
another and operated under his license.
[Dizon v. Octavio (1955)].
(4) However, one who has availed of the
kabit system is not precluded from filing
for damages against another who
caused the injury, as the policy against
the kabit system will not be defeated by
giving such person standing to sue. [Lim
v CA (2002)]
Uber/Grab:
Transport Network Company or TNC
is defined as an organization whether a
corporation, partnership, or sole
proprietorship, that provides pre-arranged
transportation services for compensation
using an internet-based technology
application or a digital platform technology
to connect passengers with drivers using
their personal vehicles [DOTC D.O. No.
2015-011]. e.g. Uber and Grab.
The TNC may or may not have been granted
a Certificate of Public Convenience (CPC). If
it is a holder of a valid and current CPC, it is
known as a common carrier. Otherwise, it is
classified as a land transportation service
contractor.
The Partners (owners of the vehicles used in
transporting passengers) forming part of
the network of a TNC, may or may not be a
common carrier, depending on whether the
Partner(s) itself/themselves are holders of a
CPC. A mere Accreditation given by LTFRB
is not an equivalent to a CPC and will not
make said holder a common carrier. If the
Partner is a holder of a CPC, said Partner is
a common carrier. However, if the Partner
is not a holder of a CPC, said Partner is
merely a land transportation service
contractor [BIR RMC 70-2015].
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Note: Please be guided by the
requirements under Art. 1732.
B. DILIGENCE REQUIRED
B.1. STANDARD OF DILIGENCE
Common carriers, from the nature of their
business and for reasons of public policy,
are bound to observe extraordinary
diligence, according to all the
circumstances of each case:
(1) In the vigilance over the goods; and
(2) For the safety of the passengers
transported by them [Art. 1733].
Extraordinary diligence in the vigilance over
the goods is expressed in Arts 1734, 1735,
and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of
the passengers is further set forth in Art.s
1755 and 1756.
As stated in Art. 1733, extraordinary
diligence is required because of the (1)
nature of the business of common carriers
and (2) for reasons of public policy.
Extraordinary diligence:
(1) Requires rendering service with the
greatest skill and utmost foresight
[Agbayani (1987)];
(2) Requires carrying passengers safely as
far as human care and foresight can
provide, using the utmost diligence of
very cautious persons, with a due regard
for all the circumstances [Art. 1755];
(3) Does not require common carriers to
exercise all the care, skill, and diligence
of which the human mind can conceive,
nor such as will free the transportation
of passengers from all possible perils.
Note: A common carrier is not an insurer of
the safety of its passengers and is not
bound absolutely and at all events to carry
them safely and without injury [Yobido v. CA
(1997)].
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B.2. PRESUMPTION OF NEGLIGENCE
The mere proof of delivery of goods in good
order to a carrier, and of their arrival at the
place of destination in bad order, makes out
a prima facie case against the carrier, so
that if no explanation is given as to how the
injury occurred, the carrier must be held
responsible. It is incumbent upon the carrier
to prove that the loss was due to accident or
some other circumstance inconsistent with
its liability [Ynchausti Steamship v. Dexter
and Unson (1920)].
Note: While delay in the delivery of goods
is a breach of contract of carriage, it does
not raise the presumption of negligence
because the goods are not lost,
deteriorated, or destroyed [see Art. 1735].
In case of death of or injuries to passengers,
common carriers are presumed to have
been at fault or to have acted negligently,
unless they prove that they observed
extraordinary diligence as prescribed in Arts
1733 and 1755 [Art. 1756].
Note: Mere failure to reach one’s
destination, without injury or death, does
not raise the presumption of negligence
because it does not involve safety of the
passengers.
C. LIABILITIES
The obligation of the common carrier
consists in the transportation of passengers
or goods or both [Art. 1732].
The liabilities of a common carrier arises
from a contract of carriage. Thus, the cause
of action, when there is failure on its part to
exert extraordinary diligence according to
all circumstances, is for breach of contract
[Isaac v. A.L. Ammen (1957)].
In what follows, these liabilities in case of
breach, both with respect to vigilance over
the goods and safety of the passengers
transported, will be discussed.
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II. Vigilance over
Goods
A. LIABILITY, IN GENERAL
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 [Art. 1753].
Under Philippine law, the liability of the
common carrier with respect to vigilance
over goods, in general, are as follows:
(1) Common carriers are responsible for the
loss, destruction, or deterioration of the
goods [Art. 1734]. In fact, they are liable
even in those cases where the cause of
the loss or damage is unknown
[Agbayani (1987)].
(2) Moreover, if the goods are lost,
destroyed, or deteriorated, common
carriers are presumed to have been at
fault or to have acted negligently [Art.
1735].
Note: Two-pronged analysis in
determining liability:
(1) Whether or not the cause of the loss,
destruction, or deterioration is included
under Art. 1734;
(2) If not, whether or not the common
carrier exercised extraordinary diligence.
B. EXEMPTING CAUSES
General Rule: Common carriers are
responsible for the loss, destruction, or
deterioration of the goods
Exception: The same is due to any of the
following causes only:
(1) Flood, storm, earthquake, lightning, or
other natural disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
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(3) Act of omission of the shipper or owner
of the goods;
(4) The character of the goods or defects in
the packing or in the containers;
(5) Order or act of competent public
authority [Art. 1734].
In all other cases of loss, destruction, or
deterioration, the common carrier is
presumed to have been at fault or to have
acted negligently, unless they prove that
they observed extraordinary diligence [Art.
1735].
Thus, in De Guzman v. CA (1988), it was held
that hijacking, not being included in Art.
1734, must be dealt with under the
provisions of Art. 1735, and thus, the
common carrier is presumed to have been
at fault or negligent.
B.1. NATURAL DISASTER OR CALAMITY
Requisites:
(1) The natural disaster must have been the
proximate and only cause of the loss;
(2) The common carrier must exercise due
diligence to prevent or minimize the
loss before, during and after the
occurrence of the flood, storm or
natural disaster [Art. 1739];
(3) The common carrier must not have
negligently incurred delay [Art. 1740];
In order that a common carrier may be
absolved from liability where the loss,
destruction or deterioration of the goods is
due to a natural disaster or calamity, it must
be shown that such natural disaster or
calamity was the proximate and only cause
of the loss; there must be an entire
exclusion of human agency from the cause
of the injury of the loss [Philippine American
General Insurance Co., Inc. v. MGG Marine
Services, Inc. (2002)].
Moreover, even in cases where a natural
disaster is the proximate and only cause of
the loss, a common carrier is still required
to exercise due diligence to prevent or
minimize loss before, during and after the
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occurrence of the natural disaster, for it to
be exempt from liability under the law for
the loss of the goods [Art. 1739].
Fire may not be considered a natural
disaster or calamity. This must be so as it
arises almost invariably from some act of
man or by human means. It does not fall
within the category of an act of God unless
caused by lightning or by other natural
disaster or calamity. It may even be caused
by the actual fault or privity of the carrier
[Eastern Shipping Lines v. IAC (1987)].
Note: If the common carrier negligently
incurs in delay in transporting the goods, a
natural disaster shall not free such carrier
from responsibility [Art. 1740].
B.2. ACT OF PUBLIC ENEMY
Requisites:
(1) The act of the public enemy was
committed either in an international or
civil war [Art. 1734];
(2) The act of the public enemy must have
been the proximate and only cause;
(3) The common carrier must exercise due
diligence to prevent or minimize the
loss before, during and after the act of
the public enemy causing the loss,
destruction or deterioration of the
goods [Art. 1739].
B.3. ACT OR OMISSION OF SHIPPER OR
OWNER
The act or omission of the shipper must
have been the proximate and only cause of
the loss, destruction, or deterioration of the
goods.
If the shipper or owner merely contributed
to the loss, destruction or deterioration of
the goods, the proximate cause being the
negligence of the common carrier, the latter
shall be liable for the damages, which shall,
however, be equitably reduced [Art. 1741].
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B.4. CHARACTER OF THE GOODS
Requisites:
(1) The loss, destruction, or deterioration of
the goods is due to the character of the
goods or defects in the packing or in the
containers [Art. 1739];
(2) The common carrier must exercise due
diligence to forestall or lessen the loss
[Art. 1741].
If the fact of improper packing is known to
the carrier or its servants or apparent upon
ordinary observation, but it accepts the
goods notwithstanding such condition, it is
not relieved of liability for loss or injury
resulting therefrom [Southern Lines v. CA
(1962)].
B.5. ORDER OF COMPETENT AUTHORITY
Requisites:
(1) There must be an order or act of
competent public authority through
which the goods are seized or destroyed
[Art. 1734];
(2) The said public authority must have had
the power to issue the order [Art. 1743].
The intervention of the municipal officials
was not of a character that would render
impossible the fulfillment by the carrier of
the obligation. A carrier is not duty bound to
obey an illegal order (of a mayor) to dump
into the sea the scrap iron. There is absence
of sufficient proof that the issuance of the
order was attended with such force or
intimidation as to completely overpower the
will of the carrier’s employees [Ganzon v. CA
(1988)).
B.6. FORCE MAJEURE
Force majeure – in general, has also been
invoked as an exempting cause based on
Art. 1174, which states that no person shall
be responsible for a fortuitous event which
could not be foreseen, or which, though
foreseen, was inevitable.
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A fortuitous event has the following
characteristics:
(1) The cause of the unforeseen and
unexpected occurrence, or the failure of
the debtor to comply with his
obligations, must be independent of
human will;
(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;
and
(4) The obligor must be free from any
participation in the aggravation of the
injury resulting to the creditor.
There must be an entire exclusion of human
agency from the cause of injury or loss.
Moreover, a common carrier may not be
absolved from liability in case of force
majeure or fortuitous event alone. The
common carrier must still prove that it was
not negligent in causing the death or injury
resulting from an accident [Yobido v. CA
(1997)].
Loss of a ship and of its cargo, in a wreck
due to accident or force majeure must, as a
general rule, fall upon their respective
owners, except in cases where the wrecking
or stranding of the vessel occurred through
the malice, carelessness, or lack of skill on
the part of the captain or because the vessel
put to sea is insufficiently repaired and
prepared.
In order that the exemption due to force
majeure would apply, the carrier must prove
that the loss or destruction of the
merchandise was due to accident and force
majeure and not to fraud, fault, or
negligence on the part of the captain or
owner of the ship [Tan Chiong Sian v.
Inchausti (1912)].
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C. CONTRIBUTORY NEGLIGENCE
The liability of the common carrier shall be
equitably reduced when the loss,
destruction, or deterioration of the goods
when:
(1) The negligence of the common carrier
was the proximate cause thereof; and
(2) The shipper or owner merely
contributed to such loss, destruction, or
deterioration [Art. 1741].
D. DURATION OF EXTRAORDINARY
RESPONSIB ILITY FOR GOODS
The responsibility to exercise extraordinary
diligence begins from the time the goods
are unconditionally placed in the possession
of and received by the carrier for
transportation [Art. 1736].
The carrier’s responsibility terminates in any
of the following cases:
(1) When the goods are delivered actually
or constructively by the carrier to the
consignee or to the person who has a
right to receive them [Art. 1736];
(2) When the goods are temporarily
unloaded or stored in transit by reason
of the exercise of the shipper or owner
of his right of stoppage in transitu;
(3) When the consignee has been advised
of the arrival of the goods at the place
of destination and has had reasonable
opportunity to remove them or dispose
of them from the warehouse of the
carrier at the place of destination [Art.
1738].
In dealing with the contract of common
carriage of passengers, for purpose of
accuracy, there are two (2) aspects of the
same, namely:
(a) contract ‘to carry (at some future time),’
which contract is consensual and is
necessarily perfected by mere consent; and
(b) contract ‘of carriage’ or ‘of common
carriage,’ which should be considered as a
real contract for not until the carrier is
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actually used can the carrier be said to have
already assumed the obligation of a carrier
[Paras, Civil Code Annotated, 11th Ed].
Note: The distinction is important in
determining when the common carrier is
required to exercise extraordinary
responsibility. The birth of the contract is
not necessarily the birth of the duty to
exercise extraordinary responsibility.
D.1. DELIVERY OF GOODS TO COMMON
CARRIERS
Under Art. 1736, delivery means
unconditionally placing the goods in the
possession of the carrier and the carrier
receiving them for transportation.
Thus, if the common carrier received the
goods not for transportation but only for
safekeeping, then the duty of extraordinary
diligence has not yet started.
Unconditionally placing the goods in the
possession of the carrier means the shipper
cannot get them back from the common
carrier at will.
The liability of the carrier as common carrier
begins with the actual delivery of the
goods for transportation and not merely
with the formal execution of a receipt or bill
of lading; the issuance of a bill of lading is
not necessary to complete delivery and
acceptance. Even where it is provided by
statute that liability commences with the
issuance of the bill of lading actual delivery
and acceptance are sufficient to bind the
carrier [Cia. Maritima v. Ins. Co. of North
America (1964)].
D.2. ACTUAL/CONSTRUCTIVE DELIVERY
The extraordinary responsibility of the
common carrier ends when, subject to Art.
1738, the goods are delivered actually or
constructively by the carrier to:
(1) The consignee; or
(2) The person who has a right to receive
them (Art. 1736), such as agents, brokers,
and the like.
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Art. 1738 provides that the extraordinary
liability of the common carrier continues to
be operative even during the time the goods
are stored in a warehouse of the carrier at
the place of destination, until the consignee
has:
(1) Been advised of the arrival of the goods;
and
(2) Had reasonable opportunity thereafter
to remove them or otherwise dispose of
them.
Delivery of the cargo to the customs
authorities is not delivery to the consignee
or “to the person who has a right to receive
them” as contemplated in Art. 1736 because
in such case the goods are still in the hands
of the government and the owner cannot
exercise dominion over them. However, the
parties may agree to limit the liability of the
carrier considering that the goods still have
to go through the inspection of the customs
authorities before they are actually turned
over to the consignee. This stipulation is not
contrary to morals or public policy. This is a
situation where it may be said that the
carrier loses control of the goods because of
a custom regulation and it is unfair that it
be made responsible for what may happen
during the interregnum [Lu Do v. Binamira
(1957)].
D.3. TEMPORARY UNLOADING OR
STORAGE
The common carrier’s duty to observe
extraordinary diligence over the goods
remains in full force and effect even when
they are temporarily unloaded or stored in
transit, unless the shipper or owner has
made use of the right of stoppage in
transitu [Art. 1737].
General rule: Extraordinary diligence over
the goods remains even when the goods are
temporarily unloaded or stored in transit.
Exception: The duty to observe such
diligence ceases when shipper or owner
made use of the right of stoppage in
transitu.
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Stoppage in transitu is the act by which
the unpaid vendor of goods stops their
progress and resumes possession of them
constructively while they are in the course of
transit from him to the purchaser, and not
yet actually delivered to the latter [Agbayani
(1987)].
Basis: Under Art. 1530, when the buyer of
the goods becomes insolvent, the unpaid
seller who has parted with the possession of
the goods at any time while they are in
transit, may resume the possession of the
goods as he would have had if he had never
parted with the possession.
When the right of stoppage in transitu is
exercised, the common carrier holds the
goods in the capacity of an ordinary bailee
or warehouseman upon the theory that the
exercise of the right of stoppage in transitu
terminates the contract of carriage. Hence,
only ordinary diligence is required
[Agbayani (1987)].
E. STIPULATION FOR LIMITATION OF
LIABILITY
There are two possible stipulations limiting
the liability of the common carrier:
(1) Stipulation limiting the common
carrier’s liability as to the diligence
required; and
(2) Stipulation limiting the common
carrier’s liability as to the amount of
liability.
An agreement limiting the common carrier’s
liability for delay on account of strikes or
riots is also valid [Art. 1748].
E.1. AS TO DILIGENCE REQUIRED
A stipulation between the common carrier
and the shipper or owner limiting the
liability of the former for the loss,
destruction, or deterioration of the goods to
a degree less than extraordinary diligence
shall be valid, provided it be:
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(1) In writing, signed by the shipper or (2) Stipulation providing for an unqualified
owner; limitation of such liability to an agreed
stipulation [Heacock v. Macondray
(2) Supported by a valuable
(1921)].
consideration other than the service
rendered by the common carrier;
and
E.2. LIMITATION OF LIABILITY TO FIXED
(3) Reasonable, just and not contrary to AMOUNT
public policy [Art. 1744].
A stipulation that the common carrier’s
liability is limited to the value of the goods
appearing in the bill of lading, unless the
Any of the following or similar stipulations
shipper or owner declares a greater value, is
shall be considered unreasonable, unjust
binding [Art. 1749].
and contrary to public policy:
A contract fixing the sum that may be
(1) That the goods are transported at the
recovered by the owner or shipper for the
risk of the owner or shipper;
loss, destruction or deterioration of the
(2) That the common carrier will not be goods is valid if:
liable for any loss, destruction, or
(1) It is reasonable and just under the
deterioration of the goods;
circumstances; and
(3) That the common carrier need not
(2) It has been fairly and freely agreed upon
observe any diligence in the custody of
[Art. 1750].
the goods;
While a passenger may not have signed the
(4) That the common carrier shall exercise
plane ticket, he is nevertheless bound by
a degree of diligence less than that of a
the provision thereof; such provisions have
good father of a family, or of a man of
been held to be part of the contract of
ordinary prudence in the vigilance over
carriage and valid and binding upon the
the movables transported;
passenger regardless of the latter’s lack of
(5) That the common carrier shall not be knowledge or assent to the regulation. It is
responsible for the acts or omission of what is known as a contract of adhesion
his or its employees; wherein one party imposes a ready-made
form of contract on the other. The one who
(6) That the common carrier’s liability for
adheres to the contract is in reality free to
acts committed by thieves, or of robbers
reject it entirely. A contract limiting liability
who do not act with grave or irresistible
upon an agreed valuation does not offend
threat, violence or force, is dispensed
against the policy of the law forbidding one
with or diminished;
from contracting against his own
(7) That the common carrier is not negligence [Ong Yiu v. CA (1979)].
responsible for the loss, destruction, or
[However], the fact that the conditions are
deterioration of goods on account of the
printed at the back of the ticket stub in
defective condition of the car, vehicle,
letters so small that they are hard to read
ship, airplane or other equipment used
would not warrant the presumption that the
in the contract of carriage [Art. 1745].
[shipper] was aware of those conditions
such that he had “fairly and freely agreed”
The following stipulations are also void: to those conditions [Shewaram v. PAL
(1966)].
(1) Stipulation exempting the common
carrier from any and all liability for loss
or damage occasioned by its own
negligence;

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Factors Affecting Agreement
The effect of these stipulations is subject to
the following provisions:
(1) An agreement limiting the common
carrier’s liability may be annulled by the
shipper or owner if the common carrier
refused to carry the goods unless the
former agreed to such stipulation [Art.
1746].
(2) 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 [Art. 1747]. The limitation may be
availed of if the delay or change of route
was due to a just cause.
(3) The fact that the common carrier has no
competitor along the line or route, or a
part thereof, to which the contract
refers shall be taken into consideration
on the question of whether or not a
stipulation limiting the common
carrier’s liability is reasonable, just and
in consonance with public policy [Art.
1751].
(4) Even when there is an agreement
limiting the liability of the common
carrier in the vigilance over the goods,
the common carrier is disputably
presumed to have been negligent in
case of their loss, destruction or
deterioration [Art. 1752].
E.3. LIMITATION OF LIABILITY IN
ABSENCE OF DECLARATION OF
GREATER VALUE
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 value, is
binding [Art. 1749].
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F. LIABILITY FOR BAGGAGE OF
PASSENGERS
Baggage are things that a passenger will
bring with him consistent with a temporary
absence from where he lives. Passenger’s
baggage must have a direct relationship
with the passenger who is traveling.
For instance, a balikbayan box or suitcase is
passenger’s baggage. However, 10,000
cans of corned beef is not considered as
passenger baggage. They are considered as
goods. They are not part of the contract of
carriage [of passenger]. A separate contract
of carriage [or bill of lading] must be
entered into in order to transport them.
These goods will then be transported
whether or not a person is physically
traveling with them [Agbayani (1987)].
There are two kinds of passenger’s baggage,
which are governed differently:
(1) Passenger baggage in the custody of
the passenger (or carry-on luggage);
and
(2) Passenger baggage not in the
custody of the passenger (or
checked-in luggage).
The liability is greater for baggage that is in
the custody of the carrier, or checked-in
baggage, as compared to those in the
possession of the passenger.
F.1. CHECKED-IN BAGGAGE
The provisions of Arts 1733-1753 shall apply
to passenger’s baggage which is not in his
personal custody or in that of his employee
[Art. 1754].
In other words, the rules governing the
responsibility of a common carrier in the
transportation of goods just discussed apply.
Thus, extraordinary diligence is required.
UP LAW BOC TRANSPORTATION LAW MERCANTILE LAW

F.2. BAGGAGE IN POSSESSION OF The following provisions also figure in

PASSENGERS
As to baggage other than checked-in
baggage, they are governed by Arts 1998,
and 2000-2003, concerning the
responsibility of hotel-keepers [Art. 1754].
Art. 1998, as applied by analogy, the
baggage of passengers in their personal
custody or in that of their employees, while
being transported, are regarded as
necessary deposits. The common carriers
are responsible as depositaries, provided
that:
(1) Notice was given to them, or to their
employees, of the effects brought by the
passengers; and
(2) The passengers take the precautions
which the common carrier advised
relative to the care and vigilance of their
baggage.
determining the liability of the common
carrier:
(1) The fact that passengers are
constrained to rely on the vigilance of
the common carrier shall be considered
in determining the degree of care
required of him [Art. 2000).
(2) The common carrier cannot free himself
from responsibility by posting notices to
the effect that he is not liable for the
articles brought by the passenger.
(3) Any stipulation whereby the
responsibility of the common carrier as
set forth in Articles 1998-2001 is
suppressed or diminished shall be void
[Art. 2003].

In case of loss or injury to the baggage of

passengers in their personal custody, or in
that of their employees, while being
transported, the carrier is liable if the loss
or injury is caused by:
(1) His servants;
(2) His employees;
(3) Strangers [Art. 2000]; or
(4) A thief or robber done without the use
of arms or irresistible force [Art. 2001].

The carrier is not liable if loss or injury is

caused by:
(1) Force majeure [Art. 2000);
(2) Theft or robbery with the use of arms or
irresistible force [Art. 2001);
(3) The acts of the passenger, his family,
servants, or visitors;
(4) The character of the baggage [Art.
2002).

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UP LAW BOC TRANSPORTATION LAW
III. Safety of
Passengers
A. LIABILITY, IN GENERAL
Under Philippine law, the liability of the
common carrier with respect to the safety of
passengers, in general, are as follows:
(1) 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
persons, with a due regard for all the
circumstances [Art. 1755].
(2) In case of death of or injuries to
passengers, common carriers are
presumed to have been at fault or to
have acted negligently, unless they
prove that they observed extraordinary
diligence [Art. 1756].
Note: It is not enough that the accident
was caused by force majeure, the common
carrier must still prove that it was not
negligent in causing the injuries resulting
from such accident. [Bachelor Express v. CA
(1990)] Bachelor Express illustrates that
force majeure is not itself a defense; the
exercise of the diligence required by law is
the defense.
B. VOID STIPULATIONS
General rule: The responsibility of a
common carrier for the safety of passengers
cannot be dispensed with or lessened by
stipulation by the posting of notices, by
statements on tickets, or otherwise [Art.
1757].
Exception: When a passenger is carried
gratuitously, a stipulation limiting the
common carrier’s liability for negligence is
valid.
Exception to the exception: Even when
a passenger is carried gratuitously, a
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stipulation limiting the common carrier’s
liability for willful acts or gross negligence is
invalid.
The reduction of fare does not justify any
limitation of the common carrier’s liability
[Art. 1758].
C. DURATION OF LIABILITY
As in the contract of carriage for goods, the
perfection of the contract of carriage of
passengers does not necessarily coincide
with the commencement of the duty of
extraordinary diligence. It may occur at the
same time or later.
Based on jurisprudence, the duty that the
carrier of passengers owes to its patrons
extends to persons boarding the cars as
well as those alighting therefrom [Del Prado
v. Manila Railroad (1929)].
This is also reflected in Art. 17, Warsaw
Convention, which applies to international
air carriage. It provides that the liability of a
common carrier for injury to the passenger
lasts from embarkation to disembarkation,
including the period when the passenger is
on board the aircraft.
In maritime commerce, Art. 698, Code of
Commerce relates to the period of the
voyage:
(1) In case a voyage already begun should
be interrupted:
(a) The passengers shall be obliged to
pay the fare in proportion to the
distance covered; and
(b) If the interruption is due to a
fortuitous event, without right to
recover for losses and damages; if
caused by the captain exclusively,
with a right to indemnity.
(2) If the interruption should be caused by
the disability of the vessel, and a
passenger should agree to await the
repairs:
UP LAW BOC TRANSPORTATION LAW
(a) He may not be required to pay any
increased price of passage; but
(b) His living expenses during the stay
shall be for his own account.
(3) In case of delay in the departure of
the vessel, the passengers have:
(a) The right to remain on board;
(b) If the delay is not due to a fortuitous
event or force majeure, with the right
to be furnished with food for the
account of the vessel;
(c) If the delay should exceed ten days:
(i) Passengers requesting the
same shall be entitled to the
return of the fare; and
(ii) If it is due exclusively to the
fault of the captain or ship
agent, they may also demand
indemnity for losses and
damages.
A vessel exclusively devoted to the
transportation of passengers must take
them directly to the port or ports of
destination, no matter what the number of
passengers may be, making all the stops
indicated in its itinerary.
C.1. WAITING FOR CARRIER OR
BOARDING OF CARRIER
As to the commencement of the duty of the
common carrier, in Del Prado v. Manila
Railroad (1929), it was held that the duty
extends to persons boarding the cars as
well as those alighting therefrom.
Thus, it is the duty of common carriers of
passengers to stop their conveyances at a
reasonable length of time in order to afford
passengers an opportunity to board and
enter, and they are liable for injuries
suffered by boarding passengers resulting
from the sudden starting up or jerking of
their conveyances while they are doing so
[Dangwa Transportation v. CA (1991)].
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In this connection, however, a person
boarding a moving car must be taken to
assume the risk of injury from boarding the
car under the conditions open to his view,
but he cannot fairly be held to assume the
risk that the motorman, having the situation
in view, will increase the peril by
accelerating the speed of the car before he
is planted safely on the platform [Del Prado
v. Manila Railroad (1929)].
C.2. ARRIVAL AT DESTINATION
As to the termination of the duty of the
common carrier, it has been held that the
relation of carrier and passenger does not
cease at the moment the passenger alights
from the carrier’s vehicle at a place selected
by the carrier at the point of destination, but
continues until the passenger has had a
reasonable time or a reasonable
opportunity to leave the carrier’s premises.
What is a reasonable time or a reasonable
delay within this rule is to be determined
from all the circumstances:
(1) A person who, after alighting from a
train, walks along the station platform
is considered still a passenger;
(2) A passenger, who has alighted at his
destination and is proceeding by the
usual way to leave the company’s
premises, but before actually doing so is
halted by the report that his brother, a
fellow passenger, has been shot, and he
in good faith and without intent of
engaging in the difficulty, returns to
relieve his brother, is deemed
reasonably and necessarily delayed and
thus continues to be a passenger
entitled as such to the protection of the
railroad and company and its agents [La
Mallorca v. CA (1966)].
The reasonableness of time should be made
to depend on the attending circumstances
of the case, such as the kind of common
carrier, the nature of its business, the
customs of the place, and so forth, and
therefore precludes a consideration of the
time element per se without taking into
account such other factors. The primary
UP LAW BOC TRANSPORTATION LAW
factor to be considered is the existence of a
reasonable cause as will justify the presence
of the victim on or near the petitioner’s
vessel.
In the case of a shipper, the passengers of
vessels are allotted a longer period of time
to disembark from the ship than other
common carriers such as a passenger bus,
since such vessels are capable of
accommodating a bigger volume of both
passenger and baggage as compared to the
capacity of a regular commuter bus.
Consequently, a ship passenger will need at
least an hour as is the usual practice, to
disembark from the vessel and claim his
baggage whereas a bus passenger can
easily get off the bus and retrieve his
luggage in a very short period of time
[Aboitiz Shipping v. CA (1989)].
The relation of carrier and passenger
continues until the latter has been landed
at the port of destination and has left the
carrier’s premises. Hence, the carrier
necessarily would still have to exercise
extraordinary diligence in safeguarding the
comfort, convenience and safety of its
stranded passengers until they have
reached their final destination [PAL v. CA
(1993)].
Note: Despite the Court’s pronouncement
in PAL v. CA, note that common carriers are
bound to observe extraordinary diligence in
the ‘safety’ of its passengers. The law does
not mention the words ‘comfort’ and
‘convenience.’
D. LIABILITY FOR ACTS OF OTHERS
D.1. EMPLOYEES
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.
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This liability does not cease even upon proof
that they exercised all the diligence of a
good father of a family in the selection and
supervision of their employees [Art. 1759].
Also, this liability cannot be eliminated or
limited by stipulation, by the posting of
notices, by statements on the tickets or
otherwise [Art. 1760].
Ratio: The servant is clothed with
delegated authority and charged with the
duty to execute the carrier’s undertaking to
carry the passenger safely [Agbayani (1987)].
Also, the defense of diligence in the
selection and supervision of employees
does not obtain because the liability is not
based on quasi-delict, but on culpa
contractual. However, there must be a
reasonable connection between the act and
the contract of carriage.
Note: The employee must be on duty at the
time of the act.
It is enough that the assault happens
within the course of the employee’s
duty. It is no defense for the carrier that the
act was done in excess of authority or in
disobedience of the carrier’s orders. The
carrier’s liability here is absolute in the
sense that it practically secures the
passengers from assaults committed by its
own employees [Maranan v. Perez (1967)].
D.2. OTHER PASSENGERS AND
STRANGERS
A common carrier is responsible for injuries
suffered by a passenger on account of the
willful acts or negligence of other
passengers or of strangers, if the common
carrier’s employees through the exercise of
the diligence of a good father of a
fam ily could have prevented or stopped
the act or omission [Art. 1763].
Note: The law speaks of injuries suffered by
the passenger but not death. However,
there appears to be no reason why the
common carrier should not be held liable
under such circumstances. The word
“injuries” should be interpreted to include
death [Agbayani (1987)].
UP LAW BOC TRANSPORTATION LAW
Under Art. 1763, a tort committed by a
stranger which causes injury to a passenger
does not accord the latter a cause of action
against the carrier. The negligence for
which a common carrier is held responsible
is the negligent omission by the carrier’s
employees to prevent the tort from being
committed when the same could have been
foreseen and prevented by them. Further,
when the violation of the contract is due to
the willful acts of strangers, as in the
instant case, the degree of care essential to
be exercised by the common carrier for the
protection of its passenger is only that of a
good father of a family [Pilapil v. CA
(1989)].
D.3. MANUFACTURERS OF EQUIPMENT
While the carrier is not an insurer of the
safety of the passengers, it should
nevertheless be held answerable for the
flaws of its equipment, if such flaws were
discoverable. The rationale for the common
carrier’s liability for manufacturing defects
is the fact that the passenger has neither
choice nor control over the carrier in the
selection and use of the equipment and
appliances in use by the carrier. Having no
privity whatever with the manufacturer or
vendor of the defective equipment, the
passenger has no remedy against him
[Necesito v. Paras (1958)].
E. CONTRIBUTORY NEGLIGENCE
The passenger must observe the diligence
of a good father of a family to avoid injury to
himself [Art. 1762].
The contributory negligence of the
passenger does not bar recovery of
damages for his death or injuries, if the
proximate cause thereof is the negligence of
the common carrier, but the amount of
damages shall be equitably reduced [Art.
1762].
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It is negligence per se for a passenger on a
railroad to voluntarily or inadvertently
protrude his arm, hand, elbow, or any other
part of his body through the window of a
moving car beyond the outer edge of the
window or outer surface of the car, so as to
come in contact with objects or obstacles
near the track; no recovery can be had for
an injury which but for such negligence
would not have been sustained [Isaac v. A. L.
Ammen Transportation (1975)]. In this case,
the negligence of the passenger was not
contributory, but was the proximate cause
of the injury. Hence, the common carrier
was exempted from liability.
F. EXTENT OF LIABILITY FOR
DAMAGES
Damages recoverable from common
carriers, both in cases of carriage of
passengers and goods, shall be awarded in
accordance with Title XVIII concerning
Damages.
Art. 2206, on liability, in case of death, for
loss of earning capacity, support, and moral
damages for mental anguish, shall also
apply to the death of a passenger caused by
the breach of contract by a common carrier
[Art. 1764].
Thus, the damages recoverable are:
(1) Actual or compensatory damages;
(2) Moral damages;
(3) Exemplary damages;
(4) Nominal, temperate, and liquidated
damages;
(5) Attorney’s fees.
F.1. ACTUAL OR COMPENSATORY
DAMAGES
Actual or compensatory damages
refer to adequate compensation for such
pecuniary loss suffered as duly proved
(Art. 2199].
UP LAW BOC TRANSPORTATION LAW
Under Art. 2201, the liability for damages
include:
(1) In case the common carrier acted in
good faith:
(a) The natural and probable
consequence of the breach of the
obligation; and
(b) Those which the parties have
foreseen or could have reasonably
foreseen at the time the obligation
was constituted;
(2) In case of fraud, bad faith, malice or
wanton attitude, all damages which
may be reasonably attributed to the
non-performance of the obligation.
In case of death, actual damages also
include:
(1) Loss of earning capacity, unless the
deceased had no earning capacity at the
time of death; and
(2) Support for a period not exceeding five
years [Art. 2206].
Note: Art. 2206 applies only in case of
death of the passenger.
In the absence of a showing that common
carrier’s attention was called to the special
circumstances requiring prompt delivery of
a passenger’s luggage, the common carrier
cannot be held liable for the cancellation of
passenger’s contracts [for exhibition of
films] as it could not have foreseen such an
eventuality when it accepted the luggage
for transit [Pan-Am World Airways v. IAC
(1988)].
F.2. MORAL DAMAGES
Moral damages, though incapable of
pecuniary computation, if they are the
proximate result of the common carrier’s
wrongful act or omission, may be recovered
[Art. 2217].
In cases of breach of contract of carriage,
moral damages may be recovered where:
(1) The common carrier acted fraudulently;
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(2) The common carrier acted in bad faith
[Art. 2220];
(3) Death of a passenger resulted even in
the absence of bad faith or fraud [Art.
2206].
Bad faith contemplates a state of mind
affirmatively operating with furtive design
or with some motive of self-interest or will
or for ulterior purpose [Air France v.
Carrascoso (1966)].
When it comes to contracts of common
carriage, inattention and lack of care on the
part of the carrier resulting in the failure of
the passenger to be accommodated in the
class contracted for amounts to bad faith or
fraud which entitles the passenger to the
award of moral damages in accordance
with Art. 2220 [Ortigas v. Lufthansa (1975)].
Willful and deliberate overbooking on the
part of the airline carrier constitutes bad
faith. Under Section 3, Economic
Regulations No. 7 of the Civil Aeronautics
Board, overbooking, which does not exceed
ten percent, is not considered as deliberate
and therefore does not amount to bad
faith [United Airlines v. CA (2001)].
F.3. EXEMPLARY DAMAGES
In a contract of carriage, exemplary
damages may be awarded if the common
carrier acted in wanton, fraudulent, reckless,
oppressive, or malevolent manner [Art.
2232].
Exemplary damages serves as an
instrument to serve the ends of law and
public policy by reshaping socially
deleterious behaviors, specifically, in the
case, to compel the common carrier to
control their employees, to tame their
reckless instincts, and to force them to take
adequate care of human beings and their
property [Mecenas v. CA].
UP LAW BOC TRANSPORTATION LAW
F.4. NOMINAL, TEMPERATE,
LIQUIDATED DAMAGES
AND
Nominal dam ages are adjudicated in
order that a right of the plaintiff, which has
been violated by the defendant, may be
vindicated or recognized, not for the
purpose of indemnifying the plaintiff for any
loss suffered by him [Art. 2221]. It may be
awarded in case of breach of contract of
carriage and in every case where any
property right has been invaded [Art. 2222].
A violation of the passenger’s right to be
treated with courtesy in accordance with the
degree of diligence required by law to be
exercised by every common carrier entitles
the passenger to nominal damages [Saludo
v. CA].
Temperate or moderate damages,
which are more than nominal but less than
compensatory damages, may be recovered
when some pecuniary loss has been
suffered but its amount cannot, from the
nature of the case, be proved with certainty
[Art. 2224].
Liquidated damages are those damages
agreed upon by the parties to a contract, to
be paid in case of breach thereof [Art. 2226].
F.5. ATTORNEY’S FEES
Under Art. 2208, as applicable to a contract
of carriage, attorney’s fees and expenses of
litigation may be recovered in the following
cases:
(1) When exemplary damages are awarded;
(2) When the common carrier’s act or
omission has compelled the plaintiff to
litigate with third persons or to incur
expenses to protect his interest;
(3) Where the common carrier acted in
gross and evident bad faith in refusing
to satisfy the plaintiff’s valid, just and
demandable claim;
(4) In any other case where the court deems
it just and equitable that attorney’s fees
and expenses of litigation should be
recovered.
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IV. Bill of Lading
(Reference is to the Code of Commerce,
unless otherwise indicated)
Definition
Bill of lading – a written
acknowledgement, 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
[70 Am. Jur. 2d 924].
It is not, however, indispensable for the
creation of a contract of carriage. [Cia.
Maritima v. Ins. Co. of North America (1964)].
In the absence of a bill of lading, disputes
shall be determined by the legal proofs
which the parties may present in support of
their respective claims, according to the
general provisions established in the Code
of Commerce for commercial contracts [Art.
354, Code of Commerce].
The bill of lading becomes effective usually
upon its delivery to and acceptance by the
shipper [Aquino, Essentials of Transportation
& Public Utilities Law (2011)].
In the absence of fraud, concealment, or
improper conduct, it is presumed that the
stipulations of the bill are known to the
shipper, and he is generally bound by his
acceptance whether he reads the bill or not
[Magellan Mfg. Marketing Corp. v. CA (1991)].
A. THREE-FOLD CHARACTER:
(1) Receipt as to the quantity and
description of the goods shipped;
(2) Contract to transport and deliver
the goods to the consignee or other
person therein designated, on the terms
specified in such instrument; and
(3) Docum ent of title, which makes it a
symbol of the goods.
UP LAW BOC TRANSPORTATION LAW
The bill of lading constitutes the legal
evidence of the contract of transportation,
and all disputes between the parties
regarding the execution and performance of
the contract shall be decided by the
contents of the bill of lading issued by the
carrier. The law admits no exceptions other
than the falsity and material error in its
drafting [Art. 353].
B. REFUSAL TO TRANSPORT
General Rule: The carrier cannot refuse
to carry a particular class of goods.
Exception: When the goods are unfit for
transportation.
If transportation is insisted upon in case of
railway transport, the company shall carry
them, but it shall be exempt from all
responsibility if the objections are so stated
in the bill of lading [Art. 356].
C. DELIVERY OF GOODS
The goods should be delivered to the
consignee or any other person to whom the
bill of lading was validly transferred or
negotiated.
The carrier is duty bound to deliver the
goods in the same condition in which,
according to the bill of lading, they were
found at the time of there were received,
without damage or impairment [Art. 363].
C.1. PERIOD OF DELIVERY
Delivery should be made within the period
fixed for the delivery of the goods as
stipulated in the bill of lading [Art. 370].
In case of failure to deliver, the carrier shall
pay the indemnity agreed upon in the bill of
lading, neither the shipper nor consignee
being entitled to anything else.
Should there be no period previously fixed,
the carrier is bound to forward the goods in
the first shipment of the same or similar
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merchandise which he may make to the
point of delivery. Should he not do so, he
shall be liable for damages cause by the
delay [Art. 358].
If no indemnity is fixed and there is delay,
the carrier shall be liable for the damages
which may have been caused by the delay
[Art. 370].
C.2. DELIVERY WITHOUT SURRENDER OF
BILL OF LADING
After the contract has been complied with,
the bill of lading which the carrier has
issued shall be returned to him, and by
virtue of the exchange of this title with the
thing transported, the respective
obligations and actions shall be considered
cancelled, unless in the same act the claim
which the parties may wish to reserve be
reduced to writing, exception being made of
the provisions of Art. 366, on period for
filing claims [Art. 353, 2nd para.].
If, in case of loss or for any other reason
whatsoever, the consignee cannot return,
upon receiving the merchandise, the bill of
lading subscribed by the carrier, he shall
give said carrier a receipt for the goods
delivered. This receipt produces the same
effects as the return of the bill of lading [Art.
353, 3rd para.].
C.3. REFUSAL OF CONSIGNEE TO TAKE
DELIVERY
The consignee may refuse to take delivery in
the following cases:
(1) If only part of the goods transported
should be delivered, when he proves
that he cannot make use thereof
without the others [Art. 363].
(2) When the goods are rendered useless
for purposes of sale or consumption in
the use for which they are properly
destined, in which case the consignee
may demand payment of the goods at
current market prices [Art. 365];
(3) In case part of the goods is in good
condition and separation is possible,
UP LAW BOC TRANSPORTATION LAW
the consignee may refuse to receive only
the damaged goods [Art. 365].
(4) Where the delay is through the fault of
the carrier [Art. 371].
In case of dispute as to the condition of the
goods, the same shall be examined by
experts appointed by the parties, and the
third one, in case of disagreement,
appointed by the judicial authority.
If the persons interested should not agree
with the report, said judicial authority shall
order the deposits of the merchandise in a
safe warehouse, and the parties interested
shall make use of their rights in the proper
manner. [Art. 367].
D. PERIOD FOR FILING CLAIMS
Pursuant to Art. 366, Code of Commerce, a
claim , on account of damage found upon
opening the packages, must be made
against the carrier:
(1) Within 24 hours, if the indications of the
damage cannot be ascertained from the
exterior of the packages (i.e., latent
damage); or
(2) At the time of receipt, if the indications
damage can be so ascertained (i.e.,
patent damage).
But the Court in Aboitiz v Insurance
Company of North America [GR No. 168402,
6 Aug 2008] made a pro hac vice ruling, in
that even if the notice was given more than
24 hrs after the receipt of the goods, the
notice requirement was held nevertheless to
have been complied with, due to the
peculiar circumstances:
“Provisions specifying a time to give notice
of damage to common carriers are
ordinarily to be given a reasonable and
practical, rather than a strict construction.
We give due consideration to the fact that
the final destination of the damaged cargo
was a school institution where authorities
are bound by rules and regulations
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governing their actions. Understandably,
when the goods were delivered, the
necessary clearance had to be made before
the package was opened. Upon opening
and discovery of the damaged condition of
the goods, a report to this effect had to pass
through the proper channels before it could
be finalized and endorsed by the institution
to the claims department of the shipping
company.”
No claim whatsoever shall be admitted
against the carrier with regard to the
condition in which the goods transported
were delivered:
(1) After the periods mentioned have
elapsed; or
(2) After the transportation charges have
been paid.
The periods mentioned commence upon
delivery of cargo to the consignee at the
place of destination.
Thus, Art. 366 is limited to cases of claims
for damage to goods actually turned over by
the carrier and received by the consignee. It
does not apply to misdelivery of goods.
Failure to file a claim bars recovery (Aquino
(2011)].
Ratio: The rule protects the carrier by
affording it an opportunity to make an
investigation of a claim while the matter is
still fresh and easily investigated so as to
safeguard itself from false and fraudulent
claims [UCPB General Ins. Co., Inc. v. Aboitiz
Shipping (2009)].
However, the periods prescribed may be
subject to modification by agreement of the
parties. [PHILAMGEN v. Sweet Lines, Inc.
(1992)].
The value of the goods stated in the bill of
lading is conclusive between the parties,
and the shipper is not allowed to prove a
higher value [Art. 372]. It is only when the
carrier’s fault is so gross as to amount to
actual fraud that the actual amount of the
losses an damages suffered may be proved
by the shipper against the carrier.
UP LAW BOC TRANSPORTATION LAW
Horses, vehicles, vessels and equipment
used by the carrier serves as liens for the
payment of the value of the goods which the
carrier must pay in case of loss or
misplacement [Art. 372].
E. PERIOD FOR FILING ACTIONS
E.1. OVERLAND TRANSPORTATION AND
COASTWISE SHIPPING
The general rules under the Civil Code on
extinctive prescription apply. Thus, action
for damages must be filed in court:
(1) Within 6 years, if a bill of lading was not
issued [Art. 1145, Civil Code].
(2) Within 10 years, if a bill of lading was
issued [Art. 1146, Civil Code].
E.2. INTERNATIONAL CARRIAGE OF
GOODS BY SEA
Suit must be brought within one year:
(1) After delivery of the goods; or
(2) From the date when the goods should
have been delivered.
Otherwise, the carrier and the ship shall be
discharged from all liability in respect of
loss or damage.
The absence of notice shall not affect or
prejudice the right of the shipper to bring
suit within one year after the delivery of the
goods or the date when the goods should
have been delivered [Section 3(6), Carriage
of Goods by Sea Act].
The period for filing the claim is one year, in
accordance with the Carriage of Goods by
Sea Act. The Carriage of Goods by Sea Act,
as adopted and embodied in
Commonwealth Act No. 65, applies
because it is a special law, and, as such,
prevails over the general provisions of the
Civil Code on prescription of actions
[Maritime Agencies & Services, Inc. v. CA].
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FALSE DECLARATION OF CONTENTS
If the carrier has a well-founded suspicion
of falsity in the declaration of the contents
of the package, the carrier may examine it.
If the declaration should be correct,
examination and repacking expenses shall
be defrayed by the carrier, and in the
contrary, by the shipper [Art. 357].
RESPONSIIBILITY OF THE CARRIER
The responsibility of the carrier commences
from the moment he personally or through
his duly authorized agent receives the
merchandise, and at the place indicated for
their reception [Art. 355].
When there is an agreed route, the carrier
shall be liable for losses due not only to the
change of route but also to other causes,
together with the indemnity agreed upon
[Art. 359]. When there is no agreed route,
the carrier must select one which may be
the shortest, least expensive and practically
passable.
All damages and impairment suffered by
the goods during the transportation, by
reason of fortuitous event or by the nature
or defect of the articles, shall be for the
account of the shipper. Proof of these
accidents is incumbent on the carrier [Art.
361].
Note: Common carriers are responsible
for loss, destruction or deterioration of the
goods, unless it exercised extraordinary
diligence, or the loss is due to Art. 1734 of
the Civil Code.
UP LAW BOC TRANSPORTATION LAW
V. Admiralty and
Maritime Commerce
Concept
The concept of admiralty, as distinguished
from overland transportation, depends on:
(1) Size of the vessel; and
(2) Size of the body of water over which such
vessel traverses.
Under B.P. 129, jurisdiction over admiralty
cases depends on the amount, and not on
the nature of the claim.
A. CHARTER PARTIES
Charter party – a contract by virtue of
which the owner or agent of a vessel binds
himself to transport merchandise or
persons for a fixed price.
It is a contract by which the owner or agent
of the vessel leases for a certain price the
whole or portion of a vessel for the
transportation of the goods or persons from
one port to another.
It is a contract whereby the whole or part of
the ship is let by the owner to a merchant or
other person for a specified time or use for
the conveyance of goods, in consideration of
the payment of freight [Caltex v. Sulpicio
Lines (1999)].
Towage is not a charter party. It is a
contract for the hire of services by which a
vessel is engaged to tow another vessel
from one port to another for consideration.
In modern maritime law and usage, there
are three distinguishable types of charter
parties:
(1) Bareboat or demise charter;
(2) Time charter; and
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MERCANTILE LAW
(3) Voyage or trip charter [Litonjua
Shipping, Inc. v. National Seamen Board
(1989)].
Note: Both time and voyage charters are
said to be contracts of affreightment, where
a common or public carrier is not converted
into a private carrier.
Contract of affreightment – one in
which the owner of the vessel leases part or
all of its space to haul goods for others. It is
a contract for special service to be rendered
by the owner of the vessel and under such
contract the general owner retains the
possession, command and navigation of the
ship, the charterer or freighter merely
having use of the space in the vessel in
return for his payment of the charter hire
[Puromines, Inc. v. CA (1993)].
Bill of lading distinguished from a
charter party
A charter party is a complete contract, while
a bill of lading is a private receipt which the
captain gives to accredit that such goods
belong to such persons.
A charter party is a consensual contract
which can be dissolved by means of
indemnity for losses and damages; while a
bill of lading is a real contract which exists
only after delivery of the goods to be
transported is made.
Liabilities arising from breach is identical to
overland transport.
A.1. BAREBOAT OR DEMISE CHARTER
In a bareboat or demise charter, the ship
owner leases to the charterer the whole
vessel, transferring to the latter the entire
command, possession and consequent
control over the vessel’s navigation,
including the master and the crew, who
thereby become the charterer’s “servants”
[Aquino (2011)].
UP LAW BOC TRANSPORTATION LAW
To create a demise, the owner of a vessel
must completely and exclusively relinquish
possession, com m and and
navigation thereof to the charterer,
anything short of such a complete transfer
is a contract of affreightment (time or
voyage charter party) or not a charter party
at all.
Although a charter party may transform a
common carrier into a private one, the same,
however, is not true in a contract of
affreightment on account of the distinctions
between a contract of affreightment and a
demise or bareboat charter [Puromines, Inc.
v. CA (1993)].
Note: In a bareboat or demise charter, the
common carrier is converted to private
carrier.
The charterer, to whom the owner of the
vessel relinquishes, completely and
exclusively, the possession, command and
navigation of the vessel, by virtue of a
demise charter, is considered the owner pro
hac vice. He mans and equips the vessel and
assumes all responsibility for navigation,
management and operation. He thus acts
as the owner of the vessel in all important
aspects during the duration of the charter
[Puromines, Inc. v. CA (1993)].
A.2. TIME CHARTER
Time charter – a contract for the use of a
vessel for a specified period of time or for
the duration of one or more specified
voyages.
In this case, the owner of a time-chartered
vessel retains possession and control
through the master and crew, who remain
his employees. What the time charterer
acquires is the right to utilize the carrying
capacity and facilities of the vessel and to
designate her destinations during the term
of the charter [Litonjua Shipping Co., Inc. v.
National Seamen Board (1989)].
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MERCANTILE LAW
A.3. VOYAGE OR TRIP CHARTER
In a voyage charter, the vessel is leased for
a single or particular voyage. The master
and crew remain the employ of the owner of
the vessel [Litonjua Shipping Co., Inc. v.
National Seamen Board (1989)].
B. LIABILITY OF SHIP OWNERS AND
SHIPPING AGENTS
The persons participating in maritime
commerce are the following:
(1) Ship owners or ship agents
(2) Captains and masters
(3) Other officers and crew
(4) Supercargoes
The ship owner has possession, control
and management of the vessel and the
consequent right to direct her navigation
and receive freight earned and paid, while
his possession continues; he is the person
who is primarily liable for damages
sustained in the operation of the vessel,
based on the provisions of the Code of
Commerce.
A ship agent is the person entrusted with
the provisioning of a vessel, or who
represents her in the port in which she
happens to be [Art. 586].
The ship agent, even though 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 [Aquino
(2011)].
Captains are those who govern vessels
that navigate the high seas or ships of large
dimensions and importance, although they
may be engaged in coastwise trade.
Masters are those who command smaller
ships engaged exclusively in coastwise
trade. In maritime commerce, masters and
captains are the same.
UP LAW BOC TRANSPORTATION LAW
A crew is a person on board who is involved
in highly technical tasks and in manning of
the vessel (e.g. master, mate).
A com plem ent is a person, not a crew,
who is not directly involved in the manning
of the vessel (e.g. cook).
Supercargo is a person on board the
vessel, who functions as an agent of the
owner of the goods shipped as cargo on a
vessel, who has charge of the cargo on
board, sells the same to the best advantage
in the foreign markets, buys cargo to be
brought back on the return voyage of the
ship, and comes home with it.
The powers and liabilities of the captain
shall cease, when there is a supercargo,
with regard to that part of the
administration legitimately conferred upon
the latter, but shall continue in force for all
acts which are inseparable from his
authority and office [Art. 649].
The ship owner or ship agent is
liable:
(1) For the acts of the captain, unless the
latter exceeds his authority [Art. 586].
(2) For contracts entered into by the
captain to repair, equip and provision
the vessel, provided that the amount
claimed was invested for the benefit of
the vessel [Art. 586].
(3) For the indemnities in favor of third
persons which may arise from the
conduct of the captain in the care of the
goods transported, as well as for the
safety of passengers transported [Art.
587].
(4) For damages to third persons for tort or
quasi-delict committed by the captain,
except collision with another vessel [Art.
1759, Civil Code].
(5) For damages in case of collision due to
the fault, negligence, or want of skill of
the captain, sailing mate, or any other
member of the complement [Art. 826].
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MERCANTILE LAW
B.1. LIABILIITY FOR ACTS OF CAPTAIN
Three (3) distinct roles of a captain:
(1) General agent of the ship owner;
(2) Commander and technical director of
the vessel;
(3) Representative of the country under
whose flag he navigates [Inter-Orient
Marine Enterprises v. NLRC (1994)].
The captain shall be liable to the
agent, and the latter to third
persons:
(1) For all the damages suffered by the
vessel and his cargo by reason of want
of skill or negligence on his part;
(2) For all the thefts committed by the crew,
reserving his right of action against the
guilty parties;
(3) For the losses, fines, and confiscations
imposed on account of violation of the
laws and regulations of customs, police,
health, and navigation;
(4) For the losses and damages caused by
mutinies on board the vessel, or by
reason of faults committed by the crew
in the service and defense of the same,
if he does not prove that he made full
use of his authority to prevent or avoid
them;
(5) For those arising by reason of an undue
use of powers and non-fulfillment of the
obligations which are his;
(6) For those arising by reason of his going
out of his course or taking a course
which he should not have taken without
sufficient cause, in the opinion of the
officers of the vessel at a meeting with
the shippers or supercargoes who may
be on board;
(7) For those arising by reason of his
voluntarily entering a port other than
that of his destination;
(8) For those arising by reason of non-
observance of the provisions contained
in the regulations on situation of lights
UP LAW BOC TRANSPORTATION LAW MERCANTILE LAW

and maneuvers for the purpose of
preventing collisions [Art. 618].
B.2. EXCEPTIONS TO LIMITED LIABILITY
The Doctrine of Limited Liability
(Hypothecary Rule)
The real and hypothecary nature of
maritime law simply means that the liability
of the carrier in connection with losses
related to maritime contracts is confined to
the vessel, which is hypothecated for such
obligations or which stands as the guaranty
for their settlement.
It has its origin by reason of the conditions
and risks attending maritime trade in its
earliest years when such trade was replete
with innumerable and unknown hazards
since vessels had to go through largely
uncharted waters to ply their trade. It was
designed to offset such adverse conditions
and to encourage people and entities to
venture into maritime commerce despite
the risks and the prohibitive cost of
shipbuilding.
Thus, the liability of the vessel owner and
agent arising from the operation of such
vessel were confined to the vessel itself, its
equipment, freight, and insurance, if any,
which limitation served to induce capitalists
into effectively wagering their resources
against the consideration of the large
profits attainable in the trade [Aboitiz
Shipping Corp. v. General Accident Fire and
Life Assurance Corp. (1993)].
Thus, under the doctrine of abandonment:
(1) The agent shall be civilly liable for the
indemnities in favor of third persons
which arise from the conduct of the
captain in the care of the goods which
the vessel carried, but he may exempt
himself therefrom by abandoning the
vessel with all her equipment and the
freight he may have earned during the
voyage [Art. 587];
(2) The owners of a vessel shall be civilly
liable in the proportion of their
contribution to the common fund, for
the results of the acts of the captain,
referred to in Art. 587. Each part owner
may exempt himself from this liability
by the abandonment before a notary of
the part of the vessel belonging to him
[Art. 590].
(3) In case of collision, the liability of the
ship owner shall be understood as
limited to the value of the vessel with all
her appurtenances and all the freight
earned during the voyage [Art. 837].
(4) If the vessel and her freight should be
totally lost, by reason of capture or
wreck, all rights of the crew to demand
any wages whatsoever shall be
extinguished, as well as the agent for
the recovery of the advances made [Art.
643].
If the ship owner or agent may in any way be
held civilly liable at all for injury to or death
of passengers arising from the negligence
of the captain in cases of collisions or
shipwrecks, his liability is merely co-
extensive with his interest in the vessel such
that a total loss thereof results in its
extinction. This is based on the exclusively
“real and hypothecary nature” of maritime
law, which operates to limit such liability to
the value of the vessel, or to the insurance
thereon, if any. [Yangco v. Laserna (1941)]
Exceptions:
(1) Claims under the Workmen’s
Compensation Act [Abueg v. San Diego];
(2) Expenses for repairing, provisioning and
equipping the vessel;
(3) There is an actual finding of negligence
on the part of the vessel owner or agent
[Aboitiz Shipping v. General Accident Fire
and Life Assurance Corp. (1993)];
(4) Vessel is insured, to the extent of the
insurance proceeds [Vasquez v. CA
(1985)];
(5) There was no total loss;
(6) Collision between two negligent vessels.

PAGE 124 OF 320

UP LAW BOC TRANSPORTATION LAW
C. ACCIDENTS AND DAMAGES IN
MARITIME COMMERCE
C.1. AVERAGES
The following shall be considered averages:
(1) All extraordinary or accidental expenses
incurred during the navigation for the
preservation of the vessel or cargo, or
both;
(2) All damages or deterioration the vessel
may suffer from the time she puts to sea
from the port of departure until she
casts anchor in the port of destination,
and those suffered by the merchandise
from the time it is loaded in the port of
shipment until it is unloaded in the port
of consignment [Art. 806].
There are two kinds of averages:
(1) Particular or simple average; and
(2) Gross or general average.
I. SIMPLE AVERAGE
Particular or simple averages shall include
all damages and expenses caused to the
vessel or cargo that did not inure to the
common benefit and profit of all persons
interested in the vessel and her cargo [Art.
809].
The owner of the goods which gave rise to
the expense or suffered the damage shall
bear this average [Art. 810].
II. GENERAL AVERAGE
General or gross averages shall include all
the damages and expenses which are
deliberately caused in order to save the
vessel, her cargo, or both at the same time,
from a real and known risk [Art. 811].
The gross or general average shall be borne
by those who benefited from the sacrifice.
These include the ship owner and the
owners of the cargoes that were saved.
Contribution may also be imposed on the
insurers of the vessel or cargoes that were
PAGE 125 OF 320
MERCANTILE LAW
saved, as well as lenders on bottomry or
respondentia.
1. REQUISITES
(1) There must be a common danger;
(2) That for the common safety, part of the
vessel or of the cargo or both is
sacrificed deliberately;
(3) That from the expenses or damages
caused follows the successful saving of
the vessel and cargo;
(4) That the expenses or damages should
have been incurred or inflicted after
taking proper legal steps and authority
[Magsaysay, Inc. v. Agan [1955]].
Common danger means both the ship
and the cargo, after it has been loaded, are
subject to the same danger, whether during
the voyage, or in the port of loading or
unloading, that the danger arises from the
accidents of the sea, dispositions of the
authority, or faults of men, provided that
the circumstances producing the peril
should be ascertained and imminent or may
rationally be said to be certain and
imminent. This last requirement excludes
measures undertaken against a distant peril
[Magsaysay, Inc. v. Agan [1955]].
Note: When a vessel is stranded
unintentionally, the damages incurred
cannot constitute general averages.
2. CASES OF GENERAL AVERAGE
(1) The goods or cash invested in the
redemption of the vessel or cargo
captured by enemies, privateers, or
pirates, and the provisions, wages, and
expenses of the vessel detained during
the time the arrangement or
redemption is taking place;
(2) The goods jettisoned to lighten the
vessel, whether they belong to the
vessel, to the cargo, or to the crew, and
the damage suffered through said act
by the goods kept;
UP LAW BOC TRANSPORTATION LAW
(3) The cables and masts which are cut or
rendered useless, the anchors and the
chains which are abandoned in order to
save the cargo, the vessel, or both;
(4) The expenses of removing or
transferring a portion of the cargo in
order to lighten the vessel and place her
in condition to enter a port or roadstead,
and the damage resulting therefrom to
the goods removed or transferred;
(5) The damage suffered by the goods of
the cargo through the opening made in
the vessel in order to drain her and
prevent her sinking;
(6) The expenses caused through floating a
vessel intentionally stranded for the
purpose of saving her;
(7) The damage caused to the vessel which
it is necessary to break open, scuttle, or
smash in order to save the cargo;
(8) The expenses of curing and maintaining
the members of the crew who may have
been wounded or crippled in defending
or saving the vessel;
(9) The wages of any member of the crew
detained as hostage by enemies,
privateers, or pirates, and the necessary
expenses which he may incur in his
imprisonment, until he is returned to
the vessel or to his domicile, should he
prefer it;
(10) The wages and victuals of the crew of a
vessel chartered by the month during
the time it should be embargoed or
detained by force majeure or by order of
the Government, or in order to repair
the damage caused for the common
good;
(11) The loss suffered in the value of the
goods sold at arrivals under stress in
order to repair the vessel because of
gross average;
(12) The expenses of the liquidation of the
average [Art. 811];
(13) If in lightening a vessel on account of a
storm, in order to facilitate her entry
into a port or roadstead, part of her
PAGE 126 OF 320
MERCANTILE LAW
cargo should be transferred to lighters
or barges and be lost, the owner of said
part shall be entitled to indemnity, as if
the loss has originated from a gross
average [Art. 817];
(14) If, as a necessary measure to extinguish
a fire in a port; roadstead; creek, or bay,
it should be decided to sink any vessel,
this loss shall be considered gross
average, to which the vessels saved
shall contribute.
(15)
3. JETTISON
The captain shall direct the jettison, and
shall order the goods cast overboard in the
following order:
(1) Goods on deck - beginning with those
which embarrass the maneuver or
damage the vessel, preferring if
possible, the heaviest ones with the
least utility and value;
(2) Goods below the upper deck - always
beginning with those of the greatest
weight and smallest value, to the
amount and number absolutely
indispensable [Art. 815].
To include the goods jettisoned in the
general or gross average, the existence of
the cargo or goods must be proved:
(1) For cargo – by means of bill of lading;
(2) For good belonging to the vessel – by
means the inventory prepared prior to
departure [Art. 816].
4. JASON CLAUSE
Jason clause is a provision in the contract
of carriage that requires the cargo owners
to contribute in general average though the
event which gave rise to the sacrifice or
expenditure may have been due to the fault
of one of the parties to the adventure [Rule
D, York Antwerp Rules].
UP LAW BOC TRANSPORTATION LAW
5. PROCEDURE FOR RECOVERY
(1) Assembly and deliberation with the
sailing mate and other officers;
(2) Resolution of the captain adopted;
(3) Hearing of the persons interested. In
case an interested person should not be
heard, he shall not contribute to the
gross average [Art. 813, Code of
Commerce];
(4) Resolution to be entered in the log book,
stating the motives and reasons
therefore as well as the votes and
reason for disagreement [Art. 814, Code
of Commerce];
(5) Minutes to be signed by all the persons
present or in urgent cases, the captain;
(6) Captain shall deliver one copy of the
minutes to the maritime judicial
authority of the first port he may make
within 24 hours [Art. 814];
(7) Captain shall ratify the minutes under
oath [Art. 814].
C.2. COLLISIONS
Collision is an impact or sudden contact
between two moving vessels [Aquino (2011)].
Allision is the striking of a moving vessel
against one that is stationary.
The steamer’s greater facility
maneuvering over a sail vessel means it has
the greater ability to avoid collisions; so as a
general rule, when meeting a sailing vessel,
whether close hauled or with the wind free,
the sail vessel has a right to keep her course,
and it is the duty of the steamer to adopt
precautions as will avoid the sail vessel…
Subject to the general rules of evidence in
collision cases as to the burden of proof, in
the case of a collision between a steam
vessel and a sail vessel, the presumption is
against the steam vessel, and she must
show that she took the proper measures to
avoid a collision. [A. Urrutia & Co. v. Baco
River Plantation Co. [1913)].
MERCANTILE LAW
When 2 power-driven vessels are meeting
head on, or nearly head on, so as to involve
risk of collision, each shall alter her course
to starboard (right side), so that each may
pass on the port (left) side of the other.
[Smith Bell and Co. v. CA (1991)].
Note: Liability in collision cases is
negligence-based. The person who caused
the injury is both civilly and criminally liable
[Aquino (2011)].
Classes of Collision:
(1) Fortuitous - none was at fault;
(2) Culpable - one or more vessels were at
fault;
(3) Inscrutable Fault - it cannot be
determined which of the vessels was at
fault.
I. FORTUITOUS
When it is due to a fortuitous event or force
majeure, each vessel and its cargo shall
bear its own damages [Art. 830].
When, by reason of force m ajeure, a
vessel properly anchored and moored
collides with another, the injury occasioned
shall be looked upon as particular average
to the vessel run into [Art. 832].
II. CULPABLE
of
When only one vessel is at fault, the
owner of the vessel at fault shall indemnify
the losses and damages suffered, after an
expert appraisal.
When both vessels are at fault, each
shall suffer its own damages, and both shall
be solidarily responsible for the losses and
damages occasioned to their cargoes [Art.
826].
Note: The ship owners cannot successfully
maintain an action against the other for the
loss or injury to his vessel.
When a third vessel at fault, the owner
of the third vessel shall indemnify the losses
and damages caused, the captain thereof
being civilly liable to said owner [Art. 831].
PAGE 127 OF 320
UP LAW BOC TRANSPORTATION LAW
III. INSCRUTABLE FAULT
In case of inscrutable fault, that is, if it
cannot be decided which of the two vessels
was the cause of the collision, each shall
bear his own damage and both shall be
jointly responsible for the losses and
damages suffered by their cargoes [Art.
828].
C.3. ARRIVAL UNDER STRESS
Arrival under stress is the arrival of a
vessel at the nearest and most convenient
port instead of the port of destination, if
during the voyage the vessel cannot
continue the trip to the port of destination.
It is lawful when the inability to continue
voyage is due to:
(1) Lack of provisions;
(2) Well-founded fear of seizure, privateers,
or pirates; or
(3) Any accident of the sea disabling it to
navigate [Art. 819].
It is unlawful when:
(1) The lack of provisions should arise from
the failure to take the necessary
provisions for the voyage, according to
usage and custom, or if they should
have been rendered useless or lost
through bad stowage or negligence in
their care;
(2) The risk of enemies, privateers, or
pirates should not have been well
known or manifest, and based on
positive and justifiable facts;
(3) The injury to the vessel should have
been caused by reason of her not being
repaired, rigged, equipped, and
arranged in a convenient manner for the
voyage, or by reason of some erroneous
order of the captain; or
(4) Malice, negligence, want of foresight, or
lack of skill on the part of the captain is
the reason for the act causing the
damage [Art. 820].
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MERCANTILE LAW
Note: Expenses for arrival under stress are
particular averages [see Art. 821].
C.4. SHIPWRECKS
Shipwreck denotes loss or wreck of a
vessel at sea as a consequence of running
against another vessel or thing at sea or on
coast where the vessel is rendered
incapable of navigation.
The losses and deterioration suffered by the
vessel and her cargo shall be individually for
the account of the owners [Art. 840].
If the wreck was due to malice, negligence
or lack of skill of the captain, or because the
vessel put to sea was insufficiently repaired
and equipped, the ship agent or the
shippers may demand indemnity from said
captain. [Art. 841].
C.5. SALVAGE
Salvage is defined as the 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 with the care of them have either
abandoned in distress at sea, or are unable
to protect and secure. It is founded on
equity and is compensation for actual
services rendered.
Three elements are necessary to a valid
salvage claim:
(1) A marine peril;
(2) Service voluntarily rendered when not
required as an existing duty or from a
special contract;
(3) Success, in whole or in part, or that the
service rendered contributed to such
success [Erlanger & Galinger v. Swedish
East Asiatic Co. Ltd (1916)].
The goods saved from the wreck shall be
specially bound for the payment of the
expenses of the respective salvage, and the
amount thereof must be paid by the owners
of the former before they are delivered to
them [Art. 842].
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Where a personal action is brought by the
salvor against the owner of the ship, the
liability of the latter is limited to such part
of the salvage compensation due for the
entire service as is proportionate to the
value of the ship.
Distinction between salvage and
towage:
Towage –a vessel is engaged to tow
another vessel from one port to another for
consideration.
In contract for towage, the crew does not
have any interest or rights with the
remuneration pursuant to the contract; only
the owner of the towing vessel is entitled to
remuneration.
Salvage – a person preserves the goods or
the ship which the owner either abandoned
in distress at sea, or is unable to protect and
secure.
In salvage, the crew of the salvaging ship is
entitled to salvage, and can look to the
salvage vessel for its share [Barrios v. Go
Thong (1963)].
D. CARRIAGE OF GOODS BY SEA ACT
(COGSA)
D.1. APPLICATION
COGSA [Commonwealth Act No. 65] is a
special law that governs all contracts of
carriage of goods by sea between or to and
from the Philippine ports.
Its application is according to the following
scheme:
(1) If the com m on carrier is coming to the
Philippines:
(a) First: Civil Code;
(b) Second: COGSA (in foreign
trade);
(c) Third: Code of Commerce;
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(2) If the private carrier is coming to the
Philippines:
(a) First: COGSA;
(b) Second: Code of Commerce;
(c) Third: Civil Code (excluding
rules on com m on carriers);
(3) If the private or common carrier is from
the Philippines to a foreign country, the
law of the foreign country applies [Art.
1753, Civil Code] unless the parties
make COGSA applicable.
Under Art. 1766, in all matters not regulated
by the Civil Code, the rights and obligations
of common carriers shall be governed by
the Code of Commerce and special laws.
Thus, although a special law, COGSA only
applies when the Civil Code has no provision
dealing with the matter.
D.2. NOTICE OF LOSS OR DAMAGES
Notice of claim and the general nature of
the loss or damage must be given in writing
to the carrier or his agent at the port of
discharge before or at the time of the
removal of the goods [Section 3(6), COGSA].
If damage is not patent or cannot be
ascertained from the package, the shipper
should file the claim with the carrier within
three days from delivery.
Under Section 3(6), COGSA, a failure to file a
notice of claim within three (3) days will not
bar recovery if it is nonetheless filed within
one year. This one-year prescriptive period
also applies to the shipper, the consignee,
the insurer of the goods or any legal holder
of the bill of lading. Inasmuch as the neither
the Civil Code nor the Code of Commerce
states a specific prescriptive period on the
matter, the COGSA may be applied [Belgian
Overseas Chartering and Shipping v.
Philippine First Ins. Co. (2002)].
Note: In the Warsaw Convention, as well
as the Code of Commerce, the notice
requirement is a condition precedent for the
right of action against the shipowner to
accrue.
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D.3. PERIOD OF PRESCRIPTION
The carrier and the ship shall be discharged
from all liability in respect of loss or
damage unless suit is brought within one
year after delivery of the goods or the date
when the goods should have been delivered.
The absence of a notice shall not affect or
prejudice the right of the shipper to bring
suit within one year after the delivery of the
goods or the date when the goods should
have been delivered [Section 3 (6)].
COGSA, as a special law, prevails over the
general provisions of the Civil Code on
prescription of actions [Maritime Agencies &
Services, Inc. v. CA (1990)].
D.4. LIMITATION OF LIABILITY
Under Section 4(5], COGSA, the limit is set
at a maximum of $500 per package or
customary freight unit.
This is deemed incorporated in the bill of
lading even if not mention therein [Eastern
Shipping v. IAC (1987)].
The declaration made by the shipper stating
an amount bigger than $500 per package
will make the carrier liable for such bigger
amount, but only if the amount so declared
is the real value of goods [Aquino (2011)].
The Civil Code does not limit the liability of
the common carrier to a fixed amount per
package. In all matters not regulated by the
Civil Code, the right and the obligations of
common carriers shall be governed by the
Code of Commerce and special laws. Thus,
the COGSA, which is suppletory to the
provisions of the Civil Code, supplements
the latter by establishing a statutory
provision limiting the carrier’s liability in the
absence of a shipper’s declaration of a
higher value in the bill of lading. [Belgian
Overseas v. Philippine First Ins. Co. (2002)].
VESSEL
Vessels are those engaged in navigation,
whether coastwise or on the high seas
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destined for the services of the industry or
maritime commerce.
The word ‘vessel’ used in the Code of
Commerce was not intended to include all
ships, craft, or floating structures of every
kind without limitation [Lopez v. Duruelo
(1928)].
Vessels are considered personal or movable
property [Art. 585]; but they partake to a
certain extent, of the nature and conditions
of real property, on account of their value
and importance in the world of commerce.
Vessel of domestic ownership and of more
than 15 tons gross is required to acquire a
certificate of Philippine register. The
purpose of the certificate is declare the
nationality of a vessel engaged in trade with
foreign nations and to enable her to assert
that nationality wherever found.
SPECIAL CONTRACTS OF MARITIME
COMMERCE
LOANS ON BOTTOMRY AND
RESPONDENTIA
Loan on bottom ry is a contract in the
nature of a mortgage, by which the owner of
the ship borrows money for the use,
equipment and repair of the vessel and for a
definite term, and pledges the ship as a
security for its repayment, with maritime or
extraordinary interest on account of the
maritime risks to be borne by the lender, it
being stipulated that if the ship be lost in
the course of the specific voyage or during
the limited time, by any of the perils
enumerated in the contract, the lender shall
also lose his money.
Loan on respondentia is one made on
the goods laden on board the ship, and
which are to be sold or exchanged in the
course of the voyage, the borrower’s
personal responsibility being deemed the
principal security for the performance of the
contract, which is therefore called
respondentia. The lender must be paid his
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principal and interest, though the ship
perishes, provided that the goods are saved.
PASSENGERS ON SEA VOYAGE
The right to passage issued to a specified
person is non-transferrable without the
consent of the captain or of the consignee
[Art. 695].
the return of the fare upon request. If
the delay is due to the sole fault of the
captain or ship agent, they may demand
indemnity for losses and damages.
(4) To be taken directly to the port or ports
of destination, making all the stops
indicated in its itinerary [Art. 698].

Rights of passengers include:

(1) In case of suspension of voyage
(a) If through the sole fault of the
captain or ship agent, the
passengers shall be entitled to have
their passage refunded and to
recover for losses and damages.
(b) If due to accidental cause or force
majeure, the passengers shall only
be entitled to the return of the
passage money [Art. 697].
(2) In case of interruption of voyage
(a) If due to fortuitous event or force
majeure, the passengers shall be
obliged to pay only the fare in
proportion to their distance covered,
without right to recover for losses or
damages.
(b) If due to the sole fault of the captain,
the passengers shall be obliged to
pay only the fare in proportion to
their distance covered, with a right
to indemnity.
(c) If due to the disability of the vessel
and the passenger should agree to
await the repairs, he may not be
required to pay any increased price
of passage, but his living expenses
during the delay shall be for his own
account [Art. 698].
(3) In case of delay in the departure, the
passengers have a right to remain on
board and to be furnished food, unless
the delay is due to accidental cause or
to force majeure. If the delay exceeds
10 days, the passengers are entitled to

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VI. International Air
Transport
The Warsaw Convention
A. APPLICABILITY
The Warsaw Convention applies to:
(1) All international carriage of persons,
baggage, or cargo performed by aircraft
for reward;
(2) Gratuitous carriage by aircraft
performed by an air transport
undertaking [Art. 1(1), Warsaw
Convention].
International air carriage or international air
transport means transportation by air
between points of contact of two high
contracting parties, or those countries that
have acceded to the Warsaw Convention,
wherein the place of departure and the
place of destination are situated:
(1) Within the territories of two high
contracting parties, regardless of
whether or not there be a break in the
transportation or a transshipment; or
(2) Within the territory of a single high
contracting party, if there is an agreed
stopping place within a territory subject
to the sovereignty, mandate or authority
of another power, even though the
power is not a party to the Convention
[Art. 1(2), Warsaw Convention].
A carriage to be perform ed by
several successive air carriers is
deemed, for the purposes of the Convention,
to be one undivided carriage, if it has been
regarded by the parties as a single
operation, whether it had been agreed upon
under the form of a single contract or of a
series of contracts [Art. 1(3), Warsaw
Convention].
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The carrier is liable for damages for:
(1) Death or injury of a passenger if the
accident causing it took place:
(a) On board the aircraft;
(b) In the course of the operations of
embarking or disembarking; or
(c) When there was delay [Art. 17 and 19,
Warsaw Convention];
(2) Destruction, loss, or damage to any
baggage or goods that are checked in, if
damage occurred:
(a) During the transportation by air; or
(b) When there was delay [Section 18
and 19, Warsaw Convention];
(3) Delay in the transport by air of
passengers, baggage or goods.
The carriage by air contemplated comprises
the period in which the baggage or goods
are in charge of the carrier, whether in an
airport or on board an aircraft, or, in the
case of a landing outside an airport, in any
place whatsoever [Art. 18, Warsaw
Convention].
B. LIMITATION OF LIABILITY
With respect to the following limitations of
liability, Art. 23, Warsaw Convention
provides that any provision tending to
relieve the carrier of liability or to fix a lower
limit than that which is laid down shall be
null and void, but the nullity of any such
provision does not involve the nullity of the
whole contract.
Also, under Art. 25, Warsaw Convention:
(1) The carrier shall not be entitled to avail
himself of the provisions which exclude
or limit his liability, if the damage is
caused by his willful misconduct or by
such default on his part as is considered
to be equivalent to willful misconduct;
(2) Similarly the carrier shall not be entitled
to avail himself of the said provisions, if
the damage is caused as aforesaid by
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any agent of the carrier acting within
the scope of his employment.
Under Art. 29, Warsaw Convention, the right
to damages under the WC is extinguished
after two years from the date of arrival at
the destination or from the date on which
the aircraft ought to have arrived, or from
the date on which the carriage stopped. The
method of calculating the period of
limitation shall be determined by the law of
the court seized of the case.
B.1. LIABILITY TO PASSENGERS
General rule: In the carriage of
passengers, the liability of the carrier for
each passenger is limited to 250,000 francs
passenger.
Exception: By special contract, the carrier
and the passenger may agree to a higher
limit [Art. 22(1), Warsaw Convention].
B.2. LIABILITY FOR CHECKED BAGGAGE
General rule: In the carriage of baggage
and goods, the liability of the carrier is
limited to 250 francs per kilogram.
Exception: The limit does not apply when
the consignor has made, at the time when
the package was handed over to the carrier,
a special declaration of the value at delivery
and has paid a supplementary sum if the
case so requires. In that case the carrier will
be liable to pay a sum not exceeding the
declared sum, unless he proves that that
sum is greater than the actual value to the
consignor at delivery [Art. 22(2), Warsaw
Convention].
B.3. LIABILITY FOR HAND-CARRIED
BAGGAGE
As regards hand-carried baggage, the
liability of the carrier is limited to 5,000
francs per passenger [Art. 22(3), Warsaw
Convention].
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The Guatemala Protocol of 1971 increased
the limit for passengers to $100,000 and to
$1,000 for baggage. However, the Supreme
Court noted in Santos III v. Northwest Orient
Airlines (1992), that the Guatemala Protocol
is still ineffective [Sundiang and Aquino
(2013)].
The Warsaw Convention should be deemed
a limit of liability only in those cases where
the cause of death or injury to person, or
destruction, loss or damage to property or
delay in its transport is not attributable to or
attended by any willful misconduct, bad
faith, recklessness, or otherwise improper
conduct on the part of any official or
employee for which the carrier is
responsible; and there is otherwise no
special or extraordinary form of resulting
injury [Alitalia Airways v. CA (1990)].
C. WILLFUL MISCONDUCT
A common carrier may not avail of the
limitation in the following cases:
(1) Willful misconduct;
(2) Default amounting to willful
misconduct [Art. 25, Warsaw
Convention];
(3) Accepting passengers without ticket
[Art. 3(2), Warsaw Convention];
(4) Accepting goods without airway bill or
baggage without baggage check.
Receipt by the person entitled to the
delivery of baggage or cargo without
complaint is prima facie evidence that the
same have been delivered in good condition
and in accordance with the document of
carriage [Art. 26, Warsaw Convention].
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D. JURISDICTION
An action for damages must be brought at
the option of the plaintiff:
(1) Before the court of the domicile of the
carrier;
(2) The court of its principal place of
business;
(3) The court where it has a place of
business through which the contract
had been made; or
(4) The court of the place of destination
[Art. 28 (2) WC].
When a passenger buys a roundtrip ticket,
the place of destination is the place of first
departure. E.g. In a round-trip ticket from
San Francisco – Manila, the place of
destination is San Francisco [Santos v
Northwest Airlines (1992)].
Note: The Montreal Convention adds a 5th
jurisdiction: residence of the plaintiff.

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