NOTES IN TRANSPORTATION LAW Atty.

Zarah Villanueva-Castro (FEU / San Beda)

GOVERNING LAWS Land Transportation 1. Common Carriers 1.1. New Civil Code (NCC) primary 1.2. Code of Commerce suppletory 2. Private Carriers 2.1. Object is a merchandise 2.1.1. Code of Commerce primary 2.1.2. NCC suppletory 2.2. Object is non-commercial 2.2.1. Law on deposit if object is property 2.2.2. Law on contracts if passenger Transportation by Sea 1. Coastwise 1.1. NCC primary 1.2. Code of Commerce suppletory 1.3. Carriage of Goods by Sea Act (COGSA) does not apply even if the parties expressly provide for it 2. Philippine port to foreign ports law of the country of destination 3. Foreign ports to Philippine ports 3.1. NCC primary 3.2. Code of Commerce 3.3. COGSA 3.4. Philippine laws still apply even if the collision actually takes place in foreign waters. Air Transportation 1. Domestic NCC; Code of Commerce 2. International Warsaw Convention COMMON CARRIERS A person, corporation, firm or association, 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 (Art. 1732 NCC) Art. 1732 makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (sideline). It also avoids distinction between offering transportation service on a regular or scheduled basis, and on an occasional, episodic or unscheduled basis. Neither does it distinguish between a carrier offering its services to the general public (general community or population) and one who offers services only from a narrow segment of the population. A person or entity is a common carrier even if he did not secure a Certificate of Public Convenience (De Guzman vs. CA, 168 SCRA 612) It does not provide that the transportation should be by motor vehicle. Hence, a grantee of pipeline concession under the Petroleum Act is considered a common carrier (First Phil. Industrial vs. CA, supra) One is a common carrier even if he has no fixed and publicly known route, maintains no terminals, and issues no tickets (Asia Lighterage Shipping vs. CA GR No. 147246, August 19, 2003) A common carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel, provided the charter is limited to the ship only, as in the case of a time or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise, that a common carrier becomes private (Planters Products vs. CA, 226 SCRA 476) A travel agency is not a common carrier. Its services include procuring tickets and facilitating travel permits or visas as well as booking customers for tours (Crisostomo vs. CA, GR No. 138334, Aug. 25, 2003)

Distinctions between a Common and a Private Carrier: COMMON CARRIER Holds himself out for all people indiscriminately Extraordinary diligence is required Subject to State regulation There is a presumption of fault or negligence Exempting circumstances are proof of extraordinary diligence and Art. 1734 NCC PRIVATE CARRIER Contracts with particular individuals or groups only Only ordinary diligence is required Not subject to State regulation No presumption of fault or negligence Exempting circumstance is fortuitous event

Tests: 1. He must be engaged in the business of carrying goods for others as a public employment, and must hold himself out as ready to engage in transportation of goods for persons generally as a business and not as a casual occupation; 2. He must undertake to carry goods of a kind to which his business is confined; 3. He must undertake to carry by the method by which his business is conducted and over his established roads; and 4. The transportation must be for hire (First Phil. Industrial vs. CA, 300 SCRA 661) Characteristics:

Parties may not agree on limiting the carriers liability except when provided by law

Governed by law on common carriers

Parties may even exempt carriers liability, provided it is not contrary to law, morals, good customs, public order or public policy Governed by law on obligations and contracts

5.

The transfer, sale, lease or assignment of the privilege granted is valid between the contracting parties but not upon the public or third persons (Gelisan vs. Alday, 152 SCRA 388)

Registered Owner Rule A registered owner of a vehicle (even if not used for public service) is the lawful operator insofar as the public and third persons are concerned; consequently, it is directly and primarily responsible for the consequences of its operation. 1. In contemplation of the law, the owner/operator of record is the employer of the driver, the actual operator and employer being considered as merely its agent (Equitable Leasing Corp. vs. Suyom, GR No. 143360. Sept. 5, 2002) The registered owner cannot escape responsibility by proving that a third person is the actual and real owner. He is liable to the injured party subject to his right of recourse against the transferee or buyer. a. The registered owner is liable even if the vehicle was leased to another (BA Finance Corp. vs. CA, 215 SCRA 715) b. It would be absurd to hold liable the owner of a stolen vehicle for an accident caused by the person who stole the vehicle (Duavit vs. CA, 173 SCRA 490)

Exceptions to kabit system: When neither of the parties to the kabit system is being held liable for damages. When the case arose from the negligence of another vehicle in using the public road to whom no representation or misrepresntation as regards the ownership and operation of passenger jeepney was made. When the riding public was not bothered or inconvenienced at the very least by the illegal arrangement. (Lim vs. CA, 373 SCRA 394) Boundary System (2005 Bar Exam) The driver pays for the gasoline consumed and does not receive a fixed wage but gets only the excess of the receipt of the fares collected by him over the amount he has agreed to pay to the owner of the vehicle The owner cannot escape liability: 1. The owner is subsidiarily liable as employer in accordance with Art. 103 RPC 2. From the viewpoint of labor laws, he is an employee, being entitled to all privileges going along with the employer-employee relationship 3. From the viewpoint of the NCC, the driver is a lessee because he pays a fixed amount of rental for his use of the vehicle 4. From the viewpoint of the law on common carriers, he is an employee of the operator for purpose of the latters liability to passengers

2.

Kabit System A system whereby a person who has been granted a certificate of public convenience allows other persons who own motor vehicles to operate under such license, for a fee or a percentage of such earnings. It is void under Art. 1409 NCC. Effects: 1. The thrust of the law in enjoining the kabit system is to identify the person upon whom responsibility may be fixed with the end in view of protecting the riding public 2. The registered owner is primarily liable for all the consequences of the operations of the carrier. 3. The registered owner cannot recover from the actual owner and the latter cannot obtain transfer of the vehicle to himself, both being in pari delicto (Teja Marketing vs. IAC, 148 SCRA 347) 4. Both the registered owner and the actual owner are solidarily liable with the driver (Zamboanga Tranportation Co. vs. CA, 30 SCRA 717)

Arrastre Operator The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and a warehouseman. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator. Hence, the duty of the arrastre operator to take care of the goods that are in its custody and to deliver them in good condition to the consignee also devolves upon the common carrier. Thus, the arrastre operator and the common carrier are liable in solidum for the proper delivery of the goods to the consignee (Eastern Shipping Lines v. CA, 234 SCRA 78)

TOWAGE ARRASTRE

A vessel is hired to bring another vessel to another place A contract for unloading of goods from a vessel. Services are not maritime. They are in fact no different from those of a depositary or warehouseman. Loading and unloading of coastwise vessels calling at the port

the consignee. However, the parties may agree to limit the liability of carrier (Lu Do vs. Binamira, 101 Phil. 120) Defenses 1. Flood, storm, earthquake, lighting, or other natural disaster or calamity.(Caso Fortuito/Force Majeure) 2. Act of public enemy in war, whether international or civil 3. Act or omission of shipper or owner of goods 4. Character of goods or defects in packing or in containers. 5. Order or act of competent authority (Art. 1734) 6. Stipulation limiting liability of carrier (Arts. 1744, 1448, 1749, 1750) Caso Fortuito/Force Majeure 1. Must be proximate and only cause of loss 2. Carrier must exercise due diligence to prevent or minimize the loss before, during or after the disaster (Art. 1739) 3. Carrier not in delay in transporting the goods (Art. 1740) Fire may not be considered a natural disaster (Eastern Shipping vs. IAC, 150 SCRA 463) Very rough seas and stormy weather were not caso fortuito, but normal occurences that an ocean-going vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas would encounter as a matter of routine (Eastern Shipping vs, CA, 196 SCRA 570)

STEVEDORING

I. CARRIAGE OF GOODS Extraordinary Diligence (1997, 2001, 2002 Bar Exams) Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all circumstances of each case (Art. 1733, NCC) Presumption of Negligence 1. If the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently (Art. 1735) 2. Mere proof of the delivery of goods in good order to a common carrier and their arrival in bad order at their destination makes for a prima facie case against the carrier (Coastwise Lighterage Corp. vs. CA, 245 SCRA 796) 3. The court need not make an express finding of fault or negligence, the law imposes liability upon common carriers, as long as it is shown that: a. There is a contract between the shipper and common carrier b. Loss or deterioration took place during the existence of contract Duration of Liability Commencement: from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation Termination: actual or constructive delivery by the carrier to the consignee or to the person who has the right to receive them (Art. 1736) Liability remains: 1. Even when goods are temporarily unloaded or stored in transit unless the shipper or owner has made use of the right of stoppage in transitu (Art. 1737) 2. And when goods are stored in the carriers warehouse at the place of destination until the consignee has been advised of the arrival thereof and had reasonable opportunity thereafter to remove or dispose them (Art. 1738) 3. Delivery to the customs authorities is not delivery to

Acts of Public Enemy 1. Must be proximate and only cause of loss 2. Carrier must exercise due diligence to prevent or minimize loss before, during or after the act causing loss, of goods (Art. 1739) Contributory Negligence If shipper or owner merely contributed to the loss, the proximate cause thereof being the negligence of carrier, the carrier shall still be liable for damages, but such shall be equitably reduced (Art. 1741) Character of the Goods Even if damage caused by the inherent defect/character of goods, the common carrier must exercise due diligence to forestall or lessen loss (Art. 1742) Carrier who, knowing the fact of improper packing of the goods upon ordinary observation, still accepts the goods notwithstanding such condition is not relieved of liability for loss resulting therefrom (Southern Lines, Inc. v. CA, 4 SCRA 258) Order or Act of Public Authority Public authority must have power to issue the order (Art. 1743). Where the officer acts without legal process, the common carrier will be held liable.

Stipulation Limiting Liability of Carrier Common carrier and shipper may agree on carriers observance of diligence to a degree less than extraordinary, provided it be: 1. In writing, signed by shipper or owner; 2. Supported by a valuable consideration other than the service rendered by carriers; and 3. Reasonable, just and not contrary to public policy. (Art. 1744) Valid Stipulations: 1. Carrier's liability limited to the value of goods appearing in the bill of lading, unless the shipper or owner declares a greater value. (Art. 1749) 2. Fixing the sum to be recovered by the owner or shipper, if it is reasonable and just under the circumstances and has been fairly and freely agreed upon. (Art. 1750) 3. Limiting carriers liability for delay on account of strikes or riots. (Art. 1748) Invalid Stipulations: 1. Goods are transported at the risk of the owner or shipper; 2. Carrier will not be liable for any loss of goods; 3. Carrier need not observe any diligence in the custody of goods; 4. Carrier shall exercise a degree of diligence less than that of a good father of a family; 5. Carrier shall not be responsible for the acts or omissions of his or its employees; 6. Carriers liability for acts committed by thieves or robbers who do not act with grave or irresistible threat, violence or force is dispensed with or diminished; 7. Carrier not responsible for the loss of goods on account of defective condition of car, vehicle, ship or other equipment used in the contract of carriage. (Art. 1745) Effect of Delay If, without just cause, goods or (2) changes the contract limiting cannot be availed of 1747) (1) delays the transportation of the stipulated or usual route, the common carrier's liability in case of loss of goods (Art.

5. 6. 7. 8. 9.

Injurious to health Goods will be exposed to untoward danger like flood, capture by enemies and the like Goods like livestock will be exposed to diseases Strike Failure to tender goods in time

Duty to Deliver Goods Oft-Repeated Rule: In the absence of a special contract, a carrier is not an insurer against delay in transportation of goods Consequences of Delay: 1. A natural disaster shall not free carrier from responsibility (Art. 1740) 2. Contract limiting carrier's liability cannot be availed of in case of loss of goods (Art. 1747) 3. Excusable delays in carriage suspend, but do not generally terminate, the contract of carriage, and when the cause is removed, the master must proceed with the voyage and make delivery 4. During delay the vessel continues to be liable as a common carrier, not as a warehouseman, and remains duty bound to exercise extraordinary diligence 5. Payment of indemnity: a. Stipulated in bill of lading b. If no indemnity stipulated, then carrier shall be liable for damages incurred due to delay 6. Consignee may: a. Leave goods transported in the hands of carrier (Abandonment) advising him thereof in writing before their arrival at the point of destination. The carrier shall pay the full value of goods as if they had been lost or mislaid. b. If no abandonment was made indemnification shall not exceed the current price of goods at the time it should have been delivered II. CARRIAGE OF PASSENGERS Not Passengers: 1. One who has boarded by fraud, stealth or deceit 2. Rides any part of the vehicle unsuitable or dangerous or which he knows is not designated or intended for passengers 3. Remains on a carrier for an unreasonable length of time after he has been afforded every safe opportunity to alight Utmost Diligence A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances (Art. 1755) BAR QUESTION (Q): X, an 80-year old epileptic, boarded the S/S Tamaraw in Manila going to

Presumption despite stipulation Even when there is an agreement limiting the liability, the common carrier is disputably presumed to have been negligent in case of their loss. (Art. 1752) Grounds for valid refusal to accept goods: 1. Dangerous objects or substances including dynamites and other explosives 2. Unfit for transportation 3. Acceptance would result in overloading 4. Contrabands or illegal goods

Mindoro. To disembark, the passengers have to walk thru a gang plank. While negotiating the gang plank, X slipped and fell into the waters. X was saved from drowning, brought to a hospital but after a month, died from pneumonia. Except for X, all the passengers were able to walk thru the gang plank. What is the liability of the owner of S/S Tamaraw? SUGGESTED ANSWER (SA): The owner of S/S Tamaraw is liable for the death of X in failing to exercise utmost diligence in the safety of passengers. Evidently, the carrier did not take the necessary precautions in ensuring the safety of passengers in the boarding of and disembarking from the vessel. Unless shown to the contrary, a common carrier is presumed to have been negligen tin cases of death or injury to its passengers (Arts. 1755-1756, NCC). Since X has not completely disembarked yet, the obligation of the shipowner to exercise utmost diligence still then subsisted and he can still be held liable. Duration of Liability Commencement: From the moment the person who purchases the ticket (or token or card) presents himself at the proper place and in a proper manner to be transported with a bona fide intent to ride the coach (Vda. De Nunca vs. Manila Railroad Co., 13 SCRA 249) Termination: Until the passenger has, after reaching his destination, (1) safely alighted; or (2) had a reasonable opportunity to leave the carriers premises Liability remains: 1. Not only during the course of the trip, but for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage (LRTA vs. Navidad) 2. Includes reasonable time to remain on the premises to see after his baggage and prepare for his departure (La Mallorca vs. CA, 17 SCRA 739) 3. Extends to persons boarding the cars as well as to those alighting therefrom. It is the duty of common carriers to stop their conveyances a reasonable length of time to afford passengers an opportunity to enter (Dangwa Trans Co. vs. CA, 202 SCRA 574)

b.

2.

The cause of accident is better known to the carrier than the passenger; and c. The accident could not have happened if due care was exercised by the carrier The court need not make an express finding of fault or negligence of the common carrier to hold it liable

Liability for Acts of Employees 1. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the formers employees, although: a. Such employees may have acted beyond the scope of their authority or b. In violation of the orders of common carriers (Art. 1759) 2. Not a defense: a. Proof of exercise of diligence of a good father of a family in the selection and supervision of employees (Ibid) b. Cannot be eliminated or limited by stipulation, posting of notices, statements on the tickets or otherwise (Art. 1760) 3. Liability of carrier for the personal violence of its employees or agents upon its passengers extends only to those acts that the carrier could foresee or avoid through the exercise of the degree of diligence required. 4. Diligence in the selection and supervision of employees under Art. 2180 NCC cannot be interposed by the common carrier to prevent damages because the liability of the carriers arises from the breach of the contract of carriage. The defense under Art. 2180 is applicable to negligence in quasi-delicts (Del Prado v. Manila Electric Co., 52 Phil 900) Liability for Acts of Strangers or other Passengers 1. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other passengers or of strangers, if the common carriers employees, through the exercise of the diligence of a good father of a family could have prevented or stopped the act or omission (Art. 1763) 2. The carrier is liable when its personnel allowed a passenger to drive the vehicle causing it to collide with another vehicle resulting to the injuries suffered by the other passengers (MRR v. Ballesteros, 16 SCRA 641) Effect of Stipulation on Liability General Rule: Liability cannot be dispensed with or lessened by stipulation, posting of notices, statements on tickets or otherwise (Art. 1757) Exception: When a passenger is carried gratuitously, a stipulation limiting the common carriers liability for negligence is valid Exception to the exception: Willful acts or gross negligence (Art. 1758)

Presumption of Negligence 1. In case of death of or injury to passengers, common carriers are presumed to have been at fault or to have acted negligently (Art. 1756 NCC). This provision applies the doctrine of res ipsa loquitor for several reasons: a. The contract imposes on the carrier the obligation to transport the passengers safely, hence the burden of explaining should fall on the carrier;

Passengers Hand-carried Baggage 3. HAND-CARRIED (In custody of passengers or their employees) Necessary deposit Common carrier exercises diligence of a depositary (ordinary diligence) Governed by Arts. 1998 and 2000-2003 III. ACTIONS Causes of Action: 1. Culpa Contractual The liability of the carrier is not merely subsidiary or secondary but direct, immediate and primary. (Medina vs. Cresencia, 99 Phil. 506) Only the carrier is primarily liable and not the driver, because there is no privity between the driver and the passenger. No defense of due diligence in the selection and supervision of employees. (Art. 1759) 2. Culpa Aquiliana The carrier and driver are solidarily liable as joint tortfeasors. Defense of due diligence in the selection and supervision of employees is available. Except: maritime tort resulting in collision Culpa Delictual The driver is primarily liable. The carrier is subsidiarily liable only if the driver is convicted and declared insolvent (Art. 100 RPC) CHECKED-IN (In custody of the carrier) Considered as goods Requires extraordinary diligence Governed by Arts. 17331753

consignees) undertake specific responsibilities and assume stipulated obligations. A legal evidence of the contract between the shipper and the carrier. Its contents shall decide all disputes which may arise with regard to their execution and fulfillment. (Magellan Manufacturing v. CA, 201 SCRA 2021) In the absence of a bill of lading, their respective claims may be determined by legal proofs which each of the contracting parties may present in conformity with law.

Obligations of the Carrier 1. Duty to Accept Goods see notes on Common Carriers for ground for valid refusal to accept goods 2. Duty to Deliver Goods to (i) person indicated in bill of lading; or (ii) any person to whom bill of lading was validly transferred or negotiated 3. see notes on Common Carriers for effects of delay 4. Duty to exercise extraordinary diligence Right of Consignee to Abandon the Goods 1. Partial non-delivery, where goods are useless with others (Art. 363 Code of Commerce) 2. Goods rendered useless for sale or consumption for purposes for which they are properly destined (Art. 365) 3. In case of delay through the fault of carrier (Art. 371) Notice of Damage Condition precedent Damage apparent immediately upon delivery Damage not apparent within 24 hours from delivery (Art. 366) Prescriptive Period 1. Not provided by Art. 366, hence NCC applies 2. No bill of lading within 6 years 3. With bill of lading 10 years ART. 366 CODE OF COMMERCE Notice of damage is a condition precedent 24-hour period for nonapparent damage No prescriptive period provided. NCC applies Does not cover misdelivery or delay Extrajudicial demand tolls prescriptive period Parties can stipulate shorter period COGSA Notice of damage not a condition precedent 3-day period for nonapparent damage 1-year period Also does not cover misdelivery or delay Extrajudicial demand does not toll prescriptive period 1-year period cannot be shortened

3.

OVERLAND TRANSPORTATION Scope: 1. Domestic land and water/maritime transportation 2. Domestic air transportation Bill of lading Written acknowledgment of receipt of goods and agreement to transport them to a specific place to a person named or to his order. Note: It is not indispensable for the creation of a contract of carriage. The contract itself arises from the moment goods are delivered by the shipper to the carrier and the carrier agrees to carry them (Compania Maritima v. Insurance Company of North America, 12 SCRA 213) Functions: 1. A receipt for the goods shipped. 2. A contract which the three parties (shipper, carrier,

MARITIME LAW Characteristics: 1. Real a. Similar to transactions over real property with respect to effectivity against third persons which is done through registration b. Evidence of real nature is shown by (1) limitation of liability of agents to actual value of the vessel and freight money; and (2) right to retain cargo and embargo and detention of vessel (Luzon Stevedoring Corp v. CA, 156 SCRA 169) 2. Hypothecary Liability of owner of vessel is limited to the value of vessel (Doctrine of Limited Liability) I. DOCTRINE OF LIMITED LIABILITY

7.

May be made to be exempted from the following liabilities: a. Civil liability to third persons arising from the conduct of the captain in the vigilance over the goods b. Proportionate contribution of co-owners of the vessel to a common fund for the results of the acts of the captain referred to in Art. 587 Code of Commerce c. Civil liability incurred by the ship owner in case of collision

Admiralty Jurisdiction all actions in admiralty and maritime jurisdiction where the claim exceeds P300,000 or in Metro Manila, exceeds P400,000 the RTC has jurisdiction (Sec. 19(3) BP 129, as amended by RA 7691) II. VESSELS

No vessel, no liability The liability of ship owners is limited to the amount of interest in said vessel such that where vessel is entirely lost, the obligation is extinguished (Luzon Stevedoring v. Escano, 156 SCRA 169) Interest extends to: 1. Vessel itself 2. Equipments 3. Freightage 4. Insurance proceeds (Chua v. IAC, 166 SCRA 183) Exceptions: 1. Where injury or damage is due to ship owners fault 2. Vessel is insured 3. Claims under Workmens Compensation 4. Expenses for repair on vessel before loss 5. Vessel is not abandoned 6. Voyage is not maritime but only in a river or gulf Abandonment 1. Indispensable requirement before the shipowner or ship agent can enjoy the benefits of the limited liability principle. The only instance where such abandonment is dispensed with is when the vessel was entirely lost. 2. Only the ship owner and the ship agent can make an abandonment 3. What may be abandoned vessel 4. Instances: a. Civil liability from indemnities to third persons (Art. 587 Code of Commerce) b. Leakage of at least of contents of cargo containing liquids (Art. 687) c. Constructive loss of vessel (Sec. 138 Insurance Code) See notes on Overland Transportation for right of consignee to abandon goods 5. No procedure to be followed 6. No prescriptive period provided not estopped from invoking the same or do acts inconsistent with abandonment

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. Excluded are local and foreign military vessels, bancas and other watercrafts of less than 3 tons gross capacity and small watercrafts engaged in river and bay traffic.

Ownership 1. Acquisition a. Prescription (1) acquisition must appear in a written instrument, (2) which shall not produce any effect to third persons if not inscribed in the registry of vessels and (3) shall be acquired by possession in good faith, continued for 3 years, (4) with a just title duly recorded. (5) In the absence of any of these, continuous possession for 10 years shall be necessary to acquire ownership. b. Sale If made while it is on voyage the freightage which it earns from the time it receives its last cargo shall pertain entirely to the purchaser, and the payment of the crew and other persons who make up its complement shall be for his account. If made after vessel arrived at port of its destination freightage shall pertain to the vendor, and the payment of the crew and other individuals who make up its complement shall be for his account, unless the contrary is stipulated in either case. 2. Registration through the Maritime Industry Authority (MARINA)

Ships Manifest - Declaration of the entire cargo. The object is to furnish customs officers with a list to check

against, to inform the revenue officers what goods are brought into a port of the country on a vessel. Hence, the requirement that a vessel must carry a manifest is not complied with even if a bill of lading can be presented A bill of lading is just a declaration of a specific cargo rather than the entire cargo. It is issued as a matter of convenience by virtue of a contract.

IV. CHARTER PARTY Contract by which an entire ship, or some principal part thereof is let by the owner to another person for a specified time or use for the conveyance of goods, in consideration of the payment of freight (Caltex Phils. vs. Sulpicio Lines, 315 SCRA 709) LEASE If for a definite period, lessee cannot give up lease by paying a portion of the amount agreed upon If the leased property is sold to one who knows of the existence of the lease, the new owner must respect the lease CHARTER PARTY Charterer may rescind charter party by paying half of freightage agreed upon The new owner is not compelled to respect the charter party so long as he can load the vessel with his own cargo

III. PARTIES 1. 2. 3. 4. Ship-owners and ship agents Captains and masters of the vessel Officers and crew of the vessel Supercargoes

Shipowners and Ship Agents Liabilities: 1. Acts of the captain (Art. 618) 2. Contracts of the captain, whether authorized or not, to repair, equip and provision the vessel, provided that the amount claimed was invested for the benefit of the vessel (Art. 586) 3. Indemnities in favor of third persons which may arise from the conduct of the captain in the care of the goods which the vessel carried, as well as for the safety of the passengers transported 4. Damages to the goods loaded on the vessel without prejudice to their right to free themselves from liability by abandoning the vessel to the creditors (Art. 587) Notes: Liable jointly and severally Not liable for an obligation contracted by the captain in excess of the latters powers and privileges pertaining to him. However, if the amount claimed were used for the benefit of the vessel, the ship owner or ship agent is liable Captains and Masters of Vessels Nature of Position 1. General agent of the ship-owner 2. Technical director of the vessel 3. Representative of the government of the country under whose flag he navigates Qualifications: 1. Filipino citizen 2. Legal capacity to contract 3. must have passed the required physical and mental examinations required for licensing him as such (Art. 609) Supercargoes - Persons who discharge administrative duties assigned to him by ship agent or shippers, keeping an account and record of transaction as required in the accounting book of the captain (Art. 649)

Classes: 1. Bareboat or Demise Charter Charterer provides crew, food and fuel. The charterer is liable as if he were the owner, except when such arises from the unworthiness of the vessel Owner pro hac vice a demise charterer, in spite of the fact that somebody else is the owner of the vessel, is treated as the owner of the chartered vessel, just for that one particular purpose only. Effect: charterer assumes customary rights and liabilities of the ship-owner to third persons and is held liable for the expense of the voyage and the wages of the seamen 2. Contract of Affreightment Owner leases the boat or part of it for the carriage of goods 1. Time charter vessel is chartered for a period of time or duration of voyage 2. Voyage or trip charter contract for hire of vessel for one or series of voyages BAREBOAT / DEMISE Charterer becomes liable to others caused by its negligence Charterer regarded as owner pro hac vice for the voyage Owner of vessel relinquishes possession, command and navigation to charterer Common carrier becomes private AFFREIGHTMENT Owner remains liable as carrier and must answer for any breach of duty Charterer is not regarded as owner Owner retains possession, command and navigation of the ship Common carrier remains as such

Freight Parties may fix the manner or form in which the charter price shall be satisfied Lay days period when vessel will be delayed in the port for loading and unloading Primage bonus to be paid to the captain after the successful voyage Deadfreight where the charterer failed to occupy the leased portion of the vessel, he may thereby be made liable by the ship-owner Demurrage sum due, by express contract, for the detention of the vessel, in loading and unloading, beyond the time allowed in the contract of affreightment, and to any other improper detention or delay beyond the time set for loading V. BOTTOMRY AND RESPONDENTIA Bottomry loan made by ship-owner or ship agent guaranteed by the vessel itself and repayable upon arrival of vessel at destination (Art. 719) Respondentia loan, taken on security of the cargo laden on a vessel, and repayable upon safe arrival of cargo at destination (Art. 719) Common Requisites: 1. Borrows money for use, equipment or repair of vessel 2. For a definite term 3. With extraordinary interest called premium 4. Secured by pledge of vessel or portion thereof (in bottomry) or goods (respondentia) 5. Loan repayment depends or conditioned on the safe arrival of the vessel (bottomry) or goods (respondentia) 6. Obligation to repay extinguished if vessel is lost due to specific marine perils in the course or voyage within a limited time, or if pledged goods are lost Formal Requirements: 1. By means of public instrument 2. Policy signed by the contracting parties and the broker taking part therein 3. Private instrument Who may contract: Bottomry ship owner or ship agent. Outside of the residence of the owners, the captain. Respondentia only the owner of the cargo, except: (i) on the portion of the vessel he owns, provided no money has been previously borrowed on the whole vessel, nor exists any other kind of lien or obligation chargeable against her; (ii) when he is permitted to do so, he must necessarily state what interest he has in the vessel

Exceptions to the Hypothecary Nature: 1. Loss due to inherent defect 2. Loss due to the barratry on the part of the captain 3. Loss due to the fault of malice of the borrower 4. Vessel was engaged in contraband 5. Cargo loaded on the vessel be different in form that agreed upon When Bottomry/Respondentia Regarded as Simple Loan 1. Lender loaned an amount larger than the value of the object due to fraudulent means employed by borrower (Art. 726) 2. Full amount of the loan is not used for the cargo or given on the goods if all of them could not have been loaded, the balance will be considered a simple loan (Art. 727) 3. If the effects on which the money is taken is not subjected to any risk (Art. 729) BOTTOMRY/ RESPONDENTIA May or may not have a collateral Collateral may be any property Absolutely repayable Need not be in writing but interest shall not be due unless expressly stipulated in writing Need not be registered to bind third persons Loss of collateral does not extinguish the loan ORDINARY LOAN Must have collateral Must be vessel or cargo subject to maritime risks Depends upon the safe arrival of the collateral at the port Must be in writing

Must be recorded in the registry of vessels of the port of registry of the vessel Loss of collateral extinguishes the same

VI. ACCIDENTS 1. 2. 3. 4. Averages Collision Arrival Under Stress Shipwreck

Protest written statement by the master of a vessel or any authorized officer, attested by proper officer or a notary, to the effect that damages has been suffered by the ship. Required in the following instances: 1. Vessel makes an arrival under stress 2. Vessel is shipwrecked 3. Vessel has gone through hurricane or the captain has suffered damages or averages 4. Maritime collisions

Note: Should be made within 24 hours following the arrival of the vessel at the first port. Upon arrival at the place of destination, the captain shall ratify the protest within 24 hours. Averages 1. An extra-ordinary or accidental expense incurred during the voyage in order to preserve the cargo, vessel or both; and 2. All damages or deterioration suffered by the vessel from departure to the port of destination, and to the cargo from the port of loading to the port consignment (Art. 806) Classes of Averages 1. Particular or Simple Average (i) Damage or expenses caused to the vessel or cargo that did not inure to common benefit, and (ii) borne by respective owners (Art. 809) 2. Gross or General Average 2.1. Damage or expenses deliberately caused in order to save the vessel, its cargo or both from real and known risk (Art. 811) All the persons having an interest in the vessel and the cargo therein at the time of the occurrence of the average shall contribute to satisfy this average (Art. 812) Requisites: 2.3.1. Common danger present 2.3.2. Arising from accidents of sea, disposition of authority 2.3.3. Peril imminent and ascertained 2.3.4. Part of vessel or cargo deliberately sacrificed 2.3.5. Intended to save vessel or cargo or both 2.3.6. Successful saving of vessel or cargo 2.3.7. Proper legal steps and authority taken Procedure for recovery: There must be an assembly of the sailing mate and other officers with the captain including those with interests in the cargo Resolution of the captain The resolution must be entered in the logbook, with reasons and motives and the votes for and against the resolution 2.4.5. The minutes shall be signed by the parties 2.4.6. The captain shall deliver a copy of the minutes to the maritime judicial authority of the first port he may make, within 24 hours after his arrival, and to ratify it immediately under oath (Art. 813-814) York-Antwerp Rules: Liability for contribution on averages: 1. Deck cargo is permitted in coastwise shipping but prohibited in overseas shipping 2. Overseas trade must always contribute to general average, but should the same be jettisoned, it would

3.

not be entitled to reimbursement because there is violation of the Y-A Rules Coastwise shipping must always contribute to general average and if jettisoned would be entitled to reimbursement

Collision Impact of two vessels both of which are moving Allision Impact between a moving vessel and a stationary one Zones of Time in the Collision of vessels: 1. First zone - all time up to the moment when risk of collision begins 2. Second zone - time between moment when risk of collision begins and moment it becomes a practical certainty; 3. Third zone - time when collision is certain and time of impact Error in Extremis sudden movement made by a faultless vessel during the third zone of collision with another vessel which is at fault during the second zone. Even if such sudden movement is wrong, no responsibility will fall on said faultless vessel (Urrutia and Co. v. Baco River Plantation, 26 Phil. 632) Cases Covered: 1. One vessel at fault such vessel is liable for damage caused to innocent vessel as well as damages suffered by the owners of cargo of both vessels 2. Both vessels at fault each vessel must bear its own loss, but the shippers of both vessels may go against the ship owners who will be solidarily liable 3. Vessel at fault not known Doctrine of Inscrutable Fault (1997 Bar Exam) In case of collision where it cannot be determined which between the two vessels was at fault, both vessels bear their respective damage, but both should be solidarily liable for damage to the cargo of both vessels. 4. Third vessel at fault same rule as (1) 5. Fortuitous event each bears its own loss Procedure: 1. Protest should be made within 24 hours before the competent authority at the point of collision or at the first port of arrival, if in the Philippines and to the Philippine consul, if the collision took place abroad (Art. 835) 2. Injuries to persons and damage to cargo of owners not on board on collision time need not be protested (Art. 836) Arrival under Stress Arrival of a vessel at a port of destination on account of lack of provision, well-founded fear of seizure,

pirates, or accidents of sea disabling navigation (Art. 819) When Not Lawful: 1. Lack of provisions due to negligence to carry according to usage and customs 2. Risk of enemy not well known or manifest 3. Defect of vessel due to improper repair; and 4. Malice, negligence, lack of foresight or skill of captain (Art. 820) Who Bears Expenses: 1. The ship-owner or ship agent except for damages caused by the shippers by reason of a lawful arrival (Art. 821) 2. The captain shall be liable for damages caused by his delay, if after the cause of the arrival under stress has ceased, he continues the voyage (Art. 825) Procedure: 1. Captain determines during the voyage if there is well founded fear of seizure, privateers and other valid grounds 2. He shall then assemble the officers 3. He shall summon the persons interested in the cargo who may be present and who may attempt but without right to vote 4. The officers determine and agree if there is well founded reason after examining the circumstances. The captain shall have the deciding vote 5. The agreement shall be drafted and the proper minutes shall be signed and entered in the log book 6. Objections and protests shall likewise entered in the minutes

Derelict Ship or her cargo which is abandoned and deserted at sea by those who were in charge of it, without any hope of recovering it, or without any intention of returning to it Requisites for Salvage Award: 1. Valid object of salvage 2. Exposed to marine peril 3. Voluntary salvage services 4. Success in whole or in part, or that services contributed to success Rules on Salvage Award 1. Fixed by RTC in the absence of agreement or where the latter is excessive (Sec. 9) 2. If sold (no claim being made within 3 months from publication) a. Proceeds, after deducting expenses and the salvage claim, shall go to the owner b. If he does not claim it within 3 years, 50% of the said proceeds shall go to the salvors, and the other half to the government (Secs. 1112) 3. If a vessel is the salvor, the reward shall be distributed as follows: a. 50% to ship owner b. 25% to captain c. 25% to officers and crew in proportion to their salaries (Sec. 13) Persons Without Right to a Salvage Reward: 1. Crew of the vessel saved 2. Persons who commenced salvage in spite of opposition of the captain or his representative 3. Person who fails to deliver a salvaged vessel or cargo to the Collector of Customs (Sec. 3) Towage - contract whereby one vessel, usually motorized, pulls another from one place to another, for compensation. It is a contract for services rather than a contract of carriage. SALVAGE Governed by special law (Act No. 2616) Requires success, otherwise no payment Must be done with the consent of the captain/crewmen Vessel must be involved in an accident Fees distributed among crewmen Salvor takes possession and may retain possession until paid Court can reduce amount of renumeration if unconscionable TOWAGE Governed by NCC on contract of lease Success not required Only the consent of the tugboat owner is needed Vessel need not be involved in an accident Fees belong to the tugboat owner Tower has no possessory lien; only an action for sum of money Court cannot change amount in towage even if unconscionable

Shipwreck Denotes all types of loss/ wreck of a vessel at sea either by being swallowed up by the waves, by running against another vessel or thing at sea or on coast where the vessel is rendered incapable of navigation SALVAGE LAW (Act 2616) Salvage - Compensation allowed to persons by whose voluntary assistance a ship at sea or her cargo or both have been saved in whole or in part from an impending or actual peril, shipwrecks, derelicts or recapture - Services one person render to the owner of a ship or goods, by his own labor, preserving the goods or the ship which the owner or those entrusted with the care of them have either abandoned in distress at sea, or are unable to protect or secure

CARRIAGE OF GOODS BY SEA ACT (CA 65) Requisites: 1. Contracts for carriage of goods 2. By sea 3. To and from Philippine ports 4. In foreign trade Shipper guarantees at time of shipment the accuracy of marks, number quantity and weight as furnished by him. He shall indemnify the carrier against all loss, damages and expenses arising from inaccuracies in such particulars To recover loss or damage to cargo, notice and general nature thereof in writing must be given by the shipper or consignee to the carrier or his agent at the port of discharge or at the time of removal of the goods 1. If loss/damage not apparent within 3 days from delivery 2. May be endorsed upon receipt for the goods given by the person taking delivery thereof 3. Need not be given if the state of goods at the time of their receipt has been the subject of joint inspection Prescriptive Periods: 1. To give notice if loss or damage is apparent notice in writing must be given to carrier or agent at time of removal of goods by persons entitled to delivery. 2. To give notice if not apparent within 3 days from delivery. 3. To bring suits 1 year after delivery or when goods should have been delivered a suit must be filed (whether notice of loss/damage is given), otherwise prescribed. Stipulation reducing the 1 year period is null and void, but a written agreement to suspend it is valid (Maritime Company of the Philippines vs. CA, 164 SCRA 593) An extra-judicial demand does not suspend the period An insurer who is exercising its right of subrogation is also bound by the 1-year period (Fil. Merchants vs. Alejandro 145 SCRA 42). It does not apply to a claim against the insurer for the insurance proceeds. The claim against the insurer is based on contract that expires in 10 years (Mayer Steel Pipe Corp. vs. CA 274 SCRA 432) If there is no delivery in case of undelivered or lost cargo the one-year period starts to run from the day the vessel left port When interrupted Action is filed in court

Contrary agreement between parties 4. Delivery to the wrong person prescriptive period is (i) 10 years because there is a breach of contract, or (ii) 4 years for quasi-delict (Ang v. American SS Agencies (19 SCRA 631) Delay or late delivery are not the damage or loss contemplated under the COGSA. The goods are not actually lost or damaged. The applicable period is 10 years (Mitsui vs. CA 287 SCRA 366) Liability under COGSA: 1. Maximum of $500 per package or, if not shipped in packages, per customary freight unit (e.g. metric ton) 2. Nature and value of goods may be declared by shipper and inserted in bill of lading; declaration is prima facie evidence and not conclusive on carrier 3. Shipper and carrier may agree on another maximum amount, but not more than the amount of damage actually sustained No Liability under COGSA: 1. Nature or value of goods knowingly and fraudulently misstated by shipper 2. Damage resulted from dangerous nature of shipment loaded without consent of carrier 3. Unseaworthiness not due to negligence of carrier 4. Deviation was to save life or property at sea

SHIP MORTGAGE DECREE Purpose: To accelerate the growth and development of the shipping industry in the Philippines and to finance the acquisition, construction, purchase or initial operation of vessels Salient Features: Recognizes the creation of preferred mortgage that must be satisfied prior to all other claims and it allows for the arrest of the vessel which in effect treats the vessel itself as the defendant in an action Preferred Mortgage Lien - One constituted for the financing, acquisition, purchase, construction and initial operation of vessels under the provisions of PD 1521 Requisites 1. Recorded in MARINA 2. Affidavit of good faith 3. Mortgage does not stipulate the waiver of preferred status of claim 4. Mortgage must be valid 5. Mortgage includes the whole vessel of domestic ownership If Vessel is of Foreign Ownership it will be recognized if: 1. Mortgage, hypothecation or similar charge has been duly and validly executed in

2.

accordance with the laws of the country under which the vessel is documented Same has been duly registered in accordance with such laws in a public register either at the port of registry of vessel or at a central office

3.

Delay in the transportation luggage or goods (Art. 19)

of

passengers,

Claims Preferred Over a Preferred Mortgage Lien: 1. Taxes 2. Judicial costs 3. Pilotage and tonnage charges and other sea and port charges 4. Salaries of depositaries and keepers of vessel 5. Captain and crews wages 6. General average 7. Salvage 8. Prior maritime liens 9. Damages arising out of tort 10. Prior preferred mortgage lien

Note: The Hague Protocol amended the Warsaw Convention by removing the provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely (Art. 20(1)) (Alitalia v. IAC, 192 SCRA 9) Action for Damages 1. Condition precedent 1.1. Written complaint (protest) must me made: 1.1.1. Damage to baggage 3 days from receipt 1.1.2. Damage to goods 7 days from receipt 1.1.3. Delay 14 days from receipt 1.2. Otherwise the action is barred except in case of fraud on the part of the carrier (Art. 26) 2. Jurisdiction governed by domestic law 3. Venue at the option of the plaintiff: 3.1. Court of domicile of carrier 3.2. Its principal place of business 3.3. Where it has a place of business through which the contract has been made 3.4. Place of destination (Art. 28) Note: The above enumeration cannot be waived, but are jurisdictional in nature (Santos III vs. Northwest Orient Airlines 210 SCRA 256) 4. Prescriptive period 2 years from: 4.1. Arrival at the destination 4.2. Expected arrival 4.3. Date the transportation stopped (Art. 29) 5. Rule in case of various successive carriers 5.1. In case of transportation of passengers action is filed only against the carrier in which the accident or delay occurred unless there is an agreement whereby the first carrier assumed liability for the whole journey. 5.2. Transportation of baggage or goods 5.2.1. Consignor can file an action against the first carrier and the carrier in which the damage occurred 5.2.2. Consignee can file an action against the last carrier and the carrier in which the damage occurred 5.2.3. These carriers are jointly and severally liable (Art. 30) Limit of Liability 1. Passengers $10,000 to $100,000 except: agreement to a higher limit 2. Checked-in baggage $20 / kg except: consigner declared its value and paid a supplementary sum, carrier liable to not more than the declared sum unless it proves the sum is greater than its actual value 3. Hand-carry baggage $400 to $1000 / passenger (Art. 22 as amended by Guatemala Protocol,

WARSAW CONVENTION OF 1929 Scope: 1. International transport by air 2. Transport of persons, baggage, or goods Note: Warsaw Convention prevails over the Civil Code, Rules of Court and all laws in the Philippines since an international law prevails over general law. International Transportation by Air any transportation in which the place of departure and the place of destination are situated either: 1. Within the territories of two High Contracting Parties regardless of whether or not there be a break in the transportation or transshipment 2. Within the territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of another power, even though that power is not a party to the Convention (round trip) Note: Absence of agreement concerning stopping place transportation not deemed international for purposes of the WC When Not Applicable: 1. If there is willful misconduct on the part of the carriers employees (PAL v. CA, 257 SCRA 33). 2. When it contradicts public policy 3. If requirements under WC are not complied with Liability of Air Carriers 1. Death or injury of a passenger if the accident causing it took place on board the aircraft or in the course of its operations (Art. 17) 2. Destruction, loss or damage to any luggage or goods, if it took place during the carriage (Art. 18)

1971; Alitalia v. IAC, supra) An agreement relieving the carrier from liability or fixing a lower limit is null and void (Art. 23) Carrier not entitled to the foregoing limit if the damage is caused by his willful misconduct or default (Art. 25)

steamship line, ferries, and water craft, shipyard, ice-plant, electric light, heat and power or any public utility (Sec. 13(b) Commercial Act 146) A casual or incidental service devoid of public character and interest is not brought within the category (Luzon Stevedoring vs. PSC, 156 SCRA 169)

Special Rules on Liabilities of Airline Carriers: 1. In case of flight diversion due to bad weather or other circumstances beyond the pilots control, the relation between carrier and passenger continues until the latter has been landed at the port of destination and has left the carriers premises. The carrier should exercise extraordinary diligence in safeguarding the safety of its stranded passengers until they have reached their final destination (Philippine Airlines v. CA, 226 SCRA 423) 2. Even where overbooking of passengers is allowed as a commercial practice, the airline company would still be guilty of bad faith and still be liable for damages if it did not properly inform passenger that it could breach the contract of carriage even if they were confirmed passengers (Zalamea v. CA, 228 SCRA 23) An open-dated ticket constitutes a complete contract between the carrier and passenger. Hence, the airline company is liable if it refused to confirm a passengers flight reservation (Singson v. CA, 282 SCRA 149) An airline company which issued a confirmed ticket to a passenger covering successive trips on different airlines can be held liable for damages occasioned by bumping off by one of the successive airlines (Lufthansa German Airlines v. CA, 238 SCRA 290) An airline ticket providing that carriage by successive air carriers is to be regarded as a single operation is to make the issuing carrier liable for the tortuous conduct of the other carrier. A printed provision in the ticket limiting liability only to its own conduct is not enough to rebut that liability (KLM Royal Dutch Airlines v. CA, 65 SCRA 237)

CERTIFICATE OF PUBLIC CONVENIENCE No public service shall operate without having been issued a certificate of public convenience (no franchise is required by law, e.g. common carriers) or a certificate of public convenience and necessity (a prior franchise is required by law, e.g. telephone and other services) (Sec. 15 Comm. Act 146) The certificate constitutes neither a franchise nor a contract, confers no property right, and is a mere license or privilege. The holder of said certificate does not acquire a property right in the route covered thereby. Nor does it confer any property right, interest or interest in the public highways. Revocation of this certificate deprives him of no vested right. New and additional burdens, alteration of the certificate, or even revocation or annulment thereof is reserved to the State (Luque vs. Villegas, 30 SCRA 408) It is a property and has a considerable value and can be the subject of sale or attachment (CogeoCubao Operators vs. CA, 207 SCRA 343) Exceptions: 1. Warehouses 2. Animal drawn vehicles and bancas moved by oar or sail; tugboats 3. Airships, except for the fixing of maximum rates for fare and freight 4. Radio companies, except for rates fixing 5. Public services owned or operated by the government, except as to rates fixing 6. Ice plants 7. Public markets Requirements for granting certificate: 1. Citizen of the Philippines, or a corporation, etc. constituted and organized under the laws of the Philippines at least 60% of its stock or paid-up capital must belong entirely to citizens of the Philippines 2. Financially capable of undertaking the proposed service 3. Proof of public necessity, interest and convenience (KMU vs. Garcia, Jr., 239 SCRA 386) Grounds for revocation of certificate: 1. Where holder is a mere dummy 2. Where operator ceased operation and placed his buses on storage

3.

4.

5.

PUBLIC SERVICE ACT (CA 146, as amended) Public Service - Includes any person who may own, operate, manage, or control in the Philippines for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, traction railway, subway motor vehicle, steamboat, or

3.

Where operator totally abandons the service (Manzanal vs. Ausejo, 164 SCRA 36) WHEN NOT REQUIRED 1. Investigation of any matter concerning public service 2. Requiring operators to furnish safe, adequate and proper service 3. Requiring public services to pay expenses of investigation 4. Valuation of properties of public utilities 5. Examination and test of measuring appliances 6. Grant of special permits to make extra or special trips in territories specified in certificate 7. Uniform accounting system and furnishing of annual reports 8. Compelling compliance with the laws and regulations

NOTICE AND HEARING REQUIRED 1. Issuance of Certificate 2. Fixing of rates, tolls and charges 3. Setting up of standards and classifications 4. Establishment of rules to secure accuracy of all meters and all measuring appliances 5. Issuance of orders requiring establishment or maintenance of extension facilities 6. Revocation of modification of Certificate 7. Suspension of Certificate (except when it is necessary to avoid serious and irreparable damage or inconvenience to the public or private interest, in which case, a suspension not more than 30 days may be ordered prior to the hearing)