Consolidated Lecture Notes On Transportation

CONSOLIDATED LECTURE NOTES ON TRANSPORTATION
November 2012
PRELIMINARIES
1. Transportation defined: Generally speaking, it has been referred to as the

movement of goods or persons from one place to another, by a carrier.
1.1 Simply, it refers to the movement of persons or things from one place to
another, and is immaterial whether the carrying be over land, water or air. It includes
waiting time, loading or unloading, stopping in transit, and all other accessorial
services in connection with the loaded movement.1
1.2 As a contract, it is one whereby a person, natural or juridical, obligates himself

to transport persons, goods or both, from one place to another, by land, water or air,
for a price or compensation.
1.3 It is also a contract whereby a certain person or association of persons obligate

themselves to transport persons, things or news from one place to another for a fixed
price. 2
HISTORICAL ORIGIN OF THE LAW ON TRANSPORTATION
1. If commerce has for its object the bringing of commodities to the consumer, it
follows that the merchant must transport his merchandise to the place where it is in
demand. In fact, he must even transport them to other countries. This requirement
has thus made transportation indispensable.
LAWS ON TRANSPORTATION THAT HAVE APPLICATION IN THE PHILIPPINES
1. Whether transportation is by land, sea or air, the primary law are Articles 1732
to 1766 of the New Civil Code. The secondary laws, particularly as to the rights and
obligations of a common carrier are the Code of Commerce and/or special laws.
1
87 C.J.S. Transportation
2
1 Blanco 640
1.1 The specific aspects that will be discussed are: (a) Public Utilities as covered
by the Public Service Act 3 (b) Common Carriers as covered by the Civil Code 4 (c)
Commercial Contracts for Transportation Overland5 (d) Maritime Commerce6
2. Both the primary and secondary laws however are subject to the Constitution
as the supreme law.
2.1 Section 11, Article XII- National Economy and Patrimony provides that the grant
of any franchise or any form of authorization to operate a public utility is limited to
Filipinos or Filipino corporations owned at least 60% by Filipinos. The participation of
foreigners in the equity and the governing body is thus limited to 40% but it is
required that all executive and managing officers must be Filipino.
2.2 The Constitution does not prohibit the mere formation of a public utility
corporation without the required proportion of Filipino capital. What is prohibited is
the grant of a franchise or other form of authorization for the operation of a public
utility to a corporation already in existence but without the requisite proportion of
Filipino capital.7
2.3 The Constitution does not require a franchise before one can own the facilities
needed to operate a public utility as long as it does not operate them to serve the
public. Note that the ownership per se of the facilities of a public utility does not
constitute the owner thereof as a public utility. It is the use thereof to serve the
public that will constitute it as a public utility.8
2.4 There is a clear distinction between operation and ownership of facilities to

serve the public. Ownership is defined as a relation in law by virtue of which a thing
pertaining to one person is completely subject to his will in everything not prohibited
by law or the concurrence with the rights of another.9 This use as an incident of
ownership is limited by law when it is to be operated and used to serve the public as a
public utility.10 The right to operate may exist independently and separately from
ownership of the facilities. A person can thus own the facility but not operate it as a
utility or may operate a public utility without owning the facilities, like in the lease
of airplanes/vessels.
3
Commerce Act No. 146, as amended by the Warsaw Convention of 1929 as to carrier
liability
4
Articles 1732-1766
5
Articles 349-379, Code of Commerce
6
Articles 673-736, Article 580-584, Code of Commerce as superseded by RA 6106, Articles
806-845, Code of Commerce, Carriage of Goods by Sea Act, Commerce Act No. 65
7
People vs. Quasha, 93 Phil 333
8
Iloilo Ice and Cold Storage vs. Public Service Board, 44 Phil 551
9
Tolentino II, Commentaries and Jurisprudence on the Civil Code of the Philippines
10
Tatad vs. Garcia, 243 SCRA 436
2.5 Hence, the mere formation of a public utility corporation does not ipso facto
characterize it as one that is operating a public utility. The moment of determination
of Filipino nationality is when it applies for a franchise to operate a public utility.
2.6 This grant is always subject to the condition that it may be amended, altered
or repealed when the common good so requires as Section 17, provides that in times
of national emergencies, when public interest requires and under reasonable terms, it
may temporarily take over the operation of a privately owned public utility or
business affected with public interest.
2.7 Under Section 18,11 if in the interest of national welfare or defense, upon
payment of just compensation, there may be a transfer to public ownership of
utilities and other private enterprises.
2.8 Under Section 19,12 the state may regulate or prohibit monopolies when the
public intent requires and no combination in restraint of trade or unfair competition
shall be allowed.13
PUBLIC SERVICE ACT
PURPOSE OF THE LAW
1. The primary purpose of the law is to secure adequate, sustained service for the
public at least cost, and to protect and conserve investments which have already
been made for that purpose.
1.1 Hence, interested or qualified parties intending to operate as a public utility or

provide public service must: (a) must apply for, and obtain, a license or permit from
the Public Service Commission, and comply with certain defined terms and conditions,
and (b) Upon grant of the license, the operator must conform to, and comply with, all
reasonable rules and regulations of the Public Service Commission.
1.2 The law was enacted not only to protect the public against unreasonable
charges and poor, inefficient service, but also to prevent ruinous competition. 14
2. The object and purpose of such a commission, among other things, is to look
out for, and protect, the interests of the public, and, in the instant case, to provide it
with safe and suitable means of travel over the highways in question, in like manner
that a railroad would be operated under the same terms and conditions.
11
Article XII, National Economy and Patrimony, 1987 Constitution
12
Article XII, National Economy and Patrimony, 1987 Constitution
13
NPC vs. Court of Appeals, GR No. 112702, September 26, 1977
14
Batangas Transportation Co. Vs. Orlanes, 52 Phil 455
3. Note that the Public Service Commission has been replaced by the following
regulatory agencies: (a)Land Transportation Franchising Regulatory Board (LTFRB) for
land transportation (b) Maritime Industry Authority (MARINA) for water
transportation (c)National Telecommunications Commission (NTC) for communication
utilities and services, radio communications systems, wire or wireless telephone and
telegraph systems, radio and television broadcasting systems and other similar public
utilities (d) Energy Regulatory Board (ERB) for electric or power companies
(e)National Water Resources Council (NWRC) for water resources (f)Civil Aeronautics
Board (CAB) for air transportation
DEFINING A PUBLIC UTILITY
1. Simply, a public utility is a business or service engaged in regularly supplying

the public with some commodity or service of public consequence. 15 The term implies
public use and service. Examples are electricity, gas, water, transportation, telephone
or telegraph service.
1.1 They are enterprises which specially cater to the needs of the public and are
conducive to their comfort and convenience.
1.2 The business and operations of a public utility are imbued with public
interest. In a very real sense, a public utility is engaged in public service- providing
basic commodities and services indispensable to the interest of the general public.
For this reason, it submits to regulation of government authorities and surrenders
certain business prerogatives, including the amount of rates that may be charged by
it. It is the imperative duty of the State to interpose its protective power whenever
too much profits become the priority of public utilities.16
1.3 When, therefore, one devotes his property to a use in which the public has an
interest, he, in effect grants to the public an interest in that use, and must submit to
the control by the public for the common good, to the extent of the interest he has
thus created.17
2. A distinction must be made between the terms public service and public utility
as they do not have the same legal meaning, although are related:
2.1 The definition of public service in the Public Service Act, as last amended by
Republic Act No. 2677, includes every person who owns, operates, manages or
controls, for hire or compensation, and done for general business purposes, any
common carrier railroad, street railway, traction railway, subway motor vehicle,
15
Albano vs. Reyes, 175 SCRA 264
16
Republic of the Philippines vs. Manila Electric Company, G.R. No. 141314, April 9, 2003
17
Kilusang Mayo Uno Labor Center vs. Hon. Jesus Garcia, LTFRB, GR No. 115381, December
23, 1994
either for freight or passenger, or both with or without fixed route and whatever may
be its classification, freight or carrier service of any class, express service,
steamboat, or steamship line, pontines, ferries, and water craft engaged in the
transportation of passengers or freight or both, shipyard, marine railway, marine
repair shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system
gas, electric light, heat and power, water supply and power, petroleum, sewerage
system, wire or wireless communication systems, broadcasting stations and other
similar public services.
2.2 A public utility, on the other hand, is a business or service engaged in

regularly supplying in the public with some commodity or service of public
consequence such as electricity, gas, water, transportation, telephone or telegraph
service.
2.3 Simply stated, a public utility provides a service or facility needed for present
day living which cannot be denied to anyone who is willing to pay for it.18
2.4 Another dissimilarity is that a public utility requires a franchise, aside from a
certificate of public necessity and convenience, for its operation, while a public
service which is not a public utility requires only a certificate of public convenience.
2.5 However, laws may provide that an activity is not a public utility. An example is
Section 29 of the Electric Power Reform Act of 2001 (EPIRA) 19 which states any law to
the contrary notwithstanding, supply of electricity to the contestable market shall not
be considered a public utility operation. This means that independent power
producers/power generators are not considered public utilities that may be subject to
regulatory policy.
CERTIFICATE OF PUBLIC CONVENIENCE AND CERTIFICATE OF CONVENIENCE AND

NECESSITY DEFINED AND DISTINGUISHED
1. A certificate of public convenience is any authorization to operate public

service issued by the Public Service Commission for which no franchise, either
municipal or legislative, is required by law.
1.1 The certificate of public convenience and necessity requires a franchise issued
by the legislative department.
1.2 Legislative franchise distinguished from a certificate of public convenience -A

franchise is distinguished from a certificate of public convenience in that the former
is a grant or privilege from the sovereign power, while the latter is a form of
regulations through an administrative agency.20
18
JG Summit Holdings, Inc. vs. Court of Appeals, 412 SCRA 10
19
RA 9136
20
Associated Communications & Wireless Service-UBN v. NTC, 397 SCRA 574
1.3 A legislative franchise is necessary before a public utility can be allowed to
secure a certificate of public convenience if there is a statute requiring it, otherwise,
it would not be required.
2. A certificate of public convenience is a mere license or a privilege and being

neither a franchise nor a contract, it confers no vested or property right or interest on
the holder. However, in its purely private aspect, it has value and may be considered
property that can be levied upon.
3. The grant of a certificate of public convenience or a certificate of public

convenience and necessity requires the concurrence of the following: (a) the
applicant must be a citizen of the Philippines, or a corporation, partnership, or joint
stock company constituted and organized under the laws of the Philippines, at least
sixty percent (60%) of its stock or paid-up capital belongs entirely to Filipino citizens
(b) the applicant must be financially capable of undertaking the proposed service and
meeting the responsibilities incident to its operation, and (c) the applicant must
prove that the operation of the business will promote the public interest in a proper
and suitable manner.
RULES OBSERVED IN THE GRANT OF CERTIFICATES OF PUBLIC

CONVENIENCE/CERTIFICATES OF PUBLIC CONVENIENCE AND NECESSITY
1. The Prior Operator Rule contemplates that the first licensee will be protected
in his investment and will not be subjected to ruinous competition.
1.1 It is not therefore, the policy of the law for the Public Service Commission to
issue a certificate of public convenience to a second operator when a prior operator is
rendering sufficient, adequate and satisfactory service, and who in all things and
respects is complying with the rules and regulations of the Commission.
1.2 The rule will not apply if the public interest is served better by a new operator
where: (a) the old operator failed to make an offer to meet the increase in traffic (b)
where the Certificate of Public Convenience is granted to a new operator is a maiden
Certificate of Public Convenience (c) where the application of the rule is conducive to
a monopoly
1.3 Another form of the rule is the Old Operator Rule which mandates that before
permitting a new operator to invade the territory of another already established with
a certificate of public convenience, thereby entering into competition with it, the
prior operator must be given an opportunity to extend its service in order to meet the
public.21
21
Javier vs. Orlanes, 53 Phil 468
1.4 Note that this rule only applies when the old operator offers to meet the
increase in the demand the moment it arises and not after another operator had
offered to render the additional service as was done in the present case.The rule
protects those who are vigilant in meeting the needs of the travelling public. 22
2. The Prior Applicant Rule presupposes a situation where two or more interested
persons apply for a Certificate of Public Convenience in the same locality over which
no person has of yet been granted a Certificate of Public Convenience, the
applications being equal, the one who first applied will be preferred.23
2.1 In relation to this rule, there is the Third Operator Rule which provides that
where two operators are more than serving the public, there is no reason to permit a
third operator to engage in competition with them. Thus, the fact that it is only one
trip and of little consequence, is not sufficient reason to grant the application.
However, if later on circumstances would change requiring the operation of new units
or extending existing facilities, the third operator rule would be subject to the prior
applicant rule and also as to who may best subserve the public interests. 24
2.2 The rule where there are various applicants for a public utility over the same
territory, is that priority of application, while an element to be considered, does not
necessarily control the granting of a certificate of public convenience. The question
to be considered in such cases is which applicant can render the best service,
considering the conditions and qualifications of the applicant to furnish the same.
But where other conditions are equal, priority in the filing of the application for a
certificate of public convenience becomes an important factor in the granting or
refusal of a certificate.25
3. Protection of Investment Rule is likewise considered as one of the primary

purposes of the law is to protect and conserve investments which have already been
made for that purpose by public service operators. 26
4. The grounds for a revocation of a certificate are: (a) The holder violates or
contumaciously refuses to comply with any order, rule or regulations of the
commission (b) The holder is a mere dummy (c) The holder ceases operations or
abandons the service.
REGULATION OF PUBLIC UTILITIES
1. The regulation of public utilities is founded upon the police powers of the State
and statues prescribing rules for the control and regulation of public utilities are
22
Angat-Manila Transportation Company vs. Victoria vda. De Tengco, 95 Phil 58
23
Batangas Transportation Company vs. Orlanes, 52 Phil 455
24
Yangco vs. Esteban, 58 Phil 346
25
Cruz vs. Marcelo, L-15301, March 30, 1962
26
Batangas Transportation Company vs. Orlanes, 52 Phil 455
considered valid exercise thereof. When private property is used for a public purpose
and is affected with public interest, it ceases to be juris privati only and becomes
subject to regulation.
1.1 The regulation is to promote the common good. Submission to regulation may
be withdrawn by the owner by discontinuing use; but as long as use of the property is
continued, the same is subject to public regulation.27
2. In regulating rates charged by public utilities, the State seeks to protect the
public against arbitrary and excessive rates while maintaining the efficiency and
quality of services rendered.
2.1 However, the power to regulate rates does not give the State the right to
prescribe rates which are so low as to deprive the public utility of a reasonable return
on investment. Thus, the rates prescribed by the State must be one that yields a fair
return on the public utility upon the value of the property performing the service and
one that is reasonable to the public for the services rendered. The fixing of just and
reasonable rates involves a balancing of the investor and the consumer interests.
2.2 The standard that should be used when an administrative body fixes the rates
of public utilities is that the rate be reasonable and just. It has been held that even
in the absence of an express requirement as to reasonableness, this standard may be
implied.
2.3 What a just and reasonable rate is a question of fact calling for the exercise of
discretion, good sense, and a fair, enlightened and independent judgment. The
requirement of reasonableness comprehends such rates which must not be so low as
to be confiscatory, or too high as to be oppressive. In determining whether a rate is
confiscatory, it is essential also to consider the given situation, requirements and
opportunities of the utility.
2.4 Determinative factors that should be considered in determining just and

reasonable rates are: (a) rate of return; (b) rate base; and (c) the return itself or the
computed revenue to be earned by the public utility based on the rate of return and
rate base. The rate of return is a judgment percentage which, if multiplied with the
rate base, provides a fair return on the public utility for the use of its property for
service to the public. The rate of return of a public utility is not prescribed by
statute but by administrative and judicial pronouncements.
2.5 The Supreme Court has consistently adopted a 12% rate of return for public
utilities. The rate base, on the other hand, is an evaluation of the property devoted
by the utility to the public service or the value of invested capital or property which
the utility is entitled to a return.
27
Republic of the Philippines vs. Meralco, GR No. 141314, November 15, 2002
3. The Supreme Court ruled in a number of cases that an administrative agency
may be empowered by law to approve provisionally, when demanded by urgent public
need, rates of public utilities without a hearing. The reason is easily discerned from
the fact that provisional rates are by their nature temporary and subject to
adjustment in conformity with the definitive rates approved after final hearing.
Thus, the Supreme Court sustained the provisional approval of increase rates by the
Energy Regulatory Board, Land Franchising and Regulatory Board and Toll Regulatory
Board28
COMMON CARRIERS:
COMMON CARRIER DEFINED
1. A common carrier defined: They 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. 29
1.1 The elements of a common carrier are: (a) persons, corporations, firms or
associations (b) engaged in the business of carrying or transporting passengers, goods
or both (c) the means of carriage is by land, water or air (d) the carrying of
passengers, goods or both is for compensation (e) the service is offered to the public
without distinction.
1.2 Engaged in the business is deemed to cover operations whether regular or

scheduled, occasional, episodic or unscheduled.
1.3 One is a common carrier even if he has no fixed and publicly known route,
maintains no terminals and issues no tickets.
1.4 Cargo operations can be classified into line service and tramp service. 30 Line
Service is defined as the operation of a common carrier which publicly offers services
without discrimination to any user, has regular ports of call/destination, fixed sailing
schedules and frequencies and published freight rates and attendant charges and
usually carries multiple consignments. The liners carry general cargo, meaning
whatever is offered is accepted for shipment. Tramp Service is defined as the
operation of a contract carrier which has no regular and fixed routes and schedules
but accepts cargo wherever and whenever the shipper desires, is hired on contractual
basis, or chartered by one or few shippers under mutually agreed terms and usually
carries bulk or break bulk cargoes. Tramps offer their capacity for the carriage of
bulk cargoes as desired by the shipper, who ordinarily engages the whole of the ship,
28
Padua v. Ranada, GR No. 141949, October 14, 2002
29
Article 1732, Civil Code
30
RA 9515, An Act Defining the Liability of Ship Agents in the Tramp Service and for other
purposes.
each voyage is thus a matter of special arrangement between shipowner and shipper.
The Tramp usually seeks and usually gets a full cargo loaded by a single shipper and
such cargoes are most often in bulk or in standard packages and typically consists of
raw materials, fuels, unprocessed foods so vital to the economy. The law defines a
liner as a common carrier and a tramp as a contract carrier. However, a tramp can be
considered as a common carrier depending on the circumstances i.e contract of
affreightment where the ship-owner does not transfer command, possession and
control of the vessel to the charterer.
1.5 The law does not make any distinction whether the carriage of goods or persons
is the principal or merely ancillary activity of the carrier as in the case of a junk
dealer who back-hauls cargo of merchants on its return trip. 31
1.6 The true test of whether the character of the use is whether the public may
enjoy it by right or by permission. Note that the contract of transportation is a
consensual contract. Hence, a common carrier engages in a continuous offer. If you
flag a common carrier down, the contract becomes perfected and is consistent with
the idea that entering with a contract with the common carrier is a matter of right
and not permission. You would know when the carrier you are going to flag down is a
common carrier because it should hold itself out principally as such.
1.7 The distinction between a common or public carrier and a private or special
carrier lies in the character of the business, such that if the undertaking is a single
transaction, not a part of a general business or occupation, although involving the
carriage of the goods for a fee, the person or corporation offering such service is a
private carrier. 32 A company bus ferrying employees or a funeral car are private
carriers.
1.8 To further distinguish: (a) The common carrier holds himself out in common,
that is, to all persons who choose to employ him, ready to carry for hire while the
private carrier or special carrier agrees in some special case with some private
individual to carry for hire (b) A private carrier is not bound to carry for any reason
unless it enters a special agreement to do so. A common carrier is bound to carry for
all who offer such goods as it is accustomed to carry and tender reasonable
compensation for carrying them (c) A common carrier is subject to regulation as it
is a public service. A private carrier is not (d) The common carrier is bound to
exercise extraordinary diligence while a private carrier owes only diligence of a good
father of a family (e) A common carrier cannot stipulate that it is exempt from
liability for the negligence of its agents or employees. Such stipulation is void as it is
against public policy. A private carrier may validly enter into such stipulation.
1.9 Recovery from a contract of private carriage requires a contract, that there
was negligence, and that the goods are lost. On the other hand, recovery from a
31
De Guzman vs. Court of Appeals, 168 SCRA 612
32
Planters Product, Inc. v. CA, September 15, 1993
contract with a common carrier only requires the contract and that the goods were
lost. This is because of the presumption of negligence.
2. When a customs broker undertakes to deliver the goods for pecuniary

consideration, it is a common carrier even when its principal function is to prepare
correct customs declarations and submit proper shipping documents. 33
2.1 A pipeline operator has also been held to be a common carrier despite its
limited clientele as it is engaged in the business of transporting or carrying goods for
all persons indifferently, that is, to all persons who choose to employ its services and
transports the goods by land for compensation.34
2.2 The operator of a beach resort that accepts clients by virtue of a tour package-
contracts that included transportation to and from the resort that accepts clients and
the point of departure in Batangas is considered a common carrier. The Court
observed that its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of the respondents ferry
services, may be availed of by anyone who can afford to pay the same. These services
are thus available to the public.35
3. A common carrier is required to obtain a certificate of public

convenience.36However, the absence thereof does not mean that it is not a common
carrier nor is it required to incur liability as a common carrier. The liability arises
upon acting as a common carrier.
3.1 To exempt it from the liabilities because it has not obtained the necessary
certificate of public convenience is offensive to sound public policy; that would be to
reward such carrier precisely for failing to comply with the applicable statutory
requirements.37
4. Distinguishing a common carrier:
4.1 Towage, where one vessel is hired to bring another vessel to another place. In
maritime law, it refers to the service rendered to a vessel by towing for the mere
purpose of expediting her voyage without reference to any circumstances of danger. It
usually is confined to vessels that have received no injury or damage. The vessel hired
to bring the other vessel is not a common carrier and is required to observe the due
diligence of a good father of a family.38
33
A.F. Sanchez Brokerage, Inc. vs. CA 447 SCRA 427
34
First Philippine Industrial Pipeline vs. CA, 300 SCRA 661
35
Spouses Cruz v. Sun Holidays, Inc., G.R. No. 186312, [June 29, 2010]
36
Section 15, Public Service Act
37
Loadstar Shipping Co. Inc., vs. CA, GR No. 131621, September 28, 1999
38
Cargolift Shipping, Inc. v. Actuario Marketing Corporation and Skyland Brokerage Inc., G.R.
No. 146426, [June 27,2006]
4.2 Arrastre comprehends the handling of cargo on the wharf or between the
establishment of the consignee or shipper and the ships tackle until delivery of the
cargo to the consignee. They have nothing to do with the trade or business of
navigation, nor the use or operation of vessels. However, like a common carrier it
must exercise the same degree of diligence as a common carrier.39
4.3 Stevedoring is the loading and unloading of coastwise vessels calling at port.
The cargo handling is confined to holds of the vessel or between the ships tackle and
the holds of the vessel. Responsibility ends upon the loading and stowing of the cargo
in the vessel.40 The diligence required is that of a good father of a family.
4.4 A travel agency is not a common carrier. The object of the contractual relation
of a person who purchases a ticket through a travel agency is only the agencys
service of arranging and facilitating the booking, ticketing, and accommodation in a
package tour. In contrast, the object of the contract with a common carrier is
transportation. The contract between the travel agency is a contract of service and
not a contract of carriage.41
DEGREE OF DILIGENCE REQUIRED OF A COMMON CARRIER
1. Regardless of whether the object are goods or passengers, a common carrier

must observe extra ordinary diligence.42
1.1 While there is no expressed definition, it should mean greater than ordinary
diligence as may be required by the nature of the obligation and the circumstances of
persons, time and place.
1.2 The requirement is such because of the nature of the business and by reason of
public policy.
2. The failure to exercise the required degree of diligence is a breach of the

contract.
2.1 If loss, destruction or deterioration of the goods occurs or death or physical

injuries is suffered by a passenger, there is a presumption of negligence that arises.
2.2 If the damage does not fall within the instances stated, it does not mean that
there is no recovery against the common carrier. The grounds for recovery will have to
be proven as there is no presumption of negligence that arises. An example would be
damages due to a delay in delivery.
39
Summa Insurance Corporation v. CA and Port Service, Inc. 323 SCRA 214 [1996]
40
Mindanao Terminal and Brokerage Service, Inc v. Phoenix Assurance Company of New
York/Mcgee & Co Inc. G.R. No. 162467, [May 8, 2009]
41
Crisostomo v. Court of Appeals, 409 SCRA 528, 534 [August 25, 2003]
42
SPECIFIC OBLIGATION OF THE COMMON CARRIER
1. As far as goods, a common carrier is responsible for its loss, destruction or

deterioration.43
1.1 Hence, he must exercise vigilance in the care and custody of the goods. Unless
the exceptions apply, a common carrier is presumed to have been at fault or acted
negligently.44
2. The list of exceptions is an exclusive list. They are:
2.1 Flood, storm, earthquake, lightning, or other natural disaster or calamity. For
it to apply, the following must be present: (a) such must be the proximate and only
cause45 (b) due diligence was exercised to prevent or minimize the loss, before,
during and after its occurrence, and (c) the common carrier is not guilty of delay in
transporting the goods.46 Note that fire is not a natural disaster or calamity unless
cause by lightning or some other natural disaster.47
2.2 Act of the public enemy in war, whether international, one that presupposes
the existence of an actual state of war, and refers to the government of a foreign
nation at war with the country to which the carrier belongs, or civil, when parties in
rebellion occupy and hold in a hostile manner a certain portion of the territory, when
they have declared independence and have in the field a regularly organized force in
armed hostility. For it to apply, the following must be present: (a) such must be the
proximate and only cause (b) due diligence was exercised to prevent or minimize the
loss, before, during and after the act of the public enemy. Note that pirates on the
high seas stand as an exception as they are considered as enemies of all civilized
nations, and their depredations on a common carrier will excuse him from liability.48
2.3 Act or omission of the shipper or owner of the goods. For it to apply, such must
be the proximate and only cause. If the shipper or owner merely contributed to the
loss, destruction or deterioration, the proximate cause being the negligence of the
common carrier, it shall still be liable for damages but it shall be equitably
reduced.49An example would be a misdirection of the shipment by the shipper, or
interference by the shipper with the goods after acceptance. Note that a shipper who
delivers the goods to the carrier during a storm is not guilty of negligence so as to
43
44
45
46
47
D.S.R. Senator-Lines vs. Federal Phoenix Assurance Company, 413 SCRA 14
48
14 Am. Jur. 2d., Sec. 523
49
excuse the carrier which consents to receive them from liability for loss sustained as a
result of the storm.50
2.4 The character of the goods or defects in the packaging or in the containers. For
it to apply, such must be the proximate and only cause. The common carrier must
have protested if visible and still exercise due diligence to forestall or lessen the
loss.51 If the carrier accepts despite the condition, it is not relieved of liability for loss
or injury.52
2.5 Order or act of competent authority resulting in the seizure or destruction. For
it to apply, the public authority must have the power to issue the order and that the
same be lawful.53
2.6 Proof of the exercise of extra-ordinary diligence. 54 When the common carrier
opts to file a demurrer to the evidence instead of presenting evidence, the
presumption that it was negligent will stand.55
3. 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. 56
4. Hijacking does not fall under any of the exempting causes, but in a case where
the goods were lost as a result of a robbery attended by a grave irresistible threat,
violence or force, the carrier was relieved from liability.57
5. For passengers, a common carrier is bound to carry them safely as far as human
care and foresight can provide, using utmost diligence of a very cautious person with
due regard for all circumstances.58 In case of death or injury , common carriers are
presumed to have been at fault or to have acted negligently, unless they exercised
extra-ordinary diligence.59
5.1 Without death or injury, no presumption of negligence will arise.
5.2 The other known exception as to liability is when carriage is gratuitous where
the parties can stipulate against the presumption as liability for negligence may be
50
14 Am. Jur. 2d., Sec. 524
51
52
Southern Lines, Inc. v CA, 4 SCRA 258
53
54
55
Regional Container Lines vs. Netherlands Insurance Company, G.R. 168151, September 4,
2009
56
57
De Guzman v. CA,
58
59
limited, but it should not include limitation of liability for willful acts or gross
negligence. If the fare is just reduced, it will not justify any limitation on liability.60
5.3 The common carrier is also liable if the death or injury arises from the
negligence or willful acts of its employees, although the employees may have acted
beyond the scope of their authority or in violation of orders. The liability does not
cease upon proof of the exercise of diligence of a good father of the family in the
selection and supervision of the employees. 61 This liability extends only to acts which
the carrier could foresee or avoid through the exercise of the degree of diligence
required and neither can it be eliminated or limited by stipulation, by the posting of
notices, by statements on the ticket or otherwise. 62However, in a like manner the
passenger must observe the diligence of a good father of a family to avoid injury to
himself 63
5.4 If the acts of the employee is not undertaken in the line of duty, the carrier is
not liable. However the rule on strangers or other passengers will apply as the
common carrier is liable for injuries suffered by a passenger on account of the wilful
acts of other passengers or strangers, if the common carriers employees through the
exercise of the diligence of a good father of a family, it could have prevented or
stopped the act or omission.64
5.5 The contributory negligence of a passenger is not a defense that will excuse a
carrier from liability for damages on account of death or injury, if the proximate
cause thereof is the negligence of the common carrier, but the amount shall be
equitably be reduced.65 Hence, the only effect of such is to mitigate the liability.
PROHIBITED AND ALLOWABLE STIPULATIONS IN A CONTRACT OF CARRIAGE
1. The following or similar stipulations shall be considered unreasonable, unjust

and contrary to public policy: (a) that the common carrier shall not be responsible
for the acts or omissions of his or its employees (b) that the common carriers 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 (c) that the common carrier
is not responsible for the loss, destruction, or deterioration of goods on account of
the defective condition of the car, vehicle, ship, airplane or other equipment used in
the contract of carriage.66
2. In a contract for the carriage of goods, the parties can stipulate on the exercise
of a lesser degree of diligence, but not that below the diligence of a good father of a
60
61
62
63
64
65
66
family, provided: (a) the stipulation be in writing and signed by both parties (b) that it
be supported by valuable consideration other than the service rendered by the
common carrier, and (c) that it be just and reasonable, and not contrary to law.67
2.1 A stipulation limiting the common carriers liability for delay on account of
strikes or riots is valid.68
2.2 A stipulation fixing the amount that may be recovered is allowed provided: (a)
it is reasonable and just under the circumstances, and (b) it is fairly and freely agreed
upon.69
2.3 A stipulation that the liability of the common carrier is limited to the value of
the goods as appearing in the bill of lading, unless the shipper or owner declares a
greater value is binding.70
2.4 The absence of a competitor along the line or route to which the contract
refers shall be taken into consideration on the question of whether or not a
stipulation limiting liability is reasonable, just and in consonance with public policy.71
2.5 Notwithstanding an agreement limiting liability in relation to vigilance over the

goods, the common carrier is still disputably presumed to be negligent in case of loss,
destruction or deterioration. 72Hence, he still has to prove the exercise of the
required degree of diligence to avoid liability.
2.6 The agreement limiting liability may be annulled by the shipper or owner if the
common carrier refused to carry the goods, unless the former agreed to the
stipulation.73
2.7 If the common carrier, without just cause, delays transportation or changes the
stipulated route, the contract limiting liability cannot be availed of in case of loss,
destruction or deterioration.
3. In a contract for the carriage of passengers, there can be no stipulation

dispensing with responsibility or reducing the amount that may be recovered. This
applies notwithstanding the posting of notices or statements in the tickets. 74
WHEN THE CONTRACT AND EXERCISE OF DILIGENCE BEGINS AND ENDS
67
68
69
70
71
72
73
74
1. In a contract for carriage of goods it commences from the time the goods are
unconditionally placed in the possession of, and received by the carrier for
transportation until the same shall have been delivered actually or constructively by
the carrier to the consignee who has the right to receive them. 75 It is the
unconditionally placing of the goods in the possession of and receipt by the carrier
that will signal perfection of the contract.
1.1 It remains in full force and effect even if they are temporarily off-loaded or
stored in transit unless the shipper or owner has made use of the right of stoppage in
transit.76
1.2 It continues even during the time they goods are stored in a warehouse of the
carrier at the place of destination until the consignee has been advised of the arrival
and has had a reasonable opportunity thereafter to remove or otherwise dispose of
them.77
2. In a contract for the carriage of passengers- it commences the moment the

person who purchases the ticket from the carrier presents himself at the proper
place and in a proper manner to be transported. This is when the contract of carriage
is perfected.
2.1 Such person must have a bona fide intention to use the facilities of the carrier,
possess sufficient fare with which to pay for his passage, and present himself to the
carrier for transportation in the place and manner provided. If he does not do so, he
will not be considered a passenger and the carrier does not owe him extraordinary
diligence.78
2.2 When an airline issues a ticket to a passenger, confirmed for a particular flight
on a certain date, a contract of carriage arises. The passenger has every right to be
transported on that flight and that date, and it becomes the airlines obligation to
carry him and his luggage safely to the agreed destination without delay.79 Further,
the contract of carriage is perfected if it can be established that the passenger has
checked in at the departure counter, passed through customs and immigration,
boarded the shuttle bus and proceeded to the ramp of the aircraft and that his
baggage has already been loaded in the aircraft to be flown with the passenger to his
destination.80
2.3 It is the duty of carriers of passengers to stop their conveyances for a

reasonable length of time in order to afford passengers an opportunity to board and
75
76
77
78
Jesusa Vda. De Nueca, et al. v. The Manila Railroad Company, CA-No. 31731, January 30,
1968.
79
Philippine Airlines vs. Court of Appeals, 566 SCRA 124
80
Korean Airlines Co, Ltd. v. Court of Appeals, 234 SCRA 717, 723 [August 3, 1994]
enter, and they are liable for injuries suffered by boarding passengers resulting from
the sudden starting up or jerking of their conveyances. 81 A public utility bus, once it
stops, is in effect making a continuous offer to bus riders.
2.4 The carrier was held liable for breach of the contract when a drunk Nicanor
Navidad died after he fell on the LRT tracks and was struck by a moving train. 82
2.5 The relationship will not ordinarily terminate until the passenger has, after
reaching his destination, safely alighted from the carriers conveyance or has had a
reasonable opportunity to leave the carriers premises.
2.6 A person, who, after alighting from a train, walks along the station platform or
has returned to retrieve a piece of baggage he had left is still considered a
passenger.83
3. Prior to perfection of the contract of carriage of passengers, there is the

contract to carry, that is, an agreement to carry a passenger at some future date. This
contract is consensual and is therefore perfected by mere consent. In this instance,
an action for damages based on a breach of the contract to carry may be sustained,
even if no ticket is issued.84
RECOVERABLE DAMAGES AND PENALTIES
1. Damages may be recovered as provided for by the provisions on damages as

found in the Civil Code.85
1.1 In case of death of a passenger or even if death does not result but the carrier
is guilty of fraud or bad faith, moral damages may be recovered. In the latter case,
only the injured may demand payment of the moral damages. If there is contributory
negligence of the passenger, moral damages cannot be recovered. 86
1.2 In breach of a contract of air carriage, moral damages may be recovered where
(a) the mishap results in the death of a passenger (b) carrier is guilty of fraud or bad
faith (c) where negligence is so gross and reckless as to virtually amount to bad faith.
In addition, exemplary damages may be recovered if it acted recklessly and
malevolently in transporting its passengers.87
81
Dangwa Transportation Co., Inc. v. Court of Appeals, 202 SCRA 575, 580 [1991].
82
LRTA v Marjorie Navidad, 397 SCRA 75 [February 6, 2003]
83
La Mallorca v. CA, 17 SCRA 739 [1966]; Aboitiz Shipping Corporation v. CA, November 6,
1989.
84
British Airways, Inc. v. Court of Appeals, 218 SCRA 699 [February 9, 1993]
85
86
PNR v. CA, GR L-55347, October 4, 1985
87
Philippine Airlines, Inc. vs. Court of Appeals, 566 SCRA 124
1.3 In addition, the carrier may also be liable for: (a) loss of earning capacity of
the deceased unless the deceased on account of a permanent physical disability not
caused by the defendant had no earning capacity at the time of his death (b) if the
deceased was obliged to give support according to Article 291, Civil Code, the
recipient who is not an heir, may demand support from the person causing death for a
period not exceeding 5 years, the exact period to be fixed by the court (c) the
spouse, legitimate or illegitimate descendants and ascendants may demand payment
of moral damages for mental anguish by reason of death.
1.4 Prevailing jurisprudence has fixed indemnity for death at PHP 50,000.00.88
1.5 The computation of net earning capacity is life expectancy [80 less the age of
the deceased multiplied by 2/3] multiplied by [gross annual income- necessary living
expenses (in the absence of proof it will be computed at 50% of gross annual
income)].89
1.6 Loss of earning capacity can also be held to apply when the breach by the
carrier results in plaintiffs permanent incapacity.90
1.7 Generally exemplary damages will be adjudged against a common carrier

when: (a) he authorized the wrongful acts of his agent, or (b) he ratifies the same
thereafter.
1.8 Interest on a claim for damages for breach of a contract of carriage shall be
computed a 6% per annum as it is not based on loan or forbearance of money.
However, after finality of judgment until execution, interest shall be computed at 12%
per annum.91
2. The Public Service Commission (now the LTFRB) may on its motion or petition
of an interested party cancel the certificate of public convenience granted to a
common carrier that repeatedly fails to comply with the exercise of extra-ordinary
diligence.92
3. Concurring causes of action exist from the negligent act of the common carrier.
3.1 In culpa contractual, the carrier is primarily liable and not the driver as there
is no privity between the latter and the passenger.93 The defense of due diligence in
the selection and supervision of an employee is not available.
88
Pestano v. Sumayang, 346 SCRA 870
89
Fortune Express, Inc. v. Court of Appeals, 305 SCRA 14 [March 18, 1999]
90
Borromeo vs. Manila Electric Railroad & Light Co., 44 Phil 165, 167 [1922]
91
Philippine Airlines, Inc. v. Court of Appeals, G.R. No. 188961 [October 13, 2009]
92
93
3.2 In culpa aquiliana, the breach of the contract is also a tort notwithstanding the
contract. The carrier and driver are solidary liable as joint tortfeasors. 94 The defense
of due diligence in the selection and supervision of an employee is available.
Exception is maritime tort resulting in a collision.
3.3 In culpa delictual, the driver is primarily liable for the civil liability arising from
the crime and the carrier is only subsidiarily liable upon conviction and declaration of
insolvency.95
APPLICABILITY OF OTHER LAWS
1. In all other matters not regulated by the Civil Code, the rights and obligations
of common carriers shall be governed by the Code of Commerce and by special laws. 96
OTHER RELATED ISSUES
1. Registered Owner Rule provides that the person who appears as the registered
owner of a vehicle is liable for any damages caused by the negligent operation of the
vehicle, even if it has already been sold or conveyed at the time of the accident,
with recourse however against the transferee or buyer.97
1.1 The registered owner is also liable even if the vehicle was leased to another
person.98 If stolen, the registered owner has no liability.99
1.2 Under the kabit system whereby a person granted a Certificate of Public
Convenience allows other persons who own motor vehicles to operate them under his
license for a fee or percentage, it is the operator who appears as the registered
owner who would be liable. The status of the contract that embodies the
arrangement is contrary to public policy, hence void. 100 The vehicle may also be levied
upon by creditors of the registered owner.101
1.3 Parties to a kabit system cannot invoke the pari delicto rule as against each
other to enforce their illegal agreement or to invoke the same to escape liability on
the maxim that no action arises out of an illicit bargain. Having entered into an
illegal contract, neither can seek relief from the courts, and each must bear the
consequences of their acts. Thus in the case of Teja Marketing v. IAC 102 the Supreme
94
95
Article 100, Revised Penal Code
96
97
Equitable Leasing Corporation v. Suyon, GR 143360, September 5, 2002
98
BA Finance v. CA, 215 SCRA 715
99
Duavit v. CA, 173 SCRA 490
100
Lim v. CA, GR No. 125817, January 16, 2002
101
Santos v. Sibug, 104 SCRA 520
102
148 SCRA 347 [March 9, 1987]
Court sustained a dismissal of an action filed by the seller against the purchaser for
the balance of the price for a motorcycle operated by the latter under the franchise
of the former.
1.4 The boundary system is one where a driver is engaged to drive the
owner/operators unit and pays the latter a fee commonly called boundary for the use
of the unit. Whatever is earned in excess of the fee is the drivers income. 103 The
relationship that is created is that of employer-employee, not lessor-lessee. 104
Consequently, the carrier cannot claim that he is a lessor so as to avoid the liability
arising from the loss or injury caused by the driver enagaged by him.105
2. Successive Carriers the second carrier shall assume the obligations of the first
carrier but shall have a right of action against the first carrier if the latter is directly
responsible for the fault giving rise to the claim of the shipper or consignee. 106
2.1 An airline ticket providing the carriage of successive air carriers is to be

regarded as a single operation is to make the issuer carrier liable for the tortious
conduct of the other carrier. A provision that limits liability only to its own conduct is
not enough to rebut the liability.
3. Passengers Baggage is deemed to include whatever articles a passenger usually

takes with him for his own personal use, comfort and convenience according to the
habits or wants of the particular class to which he belongs, either with reference to
his immediate necessities or the ultimate purpose of his journey.107 Baggage may be
hand-carried or check-in or is delivered to the carrier.
3.1 Baggage that is hand-carried and in the custody of the passenger will be
considered as a necessary deposit,108 where the carrier is responsible as a depository,
provided that notice is given to the carrier and that the passenger took the necessary
precautions which the carrier has advised him relative to care and vigilance.
3.2 In case of loss or injury that are caused by servants, employees as well as
strangers, the carrier would be liable, but not for that which may proceed from force
majeure.109 The act of a thief or robber, who entered the premises of the carrier is
not force majeure unless done with the use of arms or through an irresistible force. 110
103
Paguio Transport Corp. v. NLRC, G.R. No. 119500 [August 28, 1998]
104
Martinez v. NLRC, G.R. No. 117495 [May 29, 1997]
105
Hernandez v. Dolor, G.R. No. 160286 [July 30, 2004]
106
Article 373, Code of Commerce
107
Francisco, p. 242
108
109
110
3.3 If the loss or injury is caused by the acts of the passenger or those acting in his
behalf or due to the character of the thing, the carrier would not be liable. 111
3.4 The common carrier cannot free himself from this responsibility by posting
notices to the effect that he is not liable for the articles brought by the passenger.
Any stipulation whereby the responsibility set forth in Articles 1998 to 2001 of the
Civil Code is suppressed or diminished is void.112
3.5 Checked-in baggage or baggage that is not in the personal custody of the
passenger or that of his employee will be governed by Articles 1733 to 1753. 113 Thus it
will be treated in the same manner as goods that are being shipped and the carrier
will be required to exercise extra-ordinary diligence while they are in its custody and
control.
3.6 The carrier cannot be said to be remiss in the exercise of the required degree
of diligence when it does not cause to be opened the luggage or baggage of its
passengers, who upon an inquiry have disclosed the contents to the satisfaction of the
carrier. However, air carriers are given the power to open and if the owner, shipper or
their representative refuses to have opened and inspected, they may be refused
loading.114 Hence, their failure to exercise the power amounts to a failure to exercise
the required degree of diligence.
OVERLAND TRANSPORTATION AND BILLS OF LADING
PRELIMINARIES
1. Definition of overland transportation- the transport on land and on small bodies

of water, waterways, both natural and artificial including transport on rivers which
are not very large.
1.1 If it involves transport on sea, it will be referred to as maritime admiralty
2. The provisions of Articles 352-379 of the Code of Commerce involves

commercial contracts only. However, the applicability of laws shall be as follows:
2.1 Commercial contracts involving common carriers shall be governed primarily by

the Civil Code and supplemented by the Code of Commerce
2.2 Commercial contracts involving private carriers shall be governed primarily by

the Code of Commerce and supplemented by the Civil Code provisions.
111
112
113
114
RA 6235
3. A contract of transportation by land or waterways of any kind shall be
considered commercial when: (a) it involves merchandise or any object of commerce
or (b) no matter what its object may be, the carrier is a merchant or is customarily or
habitually engaged in transportation for the public or is a common carrier.115
3.1 The transportation of persons or news will be deemed commercial only if it is

undertaken under (b)
3.2 A contract of air transportation may be regarded as commercial since it is

analogous to land and water transportation.
4. Art. 1766 of the Civil Code provides that 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
BILL OF LADING DEFINED
1. 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. It comprehends all methods of transportation.
1.1 The nature of a Bill of Lading is as follows: (a) is a contract in itself and the
parties are bound by its terms (b) it is a receipt (c) it is a symbol of the goods covered
by it
1.2 The bill of lading is the law between the parties and is legal evidence of the
contract. As such it is an actionable document.116
1.3 As a receipt means that the issuance of a bill of lading carries the presumption
that the goods were delivered to the carrier issuing the bill, for immediate shipment
and it is nowhere questioned that a bill of lading is prima facie evidence of the
receipt of the goods by the carrier. Since it is a prima facie evidence of receipt, the
carrier may be allowed to present proof that he received the cargo on a date
different from the date of the bill of lading.117
2. Since it also is a symbol of the goods, it is considered a document of title to

the goods.
115
116
Philippine American General Insurance Co., Inc. v. Sweet Lines Inc., 212 SCRA 194, 203
[August 5, 1992]
117
Saludo Jr. v. Court of Appeals, 207 SCRA 498, 508 [March 23, 1992]
2.1 A document of title is any document used in the ordinary course of business in
the sale or transfer of goods, as proof of the possession or control of goods, or
authorizing the possessor of the document to transfer or receive, either by
endorsement or delivery, goods represented by such document
3. If negotiable in form, a Bill of Lading may be a negotiable document of title
3.1 It is negotiable if it states that the goods referred to therein will be delivered
to the bearer or the order of any person named in such document
3.2 A bill of lading stamped with the words non negotiable but containing words
that the goods are deliverable to the order of the person named therein is a
negotiable bill of lading.
3.3 It is non-negotiable if it states that the goods referred to therein will be

delivered to persons specified or named in such document
3.4 It is not a negotiable instrument because it is not payable in a sum certain in

money
3.5 A purchaser in good faith and for value of the goods covered by a negotiable
bill of lading is superior to the unpaid sellers right of stoppage in transit. 118
4. The effectivity of the bill occurs upon its delivery to and acceptance by the
shipper. It is presumed that the stipulations in the bill are, 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.119
5. As to contents, the shipper as well as the carrier of merchandise or goods may

mutually demand that a bill of lading be made, stating: (a) the name, surname and
residence of the shipper (b) the name, surname and residence of the carrier (c) the
name, surname, residence of the person to whom or to whose order the goods are to
be sent and whether they are to be delivered to the bearer of said bill (d) 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 (e) the costs of
transportation (f) the date on which shipment is made (g) the place of delivery to the
carrier (h) the place and the time at which delivery to the consignee shall be made,
and (i) the indemnity to be paid by the carrier in case of delay, if there should be an
agreement on this matter.120
5.1 In a bill of lading for maritime commerce, the following must be included: (a)
the name, registry, and tonnage of the vessel (b) the name of the captain and his
domicile (c) the port of loading and that of unloading (d) the name of the shipper (e)
118
119
Magellan mfg. Marketing Corporation v. Court of Appeals, 22 SCRA 674 [1968]
120
the name of the consignee, if the bill of lading is issued in the name of a specified
person (f) the quantity, quality, number of packages and marks of the merchandise
and, (g) the freightage and primage stipulated. This bill may also be issued to bearer,
to order or in the name of a specified person, and must be signed within 24 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.121
5.2 As to liability, a stipulation exempting the carrier from liability occasioned by

its own negligence or providing for unqualified limitation of liability to an agreed
valuation are invalid by reason of public policy. Only a stipulation limiting the liability
to an agreed valuation unless the shipper declares a higher value and pays a higher
rate of freight is valid and enforceable.122
5.3 A stipulation limiting liability is to protect the common carrier as it obliges the
shipper to notify it of the amount that it may be liable for in case of a loss of the
goods so that it can take appropriate measures, such as insurance, to protect itself.
5.4 The stipulation limiting liability must be: (a) reasonable and just under the
circumstances, and (b) fairly and freely agreed upon.
6. The form of the bill of lading is not material. If it contains an

acknowledgement by the carrier of the receipt of goods for transportation, it is in
legal effect, a bill of lading.
6.1 The Bill of Lading constitutes the legal evidence of the contract of
transportation as all disputes between the parties regarding the execution and
performance of the contract shall be decided by its contents. The law admits no
exception other than falsity and material error in its drafting.123
6.2 But the execution of a bill of lading is not essential to a contract of

transportation. The making of such is not obligatory. The fact that a Bill of Lading is
not issued does not preclude the existence of a contract of transportation.
6.3 In the absence of a bill of lading, the respective claims of the parties shall be
decided by the legal proofs that each one may submit in support of his claims. 124
However: (a) if the value is PHP 300.00 or less, testimonial evidence is allowed (b)if
the value exceeds PHP 300.00, testimonial evidence is not sufficient, there should be
proof through other writing/s.
121
122
H.E. Heacock Company v. Macondray & Company, Inc. No. 16598 [October 3, 1921]
123
124
6.4 Note that the Electronic Commerce Act 125allows data messages or electronic
documents to be used in lieu of transport writing or paper documents.
7. If transport is by air, what is issued is an airway bill.
7.1 A ticket ordinarily refers to passengers but when it refers to a thing it covers
baggage, while a bill of lading always refers to goods that are denominated usually as
cargo.126
8. A clean bill of lading is one in common form without any memorandum in the
margin or on its face showing that the goods are to be carried on deck contains any
defect. A foul bill of lading is one that carried a memorandum.
8.1 On board bill of lading is one that states that the goods have been received on
board the vessel that will transport such goods. A received for shipment bill of lading
is one that states that the goods have been received without specifying the vessel
that will transport the goods.
8.2 A custody bill of lading is one where the goods are already received by the
carrier but the vessel indicated therein has not yet arrived in port. A port bill of
lading, the vessel indicated in the bill of lading transporting the goods is already in
port.
8.3 A through bill of lading is one issued by a carrier who is obliged to use the
facilities of other carriers as well as his own facilities for the purpose of transporting
the goods from the city of the seller to the city of the buyer, which bill of lading is
honoured by the second and other interested carriers who do not issue their own
lading.
PARTIES TO A BILL OF LADING
1. The parties to a bill of lading are: (a) shipper/consignor a person to be

transported or owner of the goods to be transported; one who gives rise to the
contract of transportation (b) carrier one who binds himself to transport persons,
things or news as the case may be; one engaged in the business of carrying goods for
others for hire (c)consignee the party to whom the carrier is to deliver the things
being transported; one to whom the carrier may lawfully make delivery in accordance
with its contract of carriage
2. Note that the shipper and consignee may be 1 person.
COMMENCEMENT OF THE RESPONSIBILITY OF THE CARRIER

125
Sections 25, 26, RA 8792
126
1. Commencement of the responsibility of the carrier is upon receipt of the
merchandise from the shipper, either personally or through a person charged for that
purpose, at the place indicated for their reception.127
1.1 This responsibility shall endure and continue after the arrival of the goods at
their destination until they are ready to be delivered at the usual place of delivery,
and the owner or consignee has a reasonable opportunity, when such goods are
delivered, of examining them sufficiently to judge from their outward appearance of
their identity, and whether they are in a proper condition, and take them away.128
1.2 A common carrier cannot refuse a particular class of goods to the prejudice of
the traffic in those goods
1.3 The exception is when the goods are unfit for transportation but if
transportation is insisted upon, common carriers cannot refuse to carry them, but
they shall be exempt from all responsibility if their objections are made to appear in
the bill of lading.129
1.4 If by reason of well-founded suspicions of falsity in the declaration of the

contents of a package, the carrier should decide to examine it, he shall do so before
witnesses, in the presence of the shipper or the consignee. If the shipper or consignee
cannot appear, it shall be done before a notary. Expenses for the examination and
repackaging shall be defrayed by the carrier if the declaration of the shipper be
correct and in a contrary case for the account of the shipper.130
RESPONSIBILITIES OF THE CARRIER
1. The responsibilities of a carrier are as follows: (a) If a common carrier, observe

extra-ordinary diligence (b) to deliver goods to the consignee without delay,
otherwise, make judicial deposit (c) to deliver goods in the same condition (c) not to
deviate from the route (e) to keep a registry 131 (f) to comply with law and regulations
during the whole course of the trip and upon arrival at the port of destination, except
when the failure shall arise on account of a falsehood on the part of the shipper in the
declaration of merchandise.132
1.1 The responsibilities shall be equally applicable to those, who although do not
personally effect transportation, contract to do so through contractors for a particular
and definite operation or as agents for transportation and conveyances. 133
127
128
Kui Pay & Co. vs. Dollar Steamship Line, 52 Phil 863
129
130
131
132
133
1.2 In such case, they are subrogated in the place of the carrier, with respect to
responsibilities and rights.
DELIVERY OF THE GOODS WITHOUT DELAY
1. Where a period is fixed for delivery: the carrier must deliver the goods within
the time fixed.134
1.1 For failure to do so, the carrier shall pay the indemnity stipulated in the bill,
neither the shipper nor the consignee being entitled to anything else.
1.2 If no indemnity has been stipulated and the delay exceeds the time fixed in the
bill, the carrier shall be liable for the damages that the delay may have caused.
1.3 Where no period was fixed: the carrier shall be bound to forward them in the
first shipment of the same or similar goods which he makes to the point where he
must deliver them.135
1.4 Should he not do so, the damages caused by the delay shall be for his account
2. Concept of Conversion: Where property in the hands of a carrier is not

delivered within a reasonable time after it has reached its destination, the carrier in
the absence of any legal exemption and after demand has been made and delivery
refused, is liable for a conversion of the property.
2.1 The consignee may waive title to the property and sue for conversion and is
entitled to the value of the goods at the time they should have been delivered to him.
Subsequent tender of the goods by the carrier is not available as a defense.
2.2 If there has been demand and the carrier tenders the goods, the consignee
cannot refuse to receive the goods and sue for conversion. His sole remedy is an
action for damages on account of the delay. There can only be conversion if there has
been demand and the carrier refuses delivery.136
3. Note the remedy of judicial deposit when consignee cannot be found.
HOW AND TO WHOM DELIVERY IS MADE
1. Where the bill of lading is issued to the order of the shipper, the carrier is
under no duty to deliver the merchandise mentioned in the bill of lading except upon
the presentation of the bill of lading duly indorsed by the shipper
134
135
136
Yu Chaco Sons & Co vs. Admiral Line, 46 Phil 418
1.1 Prior to the appearance of the consignee or legitimate holder of the bill of
lading, with such bill before the carrier, the consignee or legitimate bill holder is not
a party to the contract.
2. The carrier in the above-instance is still subject to the orders of the shipper.
2.1 Hence, the shipper may, without changing the place where the delivery is to be
made, change the consignment of the goods delivered to the carrier, and the latter
must comply with his orders, provided that at the time of making the change of the
consignee the bill of lading subscribed by the carrier, if one was issued, be returned
to him, exchanging it for another containing the novation of the contract.137
2.2 The expenses arising from the change of consignment shall be defrayed by the
shipper.
2.3 Hence, in case of conflicting orders of the shipper and the consignee, there is
no other recourse than to determine at what moment the right of the shipper to
countermand the shipment terminates. This moment can be no other than the time
when the consignee or legitimate holder of the bill appears with such bill before the
carrier and makes himself a party to the contract as prior to that time, he is a
stranger to the contract.
2.4 A misdelivery occurs when delivery to a person different from that indicated in
the bill is made.
3. The carrier must deliver to the consignee without 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 damages which
may be caused thereby.138
3.1 If a consignee is not present upon arrival, he is entitled to reasonable notice

from the carrier of their arrival and a fair opportunity to take care of and remove
them.
3.2 If the consignee is unknown to the carrier, the latter must use proper and
reasonable diligence to find him.
3.3 When the consignee cannot be found at the domicile indicated in the bill or
should refuse to pay the transportation charges and expenses, or to receive the
goods, the deposit of said goods shall be ordered by the municipal judge, to be placed
at the disposal of the shipper or sender, without prejudice to a person having a better
right. This deposit shall have all the effects of a delivery.139
137
138
139
3.4 Note the availability of the remedy of abandonment by the consignee.
CONDITION OF THE GOODS UPON DELIVERY
1. The general rule is that the merchandise shall be transported at the risk and
venture of the shipper, if the contrary has not been expressly stipulated.
1.1 As a consequence, all losses and deterioration which may be suffered by the
goods through (a) fortuitous event (b) force majeure or (c) the inherent nature and
defect of the goods are for the account of the shipper.
1.2 Proof of these accidents is however incumbent upon the carrier.140
1.3 Note that while the Code of Commerce appears to allow a contrary stipulation,
the same has been repealed by Article 1745 of the Civil Code by the requirement that
a common carrier should exercise extra-ordinary diligence, qualified by a stipulation
that can allow for a lesser degree of diligence not below that of a good father of a
family under Article 1744 of the Civil Code.
2. The carrier is liable for losses or damages resulting from its negligence or by
the failure to take precautions which usage has established among careful persons.
2.1 This liability will not arise if there is fraud committed by the shipper in the bill
of lading when he represented the goods to be of a kind or quality different from
what they really were.141
2.2 Note the power given the carrier, who notwithstanding the exercise of the
precautions required, to sell the goods by placing them in the hands of judicial or
appropriate authority when they run the risk of loss due to their nature or
unavoidable accident, there being no time for their owners to sell them.
3. Consequently, with the exception of the causes mentioned in (1.1) and (2.1),
the carrier shall be obliged to deliver the goods transported in the same condition in
which, according to the bill of lading, they were at the time of their receipt, without
any damage or impairment, and should he not do so, he shall be obliged to pay the
value of the goods not delivered at the point where they should have been and at the
time the delivery should have taken place.142
3.1 If only part of the goods transported should be delivered, the consignee may
refuse to receive them, when he proves that he cannot make use thereof without the
others that were not delivered.
140
141
142
3.2 The determination of the usefulness of the goods individually depends upon the
consignee, but he cannot be arbitrary and must justify his determination.
4. If the effect of the damage due should only be a reduction in the value of the
goods, the obligation of the carrier shall be reduced to the payment of the amount of
said reduction in value, after appraisal by experts.143
5. If, on account of the damage, the goods are rendered useless for sale or
consumption for the use for which they are properly destined, the consignee shall not
be bound to receive them, and may leave them in the hands of the carrier, demanding
payment of their value at the current market price that day.144
5.1 If among the goods damaged there should be some in good condition and
without any defect whatsoever, the foregoing provision shall be applicable with
regard to the damaged ones, and the consignee shall receive those which are sound,
this separation being made by distinct and separate articles, no object being divided
for the purpose, unless the consignee proves the impossibility of conveniently making
use thereof in this form.
5.2 The same provision shall be applied to merchandise in bales or packages with
distinction of the packages which appear sound.
TIME FOR MAKING A CLAIM FOR DAMAGES
1. Within 24 hours following the receipt of the merchandise, a claim may be

brought against the carrier on account of damage or average found therein on opening
the packages, provided that the signs of the damage or average giving rise to the
claim may not be known from the exterior part of the packages, and in case that they
may be so ascertained, said claim shall only be admitted at the time of the receipt of
the packages.145
1.1 The periods prescribed shall commence to run only from the time the
consignee is in actual possession.146
1.2 The 24-hour rule is counted from the receipt of goods except if: (a) the defect
is due to the packing of the goods or may be seen from outside the goods, or (b)
owner/shipper never received the goods as there can be no question as to the right to
bring a claim.
1.3 The 24-hour rule of notice is not a prescriptive period, it is merely a condition
precedent before a complaint may be filed. Remember that failure to comply with a
143
144
145
146
Cordoba vs. Warner Barnes & Co., 1 Phil 10
condition precedent is a ground for dismissal, except when there is fraud. The
prescriptive period for an action based on written contracts is 10 years
1.4 After the periods mentioned have elapsed or after the transportation charges
have been paid, no claim whatsoever shall be admitted against the carrier with regard
to the condition in which the goods transported were delivered.
1.5 The periods may be the subject of a stipulation extending them.
2. If there should occur doubts and disputes between the consignee and the
carrier with regard to the condition of goods transported at the time of their delivery
to the former, the said goods shall be examined by experts appointed by the parties,
and in case of disagreement, a 3rd one appointed by the judicial authority.
2.1 The result of the examination being reduced to writing; and if the persons
interested should not agree to the report of the experts and could not settle the
disputes, said judicial authority shall order the deposit of the merchandise in a safe
warehouse, and the parties interested shall make use of their rights in the proper
manner.147
3. Summary of steps in filing claims for damages: (a) if damages can be

ascertained on the face of the cargo protest immediately upon receipt (b)if it
cannot be ascertained after delivery and receipt file a claim within 24 hours after
receipt.
EFFECT OF DEVIATION FROM AGREED ROUTE
1. If there is an agreement, the carrier cannot change the route unless there is
force majeure.148
2. When there is no agreed route, the carrier must select 1 which may be the
shortest, least expensive and practically passable
3. Should the route be changed without such cause, the carried is liable for any
damage suffered by the goods transported for any cause whatsoever, besides paying
the amount which may be stipulated for such cause.
3.1 On the other hand, if such cause exists causing an increase in the
transportation cost, the carrier shall be reimbursed for the increase after formal
proof.
RIGHTS AND OBLIGATIONS OF SEVERAL CARRIERS

147
148
1. The carrier who makes delivery by virtue of combined agreements or services
shall assume the obligations of those who preceded him.
1.1 However, he has a right to proceed against those who preceded him if he was
not the party directly responsible.
2. The carrier who makes delivery shall also acquire all actions and rights of those
who preceded him.
3. The shipper and the consignee shall have an immediate right of action against
the carrier who executed the transportation contract, or against carriers who may
have received the goods without reservation.
3.1 However, the reservation shall not relieve them for responsibilities which they
may have incurred by their own acts.149
RIGHTS OF THE SHIPPER OR CONSIGNEE
1. A right to the payment of damages when goods are lost or mislaid.
1.1 The value of the goods stated in the bill is conclusive between the parties and
the shipper is not allowed to prove a higher value.150
1.2 It is only when the carriers fault is so gross as to amount to actual fraud, that
the actual amount of the losses and damages suffered may be proved by the shipper
against the carrier.
2. A right to abandon exists in cases of delay on account of the fault of the carrier
as the consignee may leave the goods transported in the hands of the carrier,
informing him thereof in writing before the arrival of the same at the point of the
destination.151
2.1 It also exists when: (a) there is of partial non-delivery where the consignee
proves that he cannot make use of the goods capable of delivery independently of
those not delivered (b) where the goods are rendered useless for sale and
consumption for the purposes for which they are properly destined.
2.2 When this abandonment occurs, the carrier shall satisfy the total value of the
goods, as if they had been lost or mislaid
149
150
151
2.3 Should the abandonment not occur, the indemnity for loss and damages on
account of the delays cannot exceed the current price of the goods transported on
the day and at the place where the delivery was to have been made. The same
provision shall be observed n all cases where there this indemnity is due
OBLIGATION TO PAY FOR TRANSPORTATION CHARGES
1. The consignees to whom the remittance may have been made may not defer
the payment of the expenses and transportation charges on the goods that they
received after 24 hours have elapsed from the time of the delivery.
1.1 In case of delay in making this payment, the carrier may demand the judicial
sale of the goods he transported to a sufficient amount to cover the transportation
charges and the expenses incurred.152
2. The goods transported shall be specifically bound to answer for the

transportation charges and for the expenses and fees caused by the same during their
transportation, and until the time of their delivery.153
2.1 This special right shall be limited to 30 days 154 after the delivery has been
made, and after said prescription, the carrier shall have no further right of action
than that corresponding to an ordinary creditor
3. The preference of the carrier to the payment of what is due him for the
transportation and expenses of the goods delivered to the consignee shall not be
affected by the bankruptcy of the latter, provided the action is brought within the 30
days mentioned in the foregoing article.155
4. In the enforcement by the carrier of the payment of transportation charges,

the time limit rests on the necessity which the consignee must have for the alienation
of the goods that is why the carrier is given a period that is relatively urgent
pertaining to the said goods transported. After the time has prescribed, his
preference prescribes and his only remedy is by ordinary action.
OBLIGATION TO RETURN THE BILL OF LADING
1. The obligation to return the bill of lading arises after the contract has been
complied with.
152
153
154
155
1.1 The bill of lading shall be returned to the carrier who may have issued it, and
by virtue of the exchange of this title for the article transported, the respective
obligations and actions shall be considered cancelled, unless in the same act the
claims which the parties may wish to reserve are reduced to writing, with the
exception of that provided by Article 366.
1.2 The claims referred to are those for damages that can be ascertained from the
outside of the packages at the time of receipt.
2. In case the consignee, upon receiving the goods, cannot return the bill of
lading because of its loss or of any other cause, he must give the latter a receipt for
the goods delivered, this receipt shall produce the same effects as the return of the
bill of lading.156
2.1 The bill of lading that has not been returned is called a spent bill of lading.
ADMIRALTY AND MARITIME COMMERCE
PRELIMINARIES
1. Origin of Maritime Law is found in the customary rules adopted and utilized by
ports and communities connected with the sea which eventually crossed boundaries
because of the merchants and shipowners who travelled the seas guided by the said
rules.
1.1 They later came to be known as the law of the seas or the body of laws applied
to maritime cases.
2. Maritime Law is distinguished from Civil Law and Mercantile Law in general by
its real and hypothecary nature which means that the liability of the agent or
shipowner in relation to maritime contracts is limited to the res or the vessel.
2.1 Maritime law and Admiralty law are used synonymously.
2.2 It includes Book III of the Code of Commerce, Salvage law 157, Carriage of Goods
by Sea Act158, Ship Mortgage Decree of 1978159 and other special laws related to
maritime commerce.
2.3 The Philippines also adopts the generally accepted principles of international
156
157
Act No. 2616
158
CA 65
159
PD 1521
law as part of maritime law such as United Nations Convention on the Law of the Sea
(UNCLOS), International Conventions for the Safety of Life at Sea 1974 (SOLAS 1974)
and the Tonnage Convention of 1969.
2.4 There is also adherence to treaties not because of adoption but rather due to
observance by Philippine vessels as a matter of international custom such as the
Convention for the International Regulations on the Prevention of Collisions at Sea
1972 (COLREGS 1972).
REAL AND HYPOTHECARY NATURE OF MARITIME LAW
1. The effect is that the vessel is hypothecated or is the guarantee for the
settlement for obligations under maritime contracts.
1.2 This originated in the prevailing conditions of the maritime trade and sea
voyages during the medieval ages. To offset against the adverse conditions and to
encourage shipbuilding and maritime commerce, it was deemed necessary to confine
the liability of the owner or the agent arising from the operation of the vessel to the
vessel, its equipment, and freight or insurance, if any, so that if the shipowner or
agent abandoned the ship, equipment, and freight, his liability was extinguished. 160
This is known as the limited liability rule.
1.3 As a rule, subject to limited exceptions, if the vessel is lost, the ship owner or
ship agent will have no liability. If the vessel is not lost, the ship owner or the ship
agent may abandon the vessel to the creditors in satisfaction of their claim.
1.4 The only person who could avail of the limited liability rule is the ship owner.
He is the very person whom the rule has conceived to protect and the charterer
cannot invoke this as a defense.161
1.4 The limited liability rule finds basis in Articles 837, 587 and 590 which limits
the liability of the ship owner or ship agent to the vessel, its freight and insurance.
Note though that Article 837 is but a necessary consequence of the right to abandon
the vessel given to a ship owner under Article 587.
2. Distinguishing the ship owner from the ship agent. A ship agent is defined as
the person entrusted with provisioning or representing the vessel in the port where it
is found.162
2.1 Fundamentally, the term ship agent must be understood to refer to the person
undertaking the voyage, who, in one case may be the owner or a charterer.163
160
Abueg vs. San Diego, 44 OG 80
161
Dela Torre v. Court of Appeals, 653 SCRA 714 [July 13, 2011]
162
Article 586, 2nd Par., Code of Commerce
163
Standard Oil Co. vs. Lopez Castelo, 42 Phil 256
2.2 This interpretation is notwithstanding the apparent conflict with the statutory
definition of a ship agent and under Article 587 of the Code of Commerce where it is
utilized in manner that encompasses the term owner.
2.3 This distinction must be made when the one doing the work of a ship agent is
the ship owner himself.
3. Under our laws, the ship owner and ship agent are primarily liable for the
following acts: (a) acts of the captain (b) contracts entered into by the captain to
repair, equip and provision the vessel, provided that the amount claimed was invested
for the benefit of the vessel (c) indemnities in favor of third persons which arise from
the conduct of the captain in the care of the goods or well as safety of the
passengers,164 (d) damages to third persons for torts or quasi-delict committed by the
captain, except in a collision with another vessel 165 (e) in case of collision due to the
fault, negligence or want of skill of the captain, sailing mate or any member of the
complement.166 These are the liabilities that would be extinguished by loss or
abandonment of the vessel.
3.1 A ship agent is liable notwithstanding the insolvency of the principal/owner.

But the ship agent may exempt himself from liability by abandoning the vessel with
all her equipment and the freight it may have earned during the voyage.
3.2 The effect of abandonment is to extinguish the liability of the ship agent. The
ship agents liability is confined to that which he is entitled as a matter of right to
abandon: the vessel with all her equipment and the freight it may have earned during
the voyage and to the insurance thereof. The limited liability will not be applicable
when no abandonment of vessel is made.
3.3 The abandonment of the vessel does not require any specific procedure.The
ship owner can just say he abandons the vessel in favor of the claimants. There is no
prescriptive period within which the ship owner can make an abandonment. He may
do so for as long as he is not estopped from invoking the same or do acts inconsistent
with abandonment, like salvage.
3.4 The effect of abandonment is that it amounts to an offer of the value of the
vessel, of her equipment, and freight money earned in satisfaction of the liabilities.
3.5 Abandonment cannot be refused by creditors.
4. The exceptions to the doctrine of limited liability: (a) where the ship owner is
at fault or is due to the concurring negligence of the ship owner and captain as the
doctrine is premised on the condition that the death or injury to the passenger
164
165
166
occurred by reason of the fault or negligence of the captain only 167 (b) in cases of
Workmens Compensation as such compensation has nothing to do with maritime
commerce, it is an item in the cost of production which must be included in the
budget of nay well-managed industry168 (c) when the vessel is insured (d) Total
destruction of the vessel does not affect the liability of the owner for repairs on the
vessel completed before its loss as owners of a vessel are liable for necessary repairs
and it shall remain unaffected by the loss of the thing.169
5. Any maritime lien is also extinguished by the total loss of the vessel as there is
no longer any res to which it can attach.
5.1 A maritime lien is a privileged claim or charge upon a ship, which claim or lien
travels with the ship secretively and unconditionally and may be enforced by an
action in rem. Once it attaches, it adheres to the res. Hence, any purchaser or
charterer of the res takes title to it subject to the maritime lien and he cannot plead
want of notice to defeat the lien.
5.2 Examples of maritime liens are: (a) taxes, expenses, costs and fees imposed by
the state (b) wages of the crew (c) a general average (d) salvage (e) maritime liens
prior in time to the recording of a preferred ship mortgage (f) damages arising out of
tort
6. The persons entitled to invoke the protection of limitation on liability are the
ship owners or co-owners thereof and ship agents
6.1 Hence, only the ship-owner or ship agent can make abandonment.
6.2 In case of a co-ownership, a co-owner may exempt himself from liability by the
abandonment of the part of the vessel belonging to him
VESSELS
1. Vessels are those engaged in navigation, whether coastwise or on the high seas,
including floating docks, pontoons, dredges, scows and any other floating apparatus
destined for the services of the industry or maritime commerce
1.1 Vessels engaged in the business of carrying or transporting passengers or goods

for compensation, offering their services to the public are common carriers.
1.2 They are to be governed primarily by the Civil Code and suppletorily by the
Code of Commerce and special laws
167
Manila Steamship v. Abdulhaman, 100 Phil 32 [1956]
168
Abueg v. San Diego, 77 Phil 730 [1946]
169
Government of the Philippines v. Maritime, 45 Phil 805
2. Vessels which are governed by the Code of Commerce are those licensed to
engage in maritime commerce or commerce by sea, whether in foreign or coastwise
trade.
2.1 These are merchant ships as they are engaged in the transportation of
passengers and freight from 1 port to another
2.2. They do not include all ships, craft or floating structures of every kind without
limitation, and should not include minor craft engaged only in river and bay traffic.
Neither does it refer to pleasure ships, yachts, pontoons, health service and harbor
police vessels, towboats and other craft destined to other uses, such as coast and
geodetic survey, scientific research and exploration, crafts engaged in the loading and
the discharge of vessels, or transshipments from 1 vessel to another
3. Vessels of a minor nature not engaged in maritime commerce, such as river

boats and those carrying passengers from ship to shore must be governed as to their
liability to passengers by the provisions of the Civil Code
4. If the vessel is of domestic ownership and of 15 tons gross or more, the taking
of a Certificate of Philippine Registry shall not be optional to the owner.
4.1 Purpose of a Certificate of Philippine Registry: to declare the nationality of a

vessel engaged in trade with foreign nations and to enable her to assert that
nationality wherever found
4.2 The vessels exempt from registration are (a) AFP vessels (b) Vessels owned by
foreign governments for military purposes (c) Bancas, sail boats and other water craft
which are not motorized of less than 3 gross tons capacity
4.3 The privileges of a Certificate of Philippine Registry:(a)right to engage in

Philippine coastwise trade (b)protection of the authorities and the flag of the
Philippines in all ports and on the high seas (c)same privileges and subject to same
disabilities pertaining to foreign-built vessels transferred abroad to citizens of the
Philippines.
4.4 Registration also is determinative of: (a) determines ownership of the vessel,
and (b) to bind 3rd persons
5. The Philippine Registry is not an open registry: This means that we only allow
the registration of vessels of domestic ownership, or owned by Filipinos or Filipino
corporations.
5.1 Provided that if it be the latter and it engages in coastwise trade it must have a
president or managing directors who are Filipinos.
5.2 Consequently, the Philippine Flag is not a flag of convenience. This open
registry allows: (a) operating flexibility (b) ability to choose manning source (c) lower
degree of operating and safety standards (d) ability to choose beneficial taxation (e)
ability to hide ownership.
5.3 The disadvantages of an open registry are: (a) limited diplomatic support (b)
boycott by the International Transportation Workers Federation because of
substandard working conditions.
PERSONS PARTICIPATING IN MARITIME COMMERCE
SHIP OWNER AND SHIP AGENT
1. A ship owner is the natural or juridical person who owns the vessel, while the
ship agent is the ship owners representative in all the places where his vessel makes
port.
2. In the matter of their liability for the acts of the captain, it must be noted that
the ship owner, in the person of the captain, has complete and exclusive control of
the crew and the navigation of the ship, as well as the disposition of the cargo at the
end of the voyage.
2.1 Consequently, any person would have a right of action directly against the ship
owner for breach of a duty which the law has imposed upon the captain.
2.2 Note also that the ship owner is liable for the death of or injuries to passengers
which are caused by the negligence or willful acts of his employees, although such
employees may have acted beyond the scope of their authority or in violation of
orders.170
3. In enforcing the liability, the ship agent is the one primarily liable to the
shippers and owners of the cargo transported by it for losses and damages occasioned
to such cargo without prejudice to his rights against the owner of the ship, to the
extent of the value of the vessel, its equipment and the freight
3.1 The captain shall be civilly liable to the ship agent and the latter is directly
liable to 3rd persons for damages that may be incurred.171
3.2 This direct liability is moderated and limited by the right of abandonment.
CAPTAINS
170
171
1. Captains are those who govern vessels that navigate the high seas or ships of
large dimensions and importance, although they be engaged in coastwise trade.
2. Masters are those who command smaller ships engaged exclusively in coastwise
trade.
2.1 In maritime commerce, they are both subject to the same rights and
obligations imposed by law.
3. The 3-fold duties of the Captain are: (a) general agent of the ship owner (b)
commander and technical director of the vessel (c) represents the government of the
country under whose flag he navigates.172
4. Their powers and duties are:
4.1 Prior to the voyage: (a) to appoint or make contracts with the crew in the
absence of the ship agent and to propose said crew, should the said agent be present;
but the ship agent may not employ any member against the captains express refusal
(b) 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 interest of the owner with utmost care (c) To adopt all proper measures to keep
the vessels well supplied and equipped, purchasing all that may be necessary for the
purpose, provided there be no time to request instructions from the ship agent
4.2 During the voyage: (a) to command the crew and direct the vessels to the
port of its destination, in accordance with the instructions he may have received from
the ship agent (b) to impose, in accordance with the contracts and with the law and
regulation of the merchant marine, and when aboard the vessel, the correctional
punishment upon those who fail to comply with his orders or are wanting discipline,
holding a preliminary hearing on the crime committed on board vessels on the seas,
which crime shall be turned over the authorities having jurisdiction over the same at
the first port touched (c) to order in similar urgent cases while on a voyage, the
repairs in the hull and engines of the vessels and its rigging and equipment, which are
absolutely necessary to enable to continue and finish its voyage but if he should arrive
at a point where there is a consignee of the vessels, he shall act in concurrence with
the latter.
4.3 Upon arrival: (a) to appoint or make contracts with the crew in the absence
of the ship agent and to propose said crew, should the said agent be present; but the
ship agent may not employ any member against the captains express refusal (b)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
interest of the owner with utmost care (c) to adopt all proper measures to keep the
vessels well supplied and equipped, purchasing all that may be necessary for the
172
1 Blanco 490
purpose, provided there be no time to request instructions from the ship agent. 173
4.4 Should the captain receive news of the appearance of privateers or those of
men of war against his flag, he is obliged to proceed to the nearest neutral port,
inform his ship agent or shippers, and await an occasion to sail under convoy or he has
received express orders from the ship agent or shippers.174 If he is attacked, after
trying to avoid the encounter or resisting delivery of the effects of the vessel or of her
cargo, they are forcibly taken, he shall make an entry of such fact in the freight book
and prove the same before competent authority at the first port he touches. After so
proving the same, he shall then be exempt from liability.175
5. A maritime protest will be required when the: (a) vessel goes thorough a
hurricane (b) the cargo has suffered damages or averages or (c) vessel is wrecked and
he is saved alone or with a part of his crew.176
5.1 The basis requisites are: (a) make the protest before the competent authority
at the first port he touches (b) protest must be made within 24 hours following arrival
(c) the captain must ratify it within the same period when the vessel arrives at its
destination, and (d) he must immediately proceed with proof of facts.
5.2 These are required because the causes constitute an exemption in favor of the
party responsible for the loss. Hence, there is a duty to prove the existence of the
circumstances to be able to successfully protest liability.
6. The vessel is historically called a "she" because sailors usually say that there is
a gang of men around her and it takes much money to powder and paint her. It has
been said that this is also due to her showing her topside, hiding her bottom and when
coming into port always heads for the buoys.
OTHER OFFICERS AND CREW
1. The Other Officers and Crew constitute the complement of the vessel.
1.1 It covers all the persons on board from the Captain to the cabin boy who are
necessary for its management, maneuvers and service.177
1.2 They include the sailing mates or first mates, second mates, engineers, stokers
and other employees.
PILOT
173
174
175
176
177
1. Is person taken on board at a particular place for the purpose conducting the
ship through a river or a channel, or from or into port. They are entrusted with the
management of the helm and the direction of the vessel on her voyage.
1.2 Under English and American authorities, the pilot supersedes the captain or
master for the time being in the command and navigation of the vessel 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.
1.3 When pilotage is compulsory, it is his duty to insist on having effective control
of the vessel, or to decline to act as a pilot. Note though that when the pilot is
engaged for a voyage, he is deemed to be an adviser of the master, who retains
command and control of the vessel even when pilotage is compulsory.
2. The general rule is that when the pilot employs due diligence and reasonable
care and skill, he is not liable for damages which may be suffered by the vessel or the
cargo. The relationship is master- servant.
SUPERCARGO
1. A supercargo is a person designated by the owner of goods to accompany the

goods on the vessel where the goods are loaded.
1.1 He is an agent of the owner of the goods shipped as cargo on a vessel. He has
charge of the cargo on board, sells them to the best advantage in the market, and
buys cargo to be brought back on the return voyage and comes home with it. 178
1.2 He is not an employee of the carrier nor a part of the crew. He is in effect a
passenger.
2. Supercargoes shall discharge on board the vessel the administrative duties

which the agent or shippers may have assigned them.
2.1 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 shall respect the latter in his duties as chief of the vessel.
2.2 The powers and liabilities of the captain shall cease, when there is a
supercargo, with regard to that part of the administration legitimately conferred upon
the latter, but shall continue in force for all acts which are inseparable from his
authority and office.179
2.3 They may not, without special authorization or agreement: (a) make any
178
Blacks Law Dictionary
179
transaction for their account, with the exception of ventures which, in accordance
with the custom at the port of destination or (b) invest in the return trip more than
the profits from the ventures.180
4. The presence of a supercargo modifies or varies the legal relation of the

shipper and the carrier and the degree of attention of the carrier to the cargo.
4.1 Consequently, it may be a defense of the ship owner or captain in case of loss,
damage or deterioration
4.2 The carrier still has the duty to exercise extra-ordinary diligence as mandated
by the Civil Code over the goods and the supercargo. Note that the supercargo is also
a passenger. The mandate to exercise such degree of diligence is express.
RISKS, DAMAGES AND ACCIDENTS IN MARITIME COMMERCE
AVERAGES
1. Averages in shipping and maritime insurance refer to a loss.
2. An average may consist of either:181
2.1 An expense to the carrier, in which case it must be: (a)extraordinary or

accidental (b)incurred during the voyage (c)incurred in order to preserve the vessel,
cargo or both.
2.2 A damage or a deterioration, in which case it must: (a) have been suffered
from the time the vessel puts to sea from the port of departure until it casts anchor in
the port of destination, and (b) have been suffered by the merchandise from the
time they are loaded in the port of shipment until they are unloaded in the port of
consignment
3. The kinds of averages are:
3.1 Simple or Particular which is an expense incurred or damage suffered which has
not inured to the common benefit and profit of all persons interested in the vessel
and its cargo. The effect is that no reimbursement is allowed. Examples of particular
averages are: (a) 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; (b) 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; (c)
180
181
The losses suffered by the merchandise loaded on deck, except in coastwise
navigation, if the marine ordinances allow it; (d) 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; (e) The necessary
expenses on arrival at a port, in order to make repairs or secure provisions; (f) 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; (g) The victuals and wages of the
crew while the vessel is in quarantine; (h) 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; (i) 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.182
3.2 General/Gross which is an expense or damages suffered deliberately in order to

save the vessel, its cargo or both from a real and known risk. It is the deliverance
from an immediate peril, by a common sacrifice, that constitutes the essence of
general average. The effect is that the person who incurred the damage/expense can
ask reimbursement from those who benefited, which of course, may include the ship
owner. Examples of 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: (a) The
goods are cash or 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; (b) 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; (c) 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; (d)
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; (e)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; (e) The expenses caused in order to float a vessel intentionally stranded for
the purpose of saying it; (f) The damage caused to the vessel which had to be opened,
scuttled or broken in order to save the cargo; (g) 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; (h) 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; (i) 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;
182
(j) 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; (k) The expenses of the
liquidation of the average.183
3.3 Other general averages: (a) 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. If, on the
contrary, the merchandise transferred should be saved and the vessel should be lost,
no liability may be demanded of the salvage. 184 (b) 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.185
3.3 The requisites of a General Average are: (a) there must be a common danger,
meaning that the ship and cargo are subject to the same danger and that danger
arises from accidents of the sea, dispositions of the authorities or faults of men,
provided that the circumstances producing the peril should be ascertained and
imminent (b) for the common safety, part of the vessel or the cargo or both is
sacrificed deliberately (c) from the expenses or damages caused follows the
successful saving of the vessel and cargo (d) the expenses or damages should have
been incurred or inflicted after taking legal steps and authority.186 In summary: The
general average must: (a) deliberately incurred (b) intended to save vessel and
cargo (c) real and known risk to which the shipper and the carrier must be exposed to
(d) success in saving the vessel and the remaining cargo. Note that if notwithstanding
the jettison of merchandise, breakage of masts, ropes, and equipment, the vessel
shall be lost running the same risk, no contribution whatsoever by jettison of gross
average shall be proper. The owners of the goods saved shall not be liable for
indemnification of those jettisoned, lost or damaged. 187
3.4 The formalities for incurring gross average: (a) There must be an
assembly of the sailing mate and other officers with the captain including those with
interests in the cargo (b) There must be a resolution of the captain (c)The resolution
shall be entered in the log book, with the reasons and motives and the votes for and
against the resolution (d)The minutes shall be signed by the parties (e) Within 24
st
hours upon arrival at the 1 port the captain makes, he shall deliver 1 copy of these
minutes to the maritime judicial authority thereat.188
3.5 The Jason Clause or Rule D, York-Antwerp Rules, which is an international
183
184
185
186
A. Magsaysay, Inc. v. Agan, G.R. No. L-6393 [January 31, 1955]
187
188
Articles 813-814, Code of Commerce
system of rules, providing among others, for liquidation and payment of averages,
provides that the rights to contribution in general average shall not be affected,
though the event which gave rise to the sacrifice or expenditure may have been due
to the fault of one of the parties to the adventure. However, this shall not prejudice
any remedies which may be open against that party for such fault.
3.6 The distinctions between general or gross averages and simple or particular
averages are as follows: (a) In general or gross averages, both the ship and cargo are
subject to the same danger which is real and known, whereas in simple or particular
averages, there is no such common danger to both the vessel and the cargo; (b) In the
former, part of the vessel or of the cargo or both is sacrificed deliberately, whereas in
the latter, the expenses and damage caused to the vessel or to her cargo are neither
deliberately made nor subject to any legal step or authority; (c) In the former, from
the expenses or damage caused follows the successful saving of the vessel and her
cargo, whereas in the latter, the expenses or damages suffered have not inured to
such common benefit; (d) In the former, all the persons having an interest in the
vessel and cargo saved shall contribute to indemnify the expenses or damages caused,
whereas in the latter, the owner of the things which gave rise to the expenses or
suffered the damages shall bear the same.189 As when: Expenses incurred towards
refloating the vessel after it was intentionally run aground to save it and the cargo is
a general average. Compare with expenses incurred in refloating the vessel after it
accidentally ran aground in order to be able to proceed to its destination, which is a
particular average in the absence of imminent danger to the ship and cargo.
4. The general average is borne by all persons pro-rata having an interest in the
vessel and cargo therein at the time of the occurrence of the average shall
contribute.190
4.1 Included are lenders on bottomry and respondentia who shall suffer, in
proportion to their respective interest, the general average which may take place in
the goods on which the loan is made.191
4.2 Those entitled to receive the general average contribution are the owners of
the goods sacrificed. However, the following goods even if sacrificed are not covered:
(a) goods carried on deck, unless the rule, special law or customs allow the same (b)
goods that are not recorded on the books or records of the vessel, it being required
that insofar as the cartgo concerned that their existence on board be proven by a bill
of lading and those belonging to the vessel, by means of an inventory prepared before
189
Articles 809-815, Code of Commerce, Magsaysay vs. Agan, GR No. 6393, January 31,
1955
190
191
departure192, and (c) fuel for the vessel if there is more than sufficient fuel for the
voyage.193
4.3 The claims for payment of averages shall not be admitted if they do not exceed
5% of the interest which the claimant may have on the vessel or in the cargo if it be a
gross average or 1% of the goods damaged if it be a particular average, deducting in
both cases the expenses of appraisal, unless there is an agreement to the contrary.194
4.4 The extent of liability rule cannot be applied in determining liability when
there is negligence as common carriers cannot limit their liability for injury or loss
caused by its own negligence. Thus negligence must first be determined before
applying the extent of liability rule.195
5. The order of jettison of the captains shall be in the following order: (a) those
which are on deck, beginning with those which embarrass the maneuver or damage
the vessel, preferring, if possible, the heaviest ones with least utility and value, then
(b) those which are below upper deck, always beginning with those of greatest weight
and smallest value, to the amount and number absolutely indispensable. 196
6. If, after the vessel has been saved from the risk which gave rise to the jettison,
it should be lost through another accident taking place during the voyage, the goods
saved and existing from the first risk shall continue to be liable to contribution by
reason of the gross average according to their value in the condition in which they
may be found, deducting the expenses incurred in saving them.197
ARRIVALS UNDER STRESS
1. An Arrival Under Stress is the 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: (a) lack of provisions, except if the failure to take the
necessary provisions was due to the carriers fault like when it was not able to stow
them properly or that there was a failure to adequately determine what was required
(b) well-founded fear of seizure of privateers or pirates, except when the risk of
privateers or pirates is well-known (c) by reason of any accident of the sea disabling it
to navigate except defect in vessel was due to captains fault in failing to properly
repair, rig, equip or prepare the vessel or some erroneous order of the captain or
when malice, negligence, want of foresight, or lack of skill on the part of the captain
exists in the act causing the damage.198
192
Articles 816 and 855, Code of Commerce
193
Rule IX, York-Antwerp Rules
194
195
American Home Assurance v. Court of Appeals, G.R. No. 94149 [May 5, 1992]
196
197
198
Article 819-820, Code of Commerce
2. The significance of determining whether the arrival is under stress or not is
because the same is a deviation. Hence, if it will not constitute an arrival under stress
it is an improper deviation and liability will ensue for the damages caused to the
cargoes by such arrival under stress.
2.1 The rule is that the expenses of an arrival under stress shall always be for the
account of the ship owner of 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 captain shall be jointly liable. 199
2.2 If in order to make repairs to the vessel or because there is a danger that the
cargo may suffer damages, it should be necessary to unload, the captain may request
authorization from a competent judge or court for the removal, and carry it out with
the knowledge of the person interested in the cargo, or his representative if there be
any. In a foreign court, it shall be the duty of the Philippine consul where there is one
to give authorization. In the first case, the expenses will be for the account of the
ship agent or owner, and in the second case, they shall be chargeable to the owners of
the cargo for whose benefit the act was performed. If the unloading be done for both
reasons, the expenses shall be divided proportionately between the value of the
vessel and that of the cargo.200
2.3 The custody of the cargo that is unloaded shall be entrusted to the captain who
shall be responsible for the same, except in cases of force majeure. 201
2.4 If the entire cargo or part thereof should appear to be damaged, or there is an
imminent danger of its being damaged, the captain may request of a competent
judge, court or consul, the sale of all or part of the goods.202
3. The formalities for arrival under stress: (a) assembly of the officers
including all interested parties (b) drafting and entering in the log book the proper
minutes, which shall be signed by all (c) entry in the log book of the objections and
protests of the persons interested in the cargo
4. The captain has the duty to continue the voyage without delay after the cause
of the arrival under stress has ceased. Otherwise, he shall be liable for damages
caused by the delay.
4.1 If the cause for arrival under stress should have been the fear of enemies,
privateers, or pirates, a deliberation and resolution in a meeting of the officers of the
199
200
201
202
vessel and persons interested in the cargo who may be present shall precede the
departure.203
COLLISIONS
1. A Collision refers to the impact of two vessels both of which are moving.
1.1 Allision refers to the striking of a moving vessel against one that is stationary.
1.2 Note though that a shipowner or ship agent can be held liable even if his vessel
did not hit or collide with another as Article 831 makes the owner of a third vessel
liable if it forced a vessel to hit another.
1.3 There are three zones in collision: (a) the first zone refers to all the time up to
the moment when the risk of collision may be said to have begun-no rule applies as
each vessel is free to navigate without reference to the movement of another vessel
(b) the second zone refers to the time between the moment when risk of collision
begins and the moment it becomes a practical certainty, and (c) the third zone covers
the time of actual contact. If during the third zone, the sailing vessel changed course
to port in order to avoid, if possible, the collision, the act may be said to be done in
extremis, and even if wrong, the sailing vessel is not responsible for the result. 204
1.4 The applicable law is Book Three of the Code of Commerce on collisions 205, not
Article 2176 of the Civil Code on quasi-delict. This notwithstanding, liability in
collision cases are still negligence based and courts will be required to determine the
negligence of the parties to impose liability as Article 829 of the Code of Commerce
specifically provides that the civil action of the owner against the person causing the
injury as well as criminal liabilities, which may be proper, are reserved. In addition,
while the Philippines has not yet acceded to the International Regulations for
Preventing Collisions at Sea,206they are being utilized by most of our trading partners
that personnel of Philippine vessels are required to know and compelled to follow
them.
1.5 Causes of Collision and the Legal Effects:
Cause Effect
203
204
A, Urrutia & Co v. Baco River Plantation Co., No. 7675 [March 25, 1913]
205
Articles 826 to 839
206
COLREGS
Due to the fault, negligence or lack of The shipowner shall be liable for the
skill of the captain or the losses and damages
complement of the vessel207
Due to the fault of both vessels208 Each vessel shall suffer its own losses,
but as regards the owners of the
cargoes, both vessels shall be jointly
and severally liable
Where it cannot be determined which Each vessel shall suffer its own losses,
of the 2 vessels is at fault209 and both shall also be solidarily
responsible for the losses and
damages caused to their cargoes
Collision due to a fortuitous event or Each vessel shall bear its own
force majeure210 damages
A vessel which is properly anchored The vessel run into shall suffer its
and moored may collide with those own damages and expenses
nearby by reason of a storm or other as they are considered as a particular
average of the vessel run into
cause of force majeure211
Where 2 vessels collide with each The owner of the 3rd vessel causing
other without their fault but by the collision shall be liable for the
reason of the fault of a 3rd vessel212 losses and damages, the captain
thereof being civilly liable to the
owner
1.6 In addition, when a vessel that is run into sinks immediately, as well as that which,
having been obliged to make port to repair the damages caused by a collision, is lost during
the voyage or is obliged to be stranded in order to be saved, it shall be presumed as lost be
reason of collision.213
207
208
209
210
211
212
213
1.7 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 they shall have a right to be indemnified by the pilots, without
prejudice to the criminal liability which the latter may incur.214
2. Rules to determine negligence:
2.1 When 2 vessels are about to enter a port, the farther one must allow the
nearer to enter first; if they collide, the fault is presumed to be imputable to the one
who arrived later, unless it can be proved that there was no fault on his part
2.2 When 2 vessels meet, the smaller should give the right of way to the larger one
2.3 A vessel leaving port should leave the way clear for another which may be
entering the same port
2.4 The vessel which leaves later is presumed to have collided against one which
has left earlier
2.5 There is also a presumption against the vessel which sets sail at night
2.6 The presumption also works against the vessel with spread sails which collides
with another which is at anchor, and cannot move, even when the crew of the latter
has received word to lift anchor, when there was not sufficient time to do so or there
was fear of a greater damage or other legitimate reason
2.7 The vessel which is not properly moored or does not observe the proper
distances, has the presumption against itself.
2.8 The vessel which is moored at a place not used for the purpose, or which is
improperly moored or does not have sufficient cables, or which has been left without
watch, has also against itself the presumption
2.9 The same rule applies to those vessels which do not have buoys to indicate the
location of its anchors to prevent damage to these vessels which may approach it
3. Classes and Effects of Collisions: (a) Fortuitous when the vessels collide
with each other though fortuitous event or force majeure . Each vessel and each
cargo shall bear its own damages or a vessel which is properly anchored and moored
may collide with those nearby by reason of a storm or other cause of force majeure
vessel run into suffers its own damages (b)Culpable when the collision is due to the
fault, negligence or lack of skill of the captain or the complement of the vessel
owner of the vessel at fault shall be liable for the losses and damages or due to fault
of both vessels each vessel suffers its own losses regardless of degree of fault, hence
rules on contributory negligence does not apply, with regard to the owners of the
214
cargo, both vessels shall be jointly and severally liable even if their cause of actions
may be different or 2 vessels may collide with each other without their fault but by
reason of the fault of a 3 rd vessel owner of the 3rd vessel will be liable (c) Inscrutable
where it cannot be determined which of the 2 vessels is at fault each vessel
suffers its own losses and damages; both will be solidarily liable for losses and
damages caused to their cargoes. Hence the effect is that you treat it as a culpable
collision.
3.1 The doctrines of contributory negligence and last clear chance are not applicable.
Article 827 of the Code of Commerce holds that if both vessels were negligently operated, it
does not matter if the other has the last clear chance of avoiding injury because each must
suffer its own damage.215This applies although the negligence on the part of the mate of the
incoming vessel preceded the negligence on the part of the mate of the outgoing vessel by an
appreciable interval of time, the first vessel cannot on that account be absolved from
liability.216
4. A maritime protest is necessary as the action for recovery of losses and damages
arising from a collision 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.217
4.1 However, with respect to damages caused to persons or to the cargo, the absence of a
protest may not prejudice the persons interested who were not on board or were not in a
condition to make known their wishes.218
5. The civil liability incurred by ship owners in case of a collision shall be understood as
limited to the value of the vessel with all its appurtenances and the freightage earned during
the voyage.219
6. Should a collision between Philippine vessels take place in foreign waters, or if having
taken place in the open seas, and the vessels should make foreign port, the Consul of the
Republic of the Philippines in said port shall hold a summary investigation of the accident,
forwarding proceedings to the Secretary of the Department of Foreign Affairs for continuation
and conclusion.220
SHIPWRECKS
1. A Shipwreck is a 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 which
215
C.B. Williams v. Teodoro Yangco, No. 8325 [March 10, 1914]
216
The Government of the Philippine Islands v. Philippine Steamship Co. Inc., No. 18957
[January 16, 1925]
217
218
219
220
renders the ship incapable of navigation or when the boat sinks or is abandoned or
capsizes.
1.1 Note that there is no need for it to be wrecked.
2. A Derelict is a ship or cargo which is abandoned or deserted at sea by those

who are in charge of it, without any hope of recovering it, or without any intention of
returning it. If those in charge of the property left it with the intention of finally
leaving it, it is a derelict and the change of their intention and an attempt to return
to it will not change its nature.
3. A shipwreck or a derelict can give rise to salvage or the 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 peril, or such property is recovered from
actual peril or loss, in cases of shipwrecks, derelict or recapture.
3.1 Where a ship and its cargo are saved together, the salvage allowance should be
charged against the ship and cargo in proportion to their respective values, the same
as in general averages and neither is liable for the salvage due from the other. Where
a personal action is brought by the salvor against the owner of the ship, the liability
of the latter is limited to such part of the salvage compensation due for the entire
service as is proportionate to the value of the ship.
3.2 The elements of a valid salvage: (a) a marine peril- it being essential that the
property saved was in danger of being lost and such danger be real though not
necessarily immediate (b)service voluntarily rendered when not required as an
existing duty or from special contract (3)success, in whole or in part, or that the
services rendered contributed to such success
4. The owner is entitled to the delivery of the salvaged vessel or things once he
pays, or gives a bond to secure, the expenses incurred in relation to the salvage and
the reward.
4.1 In case no claim is made within three (3) months from the publication of the
salvage made, the things saved shall be sold at public auction, and its proceeds to be
applied in the following order of priority: (1) expenses of custody, conservation,
advertisement, auction, taxes and duties; (2) expenses of salvage; (3) salvage reward
(not exceeding 50% of net amount); and (4) remaining balance to the owner.
4.2 In case no owners claims the deposited balance, half thereof shall go to the
salvor and the other half to the National Government.221
5. The salvage reward is divided as among the shipowner, captain and crew who
effected the salvage as follows: The owner shall be entitled to 50% of the salvage
reward, while the captain and the crew shall get 25% each, respectively. The 25%
221
Sections 4, 7, 11, Act No. 2616
reward of the crew shall be apportioned among them on the basis of their salaries in
the absence of an agreement.222
6. 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. The
Salvage Act, giving salvors of human life a fair share or remuneration offered to
salvors of the vessel, refers to a situation where both lives and property were
simultaneously imperiled and both are rescued at the same time.
7. Do not confuse with a Towage Contract , which is one whereby one vessel pulls
another from one place to another for compensation. It is a contract for services, not
a contract of carriage.
7.1 The distinction between salvage and towage is of importance to the crew of
the salvaging ship; if the contract for towage is in fact towage, then the crew does
not have any interest or rights with the remuneration pursuant to the contract. But if
it is of a salvage nature, the crew of the salvaging ship is entitled to salvage, and can
look to the salvaged vessel for its share.
7.2 If all the elements are present, the salvor takes possession and may retain
possession until he is paid. In towage, there is no possessory lien, there is only an
action for the sum of money.
8. Illustrations:
8.1 M/V Cindy was floating helplessly in the open sea due to engine trouble. The
weather was fair and the sea was calm. Captain X of the M/V Pauleen answered the
distress signal of M/V Cindy and towed the latter to the nearest port with the consent
of its captain and crew. Y, the owner of M/V Pauleen, waived any compensation for
the service rendered. X demanded payment, contending that the law entitles him to
a 25% reward from the successful salvage.Is X entitled to compensation? Explain
briefly. No, Captain X is not entitled to any compensation. The instant case involves
an implied contract of towage, not salvage, because M/V Cindy was not really
exposed to a marine peril and was not abandoned by its captain and crew. In a
contract of towage, only the owner of the towing vessel is entitled to remuneration.
Since Y, the owner of M/V Pauleen, waived this right, Captain X is not entitled to any
compensation from the towage.
8.2 M/V Julia, an inter-island cargo ship, suddenly had an explosion in the engine
room that caused an irreparable leakage at the bottom portion of the ship. The ship
was gradually and hopelessly sinking so Captain X declared abandonment of the vessel
and all its cargo. Captain Y of M/V Gladys, which was just a few kilometres away,
rushed to the scene to rescue Captain X and his crew who were boarded on their
222
Section 13, Act No. 2616
lifeboats. Captain Y then told Captain X that his crew would be willing to save
whatever goods on deck they could manage to rescue, provided they would be paid
2/3 of their value. Left with no other alternative, Captain X agreed to the proposal.
Using its sophisticated equipment, Captain Y and his crew were able to save three (3)
BMW cars owned by Z on the deck of M/V Julia before it finally went down to the
bottom of the sea.(a) As legal counsel of Z, what advice will you give to your client in
relation to the salvage or assistance reward? Explain briefly. I will strongly advise Z
not to pay 2/3 of the value of the cars saved. Any agreement on the reward for
salvage or assistance may be impugned where the amount demanded was clearly
exhorbitant and was agreed under compulsion because of the danger existing at the
time. Such reward may be equitably reduced. 223 (b) Assuming that Z assails the
validity of the agreement, how will the reward for salvage or assistance be
determined? Explain briefly. The amount of the salvage reward will have to be fixed
by the Regional Trial Court (RTC) of the province where the things salvaged are found,
taking into account the following factors: (1) salvage expenses incurred; (2) zeal
demonstrated (3) time employed; (4) services rendered; (5) excessive expenses
occasioned; (6) number of persons who aided; (7) exposure to danger; (8) that which
menaced the things salvaged; and (9) value of the salvaged things after deducting
expenses224 (c) Assuming that Captain X and his crew also assisted in salvaging the
cargo, are they entitled to share in the salvage or assistance reward? Explain briefly.
No, Captain X and his crew are not entitled to any reward for salvage or assistance
rendered by them. They are the agent and servants of the shipowner and as such, it
is their duty and obligation to assist in saving the vessel and its cargo 225 (d) Assuming
that the RTC finally awarded P1,000,000 as reward for salvage or assistance, who will
share in the amount, and how much will each receive? The salvage or assistance
reward of P1,000,000 shall be apportioned as follows: P500,000 (50%) to the
shipowner, P250,000 (25%) to Captain Y, and P250,000 (25%) to the crew who will
divide it in proportion to their salaries in the absence of any agreement. 226
SPECIAL CONTRACTS IN MARITIME COMMERCE
CHARTER PARTY
1. A Charter Party is a contract whereby the owner of a vessel lets a part thereof
and/or his complement and crew to a person named as a charterer which contract
can be for a specific time, known as a time charter or for a specific voyage, known as
a voyage charter.
1.1 There are 2 kinds of charter parties: (a)contract of affreightment involves the
use of shipping space or vessels leased by the owner in part or as a whole, to carry
goods for others. Here the vessel is still a common carrier (b)charter by demise or
223
224
225
226
bareboat charter the whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its navigation, including
the master and the crew, who are his servants. The vessel in this case becomes a
private carrier.
BOTTOMRY OR RESPONDENTIA
1. Loans on Bottomry or Respondentia are contracts of loan whereby the ship

owner borrows money from a lender at an unusually high rate of interest whereby the
ability of the lender to recover depends on the safe return of the vessel. If the vessel
is lost, the contract is extinguished.
1.1 A loan on bottomry is a contract in the nature of a mortgage, by which the

owner of the ship borrows money for the use, equipment and repair of the vessel for a
definite term, and pledges the ship as a security for its repayment, with maritime or
extraordinary interest on account of the maritime risks to be borne by the lender, it
being stipulated that if the ship be lost in the course of the specific voyage or during
the limited time, by any of the perils enumerated in the contract, the lender shall
also lose his money
1.2 A loan on respondentia is one made on the goods 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 the
contract. The lender must be paid his principal and interest, though the ship perishes,
provided that the goods are saved.
CARRIAGE OF GOODS BY SEA ACT
PRELIMINARIES
1. Was originally Public Act No. 521 as passed by the Congress of the USA on April
16, 1936 and subsequently adopted by the Philippine Commonwealth on October 22,
1936 as Commonwealth Act No. 65.
2. Since the objective of the law is bring our laws on cargo covered by bills of
lading by vessels engaged in foreign trade in harmony with the rest of the
international shipping community, once a vessel is engaged in foreign trade, referring
to contracts for the carriage of goods by sea to and from Philippine ports, the law
should be applied regardless of the destination of the vessel. 227 It applies up to the
final port of destination even if the transhipment was made on an inter-island
vessel.228
227
Chua Kuy v. Everett Steamship Corp. 50 O.G. 159 [May 27, 1953]
228
Sea Land Service, Inc. v. Intermediate Appellate Court, 153 SCRA 552
2.1 Note however that the when Article 1753 of the Civil Code was held to apply, it
would mean that a vessel coming to the Philippines would be subject to a higher
standard of care, while that destined for a foreign port would be subject to due
diligence under COGSA.229
2.2 Accordingly, Article 1753 regarding the applicability of the law of the country
to which the goods are shipped in case of loss, damage or deterioration or Article
1766, as to the applicability of the Code of Commerce shall be limited to domestic
carriage of goods over water. In the same case, cargo shipped from New York, USA
aboard with freight prepaid for Cebu where the carrier transhipped the cargo on a
domestic vessel from Manila to Cebu, COGSA was held to apply.230
2.3 Notwithstanding that the Civil Code applies to common carriers and COGSA
applies only to foreign trade, when parties to a contract of private carriage stipulate
to apply the Civil Code or COGSA, they do not apply ex propio vigore or of their own
force but rather as mere terms of a contract. This means that in case of dispute, they
are simple contractual terms which call out for judicial interpretation. This is a
paramount clause.
3. The degree of diligence required is due diligence before and at the beginning
of the voyage to: (a) make the ship seaworthy (b) properly man, equip and supply the
ship, and (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.231
3.1 Whenever loss or damage arises from unseaworthiness, the burden of proving
the exercise of due diligence is on the carrier and neither shall the carrier or ship be
liable unless it is caused by want of due diligence on its part to make the ship
seaworthy.
4. The immunities can be grouped into three categories: (a) overwhelming outside
forces, i.e. acts of war, acts of public enemies, arrest of princess, quarantines,
strikes, lockouts, riots and civil commotions, (b) overwhelming natural forces, i.e.
perils of the sea or acts of God, and (c) faults of the shipper, i.e. act or omission of
the shipper or his agents, wastage in bulk or weight, losses due to inherent vice,
insufficiency of packing, insufficiency of marking and latent defects.232
5. To establish a prima facie case of liability against the carrier, the shipper has
the burden of proof that the cargo was received by the carrier in good condition and
that it was damaged upon delivery by the carrier at its destination.
229
American President Lines, Ltd. v. Klepper, G.R. No. 16571 [November 29, 1960]
230
American Insurance Co. vs. Compania Maritima, 21 SCRA 998
231
Section 3. (1) COGSA
232
Section 4 (2) COGSA
5.1 The bill of lading is prima facie evidence of receipt of the goods as described
therein and creates a rebuttable presumption that the goods were delivered in good
condition.
5.2 Once the shipper has made his prima facie case, the carrier has the burden of
proving that it exercised due diligence to prevent the damage and the loss was
occasioned by one of the excepting causes.
6. The term carriage of goods covers the period from the time the goods are
loaded to the time they are discharged.233
6.1 This is the period within which the carrier is required to exercise due diligence.
7. The maximum liability of the carrier is $500 per package or per customary
freight unit, or its equivalent in other currency, unless the shipper or owner declares
a greater value. The liability of the carrier for the loss of the goods is limited to
$500.00 even if the bill of lading indicated the amount stated in the letter of credit
obtained by the buyer, because it is not a declaration of the value of the goods for the
purposes of the bill of lading. 234 A stipulation in the bill of lading limiting the liability
of the vessel to $500 per package does not apply if the nature and value of the goods
have been inserted in the bill of lading.235
7.1 The parties, however, may stipulate a lesser amount in the bill of lading.
7.2 In no event will the carrier be liable for an amount more than the damage
actually sustained.
7.3 Neither will the carrier nor the ship be liable 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. 236
7.4 Note the use of the term package defines the extent of liability as a container
van can be considered as a single package unless the contents and the number of
packages or units are disclosed. When the goods being shipped are packed in cartons
placed in container supplied by the carrier and the number of cartons is disclosed in
the shipping documents, it is the number of cartons and not of the containers that
should be used in computing the liability of the carrier for the loss of the goods, as it
is the cartons that constitute the packages.237
233
Section 1 (e) COGSA
234
Belgian Overseas Chartering & Shipping N.V. v. Philippine First Insurance Company, Inc.,
383 SCRA 23
235
Aboitiz Shipping Corporation v. Court of Appeals, 188 SCRA 387
236
Section 4. (5) COGSA
237
Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, 150 SCRA 464
8. Notice as to damage on the goods should be given upon receipt of the goods,
unless such damage is not apparent or externally visible in which case notice should
be given within three (3) days from receipt of the goods.
8.1 No notice is required when the state of the goods has at the time of receipt
been the subject of a joint survey inspection.
8.2 When there is a failure to comply with a bill of lading provision that a notice of
claim must be given by the consignee to the carrier within 30 days from receipt of the
cargo but the action is nevertheless filed within one (1) year from delivery, the action
was held to be properly brought as the clause was deemed to be null and void for
being contrary to COGSA.238
9. The carrier and the ship shall be discharged from liability in respect to loss or
damage unless suit is brought within one (1) year after delivery of the goods or date
when the goods should have been delivered. Note thought that failure to give notice
does not bar the filing of the suit for loss or damage to the goods. 239 Failure to file
notice of loss does not bar an action against the carrier if the action was filed within
one year.240
9.1 Loss is defined as a situation where no delivery at all was made 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. It however includes damages by
reason of unreasonable delay in the transportation so that if the goods are lost or
damaged by reason of the delay, the carrier is liable.241
9.2 Loss does not include a situation where there is delivery but is made to the
wrong person. Hence,the prescriptive period will not apply to cases of misdelivery of
the goods or delivery to wrong person. What will apply is either the Civil Code
provision prescribing ten (10) years for breach of a written contract or four (4) years
for quasi-delict.242
9.3 An action under the Carriage of Goods by Sea Act must be filed within one year
from the date the last item was delivered to the consignee.243
9.4 The period is counted from the date of the delivery of the goods. If no delivery
was made, from the date when the goods should have been delivered. To illustrate
the latter, if the carrier arrived on November 2, 1962 and left on November 4, 1962
without delivering the cargo, it was on the latter date that the carrier had the
238
EE Elser Inc. vs. Court of Appeals, L-6517, November 29, 1954
239
Section 3(6) Par. 4, CA 65
240
Sea Land Service, Inc. v. Intermediate Appellate Court, 153 SCRA 552
241
Tan Liao vs. American President Lines Ltd., L-7280, January 20, 1956
242
Ang vs. American Steamship Agencies, Inc., 19 SCRA 123
243
Maritime Agencies & Services, Inc. v. Court of Appeals, 187 SCRA 346
opportunity to deliver the goods. The period then commenced to run on November 5,
1962 and expired on November 4, 1963.244
9.5 The period will not interrupted by a written extrajudicial demand or claim by
the consignee to the carrier as it has been held that the provisions of Article 1155
cannot be made to apply as its application would have the effect of extending the
period of prescription and would permit delays in the settlement of questions
affecting transportation contrary to the clear intent of the law.245 The provision in the
Civil Code that a written demand tolls the prescriptive period does not apply to the
COGSA cases, since matters affecting the transportation of goods by sea must be
decided as soon as possible.246
9.6 Where an insurer who was sued by the consignee of imported goods filed a
third party complaint against the carrying vessel more than a year after the delivery
of the goods, the third party complaint is barred by the one-year prescriptive period
under COGSA, as otherwise the prescriptive period can be avoided by the consignee
by filing a claim against the insurer.247
9.7 The one-year prescriptive period under COGSA is inapplicable to the action
filed by the importer of pipes and fitting which arrived in a damaged condition against
the insurance company which insured the pipes and fittings, because the action is
based on a contract of insurance.248
9.8 The prescriptive period for an action against a broker is ten years and not one
year under the Carriage of Goods by Sea Act, since the broker is not a carrier,
charterer or holder of the bill of lading.249
9.9 The period will be interrupted when: (a) Action has been filed in court; or (b)
Express agreement that extrajudicial claim or demand for damages will suspend the
running of the prescriptive period as the parties may agree to extend the one-year
period to file a case under COGSA.250
9.10 Note that when the action has been filed in court, there is jurisprudence
applying Section 49 of Act 190 which provides that If, in an action commenced, in
due time, a judgment for the plaintiff be reversed, or if the plaintiff fails otherwise
than upon the merits, and at the time limited for the commencement of such action,
has, at the date of such reversal or failure, expired, the plaintiff, or, if he dies, the
cause of action survives, his representatives may commence a new action within one
244
Rizal Surety & Insurance Company vs. Macondray & Company, Inc., 22 SCRA 902
245
The Yek Tong Fire & Marine Insurance Co. vs. American President Lines, 103 Phil 1125,
1992 Bar
246
Dole Philippines, Inc. v. Maritime Company of the Philippines 148 SCRA 118
247
Filipino Merchant Insurance Co., Inc. v. Alejandro, 145 SCRA 42
248
Mayer Steel Pipe Corporation v. Court of Appeals, 274 SCRA 432
249
Reyna Brokerage Inc. v. Philippine Home Assurance Corporation, 202 SCRA 564
250
Universal Shipping Lines, Inc. v. Intermediate Appellate Court, 188 SCRA 170
year after such date, and this provision shall apply to any claim asserted in any
pleading by a defendant.251
10. Illustrations:
10.1 Certain imported items were sold to Y from abroad on the agreement that Y
would first pay the price under a bank draft before the bill of lading would be given
to him by the bank for presentation to Z, common carrier. X failed to pay and so the
seller from abroad indorsed the bill of lading to X. However, Y was able to secure a
bank guaranty in favor of Z, and on the strength of this document the Bureau of
Customs delivered the goods to Y on August 10, 2006. X filed an action against Z for
the wrongful delivery on October 1, 2007. Z filed a motion to dismiss on the ground
that the action was filed beyond the 1-year prescriptive period.No, the action has not
prescribed. The 1-year prescriptive period for loss or damage to goods contemplates
actions due to loss or damage of goods while the same are in transit with the carrier.
Misdelivery of the goods is not covered by the said prescriptive period because there
was in fact no loss or damage to the goods when they were transported. X has 10
years within which to file an action for breach of written contract, or 4 years for
quasi-delict.(Ang vs. American Steamship Agencies, Inc., 19 SCRA 123)
10.2 Goods were shipped from Japan to the Philippines on June 1, 2006 on board a
vessel owned by Y Shipping, Inc. Good were received by X, consignee, on June 15,
2006. Due to shortage in the delivery of the goods, X gave a written notice of such
shortgage to Y Shipping, Inc. on June 17, 2006. Negotiations for an amicable
settlement were pursued until the parties finally stopped on August 1, 2007, unable to
settle the claim. X filed an action for damages in court against Y Shipping, Inc. on
August 10, 2007. Yes, the action has prescribed and should be dismissed.
Extrajudicial claims and negotiations for amicable settlement do not interrupt the
running of the 1-year prescriptive period, unless there is an agreement to that effect.
Since the goods were delivered to X on June 15, 2008, he has only until June 15, 2007
to file an action for damages on the goods against Y Shipping, Inc. When the case was
filed on August 10, 2007, the action has already prescribed. (Chua Kuy vs. Everette
Steamship Corporation, G.R. No. L-5554; The Yek Tong Fire & Marine Insurance Co.,
Ltd. vs. American President Lines, Inc., 103 Phil. 1125)
WARSAW CONVENTION
WHAT IS THE WARSAW CONVENTION
1. The Warsaw Convention refers to the convention for the Unification of Certain
Rules Relating International Carriage by Air which was signed in Warsaw, Poland on
251
F.H. Stevens & Co, Inc. vs. Norddeuscher Lloyd, 6 SCRA 180
October 12, 1929, and amended by the Hague Convention signed on September 28,
1955.
2. The Philippines is a party to the convention and it became applicable on

February 9, 1951.
2.1 However, it does not operate as an exclusive enumeration of instances for

declaring a carrier liable for breach of the contract of carriage or as an absolute limit
of the extent of that liability. It must not be construed to preclude the operation of
the Civil Code and other pertinent laws. It does not regulate, much less exempt, the
carrier from liability for damages for violating the rights of passengers under the
contract of carriage especially if wilful misconduct on the part of the carriers
employees is found or established.252
3. It applies to international air carriage or transportation.
3.1 Under the Convention there are two categories: (a) That where the place of
departure and place of destination are situated within the territories of two High
Contracting Parties regardless of whether or not there be a break in transportation or
transhipment, and (b) 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 the territory subject to the sovereignty, mandate or authority of
another power, even though the power is not party to the Convention.253
3.2 To illustrate: Plaintiffs purchased from TWA two tickets in Bangkok, Thailand
for LA-NY-Boston-St. Louis-Chicago. The domicile and place of business of TWA is
Kansas City, Missouri, USA. Plaintiffs left Manila via PAL to LA. From LA, they boarded
TWA to NY. Upon arrival in Boston, the plaintiffs were missing four of their luggages.
An eventual suit was filed in Manila against TWA, who moved to dismiss saying that
jurisdiction is not vested in the Manila court, which subsequently dismissed the action
applying the rule on venue as per the Warsaw Convention. Upon appeal, the dismissal
was reversed as the Convention was held inapplicable as the contract of
transportation was not an international one as LA, the place of departure and
Chicago, the place of destination are within the territory of the USA, neither does it
fall in the second type as there was no agreed stopping point in another territory.
3.3 An action for a violation of a contract of international transportation by air

must be brought, at the option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court of domicile of the carrier or of his
principal place of business or where he has a place of business through which the
contract has been made, or before the court at the place of destination.254
252
Philippine Airlines vs. Court of Appeals, 257 SCRA 33
253
Mapa vs. Court of Appeals, 275 SCRA 286
254
Section 28 (1) Warsaw Convention, Santos III vs. Northwest Orient Airlines, 210 SCRA 256
3.4 To illustrate: Northwest is a foreign corporation with principal office in
Minnesota, USA and licensed to do business in the Philippines. A Filipino resident
purchased a ticket in San Francisco for his flight from San Francisco to Manila via
Tokyo and back. Due to the cancellation of his confirmed reservation for the Tokyo to
Manila leg, he was waitlisted. He brings suit against Northwest in the Manila. The
court upon motion dismissed the action as it should have been brought in either the
USA, the carriers domicile, in Minnesota, USA, its principal place of business, San
Francisco, the place of business through which the contract was made or the place
destination.
AIR WAYBILL
1. An air waybill is a document serving as the prima facie evidence of the contract
of transportation and as the receipt of the goods carried by air carriers.
2. It has three (3) parts intended for the carrier, the consignor and the consignee
of the goods.
LIABILITY OF AN INTERNATIONAL AIR CARRIER
1. The carrier shall be liable for damages sustained in the event of death or bodily
injury suffered by a passenger on board the aircraft or in the course of embarkation
or disembarkation thereof, and of damage or loss of any checked baggage or any
goods during the transportation by air.
2. The following are the limited liability of the carrier under the convention:(a)
For each passenger 125,000 French francs; (b) For checked baggage and of goods
250 French francs per kilogram; (c) For objects that the passenger takes charge
himself 5,000 French francs per passenger.
2.1 The above limitations may be increased by agreement, but any provision
tending to relieve the carrier of its liability or to fix a lower limit shall be null and
void.
2.2 Provided, that the limitations shall not apply if the damage is caused by the
willful misconduct of the carrier or his agents.
2.3 Illustrations of wilful misconduct that would hold an airline liable for
compensatory, moral, and exemplary damages and attorneys fees: (a) Flight
attendant rudely placed a passenger with first class ticket in the economy section of
the airplane.255 (b) Flight attendant ousted an asian passenger from the plane and
substituted a caucasian passenger on his seat. 256 (c) Airline personnel subjected a
255
Northwest Airlines, Inc. v. Cuenca, 14 SCRA 1063
256
Air France v. Carrascoso, 18 SCRA 155
passenger to rude and barbaric treatment, calling him a monkey.257(d) Spouses and
child, all with confirmed and reconfirmed reservations, were placed on wait-list, with
only one making it on the scheduled flight and the two others were compelled to buy
again tickets from a different airline.258 (e) Loss of baggage due to carriers negligence
and tainted with bad faith by faking a retrieval receipt to bail itself out of having to
pay the passenger.259 (f) Where the passengers are upgraded from business class to
first class without their consent and would not be allowed to board unless they give in
to the upgrade.260
3. Illustrations:
3.1 X checked in two luggages containing advertising materials at the American

Airs ticket counter before boarding the aircraft with destination to Guam. Upon
arrival, the two luggages did not arrive with his flight. Xs business presentation to
his prospective clients was cancelled as a result. American Airways insisted that its
liability to the lost luggages is limited only to $600 ($20 x 30 kilos) as printed at the
back of the airline ticket. X contended that American Airways is guilty of wilful
misconduct in losing his luggages and so the limitation on the airlines liability does
not apply. Decide the controversy with reasons. The contention of American Airways
limiting its liability in case of lost luggages to $20 per kilo is in harmony with the
Warsaw Convention. The failure of the airline to deliver the luggages at the
designated time and place does not amount ipso fact to wilful misconduct. There
must be a showing that the acts complained of were impelled by an intention to
violate the law or in persistent disregard of ones right. It must be evidenced by a
flagrantly or shamefully wrong or improper conduct. Therefore, X is only entitled to
$600 ($20 x 30 kilos). (PanAm World Airways, Inc. vs. IAC, 164 SCRA 268)
3.2 X is a resident of the Philippines. USA Airways is a foreign corporation with

principal office in Seattle, U.S.A. and licensed to engage in business in the Philippines
with branch office in Manila. While X was vacationing in the U.S.A., he bought a
roundtrip ticket in the New York-based ticket outlet of USA Airways (New York[via
Tokyo]-Manila-New York). His airline ticket showed that his return flight (Manila-New
York) was left open. Upon his arrival in Tokyo, X was told that there was no
reservation for his Tokyo-Manila flight. X pleaded that his flight had been confirmed
and reconfirmed by the New York Office. X was waitlisted and was only able to
take the flight the following day. X then sued USA Airways in the Manila RTC. Will the
action for damages prosper? Explain briefly. No, the action will not prosper for lack
of jurisdiction of the Manila RTC. Being an international flight involving two (2) High
Contracting Parties (USA and Philippines) of the Warsaw Convention, its provision on
jurisdiction of actions for damages shall apply. Such being the case, the damage suit
can only be filed in the proper court of any of the following: (1) domicile of the
carrier; (2) principal office of the carrier; (3) place of business through which the
257
Zulueta v. Pan-Am, 43 SCRA 397
258
Zalamea v. Court of Appeals, 228 SCRA 23
259
PAL v. Court of Appeals, 207 SCRA 100
260
Cathay Pacific Airways, Ltd v. Vasquez, 399 SCRA 207
contract has been made; or (4) place of destination.It is clear that the domicile and
principal office of USA Airways are in Seattle, U.S.A., while the place of business
where the contract was made and the place of destination (round-trip) are in New
York, U.S.A. Therefore, the damage suit filed in the Manila RTC should be dismissed
for lack of jurisdiction.261
261
Santos III v. Northwest Orient Airlines, 210 SCRA 256

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CONSOLIDATED LECTURE NOTES ON TRANSPORTATION

1. Transportation defined: Generally speaking, it has been referred to as the

1.2 As a contract, it is one whereby a person, natural or juridical, obligates himself

1.3 It is also a contract whereby a certain person or association of persons obligate

HISTORICAL ORIGIN OF THE LAW ON TRANSPORTATION

LAWS ON TRANSPORTATION THAT HAVE APPLICATION IN THE PHILIPPINES

2.4 There is a clear distinction between operation and ownership of facilities to

PUBLIC SERVICE ACT

PURPOSE OF THE LAW

1.1 Hence, interested or qualified parties intending to operate as a public utility or

DEFINING A PUBLIC UTILITY

1. Simply, a public utility is a business or service engaged in regularly supplying

2.2 A public utility, on the other hand, is a business or service engaged in

CERTIFICATE OF PUBLIC CONVENIENCE AND CERTIFICATE OF CONVENIENCE AND

1. A certificate of public convenience is any authorization to operate public

1.2 Legislative franchise distinguished from a certificate of public convenience -A

2. A certificate of public convenience is a mere license or a privilege and being

3. The grant of a certificate of public convenience or a certificate of public

RULES OBSERVED IN THE GRANT OF CERTIFICATES OF PUBLIC

3. Protection of Investment Rule is likewise considered as one of the primary

REGULATION OF PUBLIC UTILITIES

2.4 Determinative factors that should be considered in determining just and

COMMON CARRIER DEFINED

1. A common carrier defined: They are persons, corporations, firms or

1.2 Engaged in the business is deemed to cover operations whether regular or

2. When a customs broker undertakes to deliver the goods for pecuniary

3. A common carrier is required to obtain a certificate of public

4. Distinguishing a common carrier:

DEGREE OF DILIGENCE REQUIRED OF A COMMON CARRIER

1. Regardless of whether the object are goods or passengers, a common carrier

2. The failure to exercise the required degree of diligence is a breach of the

2.1 If loss, destruction or deterioration of the goods occurs or death or physical

1. As far as goods, a common carrier is responsible for its loss, destruction or

2. The list of exceptions is an exclusive list. They are:

5.1 Without death or injury, no presumption of negligence will arise.

PROHIBITED AND ALLOWABLE STIPULATIONS IN A CONTRACT OF CARRIAGE

1. The following or similar stipulations shall be considered unreasonable, unjust

2.5 Notwithstanding an agreement limiting liability in relation to vigilance over the

3. In a contract for the carriage of passengers, there can be no stipulation

WHEN THE CONTRACT AND EXERCISE OF DILIGENCE BEGINS AND ENDS

2. In a contract for the carriage of passengers- it commences the moment the

2.3 It is the duty of carriers of passengers to stop their conveyances for a

3. Prior to perfection of the contract of carriage of passengers, there is the

RECOVERABLE DAMAGES AND PENALTIES

1. Damages may be recovered as provided for by the provisions on damages as

1.7 Generally exemplary damages will be adjudged against a common carrier

APPLICABILITY OF OTHER LAWS

OTHER RELATED ISSUES

2.1 An airline ticket providing the carriage of successive air carriers is to be

3. Passengers Baggage is deemed to include whatever articles a passenger usually

OVERLAND TRANSPORTATION AND BILLS OF LADING

1. Definition of overland transportation- the transport on land and on small bodies

1.1 If it involves transport on sea, it will be referred to as maritime admiralty

2. The provisions of Articles 352-379 of the Code of Commerce involves

2.1 Commercial contracts involving common carriers shall be governed primarily by

2.2 Commercial contracts involving private carriers shall be governed primarily by

3.1 The transportation of persons or news will be deemed commercial only if it is

3.2 A contract of air transportation may be regarded as commercial since it is