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Contract of Transportation – person obligates himself to transport persons or property from one place to another for a consideration.



Parties: common carrier & passenger (carried gratuitously or not)



contract to carry (

agreement to carry the passenger at some

future date) – consensual contract and perfected by mere consent

* AIRCRAFT – perfected even without issuance of ticket as long as there was already meeting of minds with respect to the subject matter and consideration


contract of carriage



real contract; not until the facilities of the carrier are actually


used can the carrier be said to have assumed the obligation of the

carrier; perfected by actual use.




– perfected if it was established that the passenger


had checked in at the departure counter, passed through customs

and immigration, boarded the shuttle bus and proceeded to the ramp of the aircraft and baggage already loaded to the aircraft.


* Public Utility Bus or Jeepneys

once it stops it is in effect making

a continuous offer to riders; perfected when passenger is already


attempting to board the vehicle


* TRAINS – perfected when a person:


purchased a ticket/ possess sufficient fare with which

to pay for his passage



presented himself at the proper place and in a proper

manner to be transported



has a bona fide


to use facilities of the carrier


Parties: shipper & carrier


> contract to carry goods – consensual

> contract of carriage - act of delivery of goods (

goods are


unconditionally placed in the possession and control of the carrier

and upon their receipt by the carrier for transportation



Common carriers (CC) (1732)

persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public. (NOT the means of transportation)

one that holds itself out as ready to engage in the


transportation of goods for hire as a public employment

and not as a casual occupation.


Tests for determining WON a party is a common carrier of goods:

1. He must be engaged in the business of carrying goods

for others as a public employment, and must hold himself out as ready to engage in the transportation of goods for persons generally as a business and not as a casual


2. He must undertake to carry good of the kind to which his business is confined.

3. he must undertake to carry by the method by which his business is conducted and over his established roads

4. transportation must be for hire.

Characteristics of Common carriers (CC):

no distinction between one whose principal business is the transportation of persons/goods and one who does such as an ancillary business

still a CC even if services offered to a limited clientele

pipeline operators are CCs – not necessarily motor vehicles


- contract by which an entire ship or some principal part thereof is let by the owner to another person for a specified time or use.

2 types:


Contract of affreightment


– involves the use of shipping space on vessels leased by the

owner in part or as a whole, to carry goods for another


- CC = observe extraordinary diligence; in case of loss,

deterioration or destruction of goods of goods, CCs are presumed

to be at fault or have acted negligently


Charter by demise/ Bareboat Charter


whole vessel is let to the charterer with a transfer to him of its

entire command and possession and consequent control over its

navigation including the master and the crew who are his





charter includes both vessel and crew—

CC becomes private


carrier (PC) insofar as that particular voyage is concerned


- if PC- ordinary diligence in the carriage of goods will suffice

- PC = undertaking is a single transaction, not a part of the

general business or occupation, although involving the carriage of goods for a fee; NO presumption of negligence applies – whosoever alleges damage to or deterioration of the goods

carried has the burden of proving that the cause was the

negligence of the carrier.

CCs v. Towage, Arrastre and Stevedoring

Towage- a vessel is hired to bring another vessel to another place e.g. a tugboat may be hired by CC to bring the vessel to a port (operator of tugboat not CC)

Arrastre operator’s functions has nothing to do with the trade and business of navigation nor to the use or operation of vessels. Services are not maritime.

Stevedoring- involves the loading and unloading of coastwise vessels calling at the port.

>>> Common carriers are public utilities, impressed with public interest and concern subject to regulation by the state.



the registered owner of a vehicle is liable from


any damage caused by the negligent operation of the vehicle

although the same was already sold or conveyed to another


person at the time of the accident.



The registered owner is liable to the injured



subject to his right of recourse against the transferee or

the buyer



Applicable in case of lease



Registered owner not liable if vehicle was taken

from him without his knowledge and consent.


- Applicable to people involved on a “kabit system” (arrangement whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate them under his license, sometimes for a fee or percentage of the earnings --- contrary to public policy)

parties to the “kabit system”

cannot invoke the same as against each other either to

enforce their illegal agreement or to invoke the same to

escape liability


pari delicto rule


having entered into an illegal

contract, neither can seek relief from the courts and each

must bear the consequences of his acts

also applicable to aircrafts and

vessels – basic rule that no person can operate a

common carrier without securing a certificate of public convenience and necessity.


I. Obligations of the carrier



A common carrier granted a certificate of public










without any discrimination.


It is

illegal for domestic ship operators to refuse to accept or

carry passengers or cargo without just cause

. (Section 16, RA



a. Time of Delivery

Where a carrier has made an express contract, the goods must be delivered within a specified time otherwise he is liable for any


(indemnity for damages).

In the absence of any agreement,

goods must be delivered at its destination within a



(depending on the attending circumstances, nature of the



b. Consequences/Effects of Delay



in carriage






terminate, the contract of carriage;

when the cause is removed,

the master must proceed with the voyage and make delivery.


During the detention or delay, vessel continues to be liable as a common carrier, not a warehouseman, and remains duty bound to

In air transportation,

passengers with confirmed tickets who

were not allowed to board are provided with denied boarding

exercise extraordinary diligence


compensation and priority boarding rules.

No compensation

for refusal if it is because of


government requisition of the


common carrier negligently delays in transporting the goods,



substitution of equipment of lesser capacity when


natural disaster shall not free it from responsibility.


required by operational and or safety and/or other causes


beyond the control of the carrier, and


if arrangements


common carrier delays , without just cause, in transporting

have been made for the passenger to take another flight in a comparable air transportation which will arrive not later than three hours after the time of flight on which the confirmed

the goods or changes the stipulated or usual route

, the contract

limiting its liability

cannot be availed




of the


destruction, or deterioration of the goods.


space is held is supposed to arrive.

(Civil Aeronautics Board


Economic Regulation)

a. Grounds for valid refusal to accept goods

1. dangerous objects or substances including

dynamites and other explosives

2. goods are unfit for transportation

3. acceptance would result in overloading

4. contrabands or illegal goods

5. goods injurious to health

6. goods will be exposed to untoward danger

(1) Abandonment In case of delay through the fault of the carrier,


the consignee

may refuse to accept the goods or may leave the goods in the

hands of the carrier.

It must be communicated to the carrier in

writing. This right must be exercised between the time of delay

and before the arrival of the goods at its destination.

The carrier

must pay the full value of the goods as if they had been lost or


If abandonment is not made, indemnification for the losses and

like flood, capture by enemies and the like

damages by reason of the delay cannot exceed the current price which the goods would have on the day and at the place they are to be delivered.


goods like livestock will be exposed to





failure to tender goods on time

The value of the goods which the carrier must pay in case of loss


or misplacement shall be that what is declared in the bill of lading.

In Fisher v. Yangco, factors in determining reasonable discrimination include, 1) suitability to the vessel for the transportation of such products; 2) reasonable possibility of danger or disaster resulting from their transportation in the form and under the conditions in which they are offered for carriage; and 3) the general nature of the business done by the carrier.

Consignee must not defer the payment of the expenses and transportation charges of the goods otherwise carrier may demand the judicial sale of the goods.

(2) Rights of Passengers in Case of Delay As to the rights and duties of the parties strictly arising out of delay, the Civil Code is silent. However, the Code of Commerce provides for such a situation:


Hazardous and Dangerous Substances


Carrier not properly equipped to transport dangerous chemicals or explosives may validly refuse to accept the same for transport.

Those which are not authorized by the Maritime Industry Authority to carry such goods may also validly refuse the same for










interrupted, the passengers shall be obliged to pay the fare



There must be a Special

Permit to Carry from the

proportion to the distance covered


without Right to recover for


losses and damages if the interruption is due to fortuitous event


of force majeure,

but with a right to indemnity if the interruption


Unfit for Transport


should have been caused by the captain exclusively




Carriers may refuse to accept goods that are unfit for transportation ( by nature be unfit for transportation or are unfit because of improper packaging or defect in their containers ). However, carriers may accept the goods and limit its liability by stipulation.

may accept the goods and limit its liability by stipulation. If by reason of well-founded suspicion
may accept the goods and limit its liability by stipulation. If by reason of well-founded suspicion
may accept the goods and limit its liability by stipulation. If by reason of well-founded suspicion
may accept the goods and limit its liability by stipulation. If by reason of well-founded suspicion

If by reason of well-founded suspicion of falsity in the declaration as to the contents of the package carrier should decide to examine and investigate it in the presence of witnesses, with the shipper and consignee in attendance. If declaration of shipper is true, expenses occasioned by the examination and of repacking the packages shall be for the account of the carrier

Even if the cause of the loss, destruction or deterioration of the goods should be caused by the character of the goods, or the

faulty nature of the packing or of the containers

, the common

carrier must exercise due diligence to forestall or lessen the loss.


interruption should be caused by the disability of the vessel and a 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 stay shall be for his own account.

In case the vessel is not able to depart on time and the delay is unreasonable, the passenger may opt to have his/her ticket immediately refunded without any refund service fee from the authorized issuing/ticketing office.


a. Place

Goods should be delivered to the consignee in the place agreed upon by the parties.

The shipper may change the consignment of the goods provided that at the time of ordering the change of the consignee the bill of lading signed by the carrier be returned to him, in exchange for

another wherein the novation of the contract appears. The expenses occasioned by the change shall be for the account of the shipper.

b. Consignee

Delivery must generally be made to the owner or consignee or to someone lawfully authorized by him to receive the goods for his

account or to the holder of the negotiable instrument.

c. Delay to Transport Passengers

Effects of ‘delayed and unfinished voyage’ in inter-island vessels:

vessel can not continue or complete her voyage for any cause – carrier is under obligation to transport the passenger to his/her destination at the expense of the carrier including free meals and lodging before the passenger is transported to his/her destination; the passenger may opt to have his/her ticket refunded in full if the cause of the unfinished voyage is due to the negligence of the carrier or to an amount that will suffice to defray transportation cost at the shortest possible route if the cause of the unfinished voyage is fortuitous event.

vessel is delayed in arrival at the port of destination – free meals during mealtime

delay in departure at the point of origin due to carrier’s negligence; fortuitous event - free meals during mealtime; carrier not obliged to serve free meals

carrier is not obliged to inform passengers of sailing schedule of the vessel

B.DUTY TO EXERCISE EXTRAORDINARY DELIGENCE Goods should be delivered in the same condition that they were received and to transport the passengers without encountering any harm or loss.

ARTICLE 1755. 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. (Civil Code)

a. Presumption of Negligence

Two conditions for the birth of the presumption of negligence:

1. there exists a contract between the passenger or the shipper and the common carrier

2. the loss, deterioration, injury or death took place during the existence of the contract

Doctrine of Proximate Cause – there is presumption of negligence If the goods are lost, destroyed or deteriorated, common carriers are presumed to have acted negligently, unless they prove that they observed extraordinary diligence. 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.

b. Duration of Duty

(1) Carriage of Goods ARTICLE 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee or to the person who has a right to receive them…

ARTICLE 1737. 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. (common carrier becomes a warehouseman – ordinary diligence)

ARTICLE 1738. 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 if destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.

(2) Carriage of Passengers By trains – the extraordinary responsibility of common carrier commences the moment the person who purchases the ticket (or

a ‘token’ or ‘card’) from the carrier presents himself at the proper place and in a proper manner to be transported with a bona fide intent to ride the coach.

* Mere purchase of a ticket does not of itself create the relation of carrier and passenger but it is an element in the inception of the relation.

* A proper person who enters upon the carrier’s premises (station,

ticketing office, or waiting room) with the intention of becoming a passenger will ordinarily be viewed as assuming the status of a passenger.

* One who goes to the railroad station to inquire as to the

possibility of securing passage on a freight train, which he knows, by the rules of the company, is not allowed to carry passengers, and to secure passage thereon if possible, is not entitled to the rights of a passenger but is a mere trespasser.


One who rides upon any part of the vehicle or conveyance which


unsuitable or dangerous, or which he knows is not intended for

passengers, is not presumed to be a passenger.

* One who secures free passage by fraud or stealth is precluded

from recovery for injuries sustained through the negligence of the carrier, for he has not assumed the status of a passenger.

* A person riding on a freight train, on a driver’s pass or similar arrangement, to look after livestock being transported and as incident to such transportation is, generally regarded as a passenger for hire.

* Motor vehicles like jeepneys and buses are duty bound to stop

their conveyances for a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they do so. Once a public utility bus or jeepney stops, it is making a continuous offer to bus riders.

Duty to exercise utmost diligence with respect to passengers will not ordinarily terminate until the passenger has, after reaching his destination, safely alighted from the carrier’s conveyance or had a reasonable opportunity to leave the carriers premises.


1. Flood, storm, earthquake, lightning, or other natural disaster or


2. Act of the public enemy in war, whether international or civil

3. Act or omission of the shipper or owner of the goods

4. The character of the goods or defects in the packing or in the


5. Order or act of competent public authority

6. Exercise of extraordinary diligence

Fortuitous Event – to be a valid defense must be established to be the proximate cause of the loss


1. The cause of the unforeseen and the unexpected occurrence,

or of the failure of the debtor to comply with his obligation, must be independent of the 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

4. The obligor (debtor) must be free from any participation in or

the aggravation of the injury resulting to the creditor

In order for the common carrier to be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm or other natural disaster

in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods.

Fire – not considered as a natural calamity or disaster

Fire caused by lightning – a natural calamity

Hijacking – does not fall under the categories of exempting causes; the common carrier is presumed to be at fault or to have acted negligently unless there is a proof of extraordinary diligence on its part

Mechanical defects – damage or injury resulting from mechanical defects is not a damage or injury that was caused by fortuitous event; carrier is liable to its passengers for damages caused by mechanical defects of the conveyance (breakage of a faulty drag- link spring, fracture of the vehicle’s right steering knuckle, defective breaks)

Pages 123-190 Juntilla v. Fontanar “Tire-blowouts” was not considered as fortuitous event although it was alleged that the tires were in good condition; no evidence was presented to show that the evidence were due to adverse road conditions – the carrier must prove all angles. The explosion could have been caused by too much air pressure injected into the tires and the fact that the jeepney was overloaded and speeding at the time of the accident.


1. Damage to cargo due to EXPLOSION of another cargo – not

attributable to peril of the seas or accidents of navigation.

2. Damage by WORMS and RATS resulting to damage to cargoes –

can’t be cited as an excuse by the carrier.

3. Damage by WATER through a port which had been left open or

insufficiently fastened on sailing.

4. Carrier cannot escape liabilities to third persons if damage was

caused by BARRATRY – where the master or crew of the ship committed unlawful acts contrary to their duties – includes theft and fraudulently running the ship ashore.

passenger of the bus and that she suffered injuries while on board the bus.

(b) Supposing that there were armed men who staged a hold-up while the bus was speeding along the highway. One of them stole the passenger’s bag and wallet while pointing a gun him. Is the bus liable? Answer: No. Hand-carried luggages are governed by necessary deposit. Besides, theft with use of arms or through irresistible force is a force majeure which exempts carriers from liability.

3. Hi-jacking cannot exculpate the carrier from liability if it is shown that the employees of the carrier were not overwhelmed by the hijackers and that there was no showing of irresistible force. Since, there were 4 employers while there were only 2 hijackers and only one of them was armed with bladed weapon. ON THE OTHER HAND, a hijacking by 3 armed men is an event which is considered to be beyond the control of the carrier. Thus, the carrier may be adjudged from liability if it can be proven that the hijacking was unforeseeable.


- presupposes a state of war and refers to the government of a

foreign nation at war with the country to which the carrier belongs, though not necessarily with that to which the owner of the gods owes allegiance.

- Thieves, rioter, and insurrectionists are not included. They are

merely private depredators for whose acts a carrier is answerable. - Rebels in insurrection against their own government are

generally not embraced in the definition of public enemy. However, if the rebels hold a portion of territory, they have

declared their impendence, cast off their allegiance and has organized armed hostility to the government, and the authority of the latter is at the time overthrown, such an uprising may take on the dignity of a civil war, and so matured and magnified, the parties are belligerent and are entitled to belligerent rights.

- Depredation by pirates (which are enemy of all civilized nation) excuses the carrier from liability.



Common carriers may be exempted from responsibility only if


the act of the public enemy has been the proximate and only


Problem: A carrier bus on its way to its destination encountered an engine failure, thus, it has to be repaired for 2 days. And while in the repair shop, a typhoon came resulting to the spoilage of cargoes. Answer: A typhoon although a natural disaster, is not a valid defense if it is shown that it was not the only cause of the loss. Especially when the facts indicate that the

Problem: A passenger told the driver that he has valuable

cause of the loss. Moreover, due diligence must be exercised to prevent or at least minimize the loss before, during and after the performance of the act of the public enemy in order that the carrier may be exempted from liability for the loss, destruction, or deterioration of the goods.

typhoon was foreseeable and could have been detected




through the exercise of reasonable care. Cargoes should have been secured while the bus was being repaired for 2 days.

items in his bag which was placed under his feet and he asked the driver (to which he is seated near) to watch for the bag while he is asleep.

Character of the goods and defects in the packaging or in the containers are defenses available to the common carrier. Similarly, the Carriage of Good b Sea Act provides that carrier shall not liable for: (1) wastage in bulk or weight or any damages arising form the inherent defect, quality or vice of goods; (2) insufficiency of packing; (3) insufficiency or inadequacy of the marks, or (4) latent defects no discoverable by due diligence.

(a) There have been incidents of throwing of stones at

However, NCC likewise provides:

passing vehicles in the North Express Way. While the bus was traversing the super highway, a stone hurled from the overpass and hit the passenger resulting to injuries. Can the passenger hold the bus liable for damages?

Art. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of the goods, or the faulty nature of the packing or the containers, the common carrier must exercise due diligence to forestall or lessen the loss.

Answer: Yes. The incident was foreseeable due the prior incidents of stone hurling. The bus should have exercised utmost diligence and employed adequate precautionary measures to secure safety of passengers since the incident was HOWEVER, if the stone throwing was entirely

Thus, if the carrier accepted the goods knowing the fact of improper packing or even if the carrier does not know but the defect was nonetheless apparent upon ordinary observation, it is not relived form liability for loss or injury to goods resulting therefrom.

unforeseeable and the carrier exercised the utmost diligence, then, the bus can’t be held liable.


Nonetheless, the burden of proof Is on the carrier to prove such exercise of diligence. It is up to the carrier to overthrow the presumption of negligence. If the passenger decides to file a case, al the passenger has to do is to prove that she was a


Problem: A carrier knowing that some of a cargo of sacks of rice had big holes and others had openings just loosely tied with strings resulting to the spillage of rice during the trip. Thus, there was shortage in the delivery of the cargoes. When sued due to the shortage, the carrier

interposed a defense that it was not liable since the shortage was due to the defective condition of the sacks. Decide. Answer: Carrier must still exercise extraordinary diligence if the fact of improper packing is known to the carrier or its servants, or apparent upon ordinary observation. If the carrier accepted the cargo despite such defects, the carriers becomes liable for the damage resulting therefrom. Apply Article 1742.

e. ORDER OF PUBLIC AUTHORITY Art. 1743. If through the order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said public authority had power to issue order.



Carrier was not excused from liability since the order of an acting mayor was not considered as a valid order of a public authority. It is required that public authority who issued the order must be duly authorized to issue the order.


Carriage of Goods by Sea Act – provides that carrier shall not responsible for loss or damage resulting from “arrest or restraint of princes, rulers, or people, or seizure under legal process” and from “quarantine restrictions”.


- Primary defense of carrier is exercise of extraordinary diligence in transporting passengers. Even if there is a fortuitous event, the carriers must also present proof of exercise of extraordinary diligence.

Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the carrier’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. The liability does not cease even upon proof that they exercised diligence in the selection and supervision of their employees.

Art. 1763. 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 family could have prevented or stopped the act or omission.

a. Employees

- Carrier is liable for the acts of its employees. It can’t escape liability by claiming that it exercised due diligence in supervision and selection of its employees (unlike in quasi-delicts).

Reasons for the rule:


Undertaking of the carrier requires that its passenger that full measure of protection afforded by the exercise of high degree of care prescribed by law, inter alia from violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier’s own servants.


The liability of the carrier for the servant’s violation of duty to performance of his contract to safely transport the passenger, delegating therewith the duty of protecting the passenger with utmost care prescribed by law.


As between the carrier and the passenger, the former must bear the risk of wrongful acts or negligence of the carrier’s employees against passenger, since it, and not the passenger, has the power to select and remove them.


Other Passengers and Third Persons

With respect to acts of strangers and other passengers resulting in injury to apassenger, the availability of such

defense is also subject to the exercise of a carrier of due diligence to prevent or stop the act or omission. Negligence of the carrier need not be the sole cause of the damage or injury to the passenger or the goods. The carrier would still be liable even if the contractual breach concurs with the negligent act or omission of another person.

G. PASSENGER’S BAGGAGES Rules that are applicable to goods that are being shipped are also applicable to baggage delivered to the custody of the carrier. Arts. 1733. 1734 and 1736 of Civil Code are applicable. However, if the luggage was hand-carried, Arts. 1998, 2000-2003 shall apply. Art. 1998. The deposit of effects made by the travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. (1783)

Art. 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care required of him. (1784a)

Art. 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force. (n)

Art. 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel. (n)

Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in articles 1998 to 2001 is suppressed or diminished shall be void. (n)



Despite the fact that the carrier gave notice that it shall not be liable for baggage brought in by passengers, the

carrier is still liable for lost hand-carried luggage since it is governed by rules on necessary deposits. Under Art. 20000, the responsibility of the depositary includes the loss of property of the guest caused by strangers but not that which may proceed from force majeure. Moreover, article 2001 considers theft as force majeure if it is done with use of arms or through irresistible force.


Even if the passenger did not declare his baggage nor pay its charges contrary to the regulations of the bus company, the carrier is still liable in case of loss of the baggage. Since, it has the duty to exercise extraordinary diligence over the baggage that was turned over to the carrier or placed in the baggage compartment of the bus. The non-payment of the charges is immaterial as long as the baggage was received by the carrier for transportation.


A. Negligence of Shipper or Passenger

The obligation to exercise due diligence is not limited to the carrier. The shipper is obliged to exercise due diligence in avoiding damage or injury. Nevertheless, contributory

negligence on the part of the shipper/ passenger would only mitigate the carrier’s liability; it is not a total excuse.

However, if the negligence of the shipper/ passenger is the proximate and only cause of the loss, then, the carrier shall not be liable. The carrier may overcome the presumption of negligence and any be able to prove that it exercised extraordinary diligence in handling the goods or in transporting the passenger. The carrier may be able to prove that the only cause of the loss of the goods is any of the following:

1. Failure of the shipper to disclose the nature of the goods;

2. Improper marking or direction as to the destination;

3. Improper loading when he assumes such responsibility.

The shipper must likewise see to it that the goods are properly packed; otherwise, liability of the carrier may either be mitigated or barred depending on the circumstances.

Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable in damages, which however, shall be equitably reduced.

Art. 1761. 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.

a. Last Clear Chance

A negligent carrier is liable to a negligent passenger in placing

himself in peril, if the carrier was aware of the passenger’s peril,

or should have been aware of it in the reasonable exercise of due

care, had in fact an opportunity later than that of the passenger to avoid an accident.

Last clear chance applies in a suit between the owners and drivers

of colliding vehicles. It does no tarise where a passenger demands

responsibility from the carrier to enforce its contractual obligations. For it would be inequitable to exempt the negligent driver of the carrier and its owner on the ground that the other driver was likewise guilty of negligence.

b. Assumption of Risk

Carriers are not insurers of the lives of their passengers. Thus, in air travel, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequence of which the passenger must assume or expect.

However, there is no assumption of risk in a case wherein a passenger boarded a carrier that was filled to capacity. The act of the passenger in taking the extension chair does not amount to implied assumption of risk. Case:

Although, there is a sign in the bus that says: “do not talk to the driver while the bus is in motion, otherwise, the company would not assume responsibility for any accident:. Nonetheless, the passengers dared the driver to race with another bus, as the bus speeds up in the attempt to overtake the other bus, it failed to slow down. As a result, the bus turns turtle causing the death and injuries to passengers. Is the bus company liable? Answer: Yes. The bus company is obligated to exercise utmost diligence in carrying passengers. This liability cannot be eliminated or limited by simply posting notices. The passenger cannot be said to have assumed the risk of being injured when he urged the driver to accept the dare. At most, the passengers can only be said to be guilty of contributory negligence which would mitigate the liability of the driver, since the proximate cause of

the accident was the driver’s willful and reckless act in running the race with the other bus.


a. Amount to be Paid

Common carriers are subject to heavy regulations with respect to rates that they are charging to the public. The regulation of rates

is founded upon the valid exercise of the Police Power of the state

in order to protect the public from arbitrary and excessive rates

while maintaining the efficiency and quality of services rendered. The fixing of just and reasonable rates involves a balancing of investor and the consumer interest.

Although the consideration that should be paid to the carrier is still subject to the agreement between parties, what can be agreed upon should not be beyond the maximum amount fixed by appropriate government agency.

b. Who will pay.

Although either of the shipper or the consignor may pay the freight before or at time the goods are delivered to the carrier for shipment, nonetheless, it is the consignor (whom the contract of carriage is made) who is primarily liable for the payment of freight whether or not he is the owner of the goods. The obligation to pay

is implied from the mere fact that the consignor has placed the

goods with the carrier for the purpose of transportation.

c. Time to pay.

Code of Commerce provides that payment should be made within 24-hours from the time of delivery in the absence of any

agreement between the parties.

ARTICLE 374. The consignees to whom the shipment was made may not defer the payment of the expenses and transportation

charges of the goods they receive after the lapse of twenty-four hours following their delivery; and in case of delay in this payment, the carrier may demand the judicial sale of the goods transported in an amount necessary to cover the cost of transportation and the expenses incurred.


Carriage of Passengers by Sea

With respect to carriage of goods by sea, the tickets are

purchased in advance. Carriers are not supposed to allow passengers without tickets. The carrier shall collect/ inspect the passenger’s ticket within one hour from vessel’s departure as not


disrupt resting or sleeping passengers.


the vessel is not able to depart on time and the delay is

unreasonable, the passenger may opt to have his/ her ticket refunded without refund service fee. Delayed voyage means “late departure of the vessel from its port of origin and/ or late arrival of the vessel to its port of destination”. Unreasonable delay means “the period of time that has lapsed without just cause and is solely attributable to the carrier which has prejudiced the transportation of the passenger and/ or cargoes to their port of destination.

A passenger who failed ot board the vessel can refund or

revalidate the ticket subject to surcharges. Revalidation means “the accreditation of the ticket that is not used and intended to be used for another voyage.


Carrier’s Lien

If consignor or the consignee fails to pay the consideration for the

transportation of goods, the carrier may exercise his lien in accordance with Art. 375 of Code of Commerce:

ARTICLE 375. The goods transported shall be especially bound

to answer for the cost of transportation and for the expenses and

fees incurred for them during their conveyance and until the


This special right shall prescribe eight days after the delivery has been made, and once prescribed, the carrier shall have no other action than that corresponding to him as an ordinary creditor.





Demurrage is the compensation provided for the contract of affreightment for the detention of the vessel beyond the time agreed on for loading and unloading. It is the claim for damages for failure to accept delivery. In broad sense, very improper detention of a vessel may be considered a demurrage. Technically, liability for demurrage exists only when expressly stipulated in the contract. Using the term in broader sense, damages in the nature of demurrage are recoverable for a breach of the implied obligation

to load or unload the cargo with reasonable dispatch, but only by the party to whom the duty is owed and only against on who is a party to the shipping contract. Notice of arrival of vessels or conveyances, or their placement for purposes of unloading is often a condition precedent to the right to collect demurrage




A common carrier is bound to carry the passengers safely as far a

human care and foresight provide, using the utmost diligence of

very cautious persons, with due regard for all circumstances.

Extraordinary diligence: Calculated to protect the passengers from the tragic mishaps that frequently occur in connection with rapid modern transportation.


Common carrier binds itself to carry the passengers safely as far as human care and foresight can provide, using the utmost

diligence of a very cautious person, with due regard for all the


- The duty even extends to the members of the crew or complement operating the carrier.

A reasonable man or a good father of a family in the position of

the carrier must exercise extraordinary diligence in the performance of his contractual obligation.

- Whether or not a reasonable man, exercising extraordinary diligence, could have foreseen and prevented the damage or loss that occurred.



The law allows a stipulation whereby the carrier will exercise a degree of diligence which is less than extraordinary with respect to goods.

Art. 1744. A stipulation between the common carrier and the shipper 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:

1. In writing, signed by the shipper/owner;

2. Supported by a valuable consideration other than the

service rendered by the common carrier (Note: Typically fare/freight); and

3. Reasonable, just and contrary to public policy.


There can be no stipulation lessening the utmost diligence that is owed to passengers.

Art. 1757. The responsibility of a common carrier for the safety of passengers as required in Arts. 1733 and 1755 cannot be dispensed with or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise. (Note: Absolute; extraordinary at all times.)

Gratuitous passenger – A stipulation limiting the common carrier’s liability for negligence is valid, but not for willful acts of gross negligence. The reduction of fare does not justify any limitation.



a.) Warranty of Seaworthiness of Ship – Extraordinary diligence requires that the ship which will transport the passengers and goods is seaworthy. Seaworthiness of the vessel is impliedly warranted.

The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to make the ship seaworthy.

b.) No duty to inquire – Because of the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessels seaworthiness, genuineness of its licenses and compliance with all maritime laws. Passengers cannot be expected to inquire everytime they board a common carrier, whether the carrier possesses the necessary papers or that all the carrier’s employees are qualified.

It is the carrier that carries such burden of proving that

the ship is seaworthy. Presentation of certificates of seaworthiness is not sufficient to overcome the presumption of negligence.

c.) Meaning of Seaworthiness – A vessel must have such degree of fitness which an owner who is exercising extraordinary diligence would require his vessel to have at the commencement of the voyage, having regard to all the probable circumstances of it. This includes fitness of the vessel itself to withstand the rigors of voyage, fitness of the vessel to store the cargoes and accommodate passengers to be transported and that it is adequately equipped and properly manned.

General Test of Seaworthiness: Whether the ship and its appurtenances are reasonably fit to perform the service undertaken.

Example: The carrier was able to establish that the ship itself was seaworthy because the records reveal that the vessel was drydocked and inspected by the Phil. Coast Guard before its first destination.

A warranty of seaworthiness requires that it be properly

laden, and provided with a competent master, a sufficient number of competent officers and seamen, and the requisite appurtenances and equipment.

The carrier shall be bound before and at the beginning of the voyage to exercise due diligence to:

1. Make the ship seaworthy;

2. Properly man, equip, and supply the ship;

3. Make all parts of the ship in which goods are

carried, fit and safe for their reception, carriage, and preservation.

The carrier shall properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

The ship must be cargoworthy. The ship must be efficiently strong and equipped to carry the particular kind of cargo which she has contracted to carry and her cargo must be so loaded that it is safe for her to proceed on her voyage.

The vessel must be adequately equipped and properly manned. On top of regular maintenance and inspection, Captains, masters or patrons of vessels must prove the skill, capacity, and qualifications necessary to command and direct the vessel. If the owner of a vessel desires to be the captain without having the legal qualifications, he shall limit himself to the financial administration of the vessel and shall entrust the navigation to a qualified person.

It is not an excuse that the carrier cannot afford the

salaries of competent and licensed crew or that latter is unavailable.

B. OVERLOADING Duty to exercise due diligence likewise includes the duty to take passengers or cargoes that are within the carrying capacity of the vessel.



The vessel itself may be suitable for the cargo but this is not enough because the cargo must also be properly stored.

Cargo must generally not be placed on deck. The carrying of deck cargo raises the presumption of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of the ship.


Failure on the part of the carrier to provide competent captain and crew should be distinguished from the negligence of the said captain and crew, because the latter is covered by the Limited Liability Rule (liability of the shipowner may be limited to the value of the vessel). If the negligence of the captain and crew can be traced to the fact that they are really incompetent, the Limited Liability Rule cannot be invoked because the shipowner may be deemed negligent.






Circular No. 114: p. 204)





a.) Deviation – If there is an agreement between the shipper and the carrier as to the road over which the conveyance is to be made (subject to the approval by the Maritime Industry Authority), the carrier may not change the route, unless it be by reason of force majeure. Without this cause, he shall be liable for all the losses which the goods may suffer, aside from paying the sum stipulated for that case. When on account of the force majeure, the carrier had to take another route which resulted to an increase in transportation charges, he shall be reimbursed upon formal proof.

b.) Transshipment – The act of taking cargo out of one ship and loading it into another; to transfer goods from the vessel stipulated in the contract of affreightment to another vessel before the place of destination named in the contract has been reached. Transshipment of freight without legal excuse is a violation of the contract and subjects the carrier to liability if the freight is lost even by a cause otherwise excepted.



Common carriers that offer transportation by land are similarly required to make sure that the vehicles that they are using are in

good order and condition.



Rule on Mechanical Defects – If the carriers will replace certain parts of the motor vehicle, they are duty bound to make sure that the parts that they are purchasing are not defective. Hence, it is a long-standing rule that a carrier cannot escape liability by claiming that the accident that resulted because of a defective break or tire is due to a fortuitous event. This is true even if it can be established that the tire that was subject of a blow-out is brand new. The duty to exercise extraordinary diligence requires the carrier to purchase and use vehicle parts that are not defective.


The carrier fails to exercise extraordinary diligence if it will not comply with basic traffic rules. The Civil Code provides for a presumption of negligence in case the accident occurs while the operator of the motor vehicle is violating traffic rules.

In cases involving breach of contract of carriage, proof of violation of traffic rules confirms that the carrier failed to exercise extraordinary diligence.


There is no unbending duty to inspect each and every package or baggage that is being brought inside the bus or jeepney. The carrier is duty bound to conduct such inspection depending on the


VI. EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR The aircraft must be in such a condition that it must be able to withstand the rigors of flight.

Airworthiness – An aircraft, its engines propellers, and other components and accessories, are of proper design and construction, and are safe for air navigation purposes, such design and construction being consistent with accepted engineering practice and in accordance with aerodynamic laws and aircraft science.

Proof of airworthiness is not by itself sufficient to prove exercise of extraordinary diligence.

The fact that the flight was cancelled due to fortuitous event does not mean that the carrier’s duty already ended. The carrier is still obligated to look after the convenience and comfort of the passenger.


Is the duty of the carrier to make inquiry as to the general nature

of the articles shipped and of their value before it consents to carry them; and its failure to do so cannot defeat the shipper’s right to recovery of full value of the package if lost, in the absence of showing of fraud or deceit on the part of the shipper.

Where a common carrier has reasonable ground to suspect that the offered goods are of a dangerous character, the carrier has the right to know the character of such goods and to insist inspection, if reasonable and practical under the circumstances, as a condition of receiving and transporting such goods. To be subjected to unusual search, other than the routinary inspection procedure customarily undertaken, there must exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant exhaustive inspection, or even refusal to accept carriage of the same.



Bill of Lading (BOL)- 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 be described the place of destination, and to be delivered to the designated consignees of the parties. It operates as a (1) RECEIPT (2) as a CONTRACT (3) as


A BOL is not necessary for the perfection of a contract of carriage.

Thus, the obligation to exercise extraordinary diligence by the carrier is still required even if there is no bill of lading. In the absence of the bill of lading, disputes shall be determined on the basis of the provisions in the New Civil Code and suppletorily by the Code of Commerce.



Clean Bill of

Does not contain any notation indicating



any defect in the goods.


Foul Bill


One that contains the abovementioned




Spent Bill of

The goods are already delivered but the



bill of lading was not yet returned (upon delivery, the carrier is supposed to retrieve the covering bill of the goods)


Through Bill

Issued by a carrier who is obliged to use the facilities of other carriers as well as his own facilities for the purpose of transporting the goods from the city of the seller to the city of the buyer, which BOL is honored by the second and other interested carriers who don’t issue their own BOL.

of Lading



On Board Bill

-states that the goods have been received on board the vessel which is to carry the goods. -apparently guarantees the certainty of shipping as well as the seaworthiness of the vessel to carry the goods.


Received for

-states that the goods have been received for shipment with or without specifying the vessel by which the goods are to be shipped. -issued when conditions are not normal and there is insufficiency of shipping space.

Shipment Bill



Custody Bill

The goods are already receied by the carrier but the vessel indicated therein has not yet arrived in the port.

of Lading






The vessel indicated in the BOL that will transport the goods is already in the port.



EFFECTIVITY of BOL- upon its delivery to and acceptance by the shipper. The acceptance of the bill without dissent raises the presumption that all the terms therein were brought to the knowledge of the shipper and agreed to by him, and in the absence of fraud or mistake, he is stopped thereafter from denying that he assented to such claims.


I. RECEIPT- as comprehending all methods of transportation, a BOL may be defined as a written acknowledgement of the receipt of goods and an agreement to transport an to deliver them at a specified place to a person named or on his order. Other terms, “shipping receipts”, “forwarders receipts”, and “receipts for transportation”. (SC) the designation however is not material, and neither is the form of the instrument. If it contains an acknowledgement by the carrier of the receipt of goods for transportation it is, in legal effect a BOL.

II. CONTRACT - it expresses the terms and conditions of the agreement between the parties; names the parties; includes consignees etc. It is the law between the parties bound by its terms and conditions.

It is to be construed liberally in favor of the shipper who adhered to such bill as it is a contract of adhesion. The only participation of the party is the signing of his signature or his adhesion thereto.

ART. 24 (NCC). In all contractual property or other relations, when one of the parties is at a disadvanatge on account of his moral dependence, ignorance indigence, mental weakness, tender age and other handicap, the court must be vigilant for his protection.

It is covered by the parol evidence rule, that the terms of the contract are conclusive upon the parties and evidence aliunde is not admissible to vary or contradict a complete enforceable agreement. If mistake was alleged, it must be timely raised in the pleadings and it must be a mistake of fact mutual to the parties.

The BOL is the legal evidence of the contract and the entries thereof constitutes prima facie evidence of the contract. All the essential elements of a valid contract (cause, consent, object) are present when such bill are issued.

BASIC STIPULATIONS (for overland transpo, maritime commerce and airline transpo of passengers, please refer to the textbook for the codal pp. 267-275)


1. Exempting the carrier from any and all liability for loss or

damage occasioned by its own negligence - INVALID as it is contrary to public policy.

2. Parties may stipulate that the diligence to be exercised by the

carrier for the carriage of goods be less than extraordinary diligence if it is (a) in writing and signed by both parties (b) supported by a valuable consideration other than the service

rendered by the common carrier ( c ) the stipulation is just, reasonable and not contrary to law.

3. Providing an unqualified limitation of such liability to an agreed

valuation - INVALID

4. Limiting the liability of the carrier to an agreed valuation unless

the shipper declares a higher value and pays a higher rate of freight- VALID and ENFORCEABLE.


ART 1507 (NCC). A document of title in which it is stated that the goods referred to therein will be delivered to the bearer or to the order of any person named in such document is a negotiable document of title.

If the document of title contains the required words of negotiability to make the instrument negotiable under Article 1507 of the NCC, the document remains to be negotiable even if the words “not negotiable” or non negotiable are places thereon

a. Bearer document- negotiated by delivery

b. Order document- negotiated by indorsement of the specified

person so named

Effects of negotiation. Negotiation of the document has the effect

of manual delivery so as to constitute the transferee the owner of

the goods.


1. Inter-island - if goods arrived in damaged condition (Art.


a. If damage is apparent, the shipper must file a claim

immediately (it may be oral or written);

b. If damage is not apparent, he should file a claim within 24

hours from delivery. The filing of claim under either (1) or (2) is a condition precedent for recovery. If the claim is filed, but the carrier refuses to pay: enforce carrier’s liability in court by filing a case:

a. within 6 year, if no bill of lading has been issued; or b. within 10 years, if a bill of lading has been issued.

2. Overseas –where goods arrived in a damaged condition from a

foreign port to a Philippine port of entry: (COGSA)

a. upon discharge of goods, if the damage is apparent, claim should be filled immediately;

b. if damage is not apparent, claim should be filled within 3 days from delivery.

Filing of claim is not a condition precedent, but an action must be filed against the carrier within a period of 1 year from discharge; if there is no delivery, the one-year period starts to run from the day the vessel left port (in case of undelivered or lost cargo), or from delivery to the arrastre (in case of damaged cargo). Where there was delivery to the wrong person, the prescriptive period is 10 years because there is a violation of contract, and the carriage of goods by sea act does not apply to misdelivery. (Ang v. American SS Agencies (19 SCRA 631)


F COGSA is applicable in international maritime commerce. It can

be applied in domestic sea transportation if agreed upon by the parties. (paramount clause)

F COGSA is suppletory to the Civil Code and the Code of

Commerce in the Carriage of goods from foreign ports to the


F Under the Sec. 4 (5), the liability limit is set at $500 per package unless the nature and value of such goods is declared by the shipper. This is deemed incorporated in the bill of lading even if not mentioned in it (Eastern Shipping v. IAC, 150 SCRA 463). Note that Art. 1749 of the NCC applies to inter-island trade.

Prescriptive periods

F Suit for loss or damage to the cargo should be brought within one year after:

a. delivery of the goods; or

b. the date when the goods should be delivered. (Sec. 3[6])

The one-year prescriptive period is suspended by:

1. express agreement of the parties (Universal Shipping Lines,

Inc. v. IAC, 188 SCRA 170)

2. when an action is filed in court until it is dismissed. (Stevens &

Co. v. Nordeutscher Lloyd, 6 SCRA 180)



Applies to all international transportation of person, baggage or goods performed by aircraft for hire. “International transportation” means any transportation in which the place of departure and the place of destination are situated either:

1. within the territories of two High Contracting Parties regardless

of whether or not there be a break in the transportation or

transshipment, or

2. within the territory of a single High Contracting Party, if there is

an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though

that power is not a party to the Convention.

Transportation to be performed by several successive air carriers shall be deemed to be one undivided transportation, if it has been regarded by the parties as a single operation, whether it has been agreed upon under the form of a single contract or of a series of contracts, and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting Party. (Art.


NOTE: Warsaw prevails over the Civil Code, Rules of Court and all laws in the Philippines since an international law prevails over general law.


1. If there is willful misconduct on the part of the carrier’s

employees. The Convention does not regulate, much less exempt, carrier from liability for damages for violating the rights of its passengers under the contract of carriage (PAL v. CA, 257 SCRA 33).

2. when it contradicts public policy;

3. if the requirements under the Convention are not complied



1. Death or injury of a passenger if the accident causing it took

place on board the aircraft or in the course of its operations; (Art.


2. Destruction, loss or damage to any luggage or goods, if it took

place during the carriage; (Art. 18) and

3. Delay in the transportation of passengers, luggage or goods.

(Art. 19)

NOTE: The Hague Protocol amended the Warsaw Convention by removing the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely (Art. 20(1)). (Alitalia v. IAC, 192 SCRA 9)


1. passengers

francs except: agreement to a higher limit

2. Goods and checked-in baggage

- limited to 250,000

- 250 francs/kg

except: consigner declared its value and paid a supplementary sum, carrier liable to not more than the declared sum unless it proves the sum is greater than its actual value.

3. hand-carry baggage - limited to 5,000 francs/passenger

An agreement relieving the carrier from liability or fixing a lower limit is null and void. (Art. 23)

Carrier not entitled to the foregoing limit if the damage is caused by willful misconduct or default on its part. (Art. 25)


1. Condition precedent

A written complaint must me made within:

- 3 days from receipt of baggage

- 7 days from receipt of goods

- in case of delay, 14 days from receipt of baggage/goods

F otherwise the action is barred except in case of fraud on the part of the carrier. (Art. 26)


Jurisdiction - governed by domestic law


Venue – at the option of the plaintiff:

a. court of domicile of the carrier;

b. court of its principal place of business;

c. court where it has a place of business through which the contract has been made;


court of the place of destination. (Art. 28)


Prescriptive period – 2 years from:


date of arrival at the destination

b. date of expected arrival

c. date on which the transportation stopped. (Art. 29)


Rule in case of various successive carriers,

a. In case of transportation of passengers – the action is filed only against the carrier in which the accident or delay occurred unless there is an agreement whereby the first carrier assumed liability for the whole journey.

b. In case of transportation of baggage or goods

i. the consignor can file an action against the first carrier and the carrier in which the damage occurred

ii. the consignee can file an action against the last carrier and the carrier in which the damage occurred. These carriers are jointly and severally liable. (Art. 30)

Nota Bene: COGSA/WARSAW applies to foreign vessels or airplane or international travel Code of Commerce applies to inter-island or domestic


Bill of Lading as Document of Title (page 341)

Bill of lading is a document of title under the Civil Code. It can be a negotiable document of title.

A. Negotiability

- It is negotiable if it is deliverable to the bearer, or to the order

of any person named in such document. (Art. 1507, Civil Code)

a) Effect of Stamp or Notation “Non-Negotiable”

the document remains to be negotiable even if the words “not-negotiable” or “non-negotiable” are placed thereon. - Art. 1510 (Civil Code)


How Negotiated

a) Bearer document (Art. 1508 and 1511)

- may be negotiated be delivery

b) Order document (Sec. 38, NIL and Art. 1509, NCC)

- can only be negotiated through the indorsement of the specified person so named.

- such indorsement may be in blank, to bearer or to a specified person.

Where a negotiable document of title is transferred for value by delivery, and the endorsement of the transferor is essential for negotiation, the transferee acquires a right against the transferor to compel him to endorse the document. xxx (Art. 1515, Civil Code)


Effects of Negotiation


has the effect of manual delivery



to constitute the

transferee the owner of the goods

- results in the transfer of ownership because transfer of document likewise transfers control over the goods

- refer to Art. 1513

Chapter 5 Actions and Damages in Case of Breach

Cause of action of a passenger and shipper:

a) against common carrier – based on culpa contractual or culpa


b) on the part of the driver – based on either culpa delictual or

culpa aquiliana

If the negligence of third persons concurs with the breach, the liability of the third person who was driving the vehicle and/or his employer may be based on quasi delict.

Solidary liability

- In case the negligence of the carrier’s driver and a third person concurs, the liability of the parties – carrier and his driver, third person – is joint and several.

I. Notice of Claim and Prescriptive Period A. Overland Transportation of Goods and Coastwise Shipping a) When to file a claim with carrier

- Art. 366 constitutes a condition precedent to the accrual of a right of action against a carrier for damage caused to the merchandise.

Under Art. 366 of the Code of Commerce, an action for damages is barred if the goods arrived in damaged condition and no claim is filed by the shipper within the following period:


immediately if damage is apparent;


within twenty four (24) hours from delivery if damage is not


- the period does not begin to run until the consignee has received possession of the merchandise that he may exercise over it the ordinary control pertinent to ownership.

- This provision applies even to transportation by sea within the Phils. or coastwise shipping.

- does not apply to misdelivery of goods.

But the period prescribed in Art. 366 may be

subject to modification by agreement of the parties.

b) Extinctive Prescription

- six (6) years if there is no written contract

- ten (10) years if there is written contract

This rule likewise applies to carriage of passengers for domestic transportation.

B. International Carriage of Goods by Sea

A claim must be filed with the carrier within the following period:

1) if the damage is apparent the claim should be filed immediately upon discharge of the goods; or

2) within 3 days from delivery if damage is not apparent

Filing of claim is not condition precedent. Thus, regardless of whether the notice of loss or damage has been given, the shipper can still bring an action to recover said loss or damage within one year after the delivery of the goods.

a) Prescription

Action for damages must be filed within a period of one (1) year from discharge of the goods.

The period is not suspended by an extra-judicial demand.

Does not apply to conversion or misdelivery.

The one (1) year period refers to loss of goods and not to misdelivery.

- Damages arising from delay or late delivery id not the damage or loss contemplated under the COGSA. The goods are not actually lost or damaged. The applicable period is ten (10) years.

This rule applies in collision cases. The one (1) year period starts not from the date of the collision but when the goods should have been delivered, had the cargoes been saved.


The insurer who is exercising its right of subrogation is also bound by the one (1) year prescriptive period.

However, it does not apply to the claim against the insurer for the insurance proceeds. The claim against the insurer is based on contract that expires in ten (10) years.

II. Recoverable Damages

Damages – is the pecuniary compensation, recompense or satisfaction for an injury sustained, or as otherwise expressed, the pecuniary consequences which the law imposes for the breach of some duty or violation of some rights.

A. Extent of Recovery (Art. 220, NCC)

pay for the

damages that are the natural and probable consequences of the breach of the obligation and which the parties have foreseen or could have reasonably foreseen at the time the obligation was constituted.

Carrier in bad faith or guilty of gross negligence – liable for all damages, whether the same can be foreseen or not.

Carrier in good faith



only to

- The carrier who may be compelled to pay has the right of recourse against the employee who committed the negligent, willful or fraudulent act.

B. Kinds of Damages

a) Actual or Compensatory Damages

– only for the pecuniary loss suffered by him as he has duly proved 2 Kinds:

1. the loss of what a person already possesses (daňo emrgente);

2. the failure to receive as a benefit that would have pertained to

him (lucro cesante).

Damages may be recovered: Art. 2205 (Civil Code) 1) For loss or impairment of earning capacity in cases of temporary or permanent personal injury; 2) For injury to the plaintiff’s business standing or commercial credit.

Damages cannot be presumed.

In case of goods – the plaintiff is entitled to their value at the time of destruction.

For personal injury and even death – the claimant is entitled to all medical expenses as well as other reasonable expenses that he incurred to treat his or her relative’s injuries.

In case of death – the plaintiff is entitled to the amount that he spent during the wake and funeral of the deceased. But, expenses after the burial are not compensable.

- Read Art. 2206 (Civil Code)

The amount of fixed damages is now P50,000.00

1) Loss of earning capacity Net Earning Capacity = Life Expectancy x [Gross Annual Income less Necessary Living Expenses]

Life expectancy – (2/3 x 80 – age at death)

Net earnings – based on the gross income of the victim minus the necessary incidental living expenses which the victim would have incurred if he were alive.

Amount of living expenses must be established. In the

absence of

proof, it



at fifty (50%)


the gross


Rules on loss of earning applies when the breach of the carrier resulted in the plaintiff’s permanent incapacity.


Attorney’s fees


- refer to Art. 2208 of the Civil Code

- attorney’s fees may be awarded in an action for breach of

contract of carriage under par. 1,2,4,5,10 and 11 of Art. 2208.

3) Interests

12% per annum – if it constitutes a loan or forbearance of money

6% per annum – if it does not constitute loan or forbearance of money

12% - for final judgment

b) Moral Damages

- Includes physical suffering, mental anguish, fright, serious

anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury.

- Though incapable of pecuniary computation, moral damages

may be recovered if they were the proximate result of the defendant’s wrongful act or omission.

- may be recovered when there is death or there is malice or bad faith. (in transportation of passengers)

- Refer to Art. 2219 and 2220

- Generally, no moral damages may be awarded where the breach of contract is not malicious.

c) Nominal Damages

- Refer to Art. 2221-2223 (Civil Code)

- the assessment of nominal damages is left to the discretion of the court

- the award of nominal damages is also justified in the absence of competent proof of the specific amounts of actual damages suffered.

- cannot co-exist with actual damages

d) Temperate or Moderate Damages

- Art. 2224 provides:

may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be provided with certainty.

- cannot co-exist with actual damages

e) Liquidated Damages

those agreed by the parties to a contract, to be paid in case of breach thereof. Ordinarily, the court cannot change the amount of liquidated damages agreed upon by the parties. However, Art. 2227 of the Civil Code provides that liquidated damages, whether intended as an indemnity or a penalty, shall be equitable reduced if they were iniquitous or unconscionable.

f) Exemplary or Corrective Damages

Requisites for the award of exemplary damages:

1. They may be imposed by way of example in addition to

compensatory damages, and only after the claimant’s right to

them has been established.

2. They cannot be recovered as a matter of right, their

determination depending upon the amount of compensatory damages that may be awarded to the claimant. 3. The act must be accompanied by bad faith or done in wanton, fraudulent, oppressive or malevolent manner.

The award of exemplary damages in breach of contract of carriage is subject to the provisions under Art. 2232-2235 of the Civil Code.