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TRANSPORTATION LAW AB

ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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Ver kav


PRELIMINARY CONSIDERATIONS

A. GOVERNING LAWS

1. New Civil Code (primary)

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

Art. 1753. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or
deterioration.

2. Code of Commerce
3. Warsaw Convention (Convention for the Unification of Certain Rules Relating
to the International Carriage by Air)
4. Carriage of Goods by Sea Act
5. Salvage Law
6. Public Service Act
7. Article XII, Section 11 (1987 Constitution)

B. CONCEPT OF PUBLIC UTILITY AND PUBLIC SERVICE

Public utility is a business or service engaged in regularly supplying the public
with some commodity or service of public consequence such as electricity, gas,
water, transportation, telephone or telegraph service. The term implies public use
and service. ALPHA PHI BETA

When 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.

The term "public service" includes every person that now or hereafter may own,
operate, manage, or control in the Philippines, for hire or compensation, with general
or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction
railway, sub-way motor vehicle, either for freight or passenger, or both with or without
fixed route and whether 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
railways, marine repair shop, [warehouse] 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 communications system, wire
or wireless broadcasting stations and other similar public services: Provided,
however, That a person engaged in agriculture, not otherwise a public service, who
owns a motor vehicle and uses it personally and/or enters into a special contract
whereby said motor vehicle is offered for hire or compensation to a third party or third
parties engaged in agriculture, not itself or themselves a public service, for operation
ALPHA PHI BETA ALPHA PHI BETA ALPHA PHI BETA ALPHA PHI BETA
SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
TRANSPORTATION LAW
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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by the latter for a limited time and for a specific purpose directly connected with the
cultivation of his or their farm, the transportation, processing, and marketing of
agricultural products of such third party or third parties shall not be considered as
operating a public service for the purposes of this Act. (Section 13, par. b, Public
Service Act)

The difference between an ordinary business and a public utility is that the latter,
being impressed with public interest, is subjected to greater regulation/monitoring by
the State. However, both are not proscribed from earning profits from the public.

C. CONSTITUTIONAL LIMITATIONS ON OPERATION OF PUBLIC
UTILITIES

No franchise, certificate, or any other form of authorization for the operation of a
public utility shall be granted except to citizens of the Philippines or to corporations or
associations organized under the laws of the Philippines at least sixty per centum of
whose capital is owned by such citizens, nor shall franchise, certificate, or
authorization be exclusive in character or for a longer period than fifty years. Neither
shall any such franchise or right be granted except under the condition that it shall be
subject to amendment, alteration, or repeal by the Congress when the common good
so requires. The State shall encourage equity participation in public utilities by the
general public. The participation of foreign investors in the governing body of any
public utility enterprise shall be limited to their proportionate share in its capital, and
all the executive and managing officers of such corporation or association must be
citizens of the Philippines. (Section 11, Article XII, 1987 Philippine Constitution)

The limit imposed by the constitution on foreign equity applies only to the operation of
a public utility and not to ownership of the facilities. The Constitution requires a
franchise for the operation of a public utility but it does not require a franchise before
one can own the facilities needed to operate a public utility. (Tatad vs. Garcia, Jr.).

D. REGULATORY AGENCIES

1. Department of Transportation and Communications other agencies are under
this department and it is the agency that issues certificates of public convenience for
operation of national railroad carriers
2. Land Transportation Franchising Regulatory Board (LTFRB) land
transportation
3. Land Transportation Office (LTO) registration of drivers and motor vehicles
4. Maritime Industry Authority (MARINA) water transportation
5. Philippine Coast Guard concerned with safety in water transportation
6. National Telecommunications Commission communication utilities and services,
radio communications systems, wire or wireless telephone and telegraph systems,
radio and television broadcasting systems and other similar public utilities.
7. Energy Regulatory Board (ERB) electric or power companies
8. National Water Resources Council water resources
9. Civil Aeronautics Board air transportation, particularly its economic aspects
10. Air Transportation Office undertakes the maintenance and operations of airports
and other similar facilities; registers aircrafts and other incidents concerning the same
and provides safety regulations in air transportation
11. Philippine Ports Authority wharves and ports ALPHA PHI BETA

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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E. CONCEPT OF FRANCHISE AND CERTIFICATE OF PUBLIC
CONVENIENCE

In Radio Communication of the Philippines, Inc. vs. National
Telecommunications Commission, a franchise was 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 regulation through the administrative agencies.

A certificate of public convenience is different from a certificate of public convenience
and necessity in that the former requires prior issuance of municipal franchise while
the latter does not.

Certificate of Public Convenience (CPC) Certificate of Public Convenience and
Necessity (CPCN)
An authorization issued by the appropriate
government agency for the operation of
public services for which no franchise,
either municipal or legislative, is required
by law, e.g., common carriers
An authorization issued by the appropriate
government agency for the operation of
public service for which a prior franchise is
required by law, e.g. telephone and other
services

CONDITIONS THAT MUST CONCUR IN THE GRANT OF CERTIFICATE OF
PUBLIC CONVENIENCE (AND NECESSITY):
1. Grantee must be a citizen of the Philippines or a corporation or entity 60 percent
of which is owned by such citizens; ALPHA PHI BETA
2. Grantee must have sufficient financial capability to undertake the service; and
3. Service will promote public interest and interest in a proper and suitable manner.
Note: The overriding principle still is public interest, necessity and convenience.





















TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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GENERAL CONCEPTS


A. CONTRACT OF TRANSPORTATION, IN GENERAL

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

The person who obligates himself to transport the goods or passengers may be a
common carrier or a private carrier.


B. PERFECTION

Contract of carriage of passengers
1. Contract to carry an agreement to carry a passenger at a future date. This
contract is consensual and is therefore perfected by mere consent.

2. Contract of carriage or of common carriage itself a real contract for not
until the facilities of the carrier are actually used can the carrier be said to have
already assumed the obligation of the carrier.

Carriage of goods
Where the carrier agrees to accept and transport the goods at a future date, such is
consensual.

However, by the act of delivery of the goods, that is, when the goods are
unconditionally placed in the possession and control of the carrier, and upon their
receipt by the carrier for transportation, the contract of carriage is perfected.

Aircraft
There is a perfected contract to carry passengers even if no tickets have been issued
to said passengers so long as there was already a meeting of the minds with respect
to the subject matter and the consideration. ALPHA PHI BETA

Buses, Jeepneys and Streetcars
Once a public utility bus or jeepney stops, it is in effect making a continuous offer to
riders. Hence, it is the duty of the drivers to stop their conveyances for a reasonable
length of time in order to afford passengers an opportunity to board and enter, and
they are liable for injuries suffered by boarding passengers resulting from the sudden
starting up of the carrier. Liability of the carrier is already based on a contract. It
follows that the passenger is deemed to be accepting the offer if he is already
attempting to board the conveyances and the contract of carriage is perfected from
that point. (Dangwa Transportation Co., Inc. vs. CA)

Trains
A person who wants to board a train in a railway station must purchase a ticket and
must present himself at the proper place and in the proper manner to be transported.
Such person must have a bona fide intention to use the facilities of the carrier,
possess sufficient fare with which to pay 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.


TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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C. COMMON CARRIER

1. STATUTORY DEFINITION

Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their services to the public.

2. DISTINGUISHED FROM PRIVATE CARRIER

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 goods for a fee, the person or corporation offering such
service is a private carrier.

Significance of classification: Common carrier = presumption of fault or
negligence

3. DISTINGUISHED FROM TOWAGE, ARRASTRE AND STEVEDORING

Towage a contract whereby one vessel, usually mo0torized, pulls another,
whether loaded or not with merchandise, from one place to another, for a
compensation.

One vessel is hired to bring another vessel to another place. It merely facilitates
the transport of goods or persons of the common carrier.

In maritime law, it refers to a service rendered to a vessel by towing for the mere
purpose of expediting her voyage without reference to any circumstances of
danger. Hence, it cannot be considered a common carrier. It is a contract of
services rather than a contract of carriage. ALPHA PHI BETA

Arrastre Service a contract for the unloading of goods from a vessel.

Functions include the following:
1. To receive, handle, care for, and deliver all merchandise imported and
exported, upon passing over government-owned wharves and piers in
the port; (depositary/ warehouseman)
2. To record and check all merchandise which may be delivered to said port
at shipside; and
3. To furnish light and water services and other incidental services in order
to undertake its arrastre service.

The legal relationship between the consignee and the arrastre operator is akin to that of a
depositor and warehouseman. The relationship between the consignee and the common carrier
is similar to that of the consignee and the arrastre operator. Since it is the duty of the arrastre
operator to take good care of the goods that are in its custody and to deliver them in good
condition to the consignee, such responsibility also devolves upon the carrier.

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

Towage, arrastre operations and stevedoring are not maritime in character.
They do not involve the functions of a common carrier.
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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4. TESTS TO DETERMINE COMMON CARRIER

In First Philippine Industrial Corp. vs. CA, the Supreme Court reiterated that
the tests for determining whether a party is a common carrier of goods are:

1. He must be engaged in the business of carrying goods for others as a
public employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation;
2. He must undertake to carry goods of the kind to which his business is
confined; ALPHA PHI BETA
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.

The true test of a common carrier is the carriage of goods or passengers,
provided it has space for all who opt to avail themselves of its transportation for a
fee. (National Steel Corp. vs. CA)

5. PARTIES TO THE CONTRACT OF CARRIAGE

Carriage of Passengers
1. Passenger one who travels in a public conveyance by virtue of a contract,
express or implied, with the carrier as to the payment of fare or that which is
accepted as an equivalent thereof.
2. Common Carrier

Carriage of Goods
1. Shipper the person who delivers the goods to the carrier for transportation.
2. Common Carrier
3. Consignee the person to whom the goods are to be delivered.

The consignee may be the shipper himself as in the case where the goods are to
be delivered to one of the branch offices of the shipper. However, the consignee
may be a third person who is not actually part of the contract. (Principle of
Relativity of Contracts) ALPHA PHI BETA

Nevertheless, the third-party consignee may still enforce the agreement as an
agent by virtue of the designation made by the shipper, or as a beneficiary who
accepted such stipulation in favor of a third party (stipulation pour autrui).

D. REGISTERED OWNER RULE AND KABIT SYSTEM

Registered Owner Rule: The registered owner of a certificate of public
convenience is liable to the public for the injuries or damages suffered by third
persons caused by the operation of said vehicle, even though the same had
been transferred to a third person.

Reason: It would be easy for him, by collusion with others or otherwise, to
transfer the responsibility by proving that a third person is the
actual and real owner. ALPHA PHI BETA

Kabit System a system or arrangement whereby a person who has been
granted a certificate of public convenience allows other persons who own motor
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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vehicles to operate under such license, sometimes for a fee or percentage of
such earnings. It is void and inexistent under Art. 1409, New Civil Code for being
contrary to public policy.

Persons who are parties to the Kabit system cannot invoke the same as against
each other either to enforce their legal agreement or to invoke the same to
escape liability. (Pari Delicto Rule)

The determining factor which negates the existence of Kabit System is the
possession of the franchise to operate and not the issuance of one SSS ID
Number for both bus lines. (Baliwag Transit vs. CA) ALPHA PHI BETA

Indeed to exempt from liability the owner of a public vehicle who operates it
under the boundary system on the ground that he is a mere lessor would be not
only to abet flagrant violations of the Public Service Law, but also to place the
riding public at the mercy of reckless and irresponsible drivers. (Spouses
Hernandez vs. Spouses Dolor)




































TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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OBLIGATIONS OF THE COMMON CARRIER IN A CONTRACT OF
CARRIAGE OF GOODS

A. VIGILANCE OVER THE GOODS

1. DUTY TO EXERCISE EXTRAORDINARY DILIGENCE

Art. 1733, Civil Code Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case.

A common carrier is required to faithfully comply with his obligation to deliver the
goods and to ferry the passenger to the point of destination. Compliance with
this obligation must be with the element of integrity in the sense that the goods
should be delivered in the same condition that they were received and to
transport the passengers without encountering any harm or loss.

Art. 363, Code of Commerce. Outside of the cases mentioned in the second
paragraph of Article 361, the carrier shall be obliged to deliver the goods shipped in
the same condition in which, according to the bill of lading, they were found at the
time they were received, without any damage or impairment, and failing to do so, to
pay the value which those not delivered may have at the point and at the time at
which their delivery should have been made.

If those not delivered form part of the goods transported, the consignee may refuse to
receive the latter, when he proves that he cannot make use of them independently of
the others. ALPHA PHI BETA

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

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

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

The same rule shall be applied to merchandise in bales or packages, separating
those parcels which appear sound.



TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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2. PRESUMPTION OF NEGLIGENCE

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

Reason: As to when and how goods were damaged in transit is a matter
peculiarly within the knowledge of the carrier and its employees.

In case of loss, damage or deterioration of goods, the court need not make an
express finding of fault or negligence of common carriers; the law imposes
liability upon common carriers, as long as it is shown that:
1. There exists a contract between the shipper/passenger and the common
carrier; and
2. That the loss, deterioration, injury or death took place during the
existence of the contract.

Mere proof of delivery of the goods in good order to a common carrier and their
arrival in bad order at their destination constitutes a prima facie case of fault or
negligence against the carrier. If no adequate explanation as to how the
deterioration, loss, or destruction of the goods happened, the transporter shall be
held responsible. ALPHA PHI BETA

In effect, the shipper/passenger has no burden of proving that his injury was
caused by the negligent or intentional act or omission of the carrier or his agents.
However, the common carrier may prove by way of defense that the loss or
damage cannot be traced to any act of said carrier but the proximate and only
cause of the loss is any of the circumstances mentioned in Art. 1734 of the New
Civil Code. The carrier can also prove that the proximate cause of the loss is not
any act or omission of the said carrier because he exercised extraordinary
diligence.

3. DURATION OF LIABILITY

Art. 1736. The extraordinary responsibility of the common carrier lasts from the time
the goods are unconditionally placed in the possession of, and received by the carrier
for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them, without
prejudice to the provisions of Article 1738.

Art. 1737. The common carrier's duty to observe extraordinary diligence over the
goods remains in full force and effect even when they are temporarily unloaded or
stored in transit, unless the shipper or owner has made use of the right of stoppage in
transitu. ALPHA PHI BETA

Art. 1738. The extraordinary liability of the common carrier continues to be operative
even during the time the goods are stored in a warehouse of the carrier at the place
of destination, until the consignee has been advised of the arrival of the goods and
has had reasonable opportunity thereafter to remove them or otherwise dispose of
them.

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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The goods are deemed delivered to the carrier when the goods are ready for and
have been placed in the exclusive possession, custody and control of the carrier
for the purpose of their immediate transportation and the carrier has accepted
them. When such delivery has thus been accepted by the carrier, the liability of
the carrier commences eo instanti.

4. DEFENSES OF COMMON CARRIERS

Flood, storm earthquake, lightning and other natural disaster and calamity
Acts of the public enemy in war, whether international or civil
Act of omission of the shipper or owner of the goods
Character of the goods or defects in the packing or in the containers
Order or act of competent public authority
Exercise of extraordinary diligence

The above enumeration is exclusive. For example, the defense of exercise of
due diligence in the selection and supervision of employees that is available in
tort is not available in an action for breach of contract of carriage.

Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following causes
only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act of omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.


a. FORTUITOUS EVENT

Art. 1739. In order that the common carrier may be exempted from responsibility,
the natural disaster must have been the proximate and only cause of the loss.
However, the common carrier must exercise due diligence to prevent or minimize
loss before, during and after the occurrence of flood, storm or other natural
disaster in order that the common carrier may be exempted from liability for the
loss, destruction, or deterioration of the goods. The same duty is incumbent upon
the common carrier in case of an act of the public enemy referred to in Article
1734, No. 2.

Requisites:
1. The cause of the unforeseen and unexpected occurrence, or the failure
of the debtor to comply with his obligation, must be independent of
human will.
2. It must be impossible to foresee the event which constitutes the caso
fortuito, or if it can be foreseen, it must be impossible to avoid.
3. The occurrence must be such as to render it impossible for the debtor
to fulfill his obligation in a normal manner.
4. The obligor (debtor) must be free from any participation in or
aggravation of the injury resulting to the creditor. ALPHA PHI BETA

Fortuitous event, to be a valid defense, must be established to be the
proximate and only cause of the loss.
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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Case: Edgar Cokaliong Shipping Lines, inc. vs. UCPB General Insurance Company, 25
June 2003

Petitioners vessel, M/V Tandag, sank due to a fire which resulted from a crack in the
auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the
heating exhaust manifold, causing the ship to burst into flames. The crack was located on
the side of the fuel oil tank, which had a mere two-inch gap from the engine room walling,
thus precluding constant inspection and care by the crew. The sinking of the vessel was
not considered due to fortuitous event. Having originated from an unchecked crack in the
fuel oil service tank, the fire could not have been caused by force majeure.

Hijacking of the carrier does not fall among the five categories of exempting
causes. The carriers vehicle must be dealt with under Art. 1735 of the New
Civil Code. In other words, the common carrier is presumed to be at fault or
to have acted negligently unless there is a proof of extraordinary diligence on
its part of the common carrier. To exculpate the carrier from liability arising
from hijacking, he must prove that the robbers or the hijackers acted with
grave or irresistible threat, violence or force. (Bascos vs. CA)

Damage or injury that can be traced to mechanical defects is not a damage
or injury that was caused by fortuitous event. The prevailing rule in this
jurisdiction is that a carrier is liable to its passengers for damages caused by
mechanical defects of the conveyance. (Necesito vs. Paras)

b. PUBLIC ENEMY

Art. 1739. In order that the common carrier may be exempted from responsibility,
the natural disaster must have been the proximate and only cause of the loss.
However, the common carrier must exercise due diligence to prevent or minimize
loss before, during and after the occurrence of flood, storm or other natural
disaster in order that the common carrier may be exempted from liability for the
loss, destruction, or deterioration of the goods. The same duty is incumbent upon
the common carrier in case of an act of the public enemy referred to in Article
1734, No. 2.

The term public enemy, in its general acceptation presupposes the
existence of an actual state of war wit the country to which the carrier
belongs, though not necessarily with that to which the owner of the goods
owes allegiance.

In order that the common carrier may be exempted from responsibility, the
act of the public enemy must have been the proximate and only cause of
the loss, and the common carrier must exercise due diligence to prevent
or minimize loss before, during and after the performance of the act of the
public enemy. ALPHA PHI BETA


c. IMPROPER PACKING

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

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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If the carrier accepts the goods knowing the fact of improper packing of the
goods upon ordinary observation or notwithstanding such condition, it is not
relieved o liability for loss or injury resulting therefrom.

For Article 1734 [4] to apply, the rule is that if the improper packing or in this
case, the defects in the container, are known to the carrier or his employees
or apparent upon ordinary observation, but he nevertheless accepts the
same without protest or exception notwithstanding such condition, he is not
relieved of liability for damage resulting therefrom. In this case, petitioner
accepted the cargo without exception despite the apparent defects in some
of the container vans. Hence, for failure of petitioner to prove that she
exercised extraordinary diligence in the carriage of goods in this case or that
she is exempt from liability, the presumption of negligence as provided in Art.
1735 holds. (Calvo vs. UCPB General Insurance Co., Inc.)

In Belgian Overseas Chartering & Shipping N.V. vs. Philippine First Insurance Co., the
petitioners tried to escape liability under Art. 1734 [4] of the Civil Code. They cite the notation
metal envelopes rust stained and slightly dented printed on the Bill of Lading as evidence that
the character of the goods or defect in the packing or the containers was the proximate cause of
the damage. The supreme Court rejected the argument explaining that:

From the evidence on record, it cannot be reasonably concluded that the damage to the
four coils was due to the condition noted on the Bill of lading. The aforecited exception
refers to cases when the goods are lost and damages while in transit as a result of the
natural decay of perishable goods or the fermentation or evaporation of substances liable
therefore, the necessary or natural wear of goods in transport, defects in packages in which
they are shipped, or the natural propensities of animals. None of these is present in the
instant case.

Further, even if the fact of improper packing was known to the carrier or its crew or was
apparent upon ordinary observation, it is not relived of liability for loss or injury resulting
therefrom, once it accepts the goods notwithstanding such condition. Thus, petitioners
have not successfully proven the application of any of the aforecited exceptions in the
present case.

Refusal by the carrier by reason of improper packing is not an actionable
wrong. Nevertheless, should the carrier decide to accept, notwithstanding
the improper packing, the common carrier must, in order to invoke it as a
defense, make the proper notation/ reservation in a Foul Bill of Lading,
indicating such improper packing; and exercise due diligence to forestall or
lessen loss or damage. Hence, mere acceptance does not always amount to
an abandonment of such defense. ALPHA PHI BETA

Foul Bill of Lading one which contains a notation thereon indicating that
the goods covered by it are in bad condition.

d. ORDER OF PUBLIC AUTHORITY

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

In Ganzon vs. CA, the petitioner carrier was not excused from liability
because the Supreme Court did not consider the order of an acting mayor as
a valid order of a public authority. In other words, the public authority who
issues the order must be duly authorized to issue the order as provided for in
the proviso in Art. 1743. ALPHA PHI BETA

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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It should be noted that the Carriage of Goods by Sea Act provides that
neither the carrier nor the ship shall be responsible for loss or damage
resulting from arrest or restraint of princes, rulers, or people, or seizure
under legal process and from quarantine restrictions.

Degree of diligence: that of a good father of a family ALPHA PHI BETA

5. CONTRIBUTORY NEGLIGENCE OF THE SHIPPER

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

The obligation to exercise due diligence is not limited to the carrier. The shipper
is obliged to exercise due diligence in avoiding damage or injury. Nevertheless,
contributory negligence is not a defense that will excuse the carrier from
liability. It will only mitigate such liability.

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

1. Failure of the shipper to disclose the nature of the goods;
2. Improper marking or direction as to destination; or
3. Improper loading when he assumes such responsibility

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

6. STIPULATION LIMITING LIABILITY OF CARRIER

a. REQUISITES

Art. 1744. A stipulation between the common carrier and the shipper or owner
limiting the liability of the former for the loss, destruction, or deterioration of the
goods to a degree less than extraordinary diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service rendered
by the common carrier; and
(3) Reasonable, just and not contrary to public policy.

The contract of carriage itself does not need to be in writing to be valid and
enforceable. Being a consensual contract, it is perfected by the mere
agreement of the parties as to the subject matter and consideration. There is
no formality is needed to become enforceable before the courts since it is not
one covered by the Statute of Frauds (Art. 1403, NCC)

However, in case of a stipulation limiting common carriers responsibility,
such stipulation is required by law to be in writing. If not in writing, the
general rule will apply, that is, extraordinary diligence.
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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Delay without just cause prevents the common carrier from availing of such
stipulation limiting its liability.

Art. 1748. An agreement limiting the common carrier's liability for delay on
account of strikes or riots is valid.

Art. 1749. A stipulation that the common carrier's liability is limited to the value of
the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding.

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

VALID STIPULATIONS

1. Reduction of degree of diligence to ordinary diligence, provided it be
a. In writing, signed by the shipper or owner;
b. Supported by a valuable consideration other than the service
rendered by the carriers; and
c. Reasonable, just and not contrary to public policy. (Art. 1744)

2. Fixed amount of liability: A contract fixing the sum to be recovered by
the owner or shipper for the loss, destruction or deterioration of the
goods, if it is reasonable and just under the circumstances and has been
fairly and freely agreed upon. (Art. 1750)

3. Limited liability for delay: An agreement limiting the common carriers
liability for delay on account of strikes or riots. (Art. 1748)

4. Stipulation limiting liability to the value of the goods appearing in the
bill of lading, unless the shipper or owner declares a greater value. (Art.
1749)

The diligence required in the carriage of goods may be reduced only by
one degree, from extraordinary to ordinary diligence or diligence of a
good father of a family. ALPHA PHI BETA

The purpose of the limiting stipulation in the Bill of Lading is to protect the
common carrier. Such stipulation obliges the shipper/consignee to notify
the common carrier of the amount that the latter may be liable for in case of
loss of the goods. The common carrier can then take appropriate measures
getting insurance, if needed, to cover or protect itself. This precaution on
the part of the carrier is reasonable and prudent. Hence, a
shipper/consignee that undervalues the real worth of the goods he seeks to
transport does not only violate a valid contractual stipulation, but commits a
fraudulent act when it seeks to make the common carrier liable for more than
the amount declared in the bill of lading. (Edgar Cokaliong Shipping Lines,
Inc. vs. UCPB General Insurance Co.)

b. INVALID STIPULATIONS

TRANSPORTATION LAW AB
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Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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

c. EFFECT OF DELAY

Art. 1747. If the common carrier, without just cause, delays the transportation of
the goods or changes the stipulated or usual route, the contract limiting the
common carrier's liability cannot be availed of in case of the loss, destruction, or
deterioration of the goods.

Art. 1740. If the common carrier negligently incurs in delay in transporting the
goods, a natural disaster shall not free such carrier from responsibility.

d. RULE ON PRESUMPTION OF NEGLIGENCE DESPITE STIPULATION

Art. 1752. Even when there is an agreement limiting the liability of the common
carrier in the vigilance over the goods, the common carrier is disputably
presumed to have been negligent in case of their loss, destruction or
deterioration.

B. OTHER OBLIGATIONS

1. DUTY TO ACCEPT GOODS

Gen. Rule: A common carrier cannot ordinarily refuse to carry a particular class
of goods. ALPHA PHI BETA
Exception: When for some sufficient reason the discrimination against the traffic
in such goods is reasonable and necessary. (Fisher vs. Yangco Steamship
Co.)

a. GROUNDS FOR VALID REFUSAL OF ACCEPTANCE OF GOODS

1. Hazardous and dangerous substances
2. Unfit for transport
These goods may by nature be unfit for transportation or are unfit
because of improper packaging or defect in their containers. However,
TRANSPORTATION LAW AB
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Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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the carrier may choose to transport such goods and limit its liability by
stipulation.
3. Acceptance would result in overloading
4. Contrabands or illegal goods
5. Goods are injurious to health
6. Goods will be exposed to untoward danger like flood, capture by enemies
and the like ALPHA PHI BETA
7. Goods like livestock will be exposed to disease
8. Strike
9. Failure to tender goods on time

2. DUTY TO DELIVER GOODS

a. TIME OF DELIVERY

In the absence, of any agreement as to the time of deliver, when a
common carrier undertakes to convey goods, the law implies a contract that
they shall be delivered at destination within a reasonable time.

Art. 358, Code of Commerce. If there is no period fixed for the delivery of the
goods to the carrier shall be bound to forward them in the first shipment of the
same or similar goods which he may make to the point of delivery; and should he
not do so, the damages caused by the delay should be for his account.

But where a carrier has made an express contract to transport and
deliver property within a specified time, he is bound to fulfill the contract
and is liable for any delay, no matter from what cause it may have arisen.

b. CONSEQUENCES OF DELAY

Art. 1740. If the common carrier negligently incurs in delay in transporting the
goods, a natural disaster shall not free such carrier from responsibility.

Art. 1747. If the common carrier, without just cause, delays the transportation of
the goods or changes the stipulated or usual route, the contract limiting the
common carrier's liability cannot be availed of in case of the loss, destruction, or
deterioration of the goods.

Effects of delay:
1. Merely suspends and generally does not terminate the contract of
carriage
2. Carrier remains duty bound to exercise extraordinary diligence
3. Natural disaster shall not free carrier from responsibility
4. If the delay is without just cause, the contract limiting the carriers liability
cannot be availed of in case of loss or deterioration of goods

Art. 370, Code of Commerce. If a period has been fixed for the delivery of the
goods, it must be made within such time, and, for failure to do so, the carrier shall
pay the indemnity stipulated in the bill of lading, neither the shipper nor the
consignee be entitled to anything else.

If no indemnity has been stipulated and the delay exceeds the time fixed in the
bill of lading, the carrier shall be liable for the damages which the delay may have
caused.
TRANSPORTATION LAW AB
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Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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

When this abandonment takes place, the carrier shall pay the full value of the
goods as if they had been lost or mislaid.

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

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

Art. 373, Code of Commerce. The carrier who makes the delivery of the
merchandise to the consignee by virtue of combined agreements or services with
other carriers shall assume the obligations of those who preceded him in the
conveyance, reserving his right to proceed against the latter if he was not the
party directly responsible for the fault which gave rise to the claim of the shipper
or consignee.

The carrier who makes the delivery shall likewise acquire all the actions and
rights of those who preceded him in the conveyance.
The shipper and consignee shall have an immediate right of action against the
carrier who executed the transportation contract, or against the other carriers
who may have received the goods transported without reservation.
However, the reservation made by the latter shall not relieve them from the
responsibilities which they may have incurred by their own acts.

Art. 374, Code of Commerce. The consignee to whom the shipment was made
may not defer the payment of the expenses and transportation charges of the
goods they receive after the lapse of twenty-four hours following their delivery;
and in case of delay of this payment, the carrier may demand the judicial sale of
the goods transported in an amount necessary to cover the cost of transportation
and the expenses incurred.

c. PLACE OF DELIVERY

The goods should be delivered in the place agreed upon by the parties. If
the specific place or warehouse is designated in the bill of lading, the goods
TRANSPORTATION LAW AB
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Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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must be delivered in such place even if it is not the usual place of delivery in
the place of destination.

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

The expenses which this change of consignment occasions shall be for the
account of the shipper.

d. TO WHOM DELIVERY SHALL BE MADE

The goods shall be delivered to the consignee or any other person to whom
the bill of lading was validly transferred or negotiated.

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

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

It should be noted that a negotiable bill of lading is a document of title that
may be transferred to a holder for value. In case of such transfer, the carrier
is obligated to deliver the goods to the transferee or holder. The transferee
to whom the bill of lading has been negotiated acquires the direct obligation
of the carrier from the time of such negotiation. There is even no need to
notify the carrier that there was such a transfer. ALPHA PHI BETA

















TRANSPORTATION LAW AB
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Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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OBLIGATIONS OF THE COMMON CARRIER IN A CONTRACT OF
CARRIAGE OF PASSENGERS

A. SAFETY OF PASSENGERS

1. DUTY TO OBSERVE UTMOST DILIGENCE

Art. 1755. A common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.

Extraordinary diligence rendition of service with the greatest skill or foresight,
with due regard for all circumstances.

2. DURATION OF LIABILITY

With respect to carriage of passengers by trains, the extraordinary responsibility
of common carriers 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 with a bona fide intent to ride the coach.

The duty of a common carrier to provide safety to its passengers so obligates it
not only during the course of the trip, but also for as long as the passengers are
within its premises and where they ought to be in pursuance to the contract of
carriage. ALPHA PHI BETA

All persons who remain on the premises within a reasonable time after leaving
the conveyance are deemed passengers, and what is a reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances,
and includes a reasonable time to see after his baggage and prepare for his
departure. (La Mallorca vs. CA; Aboitiz Shipping Corp. vs. CA)

It is the duty of common carriers of passengers to stop their conveyances a
reasonable length of time to afford passengers an opportunity to enter, and they
are liable for injuries suffered for the sudden starting up or jerking of their
conveyances while doing so. The duty which the carrier of passengers owes to
its patrons extends to persons boarding the cars as well as those alighting
therefrom. (Dangwa Transportation Co., Inc. vs. CA)

3. PRESUMPTION OF NEGLIGENCE

Art. 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in Articles 1733 and 1755.

With respect to passengers, the carriers defense is exercise of extraordinary
or utmost diligence. It is believed that the defenses mentioned in Art. 1734 like
fortuitous event or acts of public enemy (except No. 4 character or packing
of goods) may be invoked against the passenger or his heirs provided that
utmost diligence is exercised. However, the presumption under Art. 1756
applies.

TRANSPORTATION LAW AB
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Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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4. LIABILITY OF ACTS OF EMPLOYEES

Art. 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or wilful acts of the former's employees, although such
employees may have acted beyond the scope of their authority or in violation of the
orders of the common carriers.
This liability of the common carriers does not cease upon proof that they exercised all
the diligence of a good father of a family in the selection and supervision of their
employees.

Diligence in the selection and supervision of employees under Article 2180 of the
Civil Code cannot be interposed as a defense by the common carrier because
the liability of the carriers arises from the breach of the contract of carriage. The
defense under said articles is applicable to negligence in quasi-delicts under Art.
2176.

When the crime was committed by a train guard who had no duties to discharge
in connection with the transportation of the victim, the crime stands on the same
footing as if committed by a stranger or co-passenger since the killing was not in
the line of duty. (Gillaco vs. Manila Railroad) ALPHA PHI BETA

It is no defense that the employee acted beyond the scope of his authority
because the riding public is not expected to inquire from time to time before they
board the carrier whether or not the driver or any other employee is authorized to
drive the vehicle or that said driver is acting within the scope of his authority and
observing the existing rules and regulations required of him by management.

At least three very cogent reasons underlie this rule: (1) the special undertaking of the carrier requires
that it furnish its passenger that full measure of protection afforded by the exercise of high degree of
care prescribed by the law, inter alia from violence and insults at the hands of strangers and other
passengers, but above all, from the acts of the carriers own servants charged with the passengers
safety; (2) said liability of the carrier for the servants violation of duty to passengers, is the result of
the formers confiding in the servants hands the performance of his contract to safely transport the
passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed
bylaw; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful
acts and negligence of the carriers employees against passengers, since it, and not the passengers,
has power to select and remove them. (Maranan vs. Perez)

Willful acts of the employees include theft.


5. LIABILITY FOR ACTS OF STRANGERS

Art. 1763. A common carrier is responsible for injuries suffered by a passenger on
account of the wilful acts or negligence of other passengers or of strangers, if the
common carrier's employees through the exercise of the diligence of a good father of
a family could have prevented or stopped the act or omission.

Liability of a common carrier for death or injuries to passengers

For acts of its employees
For acts of other
passengers or
strangers
Required diligence
and defense
Extraordinary diligence Ordinary diligence
Nature of liability Tort; however, the employee
must be on duty at the time of
the act (Maranan vs. Perez)
Not absolute; limited by
Art. 1763
TRANSPORTATION LAW AB
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With respect to acts of strangers and other passengers resulting in injury to a
passenger, the availability of such defense is also subject to the exercise of due
diligence to prevent or stop the act or omission.

Negligence of the carrier need not be the sole cause of the damage or injury to
the passenger or the goods. The carrier would still be liable even if the
contractual breach concurs with the negligent act or omission of another person.

6. EFFECT OF STIPULATION ON LIABILITY

Art. 1757. The responsibility of a common carrier for the safety of passengers as
required in Articles 1733 and 1755 cannot be dispensed with or lessened by
stipulation, by the posting of notices, by statements on tickets, or otherwise.

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

Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the
common carrier's liability for negligence is valid, but not for willful acts or gross
negligence.
The reduction of fare does not justify any limitation of the common carrier's liability.

The provision implies that the same degree of diligence is required even if the
passenger is carried gratuitously. A common carrier should therefore exercise
extraordinary diligence even as to non-paying passengers. What the carrier can
do is just limit its liability.

Art. 1760. The common carrier's responsibility prescribed in the preceding article
cannot be eliminated or limited by stipulation, by the posting of notices, by statements
on the tickets or otherwise.

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

B. PASSENGERS BAGGAGES

Art. 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's
baggage which is not in his personal custody or in that of his employee. As to other
baggage, the rules in Articles 1998 and 2000 to 2003 concerning the responsibility of
hotel-keepers shall be applicable.

The term baggage has been defined to include whatever articles the passenger
usually takes with him for his own personal use, comfort, and convenience according
to the habits or wants of a particular class to which he belongs, either with reference
to his immediate necessities or to the ultimate purpose of his journey.

Baggage that are checked-in or delivered to the carrier are governed by Art. 1754
requiring extraordinary diligence. If the passenger had hand carried luggage, the
rules under Article 1998, 2000 to 2003 of the Civil Code on necessary deposit apply.

Art. 1998. The deposit of effects made by the travellers in hotels or inns shall also be
regarded as necessary. The keepers of hotels or inns shall be responsible for them as
TRANSPORTATION LAW AB
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depositaries, provided that notice was given to them, or to their employees, of the effects
brought by the guests and that, on the part of the latter, they take the precautions which
said hotel-keepers or their substitutes advised relative to the care and vigilance of their
effects.

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

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

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

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

In the custody of passengers
(Hand-Carried)
In the custody of the common
carrier (checked-in)
Legal nature of the baggage
Necessary deposit Considered as goods
Required diligence by the common carrier
Diligence of a depositary
(Ordinary diligence)
Extraordinary diligence
Applicable rules
Arts. 1998 and 2000-2003 Arts. 1733-1753

C. RELEVANT PROVISIONS OF THE WARSAW CONVENTION

1. BINDING EFFECT OF THE WARSAW CONVENTION

The rights and obligations of the air carrier and the passengers in international
flights are governed by the Convention for the Unification of Certain Rules
Relating to International Carriage by Air (Warsaw Convention), signed on
October 12, 1929, coming into force in February 13, 1933, adhered to by the
Philippines on November 9, 1951. This Convention was partly amended by the
Hague Protocol of September 28, 1955, the Montreal Agreement of 1966, the
Guatemala Protocol of 1971 and Montreal Protocols of 1975 (Alitalia vs. IAC,
192 SCRA 9) ALPHA PHI BETA

The Warsaw Convention of 1929 to which the Republic of the Philippines is a
party and which has the force and effect of law in this country applies to all
international transportation of persons, baggage, or goods performed by an
aircraft gratuitously or for hire. As enumerated in the Preamble of the
Convention, one of the objectives is to regulate in a uniform manner the
TRANSPORTATION LAW AB
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conditions of international transportation by air. (American vs. CA, 327 SCRA
482)

The Warsaw Convention is as much a part Philippine law as the Civil Code,
Code of Commerce, and other municipal special laws, and the provisions therein
contained, specifically on the limitation of carriers liability, are operative in the
Philippines but only in appropriate situations. (PAL vs. CA, 255 SCRA 48)

Warsaw Convention denies to the carrier availment of the provisions which
exclude or limit his liability if the damage is caused by his willful misconduct or by
such default on his part as, in accordance with the law of the court seized the
case, is considered to be equivalent to willful misconduct, or if the damage is
similarly caused by a agent of the carrier acting within the scope of his
employment. (Sabena vs. CA) ALPHA PHI BETA

Under domestic law and jurisprudence, the attendance of gross negligence
(given the equivalent of fraud or bad faith) holds the common carrier liable for all
damages which can be reasonably attributed, although unforeseen, to the non-
performance of the obligation, including moral and exemplary damages.

While the Warsaw Convention has the force and effect of law in the Philippines,
the same does not operate as an exclusive enumeration of the instances when a
carrier shall be liable for breach of contract or as an absolute limit to the extent of
liability, nor does it preclude the operation of the Civil Code or other pertinent
laws. (Cathay vs. CA, 219 SCRA 520)

Applicability: The transportation must be:

1. International transportation
2. Air transportation; and
3. Carriage of passengers, baggage or goods.

2. CATEGORIES OF INTERNATIONAL AIR TRANSPORTATION

International Transportation any transportation in which the place of
departure and the place of destination are situated either:
1. Within the territories of two High Contracting Parties regardless of whether or
not there be a break in the transportation or transshipment, or
2. Within the territory of a single High Contracting party, if there is an agreed
stopping place within a territory subject to the sovereignty, mandate or
authority of another power, even though that power is not a party to the
Convention.

Effect of the absence of an agreement concerning a stopping place: the
transportation shall not be deemed to be international for the purposes of the
Convention. ALPHA PHI BETA

High Contracting Party is one of the original parties to the convention


3. LIABILITY UNDER THE CONVENTION

Article 22, Warsaw Convention
1. In the carriage of passengers the liability of the carrier for each passenger is
limited to the sum of 125,000 francs. Where, in accordance with the law of the Court
TRANSPORTATION LAW AB
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seized of the case, damages may be awarded in the form of periodical payments, the
equivalent capital value of the said payments shall not exceed 125,000 francs.
Nevertheless, by special contract, the carrier and the passenger may agree to a
higher limit of liability.
2. In the carriage of registered luggage and of goods, the liability of the carrier is
limited to a sum of 250 francs per kilogram, unless the consignor has made, at the
time when the package was handed over to the carrier, a special declaration of the
value at delivery and has paid a supplementary sum if the case so requires. In that
case the carrier will be liable to pay a sum not exceeding the declared sum, unless
he proves that that sum is greater than the actual value to the consignor at delivery.
3. As regards objects of which the passenger takes charge himself the liability of the
carrier is limited to 5,000 francs per passenger.
4. The sums mentioned above shall be deemed to refer to the French franc
consisting of 65 1/2 milligrams gold of millesimal fineness 900. These sums may be
converted into any national currency in round figures.

Limit of Liability (Art. 22, as amended by Guatemala Protocol, 1971; Alitalia
vs. IAC, December 4, 1990)

1. Passengers
Gen. Rule: $100,000 per passenger
Exception: Agreement to a higher limit
Note: An agreement relieving the carrier from liability or fixing a
lower limit is null and void (Art. 23). Carrier is not entitled to the
foregoing limit if the damage is caused by willful misconduct or
default on its part. (Art. 25) ALPHA PHI BETA

2. Checked-in baggage
Gen. Rule: $20 per kilogram
Exception: In case of special declaration of value and payment of a
supplementary sum by consignor, carrier is liable to not more than the
declared sum unless it proves that the sum is greater than the actual
value.

3. Hand-carried baggage: $1,000 per passenger

4. Goods to be shipped
Gen. Rule: $20 per kilogram
Exception: In case of special declaration of value and payment of a
supplementary sum by consignor, carrier is liable to not more than the
declared sum unless it proves that the sum is greater than the actual
value.













TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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OBLIGATIONS OF THE SHIPPER, CONSIGNEE AND PASSENGER

A. EFFECT OF NEGLIGENCE OF SHIPPER OR PASSENGER

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

The obligation to exercise due diligence is not limited to the carrier. The shipper is
obliged to exercise due diligence in avoiding damage or injury. Nevertheless,
contributory negligence on the part of the passenger is not a defense that will excuse
the carrier from liability. It will only mitigate such liability.

Art. 1761. The passenger must observe the diligence of a good father of a family to avoid
injury to himself.

Art. 1762. The contributory negligence of the passenger does not bar recovery of
damages for his death or injuries, if the proximate cause thereof is the negligence of the
common carrier, but the amount of damages shall be equitably reduced.

The negligence of the passenger or the shipper may be the proximate and only
cause of the loss, in which case, the carrier should not be made liable. Moreover,
even if the carrier is responsible for the loss or injury, the passenger is al required to
lessen the damage or injury in what is known as the doctrine of avoidable
consequences. ALPHA PHI BETA

Doctrine of Last Clear Chance: A negligent defendant is held liable to a negligent
plaintiff, or even to a plaintiff who has been grossly negligent in placing himself in
peril, if he, aware of the plaintiffs peril, or according to some authorities, should have
been aware of it in the reasonable exercise of due care, had in fact an opportunity
later than that of the plaintiff to avoid an accident.

Assumption of Risk
Passengers must take such risks incident to the mode of travel. Carriers are not
insurers of the lives of their passengers. Thus, in air travel, adverse weather
conditions or extreme climactic changes are some of the perils involved in air travel,
the consequences of which the passenger must assume or expect. (Japan Airlines
vs. CA, August 7, 1998)

B. PAYMENT OF FREIGHT

Art. 374, Code of Commerce. The consignees to whom the shipment was made may
not defer the payment of the expenses and transportation charges of the goods they
receive after the lapse of twenty-four hours following their delivery; and in case of
delay in this payment, the carrier may demand the judicial sale of the goods transported
in an amount necessary to cover the cost of transportation and the expenses incurred.

Who will pay: The shipper may pay the necessary freight before or at the time he
delivers the goods to the carrier for shipment. However, the parties may stipulate
that the freight may be paid by the consignee at the point of destination. The
consignee is bound by such stipulation the moment he accepts the goods.
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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Nevertheless, the consignor with whom the contract of carriage is made is
primarily liable for the payment of the freight charges whether or not he is the
owner of the goods. The obligation to pay is implied from the mere fact that the
consignor has placed the goods with the carrier for the purpose of transportation.

Time to pay: In the absence of any agreement, the consignee who is supposed to
pay must do so within 24 hours from the time of the delivery. (Code of Commerce
provisions on Overland Transportation) ALPHA PHI BETA

With respect to carriage of goods by sea, the tickets are purchased in advance from
ticket outlets or booking offices that are required to be set up in every ports of call of
the vessel. Carriers are not supposed to allow passengers without tickets the
carrier is bound to observe a No Ticket, No Boarding Policy. (MARINA
Memorandum Circular No. 112 dated December 15, 1995)

Art. 375. Code of Commerce. The goods transported shall be especially bound to
answer for the cost of transportation and for the expenses and fees incurred for them
during their conveyance and until the moment of their delivery.

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

Carriers Lien. If the consignor or the consignee failed to pay the consideration for
the transportation of goods, the carrier may exercise his lien in accordance with Art.
375 of the Code of Commerce.

C. LIABILITY FOR DEMURRAGE

Demurrage the compensation provided for in the contract of affreightment for the
detention of the vessel beyond the time agreed on for loading and unloading.

Essentially, it is the claim for damages for failure to accept delivery. Liability for
demurrage, using the word in its strictly technical sense, exists only when expressly
stipulated in the contract.

Using the term in its broader sense, damages in the nature of demurrage are
recoverable fro a breach of the implied obligation to load or unload the cargo with
reasonable dispatch, but only by the party to whom the duty is owed and only against
one who is a party to the shipping contract. Notice of arrival of vessels or
conveyances, or of their placement for purposes of unloading if often a condition
precedent to the right to collect demurrage charges. (Magellan Manufacturing
Marketing Corporation vs. Court of Appeals)










TRANSPORTATION LAW AB
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EXTRAORDINARY DILIGENCE

A. UNDERLYING REASON

This extraordinary diligence required of common carriers is calculated to protect the
passengers from the tragic mishaps that frequently occur in connection with the rapid
modern transportation. This high standard of care is imperatively demanded by the
preciousness of human life and by the consideration that every person must in
every way be safeguarded against all injury. (Report of the Code Commission)

Rationale:
1. From the nature of the business and for reasons of public policy
2. Relationship of trust
3. Business is impressed with a special public duty
4. Possession of the goods
5. Preciousness of human life

Note: A common carrier is not an absolute insurer of all risks of travel. ALPHA PHI
BETA

B. EFFECT OF STIPULATION

Art. 1744. A stipulation between the common carrier and the shipper or owner limiting the
liability of the former for the loss, destruction, or deterioration of the goods to a degree
less than extraordinary diligence shall be valid, provided it be:
(1) In writing, signed by the shipper or owner;
(2) Supported by a valuable consideration other than the service rendered by the
common carrier; and
(3) Reasonable, just and not contrary to public policy.

Art. 1757. The responsibility of a common carrier for the safety of passengers as
required in Articles 1733 and 1755 cannot be dispensed with or lessened by stipulation,
by the posting of notices, by statements on tickets, or otherwise.

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

Art. 1758. When a passenger is carried gratuitously, a stipulation limiting the common
carrier's liability for negligence is valid, but not for wilful acts or gross negligence. The
reduction of fare does not justify any limitation of the common carrier's liability.

The provision implies that the same degree of diligence is required even if the
passenger is carried gratuitously. A common carrier should therefore exercise
extraordinary diligence even as to non-paying passengers. What the carrier can do
is just limit its liability. ALPHA PHI BETA

Art. 1760. The common carrier's responsibility prescribed in the preceding article cannot
be eliminated or limited by stipulation, by the posting of notices, by statements on the
tickets or otherwise.

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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There can be no stipulation lessening the utmost diligence that is owed to
passengers.

C. EXTRAORDINARY DILIGENCE IN CARRIAGE BY SEA

1. SEAWORTHINESS OF THE VESSEL

Generally, seaworthiness is that strength, durability and engineering skill made
a part of a ships construction and continued maintenance, together with a
competent and sufficient crew, which would withstand the vicissitudes and
dangers of the elements which might reasonably be expected or encountered
during her voyage without loss or damage to her particular cargo. (Standard
Vacuum Oil Co. vs. Luzon Stevedoring Co., Inc.)

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage
to exercise due diligence to
(a) Make the ship seaworthy; ALPHA PHI BETA
(b) Properly man, equip, and supply the ship;
(c) Make the holds, refrigerating and cooling chambers, and all other parts of the
ship in which goods are carried, fit and safe for their reception, carriage, and
preservation.
(2) The carrier shall properly and carefully load, handle, stow, carry, keep, care
for, and discharge the goods carried. (COGSA)

Sec. 116, Insurance Code. A warranty of seaworthiness extends not only to the
condition of the structure of the ship itself, but requires that it be properly laden, and
provided with a competent master, a sufficient number of competent officers and
seamen, and the requisite appurtenances and equipment, such as ballasts, cables
and anchors, cordage and sails, food, water, fuel and lights, and other necessary or
proper stores and implements for the voyage.

Sec. 119, Insurance Code. A ship which is seaworthy for the purpose of an
insurance upon the ship may, nevertheless, by reason of being unfitted to receive the
cargo, be unseaworthy for the purpose of the insurance upon the cargo.

Art. 609, Code of Commerce. Captains, masters or patrons of vessels must be
Filipinos, have legal capacity to contract in accordance with this code, and prove the
skill, capacity, and qualifications necessary to command and direct the vessel, as
established by marine or navigation laws, ordinances, or regulations, and must not be
disqualified according to the same for the discharge of the duties of the position.
If the owner of the vessel desires to be the captain thereof, without having the legal
qualifications therefore, he shall limit himself to the financial administration of the
vessel, and shall intrust the navigation to a person possessing the qualifications
required by said ordinances and regulations.


2. OVERLOADING

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


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3. PROPER STORAGE

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

4. OBLIGATION OF CAPTAIN AND CREW

Failure on the part of the carrier to provide competent captain and crew should
be distinguished from the negligence of the captain and the crew. Under the
Limited Liability Rule, the liability of the shipowner may be limited to the value of
the vessel. On the other hand, if the negligence of the captain or crew can be
traced to the fact that they are really incompetent, the Limited Liability Rule
cannot be invoked because the shipowner may be deemed negligent.

5. RULE ON DEVIATION AND TRANSSHIPMENT

Art. 359, Code of Commerce. If there is an agreement between the shipper and the
carrier as to the road over which the conveyance is to be made, the carrier may not
change the route, unless it be by reason of force majeure; and should he do so
without this cause, he shall be liable for all the losses which the goods he transports
may suffer from any other cause, beside paying the sum which may have been
stipulated for such case.

When on account of said cause of force majeure, the carrier had to take another
route which produced an increase in transportation charges, he shall be reimbursed
for such increase upon formal proof thereof.

Improper deviation may be a valid ground to deny a marine insurance claim
under the Insurance Code.

Transshipment the act of taking cargo out of one ship and loading it in
another; or the transfer of goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of destination named in the
contract has been reached; or the transfer for further transportation from one ship
or conveyance to another. ALPHA PHI BETA

The fact of transshipment is not dependent upon the ownership of the
transporting ships or conveyances or in the change of carriers, but rather on the
fact of actual physical transfer of cargo from one vessel to another.

D. EXTRAORDINARY DILIGENCE IN CARRIAGE BY LAND

1. VEHICLES CONDITION

Common carriers that offer transportation by land are required to make sure that
the vehicles that they are using are in good order or condition.

Thus, the carrier will not be excused from liability on the ground that the tire
blowout was due to fortuitous event when it was shown that the passengers were
injured because the floor of the bus gave way.

Explosion of tires are not considered fortuitous event. It is a long-standing rule
that a carrier cannot escape liability by claiming that the accident that resulted
TRANSPORTATION LAW AB
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because of a defective brake or tire is due to a fortuitous event. This is true,
even if it can be established, for instance, that the tire that was subject of a
blowout is brand new. The duty to exercise extraordinary diligence requires the
carrier to purchase and use vehicle parts that are not defective.

2. TRAFFIC RULES

The carrier fails to exercise extraordinary diligence if it will not comply with
basic traffic rules. For the presumption of negligence under Article 1756 to
operate, all that is required is proof of death or injury to a passenger. For the
presumption under Article 2185
1
to operate, there must be proof of violation of
traffic rules. ALPHA PHI BETA

Proof of violation of traffic rules confirms that the carrier failed to exercise
extraordinary diligence.

The basic traffic rules that must be complied with include those provided under
the Land Transportation and Traffic Code, RA No. 4136. Other traffic rules
are embodied in the ordinances issued by the local government units and the
Metro manila Development Authority. These rules are violated if the carrier did
not comply with the rules on overtaking on a curve under Sec. 41 of the Code,
when there was improper parking under Sec. 54, when the carrier is overloaded
in violation of Sec. 32 (a), or when there was overtaking in a junction without
extreme caution.

3. OBLIGATION TO INSPECT

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

E. EXTRAORDINARY DILIGENCE IN CARRIAGE BY AIR

Airworthiness means that an aircraft, its engines, propellers, and other
components and accessories, are of proper design and construction, and are safe for
air navigation purposes, such design and construction being consistent with accepted
engineering practice and in accordance with aerodynamic laws and aircraft science.
(RA 779) ALPHA PHI BETA

Proof of airworthiness is not by itself sufficient to prove exercise of extraordinary
diligence. For instance, extraordinary diligence likewise requires the carrier to
provide competent and well-trained crew.

With respect to goods, the failure of the carriers to exercise due diligence in a
number of cases consists in their failure to take care of the baggage of the carriers
passengers. In the cases where the carriers are made liable, the baggage of their
passengers are either damaged or transported to another place, or are delayed
or are lost altogether.




1
Art. 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any traffic regulation.
TRANSPORTATION LAW AB
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BILL OF LADING & OTHER FORMALITIES

A. DEFINITION OF BILL OF LADING

A bill of lading is a written acknowledgement, signed by the master of a vessel or
other authorized agent of the carrier, that he has received the described goods from
the shipper, to be transported on the expressed terms to the described place of
destination, and to be delivered there to the designated consignee or parties.

A bill of lading or a ticket is not necessary for the perfection of a contract of carriage.
Thus, the obligation of the carrier to exercise extraordinary diligence in transporting
the goods or passengers is present even if no bill of lading or ticket was issued by the
carrier. ALPHA PHI BETA

In the absence of any bill of lading, disputes shall be determined on the basis of the
provisions of the New Civil Code and suppletorily by the Code of Commerce.

B. CLASSES OF BILL OF LADING

1. Negotiable one in which it is stated that the goods referred to therein will be
delivered to the bearer or the order of the person named therein.
2. Non-negotiable one in which it is stated that the goods referred to therein will be
delivered to a specified person.
3. Clean B/L one which does not indicate any defect in the goods
4. Foul B/L one which contains a notation thereon indicating that the goods covered
by it are in bad condition.
5. On Board Bill issued when the goods have been actually placed aboard the ship
with very reasonable expectation that the shipment is as good as on its way.
6. Received for shipment bill one in which it is stated that the goods have been
received for shipment with or without specifying the vessel by which the goods are to
be shipped. ALPHA PHI BETA
7. Spent B/L one which covers goods that already have been delivered by the carrier
without a surrender of a signed copy of the bill.
8. Through B/L 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 honored by the second
and other interested carriers who do not issue their own bills.
9. Custody B/L one wherein the goods are already received by the carrier but the
vessel indicated therein has not yet arrived at the port.
10. Port B/L one which is issued by the carrier to whom the goods have been
delivered, and the vessel indicated in the bill of lading by which the goods are to be
shipped is already in the port where the goods are held for shipment.

C. NATURE OF BILL OF LADING

It is a long-standing jurisprudential rule that a bill of lading operates as a receipt, as a
contract, and is a document of title.

Art. 353. Code of Commerce. The legal evidence of the contract between the shipper
and the carrier shall be the bills of lading, by the contents of which the disputes which
may arise regarding their execution and performance shall be decided, no exceptions
being admissible other than those of falsity and material error in the drafting.

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After the contract has been complied with, the bill of lading which the carrier has issued
shall be returned to him, and by the virtue of exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled, unless
in the same act the claim which the parties may wish to reserve be reduced to writing,
with exception of that provided for in Article 366.

In case the consignee, upon receiving the goods, cannot return the bill of lading
subscribed by the carrier, because of its loss or of any other cause, he must give the
latter a receipt for the goods delivered, this receipt producing the same effects as the
return of the bill of lading.

Art. 709, Code of Commerce. A bill of lading drawn up in accordance with the
provisions of this title shall be proof as between all those interested in the cargo and
between the latter and the insurers, proof to the contrary being reserved for the latter.

Sec 3. COGSA (4) Such a bill of lading shall be prima facie evidence of the receipt by the
carrier of the goods as therein described in accordance with paragraphs (3) (a), (b), and
(c) of this section:

(5) The shipper shall be deemed to have guaranteed to the carrier the accuracy at the
time of shipment of the marks, number, quantity, and weight, as furnished by him; and
the shipper shall indemnify the carrier against all loss damages, and expenses arising or
resulting from inaccuracies in such particulars. The right of the carrier to such indemnity
shall in no way limit his responsibility and liability under the contract of carriage or to any
person other than the shipper.

1. As a contract

As a contract, it stipulates the rights and obligations assumed by the parties, it
names the parties, which includes the consignee, fixes the route, destination, and
freight rates and charges. Being a contract, it is the law between the parties who
are bound by its terms and conditions provided that these are not contrary to law,
morals, good customs, public order and public policy. ALPHA PHI BETA

a. Basic stipulations in a bill of lading

Overland Transportation

Art. 350, Code of Commerce. The shipper as well as the carrier of
merchandise or goods may mutually demand that a bill of lading be made,
stating:
1. The name, surname and residence of the shipper.
2. The name, surname and residence of the carrier.
3. The name, surname and residence of the person to whom or to whose order
the goods are to be sent or whether they are to be delivered to the bearer of
said bill.
4. The description of the goods, with a statement of their kind, of their weight,
and of the external marks or signs of the packages in which they are
contained.
5. The cost of transportation.
6. The date on which shipment is made.
7. The place of delivery to the carrier.
8. The pace and the time at which delivery to the consignee shall be made.
TRANSPORTATION LAW AB
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9. The indemnity to be paid by the carrier in case of delay, if there should be
any agreement on this matter.

Maritime Commerce

Art. 706, Code of Commerce. The captain of the vessel and the shipper shall
have the obligation of drawing up the bill of lading in which shall be stated:
1. The name, registry, and tonnage of the vessel.
2. The name of the captain and his domicile.
3. The port of loading and that of unloading.
4. The name of the shipper.
5. The name of the consignee, if the bill of lading is issued in the name of a
specified person.
6. The quantity, quality, number of packages and marks of the merchandise.
7. The freightage and the primage stipulated.
The bill of lading may be issued to bearer, to order, or in the name of a specified
person, and must be signed within 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.

Read substantially: Arts. 707-718, Code of Commerce ALPHA PHI BETA

b. Prohibited stipulations

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

2. As a document of title

Negotiation of the document has the effect of manual delivery so as to
constitute the transferee the owner of the goods. Under the Civil Code, the
ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him. Negotiation of the instrument results in the same transfer of
ownership because transfer of the document likewise transfers control over the
goods

TRANSPORTATION LAW AB
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Art. 1508, New Civil Code. A negotiable document of title may be negotiated by
delivery:
(1) Where by the terms of the document the carrier, warehouseman or other bailee
issuing the same undertakes to deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier, warehouseman or other bailee
issuing the same undertakes to deliver the goods to the order of a specified person,
and such person or a subsequent endorsee of the document has indorsed it in blank
or to the bearer.
Where by the terms of a negotiable document of title the goods are deliverable to
bearer or where a negotiable document of title has been indorsed in blank or to
bearer, any holder may indorse the same to himself or to any specified person, and in
such case the document shall thereafter be negotiated only by the endorsement of
such endorsee.

Art. 1509. A negotiable document of title may be negotiated by the endorsement of
the person to whose order the goods are by the terms of the document deliverable.
Such endorsement may be in blank, to bearer or to a specified person. If indorsed to
a specified person, it may be again negotiated by the endorsement of such person in
blank, to bearer or to another specified person. Subsequent negotiations may be
made in like manner.

Art. 1510. If a document of title which contains an undertaking by a carrier,
warehouseman or other bailee to deliver the goods to bearer, to a specified person or
order of a specified person or which contains words of like import, has placed upon it
the words "not negotiable," "non-negotiable" or the like, such document may
nevertheless be negotiated by the holder and is a negotiable document of title within
the meaning of this Title. But nothing in this Title contained shall be construed as
limiting or defining the effect upon the obligations of the carrier, warehouseman, or
other bailee issuing a document of title or placing thereon the words "not negotiable,"
"non-negotiable," or the like.

Art. 1513. A person to whom a negotiable document of title has been duly negotiated
acquires thereby:
(1) Such title to the goods as the person negotiating the document to him had or had
ability to convey to a purchaser in good faith for value and also such title to the goods
as the person to whose order the goods were to be delivered by the terms of the
document had or had ability to convey to a purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to hold possession of the
goods for him according to the terms of the document as fully as if such bailee had
contracted directly with him.

Art. 1515. Where a negotiable document of title is transferred for value by delivery,
and the endorsement of the transferor is essential for negotiation, the transferee
acquires a right against the transferor to compel him to endorse the document unless
a contrary intention appears. The negotiation shall take effect as of the time when the
endorsement is actually made.

3. As a receipt

The issuance of a bill of lading carries the presumption that the goods were
delivered to the carrier issuing the bill, for immediate shipment. A bill of lading is
a prima facie evidence of the receipt of the goods by the carrier. In the absence
TRANSPORTATION LAW AB
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of convincing testimony establishing mistake, recitals in the bill of lading showing
that the carrier received the goods for shipment on a specified date control.

An airway bill estops the carrier from denying receipt of the goods of the quantity
and quality described in the bill. However, as between the shipper and the
carrier, when no goods have been delivered for shipment no recitals in the bill
can estop the carrier from showing the true facts. Between the consignor of
goods and receiving carrier, recitals in a bill of lading as to the goods shipped
raise only the rebuttable presumption that such goods were delivered for
shipment. As between the consignor and a receiving carrier, the fact must
outweigh the recital. ALPHA PHI BETA

D. RELEVANT PROVISIONS OF THE WARSAW CONVENTION

Airway bill a document which the consignor is obliged to make out and hand over
to the carrier.

Functions: An Airway Bill is prima facie evidence of:
1. The conclusion of the contract
2. The receipt of the goods
3. The conditions of the transportation
4. The weight, dimensions and packaging of the goods
5. The number of packages

The carrier has the right to require the consignor to make out separate airway bills
when there is more than one package.

There is nothing in the Convention which prohibits the carrier from making out the
airway bill itself.

A printed stipulation in the airway bill or airline ticket limiting the liability of the air
carrier to a specified amount is valid, but any ambiguity is strictly construed against
the carrier. (Ong Yiu vs. CA)

Liability of Carrier for Damages
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 of embarking or disembarking. (Art. 17,
WC)
2. Destruction, loss or damage to any baggage or goods, if it took place during the
transportation by air (Art. 18, WC)
Transportation by air the period during which the baggage or goods are in charge of the
carrier, whether in an airport or on board an aircraft, or, in case of a landing outside an airport, in
any place whatsoever. It includes any transportation by land or water outside an airport if such
takes place in the performance of the contract of transportation by air, for the purpose of loading,
delivery, or transshipment.
3. Delay in the transportation of passengers, baggage or goods (Art. 19, WC)

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

Effect of absence, irregularity or loss of passenger ticket/ baggage check/
airway bill:
1. Does not affect the existence and validity of the contract of transportation which
shall nevertheless be subject to the rules of the Convention.
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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2. If the carrier accepts the passenger without a passenger ticket, or a baggage
without a baggage check, or goods without an airway bill, the carrier shall not be
entitled to avail of the provisions of the Convention which exclude or limit its
liability. ALPHA PHI BETA

ACTION FOR DAMAGES
1. Notice of claim

A written complaint must be made within 3 days from receipt of baggage,
7 days from receipt of goods; in case of delay, 14 days from receipt of
baggage or goods. The complaint is a condition precedent. Without the
complaint, the action is barred except in case of fraud on the part of the
carrier. (Art. 26, WC)

2. Prescriptive period
Action must be filed within 2 years from:
a. date of arrival at the destination an intermediate place where carriage may
be broken (i.e. stopping place) is not a place of destination
b. date of expected arrival
c. date on which the transportation stopped (Art. 29, WC)

In United Airlines vs. UY, the two-year prescriptive period was not applied where the
airline employed delaying tactics.

Rule in case of Various Successive Carriers
1. Carriage of passengers
Gen. Rule: Action is filed only against the carrier in which the accident or delay
occurred.
Exception: Agreement or contract whereby the first carrier assumed liability for
the whole journey.

2. Carriage of baggage or goods
a. Passenger or consignor can file an action against the first carrier and the
carrier in which the damage occurred.
b. Passenger or consignee can file an action against the last carrier and the
carrier in which the damage occurred

Note: These carriers are jointly and severally liable. (Art. 30, WC)

A contract of international carriage by air, although performed by different carriers
under a series of airline tickets constitutes a single operation. Members of the
International Air Transportation Association (IATA) are under a general pool
partnership agreement wherein they act as agent of each other in the issuance of
tickets to contracted passengers to boost ticket sales worldwide and at the same time
provide passengers access to airlines which are otherwise inaccessible in some parts
of the world. (American Airlines vs. CA, 197 SCRA 645) ALPHA PHI BETA

Under a general pool partnership agreement, the ticket-issuing airline is the principal
in a contract of carriage while the endorsee-airline is the agent. The obligation of the
former remained and did not cease even when the breach occurred not on its own
flight but on that of another airline which had undertaken to carry the passengers to
one of their destinations. (China Airlines vs. Chiok)

At the option of the plaintiff, the action for damages may be filed in the:
1. Court of domicile of the carrier;
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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2. Court of its principal place of business;
3. Court where it has a place of business through which the contract has been
made; or
4. Court of the place of destination. (Art. 28 [1])

NOTE: It is the passengers ultimate destination not an agreed stopping place that
determines the country where suit is to be filed. The place of destination is
determined by the terms of the contract of carriage. ALPHA PHI BETA

The forum of action provided in Art. 28(1) is a matter of jurisdiction rather than of
venue. (Santos III vs. Northwest Airlines)

Article 17, Warsaw Convention. The carrier is liable for damage sustained in the event of the death or
wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the
damage so sustained took place on board the aircraft or in the course of any of the operations of embarking or
disembarking.

Article 18. 1. The carrier is liable for damage sustained in the event of the destruction or loss of, or of damage
to, any registered luggage or any goods, if the occurrence which caused the damage so sustained took place
during the carriage by air.
2. The carriage by air within the meaning of the preceding paragraph comprises the period during which the
luggage or goods are in charge of the carrier, whether in an aerodrome or on board an aircraft, or, in the case of
a landing outside an aerodrome, in any place whatsoever.
3. The period of the carriage by air does not extend to any carriage by land, by sea or by river performed
outside an aerodrome. If, however, such a carriage takes place in the performance of a contract for carriage by
air, for the purpose of loading, delivery or transshipment, any damage is presumed, subject to proof to the
contrary, to have been the result of an event which took place during the carriage by air.

Article 19. The carrier is liable for damage occasioned by delay in the carriage by air of passengers, luggage
or goods.

Article 22. 1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of
125,000 francs. Where, in accordance with the law of the Court seised of the case, damages may be awarded
in the form of periodical payments, the equivalent capital value of the said payments shall not exceed 125,000
francs. Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability.
2. In the carriage of registered luggage and of goods, the liability of the carrier is limited to a sum of 250 francs
per kilogram, unless the consignor has made, at the time when the package was handed over to the carrier, a
special declaration of the value at delivery and has paid a supplementary sum if the case so requires. In that
case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that that sum is
greater than the actual value to the consignor at delivery.
3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to 5,000
francs per passenger.
4. The sums mentioned above shall be deemed to refer to the French franc consisting of 65 milligrams gold of
millesimal fineness 900. These sums may be converted into any national currency in round figures.












TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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ACTIONS IN CASE OF CONTRACT OF BREACH OF CONTRACT OF
CARRIAGE

A. CAUSES OF ACTION AND NATURE/EXTENT OF LIABILITY (CULPA
CONTRACTUAL, CULPA AQUILIANA AND CULPA DELICTUAL)

1. CULPA CONTRACTUAL (Breach of contract)
Only the carrier is primarily liable and not the driver, because there is no privity of
contract between the driver and the passenger.

No defense of due diligence in the selection and supervision of employees.

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

This liability of the common carriers does not cease upon proof that they exercised all
the diligence of a good father of a family in the selection and supervision of their
employees. ALPHA PHI BETA

2. CULPA AQUILIANA (quasi-delict)
The carrier and driver are solidarily liable as joint tortfeasors.

Defense of due diligence in the selection and supervision of employees is available.
Exception: Marine tort resulting in collision.

Basis: Art. 2180, New Civil Code. The obligation imposed by Article 2176 is demandable
not only for one's own acts or omissions, but also for those of persons for whom one is
responsible.
x x x
The owners and managers of an establishment or enterprise are likewise responsible for
damages caused by their employees in the service of the branches in which the latter are
employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.
x x x
The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage.

Although the relation of passenger and carrier is contractual both in origin and
nature, nevertheless, the act that breaks the contract, may also be a tort. (Air France
vs. Carrascoso)

In the case of injury to a passenger due to the negligence of the driver of the bus on
which the passenger was riding on and of the driver of another vehicle, the drivers as
well as the owners of the two vehicles are jointly and severally liable for damages. It
should not make any difference that the liability of the bus owner springs from a
contract while that of the driver springs from quasi-delict. (Tiu vs. Arriesgado)

Since the employers (owner) liability is primary, direct and solidary, its only recourse
is to recover what it has paid from its employee (driver) who committed the
negligence. (Philtranco vs. CA)

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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3. CULPA CRIMINAL (criminal negligence)
The driver is primarily liable. The carrier is subsidiarily liable only if the driver is
convicted and declared insolvent.

Basis: Art. 100, RPC

In case of injury to a passenger due to the negligence of the driver of the bus on
which he is riding and of the driver of another vehicle, the drivers as well as the
owners of the two vehicles are jointly and severally liable for damages. It makes no
difference that the liability of the bus driver and owner springs from contract while that
of the owner and driver of the other vehicle arises from quasi-delict. (Fabre vs. CA)

The principle of last clear chance would call for application in suit between the
owners and drivers of two colliding vehicles. It does not arise where a passenger
demands responsibility from carrier to enforce its contractual obligations. (Phil.
Rabbit Bus Lines vs. CA) ALPHA PHI BETA

The act of the shipper in furnishing the carrier with inaccurate weight of payloader is
not an excuse to avoid liability, but said act constitutes a contributory circumstance
which mitigates liability of the carrier. (Compania Maritima vs. CA)

Passengers have the right to be treated by the carriers employees with kindness,
respect, courtesy and due consideration. Such that any discourteous conduct on the
part of these employees toward a passenger gives the latter an action for damages
against the carrier. (Korean Airline vs. CA)

B. PRESCRIPTIVE PERIOD AND CONDITIONS PRECEDENT

1. OVERLAND TRANSPORTATION OF GOODS AND COASTWISE
SHIPPING

The filing of a claim with the carrier within the period prescribed under Article 366
of the Code of Commerce is a condition precedent for an action against the
carrier in overland transportation. Non-filing of the claim bard recovery.

Art. 366, Code of Commerce. Within the twenty-four hours following the receipt of
the merchandise, the claim against the carrier for damage or average be found
therein upon opening the packages, may be made, provided that the indications of
the damage or average which gives rise to the claim cannot be ascertained from the
outside part of such packages, in which case the claim shall be admitted only at the
time of receipt.

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

An action for damages is barred if the goods arrived in damaged condition and
no claim is filed by the shipper within the following period:
a. Immediately if damage is apparent.
b. Within 24 hours from delivery if damage is not apparent.

The period does not begin to run until the consignee has received possession of
the merchandise that he may exercise over it in the ordinary control pertinent to
ownership. The period prescribed in Art. 366 may be subject to modification by
agreement of the parties as stipulated in the bill of lading.
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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Requirement under Art 366 applies even to transportation by sea within the
Philippines or coastwise shipping but does not apply to misdelivery of goods.

2. INTERNATIONAL CARRIAGE OF GOODS BY SEA

Section 3, par. 6. COGSA. Unless notice or loss or damage and the general nature
of such loss or damage be given in writing to the carrier or his agent at the port of
discharge or at the time of the removal of the goods into the custody of the person
entitled to delivery thereof under the contract of carriage, such removal shall be prima
facie evidence of the delivery by the carrier of the goods as described in the bill of
lading. If the loss or damage is not apparent, the notice must be given within three
days of delivery. ALPHA PHI BETA

Said notice of loss or damage may be endorsed upon the receipt for the goods given
by the person taking delivery thereof.

The notice in writing need not be given if the state of the goods has at the time of
their receipt been the subject of joint survey or inspection.

In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or
the date when the goods should have been delivered: Provided, That, if a notice of
loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the shipper to bring suit within one
year after the delivery of the goods or the date when the goods should have
been delivered.

In the case of any actual or apprehended loss or damage, the carrier and the
receiver shall give all reasonable facilities to each other for inspecting and tallying the
goods.

A claim must be filed with the carrier within the following period:
1. Immediately upon discharge of the goods if the damage is apparent.
2. Within 3 days from delivery if damage is not apparent.

Nevertheless, the filing of claim is not condition precedent.

The action for damages under the COGSA must be filed within a period of 1
year from the discharge of the goods. In other words, the prescriptive period
commences from discharge.

The period is not suspended by extra-judicial demand. The period does not
apply to conversion or misdelivery. The one-year period provided for in
Section 3 (6) of COGSA refers to loss of the cargo and not to misdelivery.

Similarly, damages arising from delay or late delivery is not the damage
or loss contemplated under the COGSA. The goods are not actually lost
or damaged. The applicable period is 10 years. ALPHA PHI BETA

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


TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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C. RECOVERABLE DAMAGES

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

Extent of recovery

Art. 2201, New Civil Code. In contracts and quasi-contracts, the damages for which the
obligor who acted in good faith is liable shall be those that are the natural and probable
consequences of the breach of the obligation, and which the parties have foreseen or
could have reasonably foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for
all damages which may be reasonably attributed to the non-performance of the
obligation.

The carrier in good faith is liable only to pay for the damages that are the natural
and probable consequences of the breach of the obligation, and which the parties
have foreseen or could have reasonably foreseen at the time the obligation was
constituted. However, if the carrier is in bad faith or was guilty of gross negligence,
the said carrier is liable for all damages, whether the same can be foreseen or not.

The carrier who may be compelled to pay damages for the loss or damage to the
goods or passengers has the right of recourse against the employee who committed
the negligent, willful or fraudulent act. ALPHA PHI BETA

Kinds of Damages

Art. 2197, New Civil Code. Damages may be:
(1) Actual or compensatory;
(2) Moral;
(3) Nominal;
(4) Temperate or moderate;
(5) Liquidated; or
(6) Exemplary or corrective.

Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages, may be adjudicated. The assessment
of such damages, except liquidated ones, is left to the discretion of the court,
according to the circumstances of each case.

Proof of pecuniary loss is necessary if actual or compensatory damages is being
claimed. ALPHA PHI BETA

Actual or Compensatory Damages
Article 2199 of the Civil Code provides that except as provided by law or by
stipulation, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is referred to as actual
or compensatory damages. Article 2200 provides that indemnification for damages
shall comprehend not only the value of the loss suffered, but also that of the profits
which the obligee failed to obtain.

There are two kinds of actual and compensatory damages:
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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1. The loss of what a person already possesses (dano emergente), and
2. The failure to receive as a benefit that would have pertained to him (lucro
cesante).

Damages cannot be presumed by the courts, in giving an award, must point out
specific facts that could afford a basis for measuring whatever compensatory or
actual damages are borne. The burden of proof rests on the plaintiff who is claiming
actual damages against the carrier.

In the case of goods, the plaintiff is entitled to their value at the time of destruction.
Normally, the award is the sum of money which plaintiff would have to pay in the
market for identical or essentially similar good, plus in proper cases, damages for the
loss of use during the period before replacement.

Moral Damages
The Civil Code provides that moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they are the proximate result of the
defendants wrongful act for omission. The award of moral damages is designed to
compensate the claimants for actual injury and is not meant to enrich the complainant
at the expense of the defendant. Moral damages are not awarded to punish the
defendant but to compensate the victim. The Civil Code allows the award of moral
damages not only in favor of the injured passenger himself but also to his heirs in the
event of his death. ALPHA PHI BETA

Generally, no moral damages may be awarded where the breach of contract is not
malicious. The presence of contractual negligence is insufficient for such award.
However, moral damages may be awarded if the contractual negligence is
considered gross negligence.

Other factors that affect the amount to be recovered:
1. The extent of humiliation may also determine the amount of moral damages that
can be awarded.
2. The extent of pain and suffering.
3. Official, political, social and financial standing of the offended party and the
business and financial position of the offender affect the amount of damages
4. The age of the claimant.

Nominal Damages
The assessment of nominal damages is left to the discretion of the court according to
the circumstances of the case. The award of nominal damages is also justified in
the absence of competent proof of the specific amounts of actual damages
suffered.

Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered
by him.

Art. 2222. The court may award nominal damages in every obligation arising from
any source enumerated in Article 1157, or in every case where any property right has
been invaded.

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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Art. 2223. The adjudication of nominal damages shall preclude further contest upon
the right involved and all accessory questions, as between the parties to the suit, or
their respective heirs and assigns.

Temperate or Moderate Damages

Art. 2224. Temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount can not, from the nature of the case,
be provided with certainty.

Liquidated Damages
Liquidated damages are those agreed upon by the parties to a contract, to be
paid in case of breach thereof.

Ordinarily, the court cannot change the amount of liquidated damages agreed upon
by the parties. However, Article 2227 of the Civil Code provides that liquidated
damages, whether intended as an indemnity or a penalty, shall be equitably reduced
if they are iniquitous or unconscionable. In addition, Article 2228 provides that when
the breach of the contract committed by the defendant is not the one contemplated
by the parties in agreeing upon the liquidated damages, the law shall determine the
measure of damages, and not the stipulation. ALPHA PHI BETA

Exemplary or Corrective Damages

Requisites for the award of exemplary damages:
1. They may be imposed by way of example in addition to compensatory
damages, and only after the claimants right to them has been established.
2. They cannot be recovered as a matter of right, their determination
depending upon the amount of compensatory damages that may be
awarded to the claimant.
3. The act must be accompanied by bad faith or done in wanton, fraudulent,
oppressive or malevolent manner.





















TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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MARITIME LAW

A. CONCEPT OF MARITIME LAW

Maritime law is the system of laws which particularly relates to the affairs and
business of the sea, to ships, their crews and navigation, and to marine conveyance
of persons and property.

Primary law on maritime commerce: New Civil Code provisions on common carriers
Suppletory laws: Code of Commerce and special laws (Salvage Law, COGSA,
Ship Mortgage Decree of 1978, etc.) ALPHA PHI BETA

Maritime laws apply only to maritime trade and sea voyages.

Characteristics of Maritime Transaction
1. Real similar to transactions over real property with respect to effectivity
against third persons which is done through registration. The evidence of real
nature is shown by:
a. The limitation of the liability of the agents to the actual value of the
vessel and the freight money; and
b. The right to retain the cargo and embargo and detention of the
vessel. (Luzon Stevedoring Corp. vs. CA)

2. Hypothecary the liability of the owner is limited to the value of the vessel
itself. (Doctrine of Limited Liability)

The real and hypothecary nature of maritime law simply means that the liability of the
carrier in connection with losses related to maritime contracts is confined to the
vessel, which stands as the guaranty for their settlement. (Aboitiz Shipping Corp.
vs. General Accident Fire and Life Assurance Corp.)

B. LIMITED LIABILITY RULE

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

Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their
contribution to the common fund for the results of the acts of the captain, referred to in Art.
587. ALPHA PHI BETA

Each co-owner may exempt himself from this liability by the abandonment, before a notary, of
that part of the vessel belonging to him.

Art. 643. If the vessel and her cargo should be totally lost, by reason of capture or wreck, all
rights shall be extinguished, both as regards the crew to demand any wages whatsoever, and
as regards the ship agent to recover the advances made.

If a portion of the vessel or of the cargo, or of both, should be saved, the crew engaged on
wages, including the captain, shall retain their rights on the salvage, so far as they go, on the
remainder of the vessel as well as on the amount of the freightage of the cargo saved; but
sailors who are engaged on shares shall not have any right whatsoever on the salvage of the
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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hull, but only on the portion of the freightage saved. If they should have worked to recover
the remainder of the shipwrecked vessel they shall be given from the amount of the salvage
an award in proportion of the efforts made and to the risks, encountered in order to
accomplish the salvage.

Art. 837. The civil liability incurred by the shipowners in the cases prescribed in this section,
shall be understood as limited to the value of the vessel with all her appurtenances and
freight earned during the voyage.

Article 837 applies the principle of limited liability in cases of collision while Articles
587 and 590 embody the universal principle of limited liability in all cases.

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

1. CONCEPT

The real and hypothecary nature of maritime law simply means that the liability
of the carrier in connection with losses related to maritime contracts is
confined to the vessel, which stands as the guaranty for their settlement. It
has its origin by reason of the conditions and risks attending maritime trade in its
earliest years when such trade was replete with innumerable and unknown
hazards since vessels had to go through largely uncharted waters to ply their
trade. It was designed to offset such adverse conditions and encourage
people and entities to venture into maritime commerce despite the risks
and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner
and agent arising from the operation of such vessel were confined to the vessel
itself, its equipment, freight, and insurance, if any, which limitation served to
induce capitalists into effectively wagering their resources against the
consideration of the large profits attainable in their trade. ALPHA PHI BETA

NO VESSEL, NO LIABILITY, expresses in a nutshell the limited liability rule
(Monarch Ins. Co. vs. CA).

The Supreme Court ruled in Monarch Ins. Co. vs. CA that the limited liability
rule does not apply if the carrier failed to overcome the presumption of
negligence.

2. EXCEPTIONS TO THE RULE

GEN. RULE: The liability of shipowner and ship agent is limited to the amount of
interest in said vessel such that where vessel is entirely lost, the obligation is
extinguished.

The interest extends to:
1. The vessel itself
2. Equipment
3. Freightage; and
4. Insurance proceeds
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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EXCEPTIONS:
1. Injury or damage due to shipowner or to the concurring negligence of the
shipowner and the captain.
2. The vessel is insured
3. Claims under Workmens Compensation
4. Expenses for repair on vessel completed before loss
5. In case there is no total loss and the vessel is not abandoned.

The limited liability rule applies if the captain or the crew caused the damage or
injury. For instance, the shipowners or shipagents liability is limited to the value
of the vessel if the damage was caused by the unseaworthiness of the vessel
caused by the negligence of the captain or crew during the voyage. (Aboitiz
Shipping Corp. vs. GAFLAC) However, if the failure to maintain the
unseaworthiness of the vessel can be ascribed to the shipowner alone or the
shipowner concurrently with the captain, then the limited liability principle cannot
be invoked.

The carrier is liable for the damages to the full extent and not up to the value of
the vessel if it was established that the carrier was guilty of negligence in
allowing the captain and crew to play mahjong during the voyage, in failing to
maintain the ship as seaworthy and in allowing the ship to carry more
passengers than it was allowed to carry.

The limited liability doctrine applies not only to the goods but also in all cases like
death or injury to passengers. ALPHA PHI BETA

The rights of a vessel owner or agent under the limited liability rule are akin to
those of the rights of shareholders to limited liability under our Corporation laws.
In both insolvency of a corporation and the sinking of a vessel, the claimants or
creditors are limited in their recovery to the remaining value of accessible assets.
(Aboitiz Shipping Corp. vs. GAFLAC)

But the provisions of the Code of Commerce invoked by appellant have no room in the application of
the Workmen's Compensation Act which seeks to improve, and aims at the amelioration of, the
condition of laborers and employees. It is not the liability for the damage or loss of the cargo or injury
to, or death of, a passenger by or through the misconduct of the captain or master of the ship; nor the
liability for the loss of the ship as a result of collision; nor the responsibility for wages of the crew, but
a liability created by a statute to compensate employees and laborers in cases of injury
received by or inflicted upon them, while engaged in the performance of their work or
employment, or the heirs and dependents of such laborers and employees in the event of
death caused by their employment. Such compensation has nothing to do with the provisions of
the Code of Commerce regarding maritime commerce. It is an item in the cost of production which
must be included in the budget of any well managed industry. (Abueg vs. San Diego)

3. ABANDONMENT

Abandonment of the vessel, its appurtenances and the freightage is an
indispensable requirement before the shipowner or shipagent can enjoy the
benefits of the limited liability principle. If the carrier does not want to
abandon the vessel, then he is still liable even beyond the value of the
vessel.

Abandonment is the act of the insured by which, after a constructive total loss,
he declares the relinquishment to the insurer of his interest in the thing insured.
(Sec. 138, ICP)

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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Right of Shipowner or Ship agent to abandon vessel; Instances:

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

Shipowner/ Ship Agent Consignee
What may be abandoned
Vessel Goods shipped
Instances
1. In case of civil liability from
indemnities to third persons (Art.
587)
2. Sec. 138, ICP
3. In case of leakage of at least of
the contents of a cargo containing
liquids (Art. 687)
1. Partial non-delivery, where the
goods are useless without the
others (Art. 363)
2. Goods are rendered useless for
sale or consumption for the
purposes for which they are
properly destined (Art. 365); and
3. In case of delay through the fault
of the carrier (Art. 371)
Effects
1. Transfer of ownership of the vessel
from shipowner to the shippers or
insurer.
2. In case of (2), the insurer must pay
the insured as if there was actual
total loss of the vessel.
1. Transfer of ownership of the
goods from shipper to the carrier.
2. Carrier should pay the shipper the
market value of the goods at the
point of destination.

How claims are satisfied under the Limited Liability Rule
All claims should be collated before they can be satisfied from what remains of
the insurance proceeds and freightage at the time of the loss. No claimant can
be given precedence over the others by the simple expedience of having filed or
completed its action earlier than the rest. Thus, execution of judgment in earlier
completed cases, even those already final and executory, must be stayed
pending completion of all cases occasioned by the subject sinking. Then and
only then can all such claims be simultaneously settled, either completely or pro-
rata should the insurance proceeds and freightage be not enough to satisfy all
claims (Aboitiz Shipping Corporation vs. General Accident Fire and Life
Assurance Corporation, Ltd.).

C. VESSELS

"Vessels" or Watercraft" Any barge, lighter, bulk carrier, passenger ship,
freighter, tanker, container ship, fishing boats or other artificial contrivance utilizing
any source of motive power, designed, used or capable of being used as a means of
water transportation operating either as common contract carrier, including fishing
vessels covered under Presidential Decree No. 43, except (i) those owned and/or
operated by the Armed Forces of the Philippines and by foreign governments for
military purposes, and (ii) bancas, sailboats and other waterborne contrivance of less
than three gross tons capacity and not motorized. (Section 3 (b) PD 474)

This definition is important for purposes of applying the laws and regulations that are
being implemented by the Maritime Industry Authority. ALPHA PHI BETA

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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Vessels are personal property under Article 416 of the Civil Code. The same rule
can be found in Article 585 of the Code of Commerce which provides: For all
purposes of law not modified by the provisions of this Code, vessels shall continue to
be considered as personal property. ALPHA PHI BETA

Ships or vessels, whether moved by steam or by sail, partake, to a certain extent, of
the nature and conditions of real property, on account of their value and importance
in the world commerce (Rubiso and Calixto vs. Rivera). For instance, under Article
573 of the Code of Commerce, transfer of vessels should be in writing and must be
recorded in the appropriate registry.

1. ACQUISITION

a. BY PRESCRIPTION

Art. 573, Code of Commerce. Merchant vessels constitute property which may
be acquired and transferred by any of the means recognized by law. The
acquisition of a vessel must appear in a written instrument, which shall not
produce any effect with respect to third persons if not inscribed in the
registry of vessels.

The ownership of a vessel shall likewise be acquired by possession in good faith,
continued for three years, with a just title duly recorded.

In the absence of any of these requisites, continuous possession for ten years
shall be necessary in order to acquire ownership.

A captain may not acquire by prescription the vessel of which he is in command.

Art. 575. Co-owners of vessels shall have the right of repurchase and
redemption in sales made to strangers, but they may exercise the same only
within the nine days following the inscription of the sale in the registry, and
by depositing the price at the same time.

b. BY SALE

Art. 576. In the sale of a vessel it shall always be understood as included the
rigging, masts, stores and engine of a streamer appurtenant thereto, which at the
same time belongs to the vendor.

The arms, munitions of war, provisions and fuel shall not be considered as
included in the sale. ALPHA PHI BETA

The vendor shall be under the obligation to deliver to the purchaser a certified
copy of the record sheet of the vessel in the registry up to the date of the sale.

Art. 577. If the alienation of the vessel should be 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 for the same voyage shall be for his account.

If the sale is made after the vessel has arrived at the port of its destination, the
freightage shall pertain to the vendor, and the payment of the crew and other
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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individuals who make up its complement shall be for his account, unless the
contrary is stipulated in either case.

Art. 578. If the vessel being on a voyage or in a foreign port, its owner or owners
should voluntarily alienate it, either to Filipinos or to foreigners domiciled in the
capital or in a port of another country, the bill of sale shall be executed before the
consul of the Republic of the Philippines at the port where it terminates its
voyage and said instrument shall produce no effect with respect to third persons
if it is not inscribed in the registry of the consulate. The consul shall immediately
forward a true copy of the instrument of purchase and sale of the vessel to the
registry of vessels of the port where said vessel is inscribed and registered.

In every case the alienation of the vessel must be made to appear with a
statement of whether the vendor receives its price in whole or in part, or whether
he preserves in whole or in part any claim on said vessel. In case the sale is
made to a Filipino, this fact shall be stated in the certificate of navigation.

When a vessel, being on a voyage, shall be rendered useless for navigation, the
captain shall apply to the competent judge on court of the port of arrival, should it
be in the Philippines; and should it be in a foreign, to the consul of the Republic
of the Philippines, should there be one, or, where there is none, to the judge or
court or to the local authority; and the consul, or the judge or court, shall order an
examination of the vessel to be made.

If the consignee or the insurer should reside at said port, or should
representatives there, they must be cited in order that they may take part in the
proceedings on behalf of whoever may be concerned.

c. REGISTRATION

Sec. 810, Tariff and Customs Code. Privileges Conferred by Certificate of
Philippine Registry. A certificate of Philippine registry confers upon the vessel
the right to engage, consistently with law, in the Philippine coastwise trade and
entities it to the protection of the authorities and the flag of the Philippines in all
ports and on the high seas, and at the same time secures to it the same
privileges and subjects it to the same disabilities as, under the laws of the
Philippines, pertain to foreign-built vessels transferred abroad to citizens of the
Philippines.

Vessels are now registered through the Maritime Industry Authority. It is a
long standing rule that the person who is the registered owner of the
vessel is presumed to be the owner of the vessel. Moreover, it is likewise
a settled rule that the sale or transfer of the vessel is not binding on third
persons unless the same is registered.

d. SHIPS MANIFEST

Sec. 906, Tariff and Customs Code. Manifests shall be required for cargo and
passengers transported from one place or port in the Philippines to another only
when one or both of such places is a port of entry.

Vessels are required to carry manifests in coastwise trade. This
requirement is likewise imposed on every vessel from a foreign port under
Section 1005 of the same Code.
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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A manifest is a declaration of the entire cargo. The object of a manifest is
to furnish customs officers with a list to check against, to inform the revenue
officers what goods are being 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.

2. MORTGAGE OF VESSELS

Mortgage and other encumbrances over vessels are governed by the provisions
of Presidential Decree 1521, otherwise known as the Ship Mortgage Decree of
1978. ALPHA PHI BETA

Vessels are susceptible of maritime liens such as for the repair, equipping
and provisioning of the vessel in the preparation of a voyage, as well as
mortgage liabilities, in satisfaction of which a vessel may be validly
arrested and sold. (Ship Mortgage Decree of 1978)

Maritime Lien
It constitutes a present right of property in the ship, a jus in re, to be afterward
enforced in admiralty by process in rem.

If the maritime lien arose prior to the recording of a preferred mortgage, it shall
have priority over the said mortgage lien.

RA 6106 PD 1521
Effectivity Date
1969 1978
Applicability
Overseas shipping only Both domestic and overseas shipping
Kind of sale
Judicial Judicial and extrajudicial
Order of Preference
A preferred mortgage shall have priority
over all claims against the vessel, EXCEPT,
the following preferences in the order
stated:
1. Judicial costs of the proceedings;
2. Taxes due the Phil. Government;
3. Salaries and wages of the Captain and
Crew of the vessel during its last voyage;
4. General average or salvage including
contract salvage, bottomry loans, and
indemnity due shippers for the value of
goods transported but which were not
delivered to the consignee;
5. Costs of repair and equipment of the
vessel, and provisioning of food, supplies
and fuel during its last voyage; and
6. Preferred mortgages registered prior in
time.
The preferred mortgage lien shall have
priority over all claims against the
vessel, except the following preferences
in the order stated:
1. Expenses and fees allowed and
costs taxed by the court and taxes
due to the Government;
2. Crews wages;
3. General average;
4. Salvage, including contract salvage;
5. Maritime liens arising prior in time to
the recording of the preferred
mortgage;
6. Damages arising out of tort; and
7. Preferred mortgage registered prior
in time.

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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Effect of sale: All pre-existing claims in the vessel are terminated. They will
then be satisfied from the proceeds of the sale subject to the order of preference.

D. PERSONS WHO TAKE PART IN MARITIME COMMERCE

1. SHIPOWNERS AND SHIP AGENTS

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

By ship agent is understood the person entrusted with provisioning or representing
the vessel in the port in which it may be found.

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

Art. 588. Neither the shipowner nor the ship agent shall be liable for the obligations
contracted by the captain, if the latter exceeds the powers and privileges pertaining
to him by reason of his position or conferred upon him by the former.

Nevertheless, if the amounts claimed were invested for the benefit of the vessel, the
responsibility therefor shall devolve upon its owner or agent.

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

Ship agent (naviero) person entrusted with provisioning and representing the
vessel in the port in which it may be found; also includes the shipowner (Chua
Hek Yong vs. IAC). ALPHA PHI BETA

Not a mere agent under civil law; he is solidarily liable with the ship
owner.

Powers and functions:
1. Capacity to trade
2. Discharge duties of the captain, subject to Art. 609;
3. Contract in the name of the owners with respect to repairs, details of
equipment, armament, provisions of food and fuel, and freight of the
vessel, and all that relate to the requirements of navigation;
4. Order a new voyage, make a new charter or insure the vessel after
obtaining authorization from the ship owner or if granted in certificate
of appointment.

Civil Liabilities of the Shipowner and Ship Agent
1. All contracts of the captain, whether authorized or not, to repair, equip and
provision the vessel (Art. 586)
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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2. Loss and damage to the goods loaded on the vessel without prejudice to
their right to free themselves from liability by abandoning the vessel to the
creditors (Art. 587).

Duty of Ship Agent to Discharge the Captain and Members of the Crew
o If the seamen contract is not for a definite period or voyage, he may
discharge them at his discretion. (Art. 603)
o If for a definite period, he may not discharge them until after the
fulfillment of their contracts, except on the following grounds:
1. Insubordination in serious matters;
2. Robbery;
3. Theft;
4. Habitual drunkenness;
5. Damage caused to the vessel or to its cargo through malice or
manifest or proven negligence (Art. 605)

a. RULES IN CASE OF PART-OWNERS (ARTICLES 589-594, CODE OF
COMMERCE)

Art. 589. If two or more persons should be part owners of a merchant vessel, a
partnership shall be presumed as established by the co-owners. ALPHA PHI BETA

This partnership shall be governed by the resolutions of the majority of the members.

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

The person having the smallest share in the ownership shall have one vote; and
proportionately the other part owners as many votes as they have parts equal to the
smallest one.

b. RULES IN CASE OF SHIP AGENTS (ARTICLES 595-602, CODE OF
COMMERCE)

Art. 595. The ship agent, whether he is at the same time the owner of the vessel, or
a manager for an owner or for an association of co-owners, must have the capacity to
trade and must be recorded in the merchants registry of the province.

The ship agent shall represent the ownership of the vessel, and may, in his own
name and in such capacity, take judicial and extrajudicial steps in matters relating to
commerce.

2. CAPTAINS AND MATERS OF VESSELS

They are the chiefs or commanders of ships.

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

Nature of position (3-fold character)
1. General agent of the shipowner
2. Technical director of the vessel
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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3. Representative of the government of the country under whose flag he
navigates.

a. QUALIFICATIONS
1. Filipino citizen ALPHA PHI BETA
2. Legal capacity to contract
3. Must have passed the required physical and mental examinations required
for licensing him as such. (Art. 609)

b. POWERS AND FUNCTIONS

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

Sources of funds to comply with the inherent powers of the captain (in
successive order):
1. From the consignee of the vessel;
2. From the consignee of the cargo;
3. By drawing on the ship agent;
4. By a loan on bottomry;
5. By sale of part of the cargo. (Art. 611)

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

No liability for the following:
1. Damages caused to the vessel or to the cargo by force majeure;
2. Obligations contracted for the repair, equipment and provisioning of the
vessel unless he has expressly bound himself personally or has signed a
bill of exchange or promissory note in his name. (Art. 620)

Solidary liabilities of the Ship Agent/ Shipowner for acts done by the
Captain towards Passengers and cargoes
1. Damages to vessel and to cargo due to lack of skill and negligence;
2. Thefts and robberies of the crew;
TRANSPORTATION LAW AB
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Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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3. Losses and fines for violation of laws;
4. Damages due to mutinies;
5. Damages due to misuse of power;
6. For deviations;
7. For arrivals under stress;
8. Damages due to non-observance of marine regulations (Art. 618)

c. DISCRETIONARY POWERS

A ships captain must be accorded a reasonable measure of discretionary
authority to decide what the safety of the ship and of its crew and cargo
specifically requires on a stipulated ocean voyage (Inter-Orient Maritime
Enterprises, Inc. vs. CA).

It is the right and duty of the captain, in the exercise of sound discretion
and in good faith, to do all things with respect to the vessel and its
equipment and conduct of the voyage which are reasonably necessary
for the protection and preservation of the interests under his charge,
whether those be of the shipowners, charterers, cargo owners or of
underwriters. It is a basic principle of admiralty law that in navigating the
vessel, the master must be left free to exercise his own best judgment.
Under the requirements of safe navigation, the judgment and discretion of
the captain of the vessel may be confined within a straitjacket, even in this
age of electronic communications. (Inter-Orient Maritime Enterprises, Inc.
vs. CA).

3. PILOT

a. CONCEPT

Pilot a person duly qualified, and licensed, to conduct a vessel into or out
of ports, or in certain waters.

The term generally connotes a person taken on board at a particular place
for the purpose of conducting a ship through a river, road or channel, or from
a port. ALPHA PHI BETA

Compulsory pilotage States possessing harbors have enacted laws or
promulgated rules requiring vessels approaching their ports to take on board
pilots licensed under the local law.

b. RELATIONSHIP TO MASTER AND SHIPOWNER

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

Master pro hac vice (for the time being) in the command and navigation of
the ship.

Shipowner and pilot

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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Gen. Rule: On compulsory pilotage grounds, the Harbor Pilot is responsible
for damage to a vessel or to life or property due to his negligence. (Such
negligence of the pilot in the performance of duty constitutes a maritime tort.)

Exceptions:
1. Accident caused by force majeure or natural calamity provided the pilot
exercised prudence and extra diligence to prevent or minimize
damages.
2. Countermand or overrule by the master of the vessel in which case
there registered owner of the vessel is liable.

The fact that the law compelled the master to take the pilot does not
exonerate the vessel from liability. The owners of the vessel are
responsible for the acts of the pilot, and they must be left to recover the
amount against him. (Far Eastern Shipping Company vs. CA)

4. OFFICERS AND CREW OF THE VESSEL

Sailing Mate/ First Mate second chief of the vessel who takes the place of the
captain in case of absence, sickness, or death and shall assume all of his duties,
powers and responsibilities.

Second Mate Takes command of the vessel in case of the inability or
disqualification of the captain and the sailing mate, assuming in such case their
powers and responsibilities. (Third in command)

Engineers Officers of the vessel but have no authority except in matter
referring to the motor apparatus. When two or more are hired, one of them shall
be the chief engineer. ALPHA PHI BETA

Members of the crew the aggregate of seamen who man a ship, or the ships
company. Hired by the ship agent, where he is present and in his absence, the
captain hires them, preferring Filipinos, and in their absence, he may take in
foreigners, but not exceeding 1/5 of the crew. (Art. 634)

Just causes for the discharge of seaman while contract subsists:
1. Perpetration of a crime
2. Repeated insubordination, want of discipline
3. Repeated incapacity and negligence
4. Habitual drunkenness
5. Physical incapacity
6. Desertion

Supercargoes person who discharges administrative duties assigned to him
by ship agent or shippers, keeping an account and record of transaction as
required in the accounting book of the captain.

E. CHARTER PARTIES

1. CONCEPT

The term charter party is taken from carta partita which literally means divided
document. Carta partita refers to the ancient practice of writing out the terms
and conditions of the contract in duplicate on one piece of parchment and then
dividing it down the middle thus providing each party with a copy.

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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Charter Party a contract by which the entire ship or some principal part thereof
is let by the owner to another person for a specified period of time or use, in
consideration of the payment of freight. (Often referred to as a form of
mercantile lease)

Parties: Charterer, Charter Party, and the Shipowner

2. KINDS: BAREBOAT AND CONTRACT OF AFFREIGHTMENT

Bareboat or demise by the terms of which the whole vessel is let to the
charterer which transfers to him its entire command and possession and
consequent control over its navigation, including the master and crew who
are his servants. The charterer is treated as owner pro hac vice of the
vessel. In such case, a common carrier becomes a private carrier. (Planters
Products, Inc. vs. CA)

o The charterer provides crew, food and fuel. The charterer is liable as if
he were the owner, except when the cause arises from the
unworthiness of the vessel.

o The charterer becomes the owner of the vessel pro hac vice, just for that
one particular purpose only. Because the charterer is treated as owner
pro hac vice, the charterer assumes the customary rights and
liabilities of the shipowner to third persons and is held liable for the
expense of the voyage and the wages of the seamen.

Contract of affreightment a contract whereby the owner of the vessel leases
part or all of its space to haul goods for others.

o The shipowner retains the possession, command and navigation of
the ship, the charterer merely having use of the space in the vessel in
return for his payment of the charter hired.

o What the time charterer acquires is the right to utilize the carrying
capacity and facilities of the vessel and to designate her destinations
during the term of the charter.

o In a voyage charter, master and crew remain in the employ of the owner
of the vessel.

o Kinds:

A. Time charter vessel is chartered for a fixed period of time or
duration of the voyage. ALPHA PHI BETA
B. Voyage or trip charter the vessel is leased for one or series of
voyages usually for purposes of transporting goods for charterer.

Bareboat or Demise Charter Contract of Affreightment
Charterer becomes liable to others
caused by its negligence.
Owner remains liable as carrier and must
answer for any breach of duty.
Charterer regarded as owner pro hac
vice fir the voyage.
Charterer is not regarded as owner.
Owner of the vessel relinquishes
possession, command and navigation to
charterer.
The vessel owner retains possession,
command and navigation of the ship.
Common carrier is converter to private
carrier.
Common carrier is not converted into
private carrier.


TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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3. PERSONS QUALIFIED TO MAKE CHARTER

The owner of the vessel, either in whole or in majority part, who have legal
control and possession of the vessel, may validly enter into charter parties with a
charterer. A third person called a broker may, however, intervene in the
execution of the charter between the principals.

The charterer, by himself, may subcharter the entire vessel to a third person
but only in the absence of an express prohibition in the original charter regarding
any subcharter. In such case, any cargo delivered by the second charterer for
loading may not generally be refused by the captain. The subcharter, where
entered into, is an independent contract by itself involving only the charterer and
the subcharterer and therefore does not give rise to any contractual relation
between the general owner and the subcharterer. ALPHA PHI BETA

Part owners of the vessel are not precluded from chartering the same for their
own commercial purposes. In fact, such part owners enjoy preference in the
charter of the vessel over other persons who offer equal conditions and freight.

The ship agent is not allowed to make contracts for a new charter unless he is
properly or duly authorized by the owner, or by virtue of an authority given by a
resolution of the majority of the co-owners. He may, however, make such charter
if the same has been extended to him in his certificate of appointment.

It is one of the inherent powers of the captain or master of the vessel to enter
into valid and binding charter parties, but only in the event of absence of the ship
agent or consignee, and only of the said captain or master acts in accordance
with the instructions of the agent or owner and protects the latters interests.

The validity of the charter is not affected by the circumstance that the captain
or master who executed the charter violated the orders or instructions of the
agent or owner. In this latter case, the agent or owner shall have a right of action
to recover damages against the erring captain or master.

4. REQUISITES OF A VALID CHARTER

As the charter party is a contract, it is therefore to be governed by the general
principles governing ordinary contracts. Hence, the parties therein are free to
stipulate upon such terms and conditions that would suit their purposes, subject
to the caveat that these should not be contrary to law or public policy.

1. Consent of the contracting parties;
2. Existing vessel which should be placed at the disposition of the shipper;
3. Freight;
4. Compliance with the requirements of Art. 652 of the Code of Commerce,
which requires that:

A charter party must be drawn in duplicate and signed by the contracting arties, and when
either does not know how or is not able to do so, by two witnesses at his request.

The charter party shall contain, besides the conditions freely stipulated, the following
circumstances:
1. The kind, name, tonnage of the vessel.
2. Her flag and port of registry.
3. The name, surname, and domicile of the captain.
4. The name, surname, and domicile of the ship agent, if the latter should make the charter
party.
5. The name, surname, and domicile of the charterer, and if he states that he is acting by
commission, that of the person for shoes account he makes the contract.
6. The port of loading and unloading.
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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7. The capacity, number of tons or weight, or measurement which they respectively bind
themselves to load and transport, or whether the charter party is total.
8. The freight to be paid, stating whether it is to be a fixed amount for the voyage or so
much per month, or for the space to be occupied, or for the weight or measurement of
goods making up the cargo, or in any other manner whatsoever agreed upon.
9. The amount of primage to be paid by the captain.
10. The days agreed upon for loading and unloading.
11. The lay days and extra lay days to be allowed and the demurrage for each of them to be
paid.

Primage bonus to be paid to the captain after the successful voyage (San
Beda Memory Aid 2006); payment for the use of the equipment belonging to the
captain. (Aquino/Hernando) ALPHA PHI BETA

5. CONCEPT OF AND LIABILITY FOR DEMURRAGE

Demurrage, in the strict sense of the term, means a sum of money due by the
express contract for the detention of the vessel in loading or unloading,
beyond the time allowed for that purpose in the charter party.

In other words, if the vessel is detained beyond the number of days agreed
upon in the charter contract for the loading and unloading of cargo, or for
eventual sail, the charterer shall answer for the demurrage incurred thereby,
the sum of which is usually fixed by the parties in the charter party.

Deadfreight the amount paid by or recoverable from a charterer of a ship for
the portion of the ships capacity the latter contracted for but failed to occupy.

Lay Days days allowed to charter parties for loading and unloading the cargo.

6. RIGHTS AND OBLIGATIONS OF CHARTER PARTIES

Shipowner or Ship Agent Charterer
1. If the vessel is chartered wholly, not to
accept cargo from others;
2. To observe represented capacity;
3. To unload cargo clandestinely placed;
4. To substitute another vessel if load is
less than 3/5 of capacity;
5. To leave the port if the charterer does
not bring the cargo within the lay days
and extra lay days allowed;
6. To place in a vessel in a condition to
navigate;
7. To bring cargo to nearest neutral port
in case of war or blockade.
1. To pay the agreed charter price;
2. To pay freightage on unboarded
cargo;
3. To pay losses to others for loading
uncontracted cargo and illicit cargo;
4. To wait if the vessel needs repair;
5. To pay expenses for deviation.







F. LOANS ON BOTTOMRY AND RESPONDENTIA

1. DEFINITION

Bottomry loan secured by the shipowner or ship agent guaranteed by the
vessel itself and payable only upon arrival of vessel at destination. This can also
be secured by the captain outside the residence of the shipowner or shipagent.

Respondentia loan secured by the owner of the cargo payable upon safe
arrival of cargo at destination. The shipowner, shipagent or captain cannot
secure the loan.

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
Contributed by: Ivin Ronald D.M. Alzona [2007] REV based on Atty. Villanueva-Castros Course Outline

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Hypothecary nature of Bottomry and Respondentia
Gen. Rule: The obligation of the borrower to pay the loan is extinguished if the
goods given as security are absolutely lost by reason of an accident of the sea,
during the voyage designated, and if it is proven that the goods were on board.

Exceptions:
1. Loss due to inherent defect
2. Loss due to barratry (willful misconduct on the pat of the master or crew in
pursuance of some unlawful or fraudulent purpose without the consent of
the owners, and to the prejudice of the owners interest)
3. Loss due to the fault or malice of the borrower;
4. The vessel was engaged in contraband; and
5. The cargo loaded on the vessel be different from that agreed upon.

Loan on Bottomry Loan on Respondentia
Definition
Loan made by shipowner or ship agent guaranteed
by vessel itself and repayable upon arrival of vessel
at destination.
Loan taken on security of the cargo laden on a
vessel, and repayable upon safe arrival of cargo at
destination.
Who may contract
Shipowner or ship agent. Outside of the residence of
the owners the captain
Only the owner of the cargo
Common elements
1. Exposure of security to marine peril;
2. Obligation of the debtor conditioned only upon safe arrival of the security at the point of destination.
Forms
1. Public instrument
2. Policy signed by the contracting parties and the broker taking part therein
3. Private instrument (Art. 720) ALPHA PHI BETA

2. DISTINGUISHED FROM ORDINARY LOAN

Bottomry/ Respondentia Ordinary Loan (Mutuum)
Not subject to Usury Law Subject to Usury Law
Liability of the borrower is contingent on the safe
arrival of the vessel or cargo at destination
Not subject to any contingency (absolute
liability)
The last lender is a preferred creditor The first lender is a preferred creditor
Existence of marine risks No such risks
Must be recorded in the registry of vessels in
order to bind third persons
No registration required

3. PARTIES TO THE LOAN

The shipowner may secure a loan on bottomry upon his ship, although in the
case where he is only a part owner, any bottomry that he may contract shall be
limited only to the extent of his interest in the vessel.

The captain, although he has no interest in the ship, may nevertheless enter into
a loan on bottomry as when, on account of extreme necessity, he may borrow
by means of a loan on bottomry in order to comply with the obligations under
Article 583 and 611 of the Code of Commerce. No loans on bottomry may
however be made, in any case, on the salaries of the crew, nor on the profits
which may be expected.

The cargo owner shall have the right to enter into a loan on respondentia
involving his cargo. The captain, being a mere agent of the ship owner and not
of the cargo owner, may not contract a loan on respondentia, and of he does so,
TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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such a loan would be void and the principal, interest, and costs of the contract
shall be chargeable to his private account, and he may even be discharged
altogether as ship captain by the shipowner.

4. FORMALITIES NEEDED

The loans on bottomry and respondentia must be executed in accordance with
the form and manner prescribed in Article 720 of the Code of Commerce, to wit:

1. By means of a public instrument.
2. By means of a policy signed by the contracting parties and the broker
taking part therein.
3. By means of a private instrument. ALPHA PHI BETA

Under whichever of these forms the contract is executed, it shall be entered in the
certificate of registry of the vessel and shall be recorded in the registry of vessel, without
which requisites, the credits of this kind shall not have, with regard to other credits, the
preference which, according to their nature. They should have although the obligation
shall be valid between the contracting parties.

The contracts made during a voyage shall be governed by the provisions of Articles 583
and 611, and shall be effective with regard to third persons from the date of their
execution, if they should be recorded in the registry of vessels of the port of registry of the
vessel before the lapse of eight days from the date of her arrival. Should the said eight
days elapse without the record having been made in the registry of vessels, the contracts
made during the voyage of the vessel shall produce no effect with regard to third persons,
except from the day of their inscription.

In order that the policy of the contracts executed in accordance with No. 2 may have
binding force, they must conform to the registry of the broker who took part therein. With
respect to those executed in accordance with No. 3, the acknowledgment of the signature
shall be required. ALPHA PHI BETA

Contracts which are not reduced to writing shall not give rise to judicial action. (Art. 720,
Code of Commerce)

G. AVERAGES

1. CONCEPT

Average an extraordinary or accidental expense incurred during the voyage in
order to preserve the cargo, vessel, or both, and all damages or deterioration
suffered by the vessel from departure to the port of destination, and to the cargo
from the port of loading to the port of consignment. (Art. 806, Code of
Commerce) ALPHA PHI BETA

The person whose property has been saved must contribute to reimburse the
damage caused or expense incurred if the situation constitutes general average.

Where both vessel and cargo are saved, it is general average; where only the
cargo is saved, it is particular average.

Expenses incurred to refloat a vessel, which accidentally ran aground, in order to
continue its voyage, do not constitute general average. Not only is there
absence of a marine peril, common safety factor, and deliberateness. It is the
safety of the property, and not the voyage, which constitutes the true foundation
of general average.

TRANSPORTATION LAW AB
ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY ALPHA PHI BETA FRATERNITY SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL SAN BEDA LAW SCHOOL
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Petty and ordinary expenses incident to navigation, such as those of pilotage of
coasts and ports, those of lighterage and towage, anchorage, inspection, health,
quarantine, lazaretto, and other so-called expenses, costs of barges and
unloading until the merchandise is placed on the wharf, and any other usual
expenses of navigation, shall be considered ordinary expenses to be defrayed by
the shipowner, unless there is an express agreement to the contrary.

Jettison act of throwing of cargo over board in order to lighten the vessel.

Order of goods to be cast overboard:
1. Those which are on the deck, preferring the heaviest one with the least utility
and value;
2. Those which are below the upper deck, beginning with the one with greatest
weight and smallest value. (Art. 815)

Jettisoned goods are not res nullius nor deemed abandoned within the
meaning of the civil law so as to be the object of occupation by salvage.

2. CLASSES OF AVERAGE AND THE PERSON LIABLE

A. Gross or General average includes all damages and expenses which are
deliberately caused in order to save the vessel, its cargo, or both at the same
time from real and known risk.

Requisites of General Average:
1. Common danger to ship and the cargo after it has been loaded whether
during the voyage or port of loading and unloading;
2. That for the common safety part of the vessel or cargo or both is
sacrificed deliberately;
3. That from the expenses or damages caused follows the successful
saving of the vessel and cargo;
4. That the expenses or damages should have been incurred after taking
legal steps and authority. ALPHA PHI BETA

Formalities
The claim for contribution will not prosper of the formalities prescribed under
Articles 813 and 814 are not complied with. The formalities are as follows:

1. There must be resolution of the captain, adopted after a deliberation with
the other officers of the vessel and after hearing all persons interested in
the cargoes. If the latter disagree, the decision of the captain should
prevail but they shall register their objections. ALPHA PHI BETA

2. The resolution must be entered in the logbook, stating the reasons and
motives for the dissent, and the irresistible and urgent causes if he acted
in his own accord. It must be signed I the first case, by all persons
present in the hearing. In the second case, by the captain and all the
officers of the vessel. The minutes must also contain a detail of all the
goods jettisoned and those injuries caused to those on board.

B. Particular or Simple average all the expenses and damages caused to the
vessel or to her cargo which have not inured to the benefit and common profit of
all the persons interested in the vessel and her cargo. If damage is not a general
average, the same can be considered particular average.

TRANSPORTATION LAW AB
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Since simple or particular averages do not inure to the common benefit, the
owner of the goods that suffered the damage bears the loss. Article 810 of
the Code of Commerce provides that the owner of the goods which gave
rise to the expense or suffered the damage shall bear the simple or particular
averages. The rules on simple or particular average are consistent with the
maxim res perit domino. ALPHA PHI BETA

However, under Article 732 of the Code of Commerce, if the vessel or goods
are hypothecated by a loan on bottomry or respondentia, the lender shall
also bear the loss in proportion to his interest.

PARTICULAR OR SIMPLE GROSS OR GENERAL
Definition
Damages or expenses caused to the vessel or
cargo that did not inure to the common benefit,
and borne by respective owners. (Art. 809)
Damages or expenses deliberately caused in
order to save the vessel, its cargo or both from
real and known risk. (Art. 811)
Requisites
1. Common danger
2. Deliberate sacrifice
3. Success
4. Proper formalities and legal steps
Liability
The owner of the goods which gave rise to the
expense or suffered the damage shall bear this
average.
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 the average. (Art. 812)
The insurers (Art. 859) and lenders on bottomry
and respondentia shall likewise contribute. (Art.
732)
Number of interests involved
Only one interest involved Several interests involved
Share in the damage or expense
100% share In proportion to the value of the owners property
saved
Right to recover
No reimbursement There may be reimbursement
Kinds (not exclusive)
Art. 809 Art. 811
Procedure for recovery
1. Assembly and deliberation
2. Resolution of the captain
3. Entry of the resolution in the logbook
4. Detailed minutes
5. Delivery of the minutes to the maritime
judicial authority of the first port, within 24
hours from arrival
6. Ratification by captain under oath (Arts. 813-
814)

Good not covered by general; average even if sacrificed:
1. Goods carried on deck (Art. 855)
2. Goods not recorded in the books or records of the vessel. (Art 855, par. 2)
3. Fuel for the vessel if there is more that sufficient fuel for the voyage.

H. COLLISIONS

1. DEFINITION

Collision an impact or sudden contact of a moving body with an obstruction in
its line of motion, whether both bodies are in motion or one stationary and the
other, no matter which, in motion. ALPHA PHI BETA

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Collision therefore is an impact or sudden contact of a vessel with another
whether both are in motion or one stationary.

Allision impact between a moving vessel and a stationary one.

2. ZONES IN COLLISION

There are three zones in collision:
1. First zone time up to the moment when risk of collision begins; within this
zone no rule is applicable because non is necessary; each vessel is free to
direct its course as it deems best without reference to the movements of the
other vessel.
2. Second zone time between moment when risk of collision begins up to the
moment it becomes practical certainty.
3. Third zone time when collision is certain up to the time of impact.

Doctrine of Error in Extremis: If a vessel having a right of way suddenly
changes its course during the third zone, in an effort to avoid an imminent
collision due to the fault of another vessel, such act may be said to be done in
extremis, and even if wrong cannot create responsibility on the part of said
vessel with the right of way. ALPHA PHI BETA

3. RULES ON LIABILITY

ONE VESSEL AT FAULT

Art. 826. If a vessel should collide with another, through or the fault, negligence,
or lack of skill of the captain, sailing mate, or any other member of the
complement, the owner of the vessel at fault shall indemnify the losses and
damages suffered, after an expert appraisal.

BOTH VESSELS AT FAULT

Art. 827. If the collision is imputable to both vessels, each shall suffer its own
damages, and both shall be solidarily responsible for the losses and
damages occasioned to their cargoes. ALPHA PHI BETA

PARTY AT FAULT CANNOT BE DETERMINED

Art. 828. The provisions of the preceding article are applicable to the use in
which it cannot be determined which of the two vessels has caused the collision.

CAUSE IS FORTUITOUS EVENT

Art. 830. If a vessel should collide with another, through fortuitous event or force
majeure, each vessel and its cargo shall bear its own damages.

Art. 832. If by reason of a storm or other cause of force majeure, a vessel which
is properly anchored and moored should collide with those nearby, causing
them damages, the injury occasioned shall be considered as particular
average of the vessel run into.

THIRD PERSON AT FAULT

Art. 831. If a vessel should be forced by a third vessel to collide with another,
the owner of the third vessel shall indemnify the losses and damages
caused, the captain thereof being civilly liable to said owner.
TRANSPORTATION LAW AB
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The doctrine of last clear chance and the rule on contributory negligence
cannot be applied in collision cases because of Article 827 of the Code of
Commerce. If both vessels were negligently operated, it does not matter of the
other has the last clear chance of avoiding the injury because under Article 827,
each must suffer its own damage if both of them are negligent. Proof that the
plaintiff was negligent will bar recovery from the defendant in collision cases even
if the plaintiffs negligence can be classified as merely contributory.

The doctrine of res ipsa loquitor applies in case a moving vessel strikes a
stationary object, such as a bridge post, dock, or navigational aid. (Far Eastern
Shipping vs. CA)

Doctrine of inscrutable fault: In case of collision where it cannot be
determined which between the two vessels was at fault, both vessels bear their
respective damage, but both should be solidarily liable for damage to the cargo
of both vessels.

4. LIMITED LIABILITY RULE

Art. 837. The civil liability incurred by the shipowners in the case prescribed in this
section, shall be understood as limited to the value of the vessel with all its
appurtenances and freightage earned during the voyage.

The real and hypothecary nature of maritime law limits the liability of the
shipowner and shipagent to the value of the vessel in collision cases. Although
Article 837 does not require abandonment, it is understood that abandonment is
also necessary in order to benefit from this limited liability.


I. ARRIVAL UNDER STRESS

1. CONCEPT (ART. 819, CC)

Arrival under stress the arrival of a vessel at the nearest and most convenient
port which was decided upon after determining that there is a well-founded fear
of seizure, privateers, or pirates or by reason of any accident of the sea disabling
it to navigate. ALPHA PHI BETA

The steps to be taken in the determination of the propriety of an arrival under
stress may be summarized as follows:
1. The captain should determine during the voyage if there is well founded
fear of seizure, privateers and other valid grounds.
2. The captain shall then assemble the officers.
3. The captain shall summon the persons interested in the cargo who may
be present and who may attend but without right to vote.
4. The officers shall determine and agree of 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 be entered in the minutes.

2. WHEN IMPROPER

TRANSPORTATION LAW AB
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Art. 820. An arrival shall not be considered lawful in the following cases:
1. If the lack of provisions should arise from failure to take the necessary
provisions for the voyage according to the usage and customs, or if they
should have been rendered useless or lost through bad stowage or
negligence in their care.
2. If the risk of enemies, privateers, or pirates should not have been well known,
manifest, and based on positive and provable facts.
3. If the defect of the vessel should have arisen from the fact that it was not
repaired, rigged, equipped, and prepared in a manner suitable for the
voyage, or from some erroneous order of the captain.
4. When malice, negligence, want of foresight, or lack of skill on the part of the
captain exists in the act causing the damage. ALPHA PHI BETA

3. EXPENSES

Art. 821. The expenses of an arrival under stress shall always be for the account of the
shipowner or agent, but they shall not be liable for the damages which may be caused the
shippers by reason of the arrival provided the latter is legitimate.

Otherwise, the ship agent and the captain shall be jointly liable.

Art. 822. Of in order to make repairs to the vessel or because there is danger that the
cargo may suffer damage, it should be necessary to unload, the captain must request
authorization from the competent judge or court for the removal, and carry it out with the
knowledge of the person interested in the cargo, or his representative, should there be
any.

In a foreign port, it shall be the duty, of the Philippine Consul, where there is one, to give
the authorization.

In the first case, the expenses shall be for the account of the ship agent or owner, and in
the second, they shall be chargeable against the owners of the merchandise for whose
benefit the act was performed.

If the unloading should take place for both reasons, the expenses shall be divided
proportionately between the value of the vessel and that of the cargo.

4. CUSTODY OF CARGO

Article 823. The custody and preservation of the cargo which has been
unloaded shall be intrusted to the captain, who shall be responsible for the same,
except in cases of force majeure. ALPHA PHI BETA

Article 824. If the entire cargo or part thereof should appear to be damaged, or
there should be imminent danger of its being damaged, the captain may request
of the competent judge or court, or of the consul in a proper case, the sale of all
or of part of the former, and the person taking cognizance of the matter shall
authorize it, after an examination and declaration of experts, advertisements, and
other formalities required by the case, and an entry in the book, in accordance
with the provisions of Article 624.

The captain shall, in a proper case, justify the legality of his conduct, under the
penalty of answering to the shipper for the price the merchandise would have
brought if they had arrived in good condition at the port of destination.


TRANSPORTATION LAW AB
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5. CAPTAINS LIABILITY

Art. 825. The captain shall be responsible for the damages caused by his delay,
if after the cause of the arrival under stress has ceased, he should not continue
the voyage.

If the cause of arrival should have been the fear of enemies, privateers, or
pirates, a deliberation and resolution in a meeting of the officers of the vessel and
persons interested in the cargo who may be present, in accordance with the
provisions contained in Article 819, shall precede the departure.

6. RULES IN CASE OF SHIPWRECK (Read: Articles 840-845)

Shipwreck the demolition or shattering of a vessel caused by her driving
ashore or on rocks and shoals in the midseas, or by the violence of winds and
waves in tempests.

If the wreck was due to malice, negligence or lack of skill of the captain, the
owner of the vessel may demand indemnity from said captain.

The rules on collision or allision, as may be pertinent, can equally apply to
shipwrecks.

J. SALVAGE

ACT NO. 2616 or The Salvage Law, enacted February 4, 1916

1. DEFINITION

Salvage a service which one person renders to the owner of a ship or goods,
by his own labor, preserving the goods or the ship which the owner or those
entrusted with the care of them have either abandoned in distress at sea, or are
unable to protect and secure. ALPHA PHI BETA

Salvage is founded on equity of remunerating private and individual services
performed in saving, in whole or in part, a ship or its cargo from impending peril,
or recovering them after actual loss. It is a compensation for actual services
rendered to the property charged with it, and is allowed for meritorious conduct of
the salvor, and in consideration of a benefit conferred upon the person whose
property he has saved.

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.

A claim for salvage rests on the principle that, unless the property be in fact
saved by those who claim the compensation, it cannot be allowed, however
benevolent their intention and however heroic their conduct.

Requisites of Salvage Claim
1. Marine peril
2. Service is voluntarily rendered and is not required as an existing duty or from
a special contract
3. Success in whole or in part or that service contributed to the success
4. Vessel is shipwrecked beyond the control of the crew or shall have been
abandoned.
5. Valid object of salvage.
TRANSPORTATION LAW AB
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Persons who have no right to a reward for salvage
1. Crew of the vessel saved;
2. Person who commenced salvage in spite of opposition of the captain or his
representative;
3. In accordance with Sec. 3 of the Salvage Law, a person who fails to deliver a
salvaged vessel or cargo to the Collector of Customs, if the port has a
collector, and otherwise to the provincial treasurer or municipal mayor.

Derelict a ship or her cargo which is abandoned and deserted at sea by those
who are in charge of it, without any hope of recovering it, or without any intention
of returning to it.

The intention of those in charge must be ascertained. If those in charge left with
the intention of returning, or of procuring assistance, the property is not derelict,
but if they quitted the property with the intention of finally leaving it, it is derelict
and a change of their intention and an attempt to return will not change its nature.
(Erlanger and Galinger vs. Swedish East Asiatic Co., Ltd) ALPHA PHI BETA

If it is clear that the intention to return is slight, the salvage which was done
thereafter is considered valid. (Aquino/ Hernando)

When the contract created is one of towage, only the owner of the towing vessel,
to the exclusion of the crew of said vessel, may be entitled to reimbursement.
(Barrios vs. Go Thong and Co.)

Subjects of Salvage:
1. Ship itself;
2. Jetsam goods which are cast into the sea, and there and sink and remain
under water;
3. Floatsam or Flotsam goods which float upon the sea when cast
overboard;
4. Ligan or Lagan goods cast into the sea tied to a buoy, so that they may be
found again by the owners.

Basis for entitlement to salvage reward
1. The labor expended by the salvors in rendering the salvage service.
2. The promptitude, skill and energy displayed in rendering the service and
saving the property.
3. The value of the property employed by the salvors in rendering the service,
and the danger to which such property was exposed.
4. The risk incurred by the salvors in rescuing the property salved.
5. The value of the property salved.
6. The degree of danger from which the property was rescued.

2. RIGHTS AND OBLIGATIONS OF SALVORS AND OWNERS

A salvor, in view of maritime law, has an interest in the property. This is called
a lien, but it never goes, in the absence of a contract expressly made, upon
the idea of a debt. He is, to all intents and purposes, a joint owner and if the
property is lost he must bear his share like the other joint owners.

If the ship and its cargo are saved together by the salvor, the salvage allowance
should be charged against the ship and the cargo in proportion of their
respective values, as in the case of general average; and neither is liable for the
salvage due from the other.
TRANSPORTATION LAW AB
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N

B
E
D
A


S
A
N

B
E
D
A

L
A
W
L
A
W
L
A
W
L
A
W

A AA A

B


The salvor has a right of possession of a derelict for purposes of a salvage
claim. A derelict is a boat or vessel found entirely deserted or abandoned on the
sea without hope or intention of recovery or return by the master or the crew,
whether resulting from wreck, accident, necessity, or voluntary abandonment.

Rules on Salvage Reward
1. The reward is fixed by the RTC judge in the absence of agreement or where
the latter is excessive. (Sec. 9)
2. The reward should constitute a sufficient compensation for the outlay and
effort of the salvors and should be liberal enough to offer an inducement to
others to render services in similar emergencies in the future.
3. If sold at public auction (no claim being made within 3 months from
publication), the proceeds, after deducting expenses and the salvage claim,
shall go to the owner; if the latter does not claim it within 3 years, 50% of said
proceeds shall go to the salvors, who shall divide it equitably, and the other
half to the government. (Sec. 11-12)
4. If a vessel is the salvor, the reward shall be distributed as follows:
a. 50% to the shipowner;
b. 25% to the captain; and
c. 25% to the officers and crew in proportion to their salaries. (Sec. 13)

The owner of the vessel, which is a derelict, does not renounce his right to
the property. There is no presumption of an intention to abandon such property
rights on the part of such owner under the Salvage Law. What the owner
abandons temporarily is his right of possession, which is thereby transferred to
the salvor who becomes bound to preserve the property with good faith and bring
it to a place of safety for the owners use.

The owner or his representative shall have a right to the delivery of the
vessel or things saved after the salvage is accomplished, provided that he
pays, or gives a bond to secure the expenses and the proper reward. The
amount and sufficiency of the bond, in the absence of agreement, shall be
determined by the collector of customs or by the RTC judge of the province
where the things saved may be found.

The owner of the salving vessel is also entitled to the salvage reward for the
use of his vessel in rendering salvage services even though he may not have
been present at the time the salvage service was rendered. Remuneration for
salvage service is awarded to the owners of the salving vessel on account of the
danger to which the service exposes their property, and the risk which they run of
loss in suffering their vessels engaged in such perilous undertaking.

SOURCES: Notes and Cases on the Law on Transportation and Public Utilities by Aquino and
Hernando; Commercial Law Reviewer by Sundiang and Aquino; San Beda Commercial Law
Memory Aid 2006; Bar Review Materials in Commercial Law by Miravite; Atty. Villanueva-Castros
lectures and assigned cases.

We shall not be saved without Wisdom,
for though Knowledge is Power, only Wisdom is Liberty!
ALPHA PHI BETA