PART I COMMON CARRIERS

Transportation Contract whereby one obligates itself/themselves/

himself to transport persons, things, or news from one place to another
for a fixed price.

-13.
The goods or merchandise transported at sea, on land on
inland streams or lakes.
The term is used in 2 senses:
a.
To designate the price for the carriage, known as freightage
b.
To designate the goods carried.

A contract of carriage is not affected, changed or altered by the mere

fact that the obligor avails of other parties to effect the transportation
agreed upon, as in the case of transportation of agents.

Kinds:
According to object
1.
Transportation of things
2.
Transportation of persons
3.
Transportation of news
According to place of travel
1.
Land
2.
Water
a) Navigable canals
b) Lakes or rivers
c) By sea
3.
Air

Art. 1732. Common carriers are persons, corporations, firms or

associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.

Common carriers: 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.

A contract of transportation by air may be regarded as commercial.

(PAL v. Mendoza)

Things to consider when faced with a situation:

1.
Determine whether the carrier is common or private
if common, law on common carriers apply
if private general law on contracts and obligations
2.
Determine whether it involves carriage of goods or
passengers
If carriage of goods Arts. 1734 to 1754 apply
If passengers, Arts. 1755 to 1763.

Parties to the Contracts:

Dependent on the kind of transportation
Generally it involves:
1.
The shipper
2.
The carrier or conductor

They are thus:

1.
Persons, corporations, firms or associations
2.
Engaged in the business of carrying or transporting
passengers or goods or both
3.
By land, water, or air
4.
For compensation
5.
Offering their services to the public.

Private carrier Those who transport or undertake to transport in a

particular instance for hire or reward.
A common carrier undertaking to carry a special cargo or chartered to a
special person only becomes a private carrier. (Home Insurance v.
American Steamship)

The general public enters into a contract of transportation without a

hand in the preparation thereof. Hence, the law on common carriers
extends its protective mantle against one-sided stipulations over which
the riding public has no understanding, or worse, choice. This not so in
case of private carriers, where both parties can freely enter and agree
on stipulations, usually with a consideration therefore. (Valenzuela
Hardwood v. CA)

For transportation of passengers

1.
The shipper, who is also the person transported
2.
The carrier
For transportation of things:
1.
The shipper
2.
The carrier
3.
The consignee
For transportation of news:
1.
The remitter
2.
The carrier
3.
The consignee

Distinguishing common carriers from private carriers:

Carrier/Conductor One who binds himself to transport persons,

things or news as the case may be, or one employed in or engaged in
the business of carrying goods for others for hire.
May be classified into:
1.
Common
2.
Private

Not bound to carry for any

reason, unless it enters into a
special agreement to do so.

Bound to carry for all who offer

such goods as it is accustomed
to carry and tender reasonable
compensation for carrying them.
A public service and is thus
subject to regulation.

Only required to exercise

ordinary diligence.

Freight It has various definitions:

1.
The price or compensation paid for the transportation of
goods by a carrier, at sea, from port to port.
2.
May also denote the hire paid for the carriage of goods on
land from place to place or on inland streams or lakes.

Holds himself out in common,

that is, to all persons who choose
to employ him, as ready to carry
for hire.

No presumption of negligence for

injuries or loss.

Agrees in some special case with

some private individual to carry
for hire.

Consignee The party to whom the carrier is to deliver the things

being transported, or one to whom the carrier may lawfully make
delivery in accordance with the contract of carriage. Shipper and
consignee may be the same person.

Common Carrier

Does not hold itself out as

engaged in the business for the
public and is therefore not
subject to regulation as a
common carrier.

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Private Carrier

Definitions
Shipper/Consignor One who gives rise to the contract of
transportation by agreeing to deliver the things or new , or to present
his own person ir those of another/other in the case of transportation of
passengers.

SUBSECTION 1. - General Provisions

Governed by law on obligations

and contracts.

Presumed negligent for injuries

or loss.
Required to exercise
extraordinary diligence in
transporting goods and
passengers.
Governed by law on common
carriers.

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In private carriers, the stringent provisions of the Civil Code on common

carriers do not apply thus allowing for stipulations that lessen or remove
the protection given by law in contracts involving common carriers.
(National Steel Corporation v. CA)

A trucking company which is an exclusive contractor and hauler of

another company rendering or offering its services to no other individual
or entity, cannot be considered a common carrier. (FGU Insurance v.
GP Sarmiento)

Test for common carrier: (FPIC v. CA)

1.
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 occupation.
2.
Must undertake to carry goods of the kind to which his
business is confined.
3.
Must undertake to carry by methods by which his business is
conducted, and over his established roads.
4.
The transportation must be for hire.
True test: Whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to he general public as
his occupation rather than the quantity of extent of the conveyances
used in the employment. Determined by the character of the
business carried on by the carrier.

-2passengers transported by them, according to all the

circumstances of each case.

Such extraordinary diligence in the vigilance over the goods is

further expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and
7, while the extraordinary diligence for the safety of the
passengers is further set forth in Articles 1755 and 1756.

Extraordinary diligence: It is not enough that common carriers

exercise ordinary diligence of a good father of a family. It must be
extraordinary diligence.
Reason for requiring extraordinary diligence: The nature of the
business and the exigencies of public policy demand that they observe
such diligence. Such is impressed with a special public duty, subject to
the control and regulation of the state (through the Pubic Service
Commission). The public relies on the care and skill of common
carriers, and are forced to trust the utmost diligence and foresight of
common carriers. (Code Commission)

Common carriers, by the nature of their business, and by reason of

public policy, are bound to observe extra-ordinary diligence in the
vigilance over the goods and the safety of the passengers being
transported by them. (Benedicto v. IAC)

Art. 1733. Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the

Who are liable for the failure to exercise such extraordinary

diligence:
The law requires the approval of the Public Service
Commission in order that a franchise or any privilege
pertaining thereto may be sold or leased without
infringing the certificate issue to the grantee; and that if
property covered by the franchise is transferred or
leased without this requisite approval, the transfer is not
binding against the public or the Service Commission;
and in contemplation of law, the grantee of record
continues to be responsible under the franchise in
relation to the Commission and to the public. (Medina v.
Cresencia)
The prevailing rule on common carriers makes the
registered owner thereof liable for all consequences
arising from the operations of the carrier. The public has
the right to assume that the registered owner is the
actual owner thereof. Otherwise they would be put in a
disadvantage if they have to prove first the real owner
before they can recover damages. (Benedicto v. IAC)
Regardless of who the actual owner of a motor vehicle
might be, the registered owner is the operator of the
same with respect to the public and third persons, and
as such, directly and primarily responsible for the
consequences of its operation. (First Malayan Leasing
and Finance Corporation v. CA)
The registered owner of a certificate of public
convenience is liable to the public for the injuries or
damages suffered by passengers or third persons
caused by the operation of said vehicle even though the
same had been transferred to a third person. The
registered owner of any vehicle even if not use for a
public service should be responsible to the public or to
third persons for injuries caused the latter while the
vehicle is being driven on the highways or streets. A
registered owner who has already sold or transferred a
vehicle has the recourse to a third party complaint in the
same action against brought against him to recover for
the damage or injury done against the vendee or
transferee of the vehicle. (BA Finance Corp. v. CA)
A certificate of public convenience is not a requisite for
the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the
moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also
complied with the requirements of the applicable
regulatory statute and implementing regulations and has

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The test to determine a common carrier is whether the given

undertaking is a part of the business engaged in by the carrier which he
has held out to the general public as his occupation rather than the
quantity or extent of the business transacted. (Bascos v Arada)

The definition of common carriers in the Code makes no distinction as

to the means of transporting, as long as it is by land, water, or air. It
does not provide that the transportation of the passengers or goods
should by motor vehicle. (FPIC v. CA)

It is not necessary that a carrier be issued a certificate of public

convenience, and this public character is not altered by the fact that the
carriage of the goods in question was periodic, occasional, episodic or
unscheduled. (Loadstar Shipping v. CA)

Characteristics of common carriers:

1.
Undertakes to carry for all people indifferently; he is regarded
in some respects, as a public servant.
2.
Cannot lawfully decline to accept a particular class of goods
for carriage to the prejudice of the traffic in those goods.
3.
No monopoly is favored.
4.
Public convenience.

Public use Use by the public, not confined to privileged individuals,

but is open to the indefinite public. It is this quality which gives it a
public character. (Common carriers are prohibited from exercising
unreasonable discrimination.)

The concept of common carrier under Art. 1732 may be seen to

coincide neatly with the notion of public service, under the Public
Service Act. Public service includes every person that now or
hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business
purposes, any common carrier (Calvo v. UCPB General Insurance)

Common carriers are not obligated by law to carry and to deliver

merchandise, and persons are not vested with the right to prompt
delivery unless such common carriers previously assume the
obligation. Said rights and obligations are created by a specific contract
entered into by the parties. (PAL v. Mendoza)

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been granted a certificate of public convenience or other

franchise. (De Guzman v. CA)

Extraordinary diligence is not applicable to private carriers. They are

only required to exercise ordinary diligence.
Even common carriers are not made absolute insurers against all
risks of travel and of transport of goods, and are not held liable for
acts or events which cannot be foreseen or are inevitable, provided that
they shall have complied with the rigorous standard of extraordinary
diligence. (De Guzman v. CA)

SUBSECTION 2. - Vigilance Over Goods

Art. 1734. Common carriers are responsible for the loss,

destruction, or deterioration of the goods, unless 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;
(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.

These are usually Complete Defenses. (But the SC often confuses

itself)
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4,
and 5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault
or to have acted negligently, unless they prove that they observed
extraordinary diligence as required in Article 1733.

Responsibility of common carriers:

They are responsible for the loss, destruction and deterioration of the
goods carried by them. Such arises from contract, as the relation of
carriers with their patrons is contractual in nature.

Breach of contract of carriage: Culpa contractual not culpa

acquiliana.
Because of the extraordinary diligence required of common
carriers, they are given wide discretion in the selection and
supervision of persons to handle goods. But, due diligence in
selection and supervision may not exempt a common carrier for breach
of contract of carriage for failure to exercise the extraordinary diligence
required of it.

A common carrier, both from the nature of its business and for insistent
reasons of public policy is burdened by law with the duty of exercising
extraordinary diligence not only in ensuring the safety of passengers by
in caring for the goods transported by it. The loss or destruction or
deterioration of good turned over to the common carrier for the
conveyance to a designated destination raises instantly a presumption
of fault or negligence on the part of the carrier, save only where such
loss, destruction or damage arises from extreme circumstances such
as a natural disaster or calamity. In order that that the common carrier
may be exempted from liability, 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 the loss before,
during, and after the occurrence of the natural disaster in order to be
exempted from liability. (Arada v. CA)

Presumption of negligence
If the goods are proved to have been lost, destroyed or deteriorated,
the common carrier is presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the
extraordinary diligence required by law.

-3-

Burden of carrier: Prove that he exercised extraordinary diligence

required by law.
When a carrier fails to establish any caso fortuito, the presumption by
law of fault or negligence on the part of the carrier applies. (Eastern
Shipping Lines v. CA)
From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of passengers transported
by them, according to all the circumstance of each case. In the event of
loss, destruction or deterioration of the insured goods, common carriers
shall be responsible unless the same is brought about, among others,
by flood, storm, earthquake, lightning or other natural disaster or
calamity. In all other cases, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed
extraordinary diligence. (Delsan transport Lines v. CA)

There is no occasion for the necessity of discussing the diligence

required of a carrier or of the theory of prima facie liability of the carrier,
for from all indications, when the shipment did not suffer loss or
damage while it was under the care of the carrier, or of the arrastre
operator, it must be added. (Bankers v. CA)

Where the common carrier accepted its passengers baggage for

transportation and even had it placed in the vehicle by its own
employee, it is responsible for the consequent loss of the baggage.
(Sarkies Tours Phil. v. CA)

Defenses of common carriers: (Closed list)

(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
Requisites:
a) It must be the proximate and only cause.
b) Common carrier must exercise due diligence to minimize or
prevent the loss before, during and after the occurrence.

Effect of delay: natural disaster will not exempt carrier from

responsibility, if there was no negligence on the part of the shipper.
Accident due to defects of carrier is no caso fortuito so as to exempt
him from liability.

(2) Act of the public enemy in war, whether international or civil;

Requisites:
a) Act of public enemy must be the proximate and only
cause.
b) Common carrier exercised due diligence in preventing or
minimizing the loss, before during and after the act.

(3) Act of omission of the shipper or owner of the goods;

Requisites:
a) Proximate cause. If only contributory, carrier still liable if it
was due to his negligence, but damages equitably reduced.
b) Common carrier to exercise due diligence to prevent or
minimize loss.

(4) The character of the goods or defects in the packing or in the

containers;
As long as the damage is due to the inherent nature or defect of the
goods or the containers thereof, the carrier cannot be held responsible.
BUT, Common carrier must exercise due diligence to prevent or
minimize loss.
If the fact of improper packing is known to the carrier or his 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)

Burden of plaintiff: Prove that the foods transported have been lost,
destroyed or deteriorated. Thereafter burden is shifted to carrier.

(5) Order or act of competent public authority.

To exempt common carrier from liability, public authority must have
power to issue to the order. If it was issue without legal process,
common carrier will be held liable.

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Defenses do not cover hijacking, unless attended by grave and

irresistible threat, violence or force. (De Guzman v CA)
Elements of force majeure: (Philippine American General Insurance
Co., Inc. v. MGG Marine Services, Inc.)
a) 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;
b) it must be impossible to foresee the event which constitutes the caso
fortuito, or if it can be seen, it must be impossible to avoid;
c) the occurrence must be such as to render it impossible for the debtor
to fulfill his obligation in a normal manner; and d) the obligor must be
free from any participation in the aggravation of the injury resulting to
the creditor.

To exempt a common carrier from liability for death or physical injuries

to passengers upon the ground of force majeure, the carrier must
clearly show not only that the efficient cause of the casualty was
entirely independent of the human will, but also that it was impossible to
avoid. Any participation by the common carrier in the occurrence of the
injury will defeat the defense of force majeure. (Gatchalian v. Delim)

May the shipper hold the employee of the common carrier liable?
No. The action is based on a contract which binds only the parties to it,
and the employee is not such party. thus, no action may be had against
the latter.

Art. 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,
without prejudice to the provisions of Article 1738.

When carriers responsibility begins: From the time the goods are
delivered to the carrier, with the goods being placed unconditionally in
the possession of the carrier, and the carrier is to receive them.
By the act of delivery to the common carrier and upon receipt of the
goods for transportation, the contract of carriage was deemed
perfected. Pursuant to Art. 1736 of the Code, the extraordinary
diligence of the common carrier would cease only upon delivery, actual
or constructive, by the carrier to the consignee, or to the person who
has the right to receive them. (Ganzon v. CA)

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. (Compania Maritima v. Insurance Company)

When carriers responsibility terminates: At the time the goods are

delivered to the consignee or the person who has a right to receive the
goods. Delivery need not be actual, and may be constructive.
The duty of common carriers to exercise extraordinary diligence over
the goods begins from the time they are placed unconditionally upon
the hands of the carrier and lasts until its delivery, whether actual or
constructive. (Servando v. Philippine Steam)

Cargoes while being unloaded generally remain under the custody of

the carrier. (Regional Container v. Netherlands Insurance)

-4Actual delivery, where the loss of the goods did not hold the carrier
liable inasmuch as an agent who carries out the orders and instructions
of the principal without being guilty of negligence, deceit or fraud,
cannot be responsible for the failure of the principal to accomplish the
object of the agency. (Samar Mining Co., Inc. v. Nordeutscher Lloyd)

While 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,
contemplated in Art. 1736 of the NCC, 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 have still to go through the
inspection of the customs authorities before they are actually turned
over to the consignee. This is a situation where the carrier loses control
of the goods because of a custom regulation and loses control of the
goods because of a custom regulation and it is unfair that it be made
responsible for any loss or damage that may be caused to the goods
arising during the interregnum. (Lu Do v. Binamira)

"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, without prejudice to the
provisions of Article 1738." (Eastern Shipping v. CA)

The extraordinary responsibility of common carriers lasts until actual or

constructive delivery of the cargoes to the consignee or to the person
who has a right to receive them. So delivery need not always be to
consignee, but may be made to a person who has a right to receive
the goods. (Macam v. CA)

Shipper bound to observe all diligence in obtaining delivery of

goods.
A stipulation in the contract of shipment requiring the owner of the
goods to present a notice of his claim within a specified time after the
goods have arrived at their destination is in the nature of a condition
precedent to the owners right to enforce recovery, that he must show in
the first instance that he has complied with the condition, or that the
circumstances were such that to have complied with it would have
required him to do an unreasonable thing. The weight of authority,
however, sustains the view that such a stipulation is more in the nature
of a limitation upon the owners right to recovery, and that the burn of
proof is according on the carrier to show that the limitation was
reasonable and in proper form or within the time stated. (Southern
Lines v. CA)

Liability of shipper for delay in obtaining delivery of goods:

Demurrage: The shipper is liable for lost earnings occasioned by the
unnecessary delay in the use of the vehicle belonging to the carrier,
due in turn to the failure of the goods at the place of destination, to
unload forthwith and take away the cargo form the vehicles.

Where delay in unloading of cargo not due to negligence of carrier it

cannot be held liable for damages. Diligence shown by shipmaster to
protect cargo from typhoon and pilferages exempts carrier from
damages. (Philamgen v. CA)

Demurrage A charge which is permitted and recognized to afford

compensation to the carrier for additional service and to obtain prompt
release of the goods, and to prevent interference with the general traffic
of the carrier.

Constructive delivery: Notice of arrival of goods necessary

When notice is sent by the carrier to the consignee or person who has
a right to receive the goods, it is placed in the latters disposal, and thus
automatically releases the carrier of the extraordinary responsibility
over the goods.

The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the goods
entrusted to it for safe carriage and delivery. It requires common
carriers to rencer service with the greatest skill and foresight and to use
all reasonable means to ascertain the nature and characteristics of
goods tendered for shipment and to exercise due care in the handling
and stowing, including such methods as their nature requires. If the
shipper or owner merely contribured to the loss, destruction or

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deterioration of the goods, the proximate cause threof being the
negligence of the common carrier, the latter shall be liable in damages,
which however, shall be equitably reduced. (Compania Maritima v. CA)

Demurrage, in its strict sense, is the compensation provided for in the

contract of affreightment for the detention of the vessel beyond the time
agreed on for loading and unloading. Essentially, demurrage is the
claim for damages for failure to accept delivery. In a broad sense, every
improper detention of a vessel may be considered a demurrage.
Liability for demurrage, using the word in its strictly technical sense,
exists only when expressly stipulated in the contract. Using the term in
its 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 one who is a party to the shipping contract. Notice of
arrival of vessels or conveyances, or of their placement for purposes of
unloading is often a condition precedent to the right to collect
demurrage charges. (Magellan Manufacturing v. CA)

Duty of Arrastre Operator: The legal relationship between the

consignee and the arrastre operator is similar to that of a depositor and
warehouseman. It is the duty of the arrastre to take good care of the
goods that are in its custody and to the deliver the goods in its custody
and to deliver them
in good condition to the consignee, such
responsibility also devolves upon the carrier. (Firemans Fund
Insurance v. MetroPort Services)

Duty of Stevedore: There is a distinction between an arrastre and a

stevedore. Arrastre, a Spanish word which refers to hauling of cargo,
comprehends the handling of cargo on the wharf or between the
establishment of the consignee or shipper and the ship's tackle. The
responsibility of the arrastre operator lasts until the delivery of the cargo
to the consignee. The service is usually performed by longshoremen.
On the other hand, stevedoring refers to the handling of the cargo in the
holds of the vessel or between the ship's tackle and the holds of the
vessel. The responsibility of the stevedore ends upon the loading and
stowing of the cargo in the vessel. A stevedore is not a common carrier
for it does not transport goods or passengers; it is not akin to a
warehouseman for it does not store goods for profit. The loading and
stowing of cargoes would not have a far reaching public ramification as
that of a common carrier and a warehouseman; the public is adequately
protected by our laws on contract and on quasi-delict. The public policy
considerations in legally imposing upon a common carrier or a
warehouseman a higher degree of diligence is not present in a
stevedoring outfit which mainly provides labor in loading and stowing of
cargoes for its clients. (Mindanao terminal v. Phoenix Assurance)

Art. 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.

Effect of storing in transit: Does no interrupt the extraordinary

responsibility of the common carrier.
Exception: When the shipper or owner has made use of the right of
stoppage in transitu.

Stoppage in transitu: The act by which the unpaid vendor of goods

stops their progress and resumes possession of them, while they are in
the course of transit form him to the purchaser, and not yet actually
delivered to the latter.

When the right of stoppage in transitu may be exercised:

1.
When buyer is/becomes insolvent
2.
Unpaid seller has parted with possession of the goods
3.
Prior to actual delivery to buyer.
Unpaid seller may resume possession of the goods at
any time, and he will become entitled to the same right
as is he had not parted with the goods.
Responsibility of carrier when right is exercised: Extraordinary
responsibility of to carrier ceases. The carrier holds the goods in the
concept of a bailee or warehouseman and is liable only as such. The

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-5care required is only such care in regard to the goods as a reasonable

careful owner of similar goods would exercise.

Art. 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 of 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.

Effect of storage in warehouse of carrier: Extraordinary liability will

cease only if the consignee has been advised of the arrival of the goods
and has had reasonable time to remove them or otherwise dispose of
them.

When liability of warehouseman begins: Where the goods being

transported upon arrival at the place of destination are stored in the
carriers warehouse. It ceases when the consignee has been advised of
the arrival of the goods, and he has had reasonable time to remove
them or dispose of them.

Art. 1739. In order that the common carrier may 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. The same
duty is incumbent upon the common carrier in case of an act of
the public enemy referred to in Article 1734, No. 2.

Art. 1740. If the common carrier negligently incurs in delay in

transporting the goods, a natural disaster shall not free such
carrier from responsibility.
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. 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 of the containers, the common
carrier must exercise due diligence to forestall or lessen the loss.

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 the order.
Art. 1744. 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:

(1) In writing, signed by the shipper or owner;

(2) Supported by a valuable consideration other than the service
rendered by the common carrier; and
(3) Reasonable, just and not contrary to public policy.

Kinds of stipulation limiting liability: (H.E. Heacock Co. v.

Macondray & Co.)
1.
One exempting the carrier from any and all liability for loss or
damage occasioned by its own negligence.
2.
One providing for an unqualified limitation of such liability to
an agreed valuation.
3.
One limiting the liability of the carrier to an agreed valuation,
unless the shipper declares a higher value and pays a higher
rate of freight.
The 1st and 2nd kinds are invalid for being contrary to public policy, but
rd
the 3 is valid and enforceable.

A stipulation providing that the goods held by a common carrier are

being transported at the owners risk unless the loss or damage is

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caused by the negligence of the carrier is a valid one and does not
contravene public policy. (Servando v. Philippine Steam)

-6condition of the car, vehicle, ship, airplane or other equipment

used in the contract of carriage.

When the stipulation limiting liability is valid; Requisites:

1.
The stipulation must be in writing, signed by both parties;
2.
The stipulation is supported by a valuable consideration other
than the service rendered by the common carrier; and
3.
The stipulation is reasonable, just and not contrary to public
policy. (Only applies when carrier is a common carrier, not
private carrier.)
Stipulations limiting the liability of the contracting parties to a fixed sum
of money is valid provided such stipulations are
a) reasonable and just under the circumstance and
b) has been fairly and freely agreed upon. (St. Paul Fire v. Macondray
& Co.)
The just and reasonable character of the stipulation is implicit in giving
the shipper or owner the option of avoiding accrual of liability limitation
by the simple and surely far from onerous expedient of declaring the
nature and value of the shipment in the bill of lading. (Sea-Land
Services v. IAC)

Basic is the rule, long since enshrined as a statutory provision, that a

stipulation limiting the liability of the carrier to the value of the goods
appearing in the bill of the carrier to the value of the goods appearing in
the bill of lading, unless the shipper or owner declares a greater value,
is binding. (Citadel Lines v. CA)

Validity of stipulations limiting liability of carrier:

1.
A stipulation limiting the carriers liability to the value of the
goods appearing in the bill, unless the shipper or owner
declares a greater value, is valid and binding.
2.
The insurer who pay the insured on his claim for damage is
merely subrogated to the rights of the insured, and thus the
insurer cannot collect from the carrier more than what the
insured can collect from the carrier.
3.
The obligation of the carrier to pay the damages begins form
the date it fails to deliver the shipment in good condition to
the consignee.

A bill of lading operates both as a receipt and as a contract. It is

presumed that the stipulations of the bill were, in the absence of fraud,
concealment or improper conduct, known to the shipper, and he is
generally bound by his acceptance whether he reads the bill or not.
However, this ruling applies only if such contracts will not create an
absurd situation. If the questioned provision in the subject bill of lading
has the effect of practically leaving the date of arrival of the subject
shipment on the sole determination and will of the carrier, such may not
be upheld. (Maersk Line v. CA)

Contract between shipper and carrier is in the nature of a

stipulation in favor of the consignee who is bound by it. He
accepts the same by demanding delivery.
Art. 1745. Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or
shipper;
(2) That the common carrier will not be liable for any loss,
destruction, or deterioration of the goods;
(3) That the common carrier need not observe any diligence in the
custody of the goods;
(4) That the common carrier shall exercise a degree of diligence
less than that of a good father of a family, or of a man of ordinary
prudence in the vigilance over the movables transported;
(5) That the common carrier shall not be responsible for the acts
or omission of his or its employees;
(6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible
threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss,
destruction, or deterioration of goods on account of the defective

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Art. 1746. 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.
Effect of consent obtained by refusal to carry goods: Makes the
agreement limiting the liability of the carrier voidable at the instance of
the shipper.
Art. 1747. 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.
Effect of delay in transportation: Common carrier cannot avail of the
contract limiting his liability in 2 cases:
1.
Where the common carrier delays the transportation of the
goods
2.
Common carrier changes the stipulated or usual route.
In both cases, the delay or the change of route must be without just
cause.

Presumption of negligence in case of limited liability: Presumption

still stands in case of loss, destruction or deterioration of the goods, but
is still disputable and rebuttable, by evidence that the carrier exercised
the requisite extraordinary diligence.

Art. 1748. An agreement limiting the common carrier's liability for

delay on account of strikes or riots is valid.
Art. 1749. 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. 1750. A contract fixing the sum that may be recovered. by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.

Art. 1751. 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.

Effect of lack of competitor to carrier: Taken into consideration in

determining whether the stipulation limiting liability is reasonable, just
and not against public policy.
Art. 1752. 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. 1753. The law of the country to which the goods are to be
transported shall govern the liability of the common carrier for
their loss, destruction or deterioration.
Law governing contracts of transportation: Law of the place of
destination.
Art. 1754. The provisions of Articles 1733 to 1753 shall apply to the
passenger's baggage which is not in his personal custody or in
that of his employee. As to other baggage, the rules in Articles
1998 and 2000 to 2003 concerning the responsibility of hotelkeepers shall be applicable.

Classes of baggage of passengers:

1.
Baggage in the custody of the passengers or their employees

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2.

Baggage not in the custody of the passengers or their

employees, but in the carrier.

Liability for baggage in custody of passengers: Regarded as

necessary deposits. Carriers liable as depositaries, provided:
1.
notice was given to them or their employees; and
2.
the passengers take precautions which the common carrier
or their substitutes advised relative to the care and vigilance
of their baggage.
Responsibility for acts of employees: Responsible as depositary for
loss or injury to the baggage in the personal custody of the passengers.
But they are not responsible for force majeure.

Responsibility for acts of thieves or robbers: The act of a thief/

robber who has entered the vehicle is not deemed force majeure,
unless it is done with the use of arms or through irresistible force.
Common carriers are not responsible for the loss of the baggage in the
personal custody of the passenger or its employees when the loss is
due to the acts of the passengers, his family, servants, or visitors, or if
the loss arises from the character of the baggage.

Stipulations limiting liability: Common carrier cannot free himself

from responsibility by posting notices to the effect that he is not liable
for the baggage brought by the passengers. Any stipulation between
the common carrier and passenger whereby responsibility in Arts. 1998
to 2001 is suppressed or diminished is void.

Liability for baggage not in the custody of the passengers: The

common carrier is required to observe extraordinary diligence.
Carrier presumed negligent or at fault in case of loss of effects of
passengers: The moment the effects of passengers are
unconditionally placed in the possession and received by a carrier for
conveyance, the law immediately imposes upon the latter extraordinary
responsibility for the loss thereof, and this responsibility lasts until the
actual or constructive delivery to the passenger. For loss, carrier
presumed negligent, unless it observed extraordinary diligence in the
vigilance over the goods or the loss was due to the causes under Art.
1734.

Carrier liable for non-declared but accepted cargo: Liable even if

not declared and charges thereon not paid, as long as it accepted them
for transportation.
SUBSECTION 3. - Safety of Passengers

Art. 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.

Art. 1756. 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 Articles 1733 and 1755.

Common Carriers must exercise extraordinary diligence in

carrying passengers: They are bound to carry passengers:
1.
Safely
2.
As far as human care and foresight can provide
3.
With the utmost diligence of very cautious persons
4.
With a due regard for all the circumstances

Extraordinary measures and diligence must be exercised by a common

carrier for the safety of its passengers and their belongings. This
includes firing an employee due to the threat he poses to the lives of
the passengers. (PAL v. NLRC)

A common carrier is obliged to transport its passengers to their

destinations with the utmost diligence of very cautious persons.
(Sulpicio Lines v. CA)

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-7-

2 Complete defenses:
1.
Fortuitous event
2.
Extraordinary care (though the codal merely expresses the
view that it is rebuttable)

A common carrier is exhorted to carry the passengers safely as far as

human care and foresight can provide using the utmost diligence of
very cautious persons. Once a passenger in the course of travel is
injured, or does not reach his destination safely, the carrier and driver
are presumed to be at fault. (Bacarro v. Catano)

Though there is no obligation on the part of a street railway company to

stop its car to take on intending passengers at other points than those
appointed for stoppage, nevertheless when the motorman sees a
person attempting to board the car while in motion, and at a place not
appointed for stopping, he should not do any act to increase the peril of
such person; if in violation of this duty, the motorman in charge of a car
prematurely accelerates speed while the intending passenger is in the
act of boarding the car, with the result that he slips and gets his foot
crushed under the wheel of the moving car, the company is civilly liable
in damages. (Del Prado v. MRR)

It is the duty of common carriers of passengers, including common

carriers by railroad train, streetcar, or motorbus, to stop their
conveyances 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
Transport v. CA)

Presumption of negligence: In case of death or injury to passengers,

common carriers are presumed to have been at fault or to have acted
negligently. No need to prove negligence. Court need not make express
finding of fault or negligence to hold the carrier responsible. (Vda. De
Abeto v. PAL)

Any injury that the suffered by the passenger is right away attributable
to the fault or negligence of the carrier.
Negligence on the part of the common carrier is presumed where the
passenger suffers injuries. (Roque v. Buan)
In an action based on a contract of carriage, the court need not make
an express finding of fault or negligence on the part of the carrier in
order to hold it responsible for the payment of the damages sought by
the passenger. By the contract of carriage, the carrier assumes the
express obligation to transport the passengers to their destination
safely and to observe extraordinary diligence with a due regard for all
the circumstances, and any injury that might be suffered by its
passengers is right away attributable to the fault or negligence of the
carrier. (Batangas Laguna Tayabas Bus Co. v. IAC)

In an action based on a contract of carriage, the court need not make

an express finding of fault or negligence on the part of the carrier in
order to hold it responsible to pay the damages sought by the
passenger. By the contract of carriage, the carrier assumes the express
obligation to transport the passenger to his destination safely and to
observe extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the passenger
is right away attributable to the fault or negligence of the carrier. This is
an exception to the general rule that negligence must be proved, and it
is therefore incumbent upon the carrier to prove that it has exercised
extraordinary diligence as prescribed in Articles 1733 and 1755 of the
Civil Code. (Dangwa, supra.)

Gross negligence amounting to bad faith in case of breach of contract

of carriage shall warrant the award of moral damages. The same
negligent acts may be the basis in finding a person liable under a quasidelict and a breach of contract of carriage if the breach, independent of
the contract, is an actionable wrong. (Fabre Jr. v. CA)

How presumption of negligence is overcome: It must be shown that

the carrier had observed the required extraordinary diligence, which

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means that the carrier must show the utmost diligence of very cautious
persons as far as human care and foresight can provide or that the
accident was caused by a fortuitous event.

A common carrier's legal liability is the contract of carriage, and by

entering into the said contract, it binds itself to carry the passengers
safely as far as human care and foresight can provide, using the utmost
diligence of a very cautious person, with a due regard for all the
circumstances. Common carriers should teach their drivers not to
overload their vehicles, not to exceed safe and legal speed limits, and
to know the correct measures to take when a tire blows up thus insuring
the safety of passengers at all times. (Juntilla v. Fontanar)

A common carrier, through its driver, and its registered owner, has the
express obligation 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, and to observe
extraordinary diligence in the discharge of its duty. The death of the
wife of the petitioner in the course of transporting her to her destination
gave rise to the presumption of negligence of the carrier. To overcome
the presumption, respondents have to show that they observed
extraordinary diligence in the discharge of their duty, or that the
accident was caused by a fortuitous event. (Herminio Mariano v.
Ildefonso Callejas)

Requisites of caso fortuito:

1.
The event must be independent of the human will
2.
The occurrence must render it impossible for the obligor to
fulfill his obligation in a normal way
3.
The obligor must be free of a concurrent or contributory fault
or negligence. (Gacal v. PAL)

In consideration of the right granted to it by the public to engage in the

business of transporting passengers and goods, a common carrier
does not give its consent to become an insurer of any and all risks to
passengers and goods. It merely undertakes to perform certain duties
to the public as the law imposes, and holds itself liable for any breach
thereof. (Pilapil v. CA)

Events which cannot be foreseen and which, having been foreseen are
inevitable an event that takes place by accident and could not have
been foreseen, like destruction of houses, unexpected fire, shipwreck,
violence of robbers, etc. A carrier of passengers is not an absolute
insurer against the risks of travel from which the passenger may protect
himself by exercising ordinary care and diligence. (Lasam v. Smith)

A caso fortuito is an event which could not be foreseen, or which,

though foreseen, was inevitable.
This requires that the following
requirements be present: (a) the cause of the breach is independent of
the debtor's will; (b) the event is unforeseeable or unavoidable; (c) the
event is such as to render it impossible for the debtor to fulfill his
obligation in a normal manner, and (d) the debtor did not take part in
causing the injury to the
creditor. (Calalas v. CA)

If the cause of non-fulfillment of the contract is due to a fortuitous event,

it has to be the sole and only cause. (PAL v. CA)
If the event could have been foreseen and is avoidable, then it is not
caso fortuito so as to exempt the common carrier from liability. (Fortune
Express v. CA)
A contract to transport passengers is quite different in kind, and degree
from any other contractual relation. It is safe to conclude that it is a
relationship imbued with public interest. Failure on the part of the
common carrier to live up to the exacting standards of care and
diligence renders it liable for any damages that may be sustained by its
passengers. However, this is not to say that common carriers are
absolutely responsible for all injuries or damages even if the same were
caused by a fortuitous event. To rule otherwise would render the
defense of "force majeure," as an exception from any liability, illusory
and ineffective. (Japan Airlines v. CA)

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-8In order to exempt a common carrier from liability, it is not only

important to show that the cause of the accident was force majeure, but
also that the common carrier has not been negligent in causing or in
contributing to the injuries of its passengers. (Bachelor Express v. CA)

Last clear chance rule not applicable to contracts of carriage: The

principle about the last clear chance would call for application in a suit
between the owners and drivers of the two colliding vehicles. It does
not apply when the passenger demands responsibility from the carrier
to enforce its contractual obligation. (Anuran v. Bruno)

The last clear chance doctrine is not applicable when the passenger
demands responsibility from the carrier to enforce its contractual
obligations. It is only applicable in a suit between owners and drivers of
vehicles. The presumption that the vehicle which bumped the rear of
another is guilty only applies in a situation where the rear vehicle is
following the other vehicle. This is because the rear vehicle is the one
in control of the situation as it has the opportunity to observe the vehicle
in front of it. (Philippine Rabbit v. IAC)

Extraordinary diligence required of common carriers is calculated to

protect the passengers from the tragic mishaps that frequently occur in
connection with rapid modern transportation. This high standard of care
is imperatively demanded by the precariousness of human life and by
the consideration that every person must in every way be safeguarded
against all injury. (Isaac v. A.L. Ammen Transportation Co., Inc.)

Principles governing the liability of a common carrier: (Ibid.)

(1) the liability of a carrier is contractual and arises upon breach of its
obligation. There is breach if it fails to exert extraordinary diligence
according to all circumstances of each case
(2) a carrier is obliged to carry its passenger with the utmost diligence
of a very cautious person, having due regard for all the circumstances
(3) a carrier is presumed to be at fault or to have acted negligently in
case of death of, or injury to, passengers, it being its duty to prove that
it exercised extraordinary diligence
(4) the carrier is not an insurer against all risks of travel.

Article 1733 is not as unbending as the lower court has held, for it
reasonably qualifies the extraordinary diligence required of common
carriers for the safety of the passengers transported by them to be
"according to all the circumstances of each case." In fact, Article 1755
repeats this same qualification: "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 due regard for
all the circumstances." (Nocum v. Laguna Tayabas Bus)

Art. 1757. The responsibility of a common carrier for the safety of

passengers as required in Articles 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by the posting of
notices, by statements on tickets, or otherwise.

Art. 1758. When a passenger is carried gratuitously, a stipulation

limiting the common carrier's liability for negligence is valid, but
not for wilful acts or gross negligence.
The reduction of fare does not justify any limitation of the
common carrier's liability.
Ticket given to a passenger is a written contract: The ticket itself is
a complete written contract by and between the shipper and the
passenger. It has all the elements of a complete contract, namely:
1.
The consent of the contracting parties manifested by the fact
that the passenger boards the ship and the shipper consents
or accepts him in the ship for transportation
2.
Cause or consideration which is the fare paid by the
passenger as state in the ticket
3.
Object which is the transportation of the passenger from the
place of departure to the place of destination which are
stated in the ticket.

Dispensing with or limiting liability:

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In general, extraordinary diligence required for the carriage of
passengers cannot be dispensed with or lessened:
1.
by stipulation
2.
by the posting of notices
3.
by statements on tickets
4.
or otherwise.
Thus, as regards carriage of passengers, the common carrier and the
passenger cannot enter into an agreement:
1.
Absolutely exempting the carrier form liability from the
passengers death of injuries;
2.
Lessening the extraordinary diligence required by law.
Exception: Gratuitous Carriage

Gratuitous carriage: Common carrier and the passenger may stipulate

limiting the common carriers liability for negligence.
Limitation: Cannot stipulate to entirely eliminate the liability of the
carrier.

Reduction of fare: Does not justify any limitation of the common

carriers liability. The law requires no less that a gratuitous carriage of a
passenger to justify the carriers limited liability.
Thus, in the carriage of passengers, a stipulation limiting the liability in
writing, signed by the parties, supported by a sufficient consideration,
and not contrary to law, would be void, where the passenger is not
carried gratuitously, even when the fare is reduced.

Liability of owner of common carrier to accommodation

passengers or invited guests: They merely owe a duty to exercise
reasonable care so that the passenger is transported safely to their
destination. They owe a duty to exercise reasonable care in the
operation of the vehicle, and not unreasonably expose the passenger to
danger and injury by increasing the hazards of travel.

The owner or operator of an automobile owes the duty to an invited

guest to exercise reasonable care in its operation, and not
unreasonably to expose him to danger and injury by increasing the
hazard of travel. This rule, as frequently stated by the courts, is that an
owner of an automobile owes a guest the duty to exercise ordinary or
reasonable care to avoid injuring him. Since one riding in an automobile
is no less a guest because he asked for the privilege of doing so, the
same obligation of care is imposed upon the driver as in the case of
one expressly invited to ride". Defendant, therefore, is only required to
observe ordinary care, and is not in duty bound to exercise
extraordinary diligence as required of a common carrier by our law
(Articles 1755 and 1756, new Civil Code). (Lara v. Valencia)

3 Remedies against common carriers:

1.
Administrative action before the public service commission
2.
Civil action for damages under the civil code
3.
Criminal action under the RPC.

Art. 1759. Common carriers are liable for the death of or injuries to
passengers through the negligence or willful acts of the former's
employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the
common carriers.

This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees.
Failure to perform a contract cannot be excused upon the ground that
the breach was due to the negligence of a servant of the obligor, and
that the latter exercised due diligence in the selection and control of the
servant. (Cangco v. Manila Railroad)

Art. 1760. The common carrier's responsibility prescribed in the

preceding article cannot be eliminated or limited by stipulation, by
the posting of notices, by statements on the tickets or otherwise.
Liability for negligence or willful acts of employees: Common
carrier cannot escape liability by interposing the defense that the
Starr Weigand 2012

-9employees causing the injury or death acted without authority or

against the orders of the common carrier. They also cannot use the
defense of diligence on the supervision and selection of employees.

Premature announcement of the next stop by the employee of the

carrier, which caused the death of a child and her grandmother, was
made the basis of the liability of the common carrier. It is a
matter of common knowledge and experience about common carriers
like trains and buses that before reaching a station or flagstop they slow
down and the conductor announces the name of the place. It is also a
matter of common experience that as the train or bus slackens its
speed, some passengers usually stand and proceed to the nearest exit,
ready to disembark as the train or bus comes to a full stop. This is
especially true of a train because passengers feel that if the train
resumes its run before they are able to disembark, there is no way to
stop it as a bus may be stopped. (Brinas v. People)

The rule is settled that a driver in abandoning his proper lane for the
purpose of overtaking another vehicle in an ordinary situation has the
duty to see to it that the road is clear and not to proceed if he cannot do
so in safety. When a motor vehicle is approaching or rounding a curve,
there is special necessity to keep to the right side of the road and the
driver does not have the right to drive on the left hand side relying upon
having time to return to the right if a car approaching from the opposite
direction comes into view. (Mallari v. CA)

Liability of carrier for defects of its equipment: While the carrier is

not an insurer of the safety of the passengers, it should nevertheless be
held to answer for the laws its equipment if such flaws were at all
discoverable. In this connection, the manufacturer of the defective
appliance is considered in law the agent of the carrier, and the good
repute of the manufacturer will not relieve the carrier from liability. The
rationale of the carriers liability is the fact that the passenger has no
privity with the manufacturer of the defective equipment; hence, he has
no remedy against him, while the carrier usually has. (Necessito v.
Paras)

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. At least
three very cogent reasons underlie this rule.
(1) the special undertaking of the carrier requires that it furnish its
passenger that full measure of protection afforded by the exercise of
the high degree of care prescribed by the 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 charged with the
passenger's safety;
(2) said liability of the carrier for the servant's violation of duty to
passengers, is the result of the former's confiding in the servant's hands
the performance of his contract to safely transport the passenger,
delegating therewith the duty of protecting the passenger with the
utmost care prescribed by law; and
(3) as between the carrier and the passenger, the former must bear the
risk of wrongful acts or negligence of the carrier's employees against
passengers, since it, and not the passengers, has power to select and
remove them. (Maranan v. Perez)

The rationale of the carrier's liability 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, while the carrier usually
has. It is but logical, therefore, that the carrier, while not an insurer of
the safety of his passengers, should nevertheless be held to answer for
the flaws of his equipment if such flaws were at all discoverable. (Ibib,
MR to first case)

Where the cause of a tire blow-out is known and attributed to the

common carrier, the blow-out cannot be considered caso fortuito. (La
Mallorca and Pampanga Bus Co. v. De Jesus, et al.)

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An accident caused by defects in the automobile is not a caso fortuito.
The rationale of the carriers liability ist he fact that the passenger has
neither the choice nor control over the carrier in the selection and use
of the equipment and appliances in use by the carrier. When a
passenger dies or is injured, the presumption is that the common
carrier is at fault or that it acted negligently. (Landignin v. Pangasinan
Transportaion Co.)

A passenger is entitled to recover damages from a carrier for an injury

resulting from a defect in an appliance purchased from a manufacturer,
whenever it appears that the defect would have been discovered by the
carrier if it had exercised the degree of care which under the
circumstances was incumbent upon it, with regard to inspection and
application of the necessary tests. (Juntilla, supra.)

The explosion of a tire found to be brand new and of a reputable brand

is not ipso facto due to a fortuitous event, and the carrier must still show
that it has not been negligent in carrying on its contract. The state of the
tire (being new) does not remove the possibility of improper mounting,
too much air pressure and the like. (Yobido v. CA)

The rationale of the carrier's liability 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, while the carrier usually
has. It is but logical, therefore, that the carrier, while not an insurer of
the safety of his passengers, should nevertheless be held to answer for
the flaws of his equipment if such flaws were at all discoverable.
(Batangas Trans. v. Caguimbal)

Carrier exempt where the personal violence is fortuitous: Liability

of carrier for violence extends only to those which the carrier could
foresee or avoid through the exercise of the degree of diligence
required of it.

Carrier exempt from acts of employee not done in line of duty:

While a passenger is entitled to protection from personal violence by
the carrier or its agents or employees, since the contract of
transportation obligates the carrier to transport a passenger safely to
his destination, the responsibility of the carrier extends only to those
acts that the carrier could foresee or avoid through the exercise of the
degree of care and diligence required of it. Where the crime was
committed by a train guard who had no duties to discharge in
connection with the transportation of the victim, the crime stands on the
same footing as if committed by a stranger or co-passenger, since the
killing was not done in the line duty. (Gillaco v. Manila Railroad)

Carriers liability is not discharged by erroneous affidavits of

claimants for damages: Signed statements of persons claiming
damages for breach of contract expressing their belief that the
transportation company are not liable for the accident are no proof that
the latter has discharged its liability to the claimants were such belief is
erroneous and said claimants are ignorant or illiterate.

A waiver, to be valid and effective, must in the first place be couched in

clear and unequivocal terms which leave no doubt as to the intention of
a person to give up a right or benefit which legally pertains to him. A
waiver may not casually be attributed to a person when the terms
thereof do not explicitly and clearly evidence an intent to abandon a
right vested in such person. To uphold a supposed waiver of any right
to claim damages by an injured passenger, under circumstances like
those exhibited in this case, would be to dilute and weaken the
standard of extraordinary diligence exacted by the law from common
carriers and hence to render that standard unenforceable. (Gatchalian,
supra.)

When relationship of carrier and passenger terminates: The

relation of carrier and passenger does not cease at the moment the
passenger alights from the carriers vehicle at a place selected by the
carrier at the point of destination, but continues until the passenger has
had a reasonable time and opportunity to leave the carriers premises.

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- 10 And what is reasonable time or a reasonable delay within this rule is to

be determined from the circumstances. (La Mallorca v. CA)

The relation of carrier and passenger does not cease at the moment
the passenger alights from the carriers vehicle at a place selected by
the carrier at the point of destination, but continues until the passenger
has had a reasonable time and opportunity to leave the carriers
premises. And what is reasonable time or a reasonable delay within
this rule is to be determined from the circumstances. (Ibid.)

The relation of carrier and passenger continues until the passenger has
been landed at the port of destination and has left the vessel owners
dock or premises. The relationship will not ordinarily terminate until the
passenger has, after reaching his destination, safely alighted from the
carriers conveyance or had a reasonable opportunity to leave the
carriers premises. All persons who remain on the premises a
reasonable time after leaving the conveyance are to be deemed
passengers, and what is a reasonable time or a reasonable delay within
this rule is to be determined from all the circumstances, and includes a
reasonable time to see after his baggage and prepare for his departure.
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 for,
and therefore precludes a consideration of the time element per se
without taking into account such other factors. The primary factor to be
considered is the existence of a reasonable cause as will justify the
presence of the victim on or near the carrier. (Aboitiz Shipping
Corporation v. Court of Appeals)

Elimination of limitation of carriers liability: Liability of the carrier

for the negligence or willful acts of his employees which cause death of
or injury to passengers cannot be eliminated or limited:
1.
by stipulation
2.
by posting of notices
3.
by statements on the tickets
4.
or otherwise

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.

Art. 1763. A common carrier is responsible for injuries suffered by

a passenger on account of the wilful 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.

The law does not protect the negligence of the passenger: It is

presumed that persons intend the natural consequences of his acts,
and that they exercise diligence with respect to themselves. The law is
basically not one-sided.

Diligence required of the passenger: Diligence of a good father of a

family to avoid injury to himself. Not extraordinary diligence.
Effect of negligence of passenger: If the negligence of the passenger
is the proximate cause of the injury or death, then the common carrier
is exempt from liability. If it is merely contributory, damages to be
awarded will only be mitigated.

Liability for acts of strangers: Common carrier is still liable if its

employee could have prevented the injury through the exercise of the
diligence of a good father of a family. (See Manila Railroad v.
Ballesteros)

Liability for acts of passengers: Carrier only liable from injuries

caused by other passengers on another passenger, if the employees
could have prevented it by the exercise of the diligence of a good father

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of a family to prevent the injury. It does not apply to death caused by

the acts of other passengers or strangers.

From the time the goods are

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

Degree of diligence required of carriers employees: Merely that of

a good father of a family, and not extraordinary diligence. The law only
speaks of the common carriers liability for injuries to a passenger, but
not for his death, when it deals with the willful acts or negligence of
other passengers or strangers.

SUBSECTION 4. - Common Provisions

Art. 1764. Damages in cases comprised in this Section shall be

awarded in accordance with Title XVIII of this Book, concerning
Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by a common carrier.

Article 1764 of the Civil Code, expressly makes Article 2206 applicable
"to the death of a passenger caused by the breach of contract by a
common carrier." Accordingly, a common carrier is liable for actual or
compensatory damages under Article 2206 in relation to Article 1764 of
the Civil Code for deaths of its passengers caused by the breach of the
contract of transportation. (Sulpicio Lines v. CA)

Art. 1765. The Public Service Commission may, on its own motion
or on petition of any interested party, after due hearing, cancel the
certificate of public convenience granted to any common carrier
that repeatedly fails to comply with his or its duty to observe
extraordinary diligence as prescribed in this Section.

Art. 1766. In all matters not regulated by this Code, the rights and
obligations of common carriers shall be governed by the Code of
Commerce and by special laws.

CARRIAGE OF GOODS

CARRIAGE OF
PASSENGERS

Parties

1.
2.
3.

1.
2.

Common carrier
Shipper
Consignee

Common carrier
Passenger

Cause of liability

The duty of a common

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

Presumption of negligence
Delay in delivery, loss,
destruction, or deterioration
of the goods

Death or injury to the

passengers

Duration of liability

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- 11 -

Art.1735 Civil Code

Reason: As to when and how
goods were damaged in
transit is a matter peculiarly
within the knowledge of the
carrier and its employees.
(Mirasol v. Dollar, 53 PHIL
124)
Mere proof of delivery of
goods to a carrier in good
order and the subsequent
arrival of the same goods at
the place of destination in
bad order makes for a prima
facie case against the carrier.
(Coastwise Lighterage Corp.
v. CA, 245 SCRA 796)

- 12 -

Valid stipulations

Art.1755 Civil Code

Reason: The contract
between the passenger and
the carrier imposes on the
latter the duty to transport
the passenger safely; hence
the burden of explaining
should fall on the carrier.

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

Defenses

1.

2.

O r d i n a r y
circumstance:
Exercise
of
extraordinary
diligence (Art.
1735)
S p e c i a l
circumstances:
a. Flood, storm,
earthquake,
li g hting , o r
other natural
disaster or
calamity
(plus force
majeure)
b. A c t o f t h e
public enemy
in
war,
w h e t h e r
international
or civil
c. A c t
or
omission of
the shipper
or the owner
of goods
d. T
h
e
character of
the goods or
defects in the
packing or in
t
h
e
containers
e. Order or act
of competent
p u b l i c
authority (Art.
1734)

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1. E x e r c i s e
of
extraordinary
diligence (Art.
1756)
2. Caso fortuito

Stipulation limiting liability

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

! The diligence required in

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

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1.

2.

3.

4.

5.

6.

7.

That the goods are

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

- 13 Exemplary damages punitive or corrective damages, to serve as an

example to the public, which actually punishes the attitude of the
person who caused the damage.

Dispensing with or lessening

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

Xxx
Art. 2199. Except as provided by law or by stipulation, one is
entitled to an adequate compensation only for such pecuniary
loss suffered by him as he has duly proved. Such compensation is
referred to as actual or compensatory damages.

Fundamental rule on damages.

The fundamental principle of the law of damages is that one injured by
a breach of a contract or by a wrongful or negligent act or omission
shall have fair and just compensation commensurate with the loss
sustained in consequence of the defendants act, which gives rise
to the action. Hence, actual pecuniary compensation is the general
rule, whether the action is on contract or in tort, except where the
circumstances warrant the allowance of exemplary damages.

The party claiming damages must establish by competent

evidence the amount of such damages and courts can not give
judgment for a greater amount than that actually proven.
Actual damages must be proved and a court cannot rely on
speculation, conjecture or guesswork as to the fact and amount of
damages, but must depend on actual proof that damages had been
suffered and on evidence of the actual amount. Actual or compensatory
damages cannot be presumed but must be duly proved.

Actual or compensatory damages: those awarded to the aggrieved

party as adequate compensation only for such pecuniary loss suffered
by him as he has alleged and duly proved. Pecuniary loss is a
measurement in terms of money.

Purpose or Aim of Actual damages: Make good or replace the loss

caused by the wrong. They proceed from a sense of natural justice, and
are designed to repair that of which one has been deprived by the
wrong of another. They are primarily intended to simply make good or
replace the loss caused by a wrong.

Allegation and proof: Claims for actual/compensatory damages must

be especially alleged and substantiated by proof. Generally, what is not
alleged, may not be proved.
How to collect actual damages:
1.) Plead or allege the loss
GENERAL DAMAGE - natural, necessary and logical consequences of
a particular wrongful act, which result in injury; need not be specifically
pleaded because the law itself implies or presumes that they resulted
from the wrongful act.
SPECIAL DAMAGES - damages which are the natural, but not the
necessary and inevitable result of the wrongful act; need to be pleaded
2.) Pray for the relief that claim for loss be granted
3.) Prove the loss

Title XVIII. - DAMAGES

Art. 2197. Damages may be:

(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated; or
(6) Exemplary or corrective.

Actual damages Compensation commensurate with the pecuniary

loss sustained by the person injured.
Moral damages - include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury.
Nominal Damages Damages awarded to vindicate a right which has
been violated.
Temperate damages Damages awarded when some pecuniary loss
has been suffered but its amount cannot, from the nature of the case,
be proved with certainty.
Liquidated damages agreed upon by the parties to a contract to be
paid in case of breach thereof. (Thus, existence of a contract is a
necessary prerequisite).

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Except as provided by law or by stipulation: The general rule that

damages must be proved is subject to the following exceptions:
1)
When a penalty clause is agreed upon in the contract
between the parties (Art. 1226)
2)
When liquidated damages have been agreed upon (Art.
2226)
3)
When loss is presumed as when a child or spouse dies as a
result of an act of a person.
4)
Forfeiture of bonds in favor of the Government for the
purpose of promoting public policy or interest.
5)
Death caused within the contemplation of Art. 2206.
(damages as a result of death due to a crime or quasi-delict).
In these situations, actual or compensatory damages need not be
proved.

Limit on the award for damages: In no instance shall the judge grant
damages more than what had been proved in court.

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- 14 other words, the damages recoverable under Art. 2201 of the Civil
Code, is limited to the kinds of damages specified in Art. 2200.

Actual damages must be:

1)
Duly proved; and
2)
Proved with reasonable degree of certainty.

The general rule is that there must be documentary proof of such actual
damages. Documentary proof need not be actual receipts, but may be
a statement of account showing expenses incurred in the hospital for
the treatment of injuries sustained as a result of the breach of contract
of carriage. (R Transport v. Pante)

The amount of damages for death caused by a crime or quasi- delict

shall be at least three thousand pesos, even though there may have
been mitigating circumstances. In addition: (1) The defendant shall be
liable for the loss of the earning capacity of the deceased, and the
indemnity shall be paid to the heirs of the latter; such indemnity shall in
every case be assessed and awarded by the court, unless the
deceased on account of permanent physical disability not caused by
the defendant, had no earning capacity at the time of his death. (PAL v.
CA)

Under Article 2206 of the Civil Code, the amount of damages for death
caused by a crime or quasi-delict shall be at least three thousand
pesos, even though there may have been mitigating circumstances. In
addition: The defendant shall be liable for the loss of the earning
capacity of the deceased, and the indemnity shall be paid to the heirs of
the latter. Loss of pension is also lost income to be paid by the carrier.
(De Caliston v. CA)

Nominal damages cannot co-exist with actual damages. (Armovit v. CA)

Art. 2200. Indemnification for damages shall comprehend not only
the value of the loss suffered, but also that of the profits which the
obligee failed to obtain. (1106)
Actual/compensatory damages are classified as follows:
1)
Damnum emergens - this is the value of actual pecuniary
loss for what the claimant already possessed before the incident which
must be supported by receipts or the best evidence available.
2)
Lucrum cessans this refers to the expected profits which
were not realized by reason of the act of the offender or tortfeasor.

Legal interest for the breach of contract of carriage commences from

the promulgation of the judgment of the Trial Court and not by the Court
of Appeals. In addition, as an exception to the general rule, the heirs of
the victims who did not appeal the judgment, shall be afforded equitable
relief by the courts as it must be vigilant for their protection. Their claim
for legal interest and increase in the indemnity should be entertained in
spite of their failure to appeal the lower court judgment. (de Lima v.
LTB)

Art. 2201. In contracts and quasi-contracts, the damages for which

the obligor who acted in good faith is liable shall be those 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.

In case of fraud, bad faith, malice or wanton attitude, the obligor

shall be responsible for all damages which may be reasonably
attributed to the non-performance of the obligation. (1107a)
There are two important considerations which must be borne in
mind in the application of the above-quoted legal provision:
First, distinguish debtor in good faith from debtor in bad faith.
Debtor in good faith - liable only for the damages which 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.
Debtor in bad faith - liable for all damages which may be reasonable
attributed to the non-performance of the obligation without regard to
whether such damages could be foreseen or not; and

Damages in Contracts and Quasi-Contracts:

1. Damages in case of Good faith a.
Natural and probable consequence of breach of
obligation, and
b.
Parties have forseen or could have reasonably
forseen at time obligation was constituted
2. Damages in case of bad faith
a.
it is sufficient that damages may be reasonably
attributed to the non-performance of the obligation

Example of damages which were the natural and probable

consequence of the breach, but could not have been reasonably
foreseen at the time the parties entered into the contract:
Remember Mendoza v PAL? In that case the subject of the contract
was a can of film to be delivered from Manila to Bicol, to be used in the
town fiesta. There was delay, thus it did not arrive during the town
fiesta, causing loss of profits for the cinema owner. The loss of profits
was said to have not been foreseeable at the time the parties entered
into the contract, but was the natural consequence of the delay in the
delivery of the film. This was not foreseeable because, on the part of
the carrier, it did not know what the can of film was for, thus, it had no
knowledge that if it did not deliver it at a particular time, loss of profits
would be incurred by the other party. if it were appraised of all the
details, then the loss of profits would have been foreseeable, and it
could have been ordered to pay for such. Foreseeability must be on the
part of both parties. This is also the reason why exemplary and moral
damages are not generally recoverable in breach of contract, they are
not foreseeable. They only become foreseeable when there was
already some ill will or intent on the part of the carrier (bad faith, fraud,
wanton, malicious, reckless, oppressive and deliberate manner), which
thus gives rise to the breach. In such a case, carrier already knows that
the passenger would suffer moral anguish, etc. thus, damage
foreseeable.

Under Art. 2201, the damages for which the obligor in good faith is
liable shall be those that are the natural and probable consequences
for the breach of obligation, and which the parties have foreseen or
could have foreseen at the time the obligation was constituted. For
example, if A, a student in med school, dies while a passenger of a
jeepney, it was foreseeable that if he dies, he would not finish school
thus not earning as a doctor. The income he would have received as a
doctor would thus be foreseeable damages, and should be awarded as
actual damages. (Carriaga v. LTB)

As a rule, documentary evidence should be presented to substantiate

the claim for damages for loss of earning capacity. By way of exception,
damages for loss of earning capacity may be awarded despite the
absence of documentary evidence when:
1) the deceased is self-employed and earning less than the minimum
wage under current labor laws, in which case, judicial notice may be
taken of the fact that in the deceaseds line of work, no other
documentary evidence is available; or
2) the deceased is employed as a daily wage worker earning less than
the minimum wage under current labor laws. (Philippine Hawk v. Tan
Lee)

The amount recoverable is not loss of the entire earnings but rather
loss of that portion of the earnings which the beneficiary would have
received. In other words, only net earnings not gross earnings are to
be considered. The determination of such actual damages resulting
from death due to breach of contract of carriage depends, mainly on 2
factors:
1.
The number of years on the basis of which the damages shall
be computed; and
2.
The rate at which the losses sustained should be fixed.(Villa
Rey Transit v. CA)

Second, damages are only those which represent the loss

suffered and the profits which the obligee failed to obtain. In

The amount recoverable by the heirs of a victim of tort is not loss of the
entire earnings, but rather the loss of that portion of the earnings which
the beneficiary would have received. In other words, only net earnings,

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- 15 Obtention or enjoyment of benefit/s under the contract by the
plaintiff himself
Defendant acted upon advice of counsel in cases where
exemplary damages are to be awarded, such as under Art. 2230, 2231
and 2232
Defendant has done his best to lessen the plaintiffs injury or
loss.
2)
For quasi-contracts
In cases where exemplary damages are to be awarded such
as in Art. 2232
Defendant has done his best to lessen the plaintiffs injury or
loss.
3)
For quasi-delicts
That the loss would have resulted in any event because of
the negligence or omission is the immediate and proximate cause of
the damage or injury.
Defendant has done his best to lessen the plaintiffs injury.

not gross earnings, are to be considered, that is, the total of the
earnings or income and less living and other incidental expenses.
(Davila v. PAL)

xxx
Art. 2203. The party suffering loss or injury must exercise the
diligence of a good father of a family to minimize the damages
resulting from the act or omission in question.
Mitigating damages - article 2203
Duty to Mitigate
The party injured must exercise diligence to minimize the damages
arising out of the act or omission.
The Duty to Mitigate only applies to actual damages.
The claimant must show that the damages he suffered was not
avoidable it must also be reasonable.

Enumeration of mitigating events, not limited: The 5 circumstances

mentioned in the law are not exclusive. Other circumstances of similar
nature may be considered to mitigate the damages imposable upon the
offending party.

First principle in mitigation: one cannot recover for avoidable loss.

Efforts to mitigate the loss must be REASONABLE.

If refusal is due to religious grounds, is the refusal reasonable? The

duty to mitigate, efforts exerted by the complainant must be reasonable,
with respect to him, and in the circumstances. What is reasonable, is
that which is reasonable to the judge; a prudent man/good father of a
family really means the judge.

xxx
Art. 2205. Damages may be recovered:
(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.

Corollary to the first principle, if one incurs expenses to mitigate the

loss, expenses are recoverable, even if the resulting loss would have
been less if the expenses have not been incurred. Ex. additional
expenses after botched operation, even if resulting loss is greater than
if mitigation is not undertaken.

For Crimes, quasi-delicts and breach of contract of carriage:

Compensation for lost Income:

Net Earning Capacity = [2/3 x (80 age)] x (gross annual income
reasonable and necessary living expenses of deceased)
if there is lack of proof of living expenses of deceased,
net earnings are computed at 50% of gross earnings.

Third, if the duty to mitigate was successful, loss is avoided, there is no

loss, thus you cannot recover for avoided loss.
Duty to mitigate is an ever present duty on the part of the plaintiff,
whether liability is due to a contract or quasi-delict. The standard is, is it
reasonable for you to find the alternative? Various factors must be
taken into account, and is thus based on circumstances.

Mitigation of damages in contracts, quasi-contracts and quasi-delicts:

The reason for the mitigation of damages in quasi-delict is the
contributory negligence of the plaintiff although the immediate and
proximate cause of his damage is still mainly the negligence or
omission of the defendant. Contracts and quasi-contracts are
mentioned together with quasi-delicts.

But, certain actual damages are not recoverable.

According to Art. 2206, par. 1, the defendant shall be liable for the loss
of earning capacity of the deceased and indemnity shall be paid to the
heirs of the latter. This Article, while referring to damages for death
caused by crime of delict, is expressly made applicable by Art. 1764 to
the death of a passenger caused by the breach of contract by a
common carrier. (Davila v. PAL)
Article 2206 of the Civil Code of the Philippines provides that only
deaths caused by a crime as quasi delict are entitled to actual and
compensatory damages without the need of proof of the said damages.
The amount of damages for death caused by a crime or quasi delict
shall be at least Three Thousand Pesos, even though there may have
been mitigating circumstances. Deducing alone from said provision,

Instances of Grounds for Mitigation of Damages:

For contracts:
Violation of terms of the contract by the plaintiff himself

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Xxx

1)
-

Under the law, independently of its financial capacity, the common

carrier, if liable, must be made to pay the minimum amount provided in
Art. 2206. But if its financial ability is such that ut can pay a greater
amount of indemnity as demanded by the circumstances of the case,
then certainly it should be made to pay more than PhP3,000. Its
financial standing is material to ascertain the amount of damages as
indemnity for death, and thus, is material in a case for damages for
breach of contract resulting in death of a passenger. (PANTRANCO v.
Legaspi)

Non-recoverable damages:
1) Avoidable loss
2) Not properly pleaded in the complaint or inadequately proven
3) Remote damages, not caused by defendant's act or
negligence, and is not proximate cause.
4) Damnum absque injuria, there is damage, but there is no legal
injury. Defendant's act or omission is lawful, there is no liability for
damages, even if there be injury to the claimant.
5) Self-inflicted damages/injury.
6) Speculative damages, based on mere conjecture or surmises,
and not duly substantiated.
7) In breach of contract in good faith, actual damages not actually
foreseen by both parties, not just one.

Cost of living of deceased = total expenses of family/# of persons in

the family
Life Expectancy = [2/3 x (80 age)]
Indemnity for death:
Crimes resulting in death = automatic PhP50,000
If attended by treachery = additional PhP25,000

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- 16 -

one can conclude that damages arising from culpa contractual are not
compensable without proof of special damages sustained by the heirs
of the victim. (Sulpicio v. CA and Tabuquilde)

Exceptions: An existing corporation with reputation to protect is

entitled to moral damages, if the basis of the claim is either:
1.
Its good reputation has been besmirched by the
defendants (Art. 2217); and

Indemnity for death has been increased to PhP50,000 based on recent

jurisprudence. (Sulpicio v. CA)

2.

If its complaint is for libel or any other form of defamation.

xxx
!

Art. 2207. If the plaintiff's property has been insured, and he has
received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who has violated the
contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled
to recover the deficiency from the person causing the loss or
injury.

Art. 2220. Willful injury to property may be a legal ground for

awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted
fraudulently or in bad faith.

xxx
Art. 2215. In contracts, quasi-contracts, and quasi-delicts, the
court may equitably mitigate the damages under circumstances
other than the case referred to in the preceding article, as in the
following instances:

(1) That the plaintiff himself has contravened the terms of

contract;
(2) That the plaintiff has derived some benefit as a result of
contract;
(3) In cases where exemplary damages are to be awarded, that
defendant acted upon the advice of counsel;
(4) That the loss would have resulted in any event;
(5) That since the filing of the action, the defendant has done
best to lessen the plaintiff's loss or injury.

the
the
the
his

Any circumstance which mitigates the injury sustained by breach

of contract must be considered in measuring the damages.
Damages arising from the plaintiffs breach of the contract on which he
sues may be shown to reduce his claim and the defendant may also
show that even had he himself performed his contract, the plaintiff
would not have been able to do so. Any benefit derived by the plaintiff
under a contract must be charged against him in the assessment of
damages for its breach. The defendant, however, is not entitled to any
deduction of that which was to occur subsequently to a discharge of his
liability under the terms of his contract.

Art. 2216. No proof of pecuniary loss is necessary in order that

moral, nominal, temperate, liquidated or exemplary damages, may
be adjudicated. The assessment of such damages, except
liquidated ones, is left to the discretion of the court, according to
the circumstances of each case.
Proof of pecuniary loss is required in actual or compensatory damages.
They must be alleged and proved, and must not be presumed. But,
insofar as the other damages are concerned, no proof of pecuniary
loss is required. HOWEVER, there is a long line of decisions that for
the court to be able to use its discretion in determining the amounts of
said damages, it is essential that there should be a clear showing of
the facts giving rise to such damage as may be inferred from Art. 2217.

Art. 2217. Moral damages include 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 are the proximate result of the defendant's
wrongful act for omission.

While no proof of pecuniary loss is necessary in order that moral

damages may be awarded, the amount of the indemnity being left to
the discretion of the court, nevertheless, it is still essential that the
claimant should satisfactorily prove the factual basis of the moral
damages and its causal relation to the defendants acts.

Why? This is so because moral damages, although incapable of

pecuniary estimation, are in the category of an award designed to
compensate the claimant for the actual injury suffered and not to
impose a penalty on the wrongdoer. The same principle applies to
exemplary damages. They are not intended to enrich a complainant at
the expense of a defendant. They are awarded only to enable the
injured party to obtain means, diversion or amusement that will serve to
alleviate the moral suffering he has undergone, by reason of the
defendants culpable action.

Art. 2219 of the civil code enumerates the instances when moral
damages may be recovered. Plaintiffs claim for moral damages not
falling under any one of them, the same cannot be granted. Moral
damages cannot also be collected on account of breach of contract if
there is no proof that defendant did not act fraudulently or in bad faith in
connection therewith. (Carriaga v. LTB)

The right to moral damages is based on equity and he who comes

to court to demand equity must come with clean hands.
When recoverable: Can only be awarded in cases falling within Art.
2219 and 2220, as a rule. It must also be established that the act/
omission of the defendant is the proximate cause of the damage or
injury suffered by the plaintiff. It cannot be recovered in the absence of
a wrongful act of omission or fraud or bad faith.

Moral damages not recoverable in breach of contract of

transportation:
General Rule: In actions for damages predicated on breach of contract
of transportation, moral damages are not recoverable.

Exceptions:
1)
Where the mishap results in the death of the passenger;
2)
Where it is proved that the carrier was guilty of fraud or bad
faith, even if death does not result (Fores v Miranda).
Fraud, malice or bad faith must be proved, and mere carelessness of
the driver does not per se constitute or justify an inference of malice or
bad faith on the carriers part.

With respect to the award of moral damages, the general rule is that
said damages are not recoverable in culpa contractual except when the
presence of bad faith was proven. However, in breach of contract of
carriage, moral damages may be recovered when it results in the death
of a passenger. (Sulpicio Lines, Supra.)

As a general rule, moral damages may not be awarded to an artificial/

juridical person.

Starr Weigand 2012

In breach of contract of carriage by air, moral damages are awarded

only if the defendant acted fraudulently or in bad faith. (PAL v. Miano)
Where the defendant airline is not shown to have acted fraudulently or
in bad faith, liability for damages is limited to the natural and probable
consequences of the breach of obligation which the parties had

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foreseen or could have foreseen at the time the contract was made.
This being the case, it cannot contemplate moral and exemplary
damages. (Tan v. Northwest Airlines)

With respect to the award of moral damages, the general rule is that
said damages are not recoverable in culpa contractual except when the
presence of bad faith was proven. In breach of contract of carriage,
moral damages may be recovered when it results in the death of a
passenger. (Sulpicio v. CA and Tabuquilde)

Requisites for award of moral damages:

1)
There must be an injury, whether physical, mental or
psychological, clearly sustained by the claimant;
2)
There must be a culpable act or omission factually
established;
3)
The wrongful act/omission of the defendant is the proximate
cause of the injury sustained by the claimant; and
4)
The award of damages is predicated on any of the cases
stated in Art. 2219 of the Civil Code (or Art. 2220).

The award of moral damages is aimed at a restoration, within the limits

of the possible, of the spiritual status quo ante: and, therefore, it must
be proportionate to the suffering inflicted. The intensity of the pain
experienced by the relatives of the victim is proportionate to the
intensity of the affection for him and bears no relation whatever with the
wealth or means of the offender. The death caused by a beggar is felt
by the parents of the victim as intensely as that caused by the scion of
a wealthy family. To recapitulate: compensatory and moral damages
can only be awarded to indemnify the victim or his relatives for the
prejudice suffered, and the financial standing of the person responsible
is irrelevant to their evaluation. (PANTRANCO v. Legaspi)

The well-entrenched principle is that the grant of moral damages

depends upon the discretion of the court based on the circumstances of
each case.16 This discretion is limited by the principle that the "amount
awarded should not be palpably and scandalously excessive" as to
indicate that it was the result of prejudice or corruption on the part of
the trial court. Damages are not intended to enrich the complainant at
the expense of the defendant. They are awarded only to alleviate the
moral suffering that the injured party had undergone by reason of the
defendant's culpable action. There is no hard-and-fast rule in the
determination of what would be a fair amount of moral damages since
each case must be governed by its own peculiar facts. (Singson v. CA)

Under Art. 2220, in cases of breach of contract (including one of

transportation or carriage), either fraud or bad faith, that is wanton and
deliberately injurious conduct on the part of the carrier is necessary to
justify an award for moral damages. If the carrier fails to cover the side
of the bus, it was foreseeable that passengers might fall out of it during
the transport. Failing to cover the side of the bus was clearly bad faith
on their part (for failing to ensure the safety of passengers), thus
allowing for moral damages to be awarded. (LTB v. Cornista)

Gross negligence amount to bad faith and it will justify the award of
moral damages in cases of breach of contract of carriage. (Armovit v
CA)
When an airline issues a ticket to a passenger confirmed on a particular
flight, on a certain date, a contract of carriage arise, and the passenger
has every right to expect that he would fly on that flight and on that
date. If he does not, then the carrier opens itself to a suit for breach of
contract of carriage. When an airline had deliberately overbooked, it
took the risk of having to deprive some passengers of their seats in
case some of them would show up for check in. for the indignity and
inconvenience of being refused a confirmed seat on the last minute,
said passenger is entitled to an award for moral damages. (Zalamea v.
CA)

Moral and exemplary damages may be awarded for breach of contract

of carriage when the carrier acted in bad faith. Example, refusing to
allow a passenger to board the plane despite having tickets confirmed
twice, and discriminating against such passenger due to his race or
color, and arrogantly threatening him. Inattention and lack of care for
the interest of its passengers who are entitled to utmost consideration,
particularly as to their convenience, amount to bad faith which entitles
the passenger to an award for moral damages. (Trans World v. CA;
Alitalia Airways v. CA)

xxx
Art. 2226. Liquidated damages are those agreed upon by the
parties to a contract, to be paid in case of breach thereof.
How is liquidated damages different from all other damages?
It is imposed by a contract. It is stated in the contract and not by the
law, as opposed to other damages. These are fixed, previously agreed
upon by the parties in case of breach by the other.

To sue for moral damages under breach of a contract of transportation,

it must be proven that the common carrier acted in bad faith (in relation
to the breach of contract, such that the bad faith attended the accident
which resulted in the injury or death). (Fores v. Miranda)
Moral damages are not recoverable in actions for damages predicated
on a breach of contract of transportation, in view of the provisions of
articles 2219 and 2220. The exceptions are
1.
Where the mishap results in the death of a passenger; and
2.
Where it is proved that the carrier was guilty of fraud or bad
faith, even if death does not result. (Philippine Rabbit v.
Esguerra; China Airlines v. IAC)
In awarding moral damages as a result of death of a passenger, the
heirs who are entitled to such are the spouse, legitimate and illegitimate
descendants and ascendants of the deceased, as provided in Art. 2206,
and such does not include collaterals (brothers, sisters, nephews,
nieces. (Supicio v. Curso)

What constitutes bad faith?

Although the rule is that moral damages predicated upon a breach of
contract of carriage may only be recoverable in instances where the
mishap results in the death of a passenger, or where the carrier is guilty
of fraud or bad faith, there are situations where the negligence of the
carrier is so gross and reckless as to virtually amount to bad faith, in
which case, the passenger likewise becomes entitled to recover moral
damages. (Singson v. CA)

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- 17 -

Purposes of liquidated damages:

1)
Indemnity
2)
Penalty as a deterrent
How would you know that the damages function as an indemnity
or as a deterrent?
As Indemnity the amount is the amount of loss suffered. The loss is
equivalent to the amount of damages. It serves merely as
compensation for the loss. The parties anticipate that the amount of
indemnity to cover the loss is that stipulated.
As deterrent it exceeds the amount of the loss. The amount is set by
the parties, which is higher than the indemnity, but not iniquitous or
unconscionable.
Effect of partial performance: If there was partial performance of the
contract, the total amount of the liquidated damages agreed upon
cannot be enforced. They are presumed to be only for total breach of
contract. Hence, there can be a corresponding reduction of the
liquidated damages. Example: If out of 500 TV sets agreed to be
delivered, only 63 were actually delivered, equitable reduction of the
liquidated damages is proper.

Art. 2229. Exemplary or corrective damages are imposed, by way

of example or correction for the public good, in addition to the
moral, temperate, liquidated or compensatory damages.
Punitive or Vindictive damages: Also known as punitive or
vindictive damages, exemplary or corrective damages are intended to

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serve as a deterrent to serious wrongdoings and as a vindication of
undue sufferings and wanton invasion of an injured or punishment for
those guilty of outrageous conduct. What is being punished is the
attitude of the defendant. Exemplary damages are required by public
policy, for wanton acts must be suppressed. They are an antidote so
that the poison of wickedness may not run through the body politic.
They are not imposed to enrich a party or impoverish another but to
serve as a deterrent against or as a negative incentive to curb socially
deleterious actions.

Nature: Exemplary damages are mere accessories to other forms of

damages except nominal damages. They are mere additions to actual,
moral, temperate and liquidated damages which may or may not be
granted at all depending upon the necessity of setting an example for
the public good as a form of deterrent to the repetition of the same act
by any one.

Exemplary damages are imposed as a corrective measure when the

guilty party has acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.
When can an employer be liable for exemplary damages for the acts of
his employees? As a rule, an employer may not be held liable for
exemplary damages for the negligence of his employees.
Thus, our jurisprudence sets certain conditions when exemplary
damages may be awarded, as follows:
First: They may be imposed by way of example or correction only in
addition, among others, to compensatory damages, and cannot be
recovered as a matter of right, their determination depending upon the
amount of compensatory damages that may be awarded to the
claimant.

Second: The claimant must first establish his right to moral, temperate,
liquidated or compensatory damages.
Third: The wrongful act must be accompanied by bad faith, and the
award would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner.
When the plaintiffs prayed for such other relief and remedies as may be
availed of under the premises, in effect, the court was called upon to
exercise and use its discretion to decide whether the imposition of
punitive or exemplary damages can be impose, even if not expressly
prayed for or pleaded in the complaint. (Marchan v. Mendoza)

The amount of exemplary damages need not be pleaded in the

complaint because such cannot be predetermined. One can merely ask
that such be determined by the court as the evidence may warrant and
be awarded at its discretion. (PAL v. CA)

Art. 2232. In contracts and quasi-contracts, the court may award

exemplary damages if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.
According to Art. 2232 of the NCC, in contracts and quasi-contracts the
court may award exemplary damages if the defendant acted in wanton,
fraudulent, reckless, oppressive or malevolent manner. (Davila, Supra)
The award of moral and exemplary damages in the aggregate may not
be the usual way of awarding such damages. However, there can be no
question that the entitlement to moral damages having been
established, exemplary damages may be awarded. And exemplary
damages may be awarded even though not so expressly pleaded in the
complaint or proved. (PAL v. CA)

With respect to the award of exemplary damages, Article 2232 of the

Civil Code of the Philippines gives the Court the discretion to grant said
damages in breach of contract when the defendant acted in a wanton,
fraudulent and reckless manner. (Sulpicio v. Tabuquilde)

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- 18 Art. 2233. Exemplary damages cannot be recovered as a matter of

right; the court will decide whether or not they should be
adjudicated.

With respect to the award of exemplary damages, Article 2232 of the

Civil Code of the Philippines gives the Court the discretion to grant said
damages in breach of contract when the defendant acted in a wanton,
fraudulent and reckless manner. The Court will take judicial notice of
the dreadful regularity with which grievous maritime disasters occur in
our waters with massive loss of life. The bulk of our population is too
poor to afford domestic air transportation. So it is that notwithstanding
the frequent sinking of passenger in our waters, crowds of people
continue to travel by sea. This Court is prepared to use the instruments
given to it by the law for securing the ends of law and public policy. One
of those instruments is the institution of exemplary damages; one of
those ends, of special importance in an archipelagic state like the
Philippines, is the safe and reliable carriage of people and goods by
sea. (Sulpicio Lines, Supra.)

2232 of the Civil Code of the Philippines provides that, in contracts and
quasi-contracts the court may award exemplary damages if the
defendant acted in a "wanton, fraudulent, reckless, oppressive or
malevolent manner." Moreover, under Article 2208 of the same Code,
attorney's fees other than judicial costs may be awarded "when
exemplary damages are awarded." (LTB v. Diasanta)

Characteristics of exemplary damages:

1.
They cannot be recovered as a matter of right and its
determination is upon the discretion of the court.
2.
The amount of exemplary damages need not be proved
because they depend on the actual damages awarded.
3.
If it does not have to be proved, then it need not be
specifically alleged, since such depends on whether actual
damages should be awarded. (Marchan, supra.)

To justify an award of exemplary damages, the common carrier must be

in bad faith in breaching the contract of carriage. (China Airlines v. IAC)
Owners of common carriers cannot be held liable for exemplary
damages unless it is shown that it authorized or ratified the drivers
reckless driving which resulted in the breach of the contract of carriage.
It should be the driver who is to be made liable for such damages. It is
difficult to conceive how the defendant in a breach of contract case
could be held to have acted in a wanton, fraudulent, reckless,
oppressive or violent manner within the meaning of Article 2232 for
something he did or did not do after the breach, which had no causal
connection therewith. The law does not contemplate a vicarious liability
on his part: the breach is his as party to the contract, and so if he is to
be held liable at all for exemplary damages by reason of the wrongful
act of his agent, it must be shown that he had previously authorized or
knowingly ratified it thereafter, in effect making him a co-participant
The mere statement that the defendant failed, even refused, to placate
the suffering of the plaintiff, necessitating the filing of the action, is too
tenuous a basis to warrant the conclusion that the defendant approved
of the wrongful act of his servant with full knowledge of the facts.
It is not enough to say that an example should be made, or corrective
measures employed, for the public good, especially in accident cases
where public carriers are involved. For the causative negligence in such
cases is personal to the employees actually in charge of the vehicles,
and it is they who should be made to pay this kind of damages by way
of example or correction, unless by the demonstrated tolerance or
approval of the owners they themselves can be held at fault and their
fault is of the character described in Article 2232 of the Civil Code.
Otherwise there would be practically no difference between their liability
for exemplary damages and their liability for compensatory damages,
which needs no proof of their negligence since the suit is predicated on
breach of contract and due diligence on their part does not constitute a
defense. (Munsayac v. De Lara; Sarkies Tours v. IAC)

This is in opposition to the case of R Transport v. Pante where the

reckless driving of the driver of the vehicle was attributed to be reckless
behavior of the common carrier, making the latter liable for exemplary
damages. But, the court did say that award of exemplary damages is

Transportation Law|Ampil


justified to serve as an example or as a correction for the public good.
Also, in Philippine Hawk v Tan Lee, (which is an action based on tort)
whenever an employees negligence causes damage or injury to
another, there instantly arises a presumption that the employer failed to
exercise the due diligence of a good father of the family in the selection
or supervision of its employees. To avoid liability for a quasi-delict
committed by his employee, an employer must overcome the
presumption by presenting convincing proof that he exercised the care
and diligence of a good father of a family in the selection and
supervision of his employee. Such is not the case when the action is
one based on breach of contract.

Art. 2234. While the amount of the exemplary damages need not
be proved, the plaintiff must show that he is entitled to moral,
temperate or compensatory damages before the court may
consider the question of whether or not exemplary damages
should be awarded. In case liquidated damages have been agreed
upon, although no proof of loss is necessary in order that such
liquidated damages may be recovered, nevertheless, before the
court may consider the question of granting exemplary in addition
to the liquidated damages, the plaintiff must show that he would
be entitled to moral, temperate or compensatory damages were it
not for the stipulation for liquidated damages.

Art. 2235. A stipulation whereby exemplary damages are

renounced in advance shall be null and void.
Conditions for the grant of exemplary damages:
1)
Exemplary damages are merely accessory damages as an
addition to actual, moral, or temperate damages.
2)
Such grant cannot be claimed as a matter of right, and is
discretionary to the court.
3)
While the court has discretion to grant it, it is required that the
aggrieved party must establish by evidence that he is entitled to
compensatory, moral or temperate damages.
4)
In case of crimes, there must be at least one aggravating
circumstance.
5)
In quasi-delict, the defendant must be proved to be grossly
negligent.
6)
In contracts and quasi-contracts, the defendant must be
proved to have acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.

As a general rule, a party cannot impugn the correctness of a judgment

not appealed by a party. However, the court in its discretion may still
afford the parties equitable reliefs as may be proper considering the
circumstances. (De Lima, Supra)
In Sum: Damages which may be recovered for breach of contract of
carriage:
1.
Actual damages
2.
Exemplary damages
3.
Moral Damages
4.
Liquidated damages in lieu of actual damages if agreed
upon in the contract.

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- 19 -

Convention for the Unification of Certain Rules for International

Carriage by Air (Montreal, 28 May 1999)

THE STATES PARTIES TO THIS CONVENTION

RECOGNIZING the significant contribution of the Convention for the
Unification of Certain Rules relating to International Carriage by Air
signed in Warsaw on 12 October 1929, hereinafter referred to as the
"Warsaw Convention", and other related instruments to the
harmonization of private international air law;

RECOGNIZING the need to modernize and consolidate the Warsaw

Convention and related instruments;
RECOGNIZING the importance of ensuring protection of the interests
of consumers in international carriage by air and the need for equitable
compensation based on the principle of restitution;
REAFFIRMING the desirability of an orderly
international air transport operations and the
passengers, baggage and cargo in accordance with
objectives of the Convention on International Civil
Chicago on 7 December 1944;

development of
smooth flow of
the principles and
Aviation, done at

CONVINCED that collective State action for further harmonization and

codification of certain rules governing international carriage by air
through a new Convention is the most adequate means of achieving an
equitable balance of interests;

HAVE AGREED AS FOLLOWS:

Chapter 1 - General Provisions
Article 1 - Scope of application
1. This Convention applies to all international carriage of persons,
baggage or cargo performed by aircraft for reward. It applies
equally to gratuitous carriage by aircraft performed by an air
transport undertaking.

2. For the purposes of this Convention, the expression

"international carriage" means any carriage in which, according to
the agreement between the parties, the place of departure and the
place of destination, whether or not there be a break in the
carriage or a transhipment, are situated either within the territories
of two States Parties, or within the territory of a single State Party
if there is an agreed stopping place within the territory of another
State, even if that State is not a State Party. Carriage between two
points within the territory of a single State Party without an agreed
stopping place within the territory of another State is not
international carriage for the purposes of this Convention.

3. Carriage to be performed by several successive carriers is

deemed, for the purposes of this 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, and it does not lose its
international character merely because one contract or a series of
contracts is to be performed entirely within the territory of the
same State.

4. This Convention applies also to carriage as set out in Chapter V,

subject to the terms contained therein.
Article 2 - Carriage performed by State and carriage of postal
items
1. This Convention applies to carriage performed by the State or
by legally constituted public bodies provided it falls within the
conditions laid down in Article 1.

2. In the carriage of postal items, the carrier shall be liable only to

the relevant postal administration in accordance with the rules

Transportation Law|Ampil



applicable to the relationship between the carriers and the postal
administrations.

3. Except as provided in paragraph 2 of this Article, the provisions

of this Convention shall not apply to the carriage of postal items.
Chapter II - Documentation and Duties of the Parties Relating to
the Carriage of Passengers, Baggage and Cargo

Article 3 - Passengers and baggage

1. In respect of carriage of passengers, an individual or collective
document of carriage shall be delivered containing:
(a) an indication of the places of departure and
destination;
(b) if the places of departure and destination are within
the territory of a single State Party, one or more agreed stopping
places being within the territory of another State, an indication of
at least one such stopping place.

2. Any other means which preserves the information indicated in

paragraph 1 may be substituted for the delivery of the document
referred to in that paragraph. If any such other means is used, the
carrier shall offer to deliver to the passenger a written statement
of the information so preserved.

3. The carrier shall deliver to the passenger a baggage

identification tag for each piece of checked baggage.
4. The passenger shall be given written notice to the effect that
where this Convention is applicable it governs and may limit the
liability of carriers in respect of death or injury and for destruction
or loss of, or damage to, baggage, and for delay.

5. Non-compliance with the provisions of the foregoing

paragraphs shall not affect the existence or the validity of the
contract of carriage, which shall, nonetheless, be subject to the
rules of this Convention including those relating to limitation of
liability.

Article 4 - Cargo
1. In respect of the carriage of cargo, an air waybill shall be
delivered.
2. Any other means which preserves a record of the carriage to be
performed may be substituted for the delivery of an air waybill. If
such other means are used, the carrier shall, if so requested by
the consignor, deliver to the consignor a cargo receipt permitting
identification of the consignment and access to the information
contained in the record preserved by such other means.

Article 5 - Contents of air waybill or cargo receipt

The air waybill or the cargo receipt shall include:
(a) an indication of the places of departure and
destination;
(b) if the places of departure and destination are within
the territory of a single State Party, one or more agreed stopping
places being within the territory of another State, an indication of
at least one such stopping place; and
(c) an indication of the weight of the consignment.

Article 6 - Document relating to the nature of the cargo

The consignor may be required, if necessary, to meet the
formalities of customs, police and similar public authorities to
deliver a document indicating the nature of the cargo. This
provision creates for the carrier no duty, obligation or liability
resulting therefrom.

- 20 The third part shall be signed by the carrier who shall hand it to
the consignor after the cargo has been accepted.

3. The signature of the carrier and that of the consignor may be

printed or stamped.
4. If, at the request of the consignor, the carrier makes out the air
waybill, the carrier shall be deemed, subject to proof to the
contrary, to have done so on behalf of the consignor.
Article 8 - Documentation for multiple packages
When there is more than one package:
(a) the carrier of cargo has the right to require the
consignor to make out separate air waybills;
(b) the consignor has the right to require the carrier to
deliver separate cargo receipts when the other means referred to
in paragraph 2 of Article 4 are used.

Article 9 - Non-compliance with documentary requirements

Non-compliance with the provisions of Articles 4 to 8 shall not
affect the existence or the validity of the contract of carriage,
which shall, nonetheless, be subject to the rules of this
Convention including those relating to limitation of liability.

Article 10 - Responsibility for particulars of documentation

1. The consignor is responsible for the correctness of the
particulars and statements relating to the cargo inserted by it or
on its behalf in the air waybill or furnished by it or on its behalf to
the carrier for insertion in the cargo receipt or for insertion in the
record preserved by the other means referred to in paragraph 2 of
Article 4. The foregoing shall also apply where the person acting
on behalf of the consignor is also the agent of the carrier.

2. The consignor shall indemnify the carrier against all damage

suffered by it, or by any other person to whom the carrier is liable,
by reason of the irregularity, incorrectness or incompleteness of
the particulars and statements furnished by the consignor or on
its behalf.

3. Subject to the provisions of paragraphs 1 and 2 of this Article,

the carrier shall indemnify the consignor against all damage
suffered by it, or by any other person to whom the consignor is
liable, by reason of the irregularity, incorrectness or
incompleteness of the particulars and statements inserted by the
carrier or on its behalf in the cargo receipt or in the record
preserved by the other means referred to in paragraph 2 of Article
4.

Article 11 - Evidentiary value of documentation

1. The air waybill or the cargo receipt is prima facie evidence of
the conclusion of the contract, of the acceptance of the cargo and
of the conditions of carriage mentioned therein.

2. Any statements in the air waybill or the cargo receipt relating to

the weight, dimensions and packing of the cargo, as well as those
relating to the number of packages, are prima facie evidence of
the facts stated; those relating to the quantity, volume and
condition of the cargo do not constitute evidence against the
carrier except so far as they both have been, and are stated in the
air waybill or the cargo receipt to have been, checked by it in the
presence of the consignor, or relate to the apparent condition of
the cargo.

2. The first part shall be marked "for the carrier"; it shall be signed
by the consignor. The second part shall be marked "for the
consignee"; it shall be signed by the consignor and by the carrier.

Article 12 - Right of disposition of cargo

1. Subject to its liability to carry out all its obligations under the
contract of carriage, the consignor has the right to dispose of the
cargo by withdrawing it at the airport of departure or destination,
or by stopping it in the course of the journey on any landing, or by
calling for it to be delivered at the place of destination or in the
course of the journey to a person other than the consignee
originally designated, or by requiring it to be returned to the
airport of departure. The consignor must not exercise this right of
disposition in such a way as to prejudice the carrier or other

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Article 7 - Description of air waybill

1. The air waybill shall be made out by the consignor in three
original parts.

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consignors and must reimburse any expenses occasioned by the
exercise of this right.

2. If it is impossible to carry out the instructions of the consignor,

the carrier must so inform the consignor forthwith.
3. If the carrier carries out the instructions of the consignor for the
disposition of the cargo without requiring the production of the
part of the air waybill or the cargo receipt delivered to the latter,
the carrier will be liable, without prejudice to its right of recovery
from the consignor, for any damage which may be caused thereby
to any person who is lawfully in possession of that part of the air
waybill or the cargo receipt.

4. The right conferred on the consignor ceases at the moment

when that of the consignee begins in accordance with Article 13.
Nevertheless, if the consignee declines to accept the cargo, or
cannot be communicated with, the consignor resumes its right of
disposition.

Article 13 - Delivery of the cargo

1. Except when the consignor has exercised its right under Article
12, the consignee is entitled, on arrival of the cargo at the place of
destination, to require the carrier to deliver the cargo to it, on
payment of the charges due and on complying with the conditions
of carriage.

2. Unless it is otherwise agreed, it is the duty of the carrier to give

notice to the consignee as soon as the cargo arrives.
3. If the carrier admits the loss of the cargo, or if the cargo has not
arrived at the expiration of seven days after the date on which it
ought to have arrived, the consignee is entitled to enforce against
the carrier the rights which flow from the contract of carriage.

Article 14 - Enforcement of the rights of consignor and consignee

The consignor and the consignee can respectively enforce all the
rights given to them by Articles 12 and 13, each in its own name,
whether it is acting in its own interest or in the interest of another,
provided that it carries out the obligations imposed by the
contract of carriage.

Article 15 - Relations of consignor and consignee or mutual

relations of third parties
1. Articles 12, 13 and 14 do not affect either the relations of the
consignor and the consignee with each other or the mutual
relations of third parties whose rights are derived either from the
consignor or from the consignee.

2. The provisions of Articles 12, 13 and 14 can only be varied by

express provision in the air waybill or the cargo receipt.
Article 16 - Formalities of customs, police or other public
authorities
1. The consignor must furnish such information and such
documents as are necessary to meet the formalities of customs,
police and any other public authorities before the cargo can be
delivered to the consignee. The consignor is liable to the carrier
for any damage occasioned by the absence, insufficiency or
irregularity of any such information or documents, unless the
damage is due to the fault of the carrier, its servants or agents.

2. The carrier is under no obligation to enquire into the

correctness or sufficiency of such information or documents.
Chapter III - Liability of the Carrier and Extent of Compensation for
Damage
Article 17 - Death and injury of passengers - damage to baggage
1. The carrier is liable for damage sustained in case of death or
bodily injury of a passenger upon condition only that the accident
which caused the death or injury took place on board the aircraft
or in the course of any of the operations of embarking or
disembarking.

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- 21 2. The carrier liable for damage sustained in case of destruction or

loss of, or of damage to, checked baggage upon condition only
that the event which caused the destruction, loss or damage took
place on board the aircraft or during any period within which the
checked baggage was in the charge of the carrier. However, the
carrier is not liable if and to the extent that the damage resulted
from the inherent defect, quality or vice of the baggage. In the
case of unchecked baggage, including personal items, the carrier
is liable if the damage resulted from its fault or that of its servants
or agents.

3. If the carrier admits the loss of the checked baggage, or if the

checked baggage has not arrived at the expiration of twenty-one
days after the date on which it ought to have arrived, the
passenger is entitled to enforce against the carrier the rights
which flow from the contract of carriage.

4. Unless otherwise specified, in this Convention the term

"baggage" means both checked baggage and unchecked
baggage.
Article 18 - Damage to cargo
1. The carrier is liable for damage sustained in the event of the
destruction or loss of or damage to, cargo upon condition only
that the event which caused the damage so sustained took place
during the carriage by air.

2. However, the carrier is not liable if and to the extent it proves

that the destruction, or loss of, or damage to, the cargo resulted
from one or more of the following:
(a) inherent defect, quality or vice of that cargo;
(b) defective packing of that cargo performed by a
person other than the carrier or its servants or agents;
(c) an act of war or an armed conflict;
(d) an act of public authority carried out in connection
with the entry, exit or transit of the cargo.

3. The carriage by air within the meaning of paragraph 1 of this

Article comprises the period during which the cargo is in the
charge of the carrier.
4. The period of the carriage by air does not extend to any carriage
by land, by sea or by inland waterway performed outside an
airport. If, however, such carriage takes place in the performance
of a contract for carriage by air, for the purpose of loading,
delivery or transhipment, any damage is presumed, subject to
proof to the contrary, to have been the result of an event which
took place during the carriage by air. If a carrier, without the
consent of the consignor, substitutes carriage by another mode of
transport for the whole or part of a carriage intended by the
agreement between the parties to be carriage by air, such carriage
by another mode of transport is deemed to be within the period of
carriage by air.

Article 19 - Delay
The carrier is liable for damage occasioned by delay in the
carriage by air of passengers, baggage or cargo. Nevertheless, the
carrier shall not be liable for damage occasioned by delay if it
proves that it and its servants and agents took all measures that
could reasonably be required to avoid the damage or that it was
impossible for it or them to take such measures.

Article 20 - Exoneration
If the carrier proves that the damage was caused or contributed to
by the negligence or other wrongful act or omission of the person
claiming compensation, or the person from whom he or she
derives his or her rights, the carrier shall be wholly or partly
exonerated from its liability to the claimant to the extent that such
negligence or wrongful act or omission caused or contributed to
the damage. When by reason of death or injury of a passenger
compensation is claimed by a person other than the passenger,
the carrier shall likewise be wholly or partly exonerated from its
liability to the extent that it proves that the damage was caused or

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contributed to by the negligence or other wrongful act or omission
of that passenger. This Article applies to all the liability provisions
in this Convention, including paragraph 1 of Article 21.

Article 21 - Compensation in case of death or injury of passengers

1. For damages arising under paragraph 1 of Article 17 not
exceeding 100,000 Special Drawing Rights for each passenger, the
carrier shall not be able to exclude or limit its liability.

2. The carrier shall not be liable for damages arising under

paragraph 1 of Article 17 to the extent that they exceed for each
passenger 100,000 Special Drawing Rights if the carrier proves
that:
(a) such damage was not due to the negligence or other
wrongful act or omission of the carrier or its servants or agents;
or
(b) such damage was solely due to the negligence or
other wrongful act or omission of a third party.

Article 22 - Limits of liability in relation to delay, baggage and

cargo
1. In the case of damage caused by delay as specified in Article 19
in the carriage of persons, the liability of the carrier for each
passenger is limited to 4,150 Special Drawing Rights.

2. In the carriage of baggage, the liability of the carrier in the case

of destruction, loss, damage or delay is limited to 1,000 Special
Drawing Rights for each passenger unless the passenger has
made, at the time when the checked baggage was handed over to
the carrier, a special declaration of interest in delivery at
destination 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 it proves that the sum is
greater than the passenger's actual interest in delivery at
destination.

3. In the carriage of cargo, the liability of the carrier in the case of

destruction, loss, damage or delay is limited to a sum of 17
Special Drawing Rights per kilogram, unless the consignor has
made, at the time when the package was handed over to the
carrier, a special declaration of interest in delivery at destination
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 it proves that the sum is greater than the
consignor's actual interest in delivery at destination.

4. In the case of destruction, loss, damage or delay of part of the

cargo, or of any object contained therein, the weight to be taken
into consideration in determining the amount to which the
carrier's liability is limited shall be only the total weight of the
package or packages concerned. Nevertheless, when the
destruction, loss, damage or delay of a part of the cargo, or of an
object contained therein, affects the value of other packages
covered by the same air waybill, or the same receipt or, if they
were not issued, by the same record preserved by the other
means referred to in paragraph 2 of Article 4, the total weight of
such package or packages shall also be taken into consideration
in determining the limit of liability.

5. The foregoing provisions of paragraphs 1 and 2 of this Article

shall not apply if it is proved that the damage resulted from an act
or omission of the carrier, its servants or agents, done with intent
to cause damage or recklessly and with knowledge that damage
would probably result; provided that, in the case of such act or
omission of a servant or agent, it is also proved that such servant
or agent was acting within the scope of its employment.

6. The limits prescribed in Article 21 and in this Article shall not

prevent the court from awarding, in accordance with its own law,
in addition, the whole or part of the court costs and of the other
expenses of the litigation incurred by the plaintiff, including
interest. The foregoing provision shall not apply if the amount of
the damages awarded, excluding court costs and other expenses

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- 22 of the litigation, does not exceed the sum which the carrier has
offered in writing to the plaintiff within a period of six months from
the date of the occurrence causing the damage, or before the
commencement of the action, if that is later.

Article 23 - Conversion of monetary units

1. The sums mentioned in terms of Special Drawing Right in this
Convention shall be deemed to refer to the Special Drawing Right
as defined by the International Monetary Fund. Conversion of the
sums into national currencies shall, in case of judicial
proceedings, be made according to the value of such currencies
in terms of the Special Drawing Right at the date of the judgement.
The value of a national currency, in terms of the Special Drawing
Right, of a State Party which is a Member of the International
Monetary Fund, shall be calculated in accordance with the method
of valuation applied by the International Monetary Fund, in effect
at the date of the judgement, for its operations and transactions.
The value of a national currency, in terms of the Special Drawing
Right, of a State Party which is not a Member of the International
Monetary Fund, shall be calculated in a manner determined by that
State.

2. Nevertheless, those States which are not Members of the

International Monetary Fund and whose law does not permit the
application of the provisions of paragraph 1 of this Article may, at
the time of ratification or accession or at any time thereafter,
declare that the limit of liability of the carrier prescribed in Article
21 is fixed at a sum of 1,500,000 monetary units per passenger in
judicial proceedings in their territories; 62,500 monetary units per
passenger with respect to paragraph 1 of Article 22; 15,000
monetary units per passenger with respect to paragraph 2 of
Article 22; and 250 monetary units per kilogram with respect to
paragraph 3 of Article 22. This monetary unit corresponds to sixtyfive and a half milligrams of gold of millesimal fineness nine
hundred. These sums may be converted into the national currency
concerned in round figures. The conversion of these sums into
national currency shall be made according to the law of the State
concerned.

3. The calculation mentioned in the last sentence of paragraph I of

this Article and the conversion method mentioned in paragraph 2
of this Article shall be made in such manner as to express in the
national currency of the State Party as far as possible the same
real value for the amounts in Articles 21 and 22 as would result
from the application of the first three sentences of paragraph 1 of
this Article. States Parties shall communicate to the depositary the
manner of calculation pursuant to paragraph 1 of this Article, or
the result of the conversion in paragraph 2 of this Article as the
case may be, when depositing an instrument of ratification,
acceptance, approval of or accession to this Convention and
whenever there is a change in either.

Article 24 - Review of limits

1. Without prejudice to the provisions of Article 25 of this
Convention and subject to paragraph 2 below, the limits of liability
prescribed in Articles 21, 22 and 23 shall be reviewed by the
Depositary at five-year intervals, the first such review to take place
at the end of the fifth year following the date of entry into force of
this Convention, or if the Convention does not enter into force
within five years of the date it is first open for signature, within the
first year of its entry into force, by reference to an inflation factor
which corresponds to the accumulated rate of inflation since the
previous revision or in the first instance since the date of entry
into force of the Convention. The measure of the rate of inflation
to be used in determining the inflation factor shall be the weighted
average of the annual rates of increase or decrease in the
Consumer Price Indices of the States whose currencies comprise
the Special Drawing Right mentioned in paragraph 1 of Article 23.

2. If the review referred to in the preceding paragraph concludes

that the inflation factor has exceeded 10 percent, the Depositary
shall notify States Parties of a revision of the limits of liability. Any
such revision shall become effective six months after its

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notification to the States Parties. If within three months after its
notification to the States Parties a majority of the States Parties
register their disapproval, the revision shall not become effective
and the Depositary shall refer the matter to a meeting of the States
Parties. The Depositary shall immediately notify all States Parties
of the coming into force of any revision.

3. Notwithstanding paragraph 1 of this Article, the procedure

referred to in paragraph 2 of this Article shall be applied at any
time provided that one-third of the States Parties express a desire
to that effect and upon condition that the inflation factor referred
to in paragraph 1 has exceeded 30 percent since the previous
revision or since the date of entry into force of this Convention if
there has been no previous revision. Subsequent reviews using
the procedure described in paragraph 1 of this Article will take
place at five-year intervals starting at the end of the fifth year
following the date of the reviews under the present paragraph.

Article 25 - Stipulation on limits

A carrier may stipulate that the contract of carriage shall be
subject to higher limits of liability than those provided for in this
Convention or to no limits of liability whatsoever.

Article 26 - Invalidity of contractual provisions

Any provision tending to relieve the carrier of liability or to fix a
lower limit than that which is laid down in this Convention shall be
null and void, but the nullity of any such provision does not
involve the nullity of the whole contract, which shall remain
subject to the provisions of this Convention.

Article 27 - Freedom to contract

Nothing contained in this Convention shall prevent the carrier
from refusing to enter into any contract of carriage, from waiving
any defences available under the Convention, or from laying down
conditions which do not conflict with the provisions of this
Convention.

Article 28 - Advance payments

In the case of aircraft accidents resulting in death or injury of
passengers, the carrier shall, if required by its national law, make
advance payments without delay to a natural person or persons
who are entitled to claim compensation in order to meet the
immediate economic needs of such persons. Such advance
payments shall not constitute a recognition of liability and may be
offset against any amounts subsequently paid as damages by the
carrier.

Article 29 - Basis of claims

In the carriage of passengers, baggage and cargo, any action for
damages, however founded, whether under this Convention or in
contract or in tort or otherwise, can only be brought subject to the
conditions and such limits of liability as are set out in this
Convention without prejudice to the question as to who are the
persons who have the right to bring suit and what are their
respective rights. In any such action, punitive, exemplary or any
other non-compensatory damages shall not be recoverable.

Article 30 - Servants, agents - aggregation of claims

1. If an action is brought against a servant or agent of the carrier
arising out of damage to which the Convention relates, such
servant or agent, if they prove that they acted within the scope of
their employment, shall be entitled to avail themselves of the
conditions and limits of liability which the carrier itself is entitled
to invoke under this Convention.

2. The aggregate of the amounts recoverable from the carrier, its

servants and agents, in that case, shall not exceed the said limits.
3. Save in respect of the carriage of cargo, the provisions of
paragraphs 1 and 2 of this Article shall not apply if it is proved that
the damage resulted from an act or omission of the servant or
agent done with intent to cause damage or recklessly and with
knowledge that damage would probably result.

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- 23 -

Article 31 - Timely notice of complaints

1. Receipt by the person entitled to delivery of checked baggage
or cargo without complaint is prima facie evidence that the same
has been delivered in good condition and in accordance with the
document of carriage or with the record preserved by the other
means referred to in paragraph 2 of Article 3 and paragraph 2 of
Article 4.

2. In the case of damage, the person entitled to delivery must

complain to the carrier forthwith after the discovery of the
damage, and, at the latest, within seven days from the date of
receipt in the case of checked baggage and fourteen days from
the date of receipt in the case of cargo. In the case of delay, the
complaint must be made at the latest within twenty-one days from
the date on which the baggage or cargo have been placed at his or
her disposal.

3. Every complaint must be made in writing and given or

dispatched within the times aforesaid.
4. If no complaint is made within the times aforesaid, no action
shall lie against the carrier, save in the case of fraud on its part.

Article 32 - Death of person liable

In the case of the death of the person liable, an action for damages
lies in accordance with the terms of this Convention against those
legally representing his or her estate.

Article 33 - Jurisdiction
1. An action for damages must be brought, at the option of the
plaintiff, in the territory of one of the States Parties, either before
the court of the domicile of the carrier or of its principal place of
business, or where it has a place of business through which the
contract has been made or before the court at the place of
destination.

2. In respect of damage resulting from the death or injury of a

passenger, an action may be brought before one of the courts
mentioned in paragraph 1 of this Article, or in the territory of a
State Party in which at the time of the accident the passenger has
his or her principal and permanent residence and to or from which
the carrier operates services for the carriage of passengers by air,
either on its own aircraft or on another carrier's aircraft pursuant
to a commercial agreement, and in which that carrier conducts its
business of carriage of passengers by air from premises leased or
owned by the carrier itself or by another carrier with which it has a
commercial agreement.

3. For the purposes of paragraph 2,

(a) "commercial agreement" means an agreement, other
than an agency agreement, made between carriers and relating to
the provision of their joint services for carriage of passengers by
air;
(b) "principal and permanent residence" means the one
fixed and permanent abode of the passenger at the time of the
accident. The nationality of the passenger shall not be the
determining factor in this regard.

4. Questions of procedure shall be governed by the law of the

court seized of the case.
Article 34 - Arbitration
1. Subject to the provisions of this Article, the parties to the
contract of carriage for cargo may stipulate that any dispute
relating to the liability of the carrier under this Convention shall be
settled by arbitration. Such agreement shall be in writing.

2. The arbitration proceedings shall, at the option of the claimant,

take place within one of the jurisdictions referred to in Article 33.
3. The arbitrator or arbitration tribunal shall apply the provisions
of this Convention.

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4. The provisions of paragraphs 2 and 3 of this Article shall be
deemed to be part of every arbitration clause or agreement, and
any term of such clause or agreement which is inconsistent
therewith shall be null and void.

Article 35 - Limitation of actions

1. The right to damages shall be extinguished if an action is not
brought within a period of two years, reckoned 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.

2. The method of calculating that period shall be determined by

the law of the court seized of the case.
Article 36 - Successive carriage
1. In the case of carriage to be performed by various successive
carriers and falling within the definition set out in paragraph 3 of
Article 1, each carrier which accepts passengers, baggage or
cargo is subject to the rules set out in this Convention and is
deemed to be one of the parties to the contract of carriage in so
far as the contract deals with that part of the carriage which is
performed under its supervision.

2. In the case of carriage of this nature, the passenger or any

person entitled to compensation in respect of him or her can take
action only against the carrier which performed the carriage
during which the accident or the delay occurred, save in the case
where, by express agreement, the first carrier has assumed
liability for the whole journey.

3. As regards baggage or cargo, the passenger or consignor will

have a right of action against the first carrier, and the passenger
or consignee who is entitled to delivery will have a right of action
against the last carrier, and further, each may take action against
the carrier which performed the carriage during which the
destruction, loss, damage or delay took place. These carriers will
be jointly and severally liable to the passenger or to the consignor
or consignee.

Article 37 - Right of recourse against third parties

Nothing in this Convention shall prejudice the question whether a
person liable for damage in accordance with its provisions has a
right of recourse against any other person.

Chapter IV - Combined Carriage

Article 38 - Combined carriage
1. In the case of combined carriage performed partly by air and
partly by any other mode of carriage, the provisions of this
Convention shall, subject to paragraph 4 of Article 18, apply only
to the carriage by air, provided that the carriage by air falls within
the terms of Article 1.
2. Nothing in this Convention shall prevent the parties in the case
of combined carriage from inserting in the document of air
carriage conditions relating to other modes of carriage, provided
that the provisions of this Convention are observed as regards the
carriage by air.

Chapter V - Carriage by Air Performed by a Person other than the

Contracting Carrier
Article 39 - Contracting carrier - actual carrier
The provisions of this Chapter apply when a person (hereinafter
referred to as "the contracting carrier") as a principal makes a
contract of carriage governed by this Convention with a
passenger or consignor or with a person acting on behalf of the
passenger or consignor, and another person (hereinafter referred
to as "the actual carrier") performs, by virtue of authority from the
contracting carrier, the whole or part of the carriage, but is not
with respect to such part a successive carrier within the meaning
of this Convention. Such authority shall be presumed in the
absence of proof to the contrary.

- 24 If an actual carrier performs the whole or part of carriage which,

according to the contract referred to in Article 39, is governed by
this Convention, both the contracting carrier and the actual carrier
shall, except as otherwise provided in this Chapter, be subject to
the rules of this Convention, the former for the whole of the
carriage contemplated in the contract, the latter solely for the
carriage which it performs.

Article 41 - Mutual liability

1. The acts and omissions of the actual carrier and of its servants
and agents acting within the scope of their employment shall, in
relation to the carriage performed by the actual carrier, be deemed
to be also those of the contracting carrier.

2. The acts and omissions of the contracting carrier and of its

servants and agents acting within the scope of their employment
shall, in relation to the carriage performed by the actual carrier, be
deemed to be also those of the actual carrier. Nevertheless, no
such act or omission shall subject the actual carrier to liability
exceeding the amounts referred to in Articles 21, 22, 23 and 24.
Any special agreement under which the contracting carrier
assumes obligations not imposed by this Convention or any
waiver of rights or defences conferred by this Convention or any
special declaration of interest in delivery at destination
contemplated in Article 22 shall not affect the actual carrier unless
agreed to by it.

Article 42 - Addressee of complaints and instructions

Any complaint to be made or instruction to be given under this
Convention to the carrier shall have the same effect whether
addressed to the contracting carrier or to the actual carrier.
Nevertheless, instructions referred to in Article 12 shall only be
effective if addressed to the contracting carrier.

Article 43 - Servants and agents

In relation to the carriage performed by the actual carrier, any
servant or agent of that carrier or of the contracting carrier shall, if
they prove that they acted within the scope of their employment,
be entitled to avail themselves of the conditions and limits of
liability which are applicable under this Convention to the carrier
whose servant or agent they are, unless it is proved that they
acted in a manner that prevents the limits of liability from being
invoked in accordance with this Convention.

Article 44 - Aggregation of damages

In relation to the carriage performed by the actual carrier, the
aggregate of the amounts recoverable from that carrier and the
contracting carrier, and from their servants and agents acting
within the scope of their employment, shall not exceed the highest
amount which could be awarded against either the contracting
carrier or the actual carrier under this Convention, but none of the
persons mentioned shall be liable for a sum in excess of the limit
applicable to that person.

Article 45 - Addressee of claims

In relation to the carriage performed by the actual carrier, an
action for damages may be brought, at the option of the plaintiff,
against that carrier or the contracting carrier, or against both
together or separately. If the action is brought against only one of
those carriers, that carrier shall have the right to require the other
carrier to be joined in the proceedings, the procedure and effects
being governed by the law of the court seized of the case.

Article 46 - Additional jurisdiction

Any action for damages contemplated in Article 45 must be
brought, at the option of the plaintiff, in the territory of one of the
States Parties, either before a court in which an action may be
brought against the contracting carrier, as provided in Article 33,
or before the court having jurisdiction at the place where the
actual carrier has its domicile or its principal place of business.

Article 47 - Invalidity of contractual provisions

Article 40 - Respective liability of contracting and actual carriers

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Any contractual provision tending to relieve the contracting
carrier or the actual carrier of liability under this Chapter or to fix a
lower limit than that which is applicable according to this Chapter
shall be null and void, but the nullity of any such provision does
not involve the nullity of the whole contract, which shall remain
subject to the provisions of this Chapter.

Article 48 - Mutual relations of contracting and actual carriers

Except as provided in Article 45, nothing in this Chapter shall
affect the rights and obligations of the carriers between
themselves, including any right of recourse or indemnification.

Chapter VI - Other Provisions

Article 49 - Mandatory application
Any clause contained in the contract of carriage and all special
agreements entered into before the damage occurred by which the
parties purport to infringe the rules laid down by this Convention,
whether by deciding the law to be applied, or by altering the rules
as to jurisdiction, shall be null and void.

Article 50 - Insurance
States Parties shall require their carriers to maintain adequate
insurance covering their liability under this Convention. A carrier
may be required by the State Party into which it operates to
furnish evidence that it maintains adequate insurance covering its
liability under this Convention.

Article 51 - Carriage performed in extraordinary circumstances

The provisions of Articles 3 to 5, 7 and 8 relating to the
documentation of carriage shall not apply in the case of carriage
performed in extraordinary circumstances outside the normal
scope of a carrier's business.

Article 52 - Definition of days

The expression "days" when used in this Convention means
calendar days, not working days.

Chapter VII - Final Clauses

Article 53 - Signature, ratification and entry into force
1. This Convention shall be open for signature in Montreal on 28
May 1999 by States participating in the International Conference
on Air Law held at Montreal from 10 to 28 May 1999. After 28 May
1999, the Convention shall be open to all States for signature at
the headquarters of the International Civil Aviation Organization in
Montreal until it enters into force in accordance with paragraph 6
of this Article.

2. This Convention shall similarly be open for signature by

Regional Economic Integration Organisations. For the purpose of
this Convention, a "Regional Economic Integration Organisation"
means any organisation which is constituted by sovereign States
of a given region which has competence in respect of certain
matters governed by this Convention and has been duly
authorized to sign and to ratify, accept, approve or accede to this
Convention. A reference to a "State Party" or "States Parties" in
this Convention, otherwise than in paragraph 2 of Article 1,
paragraph 1(b) of Article 3, paragraph (b) of Article 5, Articles 23,
33, 46 and paragraph (b) of Article 57, applies equally to a
Regional Economic Integration Organisation. For the purpose of
Article 24, the references to "a majority of the States Parties" and
"one-third of the States Parties" shall not apply to a Regional
Economic Integration Organisation.

3. This Convention shall be subject to ratification by States and by

Regional Economic Integration Organisations which have signed
it.
4. Any State or Regional Economic Integration Organisation which
does not sign this Convention may accept, approve or accede to it
at any time.

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- 25 5. Instruments of ratification, acceptance, approval or accession

shall be deposited with the International Civil Aviation
Organization, which is hereby designated the Depositary.

6. This Convention shall enter into force on the sixtieth day

following the date of deposit of the thirtieth instrument of
ratification, acceptance, approval or accession with the Depositary
between the States which have deposited such instrument. An
instrument deposited by a Regional Economic Integration
Organisation shall not be counted for the purpose of this
paragraph.

7. For other States and for other Regional Economic Integration

Organisations, this Convention shall take effect sixty days
following the date of deposit of the instrument of ratification,
acceptance, approval or accession.

8. The Depositary shall promptly notify all signatories and States

Parties of:
(a) each signature of this Convention and date thereof;
(b) each deposit of an instrument of ratification,
acceptance, approval or accession and date thereof;
(c) the date of entry into force of this Convention;
(d) the date of the coming into force of any revision of
the limits of liability established under this Convention;
(e) any denunciation under Article 54.

Article 54 - Denunciation
1. Any State Party may denounce this Convention by written
notification to the Depositary.
2. Denunciation shall take effect one hundred and eighty days
following the date on which notification is received by the
Depositary.

Article 55 - Relationship with other Warsaw Convention

instruments
This Convention shall prevail over any rules which apply to
international carriage by air:

1. between States Parties to this Convention by virtue of those

States commonly being Party to
(a) the Convention for the Unification of Certain Rules
relating to International Carriage by Air signed at Warsaw on 12
October 1929 (hereinafter called the Warsaw Convention);
(b) the Protocol to amend the Convention for the
Unification of Certain Rules relating to International Carriage by
Air signed at Warsaw on 12 October 1929, done at The Hague on
28 September 1955 (hereinafter called The Hague Protocol);
(c) the Convention, Supplementary to the Warsaw
Convention, for the Unification of Certain Rules relating to
International Carriage by Air Performed by a Person other than the
Contracting Carrier, signed at Guadalajara on 18 September 1961
(hereinafter called the Guadalajara Convention);
(d) the Protocol to amend the Convention for the
Unification of Certain Rules relating to International Carriage by
Air signed at Warsaw on 12 October 1929 as amended by the
Protocol done at The Hague on 28 September 1955, signed at
Guatemala City on 8 March 1971 (hereinafter called the Guatemala
City Protocol);
(e) Additional Protocol Nos. 1 to 3 and Montreal Protocol
No. 4 to amend the Warsaw Convention as amended by The Hague
Protocol or the Warsaw Convention as amended by both The
Hague Protocol and the Guatemala City Protocol, signed at
Montreal on 25 September 1975 (hereinafter called the Montreal
Protocols); or
2. within the territory of any single State Party to this Convention
by virtue of that State being Party to one or more of the
instruments referred to in sub-paragraphs (a) to (e) above.

Article 56 - States with more than one system of law

1. If a State has two or more territorial units in which different
systems of law are applicable in relation to matters dealt with in
this Convention, it may at the time of signature, ratification,

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acceptance, approval or accession declare that this Convention
shall extend to all its territorial units or only to one or more of
them and may modify this declaration by submitting another
declaration at any time.

2. Any such declaration shall be notified to the Depositary and

shall state expressly the territorial units to which the Convention
applies.
3. In relation to a State Party which has made such a declaration:
(a) references in Article 23 to "national currency" shall
be construed as referring to the currency of the relevant territorial
unit of that State; and
(b) the reference in Article 28 to "national law" shall be
construed as referring to the law of the relevant territorial unit of
that State.

Article 57 - Reservations
No reservation may be made to this Convention except that a
State Party may at any time declare by a notification addressed to
the Depositary that this Convention shall not apply to:
(a) international carriage by air performed and operated
directly by that State Party for non-commercial purposes in
respect to its functions and duties as a sovereign State; and/or
(b) the carriage of persons, cargo and baggage for its
military authorities on aircraft registered in or leased by that State
Party, the whole capacity of which has been reserved by or on
behalf of such authorities.

IN WITNESS WHEREOF the undersigned Plenipotentiaries, having

been duly authorized, have signed this Convention.
DONE at Montreal on the 28th day of May of the year one thousand
nine hundred and ninety-nine in the English, Arabic, Chinese, French,
Russian and Spanish languages, all texts being equally authentic. This
Convention shall remain deposited in the archives of the International
Civil Aviation Organization, and certified copies thereof shall be
transmitted by the Depositary to all States Parties to this Convention,
as well as to all States Parties to the Warsaw Convention, The Hague
Protocol, the Guadalajara Convention, the Guatemala City Protocol and
the Montreal Protocols.

KLM v. CA
Article 30 of the Warsaw providing that in case of transportation to be
performed by various successive carriers, the passenger can take
action only against the carrier who performed the transportation during
which the accident or the delay occurred presupposes the occurrence
of either an accident or delay in the course of the air strip, and does not
apply if the damage is caused by the willful misconduct on the part of
the carrier's employee or agent acting within the scope of his
employment.
Where the passage tickets provide that the carriage to be performed
thereunder by several successive carriers "is to be regarded as a single
operation," the carrier which issued the tickets for the entire trip in effect
guaranteed to the passenger that the latter shall have sure space in the
various carriers which would ferry him through the various segments of
the trip, and the ticket-issuing carrier assumes full responsibility for the
entire trip and shall be held accountable for the breach of that guaranty
whether the breach occurred in its own lines or in those of the other
carriers.

- 26 The proximate cause of the cancellation of the contracts was private

respondent Pangan's failure to deliver the promotional and advertising
materials on the dates agreed upon. For this petitioner cannot be held
liable. Private respondent Pangan had not declared the value of the two
luggages he had checked in and paid additional charges. Neither was
petitioner privy to respondents' contracts nor was its attention called to
the condition therein requiring delivery of the promotional and
advertising materials on or before a certain date.

Northwest Airlines v. Cuenca

Articles 17, 18 and 19 of the Warsaw Convention of 1929 merely
declare the airlines liable for damage in the cases enumerated therein,
if the conditions specified are present. Neither the provisions of said
articles nor others regulate or exclude liability for other breaches of
contract by the air carriers.

PAL v. CA
Petitioner contends that under the Warsaw Convention, its liability, if
any, cannot exceed US $20.00 based on weight as private respondent
Co did not declare the contents of his baggage nor pay traditional
charges before the flight. We find no merit in that contention. The
liability of the common carrier for the loss, destruction or deterioration of
goods transported from a foreign country to the Philippines is governed
primarily by the New Civil Code. In all matters not regulated by said
Code, the rights and obligations of common carriers shall be governed
by the Code of Commerce and by Special Laws. Since the passenger's
destination in this case was the Philippines, Philippine law governs the
liability of the carrier for the loss of the passenger's luggage.
In this case, the petitioner failed to overcome, not only the
presumption, but more importantly, the private respondent's evidence,
proving that the carrier's negligence was the proximate cause of the
loss of his baggage. Furthermore, petitioner acted in bad faith in faking
a retrieval receipt to bail itself out of having to pay Co's claim.

Luna v. CA
The Warsaw Convention does not operate as an exclusive
enumeration of the instances for declaring an airline liable for breach of
contract of carriage or as an absolute limit of the extent of that liability.
The application of the Convention must not therefore be construed to
preclude the operation of the Civil Code and other pertinent laws.
Hence, petitioners' alleged failure to file a claim with the common
carrier as mandated by the provisions of the Warsaw Convention
should not be a ground for the summary dismissal of their complaints
since private respondent may still be held liable for breach of other
relevant laws which may provide a different period or procedure for
filing a claim. Considering that petitioners indeed filed a claim which
private respondent admitted having received on 21 June, 1989, their
demand may have very well been filed within the period prescribed by
those applicable laws.

Pan American World Airways, Inc. v. IAC

On the basis of the stipulations printed at the back of the Airline ticket,
specifically referring to the applicability of the Warsaw convention the
airline carriers liability for the lost baggage of private respondent
Pangan is limited to $20.00 per kilo or $600.00, as stipulated at the
back of the ticket as the latter did not declare a higher value for his
baggage and pay the corresponding additional charges, the case of
Ong Yiu v. Court of Appeals is squarely applicable to the instant case.
In the absence of a showing that petitioner's attention was called to
the special circumstances requiring prompt delivery of private
respondent Pangan's luggages, petitioner cannot be held liable for the
cancellation of private respondents' contracts as it could not have
foreseen such an eventuality when it accepted the luggages for transit.

Mapa v. CA
The Warsaw Convention does not apply. The transportation involved
in this case does not fall under the definition of international
transportation under the said Convention. There are then two
categories of international transportation, (1) that where the place of
departure and the place of destination are situated within the territories
of two High Contracting Parties regardless of whether or not there be a
break in the transportation or a transshipment; and (2) that where the
place of departure and the place of destination are 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 of the Convention.
The contracts of transportation in this case are evidenced by the two
TWA tickets, both purchased and issued in Bangkok, Thailand. On the
basis alone of the provisions therein, it is obvious that the place of
departure and the place of destination are all in the territory of the
United States, or of a single High Contracting Party. The contracts,
therefore, cannot come within the purview of the first category of
international transportation. Neither can it be under the second
category since there was NO agreed stopping place within a territory
subject to the sovereignty, mandate, or authority of another power.
The only way to bring the contracts between Purita and Carmina
Mapa, on the one hand, and TWA, on the other, within the first category

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of "international transportation" is to link them with, or to make them an
integral part of, the Manila-Los Angeles travel of Purita and Carmina
through PAL aircraft. The "linkages" which have been pointed out by the
TWA, the trial court, and the Court of Appeals are (1) the handwritten
notations on the two TWA tickets; and (2) the entries made by
petitioners Purita and Carmina Mapa in column YOUR COMPLETE
ITINERARY in TWA's Passenger Property Questionnaire, wherein they
mentioned their travel from Manila to Los Angeles in flight PR 102. The
alleged "international tickets" mentioned in the notations in conjunction
with which the two TWA tickets were issued were not presented.
TWA does not claim that the Manila-Los Angeles contracts of
transportation which brought Purita and Carmina to Los Angeles were
also its contracts. It does not deny the assertion of the petitioners that
those contracts were independent of the TWA tickets issued in
Bangkok, Thailand. No evidence was offered that TWA and PAL had an
agreement concerning transportation of passengers from points of
departures not served with aircrafts of one or the other.

PAL v. CA
Petitioner cannot claim the benefit of limited liability. The baggage
check was not presented by the petitioner in the trial court inasmuch as
it merely relied on, and adopted private respondents exhibits, none of
which was offered for the purpose of proving the missing link. Article
4(2), Section II of the Warsaw Convention provides that the baggage
check shall be made out in duplicate, one part for the passenger and
the other part for the carrier. Under the second sentence of Article 4,
paragraph 4, if the carrier accepts the baggage without a baggage
check having been delivered, if the baggage check does not contain the
particulars set at out at (d), (f), and (h) above, the carrier shall not be
entitled to avail himself of those provisions of the Convention which
exclude or limit his liability.

Cathay Pacific Airways, Ltd. v. CA

The Warsaw Convention does not regulate, much less exempt, the
carrier from liability for damages for violating the rights of its
passengers under the contract of carriage, especially if willful
misconduct on the part of the carrier's employees is found or
established.

Sabena Belgian World Airlines v. CA

The Warsaw Convention denies to the carrier the availment 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, or if the damage is caused by any
agent of the carrier acting within the scope of his employment. The loss
of said baggage not only once by twice underscores the wanton
negligence and lack of care on the part of the carrier. The attendance of
gross negligence (given the equivalent of fraud or bad faith) holds the
common carrier liable for all damages which can be reasonably
attribute, although unforeseen, to the non-performance of the
obligation, including moral and exemplary damages.

United Airlines v. Uy
Respondent is suing on 2 causes of action: (a) the shabby and
humiliating treatment he received from petitioner's employees at the
San Francisco Airport which caused him extreme embarrassment and
social humiliation; and, (b) the slashing of his luggage and the loss of
his personal effects amounting to US $5,310.00. While his second
cause of action an action for damages arising from theft or damage
to property or goods is well within the bounds of the Warsaw
Convention, his first cause of action an action for damages arising
from the misconduct of the airline employees and the violation of
respondent's rights as passenger clearly is not.
Insofar as the first cause of action is concerned, respondent's failure
to file his complaint within the 2-year limitation of the Warsaw
Convention does not bar his action since petitioner airline may still be
held liable for breach of other provisions of the Civil Code which
prescribe a different period or procedure for instituting the action,
specifically, Art. 1146 thereof which prescribes 4 years for filing an
action based on torts.
As for respondent's second cause of action, indeed the travaux
preparatories of the Warsaw Convention reveal that the delegates
thereto intended the 2-year limitation incorporated in Art. 29 as an

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- 27 absolute bar to suit and not to be made subject to the various tolling
provisions of the laws of the forum. This therefore forecloses the
application of our own rules on interruption of prescriptive periods.
Article 29, par. (2), was intended only to let local laws determine
whether an action had been commenced within the 2-year period, and
within our jurisdiction an action shall be deemed commenced upon the
filing of a complaint.
Respondent filed his complaint more than 2 years later. However,
respondent was forestalled from immediately filing an action because
petitioner airline gave him the runaround, answering his letters but not
giving in to his demands. True, respondent should have already filed an
action at the first instance when his claims were denied by petitioner
but the same could only be due to his desire to make an out-of-court
settlement for which he cannot be faulted. Hence, despite the express
mandate of Art. 29 of the Warsaw Convention, such rule shall not be
applied in the instant case because of the delaying tactics employed by
petitioner airline itself.

Lufthansa German Airlines v. CA

Antiporda was stranded in Bombay on his way to Malawi, after
disembarking from a plane of Lufthansa from Singapore. From Bombay
to Malawi, he was to ride on a plane of Air Kenya, but his seat was
given to a very important person. Thus, he was left in Bombay, without
being given any accommodations.
Antiporda was issued a confirmed Lufthansa ticket all throughout his
5-leg trip. His ticket stated that the carriage to be performed by several
successive carriers is regarded as a single operation. Thus, Lufthansa,
is clearly the principal in the contract of carriage with Antiporda and
remains to be so, regardless of those instances when actual carriage
was to be performed by various carriers. Lufthansa in effect guaranteed
that the successive carriers, such as Air Kenya, would honor his ticket,
assure him of space therein and transport him on a particular segment
of his trip.
Section 2, Article 30 of the Warsaw Convention does not contemplate
the instance of bumping-off but merely simple delay, and thus cannot
proved a handy excuse for Lufthansa to exculpate itself from any
liability.

British Airways v. CA, Mahtani and PAL

The nature of an airlines contract of carriage partakes of two types,
namely: a contract to deliver a cargo or merchandise to its destination
and a contract to transport passengers to their destination.
In determining the amount of compensatory damages in breach of
contract involving misplaced luggage, it is vital that the claimant
satisfactorily prove during the trial the existence of the factual basis of
the damages and its causal connection to defendants acts.
In a contract of carriage, a declaration by the passenger of a higher
value is needed to recover a greater amount.
An air carrier is not liable for the loss of baggage in an amount in
excess of the limits specified in the tariff which was filed with the proper
authorities, such tariff being binding on the passenger regardless of the
passengers lack of knowledge thereof or assent thereto.

American Airlines v. CA, Salas and Mendoza

The contract of carriage entered into by the private respondent with
Singapore Airlines, and subsequently with the petitioner, to transport
him to nine cities in different countries is a contract of international
transportation and the provisions of the Convention automatically apply.
The contract of carriage between the private respondent and
Singapore Airlines although performed by different carriers under a
series of airline tickets, including that issued by the petitioner,
constitutes a single operation. Members of the IATA are under a
general pool partnership agreement wherein they act as agent of each
other in the issuance of the tickets to contracted passengers to boost
ticket sales worldwide and at the same time provide passengers easy
access to airlines which are otherwise inaccessible in some parts of the
world.
The number of tickets issued does not detract from the oneness of the
contract of carriage as long as the parties regard the contract as a
single operation. The evident purpose underlying this Article is to
promote international air travel by facilitating the procurement of a
series of contracts of air transportation through a single principal and
obligating different airlines to be bound by one contract of

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transportation. Petitioners acquiescence to take the place of the
original designated carrier binds it under the contract of carriage
entered into by the private respondent and Singapore Airlines in Manila.
The third option of the plaintiff under Art. 28(1) of the Warsaw
Convention e.g., to sue in the place of business of the carrier wherein
the contract was made, is therefore, Manila, and Philippine courts are
clothed with jurisdiction over this case. While this case was filed in
Cebu and not in Manila the issue of venue is no longer an issue as the
petitioner is deemed to have waived it when it presented evidence
before the trial court.

China Airlines v. Daniel Chiok

It is significant to note that the contract of air transportation was
between petitioner and respondent, with the former endorsing to PAL
the Hong Kong-to-Manila segment of the journey. Such contract of
carriage has always been treated in this jurisdiction as a single
operation. This jurisprudential rule is supported by the Warsaw
Convention, to which the Philippines is a party, and by the existing
practices of the International Air Transport Association (IATA).
Members of the IATA are under a general pool partnership agreement
wherein they act as agent of each other in the issuance of tickets to
contracted passengers to boost ticket sales worldwide and at the same
time provide passengers easy access to airlines which are otherwise
inaccessible in some parts of the world. Booking and reservation
among airline members are allowed even by telephone and it has
become an accepted practice among them. A member airline which
enters into a contract of carriage consisting of a series of trips to be
performed by different carriers is authorized to receive the fare for the
whole trip and through the required process of interline settlement of
accounts by way of the IATA clearing house an airline is duly
compensated for the segment of the trip serviced. With CAL as
principal, and merely endorsing to PAL a segment of the trip as mere
carrying agent, it was the latter who is liable for damages. However, a
cross-claim is proper against PAL filed by CAL.

Federal Express v. American Home

Basic is the requirement that before suing to recover loss of or
damage to transported goods, the plaintiff must give the carrier notice
of the loss or damage, within the period prescribed by the Warsaw
Convention and/or the airway bill. In this jurisdiction, the filing of a claim
with the carrier within the time limitation therefor actually constitutes a
condition precedent to the accrual of a right of action against a carrier
for loss of or damage to the goods. The shipper or consignee must
allege and prove the fulfillment of the condition. If it fails to do so, no
right of action against the carrier can accrue in favor of the former. The
aforementioned requirement is a reasonable condition precedent; it
does not constitute a limitation of action.
The requirement of giving notice of loss of or injury to the goods is not
an empty formalism. The fundamental reasons for such a stipulation
are (1) to inform the carrier that the cargo has been damaged, and that
it is being charged with liability therefor; and (2) to give it an opportunity
to examine the nature and extent of the injury. This protects the carrier
by affording it an opportunity to make an investigation of a claim while
the matter is fresh and easily investigated so as to safeguard itself from
false and fraudulent claims.
When an airway bill -- or any contract of carriage for that matter -has a stipulation that requires a notice of claim for loss of or damage to
goods shipped and the stipulation is not complied with, its enforcement
can be prevented and the liability cannot be imposed on the carrier. To
stress, notice is a condition precedent, and the carrier is not liable if
notice is not given in accordance with the stipulation. Failure to comply
with such a stipulation bars recovery for the loss or damage suffered.
Being a condition precedent, the notice must precede a suit for
enforcement. In the present case, there is neither an allegation nor a
showing of respondents compliance with this requirement within the
prescribed period. While respondents may have had a cause of action
then, they cannot now enforce it for their failure to comply with the
aforesaid condition precedent.

- 28 transportation by air of passengers, baggage or goods. Article 24

excludes other remedies by further providing that (1) in the cases
covered by articles 18 and 19, any action for damages, however
founded, can only be brought subject to the conditions and limits set out
in this convention. Therefore, a claim covered by the Warsaw
Convention can no longer be recovered under local law, if the statue of
limitations of two years has elapsed. Nevertheless, this Court notes that
jurisprudence in the Philippines and the United States also recognizes
that the Warsaw Convention does not exclusively regulate the
relationship between passenger and carrier on an international flight. In
U.S. v. Uy, this Court distinguished between the (1) damage to the
passengers baggage and (2) humiliation he suffered at the hands of
the airlines employees. The First cause of action was covered by the
Warsaw Convention which prescribes in two years, while the second
was covered by the provisions of the Civil Code on torts, which
prescribes in four years.
In Mahaney v. Air France (US case), the court therein ruled that if the
plaintiff were to claim damages based solely on the delay she
experienced- for instance, the costs of renting a van, which she had to
arrange on her own as a consequence of the delay the complaint would
be barred by the twoyear statute of limitations. However, where the
plaintiff alleged that the airlines subjected her to unjust discrimination or
undue or unreasonable preference or disadvantage, an act punishable
under the US law, then the plaintiff may claim purely nominal
compensatory damages for humiliation and hurt feelings, which are not
provided for by the Warsaw Convention.
In the Petition at bar, Savillos Complaint alleged that both PAL and
Singapore Airlines were guilty of gross negligence, which resulted in his
being subjected to humiliation, embarrassment, mental anguish,
serious anxiety, fear and distress therefore this case is not covered by
the Warsaw Convention.
When the negligence happened before the performance of the
contract of carriage, not covered by the Warsaw Convention. Also, this
case is comparable to Lathigra v. British Airways. In that case, it was
held that the airlines negligent act of reconfirming the passengers
reservation days before departure and failing to inform the latter that
the flight had already been discontinued is not among the acts covered
by the Warsaw Convention, since the alleged negligence did not occur
during the performance of the contract of carriage but, rather, days
before the scheduled flight.
In the case at hand, Singapore Airlines barred Savillo from boarding
the Singapore Airlines flight because PAL allegedly failed to endorse
the tickets of private respondent and his companions, despite PALs
assurances to Savillo that Singapore Airlines had already confirmed
their passage. While this fact still needs to heard and established by
adequate proof before the RTC, an action based on these allegations
will not fall under the Warsaw Convention, since the purported
negligence on the party of PAL did not occur during the performance of
the contract of carriage but days before the scheduled flight. Thus, the
present action cannot be dismissed based on the Statue of Limitations
provided under Article 29 of the Warsaw Convention.

PAL v. Hon. Savillo

If cause of action claims moral damages, not covered by Warsaw
Convention. Article 19 of the Warsaw Convention provides for liability
on the part of a carrier for damages occasioned by delay in the

Edna Diago Lhuillier v. British Airways

The Republic of the Philippines is a party to the Convention for the
Unification of Certain Rules Relating to International Transportation by
Air, otherwise known as the Warsaw Convention. It took effect on
February 13, 1933. The Convention was concurred in by the Senate,
through its Resolution No. 19, on May 16, 1950. The Philippine
instrument of accession was signed by President Elpidio Quirino on
October 13, 1950, and was deposited with the Polish government on
November 9, 1950. The Convention became applicable to the
Philippines on February 9, 1951. On September 23, 1955, President
Ramon Magsaysay issued Proclamation No. 201, declaring our formal
adherence thereto, "to the end that the same and every article and
clause thereof may be observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof." The Convention is
thus a treaty commitment voluntarily assumed by the Philippine
government and, as such, has the force and effect of law in this
country.
The Warsaw Convention applies because the air travel, where the
alleged tortious conduct occurred, was between the United Kingdom
and Italy, which are both signatories to the Warsaw Convention. Thus,
when the place of departure and the place of destination in a contract of

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carriage are situated within the territories of two High Contracting
Parties, said carriage is deemed an "international carriage". The High
Contracting Parties referred to herein were the signatories to the
Warsaw Convention and those which subsequently adhered to it.
Under Article 28(1) of the Warsaw Convention, the plaintiff may bring
the action for damages before

1. the court where the carrier is domiciled;

2. the court where the carrier has its principal place of business;
3. the court where the carrier has an establishment by which the
contract has been made; or
4. the court of the place of destination.
In this case, it is not disputed that respondent is a British corporation
domiciled in London, United Kingdom with London as its principal place
of business. Hence, under the first and second jurisdictional rules, the
petitioner may bring her case before the courts of London in the United
Kingdom. In the passenger ticket and baggage check presented by
both the petitioner and respondent, it appears that the ticket was issued
in Rome, Italy. Consequently, under the third jurisdictional rule, the
petitioner has the option to bring her case before the courts of Rome in
Italy. Finally, both the petitioner and respondent aver that the place of
destination is Rome, Italy, which is properly designated given the
routing presented in the said passenger ticket and baggage check.
Accordingly, petitioner may bring her action before the courts of Rome,
Italy. We thus find that the RTC of Makati correctly ruled that it does not
have jurisdiction over the case filed by the petitioner.

ANNOTATIONS by JORGE R. COQUIA: (2000)

The Philippines adhered to the Convention on November 9, 1950 and
entered into force in the country on February 7, 1957
Main objectives of the Warsaw Convention: to decrease and simplify
litigation and thereby provide prompt compensation to air accident
victims or their families
Applies to all international transportation of persons, baggage or
goods performed by aircraft for hire, enumerates instances when the
carrier is liable, fixing the minimum amount of damages to be included
in each case .
Chapter II, as amended: the carriers is liable in the event of the death
or wounding of any passenger, or an other bodily injury suffered by a
passenger, if the accident took place on board the aircraft or in the
course of the operation of embarking or disembarking
The carrier is liable for damages for loss or damage to checked in
luggage, if the damage took place during the transportation by air
The procedures rules of the court of the forum shall apply
The action will prescribe if not brought within 2 years from the date of
the arrival at the destination, or from the date on which the aircraft
ought to have arrived, or from the date on which the transportation
stopped.
The passenger who takes several carriers shall be deemed to be one
of the contracting parties insofar as said carrier who performed the
transportation during the accident or delay occurred, unless by express
agreement the first carrier has assumed liability for the whole journey.
With respect to baggage or goods: the right of action against the first
carrier, and the passenger or consignee who is entitled to deliver shall
have the right of action against the last carrier.
These carriers are jointly and severally liable to the passenger or
consignor or consignee.

STEPS:
1. International Carriage
a. 1 High Contracting Party
b. 2 High Contracting Parties
If none: Warsaw Convention does not apply
2. Jurisdiction
a. Residence of carrier
b. Where carrier has his principal place of business
c. Where he has an establishment by which the contract has
been made

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- 29 -

d. Place of destination
If none: WC doesnt apply
3. Prescription
4. Limitation of Liability defenses
Plaintiff: say theres willful misconduct (therefore, unlimited
liability)
You allege these matters in your Motion to Dismiss
If your Motion to Dismiss is denied, you may allege them in
your:
o petition for certiorari c/o Rule 65
o trial as a defense
Mere delay is not equivalent to willful misconduct

CODE OF COMMERCE OF THE PHILIPPINES

COMMERCIAL CONTRACTS FOR TRANSPORTATION

ARTICLE 349. A contract of transportation by land or water ways

of any kind shall be considered commercial:
1.
When it has for its object merchandise or any article of
commerce.
2. When, whatever its object may be, the carrier is a merchant or
is habitually engaged in transportation for the public.
When is a contract deemed commercial?
Principal requirement is that the carrier be a merchant or is habitually
engaged in transportation for the public. Object carried is of little
importance, and even transport of persons can be considered
commercial, provided that the carrier is a merchant or habitually
engaged in transportation work for the public. A contract of
transportation be air is regarded as commercial (Mendoza v. PAL).

ARTICLE 350. The shipper as well as the carrier of merchandise

or goods may mutually demand that a bill of lading be made,
stating:
1.

The name, surname and residence of the shipper.

2.

The name, surname and residence of the carrier.

3.
The name, surname and residence of the person to whom or
to whose order the goods are to be sent or whether they are to be
delivered to the bearer of said bill.
4. The description of the goods, with a statement of their kind, of
their weight, and of the external marks or signs of the packages in
which they are contained.
5.

The cost of transportation.

6.

The date on which shipment is made.

7.

The place of delivery to the carrier.

8.
The place and the time at which delivery to the consignee
shall be made.
9.
The indemnity to be paid by the carrier in case of delay, if
there should be any agreement on this matter.
Bills of Lading: a written acknowledgement of the receipt of the goods
and an agreement to transport and to deliver them at a specified place
to a person named therein or to his order.
Nature of BoL:
1.
Each bill is a contract in itself and the parties are bound by its
terms.
2.
A bill is also a receipt
3.
It is a symbol of the goods covered by it. they are
documents of title (may be negotiated if negotiable)

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When negotiable? It states that the goods referred to therein will be
delivered to the bearer or to the order of any person named in such a
document.

Non-negotiable goods referred to therein will be delivered to the

person specified therein.
Types:
Clean Bill of Lading One which does not indicate any defect in the
goods.
Foul Bill of Lading One which contains and annotation thereon
indicating that the goods covered by it are in a bad condition.
Spent Bill of Lading Covers goods which have already been
delivered by the carrier without surrendering the Bill.
Through Bill of Lading Issued by a carrier who is obliged to use the
facilities of other carriers as well as his own facilities to transport the
goods.
On Boar Bill of Lading States that the goods have been received on
board the vessels which are to carry the goods.
Received-for-shipment Bill of Lading States that the goods have
been received for shipment with or without specifying the vessles on
which they are to be shipped.
Custody Bill of Lading Issued by the carrier to whom the goods
have been delivered for shipment but he steamer indicated thereon
which is to carry the goods has not yet reached the port where the
goods are held for shipment.

Port Bill of Lading Issued by the carrier to whom the goods have
been delivered and the steamer indicated in the bill by which the goods
are to shipped are already in the port where the goods are held for
shipment.

ARTICLE 351.
In transportation made by railroads or other
enterprises subject to regulation rate and time schedules, it shall
be sufficient for the bills of lading or the declaration of shipment
furnished by the shipper to refer, with respect to the cost, time and
special conditions of the carriage, to the schedules and
regulations the application of which he requests; and if the
shipper does not determine the schedule, the carrier must apply
the rate of those which appear to be the lowest, with the
conditions inherent thereto, always including a statement or
reference to in the bill of lading which he delivers to the shipper.

ARTICLE 352.
The bills of lading, or tickets in cases of
transportation of passengers, may be diverse, some for persons
and others for baggage; but all of them shall bear the name of the
carrier, the date of shipment, the points of departure and arrival,
the cost, and, with respect to the baggage, the number and weight
of the packages, with such other manifestations which may be
considered necessary for their easy identification.

ARTICLE 353.
The legal evidence of the contract between the
shipper and the carrier shall be the bills of lading, by the contents
of which the disputes which may arise regarding their execution
and performance shall be decided, no exceptions being
admissible other than those of falsity and material error in the
drafting.
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, with the exception of that provided for in
Article 366.
In case the consignee, upon receiving the goods, cannot return
the bill of lading subscribed by the carrier, because of its loss or
of any other cause, he must give the latter a receipt for the goods

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- 30 delivered, this receipt producing the same effects as the return of

the bill of lading.

ARTICLE 354. 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 this Code for commercial contracts.

The Bill itself is not essential to the contract so long as the requisites
of a contract are present (Consent, object and consideration). It is
merely evidence of such contract. As evidence of the contract, may not
be varied or altered.

It is not essential to the contract, although it may become obligatory by

reason of the regulations of railroad companies, or as a condition
imposed in the contract by the agreement of the parties themselves. If
there is no bill, disputes will be governed by the rules laid down by
Article 354.

As a receipt may be varied or altered or explained.

After the contract of transportation has been complied with, the bill shall
be returned to the issuing carrier in exchange for the goods. But, if it
cannot be returned due to its loss or any other cause, a receipt for the
goods must be provided by the shipper or consignee.

Return of bill: obligations and actions of the parties against each other
are considered cancelled, except where a receipt for claims of the
parties are made at the time of the giving of the bill or the receipt.
ARTICLE 355.
The responsibility of the carrier shall commence
from the moment he receives the merchandise, personally or
through a person charged for the purpose, at the place indicated
for receiving them.

ARTICLE 356. Carriers may refuse packages which appear unfit

for transportation; and if the carriage is to be made by railway, and
the shipment is insisted upon, the company shall transport them,
being exempt from all responsibility if its objections, is made to
appear in the bill of lading.

ARTICLE 357. If by reason of well-founded suspicion of falsity in

the declaration as to the contents of a package the carrier should
decide to examine it, he shall proceed with his investigation in the
presence of witnesses, with the shipper or consignee in
attendance.

If the shipper or consignee who has to be cited does not attend,

the examination shall be made before a notary, who shall prepare
a memorandum of the result of the investigation, for such
purposes as may be proper.

If the declaration of the shipper should be true, the expense

occasioned by the examination and that of carefully repacking the
packages shall be for the account of the carrier and in a contrary
case for the account of the shipper.

When responsibility of carrier begins: From the moment he receives

the merchandise, delivery being done either personally, or through duly
authorized representatives/agents, at the place indicated for receiving
the merchandise.

Parties to a kabit system cannot ask the court for relief in

case of disputes regarding their contract because such contract is void.
(Lita Ent. v. IAC)

The registered owner of a vehicle is directly liable for injuries

caused by such vehicle even if he has already sold or transferred
it. (Perez v. Gutierrez)

When the operator in a kabit system gets into an accident

and the one at fault is a 3rd party, the operator has standing to sue the
negligent party/party in fault. (Abelardo v. CA)

It is true that the registered owner of a vehicle is directly

liable for injuries caused by such vehicle even if he has already sold or

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transferred it. However, he may ask for reimbursement from the
transferee for whatever amount he was adjudged to pay. (Tamayo v.
Aquino)

Only the registered owner of a public service vehicle is

responsible for damages that may arise from consequences incident to
its operation, or caused to any of the passengers therein. The live-in
partner of the owner has nothing to do with the vehicle. (Juaniza v.
Jose)

If the lesse of the vehicle is a mere dummy corporation of the

registered owner, the latter is still liable for the accident even if due
to the fault of the said lessor. (MYC Agro v. Vda. De Caldo)

Even if the registered owner is directly liable for accidents,

recovery by the registered owner or operator may be made in any
form-either by a cross-claim, third-party complaint, or an
independent action. (Jereos v CA)

Right to Refuse Packages: A common carrier can refuse to accept

packages if unfit for transportation. But ordinarily, may not refuse a
particular class of good to the prejudice of the traffic in those goods.
Falsity in the declaration of the contents: If there is a well founded
belief or suspicion of falsity in the declaration as to the contents of the
package, he may examine it in the manner laid down in Art. 357.
ARTICLE 358.
If there is no period fixed for the delivery of the
goods the carrier shall be bound to forward them in the first
shipment of the same or similar goods which he may make point
where he must deliver them; and should he not do so, the
damages caused by the delay should be for his account.

Time for delivery when no period fixed: Carrier bound to forward the
goods in the first shipment of the same or similar goods which he
makes to the point of delivery. If not, he is liable for damages caused by
delay.

When period fixed for delivery: Deliver the goods within the time
fixed, failure to do so, the carrier will pay for indemnity provided in the
BoL. Under the Civil Code, damages also paid if carrier refuses to pay
for the indemnity provided.

When no indemnity stipulated: carrier liable for the damages which

the delay may be caused.
Other effects of delay: Natural disaster will not free carrier from
responsibility. Contract limiting liability (if delay without just cause and
negligent) cannot be availed of.
When delay amounts to conversion: If carrier has not delivered
within a reasonable time after reaching destination, it is liable for
conversion of the property. Consignee may waive all title to the goods
and sue for conversion, and subsequent tender by the carrier not
available as a defense. Consignee entitled to recover value of the
goods at the time they should have been delivered.

Tender before suit: Consignee cannot refuse to receive the goods and
sue for conversion. Remedy left is an action for damages due to the
delay.
ARTICLE 359. If there is an agreement between the shipper and
the carrier as to the road over which the conveyance is to be
made, the carrier may not change the route, unless it be by reason
of force majeure; and should he do so without this cause, he shall
be liable for all the losses which the goods he transports may
suffer from any other cause, beside paying the sum which may
have been stipulated for such case.

When on account of said cause of force majeure, the carrier had to

take another route which produced an increase in transportation
charges, he shall be reimbursed for such increase upon formal
proof thereof.

Change of Route without just cause: Carrier liable for losses, due to
the change, and for other causes, and limiting liability not available. If
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- 31 there is no agreed route, carrier must select route which may be the
shortest, least expensive and practically passable.

ARTICLE 360. The shipper, without changing the place where the
delivery is to be made, may change the consignment of the goods
which he delivered to the carrier, provided that at the time of
ordering the change of consignee the bill of lading signed by the
carrier, if one has been issued, be returned to him, in exchange for
another wherein the novation of the contract appears.

The expenses which this change of consignment occasions shall

be for the account of the shipper.
ARTICLE 361. The merchandise shall be transported at the risk
and venture of the shipper, if the contrary has not been expressly
stipulated.
As a consequence, all the losses and deteriorations which the
goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent nature and defect of the
goods, shall be for the account and risk of the shipper.

Proof of these accidents is incumbent upon the carrier.

at the risk and venture of the shipper means that the shipper
will suffer losses and deteriorations resulting from fortuitous events,
force majeure, or inherent nature and defects of the goods. It does not
mean that the carrier is free from liability for losses and deteriorations
arising from his negligence or fault which is presumed.

ARTICLE 362.
Nevertheless, the carrier shall be liable for the
losses and damages resulting from the causes mentioned in the
preceding article if it is proved, as against him, that they arose
through his negligence or by reason of his having failed to take
the precautions which usage has established among careful
persons, unless the shipper has committed fraud in the bill of
lading, representing the goods to be of a kind or quality different
from what they really were.

If, notwithstanding the precautions referred to in this article, the

goods transported run the risk of being lost, on account of their
nature or by reason of unavoidable accident, there being no time
for their owners to dispose of them, the carrier may proceed to
sell them, placing them for this purpose at the disposal of the
judicial authority or of the officials designated by special
provisions.

Burden of Proof: Carrier obliged to show that the damages suffered by

the goods carried are by reason of fortuitous event, force majeure, or
inherent nature of the goods: i.e. onus probandi is upon the carrier to
prove that the injury was not due to his fault. Once proved, onus
probandi shifted to the shipper to show negligence.

If goods run the risk of being lost due to their nature or unavoidable
accident carrier may sell the goods, placing them at the disposal of
the judicial authority or officials designated by special provisions of law.
ARTICLE 363.
Outside of the cases mentioned in the second
paragraph of Article 361, the carrier shall be obliged to deliver the
goods shipped in the same condition in which, according to the
bill of lading, they were found at the time they were received,
without any damage or impairment, and failing to do so, to pay the
value which those not delivered may have at the point and at the
time at which their delivery should have been made.

If those not delivered form part of the goods transported, the

consignee may refuse to receive the latter, when he proves that he
cannot make use of them independently of the others.
Duty to deliver goods: Carrier to deliver the goods and also to deliver
them in the condition in which according to the BoL they were found at
the time they were received, without damage or impairment.

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Partial delivery: consignee may refuse to receive if he can prove that
they may not be independently used.

Estoppel of shipper by laches: Neglect of shipper to demand

immediately, or within a reasonable time the return of the merchandise
shipped or its value, places the carrier at a disadvantageous position to
show that it had fulfilled what it had undertaken. Failure of shipper to
assert his right constitutes estoppel by laches.

- 32 In both cases, claim must be made before payment of transportation

charges.

These are conditions precedent to the accruing of the rights of action

against carriers for damages caused to the merchandise. They are not
limitations of action.
ARTICLE 366

ARTICLE 364.
If the effect of the damage referred to in Article
361 is merely a diminution in the value of the goods, the obligation
of the carrier shall be reduced to the payment of the amount
which, in the judgment of experts, constitutes such difference in
value.

Applicability

1.

Domestic/inter-island/
coastwise transportation
2. Land, water, air transportation
3. Carriage of goods

When value of goods diminished: Where all goods delivered but

value diminished considerably, obligation of carrier shall be reduced to
the payment of the amount which, in the judgment of the experts,
constitute such difference in value.

ARTICLE 365.
If, in consequence of the damage, the goods are
rendered useless for sale and consumption for the purposes for
which they are properly destined, the consignee shall not be
bound to receive them, and he may have them in the hands of the
carrier, demanding of the latter their value at the current price on
that day.

1. Condition precedent
2. 24-hour period for claiming
latent damage

If among the damaged goods there should be some pieces in

good condition and without any defect, the foregoing provision
shall be applicable with respect to those damaged and the
consignee shall receive those which are sound, this segregation
to be made by distinct and separate pieces and without dividing a
single object, unless the consignee proves the impossibility of
conveniently making use of them in this form.

None provided; Civil Code

applies.

The same rule shall be applied to merchandise in bales or

packages, separating those parcels which appear sound.

When consignee may abandon the goods:

1.
Art. 336, when there is partial non-delivery and consignee
proves that he cannot make use of the goods which may be
delivered, independently of those not delivered.
2.
Art. 365, where the goods are rendered useless for sale and
consumption for the purposes which they are properly
destined.
3.
Art. 371, where there is delay through fault of the carrier.

ARTICLE 366. Within the twenty-four hours following the receipt

of the merchandise, the claim against the carrier for damage or
average be found therein upon opening the packages, may be
made, provided that the indications of the damage or average
which gives rise to the claim cannot be ascertained from the
outside part of such packages, in which case the claim shall be
admitted only at the time of receipt.

After the periods mentioned have elapsed, or the transportation

charges have been paid, no claim shall be admitted against the
carrier with regard to the condition in which the goods transported
were delivered.

Claim necessary to right of action: Damage may either be:

1.
ascertainable only by opening of the packages; or
- claim made within 24 hourse after receipt.
2.
from the outside part of the packages.
claim must be made upon receipt.

Starr Weigand 2012

1. Not a condition
precedent
2. 3-day period for claiming
latent damage

Prescriptive period

1. International/
overseas/foreign (from
foreign country to Phils.)
Note: subject to the rule on
Paramount Clause
2. Water/maritime
transportation
3. Carriage of goods

Notice of damage

When damage renders goods useless: If damage affects all goods,

consignee may abandon the goods to the carrier, who shall pay the
damages. If only part of goods damaged, consignee may only abandon
those damaged. If it is impossible to conveniently use the undamaged
goods without those damaged, consignee may abandon all the goods.

COGSA Sec.3 (6)

One year from the date of

delivery (delivered but
damaged goods), or date
when the vessel left port or
from the date of delivery to
the arrastre (non-delivery or
loss).

ARTICLE 367.
If doubts and disputes should arise between the
consignee and the carrier with respect to the condition of the
goods transported at the time their delivery to the former is made,
the goods shall be examined by experts appointed by the parties,
and, in case of disagreement, by a third one appointed by the
judicial authority, the results to be reduced to writing; and if the
interested parties should not agree with the expert opinion and
they do not settle their differences, the merchandise shall be
deposited in a safe warehouse by order of the judicial authority,
and they shall exercise their rights in the manner that may be
proper.

Dispute as to condition of the goods: Expert opinion may be availed

of, but not conclusive on the parties.
ARTICLE 368. The carrier must deliver to the consignee, without
any delay or obstruction, the goods which he may have received,
by the mere fact of being named in the bill of lading to receive
them; and if he does not do so, he shall be liable for the damages
which may be caused thereby.

To whom delivery is to be made: To the consignee. If to the order of

consignee, BoL must be presented, if not, carrier liable for misdelivery.

Transportation Law|Ampil



Misdelivery

- 33 If no abandonment indemnity not to exceed the current price which

the goods had on the day when to be delivered.

Non-delivery

There is delivery nut it is made to

the wrong person.

There is no delivery at all.

SHIPOWNER OR SHIP
AGENT

In case of conflicting orders what moment the right of the shipper to

countermand the shipment terminates: when the consignee or
legitimate holder of the bill of lading appears with such bill of lading
before the carrier and makes himself a party to the contract.

CONSIGNEE

What may be abandoned

Vessel

Goods shipped

1. In case of civil liability from

indemnities to third persons
(Art. 587);
2. Sec. 138, Insurance Code;
3. In case of leakage of at
least of the contents of a
cargo containing liquids (Art.
687)

1. Partial non-delivery, where the

goods are useless without the
others (Art. 363);
2. Goods are rendered useless
for sale or consumption for the
purposes for which they are
properly destined (Art. 365); and
3. In case of delay through the
fault of the carrier (Art. 371).

Effects

1. Transfer of ownership of
the vessel from the
shipowner to the shippers
or insurer.
2. In case of (2), the insurer
must pay the insured as if
there was actual total loss
of the vessel.

stoppage in transitu sellers right prevails

ARTICLE 369. If the consignee cannot be found at the residence
indicated in the bill of lading, or if he refuses to pay the
transportation charges and expenses, or if he refuses to receive
the goods, the municipal judge, where there is none of the first
instance, shall provide for their deposit at the disposal of the
shipper, this deposit producing all the effects of delivery without
prejudice to third parties with a better right.

Instances

When goods may be deposited:

1.
Where the consignee cannot be found at the residence
indicated
2.
Where the consignee refuse to pay the transportation
charges
3.
Where the consignee refuses to receive the goods.
Liability for failure to look for consignee: Carrier liable for the
damages resulting from delay in the receipt of the goods by the
consignee, occasioned by such want of diligence. To relieve himself of
liability, store the goods after, by the use of reasonable diligence, he is
unable to find the consignee.
Effect of judicial intervention: Produces the effects of delivery, subject to
third parties with a better right.
ARTICLE 370.
If a period has been fixed for the delivery of the
goods, it must be made within such time, and, for failure to do so,
the carrier shall pay the indemnity stipulated in the bill of lading,
neither the shipper nor the consignee being entitled to anything
else.
If no indemnity has been stipulated and the delay exceeds the time
fixed in the bill of lading, the carrier shall be liable for the damages
which the delay may have caused.

ARTICLE 371.
In case of delay through the fault of the carrier,
referred to in the preceding articles, the consignee may leave the
goods transported in the hands of the former, advising him thereof
in writing before their arrival at the point of destination.

When this abandonment takes place, the carrier shall pay the full
value of the goods as if they had been lost or mislaid.
If the abandonment is not made, the indemnification for losses
and damages by reason of the delay cannot exceed the current
price which the goods transported would have had on the day and
at the place in which they should have been delivered; this same
rule is to be observed in all other cases in which this indemnity
may be due.

Right of abandonment: Consignee has exceptional but limited right to

abandon the goods in case of delay in delivery. May be exercised
between the moment when the fault of the carrier produces the delay
until the moment just before the arrival of the goods at the place of
delivery.

How: communicating the abandonment to the carrier in writing.

If there is abandonment full price or value of goods paid.

Starr Weigand 2012

1. Transfer of ownership on the

goods from the shipper to the
carrier.
2. C a r r i e r s h o u l d p a y t h e
shipper the market value of
the goods at the point of
destination.

ARTICLE 372. The value of the goods which the carrier must pay
in cases if loss or misplacement shall be determined in
accordance with that declared in the bill of lading, the shipper not
being allowed to present proof that among the goods declared
therein there were articles of greater value and money.
Horses, vehicles, vessels, equipment and all other principal and
accessory means of transportation shall be especially bound in
favor of the shipper, although with respect to railroads said
liability shall be subordinated to the provisions of the laws of
concession with respect to the property, and to what this Code
established as to the manner and form of effecting seizures and
attachments against said companies.

Shippers Lien Security for the payment of the value of the goods
which the carrier must pay in cases of loss or misplacement.
ARTICLE 373.
The carrier who makes the delivery of the
merchandise to the consignee by virtue of combined agreements
or services with other carriers shall assume the obligations of
those who preceded him in the conveyance, reserving his right to
proceed against the latter if he was not the party directly
responsible for the fault which gave rise to the claim of the
shipper or consignee.
The carrier who makes the delivery shall likewise acquire all the
actions and rights of those who preceded him in the conveyance.
The shipper and the consignee shall have an immediate right of
action against the carrier who executed the transportation
contract, or against the other carriers who may have received the
goods transported without reservation.

Transportation Law|Ampil

However, the reservation made by the latter shall not relieve them
from the responsibilities which they may have incurred by their
own acts.
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.
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
moment of their delivery.
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.

ARTICLE 376.
The preference of the carrier to the payment of
what is owed him for the transportation and expenses of the
goods delivered to the consignee shall not be cut off by the
bankruptcy of the latter, provided it is claimed within the eight
days mentioned in the preceding article.

Enforcement of payment of charges:

1.
Article 374, judicial sale of the goods transported
2.
Article 375, by creating a lien in favor of the carrier on the
goods transported.
Right to sue not excluded: The mere fact that the goods remain in the
possession of the carrier because they have not been removed by the
consignee, and the right to demand sale do not deprive the carrier to
demand in a proper case the amounts owing to it by reason of the
contract of transportation.

Effect of Bankruptcy: Bankruptcy of the consignee shall not cut off the
preference of the carrier, provided that the claim is made within 30 days
from the date of delivery.
Purpose of lien and time limit: lien in favor of the shipper.
ARTICLE 377. The carrier shall be liable for all the consequences
which may arise from his failure to comply with the formalities
prescribed by the laws and regulations of the public
administration, during the whole course of the trip and upon
arrival at the point of destination, except when his failure arises
from having been led into error by falsehood on the part of the
shipper in the declaration of the merchandise. If the carrier has
acted by virtue of a formal order of the shipper or consignee of the
merchandise, both shall become responsible.

Liability for non-compliance with government rules: carrier liable,

even if non-compliance was due to order of shipper or consignee. He is
exempted when the failure to comply was due to error by the falsehood
on the part of the shipper in the declaration of the merchandise.

ARTICLE 378. Agents for transportation shall be obliged to keep

a special registry, with the formalities required by Article 36, in
which all the goods the transportation of which is undertaken
shall be entered in consecutive order of number and dates, with a
statement of the circumstances required in Article 350 and others
following for the respective bills of lading.

ARTICLE 379.
The provisions contained in Articles 349 and
following shall be understood as equally applicable to those who,
although they do not personally effect the transportation of the
merchandise, contract to do so through others, either as
contractors for a particular and definite operation, or as agents for
transportations and conveyances.
In either case they shall be subrogated in the place of the carriers
themselves, with respect to the obligations and responsibility of
the latter, as well as with regard to their rights.

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- 34 BOOK THREE MARITIME COMMERCE
TITLE ONE - VESSELS

ARTICLE 573. Merchant vessels constitute property which may be

acquired and transferred by any of the means recognized by law.
The acquisition of a vessel must appear in a written instrument,
which shall not produce any effect with respect to third persons if
not inscribed in the registry of vessels.
The ownership of a vessel shall likewise be acquired by
possession in good faith, continued for three years, with a just
title duly recorded.
In the absence of any of these requisites, continuous possession
for ten years shall be necessary in order to acquire ownership.
A captain may not acquire by prescription the vessel of which he
is in command.

Effect of the new Civil Code: vessels engaged in the business of

carrying or transporting passengers or goods, for compensation,
offering their services to the public are common carriers; governed
primarily by the provisions of the new Civil Code on common carriers,
and subsidiarily by the provisions of the Code of Commerce and by
special laws

Vessels governed by the Code of Commerce: merchant ships; do

not include war ships; craft that are not accessory to another as in the
case of launches, lifeboats, etc.
Vessels not included under the Code of Commerce: pleasure craft,
yacht, pontoons, health service and harbor police vessels, floating
storehouses, warships or patrol vessels, coast guard vessels, fishing
vessels, towboats, and other craft destined to other uses

Purpose of registration: necessary and indispensable in order that

the purchasers rights may be maintained against a claim filed by a
third person
It is not now necessary for a chattel mortgage of a vessel to be noted in
the registry of the register of deeds
It is essential that a record of documents affecting the title to a vessel
be entered in the office of the collector of customs at a port of entry,
now in the Philippine Coast Guard

A small vessel used for the transportation of merchandise by

sea and for the making of voyages from one port to another, equipped
and victualed for this purpose by its owner, is a vessel, within the
purview of the Code of Commerce, for the determination of the
character and effect of the relations created between the owners of the
merchandise laden on it and its owner. (yu Con v. Ipil)

Art 835 does not apply to small boats engaged in river and
bay traffic. This articles apply to merchant vessels. When the
mercantile codes speak of vessels, they refer solely and exclusively to
merchant ships, as they do not include war ships furthermore, they
almost always refer to craft which are not accessory to another as is the
case of launches, lifeboats, etc. Moreover, the mercantile laws, in
making use of the words ship, vessels, boat, embarkation, etc., refer
exclusively to those which are engaged in the transportation of
passengers and freight from one port to another or from one place to
another; in a word, they refer to merchant vessels and in no way can
they or should they be understood as referring to pleasure craft, yachts,
pontoons, health service and harbor police vessels, floating
storehouses, warships or patrol vessels, coast guard vessels, fishing
vessels, towboats, and other craft destined to other uses. (Lopez v.
Duruelo)

ARTICLE 574. Builders of vessels may employ the materials and

follow, with respect to their construction and rigging, the systems
most suitable to their interests. Ship owners and seamen shall be
subject to what the laws and regulations of the public
administration on navigation, customs, health, safety of vessels,
and other similar matters.

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ARTICLE 576. In the sale of a vessel it shall always be understood

as included the rigging, masts, stores and engine of a streamer
appurtenant thereto, which at the time belongs to the vendor.
The arms, munitions of war, provisions and fuel shall not be
considered as included in the sale.
The vendor shall be under the obligation to deliver to the
purchaser a certified copy of the record sheet of the vessel in the
registry up to the date of the sale.

ARTICLE 577. If the alienation of the vessel should be made while

it is on a voyage, the freightage which it earns from the time it
receives its last cargo shall pertain entirely to the purchaser, and
the payment of the crew and other persons who make up its
complement for the same voyage shall be for his account.
If the sale is made after the vessel has arrived at the port of its
destination, the freightage shall pertain to the vendor, and the
payment of the crew and other individuals who make up its
complement shall be for his account, unless the contrary is
stipulated in either case.

ARTICLE 578. If the vessel being on a voyage or in a foreign port,

its owner or owners should voluntarily alienate it, either to
Filipinos or to foreigners domiciled in the capital or in a port of
another country, the bill of sale shall be executed before the
consul of the Republic of the Philippines at the port where it
terminates its voyage and said instrument shall produce no effect
with respect to third persons if it is not inscribed in the registry of
the consulate. The consul shall immediately forward a true copy of
the instrument of purchase and sale of the vessel to the registry of
vessels of the port where said vessel is inscribed and registered.
In every case the alienation of the vessel must be made to appear
with a statement of whether the vendor receives its price in whole
or in part, or whether he preserves in whole or in part any claim on
said vessel. In case the sale is made to a Filipino, this fact shall be
stated in the certificate of navigation.
When a vessel, being on a voyage, shall be rendered useless for
navigation, the captain shall apply to the competent judge on
court of the port of arrival, should it be in the Philippines; and
should it be in a foreign country, to the consul of the Republic of
the Philippines, should there be one, or, where there is none, to
the judge or court or to the local authority; and the consul, or the
judge or court, shall order an examination of the vessel to be
made.
If the consignee or the insurer should reside at said port, or
should have representatives there, they must be cited in order that
they may take part in the proceedings on behalf of whoever may
be concerned.

ARTICLE 579. After the damage to the vessel and the impossibility
of her being repaired, in order to continue the voyage had been
shown, its sale at public auction shall be ordered, subject to the
following rules:
1. The hull of the vessel, its rigging, engines, stores, and other
articles shall be appraised, after making an inventory, said
proceedings to be brought to the notice of the persons who may
wish to take part in the auction.
2. The order or decree ordering the auction to be held shall be
posted in the usual places, an announcement thereof to be
inserted in the Official Gazette and in two of the newspapers of the
largest circulation of the port where the auction is to be held,
should there be any.
The period which may be fixed for the auction shall not be less
than twenty days.
3. These announcements shall be repeated every ten days, and
their publication shall be made to appear in the records.
4. The auction shall be held on the day fixed, with the formalities
prescribed in the common law for judicial sales.
5. If the sale should take place while the vessel is in a foreign
country, the special provisions governing such cases shall be
observed.

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- 35 ARTICLE 580. In all judicial sales of any vessel for the payment of
creditors, the following shall have preference in the order stated 2
1. The credit in favor of the public treasury proven by means of an
official certificate of competent authority.
2. The judicial costs of the proceedings, according to an
appraisement approved by the judge or court.
3. The pilotage charges, tonnage dues, and the other sea or port
charges, proven by means of proper certificates of the officers
intrusted with the collection thereof.
4. The salaries of the depositaries and keepers of the vessel and
any other expenses for its preservation from the time of arrival at
the port until the sale, which appear to have been paid or be due
by virtue of an account verified and approved by the judge or
court.
5. The rent of the warehouse where the rigging and stores of the
vessel have been taken care of, according to contract.
6. The salaries due the captain and crew during its last voyage,
which shall be verified by means of the liquidation to be made in
view of the lists and of the books of account of the vessel,
approved by the chief of the Bureau of Merchant Marine, where
there is one, and in his absence by the consul or judge or court.
7. The reimbursement for the goods of the freight which the
captain may have sold in order to repair the vessel, provided that
the sale has been ordered through a judicial proceedings held
with the formalities required in such cases, and recorded in the
certificate of registry of the vessel.
8. The part of the price which has not been paid to the said vendor,
the unpaid credits for materials and labor in the construction of
the vessel, when it has not navigated, and those arising from the
repair and equipment of the vessels and from its provisioning with
victuals and fuel during the last voyage.
In order that the credits provided for in this subdivision may enjoy
this preference, they must appear by contracts recorded in the
registry of vessels, or if they were contracted for the vessel while
on a voyage and said vessel has not returned to the port where it
is registered, they must be made with the authorization required
for such cases and annotated in the certificate of registration of
the vessel.
9. The amount borrowed on bottomry on the hull, keel, tackle, and
stores of the vessel before its departure, proven by means of the
contract executed according to law and recorded in the registry of
vessels; those borrowed during the voyage with the authorization
mentioned in the preceding subdivision, satisfying the same
requisites; and the insurance premium, proven by the insurance
policy or a certificate taken from the books of the broker.
10. The indemnity due the shipper for the value of the goods
shipped which were not delivered to the consignees, or for
averages suffered for which the vessel is liable, provided that
either appear in a judicial or arbitration decision.

Bottomry - A contract, in maritime law, by which money is borrowed for

a specified term by the owner of a ship for its use, equipment, or repair
for which the ship is pledged as collateral. If the ship is lost in the
specified voyage or during the limited time, the lender will lose his or
her money according to the provisions of the contract.
- A contract by which a ship or its freight is pledged as security for a
loan, which is to be repaid only in the event that the ship survives a
specific risk, voyage, or period.

ARTICLE 581. If the proceeds of the sale should not be sufficient

to pay all the creditors included in one number or grade, the
residue shall be divided among them pro rata.
ARTICLE 582. After the bill of the judicial sale at public auction
has been executed and inscribed in the registry of vessels, all the
other liabilities of the vessel in favor of the creditors shall be
considered extinguished.
But if the sale should have been voluntary and should have been
made while the vessel was on a voyage, the creditors shall
preserve their rights against the vessel until it returns to the port
of her registry, and three months after the inscription of the sale in
the registry of vessel or the arrival.

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ARTICLE 583. If while on a voyage the captain should find it
necessary to contract one or more of the obligations mentioned in
subdivisions 8 and 9 of Article 580, he shall apply to the judge or
court if he is in Philippine territory, and otherwise to the consul of
the Republic of the Philippines, should there be one, and, in his
absence, to the judge or court or proper local authority, presenting
the certificate of the registration sheet treated of in Article 612
and the instruments proving the obligation contracted.
The judge or court, the consul, or the local authority, as the case
may be, in view of the result of the proceedings instituted, shall
make a temporary memorandum of their result in the certificate, in
order that it may be recorded in the registry when the vessel
returns to the port of its registry, or so that it can be admitted as a
legal and preferred obligation in case of sale before its return, by
reason of the sale of the vessel on account of a declaration of
unseaworthiness.

The omission of this formality shall make the captain personally

liable for the credits prejudiced on his account.
ARTICLE 585. For all purposes of law not modified or restricted by
the provisions of this Code, vessels shall continue to be
considered as personal property.
TITLE TWO
PERSONS WHO TAKE PART IN MARITIME COMMERCE
SECTION ONE - SHIPOWNERS AND SHIP AGENTS

ARTICLE 586. The shipowner and the ship agent shall be civilly
liable for the acts of the captain and for the obligations contracted
by the latter to repair, equip, and provision the vessel, provided
the creditor proves that the amount claimed was invested for the
benefit of the same.

By ship agent is understood the person entrusted with

provisioning or representing the vessel in the port in which it may
be found.
PARTICIPANTS IN MARITIME COMMERCE
A. Shipowners and ship agents
B. Captains and masters of the vessel
C. Officers and crew of the vessel
D. Supercargoes
E. Pilot

SHIPOWNERS AND SHIP AGENTS

Shipowner (proprietario)
Person who has possession, control and management of the vessel
and the consequent right to direct her navigation and receive freight
earned and paid, while his possession continues.

The doctrines having reference to the relations between principal and

agent cannot be applied in the case of ship agents and ship owners.
(Yu Biao v. Osorio)
Ship agent (naviero)
Person entrusted with provisioning and representing the vessel in the
port in which it may be found; also includes the shipowner.
Not a mere agent under civil law; he is solidarily liable with the ship
owner.
Powers and functions:
1.
Capacity to trade;
2.
Discharge duties of the captain, subject to Art.609;
3.
Contract in the name of the owners with respect to repairs,
details of equipment, armament, provisions of food and fuel, and freight
of the vessel, and all that relate to the requirements of navigation;
4.
Order a new voyage, make a new charter or insure the
vessel after obtaining authorization from the shipowner or if granted in
certificate of appointment.

Civil Liabilities of the Shipowner And Ship Agent

1.
All contracts of the captain, whether authorized or not, to
repair, equip and provision the vessel; (Art. 586)
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- 36 2.
Loss and damage to the goods loaded on the vessel without
prejudice to their right to free themselves from liability by abandoning
the vessel to the creditors. (Art. 587)

A ship agent, according to Article 586 of the Code of Commerce, is "the

person entrusted with the provisioning of a vessel, or who represents
her in the port in which she happens to be." Citadel Lines is the local
representative in the Philippines of the Oyama Shipping Co., Ltd. Upon
arrival of the vessel S/S "St. Lourdes" in Manila, it took charge of the
unloading of the cargo and issued cargo receipts (or tally sheets) in its
own name, for the purpose of evidencing discharge of cargoes and the
conditions thereof from the vessel to the arrastre operators and/or unto
barges/lighters, and that claims against the vessel S/S "St. Lourdes" for
losses/damages sustained by shipments were in fact filed and
processed by respondent Citadel Lines, Inc. Private respondent
represents the vessel in the port of Manila and hence is a ship agent
within the meaning and context of Article 586 of the Code of
Commerce. The ship agent shall also be 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 equipments and the
freightage he may have earned during the voyage. (Article 587). In
addition, Article 618 states that the captain shall be civilly liable to the
ship agent and the ship agent shall be liable to third persons who may
have made the contracts with the former (a) for all damages suffered by
the vessel and its cargo by reason of want of skill or negligence on his
part; if a misdemeanor/crime has been committed he shall be liable in
accordance with the Penal Code; (b) for all thefts and robberies
committed by the crew. (Switzerland General Insurance v. Ramirez)

ANNOTATION by Domingo Lucenario:

ship agent the person entrusted with provisioning or representing
the vessel in the port in which it may be found; it represents her in the
port in which she happens to be; although Art. 587 of the Code of
Commerce refers to the ship agent only, it does not exclude the owner
of the vessel
ship captain person who governs a vessel that navigates the seas
or a ship of large dimensions and importance, although it be engaged I
the coastwise trade; for purposes of maritime commerce, the words
captain and master have the same meaning, both being the chiefs or
commanders of ships; he commands and directs the vessel; he is the
general agent of the shipowner, the technical director of the vessel, and
usually represents the government of the country under whose flag he
navigates
freight may refer either to the cargo of a ship or the charge for the
transportation of the goods
liability for lawful obligations contracted by the captain the
shipowner and the ship agent are civilly liable for the acts of the captain
and for the obligations contracted by the latter to repair, equip and
provision the vessel, provided the creditor proves that the amount
claimed was invested for the benefit of the same
liability for indemnities in favor of third persons the ship agent
shall be civilly liable for the indemnities in favor of third persons which
may arise from the conducts of the captain in the care of the goods
which he loaded on the vessel, as well as for the safety of passengers
transported; shipowners and ship agents are civilly liable for the acts of
the Captain (Art. 586) and for the indemnities due the third persons
(Art. 587)
responsibility for damages to third persons arising from tort or
quasi-delict the ship agent may be held liable to third persons, who
may have contracted with the captain for all damages suffered by the
cargo by reason of want of skill or negligence on his part, or for the
losses and damages caused by reason of faults committed by the crew
liability for damages in cases of collision by reason of the fault,
negligence or lack of skill of the captain, or any member of the
complement if the collision is imputable to both vessels, each one
shall suffer its own damages, and both shall be solidarily responsible
for the losses or damages occasioned to their cargoes; if a vessel
should be forced by a third vessel to collide with another, the owner of
the third vessel shall indemnify the losses and damages caused, the
captain thereon being civilly liable to said owner

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the provision of Article 590 reiterates the principle of limited liability
embodied in Article 587, though Article 590 contemplates of a situation
where the vessel is owned by two or more persons
corollaries to the rule of limited liability the abandonment
amounts to an offer to the injured party of the value of the vessel, of her
equipment, and the freight money earned during the voyage; the
creditors acceptance of the abandonment is compulsory as he cannot
refuse it; where the vessel is insured by a marine insurance,
abandonment has the effect of the shipowners relinquishment to the
insurer of his interest in the thing insured

ARTICLE 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded
on the vessel; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight it
may have earned during the voyage.

Otherwise known as the limited liability rule in maritime law

To encourage investment in the shipping industry before, investors
had to invest a lot of money for shipping using boats with sails and it
would be unfair to hold them liable for more than what they invested
Applies to passengers.

It is well and good that the shipowner be not held criminally

liable for such crimes or quasi crimes; but the cannot be excused from
liability for the damage and harm which, in consequence of those acts,
may be suffered by the third parties who contracted with the captain, in
his double capacity of agent and subordinate of the shipowner himself.
In maritime commerce, the shippers and passengers in making
contracts with the captain do so through the confidence they have in
the shipowner who appointed him; they presume that the owner made a
most careful investigation before appointing him, and, above all, they
themselves are unable to make such an investigation, and even though
they should do so, they could not obtain complete security, inasmuch
as the shipowner can, whenever he sees fit, appoint another captain
instead. (Yu Con v. Ipil)

Since the ship agent's or ship owner's liability is merely co-extensive

with his interest in the vessel such that a total loss thereof results in its
extinction and none of the exceptions to the rule on limited liability
being present, the liability of the owners for the loss of the cargo of
copra must be deemed to have been extinguished. There is no showing
that the vessel was insured in this case.
In relation to the CIVIL CODE and COMMON CARRIERS, the SC
explained that the presumption of negligence in case of loss,
destruction or deterioration still applies. However, the liability is limited
by Art 587. Since the Civil Code contains no provisions regulating
liability of ship owners or agents in the event of total loss or destruction
of the vessel, it is the provisions of the Code of Commerce, more
particularly Article 587, that govern in this case. [note: remember, the
issue of w/n a CC is liable is different to the extent of its liability, in this
case there was NO finding of negligence on the part of the ship owner
OR its employees/agents]. (Chua Yek v. IAC)

- 37 common carriers shall be governed by the Code of Commerce and by

special laws. Since the Civil Code contains no provisions regulating
liability of ship owners or agents in the event of total loss or destruction
of the vessel, Code of Commerce (Art 587) will govern here. (Ibid)

DOCTRINE OF LIMITED LIABILITY

(HYPOTHECARY RULE)
Cases where applicable:
1.
Art. 587 civil liability for indemnities to third persons
2.
Art. 590 indemnities from negligent acts of the captain (not
the shipowner or ship agent)
3.
Art. 837 collision
4.
Art. 643 liability for wages of the captain and the crew and
for advances made by the ship agent if the vessel is lost by shipwreck
or capture

GENERAL RULE: The liability of shipowner and ship agent is limited to

the amount of interest in said vessel such that where vessel is entirely
lost, the obligation is extinguished. (Luzon Stevedoring v. Escano, 156
SCRA 169) The interest extends to: 1) the vessel itself; 2) equipments;
3) freightage; and 4) insurance proceeds. (Chua v. IAC, 166 SCRA 183)
4 exceptions to limited liability rule:
1. insurance
2. workmens compensation claims
3. repairs before loss
4. negligence of the ship owner and/or captain
Abandonment of the vessel is necessary to limit the liability of the
shipowner. The only instance were abandonment is dispensed with is
when the vessel is entirely lost (Luzon Stevedoring vs. CA 156 SCRA
169).

RIGHT OF SHIPOWNER OR SHIP AGENT TO ABANDON VESSEL

Instances:
1.
In case of civil liability from indemnities to third persons (Art.
587);
2.
In case of leakage of at least of the contents of a cargo
containing liquids (Art. 687); and
3.
In case of constructive loss of the vessel (Sec. 138,
Insurance Code).

RIGHT OF ABANDONMENT

Vessel

Goods shipped

Instances
1. In case of civil liability
from indemnities to third
persons (Art. 587);
2. Sec. 138, Insurance
Code;
3. In case of leakage of
at least of the contents
of a cargo containing
liquids (Art. 687)

The term "ship agent" as used is broad enough to include the ship
owner. This direct liability is moderated and limited by the ship agent's
or ship owner's right of abandonment of the vessel and earned freight.
This is the universal principle of limited liability under maritime law. The
most fundamental effect of abandonment is the cessation of the
responsibility of the ship agent/owner.
The rationale: The real and hypothecary nature of the liability of the
ship owner or agent in the Maritime Law, Code of Commerce, had its
origin in the prevailing conditions of the maritime trade and sea
voyages during the medieval ages, attended by innumerable hazards
and perils. To offset against these adverse conditions and to encourage
ship building and maritime commerce, it was necessary to confine the
liability of the owner or agent arising from the operation of a ship to the
vessel, equipment, and freight, or insurance, if any, so that if the ship
owner or agent abandoned the ship, equipment, and freight, his liability
was extinguished. Also, Article 1766 of the Civil Code provides: In all
matters not regulated by this Code, the rights and obligations of
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CONSIGNEE

What may be abandoned

SHIPOWNER OR SHIP
AGENT

1. Partial non-delivery,
where the goods are
useless without the
others (Art. 363);
2. Goods are rendered
useless for sale or
consumption for the
purposes for which they
are properly destined
(Art. 365); and
3. In case of delay
through the fault of the
carrier (Art. 371).

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Effects
3. Transfer of ownership
of the vessel from the
shipowner to the
shippers or insurer.
4. In case of (2), the
insurer must pay the
insured as if there was
actual total loss of the
vessel.

Where the shipowner fails to overcome the presumption of

negligence, the doctrine of limited liability cannot be applied. (Aboitiz v.
New India)

3. T r a n s f e r
of
ownership on the
goods from the
shipper to the
carrier.
4. Carrier should pay
the shipper the
market value of the
goods at the point of
destination.

The international rule is to the effect that the right of abandonment of

vessels, as a legal limitation of a shipowners liability, does not apply to
cases where the injury or average was occasioned by the shipowners
own fault. Likewise, the shipowner may be held liable for injuries to
passengers notwithstanding the exclusively real and hypothecary
nature of maritime law if fault can be attributed to the shipowner. If the
shipowner and agent was found to be at fault, the liability is not limited
to their interests in the vessel, which in this case was allegedly the
insurance proceeds only. They are liable for the full amount of damages
as proved in trial. (Aboitiz v. CA)

The term "ship agent" as used in Art 587 is broad enough to

include the ship owner. Pursuant to said provision, therefore,
both the ship owner and ship agent are civilly and directly liable for
the indemnities in favor of third persons, which may arise from the
conduct of the captain in the care of goods transported, as well as
for the safety of passengers.

However, under the same Article (Art 587), this direct liability is
moderated and limited by the ship agent's or ship owner's right of
abandonment of the vessel and earned freight. This expresses the
universal principle of limited liability under maritime law. The most
fundamental effect of abandonment is the cessation of the
responsibility of the ship agent/owner. In other words, the ship
owner's or agent's liability is merely co-extensive with his interest
in the vessel such that a total loss thereof results in its extinction.
"No vessel, no liability" expresses in a nutshell the limited liability
rule. The total destruction of the vessel extinguishes maritime liens
as there is no longer any res to which it can attach.

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
Unseaworthiness may also pertain to the captain and its crew, and may
operate to exonerate the shipowner from liability
GR is that the limited liability rule will be applied if there is no showing
of negligence on the part of the shipowner. (Aboitiz v. General Accident
Fire)

In cases involving the limited liability of shipowners, the initial

burden of proof of negligence or unseaworthiness rests on the
claimants. However, once the vessel owner or any party asserts the
right to limit its liability, the burden of proof as to lack of privity or
knowledge on its part with respect to the matter of negligence or
unseaworthiness is shifted to it. (Monarch Incurance v. CA)

The rule is to the effect that the right of abandonment of

vessels, as a legal limitation of a shipowner's liability, does not apply to
cases where the injury or average was occasioned by the shipowner's
own fault. Art. 587 speaks only of situations where the fault or
negligence is committed solely by the captain. Where the shipowner is
likewise to be blamed, Art. 587 will not apply, and such situation will be
covered by the provisions of the Civil Code on common carrier.
(Philamgen v. CA)

The tort in question is not a civil tort under the Civil Code but a maritime
tort resulting in a collision at sea, governed by Articles 826-939 of the
Code of Commerce. In case of collision between two vessels imputable
to both of them, each vessel shall suffer her own damage and both
shall be solidarily liable for the damages occasioned to their cargoes.
The shipowner is directly and primarily responsible in tort resulting in a
collision at sea, and it may not escape liability on the ground that it
exercised due diligence in the selection and supervision of the
vessels's officer and crew. This direct responsibility is recognized in
Article 618 of the Code of Commerce under which the captain shall be
civilly liable to the ship agent, and the latter is the one liable to third
persons. To admit the defense of due diligence of a bonus paterfamilias
(in the selection and vigilance of the officers and crew) would render
nugatory the solidary liability established by Article 827 of the Code of
Commerce for the greater protection of injured parties. The owner of a
vessel who had caused the same to sail without licensed officers is
liable for the injuries caused by the collision over and beyond the value
of his vessel; hence, he can not escape liability because of the sinking
of the vessel. More so when he expressly declared and stipulated that
he assumes full risk and responsibility for any accident, damage or
loss. (Manila Steamship v. Abdulhaman)
Atty. Ampils opinion: the defense of diligence in the supervision of
employees is not available in cases or maritime tort because it is
impossible for the shipowner to supervise its employees at sea

ARTICLE 588. Neither the shipowner nor the ship agent shall be
liable for the obligations contracted by the captain, if the latter
exceeds the powers and privileges pertaining to him by reason of
his position or conferred upon him by the former.
Nevertheless, if the amounts claimed were invested for the benefit
of the vessel, the responsibility therefor shall devolve upon its
owner or agent.

Ship agent one appointed to manage and operate the vessels of the
shipowner, bound to provisions and victual them, and to render
reports on the operations of the vessels, authorized to appoint
subagents remaining responsible to the shipowner.

Reason for imposition of liability on owner: to place the primary liability

upon the person who has actual control over the conduct of the voyage
and who has most capital embarked in the venture, namely, the owner
of the ship, leaving him to obtain recourse, as it is very easy to do, from
other individuals who have been drawn into the venture as shippers

If force majeure insurer bears loss.

If not force majeure negligence of shipowner insurer bears loss
but has right of subrogation against the shipowner.

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A shipowner may be held liable for injuries to passengers

notwithstanding the exclusively real and hypothecary nature of maritime
law if fault can be attributed to the shipowner. (Negros Navigation v.
CA)

The liability of a shipowner is limited to the value of the vessel or to

the insurance thereon. Despite the total loss of the vessel therefore, its
insurance answers for the damages that a shipowner or agent may be
held liable for by reason of the death of its passengers. (Vasquez v. CA)

- 38 -

Effect of abandonment: to extinguish the liability of the ship agent

Ship agents liability is merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction.
The total destruction of the vessel extinguishes a maritime lien, as there
is no other any res to which it can attach.
ARTICLE 589. If two or more persons should be part owners of a
merchant vessel, a partnership shall be presumed as established
by the co-owners.

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This partnership shall be governed by the resolutions of the
majority of the members.
If the part owners should not be more than two, the disagreement
of views, if any, shall be decided by the vote of the member having
the largest interest. If the interests are equal, it should be decided
by lot.

The person having the smallest share in the ownership shall have
one vote; and proportionately the other part owners as many
votes as they have parts equal to the smallest one.
A vessel may not be detained, attached or levied upon in
execution in its entirety, for the private debts of a part owner, but
the proceedings shall be limited to the interest which the debtor
may have in the vessel, without interfering with the navigation.

ARTICLE 590. The co-owners of a vessel shall be civilly liable in

the proportion of their interests in the common fund, for the
results of the acts of the captain, referred to in Article 587.
Each co-owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel belonging
to him.

ARTICLE 591. All the part owners shall be liable, in proportion to

their respective ownership, for the expenses for repairing the
vessel, and for other expenses which are incurred by virtue of a
resolution of the majority.
They shall likewise be liable in the same proportion for the
expenses for the maintenance, equipment, and provisioning of the
vessel, necessary for navigation.

ARTICLE 592. The resolution of the majority with regard to the

repair, equipment, and provisioning of the vessel in the port of
departure shall bind the minority, unless the minority members
renounce their interests, which must be acquired by the other coowners, after a judicial appraisement of the value of the portion or
portions assigned.
The resolutions of the majority relating to the dissolution of the
partnership and sale of the vessel shall also be binding on the
minority.
The sale of the vessel must be made at public auction, subject to
the provisions of the law of civil procedure, unless the co-owners
unanimously agree otherwise, saying always the right of
repurchase and redemption provided for in Article 575.

ARTICLE 593. The owners of a vessel shall have preference in her

charter over other persons, under the same conditions and price.
If two or more of them should claim this right, the one having the
greater interest shall be preferred; and should they have equal
interests, the matter shall be decided by lot.

ARTICLE 594. The co-owners shall elect the manager who is to

represent them in the capacity of ship agent.
The appointment of director or ship agent shall be revocable at the
will of the members.

ARTICLE 595. The ship agent, whether he is at the same time the
owner of the vessel, or a manager for an owner or for an
association of co-owners, must have the capacity to trade and
must be recorded in the merchant's registry of the province.
The ship agent shall represent the ownership of the vessel, and
may, in his own name and in such capacity, take judicial and
extrajudicial steps in matters relating to commerce.

ARTICLE 596. The ship agent may discharge the duties of captain
of the vessel, subject in every case to the provision of Article 609.
If two or more co-owners apply for the position of captain, the
disagreement shall be decided by a vote of the members; and if
the vote should result in a tie, it shall be decided in favor of the coowner having the larger interest in the vessel.
If the interests of the applicants should be equal, and there should
be a tie, the matter shall be decided by lot.

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- 39 ARTICLE 597. The ship agent shall designate and come to terms
with the captain, and shall contract in the name of the owners,
who shall be bound in all that refer to repairs, details of
equipment, armament, provisions of food and fuel, and freight of
the vessel, and, in general, in all that relate to the requirements of
navigation.

ARTICLE 598. The ship agent may not order a new voyage, or
make contracts for a new charter, or insure the vessel, without the
authorization of its owner or resolution of the majority of the coowners, unless these powers were granted him in the certificate of
his appointment.
If he insures the vessel without authorization therefore, he shall be
subsidiarily liable for the solvency of the insurer.

ARTICLE 599. The ship agent managing for an association shall

render to his associates an account of the results of each voyage
of the vessel, without prejudice to always having the books and
correspondence relating to the vessel and to its voyages at their
disposal.

ARTICLE 600. After the account of the managing agent has been
approved by a relative majority, the co-owners shall pay the
expenses in proportion to their interest, without prejudice to the
civil or criminal actions which the minority may deem fit to
institute afterwards.
In order to enforce the payment, the managing agent shall be
entitled to an executory action ("accion ejecutiva"), which shall be
instituted by virtue of a resolution of the majority, and without
further proceedings than the acknowledgment of the signatures of
the persons who voted for the resolution.

ARTICLE 601. Should there be any profits, the co-owners may

demand of the managing agent the amount corresponding to their
interests by means of an executory action ("accion ejecutiva"),
without any other requisite than the acknowledgment of the
signatures on the instrument approving the account.

ARTICLE 602. The ship agent shall indemnify the captain for all
the expenses he may have incurred with funds of his own or of
others, for the benefit of the vessel.
ARTICLE 603. Before the vessel sets out to sea the ship agent may
at his discretion discharge the captain and members of the crew
whose contracts are not for a definite period or voyage, paying
them the salaries earned according to their contracts, and without
any indemnity whatsoever, unless there is an express and specific
agreement in respect thereto.

Duty of Ship Agent to Discharge the Captain and Members of the

Crew
If the seamen contract is not for a definite period or voyage, he may
discharge them at his discretion. (Art. 603)
If for a definite period, he may not discharge them until after the
fulfillment of their contracts, except on the following grounds:
a.
Insubordination in serious matters;
b.
Robbery;
c.
Theft;
d.
Habitual drunkenness;
e.
Damage caused to the vessel or to its cargo through malice
or manifest or proven negligence. (Art. 605)

ARTICLE 604. If the captain or any other member of the crew

should be discharged during the voyage, they shall receive their
salary until they return to the port where the contract was made,
unless there should be just cause for the discharge, all in
accordance with Article 636 and following of this Code.

ARTICLE 605. If the contracts of the captain and members of the

crew with the ship agent should be for a definite period or voyage,
they may not be discharged until after the fulfillment of their
contracts, except by reason of insubordination in serious matters,
robbery, theft, habitual drunkenness, or damage caused to the

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vessel or to its cargo through malice or manifest or proven
negligence.

ARTICLE 606. If the captain should be a co-owner of the vessel, he

may not be discharged unless the ship agent returns to him the
amount of his interest therein, which, in the absence of agreement
between the parties, shall be appraised by experts appointed in
the manner established in the law of civil procedure.

ARTICLE 607. If the captain who is a co-owner should have

obtained the command of the vessel by virtue of a special
agreement contained in the articles of association, he may not be
deprived of his office except for the causes mentioned in Article
605.
ARTICLE 608. In case of the voluntary sale of the vessel, all
contracts between the ship agent and the captain shall terminate,
reserving to the latter his right to the indemnity which may pertain
to him, according to the agreements made with the ship agent.
They vessel sold shall remain subject to the security of the
payment of said indemnity if, after the action against the vendor
has been instituted, the latter is found to be insolvent.

SECTION TWO - CAPTAINS AND MASTERS OF VESSELS

ARTICLE 609. Captains, masters or patrons of vessels must be

Filipinos, have legal capacity to contract in accordance with this
code, and prove the skill, capacity, and qualifications necessary to
command and direct the vessel, as established by marine or
navigation laws, ordinances, or regulations, and must not be
disqualified according to the same for the discharge of the duties
of the position.

If the owner of a vessel desires to be the captain thereof, without

having the legal qualifications therefor, he shall limit himself to the
financial administration of the vessel, and shall intrust the
navigation to a person possessing the qualifications required by
said ordinances and regulations.

CAPTAINS AND MASTERS

They are the chiefs or commanders of ships.
The terms have the same meaning, but are particularly used in
accordance with the size of the vessel governed and the scope of
transportation, i.e., large and overseas, and small and coastwise,
respectively.

Nature of position (3-fold character):

1.
General agent of the shipowner;
2.
Technical director of the vessel;
3.
Representative of the government of the country under
whose flag he navigates.

- 40 -

3.
By drawing on the ship agent;
4.
By a loan on bottomry;
5.
By sale of part of the cargo. (Art. 611)
Duties:
1.
Bring on board the proper certificate and documents and a
copy of the Code of Commerce;
2.
Keep a Log Book, Accounting Book and Freight Book;
3.
Examine the ship before the voyage;
4.
Stay on board during the loading and unloading of the cargo;
5.
Be on deck while leaving or entering the port;
6.
Protest arrivals under stress and in case of shipwreck;
7.
Follow instructions of and render an accounting to the ship
agent;
8.
Leave the vessel last in case of wreck;
9.
Hold in custody properties left by deceased passengers and
crew members;
10.
Comply with the requirements of customs, health, etc. at the
port of arrival;
11.
Observe rules to avoid collision;
12.
Demand a pilot while entering or leaving a port. (Art. 612)

A ships captain must be accorded a reasonable measure of

discretionary authority to decide what the safety of the ship and of its
crew and cargo specifically requires on a stipulated ocean voyage
(Inter-Orient Maritime Enterprises Inc. vs. CA).

No liability for the following:

1.
Damages caused to the vessel or to the cargo by force
majeure;
2.
Obligations contracted for the repair, equipment, and
provisioning of the vessel unless he has expressly bound himself
personally or has signed a bill of exchange or promissory note in his
name. (Art. 620)

Solidary Liabilities of the Ship Agent/Shipowner for Acts Done by

the Captain towards Passengers and Cargoes
1.
Damages to vessel and to cargo due to lack of skill and
negligence;
2.
Thefts and robberies of the crew;
3.
Losses and fines for violation of laws;
4.
Damages due to mutinies;
5.
Damages due to misuse of power;
6.
For deviations;
7.
For arrivals under stress;
8.
Damages due to non-observance of marine regulations. (Art.
618)

Sources of funds to comply with the inherent powers of the

captain (in successive order):
1.
From the consignee of the vessel;
2.
From the consignee of the cargo;

The captain of a vessel is a confidential and managerial employee. A

master or captain, for purposes of maritime commerce, is one who has
command of a vessel. A captain commonly performs three (3) distinct
roles: (1) he is a general agent of the shipowner; (2) he is also
commander and technical director of the vessel; and (3) he is a
representative of the country under whose flag he navigates. In his role
as general agent of the shipowner, the captain has authority to sign bills
of lading, carry goods aboard and deal with the freight earned, agree
upon rates and decide whether to take cargo. The ship captain, as
agent of the shipowner, has legal authority to enter into contracts with
respect to the vessel and the trading of the vessel, subject to applicable
limitations established by statute, contract or instructions and
regulations of the shipowner. To the captain is committed the
governance, care and management of the vessel. Clearly, the captain is
vested with both management and fiduciary functions. A ship's captain
must be accorded a reasonable measure of discretionary authority to
decide what the safety of the ship and of its crew and cargo specifically
requires on a stipulated ocean voyage. The captain has control of all
departments of service in the vessel, and reasonable discretion as to its
navigation. It is the right and duty of the captain, in the exercise of
sound discretion and in good faith, to do all things with respect to the
vessel and its equipment and conduct of the voyage which are
reasonably necessary for the protection and preservation of the
interests under his charge, whether those be of the shipowner,
charterers, cargo owners or of underwriters. In navigating a
merchantman, the master must be left free to exercise his own best

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Qualifications:
1.
Filipino citizen;
2.
Legal capacity to contract;
3.
Must have passed the required physical and mental
examinations required for licensing him as such. (Art. 609)

Inherent powers:
1.
Appoint crew in the absence of ship agent;
2.
Command the crew and direct the vessel to its port of
destination;
3.
Impose correctional punishment on those who, while on
board vessel, fail to comply with his orders or are wanting in discipline;
4.
Make contracts for the charter of vessel in the absence of
ship agent.
5.
Supply, equip, and provision the vessel; and
6.
Order repair of vessel to enable it to continue its voyage. (Art.
610)

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judgment. If the ship captain is convinced, as a reasonably prudent and
competent mariner acting in good faith that the shipowner's or ship
agent's instructions will result, in the very specific circumstances facing
him, in imposing unacceptable risks of loss or serious danger to ship or
crew, he cannot casually seek absolution from his responsibility, if a
marine casualty occurs, in such instructions. (Inter-Orient v. NLRC)

When jettison of cargo occurs it is the duty of the captain to effect the
adjustment, liquidation, and distribution of the general average; and his
omission to take these steps constitutes an actionable dereliction of
duty. For this omission not only is the captain personally liable to the
shipper of the jettisoned goods, but the latter may go at once upon the
owner, since the captain of the ship is the representative of the owner,
and the latter is civilly liable for the acts of the former. The owner of the
ship ordinarily has vastly more capital embarked upon a voyage than
has any individual shipper of cargo. Moreover, the owner of the ship, in
the person of the captain, has complete and exclusive control of the
crew and of the navigation of the ship, as well as of the disposition of
the cargo at the end of the voyage. It is therefore proper that any
person whose property may have been cast overboard by order of the
captain should have a right of action directly against the ship's owner
for the breach of any duty which the law may have imposed on the
captain with respect to such cargo. The evident intention of the Code,
taken in all of its provisions, is to place the primary liability upon the
person who has actual control over the conduct of the voyage and who
has most capital embarked in the venture, namely, the owner of the
ship, leaving him to obtain recourse, as it is very easy to do, from other
individuals who have been drawn into the venture as shippers.
(Standard Oil v. Castelo)

- 41 purpose, provided there is no time to request instruction from the

ship agent.
6. To order, in similar urgent cases while on a voyage, the repairs
on the hull and engines of the vessel and in its rigging and
equipment, which are absolutely necessary to enable it to
continue and finish its voyage; but if he should arrive at a point
where there is a consignee of the vessel, he shall act in
concurrence with the latter.

ARTICLE 611. In order to comply with the obligations mentioned in

the preceding article, the captain, when he has no funds and does
not expect to receive any from the ship agent, shall obtain the
same in the successive order stated below:
1. By requesting said funds from the consignee of the vessel or
correspondents of the ship agent.
2. By applying to the consignees of the cargo or to those
interested therein.
3. By drawing on the ship agent.
4. By borrowing the amount required by means of a loan on
bottomry.
5. By selling a sufficient amount of the cargo to cover the sum
absolutely indispensable for the repair of the vessel and to enable
it to continue its voyage.
In these two last cases he must apply to the judicial authority of
the port, if in the Philippines, and to the consul of the Republic of
the Philippines if in a foreign country, and where there is none, to
the local authority, proceeding in accordance with the provisions
of Article 583, and with the provisions of the law of civil procedure.

ARTICLE 610. The following powers shall be inherent in the

position of captain, master or patron of a vessel:
1. To appoint or make contracts with the crew in the absence of
the ship agent, and to propose said crew, should said agent be
present; but the ship agent may not employ any member against
the captain's express refusal.
2. To command the crew and direct the vessel to the port of its
destination, in accordance with the instructions he may have
received from the ship agent.
3. To impose, in accordance with the contracts and with the laws
and regulations of the merchant marine, and when on board the
vessel, correctional punishment upon those who fail to comply
with his orders or are wanting in discipline, holding a preliminary
hearing on the crimes committed on board the vessel on the seas,
which crimes shall be turned over to the authorities having
jurisdiction over the same at the first port touched.
4. To make contracts for the charter of the vessel in the absence of
the ship agent or of its consignee, acting in accordance with the
instructions received and protecting the interests of the owner
with utmost care.
5. To adopt all proper measures to keep the vessel well supplied
and equipped, purchasing all that may be necessary for the

ARTICLE 612. The following obligations shall be inherent in the

office of captain:
1. To have on board before starting on a voyage a detailed
inventory of the hull, engines, rigging, spare-masts, tackle, and
other equipment of the vessel; the royal or the navigation
certificate; the roll of the persons who make up the crew of the
vessel, and the contracts entered into with them; the lists of
passengers; the bill of health; the certificate of the registry
proving the ownership of the vessel and all the obligations which
encumber the same up to that date; the charter parties or
authenticated copies thereof; the invoices or manifests of the
cargo, and the memorandum of the visit or inspection by experts,
should it have been made at the port of departure.
2. To have a copy of this code on board.
3. To have three folioed and stamped books, placing at the
beginning of each one a memorandum of the number of folios it
contains, signed by the maritime authority, and in his absence by
the competent authority.
In the first book, which shall be called "log book," he shall enter
day by day the condition of the atmosphere, the prevailing winds,
the courses taken, the rigging carried, the power of the engines
used in navigation, the distances covered, the maneuvers
executed, and other incidents of navigation; he shall also enter the
damage cause may be, as well as the impairment and damage
suffered by cargo, and the effect and importance of the jettison,
should there be any; and in cases of serious decisions which
require the advice or a meeting of the officers of the vessel, or
even of the crew and passengers, he shall record the decisions
adopted. For the information indicated he shall make use of the
binnacle book and of the steam of engine book kept by the
engineer.
In the second book called the "accounting book," he shall record
all the amounts collected and paid for the account of the vessel,
entering specifically article by article, the source of the collection
and the amounts spent for provisions, repairs, acquisitions of
equipment or goods, fuel, food, outfits, wages, and other
expenses of whatever nature they may be. He shall furthermore
enter therein a list of all the members of the crew, stating their
domiciles, their wages and salaries, and the amounts they may
have received on account, directly or by delivery to their families.
In the third book, called "freight book," he shall record the loading
and discharge of all the goods, stating their marks and packages,
names of the shippers and of the consignees, ports of loading and
unloading, and the freightage they give. In this same book he shall

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The "Don Carlos" failed to comply with the requirements of Rule 18 (a)
of the International Rules of the Road, which provides: "(a) When two
power-driven vessels are meeting end on, or nearly end on, so as to
involve risk of collision, each shall alter her course to starboard, so that
each may pass on the port side of the other. The "Don Carlos" also
violated Rule 28 (c) for it failed to give the required signal of two (2)
short horn blasts meaning "I am altering my course to port. The "Don
Carlos" failed to have on board that night a "proper look-out" as
required by Rule I (B) of the International Rules of the Road. Under
Rule 29 of the same set of Rules, all consequences arising from the
failure of the "Don Carlos" to keep a "proper look-out" must be born by
the "Don Carlos." The Second Mate Benito German was, immediately
before and during the collision, in command of the "Don Carlos."
Second Mate German simply did not have the level of experience,
judgment and skill essential for recognizing and coping with the risk of
collision as it presented itself that early morning when the "Don Carlos,"
running at maximum speed and having just overtaken the "Don
Francisco" then approximately one mile behind to the starboard side of
the "Don Carlos," found itself head-on or nearly head-on vis-a-vis the
"Yotai Maru." (Smith Bell v. CA)

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record the names and places of sailing of the passengers, the
number of packages in their baggage, and the price of passage.
4. Before receiving cargo, to make with the officers of the crew
and two experts, if required by the shippers and passengers, an
examination of the vessel, in order to ascertain whether it is watertight, with the rigging and engines in good condition, and with the
equipment required for good navigation, preserving under his
responsibility a certificate of the memorandum of his inspection,
signed by all those who may have taken part therein.
The experts shall be appointed, one by the captain of the vessel
and another by those who request its examination, and in case of
disagreement a third shall be appointed by the marine authority of
the port or by the authority, exercising his functions.
5. To remain constantly on board the vessel with the crew while
the cargo is being taken on board and to carefully watch the
stowage thereof; not to consent to the loading of any merchandise
or matter of a dangerous character, such as inflammable or
explosive substances, without the precautions which are
recommended for their packing, handling and isolation; not to
permit the carriage on deck of any cargo which by reason of its
arrangement, volume, or weight makes the work of the sailors
difficult, and which might endanger the safety of the vessel; and if,
on account of the nature of the merchandise, the special character
of the shipment, and principally the favorable season in which it is
undertaken, merchandise may be carried on deck, he must hear
the opinion of the officers of the vessel and have the consent of
the shippers and of the ship agent.
6. To demand a pilot at the expense of the vessel whenever
required by the navigation, and principally when he has to enter a
port, canal, or river, or has to take a roadstead or anchoring place
with which neither he nor the officers and crew are acquainted.
7. To be on deck on reaching land and to take command on
entering and leaving ports, canals, roadsteads, and rivers, unless
there is a pilot on board discharging his duties. He shall not spend
the night away from the vessel except for serious causes or by
reason of official business.
8. To present himself, when making a port in distress, to the
maritime authority if in the Philippines and to the consul of the
Republic of the Philippines if in a foreign country, before twentyfour hours have elapsed, and to make a statement of the name
registry, and port of departure of the vessel, of its cargo, and the
cause of arrival which declaration shall be visaed by the authority
or the consul, if after examining the same it is found to be
acceptable, giving the captain the proper certificate proving his
arrival in distress and the reasons therefor. In the absence of the
maritime authority or of the consul, the declaration must be made
before the local authority.
9. To take the necessary steps before the competent authority in
order to record in the certificate of the vessel in the registry of
vessels the obligations which he may contract in accordance with
Article 583.
10. To place under good care and custody all the papers and
belongings of any members of the crew who might die on the
vessel, drawing up a detailed inventory, in the presence of
passengers, or, in their absence, of members of the crew as
witnesses.
11. To conduct himself according to the rules and precepts
contained in the instructions of the ship agent, being liable for all
that which he may do in violation thereof.
12. To inform the ship agent from the port at which the vessel
arrives, of the reason of his arrival, taking advantage of the
semaphore, telegraph, mail, etc., as the case may be; to notify him
of the cargo he may have received, stating the names and
domiciles of the shippers, freightage earned, and amounts
borrowed on bottomry loan; to advise him of his departure, and of
any operation and date which may be of interest to him.
13. To observe the rules with respect to situation, lights and
maneuvers in order to avoid collisions.
14. To remain on board, in case the vessel is in danger, until all
hope to save it is lost, and before abandoning it, to hear the
officers of the crew, abiding by the decision of the majority; and if
the boats are to be taken to, he shall take with him, before
anything else, the books and papers, and then the articles of most

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- 42 value, being obliged to prove, in case of the loss of the books and
papers, that he did all he could to save them.
15. In case of wreck, to make the proper protest in due form at the
first port of arrival, before the competent authority or the
Philippine consul, within twenty-four hours, specifying therein all
the incidents of the wreck, in accordance with subdivision 8 of
this article.
16. To comply with the obligations imposed by the laws and
regulations on navigation, customs, health, and others.

study Article s 610-612 for the bar

Captain

Master

General agent of shipowner

Technical director
Representative of the flag of the
government
Found in ocean vessels

Found in smaller boats

PILOT
A person duly qualified, and licensed, to conduct a vessel into or out of
ports, or in certain waters.
The term generally connotes a person taken on board at a particular
place for the purpose of conducting a ship through a river, road or
channel, or from a port.
Master pro hac vice for the time being in the command and navigation
of the ship.

While in exercising his functions a pilot is in sole command of the ship

and supersedes the master for the time being in the command and
navigation of the ship, the master does not surrender his vessel to the
pilot and the pilot is not the master. There are occasions when the
master may and should interfere and even displace the pilot, as when
the pilot is obviously incompetent or intoxicated (Far Eastern Shipping
Company vs. CA).

Compulsory Pilotage States possessing harbors have enacted laws

or promulgated rules requiring vessels approaching their ports to take
on board pilots licensed under the local laws. (Notes and Cases on the
Law on Transportation and Public Utilities, Aquino, T. & Hernando, R.P.
2004 ed. p. 518)

Liablity of Pilot
GENERAL RULE: On compulsory pilotage grounds, the Harbor Pilot is
responsible for damage to a vessel or to life or property due to his
negligence.
EXCEPT:
1. Accident caused by force majeure or natural calamity provided the
pilot exercised prudence and extra diligence to prevent or minimize
damages.
2. Countermand or overrule by the master of the vessel in which case
the registered owner of the vessel is liable. (Sec.11, Art.III PPA Admin
Order 03-85)

A pilot, in maritime law, is a person duly qualified, and licensed, to

conduct a vessel into or out of ports, or in certain waters. The term
includes both (1) those whose duty it is to guide vessels into or out of
ports, or in particular waters and (2) those entrusted with the navigation
of vessels on the high seas. However, it is more generally understood
as a person taken on board at a particular place for the purpose of
conducting a ship through a river, road or channel, or from a port.
Under English and American authorities, generally speaking, the pilot
supersedes the master for the time being in the command and
navigation of the ship, and his orders must be obeyed in all matters
connected with her navigation. He becomes the master pro hac vice
and should give all directions as to speed, course, stopping and
reversing, anchoring, towing and the like. And when a licensed pilot is
employed in a place where pilotage is compulsory, it is his duty to insist
on having effective control of the vessel, or to decline to act as pilot.

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The purpose of these laws providing for compulsory pilotage is to
create a body of seamen thoroughly acquainted with the harbor, to pilot
vessels seeking to enter or depart, and thus protect life and property
from the dangers of navigation. (Far Eastern v. CA)

ARTICLE 613. A captain who navigates for freight in common or

on shares may not make any separate transaction for his own
account; and should he do so, the profit which may accrue shall
belong to the other persons interested, and the losses shall be
borne by him exclusively.

ARTICLE 614. A captain who, having made an agreement to make

a voyage, fails to perform his undertaking, without prevented by
fortuitous accident or force majeure, shall indemnify for all the
losses which he may cause without prejudice to the criminal
penalties which may be proper.

ARTICLE 615. Without the consent of the agent, the captain

cannot have himself substituted by another person; and should he
do so, besides being liable for all the acts of the substitute and
bound to the indemnities mentioned in the foregoing articles, the
captain as well as the substitute may be discharged by the ship
agent.

ARTICLE 622. If while on a voyage the captain should learn of the

appearance of privateers or men of war against his flag, he shall
be obliged to make the nearest neutral port, inform his agent or
shippers, and await an occasion to sail under convoy, or until the
danger is over or he has received express orders from the ship
agent or the shippers.

privateer- warships
ARTICLE 623. If he should be attacked by a privateer, and, after
having tried to avoid the encounter and having resisted the
delivery of the effects of the vessel or its cargo, they should be
forcibly taken away from him, or he should be obliged to deliver
them, he shall make an entry thereof in his freight book and shall
prove the fact before the competent authority at the first port he
touches.
After the force majeure has been proved, he shall be exempted
from liability.

ARTICLE 624. A captain whose vessel has gone through a

hurricane or who believes that the cargo has suffered damages or
averages, shall make a protest thereon before the competent
authority at the first port he touches, within twenty-four hours
following his arrival and shall ratify it within the same period when
he arrives at his destination, immediately proceeding with the
proof of the facts, and he may not open the hatches until after this
has been done.
The captain shall proceed in the same manner, if, the vessel
having been wrecked; he is saved alone or with part of his crew, in
which case he shall appear before the nearest authority, and make
a sworn statement of facts.
The authority or the consul shall verify the said facts receiving
sworn statements of the members of the crew and passengers
who may have been saved; and taking such other steps as may
assist in arriving at the facts he shall make a statement of the
result of the proceedings in the log book and in that of the sailing
mate, and shall deliver to the captain the original record of the
proceedings, stamped and folioed, with a memorandum of the
folios, which he must rubricate, in order that it may be presented
to the judge or court of the port of destination.
The statement of the captain shall be accepted if it is in
accordance with those of the crew and passengers; if they
disagree, the latter shall be accepted, always saying proof to the
contrary.

ARTICLE 625. The captain, under his personal responsibility as

soon as he arrives at the port of destination, should get the
necessary permission from the health and customs officers, and
perform the other formalities required by the regulations of the

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- 43 administration, delivering the cargo without any defalcation, to the

consignee, and in a proper case, the vessel, rigging, and
freightage to the ship agent.
If by reason of the absence of the consignee or on account of the
nonappearance of a legal holder of the bills of lading, the captain
should not know to whom he is to legally make the delivery of the
cargo, he shall place it at the disposal of the proper judge or court
or authority, in order that he may determine what is proper with
regard to its deposit, preservation and custody.

ARTICLE 626. In order to be a sailing mate it shall be necessary:

1. To have the qualifications required by the marine or navigation
laws or regulations.
2. Not to be disqualified in accordance therewith for the discharge
of his duties.

ARTICLE 617. The captain may not contract loans on respondentia

secured by the cargo; and should he do so, the contracts shall be
void.
Neither may he borrow money on bottomry for his own
transactions, except on the portion of the vessel he owns,
provided no money has been previously borrowed on the whole
vessel, and there does not exist any other kind of lien or
obligation chargeable against the vessel. If he may do so, he must
state what interest he has in the vessel.
In case of violation of this article, the principal, interest, and costs
shall be for the personal account of the captain, and the ship
agent may furthermore discharge him.

ARTICLE 618. The captain shall be civilly liable to the ship agent,
and the latter to the third persons who may have made contracts
with the former;
1. For all the damages suffered by the vessel and its cargo by
reason of want of skill or negligence on his part. If a misdemeanor
or crime has been committed, he shall be liable in accordance with
the Penal Code.
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 an account of
violation of customs, police, health, and navigation laws and
regulations.
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 timely
use of all his authority to prevent or avoid them.
obligations pertaining to him in accordance with Articles 610 and
612.
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.
No exceptions whatsoever shall exempt him from this obligation.
7. For those arising by reason of his voluntarily entering a port
other than that of his destination, outside of the cases or without
the formalities referred to in Article 612.
8. For those arising by reason of non-observance of the
provisions contained in the regulations on situation of lights and
maneuvers for the purpose of preventing collisions.

ARTICLE 619. The captain shall be liable for the cargo from the
time it is delivered to him at the dock or afloat alongside the at the
port of loading, until he delivers it on the shore or on the
discharging wharf at the port of unloading, unless the contrary
has been expressly agreed upon.

ARTICLE 620. The captain shall not be liable for the damages
caused to the vessel or to the cargo by force majeure; but he shall
always be so for those arising through his own fault, no
agreement to the contrary being valid.
Neither shall he be personally liable for the obligations he may
have contracted for the repair, equipment, and provisioning of the
vessel, which shall devolve upon the ship agent, unless the former

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has expressly bound himself personally or has signed a bill of
exchange or promissory note in his name.

SECTION THREE OFFICERS AND CREW OF VESSELS

ARTICLE 621. A captain who borrows money on the hull, engine,

rigging or tackle of the vessel, or pledges or sells merchandise or
provisions outside of the cases and without the formalities
prescribed in this Code, shall be liable for the principal, interests,
and costs, and shall indemnify for the damages he may cause.
He who commits fraud in his accounts shall pay the amount
defrauded and shall be subject to the provisions of the Penal
Code.

OFFICERS AND CREW

1.
Sailing Mate/First Mate
2.
Second Mate
3.
Engineers
4.
Crew
F No liability under the following circumstances:
1.
If, before beginning voyage, captain attempts to change it, or
a naval war with the power to which the vessel was destined occurs;
2.
If a disease breaks out and be officially declared an epidemic
in the port of destination;
3.
If the vessel should change owner or captain. (Art. 647)

ARTICLE 627. The sailing mate, as the second chief of the vessel,
and unless the agent orders otherwise, shall take the place of the
captain in cases of absence, sickness, or death, and shall then
assume all his powers, duties, and responsibilities.

Sailing Mate/First Mate

Second chief of the vessel who takes the place of the captain in case of
absence, sickness, or death and shall assume all of his duties, powers
and responsibilities. (Art. 627)
F Duties:
1.
Provide himself with maps and charts with astronomical
tables necessary for the discharge of his duties;
2.
Keep the Binnacle Book;
3.
Change the course of the voyage on consultation with the
captain and the officers of the boat, following the decision of the captain
in case of disagreement;
4.
Responsible for all the damages caused to the vessel and
the cargo by reason of his negligence. (Arts. 628 - 631)

- 44 should still insist on his negative decision, the sailing mate shall
make the proper protest, signed by him and by one other officer,
in the log book, and shall obey the captain, who alone shall be
responsible for the consequences of his decision.

ARTICLE 631. The sailing mate shall be responsible for all the
damages caused to the vessel and the cargo by reason of his
negligence or want of skill without prejudice to the criminal
liability which may arise, if a felony or misdemeanor has been
committed.

ARTICLE 632. The following shall be the obligations of the second

mate:
1. To watch over the preservation of the hull and rigging of the
vessel, and to take charge of the preservation of the tackle and
equipment which make up her outfit, suggesting to the captain the
repairs necessary and the replacement of the goods and
implements which are rendered useless and are lost.
2. To take care that the cargo is well arranged, keeping the vessel
always ready for maneuver.
3. To preserve order, discipline, and good service among the crew,
requesting the necessary orders and Instructions of the captain,
and giving him prompt information of any occurrence in which the
intervention of his authority may be necessary.
4. To assign to each sailor the work he is to do on board, in
accordance with the instruction received and to see that it is
promptly and accurately carried out.
5. To take charge under inventory of the rigging and all the
equipment of the vessel, if it should be laid up, unless the ship
agent has ordered otherwise.

ARTICLE 630. In order to change the course and to take the one
most convenient for a good voyage of the vessel, the sailing mate
shall come to an agreement with the captain. If the latter should
object, the sailing mate shall state to him the proper observations
in the presence of the other officers of the sea. If the captain

With regard to engineers the following rules shall govern:

1. In order to be taken on board as a marine engineer forming part
of the complement of a merchant vessel, it shall be necessary to
have the qualifications which the laws and regulations require,
and not be disqualified in accordance therewith for the discharge
of his duties. Engineers shall be considered officers of the vessel
but they shall have no authority or intervention except in matters
referring to the motor apparatus.
2. When there are two or more engineers on board a vessel, one of
them shall be the chief, and the other engineers and all the
personnel of the engines shall be under his orders; he shall also
have charge of the motor apparatus, the spare parts, the
instruments and tools pertaining thereto, the fuel, the lubricating
material and, finally, whatever is entrusted to an engineer on
board a vessel.
3. He shall keep the engines and boilers in good condition and
state of cleanliness, and shall order what may be proper in order
that they may always be ready to work with regularity, being liable
for the accidents or damages which his negligence or want of skill
may cause to the motor apparatus, to the vessel and to the cargo,
without prejudice to the criminal liability which may be proper if
there has been a felony or misdemeanor.
4. He shall not make any change in the motor apparatus, or
proceed to repair the averages he may have noticed in the same,
or change the normal speed of its movement without the prior
authorization of the captain., to whom, if he should object to their
being made, he shall state the proper observations in the
presence of the other engineers or officers; and if,
notwithstanding this, the captain should insist on his objection,
the chief engineer shall make the proper protests, entering the
same in the engine book, and shall obey the captain, who, alone
shall be responsible for the consequences of his decision.
5. He shall inform the captain of any average which may occur in
the motor apparatus, and shall advise him whenever it may be
necessary to stop the engines for some time, or when any other
incident occurs in his department of which the captain should be
immediately informed, besides frequently advising him of the
consumption of fuel and lubricating material.
6. He shall keep a book or registry called the "engine book," in
which shall be entered all the date referring to the work of the
engines, such as, for example, the number of furnaces heated, the
vacuum in the condenser, the temperature, the degree of

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ARTICLE 628. The sailing mate must provide himself with charts
of the seas in which he will navigate with the astronomical tables
and instruments for observation which are in use and which are
necessary for the discharge of his duties, being liable for the
accidents which may arise by reason of his omission in this
regard.

ARTICLE 629. The sailing mate shall particularly and personally

keep a book, folioed and stamped on all its pages, denominated
"Binnacle Book" with a memorandum at the beginning stating the
number of folios it contains, signed by the competent authority,
and shall enter therein daily the distance, the course travelled, the
variations of the needle, the leeway, the direction and force of the
wind, the condition of the atmosphere and of the sea, the rigging
set, the latitude and longitude observed, the number of furnace
heated, the steam pressure, the number of revolutions, and under
the title "incidents," the maneuvers made, the meeting with other
vessels, and all the details and incidents which. may occur during
the voyage.

remember this for the bar: Binnacle Book

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saturation of the water in the boilers the consumption of fuel and
lubricating material, and under the heading of "noteworthy
occurrences," the averages and maladjustments which occur in
the engines and boilers, the causes thereof and the means
employed to repair the same likewise, the force and direction of
the wind, the rigging set and the speed of the vessel shall be
stated, taking the information from the Binnacle Book.

ARTICLE 633. The second mate shall take command of the vessel
in case of the inability or disqualification of the captain and the
sailing mate, assuming in such case their powers and
responsibility.

Second Mate
Takes command of the vessel in case of the inability or disqualification
of the captain and the sailing mate, assuming in such case their powers
and responsibilities.
F Third in command
F Duties:
1.
Preserve the hull and rigging of the vessel;
2.
Arrange well the cargo;
3.
Discipline the crew;
4.
Assign work to crew members;
5.
Inventory the rigging and equipment of the vessel, if laid up.
(Art. 632)

Engineers
Officers of the vessel but have no authority except in matters referring
to the motor apparatus. When two or more are hired, one of them shall
be the chief engineer.
F Duties:
1.
In charge of the motor apparatus, spare parts, and other
instruments pertaining to the engines;
2.
Keep the engines and boilers in good condition;
3.
Not to change or repair the engine without authority of the
captain;
4.
Inform the captain of any damage to the motor apparatus;
5.
Keep an Engine Book;
6.
Supervise all personnel maintaining the engine. (Art. 632)

ARTICLE 634. The captain may make up the crew of his vessel
with such number of men as he may consider proper, and in the
absence of Filipino sailors, he may take on foreigners residing in
the country, the number thereof not to exceed one-fifth of the
crew. If in foreign ports the captain should not find a sufficient
number of Filipino sailors, he may complete the crew with
foreigners, with the consent of the consul or marine authorities.
The agreement which the captain may make with the members of
the crew and others who go to make up the complement of the
vessel, to which reference is made in Article 612, must be reduced
to writing in the account book, without the intervention of a notary
public or clerk of court ("escribano"), signed by the parties thereto
and visaed by the marine authority if they be executed in
Philippine territory or by the consuls or consular agents of the
Republic of the Philippines if executed abroad, stating therein all
the obligations which each one contracts and all the rights he
acquires said authorities taking care that these obligations and
rights are recorded in a clear and definite manner which give no
room for doubts or claims.
The captain shall take care to read to them the articles of this
Code which concern them, stating in said document that they
were read.
If the book contains the requisites prescribed in Article 612, and
there should not appear any signs of alterations in its entries, it
shall be admitted as evidence in questions which may arise
between the captain and the crew with respect to the agreements
contained therein and the amounts paid on account of the same.
Every member of the crew may demand of the captain a copy,
signed by the latter, of the agreement and of the liquidation of his
wages, as they appear in the book.

ARTICLE 635. A seaman who has been contracted to serve on a

vessel may not rescind his contract or fail to comply therewith
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- 45 except by reason of a legitimate impediment which may have

happened to him.
Neither may he transfer from the service of one vessel to another
without obtaining the written permission of the captain of the
vessel on which he may be.
If, without obtaining said permission, the seaman who has signed
for one vessel should sign for another one, the second contract
shall be void, and the captain may choose between forcing him to
fulfill the service to which he first bound himself, or at his expense
to look for a person to substitute him.
Furthermore, he shall lose the wages earned on his first contract,
to the benefit of the vessel for which he had signed.
A captain who, knowing that a seaman is in the service of another
vessel, should have made a new agreement with him without
having required of him the permission referred to in the preceding
paragraphs, shall be subsidiarily responsible to the captain of the
vessel to which the seaman first belonged, for that part of the
indemnity, referred to in the third paragraph of this article, which
the seaman may not be able to pay.

Crew
The aggregate of seamen who man a ship, or the ships company.
Hired by the ship agent, where he is present and in his absence, the
captain hires them, preferring Filipinos, and in their absence, he may
take in foreigners, but not exceeding 1/5 of the crew. (Art. 634)

Classes of Seamans Contracts

1.
By the voyage;
2.
By the month; and
3. By share of profits or freightage.

Just Causes for the Discharge of Seaman While Contract Subsists

1.
Perpetration of a crime;
2.
Repeated insubordination, want of discipline;
3.
Repeated incapacity and negligence;
4.
Habitual drunkenness;
5.
Physical incapacity;
6.
Desertion. (Art. 637)

Rules in case of Death of a Seaman

The seamans heirs are entitled to payment as follows:
1.
If death is natural:
a.
compensation up to time of death if engaged on wage
b.
if by voyage - half of amount if death occurs on voyage out;
and full, if on voyage in
c.
if by shares - none, if before departure; full, if after departure
2.
if death is due to defense of vessel - full payment;
3.
if captured in defense of vessel - full payment;
4.
if captured due to carelessness - wages up to the date of the
capture. (Art. 645)

Complement of the Vessel

All persons on board, from the captain to the cabin boy, necessary for
the management, maneuvers, and service, thus including the crew, the
sailing mates, engineers, stokers and other employees on board not
having specific designations.
Does not include the passengers or the persons whom the vessel is
transporting.

ARTICLE 643. If the vessel and her cargo should be totally lost, by
reason of capture or wreck, all rights shall be extinguished, both
as regards the crew to demand any wages whatsoever, and as
regards the ship agent to recover the advances made.
If a portion of the vessel or of the cargo, or of both, should be
saved, the crew engaged on wages, including the captain, shall
retain their rights on the salvage, so far as they go, on the
remainder of the vessel as well as on the amount of the freightage
of the cargo saved; but sailors who are engaged on shares shall
not have any right whatsoever on the salvage of the hull, but only
on the portion of the freightage saved. [If they should have worked
to recover the remainder of the shipwrecked vessel they shall be
given from the amount of the salvage an award in proportion of

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the efforts made and to the risks, encountered in order to
accomplish the salvage.] [repealed by Salvage Law]

ARTICLE 644. A seaman who falls sick shall not lose his right to
wages during the voyage, unless the sickness is the result of his
own fault. At any rate, the costs of the attendance and cure shall
be defrayed from the common funds, in the form of a loan. If the
sickness should come from an injury received in the service or
defense of the vessel, the seaman shall be attended and cured at
the expense of the common funds deducting, before anything
else, from the proceeds of the freightage the cost of the
attendance and cure.

ARTICLE 645. If a seaman should die during the voyage, his heirs
will be given the wages earned and not received according to his
contract and the cause of his death, namely
If he died a natural death and was engaged on wages, that which
may have been earned up to the date of his death shall be paid.
If the contract was for a fixed sum for the whole voyage, half the
amount earned shall be paid if the seamen died on the voyage out,
and the whole amount if he died on the return voyage.
And if the contract was on shares and death occurred after the
voyage was begun, the heirs shall be paid the entire portion due
the seaman; but if the latter died before the departure of the vessel
from the port, the heirs shall not be entitled to claim anything.
If death occurred in the defense of the vessel, the seaman shall be
considered as living, and his heirs shall be paid, at the end of the
voyage, the full amount of wages or the integral part of the profits
which may be due him as to others of his class.
In the same manner, the seaman captured while defending the
vessel shall be considered present so as to enjoy the same
benefits as the rest; but should he have been captured on account
of carelessness or other accident not related to the service, he
shall only receive the wages due up to the day of his capture.

Shares refers to interest in the freight

ARTICLE 648. By the complement of a vessel shall be understood

all the persons on board, from the captain to the cabin boy,
necessary for the management, maneuvers, and service, and
therefore, the complement shall include the crew, the sailing
mates, engineers, stokers and other employees on board not
having specific designations; but it shall not include the
passengers or the persons whom the vessel is transporting.

ARTICLE 636. If there is no fixed period for which a seaman has

been contracted he may not be discharged until the end of the
return voyage to the port where he enlisted.
ARTICLE 637. Neither may the captain discharge a seaman during
the time of his contract except for just cause, the following being
considered as such:
1. The perpetration of a crime which disturbs order on the vessel.
2. Repeated insubordination, want of discipline, or non-fulfillment
of the service.
3. Repeated incapacity and negligence in the fulfillment of the
service he should render.
4. Habitual drunkenness.
5. Any occurrence which incapacitates the seaman to perform the
work entrusted to him, with the exception of that provided in
Article 644.
6. Desertion.

The captain may, however, before getting out on a voyage and

without giving any reason, refuse to permit a seaman whom he
may have engaged to go on board, and leave him on land, in
which case he will be obliged to pay him his wages as if he had
rendered services.
This indemnity shall be paid from the funds of the vessel if the
captain should have acted for reasons of prudence and in the
interest of the safety and good services of the farmer. Should this
not be the case, it shall be paid by the captain personally.

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- 46 After the voyage has begun, during the same, and until the
conclusion thereof, the captain may not abandon any member of
his crew on land or on sea, unless, by reason of some crime, his
imprisonment and delivery to the competent authority in the first
port touched should be proper, a matter obligatory for the captain.

ARTICLE 638. If, after the crew has been engaged, the voyage is
revoked by the will of the ship agent or of the charterers before or
after the vessel has put to sea, or if the vessel is for the same
reason given a destination different from that fixed in the
agreement with the crew, the latter shall be indemnified on
account of the rescission of the contract, according to the cases
follows:
1. If the revocation of the voyage should be decided upon before
the departure of the vessel from the port, each sailor engaged
shall be given one month's salary, besides what may be due him,
in accordance with his contract, for the services rendered to the
vessel up to the date of the revocation.
2. If the agreement should have been for a fixed amount for the
whole voyage, that which may be due for said month and days
shall be determined in proportion to the approximate number of
days the voyage should have lasted, in the judgment of experts, in
the manner established in the law of Civil Procedure; and if the
proposed voyage should be of such short duration that it is
calculated at approximately one month, the indemnity shall be
fixed for fifteen days, discounting in all cases the sums advanced.
3. If the revocation should take place after the vessel has put to
sea, the seamen engaged for a fixed amount for the voyage shall
receive in full the salary which may have been offered them as if
the voyage had terminated; and those engaged by the month shall
receive the amount corresponding to the time they might have
been on board and to the time they may require to arrive at the
port of destination, the captain being obliged, furthermore, to pay
the seamen in both cases, the passage to the said port or to the
port of sailing of the vessel, as may be convenient for them.
4. If the ship agent or the charterers of the vessel should give it a
destination different from that fixed in the agreement, and the
members of the crew should not agree thereto, they shall be given
by way of indemnity half the amount fixed in case No. 1, besides
what may be owed them for the part of the monthly wages
corresponding to the days which have elapsed from the date of
their agreements.
If they accept the change, and the voyage, on account of the
greater distance or of other reasons, should give rise to an
increase of wages, the latter shall be adjusted privately or through
amicable arbitrators in case of disagreement. Even though the
voyage should be shortened to a nearer point, this shall not give
rise to a reduction in the wages agreed upon.
If the revocation or change of the voyage should come from the
shippers or charterers, the agent shall have a right to demand of
them the indemnity which may be justly due.

ARTICLE 640. The following shall be just causes for the revocation
of the voyage.
1. A declaration of war or interdiction of commerce with the power
to whose territory the vessel was bound.
2. The blockade of the port of its destination, or the breaking out
of an epidemic after the agreement.
3. The prohibition to receive in said port the goods which make up
the cargo of the vessel.
4. The detention or embargo of the same by order of the
government, or for any other reason independent of the will of the
ship agent.
5. The inability of the vessel to navigate.

ARTICLE 641. If, after a voyage has been begun, any of the first
three causes mentioned in the foregoing article should occur, the
sailors shall be paid at the port which the captain may deem
advisable to make for the benefit of the vessel and cargo,
according to the time they may have served thereon; but if the
vessel is to continue its voyage, the captain and the crew may
mutually demand the enforcement of the contract.

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In case of the occurrence of the fourth cause, the crew shall
continue to be paid half wages, if the agreement is by month; but
if the detention should exceed three months, the contract shall be
rescinded and the crew shall be paid what they should have
earned according to the contract if the voyage had been
concluded. And if the agreement should be for a fixed sum for the
voyage, the contract must be complied within the terms agreed
upon.
In the fifth case, the crew shall have no other right than to collect
the wages earned; but if the disability of the vessel should have
been caused by the negligence or lack of skill of the captain,
engineer, or sailing mate, they shall indemnify the crew for the
damages suffered, always without prejudice to the criminal
liability which may be proper.

ARTICLE 642. If the crew have been engaged on shares, they shall
not be entitled, by reason of the revocation, delay, or greater
extension of the voyage, to anything but the proportionate part of
the indemnity which way be paid into the common funds of the
vessel by the persons liable for said occurrences.

ARTICLE 647. The officers and the crew of the vessel shall be free
from all obligations if they deem it proper, in the following cases:
1. If, before beginning the voyage, the captain attempts to change
it, or a naval war with the power to which the vessel was destined
occurs.
2. If a disease should break out and be officially declared an
epidemic in the port of destination.
3. If the vessel should change owner or captain.

ARTICLE 648. By the complement of a vessel shall be understood

all the persons on board, from the captain to the cabin boy,
necessary for the management, maneuvers, and service, and
therefore, the complement shall include the crew, the sailing
mates, engineers, stokers and other employees on board not
having specific designations; but it shall not include the
passengers or the persons whom the vessel is transporting.

SECTION FOUR SUPERCARGOES

ARTICLE 649. Supercargoes shall discharge on board the vessel
the administrative duties which the ship agent or the shippers may
have assigned to them; they shall keep an account and record of
their transactions in a book which shall have the same conditions
and requisites as required for the accounting book of the captain,
and they shall respect the latter in his capacity as chief of the
vessel.
The powers and responsibilities 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.

Supercargo an agent of the owner of 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 market, buys a cargo to be brought back
on the return voyage of the ship, and comes home with it.

- Persons who discharges administrative duties assigned to him by ship

agent or shippers, keeping an account and record of transaction as
required in the accounting book of the captain. (Art. 649)
ARTICLE 650. All the provisions contained in the second section
of Title III, Book II, with regard to capacity, manner of making
contracts, and liabilities of factors, shall be applicable to
supercargoes.

ARTICLE 651. Supercargoes may not, without special

authorization or agreement, make any transaction for their own
account during the voyage, with the exception of the ventures
which, in accordance with the custom of the port of destination,
they are permitted to do.

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- 47 Neither shall they be permitted to invest in the return trip more

than the profits from the ventures, unless there is an express
authorization from the principals.

TITLE THREE - SPECIAL CONTRACTS OF MARITIME COMMERCE

SECTION ONE - CHARTER PARTIES

PART I - FORMS AND EFFECTS OF CHARTER PARTIES

ARTICLE 652. A charter party must be drawn in duplicate and

signed by the contracting parties, and when either does not know
how or is not able to do so, by two witnesses at his request.
The charter party shall contain, besides the conditions freely
stipulated, the following circumstances:
1. The kind, name, and tonnage of the vessel.
2. Its flag and port of registry.
3. The name, surname, and domicile of the captain.
4. The name, surname, and domicile of the ship agent, if the latter
should make the charter party.
5. The name, surname, and domicile of the charterer; and if he
states that he is acting by commission, that of the person for
whose account he makes the contract.
6. The port of loading and unloading.
7. The capacity, number of tons or the weight or measurement
which they respectively bind themselves to load and to transport,
or whether the charter party is total.
8. The freightage to be paid, stating whether it is to be a fixed
amount for the voyage or so much per month, or for the space to
be occupied, or for the weight or measure of the goods of which
the cargo consists, or in any other manner whatsoever agreed
upon.
9. The amount of primage to be paid to the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and the
demurrage to be paid for each of them.
ARTICLE 653. If the cargo should be received without the charter
party having been signed, the contract shall be understood as
executed in accordance with what appears in the bill of lading, the
sole evidence of title with regard to the cargo for determining the
rights and obligations of the ship agent, of the captain, and of the
charterer.

ARTICLE 654. The charter parties executed with the intervention of

a broker, who certifies to the authenticity of the signatures of the
contracting parties because they were signed in his presence,
shall be full evidence in court; and if they should be conflicting,
that which accords with one which the broker must keep in his
registry, if kept in accordance with law, shall govern.
The contracts shall also be admitted as evidence, even though a
broker has not taken part therein, if the contracting parties
acknowledge the signatures to be the same as their own.
If no broker has intervened in the charter party and the signatures
are not acknowledged, doubts shall be decided by what is
provided for in the bill of lading and in the absence thereof, by the
proofs submitted by the parties.

ARTICLE 655. Charter parties executed by the captain in the

absence of the ship agent shall be valid and effective, even though
in executing them he should have acted in violation of the orders
and instructions of the ship agent or shipowner; but the latter
shall have a right of action against the captain for indemnification
of damages.

ARTICLE 656. If in the charter party the time in which the loading
and unloading are to take place is not stated, the usages of the
port where these acts take place shall be observed. After the
stipulated or the customary period has passed, and there is no
express proviso in the charter party fixing the indemnity for the
delay, the captain shall be entitled to demand demurrage for the
lay days and extra lay days which may have elapsed in loading
and unloading.

SPECIAL CONTRACTS OF MARITIME COMMERCE

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1.
2.
3.
4.
5.
6.

- 48 The shipowner retains the possession, command and navigation of the

ship, the charterer merely having use of the space in the vessel in
return for his payment of the charter hired.

Charter party
Bill of lading
Contract of transportation of passengers on sea voyages
Loan on bottomry
Loan on respondentia
Marine insurance

2 more common types of contracts:

(1) charter party
a) affreightment charterer leases the space
1. time charter
2. voyage charter
b) bareboat shipowner relinquishes possession and
command of the vessel charterer because owner pro hac vice for
one time only
(2) bill of lading
a) negotiable
b) non-negotiable

General Rule: venue can be agreed upon by the parties

Exception: Sweet Lines v. Teves: A common carrier engaged in interisland shipping may not stipulate thru a condition printed at the back of
passage tickets that all actions arising out of the contract of carriage
should be filed only in a particular province/city to the exclusion of all
others when such condition will go against the policy of providing
convenience to plaintiffs in pursuing their claims and promoting the
ends of justice.

Charter party contract by virtue of which the owner or the agent of a

vessel binds himself to transport merchandise or persons for a fixed
price; contract by virtue of which the owner or the agent of the vessel
leases for a certain price the whole or a portion of the vessel for the
transportation of the goods or persons from one port to another
o classes or charter party:
(1) as to extent of vessel hired
(a) total where the whole of the vessel is
chartered or
(b) partial where only a part of the vessel is
chartered; the charterer does not, as a rule, acquire the right to fix the
date when the vessel should depart, unless such right is expressly
granted in the contract
(2) as to time
(a) until a fixed day for a definite number of days
or month
(b) for a voyage either outgoing or return, or
round trip
(3) as to freightage
(a) for a fixed amount for the whole cargo
(b) for a fixed rate per ton
(c) for so much per month

Parties:
1.
Ship owner or ship agent
2.
Charterer
Classes:
1. Bareboat or demise The charterer provides crew, food and fuel.
The charterer is liable as if he were the owner, except when the cause
arises from the unworthiness of the vessel. The shipowner leases to the
charterer the whole vessel, transferring to the latter the entire
command, possession and consequent control over the vessels
navigation, including the master and the crew, who thereby become the
charters servants. It transforms a common carrier into a private carrier.

The charterer becomes the owner of the vessel pro hac vice, just for
that one particular purpose only. Because the charterer is treated as
owner pro hac vice, the charterer assumes the customary rights and
liabilities of the shipowner to third persons and is held liable for the
expense of the voyage and the wages of the seamen.

2. Contract of Affreightment A contract whereby the owner of the

vessel leases part or all of its space to haul goods for others.

Starr Weigand 2012

Kinds:
a.
Time charter vessel is chartered for a fixed period of time
or duration of voyage.
b.
Voyage or trip charter the vessel is leased for one or
series of voyages usually for purposes of transporting goods for
charterer.

Generally, a private carriage is undertaken by special agreement and

the carrier does not hold himself out to carry goods for the general
public. In this instant case, VSI did not offer its services to the general
public. It carried passengers or goods only for those it chose under a
"special contract of charter party." Consequently, the rights and
obligations of VSI and NSC, including their respective liability for
damage to the cargo, are determined primarily by stipulations in their
contract of private carriage or charter party and not by the stringent
provisions of the Civil Code on common carriers. In an action against a
private carrier for loss of, or injury to, cargo, the burden is on the
plaintiff to prove that the carrier was negligent or unseaworthy. The
burden of proving negligence or a breach of that duty rests on plaintiff
and proof of loss of, or damage to, cargo while in the carrier's
possession does not cast on it the burden of proving proper care and
diligence on its part or that the loss occurred from an excepted cause in
the contract or bill of lading. Under the parties Contract of Voyage
Charter Hire NSC must prove that the damage to its shipment was
caused by VSI's willful negligence or failure to exercise due diligence in
making MV Vlasons I seaworthy and fit for holding, carrying and
safekeeping the cargo. (Vlasons Shipping v. CA)

Respondent carrier, in the ordinary course of business, operates as a

common carrier, transporting goods indiscriminately for all persons.
When petitioner chartered the vessel M/V "Sun Plum", the ship captain,
its officers and compliment were under the employ of the shipowner
and therefore continued to be under its direct supervision and control.
Hardly then can we charge the charterer, a stranger to the crew and to
the ship, with the duty of caring for his cargo when the charterer did not
have any control of the means in doing so. This is evident in the
present case considering that the steering of the ship, the manning of
the decks, the determination of the course of the voyage and other
technical incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the
shipowner. (Planter Products v. CA)

Coastwises contract with the consignee is one of affreightment. PagAsa Sales Inc. only leased 3 of Coastwises vessels, in order to carry
cargo from one point to another, but the possession, command and
navigation of the vessels remained with Coastwise. Therefore,
Coastwise, by the contract of affreightment, was not converted into a
private carrier, but remained a common carrier. ICoastwise Lighterage
v. CA)

As regards the goods damaged or lost during unloading, the charterer

is liable therefor, having assumed this activity under the charter party
"free of expense to the vessel." The difficulty is that Transcontinental
has not been impleaded in these cases and so is beyond our
jurisdiction. The liability imposable upon it cannot be borne by Maritime
which, as a mere agent, is not answerable for injury caused by its
principal. The charterer did not represent itself as a carrier and indeed
assumed responsibility only for the unloading of the cargo, i.e, after the
goods were already outside the custody of the vessel. In supervising
the unloading of the cargo and issuing Daily Operations Report and
Statement of Facts indicating and describing the day-to-day discharge
of the cargo, Maritime acted in representation of the charterer and not
of the vessel. It thus cannot be considered a ship agent. As a mere
charterer's agent, it cannot be held solidarily liable with
Transcontinental for the losses/damages to the cargo outside the
custody of the vessel. (Maritime Agencies v. CA)

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Petitioner Litonjua did not place into the record of this case a copy of
the charter party covering the M/V Dufton Bay. We must assume that
petitioner Litonjua was aware of the nature of a bareboat or demise
charter and that if petitioner did not see fit to include in the record a
copy of the charter party, which had been entered into by its principal, it
was because the charter party and the provisions thereof were not
supportive of the position adopted by petitioner Litonjua in the present
case, position diametrically opposed to the legal consequence of a
bareboat charter. Treating Fairwind as owner pro hac vice, petitioner
Litonjua having failed to show that it was not such, we believe and so
hold that petitioner Litonjua, as Philippine agent of the charterer, may
be held liable on the contract of employment between the ship captain
and the private respondent. (Litonjua v. CA)

BILL OF LADING

An entire or complete contract.

More like a private receipt

which the captain gives to
accredit goods received from
persons

Consensual contract

Real contract

An owner who retains possession of the ship, though the hold is the
property of the charterer, remains liable as carrier and must answer for
any breach of duty as to the care, loading or unloading of the cargo.
Assuming that in the present case, the charter party is a demise or
bareboat charter, then Philipp Brothers is liable to Puromines, Inc.,
subject to the terms and conditions of the sales contract. On the other
hand, if the contract between respondent and the owner of the vessel
MV "Liliana Dimitrova" was merely that of affreightment, then it cannot
be held liable for the damages caused by the breach of contract of
carriage, the evidence of which is the bills of lading. (Puromines v. Ca)

primage - no longer a gratuity to the master, unless especially

stipulated; but it belongs to the owners or freighters, and is nothing but
an increase of the freight rate
demurrhage sum which is fixed by the contract of carriage, or
which is allowed, as reimbursement to the owner of a ship for the
detention of his vessel beyond the number of days allowed by the
charter party for loading and unloading or for sailing
o only an extended freight or reward to the vessel, in compensation for
the earnings she is improperly caused to lose
o term has been applied to a claim for damages for failure of the
consignee to accept delivery of the goods
lay days days allowed to charter parties for loading and unloading
the cargo
extra lay days days which follow after the lay days have elapsed

CHARTER PARTY

- 49 -

BAREBOAT OR DEMISE
CHARTER

CONTRACT OF
AFFREIGHTMENT (TIME OR
VOYAGE CHARTER)

Charterer becomes liable to others

caused by its negligence

Owner remains liable as

carrier and must answer for
any breach of duty

Charterer regarded as owner pro

hac vice for the voyage

Charterer is not regarded as

owner.

Owner of vessel relinquishes

possession, command and
navigation to charterer

The vessel owner retains

possession, command and
navigation of the ship

Common carrier is converted to

private carrier.

Common carrier is not

converted to a private carrier.

Freightage - The price or compensation paid for the transportation of

goods by a carrier. Freight is also applied to the goods transported by
such carriers.

PERSONS WHO MAY MAKE A CHARTER

1.
Owner or owners of the vessel, either in whole or in majority
part, who have legal control and possession of the vessel
2.
Charterer may subcharter entire vessel to 3rd person only if
not prohibited in original charter. (Art.679)
3.
Ship agent if authorized by the owner/s or given such power
in the certificate of appointment. (Art.598)
4.
Captain in the absence of the ship agent or consignee and
only if he acts in accordance with the instructions of the agent or owner
and protects the latters interests. (Art.609)

As defined, a contract of affreightment is a contract with the shipowner

to hire his ship or part of it, for the carriage of goods, and generally
takes the form either of a charter party or a bin of lading. The charter
party may be oral, in wchih case the terms thereof, not having been in
writing, shall be those embodied in the bill of lading. (Market
Development v. IAC)

REQUISITES OF A VALID CHARTER PARTY

1.
Consent of the contracting parties
2.
Existing vessel which should be placed at the disposition of
the shipper
3.
Freight
4.
Compliance with Art. 652 of the Code of Commerce

LEASE

CHARTER PARTY

If for a definite period, lessee

cannot give up the lease by paying
a portion of the amount agreed
upon.

Charterer may rescind charter

party by paying half of the
freightage agreed upon.

If the leased property is sold to one

who knows of the existence of the
lease, the new owner must respect
the lease.

The new owner is not

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

Civil law concept

Starr Weigand 2012

A 'charter-party' is defined as a 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; a contract of affreightment by which the owner of
a ship or other vessel lets the whole or a part of her to a merchant or
other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight. Contract of affreightment may
either be time charter, wherein the vessel is leased to the charterer for
a fixed period of time, or voyage charter, wherein the ship is leased for
a single voyage. In both cases, the charter-party provides for the hire of
the vessel only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ship's store, pay for
the wages of the master of the crew, and defray the expenses for the
maintenance of the ship. (Tabacalera v. North Front)

A charter party is a 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; a contract of affreightment is one by which the owner of a ship or
other vessel lets the whole or part of her to a merchant or other person
for the conveyance of goods, on a particular voyage, in consideration of
the payment of freight. A contract of affreightment may be either time
charter, wherein the leased vessel is leased to the charterer for a fixed

Commercial law concept

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period of time, or voyage charter, wherein the ship is leased for a single
voyage. In both cases, the charter-party provides for the hire of the
vessel only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ship's store, pay for
the wages of the master of the crew, and defray the expenses for the
maintenance of the ship. Under a demise or bareboat charter on the
other hand, the charterer mans the vessel with his own people and
becomes, in effect, the owner for the voyage or service stipulated,
subject to liability for damages caused by negligence. If the charter is a
contract of affreightment, which leaves the general owner in possession
of the ship as owner for the voyage, the rights and the responsibilities
of ownership rest on the owner. The charterer is free from liability to
third persons in respect of the ship. (Caltex v. Sulpicio)

Transhipment, in maritime law, is defined as "the act of taking cargo out

of one ship and loading it in another," or "the transfer of goods from the
vessel stipulated in the contract of affreightment to another vessel
before the place of destination named in the contract has been
reached" or "the transfer for further transportation from one ship or
conveyance to another." The fact of transhipment is not dependent
upon the ownership of the transporting ships or conveyances or in the
change of carriers but rather on the fact of actual physical transfer of
cargo from one vessel to another. (Magellan Manufacturing v. CA)

- 50 -

If the vessel has been chartered by one shipper only, and there
should appear to be an error or fraud in her capacity, and the
charterer should not wish to rescind the contract, when he has a
right to do so, the freightage shall be reduced in proportion to the
cargo which the vessel can not receive, the person from whom the
vessel is chartered being furthermore obliged to indemnify the
charterer for the losses he may have caused him.

If, on the contrary there should be several charter parties, and by

reason of want of space all the cargo contracted for cannot be
loaded, and none of the charterers desires to rescind the contract,
preference shall be given to the person who has already loaded
and arranged the freight in the vessel, and the rest shall take the
places corresponding to them in the order of the dates of their
contracts.

Should there be no priority, the charterers may load, if they wish,

in proportion to the amounts of weight or space for which each
may have contracted, and the person from whom the vessel was
chartered shall be obliged to indemnify them for losses and
damages.

Rights and Obligations of Parties

The act of the charterer in sub-chartering the vessel, in spite of a

categorical prohibition may be a violation of a contract, but the owners
right of recourse is against the original charterer. In a sublease
agreement, there are two distinct leases involved that is, the principal
lease and the sublease. The personality of the lessee qua lessee does
not disappear; his rights and obligations vis--vis the lessor are not
passed on to nor acquired by the sublessee. The lessee-sublessor is
not an agent of the lessor nor is the lessor an agent of the lesseesublessor. The sublessee has no right or authority to pay the sublease
rentals to the lessor, said rentals being due and payable to the lesseesublessor.
Petitioner, as owner of the vessel, has no lien over the cargo. In a
bareboat charter, not only the entire capacity of the ship is let but the
ship itself, and the possession is passed to the charterer. The entire
control and management of it is given up to him. The general owner
loses his lien for freight, but the lien itself is not destroyed; the charterer
is substituted in his place, in whose favor the lien continues to exist
when goods are taken on freight. The general owner, however, has no
remedy for the charter of his vessel but his personal action on the
covenants of the charter party. It is a contract in which he trusts in the
personal credit of the charterer. Where the charter constitutes a demise
of the ship and the charterer is the owner for the voyage, and that is the
kind of charter party involved in the instant case, the general owner has
no lien on the cargo for the hire of the vessel, in the absence of an
express provision therefor as in the case at bar. Moreover, even on the
assumption that petitioner had a lien on the cargo for unpaid freight, the
same was deemed waived when the goods were unconditionally
released to the consignee at the port of destination. A carrier has such
a lien only while it retains possession of the goods, so that delivery of
the goods to the consignee or a third person terminates, or constitutes
a waiver of, the lien. In the present case, the cargo of cement was
unloaded from the vessel and delivered to the consignee on October
23, 1980, without any oral or written notice or demand having been
made on SMCSI for unpaid freight on the cargo. Consequently, after
the lapse of thirty (30) days from the date of delivery, the cargo of
cement had been released from any maritime lien for unpaid freight.
(Ouano v. CA)

SHIPOWNER OR SHIP
AGENT

1.

2.
3.
4.

5.

6.
7.

CHARTERER

If the vessel is chartered

wholly, not to accept cargo
from others;
To observe represented
capacity;
To u n l o a d c a r g o
clandestinely placed
To s u b s t i t u t e a n o t h e r
vessel if load is less than
3/5 of capacity;
To leave the port if the
charterer does not bring
the cargo within the lay
days and extra lay days
allowed;
To place in a vessel in a
condition to navigate;
to bring cargo to nearest
neutral port in case of war
or blockade. (Arts.
669-678)

1.
2.
3.

4.
5.

To pay the agreed charter

price;
To p a y f r e i g h t a g e o n
unboarded cargo;
To pay losses to others for
loading uncontracted cargo
and illicit cargo;
To wait if the vessel needs
repair;
To p a y e x p e n s e s f o r
deviation. (Arts. 679-687)

If the shipowner or the captain should contract to carry a greater

amount of cargo than the vessel can carry in view of her tonnage,
they shall indemnify the shippers whose contracts they do not
fulfill for the losses they may have caused when by reason of their
default, according to the following cases, viz:

ARTICLE 670. If the person from whom the vessel is chartered,

after receiving a part of the freight, should not find sufficient to
make up at least three-fifths of the amount which the vessel may
hold, at the price he may have fixed, he may substitute for the
transportation another vessel inspected and declared suitable for
the same voyage, the expenses of transfer and the increase in the
price of the charter, should there be any, being for his account.
Should he not be able to make this change, he shall undertake the
voyage at the time agreed upon; and should no time have been
fixed, within fifteen days from the time the loading began, unless
otherwise stipulated.

Starr Weigand 2012

PART 2 - RIGHTS AND OBLIGATIONS OF SHIPOWNERS

ARTICLE 669. The shipowner or the captain shall observe in
charter parties the capacity of the vessel or that expressly
designated in its registry, a difference greater than 2 per cent
between that stated and her true capacity not being permissible.

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If the owner of the part of the freight already loaded should
procure some more at the same price and under similar or
proportionate conditions to those accepted for the freight
received, the person from whom the vessel is chartered or the
captain can not refuse to accept the rest of the cargo; and should
he do so, the shipper shall have a right to demand that the vessel
put to sea with the cargo which it may have on board.

ARTICLE 671. After three-fifths of the vessel has been loaded, the
person from whom she is chartered may not, without the consent
of the charterers or shippers, substitute the vessel designated in
the charter party by another one, under the penalty of making
himself thereby liable for all the losses and damages occurring
during the voyage to the cargo of those who did not consent to
the change.

ARTICLE 672. If the vessel has been chartered in whole, the

captain may not, without the consent of the charterer, accept
cargo from any other person; and should he do so, said charterer
may oblige him to unload it and to indemnify him for the losses
suffered thereby.

ARTICLE 673. The person from whom the vessel is chartered shall
be liable for all the losses caused to the charterer by reason of the
voluntary delay of the captain in putting to sea, according to the
rules prescribed, provided he has been requested, notarially or
judicially, to put to sea at the proper time.

ARTICLE 674. If the charterer should carry to the vessel more

cargo than that contracted for, the excess may be admitted in
accordance with the price stipulated in the contract, if it can be
well stowed without injuring the other shippers; but if in order to
load it, the vessel would be thrown out of trim, the captain must
refuse it or unload it at the expense of its owner.
In the same manner, the captain may, before leaving the port,
unload merchandise clandestinely placed on board, or transport
them, if he can do so with the vessel in trim, demanding by way of
freightage the highest price which may have been stipulated for
said voyage.

ARTICLE 675. If the vessel has been chartered to receive the cargo
in another port, the captain shall appear before the consignee
designated in the charter party; and, should the latter not deliver
the cargo to him, he shall inform the charterer and wait his
instructions, the lay days agreed upon or those allowed by custom
in the port beginning to run in the meantime, unless there is an
express, agreement to the contrary.
Should the captain not receive an answer within the time
necessary therefor, he shall make efforts to find freight; and
should he not find any after the lay days and extra lay days have
elapsed, he shall make a protest and return to the port where the
charter was made.
The charterer shall pay the freightage in full, discounting that
which may have been earned on the merchandise which may have
been carried on the voyage out or on the return trip, if carried for
the account of third persons.
The same shall be done if a vessel, having been chartered for the
round trip, should not be given any cargo on its return.

ARTICLE 676. The captain shall lose the freightage and shall
indemnify the charterers if the latter should prove, even against
the certificate of inspection, if one has been made at the port of
departure, that the vessel was not in a condition to navigate at the
time of receiving the cargo.

- 51 If, by orders of the shipper, the cargo should be discharged at the

port of arrival, the freightage for the voyage out shall be paid in
full.

ARTICLE 678. If the time necessary, in the opinion of the judge or

court, to receive the orders of the shipper should have elapse,
without the captain having received any instructions, the cargo
shall be deposited, and it shall be liable for the payment of the
freightage and expenses on its account during the delay, which
shall be paid from the proceeds of the part first sold.

Terms:
Primage - bonus to be paid to the captain after the successful voyage.
Demurrage the sum fixed in the charter party as a remuneration to
the owner of the ship for the detention of his vessel beyond the number
of days allowed by the charter party for loading or unloading or for
sailing.
Deadfreight the amount paid by or recoverable from a charterer of a
ship for the portion of the ships capacity the latter contracted for but
failed to occupy.
Lay Days - days allowed to charter parties for loading and unloading
the cargo.
Extra Lay Days days which follow after the lay days have elapsed.
TRANSSHIPMENT OF GOODS
The act of taking cargo out of one ship and loading it in another, or the
transfer of goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of destination named
in the contract has been reached, or the transfer for further
transportation from one ship or conveyance to another.
It is not dependent on the ownership of the transporting ships or in the
change of carriers, but rather on the fact of actual physical transfer of
cargo from one vessel to another.
If done without legal excuse, however competent and safe the vessel
into which the transfer is made, is a violation of contract and
infringement of right of shipper and subjects carrier to liability if freight is
lost event by cause otherwise excepted. (Magellan Manufacturing vs.
CA, 201 SCRA 102)

PART 3 - OBLIGATIONS OF CHARTERERS

ARTICLE 679. The charterer of an entire vessel may sub-charter
the whole or part thereof on such terms as he may consider most
convenient, the captain not being allowed to refuse to receive on
board the freight delivered by the second charterers, provided that
the conditions of the first charter are not change, and that the
price agreed upon is paid in full to the person from whom the
vessel is chartered, even though the full cargo is not embarked,
with the limitation established in the next article.

ARTICLE 680. A charterer who does not complete the full cargo he
bound himself to ship shall pay the freightage of the amount he
fails to ship, if the captain does not take other freight to complete
the load of the vessel, in which case the first charterer shall pay
the difference, should there be any.

ARTICLE 681. If the charterer should load goods different from

those stated at the time of executing the charter party, without the
knowledge of the person from whom the vessel was chartered or
of the captain, and should thereby give rise to losses, by reason of
confiscation, embargo, detention, or other causes, to the person
from whom the vessel was chartered or to the shippers, the
person giving rise thereto shall be liable with the value of his
shipment and furthermore with his property, for the full indemnity
to all those injured through his fault.

ARTICLE 677. The charter party shall subsist if a declaration of

war or a blockade should take place during the voyage, the
captain not having any instructions from the charterer. In such
case the captain must proceed to the nearest safe and neutral
port, requesting and awaiting orders from the shipper, and the
expenses and salaries paid during the detention shall be paid as
general average.

ARTICLE 682. If the merchandise should have been shipped for

the purpose of illicit commerce, and were taken on board with the
knowledge of the person from whom the vessel was chartered or
of the captain, the latter, jointly with the owner of the same, shall
be liable for all the losses which may be caused the other
shippers; and even though it may have been stipulated, they can
not demand any indemnity whatsoever from the charterer for the
damaged caused to the vessel.

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ARTICLE 683. In case of making a port to repair the hull,
machinery, or equipment of the vessel, the shippers must await
until the vessel is repaired, being permitted to unload it at their
own expense should they deem it proper.
If, for the benefit of the cargo subject to deterioration, the shippers
or the court, or the consul, or the competent authority in a foreign
country, should order the merchandise to be unloaded, the
expenses of unloading and reloading shall be for the account of
the former.

ARTICLE 684. If the charterer, without the occurrence of any of the

cases of force majeure mentioned in the foregoing article, should
wish to unload his merchandise before arriving at the port of
destination, he shall pay the full freightage, the expenses of the
arrival made at his request, and the losses and damages caused
the other shippers, should there be any.

ARTICLE 685. In charters for transportation of general freight, any

of the shippers may unload the merchandise before the beginning
of the voyage, paying one-half of the freightage, the expense of
stowing and restowing the cargo, and any other damage which for
his reason he may cause the other shippers.

ARTICLE 686. After the vessel has been unloaded and the cargo
placed at the disposal of the consignee, the latter must
immediately pay the captain the freightage due and the other
expenses for which said cargo may be liable.
The primage must be paid in the same proportion and at the same
time as the freightage, all the changes and modifications to which
the latter should be subject also governing the former.

ARTICLE 687. The charterers and shippers may not abandon

merchandise damaged on account of inherent defect or fortuitous
event, for the payment of the freightage and other expenses.
The abandonment shall be proper, however, if the cargo should
consist of liquids and they have leaked out, nothing remaining in
the containers but one-fourth part of their contents.

PART 4 - TOTAL OR PARTIAL RESCISSION OF CHARTER PARTIES

ARTICLE 688. A charter party may be rescinded at the request of
the charterer:
1. If before loading the vessel he should not agree with that stated
in the certificate of tonnage, or if there should be an error in the
statement of the flag under which she sails.
2. If the vessel should not be placed at the disposal of the
charterer within the period and in the manner agreed upon.
3. If after the vessel has put to sea, she should return to the port of
departure, on account of risk from pirates, enemies, or bad
weather, and the shippers should agree to unload her.
In the second and third cases the person from whom the vessel
was chartered shall indemnify the charterer for the voyage out.
4. If the charter should have been made by the months, the
charterers shall pay the full freightage for one month, if the
voyage is for a port in the same waters, and for two months, if for
a port in different waters.
From one port to another of the Philippines and adjacent islands,
the freightage for one month only shall be paid.
5. If the vessel should make a port during the voyage in order to
make urgent repairs, and the charterers should prefer to dispose
of the merchandise.
When the delay does not exceed thirty days, the shippers shall
pay the full freightage for the voyage out.
Should the delay exceed thirty days, they shall only pay the
freightage in proportion to the distance covered by the vessel.

- 52 must pay half the freight stipulated, besides the demurrage due
for the lay days and extra lay days.
2. If the person from whom the vessel was chartered should sell it
before the charterer has begun to load it, and the purchaser
should load it for his own account.
In such case the vendor shall indemnify the charterer for the
losses he may suffer.
If the new owner of the vessel should not load it for his own
account, the charter party shall be respected, and the vendor shall
indemnify the purchaser if the former did not inform him of the
charter pending at the time of making the sale.

ARTICLE 690. The charter party shall be rescinded and all actions
arising therefrom shall be extinguished, if, before the vessel puts
to sea from the port of departure, any of the following cases
should occur:
1. A declaration of war or interdiction of commerce with the power
to whose ports the vessel was to make its voyage.
2. A condition of blockade of the port of destination of said vessel,
or the breaking out of an epidemic after the contract was
executed.
3. The prohibition to receive at the said port the merchandise
constituting the cargo of the vessel.
4. An indefinite detention, by reason of an embargo of the vessel
by order of the government, or for any other reason independent
of the will of the ship agent.
5. The inability of the vessel to navigate, without fault of the
captain or ship agent.
The unloading shall be made for the account of the charterer.

ARTICLE 691. If the vessel cannot put to sea on account of the

closing of the port of departure or any other temporary cause, the
charter shall remain in force, with neither one of the contracting
parties having a right to claim damages.
The subsistence and wages of the crew shall be considered as
general average.
During the interruption, the charterer may at the proper time and
for his own account, unload and load the merchandise, paying
demurrage if he delays the reloading after the cause for the
detention has ceased.

example of temporary cause - storm

ARTICLE 692. A charter party shall be partially rescinded, unless
there is an agreement to the contrary, and the captain shall only
be entitled to the freightage for the voyage out, if, by reason of a
declaration of war, closing of ports, or interdiction of commercial
relations during the voyage, the vessel should make the port
designated for such a case in the instructions of the charterer.

Rescission of Charter Party

At charterers
request
(Art 688)

At shipowners
request
(Art. 689)

Fortuitous causes
(Art. 690)

Not the same concept as rescission; it is actually resolution under Art.

1191CC
ARTICLE 689. At the request of the person from whom the vessel
is chartered the charter party may be rescinded:
1. If the charterer, at the termination of the extra lay days, does not
place the cargo alongside the vessel. In such case the charterer

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

1. If the extra lay

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

1. War or
interdiction of
commerce;
2. Blockade;
3. Prohibition to
receive cargo;
4. Embargo; and
5. Inability of the
vessel to navigate.

ARTICLE 699. If the contract is rescinded, before or after the

commencement of the voyage, the captain shall have a right to
claim payment of what he may have furnished the passengers.
ARTICLE 700. In all matters pertaining to the preservation of order
and discipline on board the vessel passengers shall be subject to
the orders of the captain, without any distinction whatsoever.
ARTICLE 701. The convenience or the interest of the passengers
shall not obligate or empowers the captain to stand in shore or
enter places which may take the vessel out of her course, or to
remain in the ports he must or in under necessity of touching for a
period longer than that required by the needs of navigation.

PART 5 - PASSENGERS ON SEA VOYAGES

ARTICLE 693. If the passage price has not been agreed upon, the
judge or court shall summarily fix it, after a declaration of experts.
ARTICLE 694. Should the passenger not arrive on board at the
time fixed, or should leave the vessel without permission from the
captain when the latter is ready to leave the port, the captain may
continue the voyage and demand the full passage price.

ARTICLE 695. The right to passage, if issued to a specified

person, may not be transferred without the consent of the captain
or of the consignee.
ARTICLE 696. If before beginning the voyage the passenger
should die, his heirs shall only be obliged to pay half of the fare
agreed upon.
If the expenses of subsistence are included in the price stipulated,
the judge or court, after hearing experts if he considers it
necessary, shall fix the amount which has to be left for the benefit
of the vessel.
Should another passenger be received in the place of the
deceased, no payment shall be made by said heirs.

ARTICLE 697. If before the voyage is begun it is suspended

through the exclusive fault of the captain or ship agent, the
passengers shall have the right to a refund of their fares and to
recover losses and damages; but if the suspension is due to
fortuitous events, or to force majeure, or to any other cause
independent of the captain or ship agent, the passengers shall
only be entitled to the return of the fare.

ARTICLE 698. In case a voyage already begun should be

interrupted, the passengers shall be obliged to pay the fare in
proportion to the distance covered, without right to recover for
losses and damages if the interruption is due to fortuitous event
or to force majeure, but with a right to indemnity if the interruption
should have been caused by the captain exclusively. If the
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 of delay in the departure of the vessel, the passengers
have the right to remain on board and to be furnished with food
for the account of the vessel unless the delay is due to fortuitous
events or to force majeure. If the delay should exceed ten days,
passengers requesting the same shall be entitled to the return of
the fare; and 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.

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ARTICLE 702. In the absence of an agreement to the contrary, it

shall be understood that the subsistence of the passengers during
the voyage is included in the price of the passage; but should it be
for the account of the latter, the captain shall be under obligation,
in case of necessity, to furnish the supply of food necessary for
their sustenance at a reasonable price.

ARTICLE 703. A passenger shall be considered a shipper insofar

as the goods he carries on board are concerned, and the captain
shall not be responsible for what the former may keep under his
immediate and special custody, unless the damage arises from an
act of the captain or of the crew.

hand-carry = depositary
ARTICLE 704. The captain, in order to collect the passage-money
and expenses of sustenance, may retain the goods belonging to
the passenger, and in case of the sale of the same he shall be
given preference over other creditors acting the same way as in
the collection of freightage.

ARTICLE 705. In case of the death of a passenger during the

voyage, the captain shall be authorized, with regard to the body, to
take the steps required by the circumstances, and shall carefully
take care of the papers and goods which may be on board
belonging to the passenger, observing the provisions of case No.
10 of Article 612 with regard to members of the crew.

PART 6 - BILLS OF LADING

ARTICLE 706. The captain of the vessel and the shipper shall have
the obligation of drawing up the bill of lading in which shall be
stated:
1. The name, registry, and tonnage of the vessel.
2. The name of the captain and his domicile.
3. The port of loading and that of unloading.
4. The name of the shipper.
5. The name of the consignee, if the bill of lading is issued in the
name of a specified person.
6. The quantity, quality, number of packages and marks of the
merchandise.
7. The freightage and the primage stipulated.
The bill of lading may be issued to bearer, to order, or in the name
of a specified person, and must be signed within twenty-four
hours after the cargo has been received on board, the shipper
being entitled to demand the unloading at the expense of the
captain should the latter not sign it, and, in every case, the losses
and damages suffered thereby.

Principal Differences between charter party and bill of lading:

Charter Party

Bill of Lading

Transportation Law|Ampil

Entire or complete contract

A consensual contract is entered
into, which can be dissolved by
means of indemnity for losses
and damages

- 54 ARTICLE 711. The legitimate holder of a bill of lading who fails to

present it to the captain of the vessel before the unloading
obliging the latter thereby to unload it and place it in deposit, shall
be responsible for the expenses of warehousing and other
expenses arising therefrom.

Like a private receipt which the

captain gives to accredit that
such and such goods belong to
such and such persons show the
existence of a real contract, for
the reason that its effects exist
only after the delivery of t

An on board bill of lading is one in which it is stated that the goods have
been received on board the vessel which is to carry the goods, whereas
a received for shipment bill of lading is one in which it is stated that the
goods have been received for shipment with or without specifying the
vessel by which the goods are to be shipped. Received for shipment
bills of lading are issued whenever conditions are not normal and there
is insufficiency of shipping space. An on board bill of lading is issued
when the goods have been actually placed aboard the ship with every
reasonable expectation that the shipment is as good as on its way. It is,
therefore, understandable that a party to a maritime contract would
require an on board bill of lading because of its apparent guaranty of
certainty of shipping as well as the seaworthiness of the vessel which is
to carry the goods. (Magellan Manufacturing v. CA)

Bills of lading, in modern jurisdiction, are not those issued by masters of

vessels alone; they now comprehend all forms of transportation,
whether by sea or land, and include the receipts for cargo transported.
As comprehending all methods of transportation, a bill of lading may be
defined as a written acknowledgment of the receipt of goods and an
agreement to transport and to deliver them at a specified place to a
person named or on his order. Such instruments are sometimes called
'shipping receipts,' 'forwarders' receipts,' and 'receipts for
transportation'. The designation, however, is not material, and neither is
the form of the instrument. If it contains an acknowledgment by the
carrier of the receipt of goods for transportation, it is, in legal effect, a
bill of lading. (Mindanao Bus v. CIR)

ARTICLE 707. Four true copies of the original bill of lading shall be
made, and all of them shall be signed by the captain and the
shipper. Of these, the shipper shall keep one and send another to
the consignee; the captain shall take two, one for himself and
another for the ship agent.
There may also be drawn up as many copies of the bill of lading as
may be considered necessary by the person interested; but when
they are issued to order or to bearer, they shall be stated in all the
copies, be they the first four or the subsequent ones, the
destination of each one, stating whether it is for the agent, for the
captain, for the shipper, or for the consignee. If the copy sent to
the latter should have a duplicate, this circumstance and the fact
that it is not valid except in default of the first one must be stated
therein.

ARTICLE 708. Bills of lading issued to bearer and sent to the

consignee shall be transferable by actual delivery of the
instrument; and those issued to order, by virtue of an
indorsement.
In either case, the person to whom the bill of lading is transferred
shall acquire all the rights and actions of the transferor or indorser
with regard to the merchandise mentioned in the same.

ARTICLE 709. A bill of lading drawn up in accordance with the

provisions of this title shall be proof as between all those
interested in the cargo and between the latter and the insurers,
proof to the contrary being reserved for the latter.

ARTICLE 710. If the bills of lading do not agree, and no change or

erasure can be observed in any of them, those possessed by the
shipper or consignee signed by the captain shall be proof against
the captain or ship agent in favor of the consignee or shipper; and
those possessed by the captain or ship agent signed by the
shipper shall be proof against the shipper or consignee in favor of
the captain or ship agent.

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ARTICLE 712. The captain may not by himself change the

destination of the merchandise. In admitting this change at the
instance of the shipper, he must first take up the bill of lading
which he may have issued, under pain of being liable for the cargo
to the legitimate holder of the same.

ARTICLE 713. If before the delivery of the cargo a new bill of

lading should be demanded of the captain, on the allegation that
the failure to present the previous ones is due to their loss or to
any other just cause, he shall be obliged to issue it, provided that
security for the value of the cargo is given to his satisfaction, but
without changing the consignment, and stating therein the
circumstances prescribed in the last paragraph of Article 707,
under penalty, should he not so state, of being held liable for said
cargo if improperly delivered through his fault.

ARTICLE 714. If before the vessel puts to sea the captain should
die or should cease to hold his position through any cause, the
shippers shall have the right to demand of the new captain the
ratification of the first bills of lading, and the latter must do so,
provided that all the copies previously issued be presented or
returned to him, and it should appear from all examination of the
cargo that they are correct.
The expenses arising from the examination of the cargo shall be
defrayed by the ship agent, without prejudice to the right of action
of the latter against the first captain if he ceased to be such
through his own fault. Should said examination not be made, it
shall be understood that the new captain accepts the cargo as it
appears from the bills of lading issued.

ARTICLE 715. Bills of lading will give rise to a most summary

action or to judicial, compulsion ("accion sumarisima o de
apremios"), according to the case, for the delivery of the cargo
and the payment of the freightage and the expenses thereby
incurred.

ARTICLE 716. If several persons should present bills of lading

issued to bearer or to order, indorsed in their favor, demanding the
same merchandise, the captain shall prefer, in making delivery the
person who presents the copy first issued, except when the latter
one was issued on proof of the loss of the first, and both are
presented by different persons.
In such case, as well as when only second subsequent copies,
issued without this proof, are presented, the captain shall apply to
the judge or court, so that he may order the deposit of the
merchandise and their delivery, through him, to the proper person.

remedy where 2 or more bills issued: the captain shall deliver the
goods to the holder of the bill which was first issued
if the reason why the second bill of lading was issued is that the first
one was lost: the captain must bring an action in court i.e., a complaint
in interpleader

ARTICLE 717. The delivery of the bill of lading shall effect the
cancellation of all the provisional receipts of prior date given by
the captain or his subordinates for partial deliveries of the cargo
which may have been made.

ARTICLE 718. After the cargo has been delivered the bill of lading
which the captain signed, or at least the copy by reason of which
the delivery is made, shall be returned to him, with the receipt for
the merchandise mentioned therein.
The delay on the part of the consignee shall make him liable for
the damages which such delay may cause the captain.
Requisites for delivery of goods:
(1) the bill of lading covering such goods must be surrendered
(2) the one receiving the goods must issue a receipt for the same

Transportation Law|Ampil

The inclusion of the unmanifested cargoes in the Bill of Lading does not
satisfy the requirement of the aforequoted sections of the Tariff and
Customs Code. Nowhere in the said section is the presentation of a Bill
of Lading required, but only the presentation of a Manifest containing a
true and accurate description of the cargoes. While a manifest is a
declaration of the entire cargo, a bill of lading is but a declaration of a
specific part of the cargo and is a matter of business convenience
based exclusively on a contract. The object of a manifest is to furnish
the customs officers with a list to check against, to inform our revenue
officers what goods are being brought into the country, and to provide a
safeguard against goods being brought into this country on a vessel
and then smuggled ashore. In short, while a bill of lading is ordinarily
merely a convenient commercial instrument designed to protect the
importer or consignee, a manifest of the cargo is absolutely essential to
the exportation or importation of property in all vessels, to impose upon
the owners and officers of such vessel an imperative obligation to
submit lists of the entire loading of the ship in the prescribed form, to
facilitate the labors of the customs and immigration officers and to
defeat any attempt to make use of such vessels to secure the unlawful
entry of persons or things into the country. The law imposes the
absolute obligation, under penalty for failure, upon every vessel from a
foreign port to have "on board complete written or typewritten manifests
of all her cargo, signed by the master". Where the law requires a
manifest to be kept or delivered, it is not complied with unless the
manifest is true and accurate. (Macondray v. Comm. Of Cusotms)

loan on bottomry contract in the nature of a mortgage, by which

the owner of a ship borrows money for the use, equipment or repair of
the vessel, and for a definite term, and pledges the ship (or the keel
and bottom of 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 made on the goods laden on board the ship,
and which are to be sold or exchanged in the course of the voyage, the
borrowers personal responsibility being deemed the principal security
for the performance of a contract, which is therefore called
respondentia; the lender must be paid his principal and interest, though
the ship perishes, provided the goods are saved.

Petitioner admits that it "received the bill of lading immediately after the
arrival of the shipment". Having been afforded an opportunity to
examine the said document, petitioner did not immediately object to or
dissent from any term or stipulation therein. It was only six months later
that petitioner sent a letter to private respondent saying that it could not
accept the shipment. Petitioner's inaction for such a long period
conveys the clear inference that it accepted the terms and conditions of
the bill of lading. After accepting the bill of lading, receiving notices of
arrival of the shipment, failing to object thereto, petitioner) cannot now
deny that it is bound by the terms in the bill of lading. If it did not intend
to be bound, petitioner would not have waited for six months to lapse
before finally bringing the matter to private respondent's attention.
In the case at bar, the prolonged failure of petitioner to receive and
discharge the cargo from the private respondent's vessel constitutes a
violation of the terms of the bill of lading. It should thus be liable for
demurrage to the former. Demurrage is merely an allowance or
compensation for the delay or detention of a vessel. The apparent
discrepancy was a result of the variance of the dates when the two
demands were made. Necessarily, the longer the cargo remained
unclaimed, the higher the demurrage. Thus, while in his letter, private
respondent's counsel demanded payment of only P37,800, the
additional demurrage incurred by petitioner due to its continued refusal
to receive delivery of the cargo ballooned to P67,340 by November 22,
1983. The contract of carriage, as stipulated in the bill of lading in the
present case, must be treated independently of the contract of sale
between the seller and the buyer, and the contract for the issuance of a
letter of credit between the buyer and the issuing bank. Any
discrepancy between the amount of the goods described in the
commercial invoice in the contract of sale and the amount allowed in
the letter of credit will not affect the validity and enforceability of the
contract of carriage as embodied in the bill of lading. (Keng Hua Paper
v. CA)

Loan made by shipowner or ship

agent guaranteed by vessel itself
and repayable upon arrival of
vessel at destination. (Art. 719)

Shipowner or ship agent.

Outside of the residence of the
owners - the captain.
1.
2.

1.
2.
3.
1.
2.
3.
4.
5.
6.
7.

Only the owner of the cargo.

Common elements:
Exposure of security to marine peril;
Obligation of the debtor conditioned only upon safe arrival of the
security at the point of destination.
Forms:
Public instrument
Policy signed by the contracting parties and the broker taking
part therein
Private instrument (Art. 720)
Contents:
Kind, name and registry of the vessel;
Name, surname and domicile of the captain;
Names, surnames and domiciles of the borrower and the
lender;
Amount of the loan and the premium stipulated;
Time for repayment;
Goods pledged to secure repayment;
Voyage during which the risk is run (Art.721)

BOTTOMRY/ RESPONDENTIA

LOAN ON BOTTOMRY AND RESPONDENTIA

A real, unilateral, aleatory contract, by virtue of which one person lends
to another a certain amount of money or goods on things exposed to
maritime risks, which amount, with its earnings, is to be returned if the
things are safely transported, and which is lost if the latter are lost.

Loan taken on security of the

cargo laden on a vessel, and
repayable upon safe arrival of
cargo at destination. (Art. 719)

Who may contract

LOAN ON RESPONDENTIA
Definition

SECTION TWO - LOANS ON BOTTOMRY AND RESPONDENTIA

ARTICLE 719. A loan in which under any condition whatever, the
repayment of the sum loaned and of the premium stipulated
depends upon the safe arrival in port of the goods on which it is
made, or of the price they may receive in case of accident, shall be
considered a loan on bottomry or respondentia.

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LOAN ON BOTTOMRY

- 55 -

ORDINARY LOAN (MUTUUM)

Not subject to Usury Law

Subject to Usury Law

Liability of the borrower is

contingent on the safe arrival of
the vessel or cargo at destination

Not subject to any contingency

(absolute liability)

Transportation Law|Ampil



The last lender is a preferred
creditor

The first lender is a preferred

creditor

MARINE INSURANCE

LOAN ON BOTTOMRY OR
RESPONDENTIA

Indemnity is paid after the loss

has occurred

Indemnity is paid in advance by

way of a loan

In case of loss of the vessel due

to a risk insured against, the
obligation of the insurer becomes
absolute

In case of loss of the vessel due

to a marine peril, the obligation
of the borrower to pay is
extinguished

Consensual contract

Real contract

later loan on respondentia gives preference over an earlier one

ARTICLE 724. The loans may be constituted jointly or separately:

1. On the hull of the vessel.
2. On the rigging.
3. On the equipment, provisions, and fuel.
4. On the engine, if the vessel is a steamer.
5. On the merchandise loaded.
If the loan in constituted on the hull of the vessel, the rigging,
equipment and other goods, provisions, fuel, steam engines, and
the freightage earned during the voyage on which the loan is
made shall also be considered as included in the liability for the
loan.
If the loan is made on the cargo, all that which constitutes the
same shall be subject to the repayment; and if on a particular
object of the vessel or of the cargo, only the object concretely and
specifically mentioned shall be liable.

ARTICLE 725. No loans on bottomry may be made on the salaries

of the crew or on the profits expected.

ARTICLE 720. Loans on bottomry or respondentia may be

executed:
1. By means of a public instrument.
2. By means of a policy signed by the contracting parties and the
broker taking part therein.
3. By means of a private instrument.
Under whichever of these forms the contract is executed, it shall
be entered in the certificate of the registry of the vessel and shall
be recorded in the registry of vessels, without which requisites the
credits of this kind shall not have, with regard to other credits, the
preference which, according to their nature, they should have,
although the obligation shall be valid between the contracting
parties.
The contracts made during a voyage shall be governed by the
provisions of Articles 583 and 611, and shall be effective with
regard to third persons from the date of their execution, if they
should be recorded in the registry of vessels of the port of registry
of the vessel before the lapse of eight days following its arrival. If
said eight days should elapse without the record having been
made in the corresponding registry, the contracts made during the
voyage of a vessel shall produce no effect with regard to third
persons, except from the day and date of their inscription.
In order that the policy of the contracts executed in accordance
with No. 2 may have binding force, they must conform to the
registry of the broker who took part therein.
With respect to those executed in accordance with No. 3 the
acknowledgment of the signature shall be required.
Contracts which are not reduced to writing shall not give rise to
judicial action.

ARTICLE 721. In a contract on bottomry or respondentia the

following must be stated:
1. The kind, name, and registry of the vessel.
2. The name, surname, and domicile of the captain.
3. The names, surnames, and domiciles of the person giving and
the person receiving the loan.
4. The amount of the loan and the premium stipulated.
5. The time for repayment.
6. The goods pledged to secure repayment.
7. The voyage during which the risk is run.

ARTICLE 722. The contract may be made to order, in which case

they shall be transferable by indorsement, and the indorsee shall
acquire all the rights and shall incur all the risks corresponding to
the indorser.

ARTICLE 723. Loans may be made in goods and in merchandise,

fixing their value in order to determine the principal of the loan.
a lender can impose an extraordinary rate of interest because if the
security disappears, the principal obligation disappears as well
Starr Weigand 2012

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ARTICLE 726. If the lender should prove that he loaned an amount

larger than the value of the object liable for the bottomry loan, on
account of fraudulent measures employed by the borrower, the
loan shall be valid only for the amount at which said object is
appraised by experts.
The surplus principal shall be returned with legal interests for the
entire time required for repayment.

ARTICLE 727. If the full amount of the loan contracted in order to

load the vessel should not be used for the cargo, the balance shall
be returned before clearing.
The same procedure shall be observed with regard to the goods
taken as loan, if they were not loaded.

WHEN LOAN ON BOTTOMRY OR RESPONDENTIA REGARDED AS

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

ARTICLE 728. The loan which the captain takes at the point of
residence of the owners of the vessel shall only affect that part
thereof which belongs to the captain, if the other owners or their
agents should not have given their express authorization therefor
or should not have taken part in the transaction.
If one or more of the owners should be requested to furnish the
amount necessary to repair or provision the vessel, and they
should not do so within twenty-four hours, the interest which the
parties in default may have in the vessel shall be liable for the loan
in the proper proportion.
Outside of the residence of the owners the captain may contract
loans in accordance with the provisions of Articles 583 and 611.

ARTICLE 729. Should the goods on which money is taken not be

subjected to risk, the contract shall be considered a simple loan,
with the obligation on the part of the borrower to return the
principal and interest at the legal rate, if that agreed upon should
not be lower.

ARTICLE 730. Loans made during the voyage shall have

preference over those made before the clearing of the vessel, and
they shall be graduated in the inverse order of their dates.
The loans for the last voyage shall have preference over prior
ones.

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Should several loans have been made at the same port of arrival
under stress and for the same purpose, all of them shall be paid
pro rata.

preference in inverse order reason: the later loans contribute to

the preservation of the vessel and of the prior credits, and if this order
of preference did not exist, it would be impossible to obtain the
necessary loan in case of necessity if the vessel or merchandise should
already be burdened by prior loans

ARTICLE 731. The actions pertaining to the lender shall be

extinguished by the absolute loss of the goods on which the loan
was made, if it arose from an accident of the sea at the time and
during the voyage designated in the contract, and it is proven that
the cargo was on board; but this shall not take place if the loss
was caused by the inherent defect of the thing, or through the
fault or malice, of the borrower, or barratry on the part of the
captain, or if it was caused by damages suffered by the vessel as
a consequence of being engaged in contraband, or if it arose from
having loaded the merchandise on a vessel different from that
designated in the contract, unless this change should have been
made by reason of force majeure.
Proof of the loss as well as of the existence in the vessel of the
goods declared to the lender as the object of the loan is
incumbent upon him who received the loan.

Hypothecary Nature of Bottomry/ Respondentia

GENERAL RULE: The obligation of the borrower to pay the loan is
extinguished if the goods given as security are absolutely lost by
reason of an accident of the sea, during the voyage designated, and if it
is proven that the goods were on board.
EXCEPTIONS:
1.
Loss due to inherent defect;
2.
Loss due to the barratry on the part of the captain;
3.
Loss due to the fault or malice of the borrower;
4.
The vessel was engaged in contraband; and
5.
The cargo loaded on the vessel be different in from that
agreed upon.

ARTICLE 732. Lenders on bottomry or respondentia shall suffer, in

proportion to their respective interest, the general average which
may take place in the goods on which the loan is made.
In particular averages, in the absence of an express agreement
between the contracting parties, the lender on bottomry or
respondentia shall also contribute in proportion to his respective
interest, should it not belong to the kind of risks excepted in the
foregoing article.

ARTICLE 733. Should the period during which the lender shall run
the risk not have been stated in the contract, it shall last, with
regard to the vessel, engines, rigging, and equipment, from the
moment said vessel puts to sea until she drops anchor in the port
of destination; and with regard to the merchandise, from the time
they are loaded at the shore or wharf of the port of shipment until
they are unloaded in the port of consignment.

ARTICLE 734. In case of shipwreck, the amount liable for the

payment of the loan shall be reduced to the proceeds of the goods
saved, after deducting the costs of the salvage.
If the loan should be on the vessel or any of its parts, the
freightage earned during the voyage for which said loan was
contracted shall also be liable for its payment, as far as it may
reach.

ARTICLE 735. If the same vessel or cargo should be the object of a

loan on bottomry or respondentia and marine insurance, the value
of what may be saved in case of shipwreck shall be divided
between the lender and the insurer, in proportion to the legitimate
interest of each one, taking into consideration, for this purpose
only, the principal with respect to the loan, and without prejudice
to the right of preference of other creditors in accordance with
Article 580.

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- 57 Concurrence of Marine Insurance and Loan on Bottomry/

Respondentia
1.
The insurable interest of the owner of a ship hypothecated by
bottomry is only the excess of the value over the amount secured by
bottomry. (Sec. 101, Insurance Code)
2.
The value of what may be saved in case of shipwreck shall
be divided between the lender and the insurer in proportion to the
interest of each one. (Art. 735)

Note: If a vessel is hypothecated by bottomry only the excess is

insurable, since a loan on bottomry partakes of the nature likewise of
an insurance coverage to the extent of the loan accommodation. The
same rule would apply to the hypothecation of the cargo by
respondentia. (Pandect of Commercial Law and Jurisprudence, Justice
Jose Vitug, 1997 ed.)

ARTICLE 736. If there should be delay in repayment of the

principal and premiums of the loan, only the former shall bear of
legal interest.
TITLE FOUR - RISKS, DAMAGES AND ACCIDENTS OF MARITIME
COMMERCE
SECTION ONE - AVERAGES
ARTICLE 806. For the purposes of this code the following shall be
considered averages:
1. All extraordinary or accidental expenses which may be incurred
during the voyage in order to preserve the vessel, the cargo, or
both.
2. Any damages or deteriorations which the vessel may suffer
from the time it puts to sea from the port of departure until it casts
anchor in the port of destination, and those suffered by the
merchandise from the time they are loaded in the port of shipment
until they are unloaded in the port of their consignment.

the risks, damages and accidents of maritime commerce are:

(1) averages, both general and particular
(2) arrivals under stress
(3) collisions
(4) shipwrecks

AVERAGE
An extraordinary or accidental expense incurred during the voyage
in order to preserve the cargo, vessel or both, and all damages or
deterioration suffered by the vessel from departure to the port of
destination, and to the cargo from the port of loading to the port of
consignment. (Art. 806)
The person whose property has been saved must contribute to
reimburse the damage caused or expense incurred if the situation
constitutes general average.
Classes:
1.
Particular or Simple Average
2.
Gross or General Average

Where both vessel and cargo are saved, it is general average; where
only the vessel or only the cargo is saved, it is particular average.
When, in conformity with marine regulations, cargo is carried on the
deck of a steamer engaged in coastwise trade, the jettison of such
cargo upon occasion of peril makes a case for general average.
(Standard Oil v. Castelo)

Expenses incurred to refloat a vessel, which accidentally ran aground,

in order to continue its voyage, do not constitute general average. Not
only is there absence of a marine peril, common safety factor, and
deliberateness. It is the safety of the property, and not the voyage,
which constitutes the true foundation of general average. (A.
Magsaysay, Inc. vs. Agan, G.R.No. L-6393, Jan. 31, 1955)

The expenses are not considered general average. The defendant

cannot be made to contribute. The stranding of plaintiff's vessel was
due to the sudden shifting of the sandbars at the mouth of the river
which the port pilot did not anticipate, hence, accidental. General or
gross averages include "all the damages and expenses which are

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deliberately caused in order to save the vessel, its cargo, or both at the
same time, from a real and known risk" (Art. 811). Being for the
common benefit, gross averages are to be borne by the owners of the
articles saved (Art. 812). Tolentino gives the following requisites for
general average: (1) common danger both ship and cargo, after
it has been loaded, are subject to the same danger - the danger
arises from accidents of the sea, dispositions of the authority, or
faults of men; the circumstance 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; (2) for the common safety part
of the vessel/cargo/both is sacrificed deliberately; (3) from the
expenses or damages caused follows the successful saving of the
vessel and cargo; (4) the expenses or damages should have been
incurred or inflicted after taking proper legal steps and authority.
(Ibid.)

Damages or expenses
caused to the vessel or cargo
that did not inure to the
common benefit, and borne
by respective owners. (Art.
809)
Requisites

1.
2.
3.
4.

ARTICLE 807. The petty and ordinary expenses incident to

navigation, such as those of pilotage of coasts and ports, those of
lighterage and towage, anchorage, inspection, health, quarantine,
lazaretto, and other so-called port expenses, costs of barges and
unloading until the merchandise is placed on the wharf, and any
other usual expenses of navigation, shall be considered ordinary
expenses to be defrayed by the shipowner, unless there is an
express agreement to the contrary.

The owner of the goods which

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

ARTICLE 808. Averages shall be:

1. Simple or particular.
2. General or gross.
ARTICLE 809. As a general rule, simple or particular averages
shall include all the expenses and damages caused to the vessel
or to her cargo which have not inured to the common benefit and
profit of all the persons interested in the vessel and her cargo, and
especially the following:
1. The losses suffered by the cargo from the time of its
embarkation until it is unloaded, either on account of inherent
defect of the goods or by reason of an accident of the sea or force
majeure, and the expenses incurred to avoid and repair the same.
2. The losses and expenses suffered by the vessel in its hull,
rigging, arms, and equipment, for the same causes and reasons,
from the time it puts to sea from the port of departure until it
anchors and lands in the port of destination.
3. The losses suffered by the merchandise loaded on deck, except
in coastwise navigation, if the marine ordinances allow it.
4. The wages and victuals of the crew when the vessel is detained
or embargoed by legitimate order or force majeure, if the charter
has been contracted for a fixed sum for the voyage.
5. The necessary expenses on arrival at a port, in order to make
repairs or secure provisions.
6. The lowest value of the goods sold by the captain in arrivals
under stress for the payment of provisions and in order to save
the crew, or to meet any other need of the vessel, against which
the proper amount shall be charged.
7. The victuals and wages of the crew while the vessel is in
quarantine.
8. The loss inflicted upon the vessel or cargo by reason of an
impact or collision with another, if it is accidental and
unavoidable.
If the accident should occur through the fault or negligence of the
captain, the latter shall be liable for all the losses caused.
8.
Any loss suffered by the cargo through the fault, negligence,
or barratry of the captain or of the crew, without prejudice to
the right of the owner to recover the corresponding indemnity
from the captain, the vessel, and the freightage.

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Only one interest involved

100% share

In proportion to the value of the

owners property saved

Right to recover
No reimbursement

There may be reimbursement

Kinds (not exclusive)

Art. 809

Art. 811

Procedure for recovery

Several interests involved

Share in the damage or expense

GROSS OR GENERAL

Definition

All the persons having an interest in

the vessel and the cargo therein at
the time of the occurrence of the
average shall contribute to satisfy
this average. (Art. 812)
! The insurers (Art.859) and
lenders on bottomry and
respondentia shall likewise
contribute. (Art.732).

Number of interests involved

PARTICULAR OR SIMPLE

common danger;
deliberate sacrifice;
success;
proper formalities and legal
steps.

Liability

Damages or expenses deliberately

caused in order to save the vessel,
its cargo or both from real and
known risk. (Art. 811)

1. Assembly and deliberation

2. Resolution of the captain
3. Entry of the resolution in the
logbook
4. Detailed minutes
5. Delivery of the minutes to the
maritime judicial authority of the
first port, within 24 hours from
arrival,
6. Ratification by captain under
oath. (Arts. 813-814)

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As a rule, general or gross averages include all damages and expenses
which are deliberately caused in order to save the vessel, its cargo, or
both at the same time, from a real and known risk. While the instant
case may technically fall within the purview of the said provision, the
formalities prescribed under Article 813 10 and 814 of the Code of
Commerce in order to incur the expenses and cause the damage
corresponding to gross average were not complied with. Consequently,
respondent ESLI's claim for contribution from the consignees of the
cargo at the time of the occurrence of the average turns to naught.
(Phil. Home Assurance v. CA)

GOODS NOT COVERED BY GENERAL AVERAGE EVEN IF

SACRIFICED
1.
Goods carried on deck. (ART.855)
2.
Goods not recorded in the books or records of the vessel.
(ART.855 (2))
3.
Fuel for the vessel if there is more than sufficient fuel for the
voyage. (Rule IX, York-Antwerp Rule)

The law on averages under the Code of Commerce cannot be applied

in determining liability where there is negligence on the part of the
common carrier. (American Home Assurance v. CA)
ARTICLE 810. The owner of the goods which gave rise to the
expense or suffered the damage shall bear the simple or particular
averages.
ARTICLE 811. As a general rule, general or gross averages shall
include all the damages and expenses which are deliberately
caused in order to save the vessel, its cargo, or both at the same
time, from a real and known risk, and particularly the following:
1. The goods or cash invested in the redemption of the vessel or
of the cargo captured by enemies, privateers, or pirates, and the
provisions, wages, and expenses of the vessel detained during the
time the settlement or redemption is being made.
2. The goods jettisoned to lighten the vessel, whether they belong
to the cargo, to the vessel, or to the crew, and the damage
suffered through said act by the goods which are kept on board.
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 it 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 by the opening
made in the vessel in order to drain it and prevent its sinking.
6. The expenses caused in order to float a vessel intentionally
stranded for the purpose of saying it.
7. The damage caused to the vessel which had to be opened,
scuttled or broken in order to save the cargo.
8. The expenses for the treatment and subsistence of the
members of the crew who may have been wounded or crippled in
defending or saying the vessel.
9. The wages of any member of the crew held 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 that it is embargoed or detained by
force majeure or by order of the government, or in order to repair
the damage caused for the common benefit.
11. The depreciation resulting in the value of the goods sold at
arrival under stress in order to repair the vessel by reason of
gross average.
12. The expenses of the liquidation of the average.

ARTICLE 817. If in lightening a vessel on account of a storm, in

order to facilitate its entry into a port or roadstead, part of the
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 had
originated from a gross average, the amount thereof being
distributed between the vessel and cargo from which it came.

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- 59 If, on the contrary, the merchandise transferred should be saved

and the vessel should be lost, no liability may be demanded of the
salvage.

ARTICLE 818. 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.

ARTICLE 812. In order to satisfy the amount of the gross or

general averages, all the persons having an interest in the vessel
and cargo therein at the time of the occurrence of the average
shall contribute.

ARTICLE 813. In order to incur the expenses and cause the

damages corresponding to gross average, there must be a
resolution of the captain, adopted after deliberation with the
sailing mate and other officers of the vessel, and after hearing the
persons interested in the cargo who may be present.
If the latter shall object, and the captain and officers or a majority
of them, or the captain, if opposed to the majority, should consider
certain measures necessary, they may be executed under his
responsibility, without prejudice to the right of the shippers to
proceed against the captain before the competent judge or court,
if they can prove that he acted with malice, lack of skill, or
negligence.
If the persons interested in the cargo, being on board the vessel,
have not been heard, they shall not contribute to the gross
average, their share being chargeable against the captain, unless
the urgency of the case should be such that the time necessary
for previous deliberations was wanting.

ARTICLE 814. The resolution adopted to cause the damages which

constitute general average must necessarily be entered in the log
book, stating the motives and reasons for the dissent, should
there be any, and the irresistible and urgent causes which
impelled the captain if he acted of his own accord.
In the first case the minutes shall be signed by all the persons
present who could do so before taking action, if possible; and if
not, at the first opportunity. In the second case, it shall be signed
by the captain and by the officers of the vessel.
In the minutes, and after the resolution, shall be stated in detail all
the goods jettisoned, and mention shall be made of the injuries
caused to those kept on board. The captain shall be obliged to
deliver one copy of these minutes to the maritime judicial
authority of the first port he may make, within twenty-four hours
after his arrival, and to ratify it immediately under oath.

ARTICLE 815. The captain shall direct the jettison, and shall order
the goods cast overboard in the following order:
1. Those which are on deck, beginning with those which
embarrass the maneuver or damage of the vessel, preferring, if
possible, the heaviest ones with the least utility and value.
2. Those which are below the upper deck, always beginning with
those of the greatest weight and smallest value, to the amount and
number absolutely indispensable.

Jettison
Act of throwing cargo overboard in order to lighten the vessel.
Order of goods to be cast overboard:
1.
Those which are on the deck, preferring the heaviest one
with the least utility and value;
2.
Those which are below the upper deck, beginning with the
one with greatest weight and smallest value. (Art. 815)

Jettisoned goods are not res nullius nor deemed abandoned within
the meaning of civil law so as to be the object of occupation by salvage.
(Pandect of Commercial Law and Jurisprudence, Justice Jose Vitug,
1997 ed.)

In order that the jettisoned goods may be included in the gross or

general average, the existence of the cargo on board should be proven
by means of the bill of lading. (Art. 816)

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ARTICLE 816. In order that the goods jettisoned may be included

in the gross average and the owners thereof be entitled to
indemnity, it shall be necessary insofar as the cargo is concerned
that their existence on board be proven by means of the bill of
lading; and with regard to those belonging to the vessel, by means
of the inventory prepared before the departure in accordance with
the first paragraph of Article 812.

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

SECTION TWO - ARRIVALS UNDER STRESS

ARTICLE 819. If during the voyage the captain should believe that
the vessel can not continue the trip to the port of destination on
account of the lack of provisions, well-founded fear of seizure,
privateers, or pirates, or by reason of any accident of the sea
disabling it to navigate, he shall assemble the officers and shall
summon the persons interested in the cargo who may be present,
and who may attend the meeting without the right to vote; and if,
after examining the circumstances of the case, the reason should
be considered well-founded, the arrival at the nearest and most
convenient port shall be agreed upon, drafting and entering the
proper minutes, which shall be signed by all, in the log book.
The captain shall have the deciding vote, and the persons
interested in the cargo, may make the objections and protests
they may deem proper, which shall be entered in the minutes in
order that they may make use thereof in the manner they may
consider advisable.

ARTICLE 820. An arrival shall not be considered lawful in the

following cases:
1. If the lack of provisions should arise from the failure to take the
necessary provisions for the voyage according to usage and
customs, or if they should have been rendered useless or lost
through bad stowage or negligence in their care.
2. If the risk of enemies, privateers, or pirates should not have
been well known, manifest, and based on positive and provable
facts.
3. If the defect of the vessel should have arisen from the fact that it
was not repaired, rigged, equipped, and prepared in a manner
suitable for the voyage, or from some erroneous order of the
captain.
4. When malice, negligence, want of foresight, or lack of skill on
the part of the captain exists in the act causing the damage.

ARTICLE 821. The expenses of an arrival under stress shall

always be for the account of the shipowner or agent, but they shall
not be liable for the damages which may be caused the shippers
by reason of the arrival provided the latter is legitimate.
Otherwise, the ship agent and the captain shall be jointly liable.

Arrival under stress (Arribada) arrival of a vessel at the nearest and

most convenient port, if during the voyage the vessel cannot continue
the trip to the port of destination due to:
(1) lack of provisions
(2) a well-founded fear of seizure, privateers of pirates
(3) by reason of any accident of the sea disabling it to navigate

When lawful

Starr Weigand 2012

When unlawful

Who
expenses:

1.

2.

3.

4.

Lack
of
provisions due
to negligence to
carry according
to usage and
customs;
Risk of enemy
not well known
or manifest
Defect of vessel
due to improper
repair; and
M a l i c e ,
negligence, lack
of foresight or
skill of captain.
(Art. 820)

The shipowner or ship

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

It is the duty of the captain to continue the voyage without delay after
the cause of the arrival under stress has ceased failing in such duty
renders him liable. However, in case the cause has been risk of
enemies, there must first be an assembly before departure. (Art. 825)

Steps:
1.
Captain should determine during the voyage if there is well
founded fear of seizure, privateers and other valid grounds;
2.
Captain shall assemble the officers and summon the persons
interested in the cargo who may attend the meeting but without a right
to vote;
3.
The officers shall determine and agree if there is wellfounded reason after examining the circumstances. The captain shall
have the deciding vote;
4.
The agreement shall be drafted and the proper minutes shall
be signed and entered in the log book;
5.
Objections and protests shall likewise be entered in the
minutes.

ARTICLE 822. If in order to make repairs to the vessel or because

there is danger that the cargo may suffer damage, it should be
necessary to unload, the captain must request authorization from
the competent judge or court for the removal, and carry it out with
the knowledge of the person interested in the cargo, or his
representative, should there be any.
In a foreign port, it shall be the duty, of the Philippine Consul,
where there is one, to give the authorization.
In the first case, the expenses shall be for the account of the ship
agent or owner, and in the second, they shall be chargeable
against the owners of the merchandise for whose benefit the act
was performed.
If the unloading should take place for both reasons, the expenses
shall be divided proportionately between the value of the vessel
and that of the cargo.

bears

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ARTICLE 823. The custody and preservation of the cargo which

has been unloaded shall be intrusted to the captain, who shall be
responsible for the same, except in cases of force majeure.
ARTICLE 824. If the entire cargo or part thereof should appear to
be damaged, or there should be imminent danger of its being
damaged, the captain may request of the competent judge or
court, or of the consul in a proper case, the sale of all or of part of
the former, and the person taking cognizance of the matter shall
authorize it, after an examination and declaration of experts,
advertisements, and other formalitiesrequired by the case, and an
entry in the book, in accordance with the provisions of Article 624.
The captain shall, in a proper case, justify the legality of his
conduct, under the penalty of answering to the shipper for the

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price the merchandise would have brought if they had arrived in
good condition at the port of destination.

ARTICLE 825. The captain shall be responsible for the damages

caused by his delay, if after the cause of the arrival under stress
has ceased, he should not continue the voyage.
If the cause of arrival should have been the fear of enemies,
privateers, or pirates, a deliberation and resolution in a meeting of
the officers of the vessel and persons interested in the cargo who
may be present, in accordance with the provisions contained in
Article 819, shall precede the departure.

SECTION THREE - COLLISIONS

ARTICLE 826. If a vessel should collide with another, through or
the fault, negligence, or lack of skill of the captain, sailing mate, or
any other member of the complement, the owner of the vessel at
fault shall indemnify the losses and damages suffered, after an
expert appraisal.

ARTICLE 827. If the collision is imputable to both vessels, each

one shall suffer its own damages, and both shall be solidarily
responsible for the losses and damages occasioned to their
cargoes.

ARTICLE 828. The provisions of the preceding article are

applicable to the use in which it cannot be determined which of
the two vessels has caused the collision.
ARTICLE 829. In the cases above mentioned the civil action of the
owner against the person causing the injury as well as the
criminal liabilities, which may be proper, are reserved.
ARTICLE 830. If a vessel should collide with another, through
fortuitous event or force majeure, each vessel and its cargo shall
bear its own damages.
ARTICLE 831. If a vessel should be forced by a third vessel to
collide with another, the owner of the third vessel shall indemnify
the losses and damages caused, the captain thereof being civilly
liable to said owner.

ARTICLE 832. If by reason of a storm or other cause of force

majeure, a vessel which is properly anchored and moored should
collide with those nearby, causing them damages, the injury
occasioned shall be considered as particular average of the vessel
run into.

COLLISION - Impact of two vessels both of which are moving.

Zones of time in collision:

(1) first division covers all the time up to the moment when the risk
of collision may be said to have begun
- within this zone no rule is applicable because none is necessary
- each vessel is free to direct its course as it deems best with reference
to the movements of the other vessel
(2) second division covers the time between the moment when the
risk of collision begins and the moment when it becomes a practical
certainty
(3) third division covers the time between the moment when
collision has become a practical certainty and the moment of actual
contact

o if a vessel, having a right of way, suddenly changes its course during

the third zone, in an effort to avoid an imminent collision due to the fault
of another vessel, such act may be said to be done in extremis , and
even if wrong, cannot create responsibility on the part of said vessel
with the right of way
defense of diligence in the selection of employees not available to
shipowner in maritime tort

Starr Weigand 2012

Cases Covered By Collision and Allision

1.
One vessel at fault
Vessel at fault is liable for damage caused to innocent vessel as well as
damages suffered by the owners of cargo of both vessels. (Art. 826)
2.
Both vessels at fault
Each vessel must bear its own loss, but the shippers of both vessels
may go against the shipowners who will be solidarily liable. (Art. 827)
3.
Vessel at fault not known
Each vessel must bear its own loss, but the shippers of both vessels
may go against the shipowners who will be solidarily liable. (Art. 828)
Doctrine of Inscrutable Fault In case of collision where it cannot be
determined which between the two vessels was at fault, both vessels
bear their respective damage, but both should be solidarily liable for
damage to the cargo of both vessels.
4.
Third vessel at fault
The third vessel will be liable for losses and damages. (Art. 831)
5.
Fortuitous event/force majeure
No liability. Each bears its own loss. (Art. 830)

The doctrine of res ipsa loquitur applies in case a moving vessel strikes
a stationary object, such as a bridge post, dock, or navigational aid.
(Far Eastern Shipping v. CA, Luzon Stevedoring vs. CA)
ARTICLE 833. A vessel which, upon being run into, sinks
immediately, as well as that which, having been obliged to make a
port to repair the damages caused by the collision, is lost during
the voyage or is obliged to be stranded in order to be saved, shall
be presumed as lost by reason of collision.

ARTICLE 834. If the vessels colliding with each other should have
pilots on board discharging their duties at the time of the collision,
their presence shall not exempt the captains from the liabilities
they incur, but the latter shall have the right to be indemnified by
the pilots, without prejudice to the criminal liability which the latter
may incur.

ARTICLE 835. The action for the recovery of losses and damages
arising from collisions cannot be admitted if a protest or
declaration is not presented within twenty-four hours before the
competent authority of the point where the collision took place, or
that of the first port of arrival of the vessel, if in Philippine
territory, and to the consul of the Republic of the Philippines if it
occurred in a foreign country.

Allision - Impact between a moving vessel and a stationary one.

- 61 application of doctrine of last clear chance does not apply

because of the provisions of Art. 827, under which, the evidence
disclosing that both vessels are blameworthy, the owners of neither can
successfully maintain an action against the other for the loss of or injury
to his vessels

MARITIME PROTEST
Condition precedent or prerequisite to recovery of damages arising
from collisions and other maritime accidents.
It is a written statement made under oath by the captain of a vessel
after the occurrence of an accident or disaster in which the vessel or
cargo is lost or damaged, with respect to the circumstances attending
such occurrence, for the purpose of recovering losses and damages.
Excuses for not filing protest: 1) where the interested person is not
on board the vessel; and 2) on collision time, need not be protested.
(Art. 836)
Cases applicable:
1.
Collision (Art. 835);
2.
Arrival under stress (Art. 612(8));
3.
Shipwrecks (Arts. 612(15), 843);
4.
Where the vessel has gone through a hurricane or when the
captain believes that the cargo has suffered damages or averages (Art.
624).
Who makes: Captain
When made: within 24 hours from the time the collision took place.
Before whom made: competent authority at the point of collision or at
the first port of arrival, if in the Philippines and to the Philippine consul,
if the collision took place abroad. (Art. 835)

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ARTICLE 836. With respect to damages caused to persons or to
the cargo, the absence of protest may not prejudice the persons
interested who were not on board or were not in a condition to
make known their wishes.

ARTICLE 837. The civil liability incurred by the shipowners in the

case prescribed in this section, shall be understood as limited to
the value of the vessel with all its appurtenances and freightage
earned during the voyage.

In case of illegal or tortious acts of the captain the liability of

the shipowner and agent is subsidiary. In such instance the shipowner
or agent may avail of the provisions of Article 837 of the Code by
abandoning the vessel. However, if the injury or damage is caused by
the shipowner's fault as where he engages the services of an
inexperienced and unlicensed captain or engineer, he cannot avail of
the provisions of Article 837 of the Code by abandoning the vessel. He
is personally liable for the damages arising thereby. (Luzon Stevedoring
v. CA)

We reiterate what We said in previous decisions that the real and

hypothecary nature of the liability of the shipowner or agent is
embodied in the provisions of the Maritime Law, Book III, Code of
Commerce. Articles 587, 590 and 837 of the same code are precisely
intended to limit the liability of the shipowner or agent to the value of the
vessel, its appurtenances and freightage earned in the voyage,
provided that owner or agent abandons the vessel. Although it is not
specifically provided for in Article 837 of the same code that in case of
collision there should be such abandonment to enjoy such limited
liability, said article on collision of vessels is a mere amplification of the
provisions of Articles 587 and 590 of same code where abandonment of
the vessel is a pre-condition. Even without said article, the parties may
avail of the provisions of Articles 587 and 590 of same code in case of
collision. This is the reason why Article 837 of the same code is
considered a superfluity. (Ibid.)

ARTICLE 838. When the value of the vessel and her

appurtenances should not be sufficient to cover all the liabilities,
the indemnity due by reason of the death or injury of persons shall
have preference.

Rule of limited liability in case of collisions, the liability of the vessel

owner is limited to the value of the vessel and the freightage earned
during the voyage; consequently, his property, other than such vessel
and freightage earned during the voyage cannot be made to answer for
his liability arising from collision with other vessels.

ARTICLE 839. If the collision should take place between Philippine

vessels in foreign waters, or if having taken place in the open
seas, and the vessels should make a foreign port, the Consul of
the Republic of the Philippines in said port shall hold a summary
investigation of the accident, forwarding the proceedings to the
Secretary of the Department of Foreign Affairs for continuation
and conclusion.

Collision falls among matters not specifically regulated by the Civil

Code, so that the Code of Commerce applies. Article 826 of the Code
of Commerce provides that where collision is imputable to the
personnel of a vessel, the owner of the vessel at fault, shall indemnify
the losses and damages incurred after an expert appraisal. Article 827
provides that if the collision is imputable to both vessels, each one shall
suffer its own damages and both shall be solidarily responsible for the
losses and damages suffered by their cargoes. Under Articles 826 to
839, the shipowner or carrier, is not exempt from liability for damages
arising from collision due to the fault or negligence of the captain.
Primary liability is imposed on the shipowner or carrier in recognition of
the universally accepted doctrine that the shipmaster or captain is
merely the representative of the owner who has the actual or
constructive control over the conduct of the voyage.
COGSA, in no uncertain terms, restricts its application "to all contracts
for the carriage of goods by sea to and from Philippine ports in foreign
trade." Under Section 1 thereof, it is explicitly provided that "nothing in

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- 62 this Act shall be construed as repealing any existing provision of the

Code of Commerce which is now in force, or as limiting its application."
In case of collision, both the owner and the agent are civilly
responsible for the acts of the captain. Both the owner and agent
(Naviero) should be declared jointly and severally liable, since the
obligation which is the subject of the action had its origin in a tortious
act and did not arise from contract, without prejudice, however, to his
rights against the owner of the ship, to the extent of the value of the
vessel, its equipment, and the freight. The declared value of the goods
was stated in the bills of lading and corroborated no less by invoices
offered as evidence during the trial. Common carriers "cannot limit its
liability for injury to a less of goods where such injury or loss was
caused by its own negligence." Negligence of the captains of the
colliding vessel being the cause of the collision, and the cargoes not
being jettisoned to save some of the cargoes and the vessel, the trial
court and the Court of Appeals acted correctly in not applying the law
on averages (Articles 806 to 818, Code of Commerce). (NDC v. CA)

SECTION FOUR - SHIPWRECKS

ARTICLE 840. The losses and deteriorations suffered by a vessel
and her cargo by reason of shipwreck or stranding shall be
individually for the account of the owners, the part which may be
saved belonging to them in the same proportion.

ARTICLE 841. If the wreck or stranding should be caused by the

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 of the captain
for the damages caused to the vessel or to the cargo by the
accident, in accordance with the provisions contained in Articles
610, 612, 614, and 621.

Shipwreck - in its popular sense: a ship which has received injuries

rendering her incapable of navigation; loss of a vessel at sea, either by
being swallowed up by the waves, by running against another vessel or
thing at sea, or on the coast.

Burden of liability the captain is liable where: in case of the wreck or

stranding is due to the
(1) malice, negligence, or lack of skill of the captain;
(2) because the vessel put to sea was insufficiently repaired and
equipped.

ARTICLE 842. 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, and with preference over any
other obligation if the merchandise should be sold.

ARTICLE 843. If several vessels sail under convoy, and any of

them should be wrecked, the cargo saved shall be distributed
among the rest in proportion to the amount which each one is able
to take.
If any captain should refuse, without sufficient cause, to receive
what may correspond to him, the captain of the wrecked vessel
shall enter a protest against him, before two sea officials, of the
losses and damages resulting therefrom, ratifying the protest
within twenty-four hours after arrival at the first port, and
including it in the proceedings he must institute in accordance
with the provisions contained in Article 612.
If it is not possible to transfer to the other vessels the entire cargo
of the vessel wrecked, the goods of the highest value and smallest
volume shall be saved first, the designation thereof to be made by
the captain with the concurrence of the officers of his vessel.

ARTICLE 844. A captain who may have taken on board the goods
saved from the wreck shall continue his course to the port of
destination, and on arrival shall deposit the same, with judicial the
intervention, at the disposal of their legitimate owners.
In case he changes his course, if he can unload them at the port of
which they were consigned, the captain may make said port if the
shippers or supercargoes present and the officers and
passengers of the vessel consent thereto; but he may not do so,

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even with said consent, in time of war or when the port is difficult
and dangerous to make.
The owners of the cargo shall defray all the expenses of this
arrival as well as the payment of the freightage which, after taking
into consideration the circumstances of the case, may be fixed by
agreement or by a judicial decision.

ARTICLE 845. If on the vessel there should be no person

interested in the cargo who can pay the expenses and freightage
corresponding to the salvage, the competent judge or court may
order the sale of the part necessary to cover the same. This shall
also be done when its preservation is dangerous, or when in a
period of one year it should not have been possible to ascertain
who are its legitimate owners.
In both cases the proceedings shall be with the publicity and
formalities prescribed in Article 579, and the net proceeds of the
sale shall be safely deposited, in the discretion of the judge or
court, so that they may be delivered to the legitimate owner
thereof.

SHIPWRECK
It is the loss of the vessel at sea as a consequence of its grounding, or
running against an object in sea or on the coast. It occurs when the
vessel sustains injuries due to a marine peril rendering her incapable of
navigation.
If the wreck was due to malice, negligence or lack of skill of the captain,
the owner of the vessel may demand indemnity from said captain. (Art.
841)
The rules on collision or allision, as may be pertinent, can equally apply
to shipwrecks.

SPECIAL CONCEPTS
ARRASTRE SERVICE
A contract for the unloading of goods from a vessel.
Applicability: Overseas trade only. (Commercial Law Review, C.
Villanueva, 2004 ed.)
Significance: When a person brings in cargo from abroad, he cannot
unload and deliver the cargo by himself. The unloading must be done
by the arrastre operator, which will then deliver the cargo to the
importer. (Commercial Law Review, C. Villanueva, 2004 ed.)

Nature of business: It is a public utility, discharging functions which

are heavily invested with public interest.
Liability:
1.
Similar to a warehouseman (Lua Kian v. Manila Railroad)
2.
Similar to a common carrier (Northern Motors v. Prince Line)
3.
Solidary liability with the common carrier

- 63 The matter of quantity, description and conditions of the cargo inside

the container is the sole responsibility of the shipper, unless there is
stipulation to the contrary. (US Lines vs. Comm. Of Customs, Reyma
Brokerage v. Phil. Home Assurance)

Note: In order to attribute to the carrier any damage to the shipment

that may be found, inspection of the goods should be done at pier-side.
(Bankers vs. CA)
The containerization system was devised to facilitate the expeditious
and economical loading, carriage and unloading of cargoes. Under this
system, the shipper loads his cargoes in a specially designed container,
seals the container and delivers it to the carrier for transportation. The
carrier does not participate in the counting of the merchandise for
loading into the container, the actual loading thereof nor the sealing of
the container. Having no actual knowledge of the kind, quantity or
condition of the contents of the carrier, the carrier issues thee
corresponding bill of lading based on the declaration of the shipper. The
bill of lading describes the cargo as a container simply and it states the
contents of the container either as advised by this shipper or prefaced
by the phrase said to contain. (STC) Clearly then, the matter of
quantity, description and conditions of the cargo is the sole
responsibility of the shipper. The carrier, by signifying in the bill of lading
that it is a receipt for the number of packages shown above had
explicitly admitted that the containerized shipments had actually the
number of packages declared by the shipper in the bill of lading. This
conclusion is bolstered by the stipulation printed in the bill of lading,
unless expressly acknowledged and agreed to. This express
acknowledgment of the carrier makes the case at bar an exception to
the doctrine enunciated in United States Lines. The rule enunciated in
United States Lines applies to a situation where the carrier of the
containerized cargo simply admits the information furnished by the
shipper with regard to the goods it shipped as reflected in the bill of
lading but not where the carrier of the containerized cargo makes an
explicit admission as to the weight, measurement marks, numbers,
quality contents, and value, etc. In its stead, what governs is the dictum
that the bill of lading shall be prima facie evidence of the receipt by the
carrier of the goods as therein described. As the petitioner prim facie
received all the shipments in the sealed containers, it has the burden to
rebut the conclusion that it received the same without shortage. The
petitioner had not overthrown this presumption by contrary evidence.
Therefore, the respondent court did not commit any reversible error in
agreeing with the trial court that the loss of the 203 cartons is
attributable to the petitioner. (Reyma Brokerage v. Phil. Home
Assurance)

Note: In order that the arrastre operator may be held liable, the
consignee must prove that the damage was due to the negligence and
while the goods are in the custody of the arrastre operator. (Hartford
Fire Insurance v. E. Razon, Inc.)
STEVEDORING SERVICE
The carriage of goods from the warehouse or pier to the holds of the
vessel. (Chief of Staff vs. CIR)
As understood in the port business, the term consists of the handling of
cargo from the hold of the ship to the dock, in case of pier-side
unloading; or to a barge, in case of unloading at sea. (Anglo-Fil Trading
Corp. vs. Lazaro)
The loading on the ship of outgoing cargo is also part of stevedoring
work. (Ibid.)

CONTAINERIZATION/ SAID-TO-CONTAIN/ SHIPPERS LOAD

AND COUNT SYSTEM
System whereby the shipper loads his cargoes in a specially designed
container, seals the container and delivers it to the carrier for
transportation. The carrier does not participate in the counting of the
merchandise for loading into the container, the actual loading, and the
sealing of the container. (US Lines v. Comm. Of Customs, ICTSI v.
Prudential Guarantee)

Starr Weigand 2012

CARRIAGE OF GOODS BY SEA ACT/COGSA (C.A. No. 65)

COMMONWEALTH ACT NO. 65

IN ACT TO DECLARE THAT PUBLIC ACT NUMBERED FIVE
HUNDRED AND TWENTY-ONE, KNOWN AS "CARRIAGE OF
GOODS BY SEA ACT," ENACTED BY THE SEVENTY-FOURTH
CONGRESS OF THE UNITED STATES, BE ACCEPTED, AS IT IS
HEREBY ACCEPTED BY THE NATIONAL ASSEMBLY
Numbered Five hundred and twenty-one, entitled: "Carriage of
Goods by Sea Act";
WHEREAS, the primordial purpose of the said Acts is to bring
about uniformity in ocean bills of lading and to give effect to the
Brussels Treaty, signed by the United States with other powers;
WHEREAS, the Government of the United States has left it to the
Philippine Government to decide whether or not the said Act shall
apply to carriage of goods by sea in foreign trade to and from
Philippine ports;

WHEREAS, the said Act of Congress contains advanced

legislation, which is in consonance with modern maritime rules
and the practices of the great shipping countries of the world;
WHEREAS, shipping companies, shippers, and marine insurance
companies, and various chambers of commerce, which are

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directly affected by such legislation, have expressed their desire
that said Congressional Act be made applicable and extended to
the Philippines; therefore,
SECTION 1. That the provisions of Public Act Numbered Five
hundred and twenty-one of the Seventy-fourth Congress of the
United States, approved on April sixteenth, nineteen hundred and
thirty-six, be accepted, as it is hereby accepted to be made
applicable to all contracts for the carriage of goods by sea to and
from Philippine ports in foreign trade: Provided, That nothing in
the Act shall be construed as repealing any existing provision of
the Code of Commerce which is now in force, or as limiting its
application.

SECTION 2. This Act shall take effect upon its approval.

Approved: October 22,1936.
An Act Relating to the Carriage of Goods by Sea.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That every bill
of landing or similar document of title which is evidence of a
contract for the carriage of goods by sea to or from ports of the
United States, in foreign trade, shall have effect subject to the
provisions of the Act.

TITLE I
SECTION 1. When used in this Act
(a) The term "carrier" includes the owner or the charterer who
enters into a contract of carriage with a shipper.
(b) The term "contract of carriage" applies only to contracts of
carriage covered by a bill of lading or any similar document of
title, insofar as such document relates to the carriage of goods by
sea, including any bill of lading or any similar document as
aforesaid issued under or pursuant to a charter party from the
moment at which such bill of lading or similar document of title
regulates the relations between a carrier and a holder of the same.

(c) The term "goods" includes goods, wares, merchandise, and

articles of every kind whatsoever, except live animals and cargo
which by the contract of carriage is stated as being carried on
deck and is so carried.

(d) The term "ship" means any vessel used for the carriage of
goods by sea.
(e) The term "carriage of goods" covers the period from the time
when the goods are loaded on to the time when they are
discharged from the ship.
Sec. 1 of this Act expressly provides that nothing in it shall be
construed as repealing any existing provisions of the Code of
Commerce
It was held that contracts for the carriage of goods by sea, after July
4, 1946, from the US to the Philippine ports are governed by the
Carriage of Goods by Sea Act
Under Article 1753, contracts for the carriage of goods by sea from
the Philippines to a foreign country shall be governed by the laws of
such foreign country
As to contracts for the carriage of goods by sea from a foreign country
to the Philippines, the Civil Code shall primarily govern under authority
of Article 1766 CC
Where the CC contains no provisions pertinent to the point in
question, the provisions of the Code of Commerce and special laws,
such as the COGSA, shall govern
Should there by any conflict between the provisions of the Code of
Commerce and those of said Act, under Section 1 of said Act, the
former shall prevail

Responsibilities and Liabilities

SECTION 3. (1) The carrier shall be bound, before and at the
beginning of the voyage, to exercise due diligence to
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling chambers,
and all other parts of the ship in which goods are carried, fit and
safe for their reception carriage and preservation.

(2) The carrier shall properly and carefully load, handle, stow,
carry, keep, care for, and discharge the goods carried.
(3) After receiving the goods into his charge the carrier, or the
master or agent of the carrier, shall, on demand of the shipper,
issue to the shipper a bill of lading showing among other things
a) The leading marks necessary for identification of the
goods as the same are furnished in writing by the shipper before
the loading of such goods starts, provided such marks are
stamped or otherwise shown clearly upon the goods if uncovered,
or on the cases or coverings in which such goods are contained,
in such a manner as should ordinarily remain legible until the end
of the voyage.
(b) Either the number of packages or pieces, or the
quantity or weight, as the case may be, as furnished in writing by
the shipper.
(c) The apparent order and condition of the goods:
Provided, That no carrier, master, or agent of the carrier, shall be
bound to state or show in the bill of lading any marks, number,
quantity, or weight which he has reasonable ground for
suspecting not accurately to represent the goods actually
received, or which he has had no reasonable means of checking.

(4) Such a bill of lading shall be prima facie evidence of the receipt
by the carrier of the goods as therein described in accordance
with paragraphs (3) (a), (b), and (c) of this section: Provided, That
nothing in this Act shall be construed as repealing or limiting the
application of any part of the Act, as amended, entitled "An Act
relating to bills of lading in interstate and foreign commerce,"
approved August 29, 1916 (U. S. C. title 49, secs. 81-124),
commonly known as the "Pomerene Bills of Lading Act."

(5) The shipper shall be deemed to have guaranteed to the carrier

the accuracy at the time of shipment of the marks, number,
quantity, and weight, as furnished by him; and the shipper shall
indemnify the carrier against all loss damages, and expenses
arising or resulting from inaccuracies in such particulars. The
right of the carrier to such indemnity shall in no way limit his
responsibility and liability under the contract of carriage or to any
person other than the shipper.

(6) Unless notice of loss or damage and the general nature of such
loss or damage 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
into the custody of the person entitled to delivery thereof under
the contract of carriage, such removal shall be prima facie
evidence of the delivery by the carrier of the goods as described
in the bill of lading. If the loss or damage is not apparent, the
notice must be given within three days of the delivery.
Said notice of loss or damage may be endorsed upon the receipt
for the goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods
has at the time of their receipt been the subject of joint survey or
inspection.

Risks

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- 64 SECTION 2. Subject to the provisions of section 6, under every

contract of carriage of goods by sea, the carrier in relation to the
loading handling, stowage, carriage, custody, care, and discharge
of such goods, shall be subject to the responsibilities and
liabilities and entitled to the rights and immunities hereinafter set
forth.

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In any event 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: Provided, That if a notice of loss or
damage, either apparent or concealed, is not given as provided for
in this section, that fact 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
In the case of any actual or apprehended loss or damage the
carrier and the receiver shall give all reasonable facilities to each
other for inspecting and tallying the goods.

(7) After the goods are loaded the bill of lading to be issued by the
carrier, master, or agent of the carrier to the shipper shall, if the
shipper so demands, be a "shipped" bill of lading Provided, That if
the shipper shall have previously taken up any document of title to
such goods, he shall surrender the same as against the issue of
the "shipped" bill of lading, but at the option of the carrier such
document of title may be noted at the port of shipment by the
carrier, master, or agent with name or name the names of the ship
or ships upon which the goods have been shipped and the date or
dates of shipment, and when so noted the same shall for the
purpose of this section be deemed to constitute a "shipped" bill of
lading.

(8) Any clause, covenant, or agreement in a contract of carriage

relieving the carrier or the ship from liability for loss or damage to
or in connection with the goods, arising from negligence, fault, or
failure in the duties and obligations provided in this section, or
lessening such liability otherwise than as provided in this Act,
shall be null and void and of no effect. A benefit of insurance in
favor of the carrier, or similar clause, shall be deemed to be a
clause relieving the carrier from liability.

Rights and Immunities

SECTION 4. (1) Neither the carrier nor the ship shall be liable for
loss or damage arising or resulting from unseaworthiness unless
caused by want of due diligence on the part of the carrier to make
the ship seaworthy, and to secure that the ship is properly
manned, equipped, and supplied, and to make to the holds,
refrigerating and cool chambers, and all other parts of the ship in
which goods are carried fit and safe for their reception, carriage,
and preservation in accordance with the provisions of paragraph

(1) of section 3. Whenever loss or damage has resulted from

unseaworthiness, the burden of proving the exercise of due
diligence shall be on the carrier or other persons claiming
exemption under the section.

(2) Neither the carrier nor the ship shall be responsible for loss or
damage arising or resulting from
(a) Act, neglect, or default of the master, mariner, pilot, or
the servants of the carrier in the navigation or in the management
of the ship;
(b) Fire, unless caused by the actual fault or privity of the
carrier;
(c) Perils, dangers, and accidents of the sea or other
navigable waters;
(d) Act of God;
(e) Act of war,
(f) Act of public enemies;
(g) Arrest or restraint of princes, rulers, or people, or
seizure under legal process;
(h) Quarantine restrictions;
(i) Act or omission of the shipper or owner of the goods,
his agent or representative;
(j) Strikes or lockouts or stoppage or restraint of labor
from whatever cause, whether partial or general; Provided, That
nothing herein contained shall be construed to relieve a carrier
from responsibility for the carrier's own acts;
(k) Riots and civil commotions
(l) Saving or attempting to save life or property at sea;

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- 65 (m) Wastage in bulk or weight or any other loss or

damage arising from inherent defect, quality, or vice of the goods;
(n) Insufficiency of packing;
(o) Insufficiency of inadequacy of marks;
(p) Latent defects not discoverable by due diligence; and
(q) Any other cause arising without the actual fault and
privity of the carrier and without the fault or neglect of the agents
or servants of the carrier, but the burden of proof shall be on the
person claiming the benefit of this exception to show that neither
the actual fault or privity of the carrier nor the fault or neglect of
the agents or servants of the carrier contributed to the loss or
damage.

(3) The shipper shall not be responsible for loss or damage

sustained by the carrier or the ship arising from any cause without
the act, fault, or neglect of the shipper, his agents, or servants.
(4) Any deviation in saving or attempting to save life or property at
sea, or any reasonable deviation shall not be deemed to be an
infringement or breach of this Act or of the contract of carriage,
and the carrier shall not be liable for any loss or damage resulting
therefrom: Provided, however, That if the deviation is for the
purpose of loading cargo or unloading cargo or passengers it
shall, prima facie, be regarded as unreasonable.

(5) Neither the carrier nor the ship shall in any event be or become
liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $600 per package
lawful money of the United States, or in case of goods not shipped
in packages, per customary freight unit, or the equivalent of that
sum in other currency, unless the nature and value of such goods
have been declared by the shipper before shipment and inserted
in the bill of lading. This declaration, if embodied in the bill of
lading, shall be prima facie evidence, but shall not be conclusive
on the carrier.

By agreement between the carrier, master, or agent of the carrier,

and the shipper another maximum amount than that mentioned in
this paragraph may be fixed: Provided, That such maximum shall
not be less than the figure above named. In no event shall the
carrier be liable for more than the amount of damage actually
sustained.

Neither the carrier nor the ship shall be responsible in any event
for loss or damage to or in connection with the transportation of
the goods if the nature or value thereof has been knowingly and
fraudulently misstated by the shipper in the bill of lading.

(6) Goods of an inflammable, explosive, or dangerous nature to

the shipment whereof the carrier, master or agent of the carrier,
has not consented with knowledge of their nature and character,
may at any time before discharge be landed at any place or
destroyed or rendered innocuous by the carrier without
compensation, and the shipper of such goods shall be liable for all
damages and expenses directly or indirectly arising out of or
resulting from such shipment. If any such goods shipped with
such knowledge and consent shall become a danger to the ship or
cargo, they may in like manner be landed at any place, or
destroyed or rendered innocuous by the carrier without liability on
the part of the carrier except to general average, if any.
Surrender of Rights and Immunities and increase of

Package in section 4(c) refer to cartons not to containers

the nature of the value of the goods as declared and reflected in the
bill of lading is the basis of the liability of the carrier as the actual value
of the losses; (Aboitiz Shipping Corporation v. CA)
parties may agree to amount less than $500 under Sec. 4(5) (Eastern
& Australian Steamship Co., Ltd. v. Great American Ins. Co.)

Responsibilities and Liabilities

SECTION 5. A carrier shall be at liberty to surrender in whole or in
part all or any of his rights and immunities or to increase any of

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his responsibilities and liabilities under this Act, provided such
surrender or increase shall be embodied in the bill of lading
issued to the shipper.

The provisions of this Act shall not be applicable to charter

parties; but if bills of lading are issued in the case of a ship under
charter party, they shall comply with the terms of this Act. Nothing
in this Act shall be held to prevent the insertion in a bill of lading
of any lawful provision regarding general average.
Special Conditions

SECTION 6. Notwithstanding the provisions of the preceding

sections, a carrier, master or agent of the carrier, and a shipper
shall, in regard to any particular goods be at liberty to enter into
any agreement in any terms as to the responsibility and liability of
the carrier for such goods, and as to the rights and immunities of
the carrier in respect of such goods, or his obligation as to
seaworthiness (so far as the stipulation regarding seaworthiness
is not contrary to public policy), or the care or diligence of his
servants or agents in regard to the loading, handling stowage,
carriage, custody, care, and discharge of the goods carried by
sea: Provided, That in this case no bill of lading has been or shall
be issued and that the terms agreed shall be embodied in a receipt
which shall be a non-negotiable document and shall be marked as
such.

Any agreement so entered into shall have full legal effect:

Provided, That this section shall not apply to ordinary commercial
shipments made in the ordinary course of trade but only to other
shipments where the character or condition of the property to be
carried or the circumstances, terms, and conditions under which
the carriage is to be performed are such as reasonably to justify a
special agreement.

Under Sec. 6(3): the carrier and the ship shall be discharged fro all
liability in respect to loss or damage unless suit is brought within 1 year
after delivery of the goods or the date when the goods should have
been delivered
This provision anticipates 2 possibilities:
1. that delivery has been made, in which case the action should be
brought within one year after delivery of the goods;
2. that no delivery has taken place, in which even said period should be
computed from the date when the goods should have been delivered
It was held that one year prescriptive period applies to the insurer as
subrogee of the shipper or consignee even if said insurer has not yet
paid the shipper or consignee (Filipino Merchants Ins. Co. v. Alejandro)
cases of misdelivery or conversion not covered prescriptive period is
10 years for contracts or 4 years for tortious obligations (Ang v.
American Steamship Agencies)
an extrajudicial demand for damages does not toll prescription in the
COGSA (DOLE Philippines, Inc. v. Maritime Co. of the Philippines)
when period renewed for another year by NCC and CC F. H.
Stevens & Co. v. Nordeuscher Lloyd)
shipper, consignee or legal holder of bill may invoke prescriptive
period from the language of Sec. 3(6), it seems clear that the notice
of loss or damage is required to be filed not necessarily by the shipper
but also by the consignee or any legal holder of the bill of lading
exception to 1-year prescriptive period: express agreement of the
parties (Universal Shipping Lines, Inc. v. CA)

SECTION 7. Nothing contained in this Act shall prevent a carrier or

a shipper from entering into any agreement, stipulation, condition,
reservation, or exemption as to the responsibility and liability of
the carrier or the ship for the loss or damage to or in connection
with the custody and care and handling of goods prior to the
loading on and subsequent to the discharge from the ship on
which the goods are carried by sea.

- 66 inclusive, of the Revised Statutes of the United States, or of any

amendments thereto; or under the provisions of any other
enactment for the time being in force relating to the limitation of
the liability of the owners of seagoing vessels.

SECTION 9. Nothing contained in this Act shall be construed as

permitting a common carrier by water to discriminate between
competing shippers similarly place in time and circumstances,
either (a) with respect to the right to demand and receive bills of
lading subject to the provisions of this Act; or (b) when issuing
such bills of lading, either in the surrender of any of the carrier's
rights and immunities or in the increase of any of the carrier's
responsibilities and liabilities pursuant to section 6, title I, of this
Act or (c) in any other way prohibited by the Shipping Act, 1916, s
amended.

SECTION 10. Section 25 of the Interstate Commerce Act is hereby

amended by adding the following proviso at the end of paragraph
4 thereof: "Provided, however, That insofar as any bill of lading
authorized hereunder relates to the carriage of goods by sea, such
bill of lading shall be subject to the provisions of the Carriage of
Goods by Sea Act."

SECTION 11. Where under the customs of any trade the weight of
any bulk cargo inserted in the bill of lading is a weight ascertained
or accepted by a third party other than the carrier or the shipper,
and the fact that the weight is so ascertained or accepted is stated
in the bill of lading, then, notwithstanding any thing in this Act, the
bill of lading shall not be deemed to be prima facie evidence
against the carrier of the receipt of goods of the weight so
inserted in the bill of lading, and the accuracy thereof at the time
of shipment shall not be deemed to have been guaranteed by the
shipper.

SECTION 12. Nothing in this Act shall be construed as

superseding any part of the Act entitled "An act relating to
navigation of vessels, bills of lading, and to certain obligations,
duties, and rights in connection with the carriage of property,"
approved February 13,1893, or of any other law which would be
applicable in the absence of this Act, insofar as they relate to the
duties, responsibilities, and liabilities of the ship or carrier prior to
the time when the goods are loaded on or after the time they are
discharged from the ship.

SECTION 13. This Act shall apply to all contracts for carriage of
goods by sea to or from ports of the United States in foreign trade.
As used in this Act the term "United States" includes its districts,
territories, and possessions: Provided, however, That the
Philippine legislature may by law exclude its application to
transportation to or from ports of the Philippine Islands. The term
"foreign trade" means the transportation of goods between the
ports of the United States and ports of foreign countries. Nothing
in this Act shall be held to apply to contracts for carriage of goods
by sea between any port of the United States or its possessions,
and any other port of the United States or its possession:
Provided, however, That any bill of lading or similar document of
title which is evidence of a contract for the carriage of goods by
sea between such ports, containing an express statement that it
shall be subject to the provisions of this Act, shall be subjected
hereto as fully as if subject hereto as fully as if subject hereto by
the express provisions of this Act: Provided, further, That every
bill of lading or similar document of title which is evidence of a
contract for the carriage of goods by sea from ports of the United
States, in foreign trade, shall contain a statement that it shall have
effect subject to the provisions of this Act.

SECTION 8. The provisions of this Act shall not affect the rights
and obligations of the carrier under the provisions of the Shipping
Act, 1916, or under the provisions of section 4281 to 4289,

SECTION 14. Upon the certification of the Secretary of Commerce

that the foreign commerce of the United States in its competition
with that of foreign nations is prejudiced the provisions, or any of
them, of Title I of this Act, or by the laws of any foreign country or
countries relating to the carriage of goods by sea, the President of
the United States, may, from time to time, by proclamation,
suspend any or all provisions of Title I of this Act for such periods

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Transportation Law|Ampil



of time or indefinitely as may be designated in the proclamation.
The President may at any time rescind such suspension of Title I
hereof, and any provisions thereof which may have been
suspended shall thereby be reinstated and again apply to
contracts thereafter made for the carriage of goods by sea. Any
proclamation of suspension or rescission of any such suspension
shall take effect on a date named therein, which date shall be not
less than ten days from the issue of the proclamation.

Any contract for the carriage of goods by sea, subject to the

provisions of this Act, effective during any period when title I
hereof, or any part thereof, is suspended, shall be subject to all
provisions of law now or hereafter applicable to that part of Title I
which may have thus been suspended.

SECTION 15. This Act shall take effect ninety days after the date of
its approval; but nothing in this Act shall apply during a period not
to exceed one year following its approval to any contract for the
carriage of goods by sea, made before the date on which this Act
is approved, nor to any bill of lading or similar document of title
issued, whether before or after such date of approval in pursuance
of any such contract as aforesaid.

SECTION 16. This Act may be cited as the "Carriage of Goods by

Sea Act."
Approved, April 16, 1936.

- 67 late delivery (Mitsui O.S.K. Lines Ltd. vs. CA). In such instance the,
Civil Code rules on prescription shall apply.

The one-year prescriptive period is suspended by:

1.
The express agreement of the parties (Universal Shipping
Lines, Inc. vs. IAC, 188 SCRA 170)
2.
The filing of an action in court until it is dismissed. (Stevens &
Co. vs. Nordeutscher Lloyd, 6 SCRA 180)

The one-year period shall run from delivery of the last package and is
not suspended by extrajudicial demand. (Dole Phils.,Inc. vs. Maritime
Co.,148 SCRA 118)
The one-year period shall run from delivery to the arrastre operator and
not to the consignee. (Union Carbide Phils, Inc. vs. Manila Railroad
Co.,SCRA 359)
The insurer exercising its right of subrogation is bound by the one-year
prescriptive period. However, it does not apply to the claim against the
insurer for the insurance proceeds.
(Fil. Merchants Ins. Co. vs.
Alejandro; Mayer Steel Pipe Corp. vs. CA)

Warsaw Convention

APPLICABILITY
The transportation must be:
1.
Water/maritime transportation;
2.
for the carriage of goods; and
3.
overseas/international/foreign (from foreign port to
Philippine port).

It can be applied in domestic sea transportation if agreed upon by the

parties. (Clause paramount or paramount clause)
IMPORTANT FEATURES:
1.
Amount of carriers liability
2.
Notice of damage
3.
Prescriptive period
AMOUNT OF CARRIERS LIABILITY
Under the Sec. 4(5), the liability limit is set at $500 per package or
customary freight unit unless the nature and value of such goods is
declared by the shipper. This is deemed incorporated in the bill of
lading even if not mentioned in it. (Eastern Shipping vs. IAC, 150 SCRA
463)
Note that Art. 1749, NCC applies to domestic/inter-island/coastwise
trade.
NOTICE OF DAMAGE (SEC. 3(6))
Rules:
a.
Patent damage: shipper should file a claim with the carrier
immediately upon delivery
b.
Latent damage: shipper should file a claim with the carrier
within three days from delivery.
Note: The filing of a notice of claim is not a condition precedent.
PRESCRIPTIVE PERIOD
Action for loss or damage to the cargo should be brought within one
year after:
a.
Delivery of the goods (delivered but damaged goods); or
b.
The date when the goods should have been delivered (nondelivery). (Sec. 3[6])

Loss or Damage as applied to the COGSA contemplates a situation

where no delivery at all was made by the shipper of the goods because
the same had perished, gone out of commerce, or disappeared in such
a way that their existence is unknown or they cannot be recovered.
Thus, it is inapplicable in case of misdelivery or conversion. (Ang vs.
American Steamship Agencies Inc.) and damage arising from delay or
Starr Weigand 2012

Carriage by Air

Carriage by Sea

Involves international
transportation

May be domestic

Transportation to and from the

Philippines
Applies to both passengers and
goods
Covers loss, damage, delay and
misdelivery

COGSA

Notice of the above is a condition

precedent for filing claims
Prescriptive period is two years

Transportation to the Philippines

Applies to goods only
Covers loss or damage only
Notice of loss not necessary
Prescriptive period for claims is
one year

THE SALVAGE LAW

SECTION 1. When in case of shipwreck, the vessel or its cargo

shall be beyond the control of the crew, or shall have been
abandoned by them, and picked up and conveyed to a safe place
by other persons, the latter shall be entitled to a reward for the
salvage.
Those who, not being included in the above paragraph, assist in
saving a vessel or its cargo from shipwreck, shall be entitled to a
like reward.
Salvage compensation allowed to persons by whose voluntary
assistance a ship at sea or her cargo or both have been saved in whole
or in part from impending sea peril, or such property recovered from
actual peril or loss, as in cases of shipwreck, derelict or recapture

Two concepts:
1.
Services one person renders to the owner of a ship or goods,
by his own labor, preserving the goods or the ship which the owner or
those entrusted with the care of them have either abandoned in distress
at sea, or are unable to protect or secure.
2.
Compensation allowed to persons by whose voluntary
assistance a ship at sea or her cargo or both have been saved in whole

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or in part from impending sea peril, or such property recovered from
actual peril or loss, as in cases of shipwreck, derelict or recapture.

Requisites:
1.
Valid object of salvage;
2.
Object must have been exposed to marine peril (not perils of
the ship);
3.
Services rendered voluntarily (neither an existing duty nor out
of a pre-existing contract);
4.
Services are successful, total or partial.

Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea, and there sink and
remain under water;
3. Floatsam or Flotsam goods which float upon the sea when cast
overboard;
4. Ligan or Lagan goods cast into the sea tied to a buoy, so that they
may be found again by the owners (p.173, Judge Diaz).

Persons who have no right to a reward for salvage:

1. Crew of the vessel saved;
2. Person who commenced Salvage in spite of opposition of the
Captain or his representative;
3. In accordance with Sec. 3 of the Salvage Law, a person who fails
to deliver a salvaged vessel or cargo to the Collector of Customs.

Elements of salvage:
(1) a marine peril
(2) service voluntarily rendered when not required as an existing duty or
from special contract
(3) success, in whole or in part, or that services rendered contributed to
such success

Shipwreck in a popular sense, means a ship which has received

injuries rendering her incapable by navigation; loss of a vessel at sea,
either by being swallowed up by the waves, running against a thing at
sea, or on the coast

Arrival under stress the ship is not lost, and is still able to go to its
destination, though damaged or injured.
Derelict ship or her cargo which is abandoned and deserted at sea
by those who are in charge of it, without any hope of recovering it, or
without any intention of returning to it; if those in charge of the property
quitted it or left it with the intention of finally leaving it, it is a derelict,
and the change of their intention and an attempt to return will not
change its nature (Erlanger)

If it is clear that the intention to return is slight, the salvage which was
done thereafter is considered valid. (Notes and Cases on the Law on
Transportation and Public Utilities, Aquino, T. & Hernando, R.P. 2004
ed. p. 616)

SECTION 2. If the captain of the vessel, or the person acting in his

stead, is present, no one shall take from the sea, or from the
shores or coast merchandise or effects proceeding from a
shipwreck or proceed to the salvage of the vessel, without the
consent of such captain or person acting in his stead.
SECTION 3. He who shall save or pick up a vessel or merchandise
at sea, in the absence of the captain of the vessel, owner, or a
representative of either of them, they being unknown, shall convey
and deliver such vessel or merchandise, as soon as possible, to
the Collector of Customs, if the port has a collector, and otherwise
to the provincial treasurer or municipal mayor.

SECTION 4. After the salvage is accomplished, the owner or his

representative shall have a right to the delivery of the vessel or
things saved, provided that he pays, or gives a bond to secure, the
expenses and the proper reward.
The amount and sufficiency of the bond, in the absence of
agreement, shall be determined by the Collector of Customs or by

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- 68 the Judge of the Court of First Instance of the province in which

the things saved may be found.

SECTION 5. The Collector of Customs, provincial treasurer, or

municipal mayor, to whom a salvage is reported, shall order:
a. That the things saved be safeguard and inventoried.
b. The sale at public auction of the things saved which may be in
danger of immediate loss or of those whose conservation is
evidently prejudicial to the interests of the owner, when no
objection is made to such sale.
c. The advertisement within the thirty days subsequent to the
salvage, in one of the local newspapers or in the nearest
newspaper published, of all the details of the disaster, with a
statement of the mark and number of the effects requesting all
interested persons to make their claims.

SECTION 6. If, while the vessel or things saved are at the

disposition of the authorities, the owner or his representative shall
claim them, such authorities shall order their delivery to such
owner or his representative, provided that there is no secure the
payment of the expenses and the proper reward. Otherwise, the
delivery shall nor be made until the matter is decided by the Court
of First Instance of the province.

SECTION 7. No claim being presented in the three months

subsequent to the publication of the advertisement prescribed in
sub-section (c) of Section five, the things save shall be sold at
public auction, and their proceeds, after deducting the expenses
and the proper reward shall be deposited in the insular treasury. If
three years shall pass without anyone claiming it, one-half of the
deposit shall be adjudged to him who saved the things, and the
other half to the insular government.

SECTION 8. The following shall have no right to a reward for

salvage or assistance:
a. The crew of the vessel shipwrecked or which was is danger of
shipwreck;
b. He who shall have commenced the salvage in spite of
opposition of the captain or his representative; and
c. He who shall have failed to comply with the provisions of
Section three.

SECTION 9. If, during the danger, an agreement is entered into

concerning the amount of the reward for salvage or assistance, its
validity may be impugned because it is excessive, and it may be
required to be reduced to an amount proportionate to the
circumstances.

SECTION 10. In a case coming under the last preceding section,

as well as in the absence of an agreement, the reward for salvage
or assistance shall be fixed by the Court of First Instance of the
province where the things salvaged are found, taking into account
principally the expenditures made to recover or save the vessel or
the cargo or both, the zeal demonstrated, the time employed, the
services rendered, the excessive express occasioned the number
of persons who aided, the danger to which they and their vessels
were exposed as well as that which menaced the things recovered
or salvaged, and the value of such things after deducting the
expenses.

Reasons for allowing salvage compensation to salving vessel: to

reward promptness, energy, efficiency and heroic endeavor in saving
life and property in peril, etc., but however, meritorious and worthy of
praise be the action and cooperation of the officers and the crew of the
salving vessel, it is of capital importance to take into consideration the
use and service of the said vessel as an indispensable instrument for
the salvage, as well as the danger to which it was exposed

SECTION 11. From the proceeds of the sale of the things saved
shall be deducted, first, the expenses of their custody,
conservation, advertisement, and auction, as well as whatever
taxes or duties they should pay for their entrance; then there shall
be deducted the expenses of salvage; and from the net amount

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remaining shall be taken the reward for the salvage or assistance
which shall not exceed fifty per cent of such amount remaining.

SECTION 12. If in the salvage or in the rendering of assistance

different persons shall have intervened the reward shall be divided
between them in proportion to the services which each one may
have rendered, and, in case of doubt, in equal parts.
Those who, in order to save persons, shall have been exposed to
the same dangers shall also have a right to participation in the
reward.

Here, more than 1 person has intervened

If in a first vessel, passengers were at the point of death, a second
vessel rescues them, will the second vessel be entitled to
salvage? No, because rescuing human beings is an act of humanity.
One is duty-bound to save persons. This is according to jurisprudence.

- 69 -

b.
25% to the captain; and
c.
25% to the officers and crew in proportion to their
salaries. (Sec. 13)

Taking passengers from a sinking ship, without rendering any service in

rescuing the vessel, is not a salvage service, being a duty of humanity
and not for reward.
4 accidents in maritime law: collision, shipwreck, arrival under stress,
general average
Shipwreck is applicable to salvage law because its a derelict
In towage, there is no shipwreck (Thus, not covered)

RULES ON SALVAGE REWARD

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

Generally salvage may be defined as a service which one person

renders to the owner of a ship or goods by his own labor,
preserving the goods or 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 found on the equity of
remunerating private and secure. It is found on the equity of
remunerating private individual services performed in saving, in whole
or in part, a ship or its cargo from impending peril, or of recovering them
after actual loss. It is a compensation for actual services rendered to
the property charged with it, and is allowed for meritorious conduct of
the salvor and in consideration of a benefit conferred upon the person
whose property he has saved. Three elements are necessary to a
valid salvage claim: (a) a marine peril; (b) service voluntarily
rendered when not required as an existing duty or from special
contract; (c) success, in whole or in part, or that the services
rendered contributed to such success.
Compensation as salvage is not viewed by the admiralty courts merely
as pay on the principle of quantum meruit or as a remuneration pro
opere et labore, but as a reward given for perilous services, voluntarily
rendered, and as an inducement to mariners to embark in such
dangerous enterprises to save life and property. The amount should be
liberal enough to cover the expenses and to give an extra sum as a
reward for the services rendered. There is no fixed rule for salvage
allowance. The allowance rests in the sound discretion of the court or
judge who hears the case, hears the witnesses testify, and is
acquainted with the environments in golden scales, but should be made
as a reward for meritorious voluntary services, rendered at a time when
danger of loss is imminent and for the purpose of encouraging others in
like services.
A salvor, in the view of the maritime law, has an interest in the property;
this is called a lien, but it never goes, in the absence of a contract
expressly made, upon the idea of a debt due by the owner to the salvor
for services rendered, but upon the principle that the service creates a
property in the thing saved. He is, to all intents and purposes, a joint
owner and if the property is lost he must bear his share like the other
joint owners.
A derelict is defined as "A ship or her cargo which is abandoned
and deserted at sea by those who were in charge of it, without any
hope of recovering it (sine spe recuperandi), or without any
intention of returning to it (sine animo revertendi). If those in
charge left within the intention of returning, or of procuring
assistance, the property is not derelict, but if they quitted the
property with the intention of finally leaving it, it is derelict, and a
change of their intention and an attempt to return will not change
of their intention and an attempt to return will not change its
nature.
When a vessel is found at sea, deserted, and has been abandoned by
the master and crew without the intention of returning and resuming
possession, she is, in the sense of the law, derelict, abandoned, and
the finder who take possession with the intention of saving her gains a
right of possession which he can maintain against the true owner. The
owner does not, indeed, renounce his right of property. This is not
presumed to be his intention, nor does the finder acquire any such
right. But the owner does abandon, temporarily, his right of possession,
which is transferred to the finder who becomes bound to preserve the
property with good faith and bring it to a place of safety for the owner's
use; and he acquires a right to be paid for his services a reasonable
and proper compensation out of the property itself. He is not bound to
part with the possession until it is paid, or the property is taken into the

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SECTION 13. If a vessel or its cargo shall have been assisted or

saved, entirely or partially, by another vessel, the reward for
salvage or for assistance shall be divided between the owner, the
captain, and the remainder of the crew of the latter vessel, so as to
give the owner a half, the captain a fourth, and all the remainder of
the crew the other fourth of the reward, in proportion to their
respective salaries, in the absence of an agreement to the
contrary. The express of salvage, as well as the reward for salvage
or assistance, shall be a charge on the things salvaged on their
value.

SECTION 14. This Act shall take effect on its passage.

Enacted: February 4, 1916
CONTRACT OF TOWAGE
A contract whereby one vessel, usually motorized, pulls another,
whether loaded or not with merchandise, from one place to another, for
a compensation. It is a contract for services rather than a contract of
carriage.

SALVAGE

TOWAGE

Governed by special law (Act No.

2616)

Governed by Civil Code on

contract of lease

Requires success, otherwise no

payment

Success is not required

Must be done with the consent of

the captain/crewmen

Only the consent of the

tugboat owner is needed

Vessel must be involved in an

accident

Vessel need not be involved in

an accident

Fees distributed among crewmen

Fees belong to the tugboat

owner

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possession of the law preparatory to the amount of salvage being
legally ascertained.
The evidence proves that the Nippon was in peril; that the captain left in
order to protect his life and the lives of the crew; that the animo
revertendi was slight. The argument of the defendant-appellant to the
effect that the ship was in no danger is a bit out of place in view of the
statement of the captain that she would sink with the first gale, coupled
with the fact that a typhoon was the cause of her stranding. The
abandonment of a vessel by all on board, when the vessel is in
peril, will justify third parties in taking possession with the bona
fide intention of saving the vessel and its cargo for its owners. The
mental hope of the master and the crew will in no way affect the
possession nor the right to salvage.
The salvage was conducted with skill, diligence and efficiency. Capt.
Robinson, who was the only one of the experts who had had any
experience in handling wet copra, unqualifiedly approved Manila as a
base for operations. Lebreton, a stevedore, testified that he would have
gotten some of his materials from Hongkong but that he would have
freighted the salved cargo to Manila. All other things being equal, the
fact that Hongkong is forty sailing hours from Scarborough Reef while
Manila is less than twenty-four sailing hours would make Manila by far
the more logical base. Some of the witnesses contended that other
methods should have been used. They testified that "grabs" or "clam
shells" would have brought better results, but none of these witnesses
had had any experience in unloading wet copra. Capt. Robinson was
the only witness called who had had any experience in this class of
work. He testified that the only way all the copra could be gotten out
was by sacks or by canvas slings; that "grabs" would be of no use
because of the inability to work with them between decks. The copra
was in three layers. The top layer was dry, the middle layer was
submerged every time the tide rose, and the lower layer was
submerged all of the time. It was manifestly impossible to keep these
layers separate by using "grabs" or "clam shells." The estimates of the
experts with regard to the time necessary to remove the cargo ranged
from eight to twenty days. The greater portion of the cargo was brought
in by the plaintiffs within fifteen days. The delay after June 5 was due to
the difficulty in inducing laborers to work with wet copra. This difficulty
would have arisen with any set of salvors and cannot be attributed to a
lack of care or diligence on the part of the plaintiffs. (Erlanger &
Galinger v. Swedish Asiatic)

There was no marine peril to justify a valid salvage. Although the

defendant's vessel was in a helpless condition due to engine failure, it
did not drift too far from the place where it was. The weather was fair,
clear, and good. The waves were small and too slight, so much so, that
there were only ripples on the sea, which was quite smooth. During the
towing of the vessel there was moonlight. Although said vessel was
drifting towards the open sea, there was no danger of it floundering or
being stranded, as it was far from any island or rocks. In case of danger
of stranding, its anchor could released, to prevent such occurrence.
There was no danger that defendant's vessel would sink, in view of the
smoothness of the sea and the fairness of the weather. Said vessel or
its crew did not even find it necessary to lower its launch and two motor
boats, in order to evacuate its passengers aboard. Neither did they find
occasion to jettison the vessel's cargo as a safety measure. Neither the
passengers nor the cargo were in danger of perishing. All that the
vessel's crew members could not do was to move the vessel on its own
power. That did not make the vessel a quasi-derelict, considering that
even before the appellant extended the help to the distressed ship, a
sister vessel was known to be on its way to succor it.
It can be considered a contract of towage. In consenting to plaintiff's
offer to tow the vessel, defendant (through the captain of its vessel MV
Don Alfredo) thereby impliedly entered into a juridical relation of
"towage" with the owner of the vessel MV Henry I, captained by
plaintiff, the William Lines, Incorporated. Tug which put line aboard
liberty ship which was not in danger or peril but which had reduced its
engine speed because of hot grounds, and assisted ship over bar and,
thereafter, dropped towline and stood by while ship proceeded to dock
under own power, was entitled, in absence of written agreement as to
amount to be paid for services, to payment for towage services, and not
for salvage services.
The distinction between salvage and towage is of importance to
the crew of the salvaging ship, for the following reasons: If the

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- 70 contract for towage is in fact towage, then the crew does not have
any interest or rights in the remuneration pursuant to the contract.
But if the owners of the respective vessels are of a salvage nature,
the crew of the salvaging ship is entitled to salvage, and can look
to the salvaged vessel for its share.
As the vessel-owner, William Lines, Incorporated, had expressly waived
its claim for compensation for the towage service rendered to
defendant, it is clear that plaintiff, whose right if at all depends upon and
not separate from the interest of his employer, is not entitled to payment
for such towage service. (Barrios v. Go Thong)

The services rendered by the launch Triton are more in the nature of
salvagerather than towage. A vessel, though not abandoned, may be
the subject of salvage if at the time the services were rendered there
was a probable, threatening danger of the vessel or its cargo being
damaged. On the date of the occurrence, there was such an imminent
danger (there was a typhoon and it was feared that there would be a
flood and consequently strong current in the river) and that the
barangay needed assistance in her trip downstream to Aparri.
Mere towage service is confined to vessels that have received no
injury or damage, and mere towage reward is payable in those
cases only where the vessel receiving the service is in the same
condition she would ordinarily be in without having encountered
any damage or accident. If the vessel towed is by this means
aided in escaping from a present or prospective danger, the
service will be regarded as one of salvage, and the towage as
merely an incident. If, on the other hand, the vessel thus assisted
is not encompassed by any actual or probable danger, and the
employment is simply for the purpose of expediting the voyage,
such service is towage and not salvage.
There is no negligence on the part of the patron of the launch with
respect to the rope. It was used exclusively for towing and emergency
purposes. Although it was 2 years old, it was never used very often.
The barangay was not overloaded. The trial court merely confused
gross tonnage with deadweight. That La Granja did not use the bigger
launch Delfin is not negligence. The said launch was not available at
that time. The crew was not on board, and Delfin was not suited to
rescue the barangay which was the in shallow waters.
The patron of the launch was not wanting in the exercise of the degree
of caution and skill which prudent navigators usually employ. He had
been a master of a tug-boat and had navigated for 20 years. He is
qualify to take that course which, according to his experience, has
proved safe in entering the Appagonan Creek.
When towage failed, it gave rise to a situation for salvage. (Alhambra
Cigar v. La Granja)

A vessel which undertakes a towage service is liable for reasonable

care of the tow, and that reasonable care is measured by the dangers
and hazards to which the tow is or may be exposed, which it is the duty
of the master of the tug to know and to guard against not only by giving
proper instructions for the management of the tow, but by watching her
when in a dangerous locality, to see that his directions are obeyed. The
duty of the tug to a tow is a continuous one from the time service
commences until it is completed. Its responsibility includes not only the
proper and safe navigation of the tug on the journey, but to furnish safe,
sound and reasonable appliances and instrumentalities for the service
to be performed, as well as the giving of proper instructions as to the
management of the tow; and if the locality in which the two finds itself at
any given time is more than ordinarily dangerous, the tug is held to a
proportionately higher degree of care and skill. It is well recognized that
in towing a boat built only for the shallow water of an inland stream, as
the cascos mentioned in this case are, greater care must necessarily
be used when venturing upon an ocean voyage than with a vessel fitted
for deep water; and this applies not only in the choice of routes, to
select the one having the smoothest water and affording shelter is
stormy weather, but in the handling of the tow. In the case at bar the
defendant failed to meet any of these requirements; it neglected to
furnish suitable appliances and instrumentalities; for the tug itself, as is
demonstrated by the facts in this case, was unsuitable for the purpose
in hand. As we have said, it is negligence to leave two heavily loaded
cascos in Manila Bay at the mercy of weather likely to exist in the
month of August for a distance of 1,500 meters with no other motive
power than bamboo poles. Also the captain of the Matulin failed to give

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proper instructions to the tow. If it was negligence not to provide himself
with appliances by which the cascos could be protected while passing
from the mouth of the river to the launch, it was negligence for him to
ask the cascos to move out into the open sea under such
circumstances. It is clear, therefore, that the defendant directly or
through the captain failed in every duty laid upon it by the law, even
though the law applicable under the facts and circumstances of this
case require the use of only ordinary diligence and care; but, as a
matter of fact, the law required the exercise of more than ordinary care
under the circumstances existing at the time the cascos were lost. The
fact of time and season and of the probability that in coming out of the
river they would be met with wind and wave and, in their helpless
condition, would in all probability, if so met, be driven on the shoals,
made the situation of the cascos one of more than ordinary danger; and
the tug should be held to a proportionately higher degree of care and
skill. While the captain of the Matulin would not have been responsible
for an act of God by which the cascos were lost, it was his duty to
foresee what the weather was likely to be, and to take such precautions
as were necessary to protect his tow. It was not an act of God by which
the cascos were lost; it was the direct result of the failure of the captain
of the Matulin to meet the responsibilities which the occasion placed on
him. To be exempt from liability because of an act of God the tug must
be free from any previous negligence or misconduct by which that loss
or danger may have been occasioned. For, although the immediate or
proximate cause of the loss in any given instance may have been what
is termed an act of God, yet, if the tug unnecessarily exposed the two to
such accident by any culpable act or omission of its own, it is not
excluded. (Limpangco v. Yangco Steamship)

PUBLIC SERVICE ACT

What is the nature of a certificate of public convenience?

Certificate of public convenience and necessity?
A certificate of public convenience constitutes neither a franchise nor a
contract, confers no property rights, and is a mere license or privilege,
and such privilege is forfeited when the grantee fails to comply with his
commitments behind which lies the paramount interest of the public, for
public necessity cannot e made to wait, nor sacrificed for private
convenience. Certificate of public convenience represent property rights
to the extent that if the rights which any public utility is exercising
pursuant to lawful orders of the Public Utility Commissioner has been
invaded by another public utility, in appropriate cases actions may be
maintained by the complainant public utility. (Agbayani)
The primordial consideration in granting franchises or certificates of
public convenience is public interest.

PURPOSES:
1.
To secure adequate, sustained service for the public at the
least possible cost;
2.
To protect the public against unreasonable charges and poor,
inefficient service;
3.
To protect and secure investments in public services;
4.
To prevent ruinous competition.

AUTHORITY TO OPERATE PUBLIC SERVICES

GENERAL RULE: No public service shall operate without having been
issued a certificate of public convenience or a certificate of public
convenience and necessity.
EXCEPTIONS:
1.
Warehouses;
2.
Animal drawn vehicles and bancas moved by oar or sail;
3.
Airships, except for the fixing of maximum rates for fare and
freight;
4.
Radio companies, except for rates fixing;
5.
Public services owned or operated by the government,
except as to rates fixing;
6.
Ice plants; and
7.
Public markets.
PUBLIC SERVICE
A person who owns, operates, manages or controls in the Philippines
for hire or compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general business

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- 71 purposes, any common carrier or public utility, ice plants, power and
water supplies, communication and similar public services. (Sec. 13b,
CA 146)
A casual or incidental service devoid of public character and interest is
not brought within the category. The question depends on such factors
as the extent of services, whether such person or company has held
himself or itself out as ready to serve the public or a portion of the
public generally. (Luzon Stevedoring vs. PSC)

NOTE: The Public Service Commission created under the Public

Service Law has already been abolished under P.D. No. 1 and other
issuances. It has been replaced by the following government agencies:
LTO; LTFRB; ATO; BOE; NTC; NEA; ERB; NWRC; CAB; and MIA.

Certificate of Public
Convenience

Certificate of Public Necessity

Issued whenever the

Commission finds that the
operation of the proposed public
service will promote the public
interests in a proper and suitable
manner, for which a municipal or
legislative franchise is not
necessary

Issued upon approval of any

franchise or privilege granted by
any political subdivision of the
Philippines when in the judgment
of the Commission, such
franchise or privilege will properly
conserve the public interest

A CPC or a CPCN constitutes neither a franchise nor a contract,

confers no property right, and is a mere license or a privilege. The
holder of said certificate does not acquire a property right in the route
covered thereby. Nor does it confer upon the holder any proprietary
right or interest or franchise in the public highways. Revocation of this
certificate deprives him of no vested right. New and additional burdens,
alteration of the certificate, or even revocation or annulment thereof is
reserved to the State. (Luque vs. Villegas, 30 SCRA 408)

The law requires that there be a proper notice and hearing before the
Commissioner can exercise any of the 15 powers enumerated in this
section. (Agbayani)
The power to cancel or revoke a certificate may be exercised by the
Commission even without a formal charge, with the only limitation that
the holder of the certificate should be given his day in court. (Perez
citing Collector of Internal Revenue v. Estate of F. P. Buan)

It is a property and has a considerable value and can be the subject of

sale or attachment. (Cogeo-Cubao Operators and Drivers Assn. vs. CA,
207 SCRA 343, Raymundo vs. Luneta Motor Co.)
REQUREMENTS FOR GRANTING CPC OR CPCN
1.
Applicant must be a citizen of the Philippines or a corporation
or entity 60% of the capital of which is owned by such citizens;
2.
Applicant must prove public necessity;
3.
Applicant must prove that the operation of the public service
proposed and the authorization to do business will promote the public
interest on a proper and suitable manner;
4.
Applicant must have sufficient financial capability to
undertake the proposed services and meeting the responsibilities
incident to its operation.

The Commission shall have the power, without previous hearing:

(1) to investigate, upon its own initiative, or upon complaint in writing,
any matter concerning any public service as regards matters under its
jurisdiction;
(2) to require any public service to furnish safe, adequate, and proper
service as the public interest may require and warrant;
(3) to enforce compliance with any standard, rule, regulation, order or
other requirement of this Act or of the Commission, and to prohibit or
prevent any public service from operating without having first secured a
certificate of public convenience or public necessity and convenience;
and

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(4) to require existing public services to pay the fee provided in this Act
for the issuance of the proper certificate under penalty of the revocation
and cancellation of the acquired right (Perez citing Sec. 17[a])
The following are some cases in which no notice and hearing are
necessary: (Agbayani)
(5) the order is a mere order of investigation preparatory to the final
hearing and decision of the application
(6) the modification of the certificate is only in form and not in
substance
(7) the order is merely to give additional time to register vehicles
(8) an order for good cause suspending for a period not to exceed 30
days any certificate or the exercise of any right or authority issued or
granted under this Act by order of the Commission, whenever such step
shall be necessary to avoid serious and irreparable damage or
inconvenience to the public or to private interests
(9) the authorized line of the oppositor are different from those applied
for by the applicant, the former cannot be considered to have
substantial interest in the application so as to require his personal
notification of the hearing

POWERS REQUIRING PRIOR

NOTICE AND HEARING

1.

Issuance of CPC or
CPCN;
2.
Fixing of rates, tolls, and
charges;
3.
Setting up of standards
and classifications;
4.
Establishment of rules to
secure accuracy of all
meters and all measuring
appliances;
5.
Issuance of orders
requiring establishment or
maintenance of extension
of facilities;
6.
Revocation,
or
modification of CPC or
CPCN;
7. Suspension of CPC or
CPCN, except when it is
necessary to avoid serious and
irreparable damage or
inconvenience to the public or
private interest, in which case,
a suspension not more than 30
days may be ordered, prior to
t h e h e a r i n g . ( S o r i a n o v.
Medina, 164 SCRA 36)

1.
2.

3.

4.
5.
6.

7.

8.

Investigation any matter

concerning public service;
Requiring operators to
furnish safe, adequate, and
proper service;
Requiring public services to
pay expenses of
investigation;
Valuation of properties of
public utilities;
Examination and test of
measuring appliances;
Grant of special permits to
make extra or special trips
in territories specified in the
certificate;
Uniform accounting system
and furnishing of annual
reports;
Compelling compliance with
the laws and regulations.

The water transport service between Matnog and Allen is not a ferry
boat service but a coastwise or interisland shipping service. Before
private respondent may be issued a franchise or CPC for the operation
of the said service as a common carrier, it must comply with the usual
requirements of filing an application, payment of the fees, publication,
adducing evidence at a hearing and affording the oppositors the
opportunity to be heard, among others, as provided by law. (San Pablo
v. Pantranco South Express, Inc.)

What is the PRIOR OPERATOR RULE?

Prior operator rule means that before permitting a new operator to
invade the territory of another already established with a certificate of
public convenience, the prior operator must first be given the
opportunity to extend its service in order to meet public needs in the
manner of transportation. It means that a public utility operator should
be shielded from ruinous competition by affording him an opportunity to
improve his equipment and service before allowing a new operator to
serve the same territory he covers. (Perez citing Mandaluyong Bus v.
Francisco, Javier v. Orlanes)

The rule allowing an existing franchised operator to invoke a

preferential right within the authorized territory as long as he
renders satisfactory and economical service.
The policy is not to issue a certificate to a second operator to cover the
same field and in competition with a first operator who is rendering
sufficient, adequate and satisfactory service. The prior operator must
first be given an opportunity to improve its service, if inadequate or
deficient.
Purpose: To prevent ruinous and wasteful competition in order that the
interests of the public would be conserved and preserved.

It subordinates the prior applicant rule which gives the first applicant
priority only if things and circumstances are equal.

ACTS REQUIRING PRIOR APPROVAL

1.
Establish and maintain individual or joint rates;

Under Sec. 20(g) of C.A. No. 146, the sale, etc. may be negotiated and
completed before the approval by the proper authority. Its approval is
not a condition precedent to the validity of the contract. The approval is
necessary only to protect public interest.

UNLAWFUL ACTS OF PUBLIC UTILITY COMPANIES

1.
Engagement in public service business without first securing
the proper certificate;
2.
Providing or maintaining unsafe, improper or inadequate
service as determined by the proper authority;
3.
Committing any act of unreasonable and unjust preferential
treatment to any particular person, corporation or entity as determined
by the proper authority;
4.
Refusing or neglecting to carry public mail upon request.
(Secs. 18 and 19)

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The supervening passage of the RA 9295 and the filing by the shipping
company of an application for a new CPC under the new law rendered
the previous MARINA decision and the old CPC of no consequence,
there was no more justiciable controversy for the CA to decide and no
remedy to grant or deny. Due deference should have been given to the
exercise by the MARINA of its sound administrative discretion in
applying its special knowledge, experience and expertise to determine
the technical and intricate factual matters relating to the new CPCs of a
shipping corporation. (Sta. Clara Shipping v. San Pablo)

2.
Establish and operate new units;
3.
Issue free tickets;
4.
Issue any stock or stock certificates representing an increase
of capital;
5.
Capitalize any franchise in excess of the amount actually
paid to the Government;
6.
Sell, alienate, mortgage or lease property, certificates or
franchise.

POWERS EXERCISABLE
WITHOUT PRIOR NOTICE AND
HEARING

- 72 -

Where the operator either fails or neglects to make the improvement or

effect the increase in services, especially when given the opportunity,
new operators should be given the chance to give the services needed
by the public.

The "prior operator" and "protection of investment" rules cannot prevail

over the convenience of the public. At present, there is no ice plant in
any of the municipalities of Casiguran, Juban, Magallanes and Irosin,
where a great demand for ice exists, as can be gleaned from the
successive increase in the productive capacity of respondent
company's ice plant from 2 tons in 1948 to 7 tons in 1950 and to 13.5
tons in 1952. 21 Said "protection of investment" rule is not absolute, for
nobody has exclusive right to secure a franchise or a certificate of
public convenience. 22 It cannot be applied unqualifiedly for that would

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encourage violation or disregard of the terms and conditions of the
certificate and the Commission's directives and regulations, and would
close the door to other applicants who could establish, operate and
provide adequate, efficient and satisfactory service for the benefit and
convenience of the inhabitants. (Martires Ereno v. Public Service
Commission)

What is the PRIOR APPLICANT RULE?

Presupposes a situation when two interested persons apply for a
certificate to operate a public utility in the same community over which
no person has as yet granted any certificate. If it turns out, after the
hearing, that the circumstances between the two applicants are more or
less equal, then the applicant who applied ahead of the other, will be
granted the certificate.

RATE-FIXING POWER
The rate to be fixed must be just, founded upon conditions which are
fair and reasonable to both the owner and the public.
A rate is just and reasonable if it conforms to the following
requirements:
1.
One which yields to the carrier a fair return upon the value of
the property employed in performing the service; and
2.
One which is fair to the public for the service rendered.

- 73 -

What is the Ruinous or unfair competition?

Mere possibility of reduction in the income of an existing operator
holding a public service permit does not, of itself, establish that issuing
a permit to another to operate within the same territory will result in
ruinous competition. To prove the latter, it should be shown that the
oppositor will not obtain sufficient profits to pay a dividend or
reasonable interest upon invested capital. (Perez citing Halili v. Ice and
Cold Storage Industries)

Nor could an unfair or ruinous competition result from the authorization

of the ice plant applied for. In order that the opposition based on
ruinous competition may prosper, it must be shown that the oppositor
would be deprived of fair profits on the capital invested in its business.
The mere possibility of reduction in the earnings of a business is not
sufficient to prove ruinous competition. It must be shown that the
business would not have sufficient gains to pay a fair rate of interest on
its capital. (Martires Ereno, Supra.)

NOTE: Dont forget to study the Beaufort Scale.

----------oooOooo---------

What is the Registered Owner Rule?

The registered owner of a certificate of public convenience is liable to
the public for the injuries or damages suffered by third persons caused
by the operation of said vehicle, even though the same had been
transferred to a third person.
The registered owner is not allowed to escape responsibility by proving
that a third person is the actual and real owner Reason: It would be
easy for him, by collusion with others or otherwise, to transfer the
responsibility to an indefinite person, or to one who possesses no
property with which to respond financially for the damage or injury
done. (Erezo, et al. vs. Jepte 102 Phil 103).

Kabit System:
A system whereby a person who has been granted a certificate of
public convenience allows other persons who own motor vehicles to
operate under such license, for a fee or percentage of such earnings. It
is void and inexistent under Art. 1409, Civil Code.
Effects:
1.
The transfer, sale, lease or assignment of the privilege
granted is valid between the contracting parties but not upon the public
or third persons. (Gelisan vs. Alday, 154 SCRA 388)
2.
The registered owner is primarily liable for all the
consequences flowing from the operations of the carrier.
? The public has the right to assume that the registered owner is the
actual or lawful owner thereof. It would be very difficult and often
impossible, as a practical matter, for the public to enforce their rights of
action that they may have for injuries inflicted by the vehicle if they
should be required to prove who the actual owner is. (Benedicto vs.
IAC, 187 SCRA 547)
3.
The thrust of the law in enjoining the kabit system is to
identify the person upon whom responsibility may be fixed with the end
in view of protecting the riding public (Lim vs. CA 373 SCRA 394).
4.
The registered owner cannot recover from the actual owner
and the latter cannot obtain transfer of the vehicle to himself, both being
in pari delicto. (Teja Marketing vs. IAC)
5.
For the better protection of the public, both the registered
owner and the actual owner are jointly and severally liable with the
driver. (Zamboanga Transportation Co. vs. CA)

What is the Protection of investment rule?

Protection of investment rule means that one of the purposes of the
Public Service Law is to protect and conserve investments which have
already been made for that purpose by public service operators. Said
rule however, is not absolute, for nobody has an exclusive right to
secure a franchise or a certificate of public convenience. The
paramount consideration should always be the public interest and
public convenience. (Perez citing Batangas Trans. Co. v. Orlanes, Rizal
Light & Ice Co., Inc. v. Mun. of Morong, Rizal)

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