POINTERS IN TRANSPORTATION LAW

(2018 Bar Examinations)

Atty. Maria Diory Rabajante

CONTRACT OF CARRIAGE, DEFINED

A contract of carriage is defined as one whereby a certain person or association of

persons obligate themselves to transport persons, things, or goods from one place to another
for a fixed price. (Spouses Fernando v. Northwest Airlines, Inc., G.R. Nos. 212038 and
212043, 8 February 2017) Thus, when an airline issues a ticket to a passenger confirmed for
a particular flight on a certain date, a contract of carriage arises. The passenger then has
every right to expect that he would fly on that flight and on that date. If he does not, then the
carrier opens itself to a suit for breach of contract of carriage. (Id.)

COMMON CARRIER, DEFINED

A common carrier is a person, corporation, firm or association engaged in the business

of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering such services to the public. (Spouses Pereña v. Spouses Zarate, et
al., G.R. No. 157917, 29 August 2012)

The definition of "common carriers" in the Civil Code makes no distinction as to the
means of transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. (First Philippine
Industrial Corporation v. Court of Appeals, G.R. No. 125948, 29 December 1998)

Article 1732 of the Civil Code avoided any distinction between a person or an enterprise
offering transportation on a regular or an isolated basis; and has not distinguished a carrier
offering his services to the general public, that is, the general community or population, from
one offering his services only to a narrow segment of the general population. (Spouses Pereña
v. Spouses Zarate, supra., citing De Guzman v. Court of Appeals, G.R. No. L-47822, 22,
December 1988)

TEST IN DETERMINING A COMMON CARRIER

In determining whether a party is a common carrier of goods: (a) 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; (b) he must undertake to carry goods of the kind to which his
business is confined; (c) he must undertake to carry by the method by which his business is
conducted and over his established roads; and (d) the transportation must be for hire. (First
Philippine Industrial Corporation v. Court of Appeals, supra.)

The true test for a common carrier is not the quantity or extent of the business actually
transacted, or the number and character of the conveyances used in the activity, but whether
the undertaking is a part of the activity engaged in by the carrier that he has held out
to the general public as his business or occupation. If the undertaking is a single
transaction, not a part of the general business or occupation engaged in, as advertised and
held out to the general public, the individual or the entity rendering such service is a private,
not a common, carrier. The question must be determined by the character of the business
actually carried on by the carrier, not by any secret intention or mental reservation it may
entertain or assert when charged with the duties and obligations that the law imposes.
(Spouses Pereña v. Spouses Zarate, et al., supra.)

The Supreme Court has considered as common carriers pipeline operators, custom
brokers and warehousemen, and barge operators even if they had limited clientèle.
(Spouses Pereña v. Spouses Zarate, et al., supra., citing First Philippine Industrial Corporation
v. Court of Appeals, supra., Calvo v. UCPB General Insurance Co. [G.R. No. 148496, 19
March 2002] and Asia Lighterage and Shipping, Inc. v. Court of Appeals [G.R. No. 147246, 9
August 2003])

The operator of a school bus service is a common carrier in the eyes of the law. He
is bound to observe extraordinary diligence in the conduct of his business. He is presumed to
be negligent when death occurs to a passenger. His liability may include indemnity for loss of
earning capacity even if the deceased passenger may only be an unemployed high school
student at the time of the accident. (Spouses Pereña v. Spouses Zarate, et al., supra.)

COMMON CARRIER AND PRIVATE CARRIER

A private carrier is one who, without making the activity a vocation, or without holding
himself or itself out to the public as ready to act for all who may desire his or its services,
undertakes, by special agreement in a particular instance only, to transport goods or
persons from one place to another either gratuitously or for hire. The provisions on ordinary
contracts of the Civil Code govern the contract of private carriage. The diligence required of
a private carrier is only ordinary, that is, the diligence of a good father of the family.
(Spouses Pereña v. Spouses Zarate, et al., supra.)

In contrast, a common carrier is a person, corporation, firm or association engaged in

the business of carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering such services to the public. Contracts of common carriage are
governed by the provisions on common carriers of the Civil Code, the Public Service Act,
and other special laws relating to transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to have acted negligently in case
of the loss of the effects of passengers, or the death or injuries to passengers. (Spouses
Pereña v. Spouses Zarate, et al., supra.)

REGISTERED OWNER RULE

The person who is the owner of a vehicle is liable for any damages caused by the
negligent operation of the vehicle although the same was already sold or conveyed to another
person at the time of the accident. (Villanueva v. Domingo, G.R. No. 144274, 20 September
2004)

The registered owner rule has for its purpose easy identification of the owner to be sued
for liability. (Villanueva v. Domingo, supra.) To require the driver of the vehicle to be authorized
by the actual owner before the registered owner can be held accountable is to defeat the very
purpose why motor vehicle legislations are enacted in the first place (Id.)

KABIT SYSTEM

The kabit system is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to operate them
under his license, sometimes for a fee or percentage of the earnings. Although the parties to
such an agreement are not outrightly penalized by law, the kabit system is invariably
recognized as being contrary to public policy and therefore void and inexistent under Article
1409 of the Civil Code. (Lim v. Court of Appeals, G.R. No. 125817, 16 January 2002)

It would seem then that the thrust of the law in enjoining the kabit system is not so much
as to penalize the parties but to identify the person upon whom responsibility may be fixed in
case of an accident with the end view of protecting the riding public. The policy therefore
loses its force if the public at large is not deceived, much less involved. Thus, when a
passenger jeepney covered by a certificate of public convenience is sold to another who
continues to operate it under the same certificate of public convenience under the so-
called kabit system, and in the course thereof the vehicle meets an accident through the fault
of another vehicle, the new owner may sue for damages against the erring vehicle. (Lim v.
Court of Appeals, G.R. No. 125817, supra.)

DILIGENCE REQUIRED OF COMMON CARRIERS

a. In Transportation of Goods

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 transported by them.
Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or deterioration of the goods. (Westwind
Shipping Corporation v. UCPB General Insurance Co., Inc., et al., G.R. Nos. 200289 and
200314, 25 November 2013)

b. In Carriage of Passengers

The law exacts from common carriers (i.e., those 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) the highest degree
of diligence (i.e., extraordinary diligence) in ensuring the safety of its passengers. (G.V. Florida
Transport v. Heirs of Battung, Jr., G.R. No. 208802, 14 October 2015)

STIPULATIONS LIMITING LIABILITY

a. In Transportation of Goods

A stipulation in the bill of lading limiting to a certain sum the common carrier’s liability for
loss or destruction of a cargo -- unless the shipper or owner declares a greater value -- is
sanctioned by law. There are, however, two conditions to be satisfied: (1) the contract is
reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon
by the parties. The rationale for, this rule is to bind the shippers by their agreement to the
value (maximum valuation) of their goods. It is to be noted, however, that the Civil Code does
not limit the liability of the common carrier to a fixed amount per package. In all matters not
regulated by the Civil Code, the right and the obligations of common carriers shall be governed
by the Code of Commerce and special laws. Thus, the COGSA, which is suppletory to the
provisions of the Civil Code, supplements the latter by establishing a statutory provision
limiting the carrier’s liability in the absence of a shipper’s declaration of a higher value in the
bill of lading. The provisions on limited liability are as much a part of the bill of lading as though
physically in it and as though placed there by agreement of the parties. (Belgian Overseas
Chartering and Shipping N.V. And Jardine Davies Transport Services, Inc., G.R. No. 143133,
5 June 2002)
 (See Articles 1744 to 1751 of the Civil Code)

b. In Carriage of Passengers

No device, whether by stipulation, posting of notices, statements on tickets, or otherwise,

may dispense with or lessen the responsibility of the common carrier as defined under Article
1755 of the Civil Code. (Spouses Pereña v. Spouses Zarate, et al., supra.)

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. (Civil Code, Article 1758)

PRESUMPTION OF NEGLIGENCE

a. In Transportation of Goods

Owing to the high degree of diligence required of common carriers, they are, as a
general rule, presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss
or damage, therefore, they have the burden of proving that they observed such high level of
diligence. (Eastern Shipping Lines v. BPI/MS Insurance Corp., G.R. No. 193986, 15 January
2014)

There are very few instances when the presumption of negligence does not attach and
these instances are enumerated in Article 1734 of the Civil Code. In those cases where the
presumption is applied, the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption. (Bascos v. Court of Appeals, G.R. No.
101089, 7 April 1993)

b. In Carriage of Passengers

To successfully fend off liability in an action upon the death or injury to a passenger, the
common carrier must prove his or its observance of that extraordinary diligence; otherwise,
the legal presumption that he or it was at fault or acted negligently would stand. (Spouses
Pereña v. Spouses Zarate, et al., supra.)

Where the injury sustained by the passenger was in no way due (1) to any defect in the
means of transport or in the method of transporting, or (2) to the negligent or willful acts of the
common carrier’s employees with respect to the foregoing – such as when the injury arises
wholly from causes created by strangers which the carrier had no control of or prior knowledge
to prevent – there would be no issue regarding the common carrier’s negligence in its duty to
provide safe and suitable care, as well as competent employees in relation to its transport
business; as such, the presumption of fault/negligence foisted under Article 1756 of the Civil
Code should not apply. (G.V. Florida Transport v. Heirs of Battung, Jr., supra., citing Pilapil v.
Court of Appeals [259 Phil. 1031])

If the death was caused by a co-passenger, the applicable provision is Article 1763 of
the Civil Code, which states that “a common carrier is responsible for injuries suffered by a
passenger on account of the willful acts or negligence of other passengers or of strangers, if
the common 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.” Notably, for this obligation, the
law provides a lesser degree of diligence, i.e., diligence of a good father of a family, in
assessing the existence of any culpability on the common carrier’s part. (G.V. Florida
Transport v. Heirs of Battung, Jr., supra.)

DURATION OF EXERCISE OF EXTRAORDINARY DILIGENCE

a. In Transportation of Goods

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. (Westwind Shipping Corporation v. UCPB General
Insurance Co., Inc., et al., supra.)

The common carrier’s duty to observe the requisite diligence in the shipment of goods
lasts until the goods are delivered to, or until the lapse of a reasonable time for their
acceptance, by the person entitled to receive them. (Philippine Charter Insurance Corporation
v. Unknown Owner of The Vessel M/V National Honor, G.R. No. 161833, 8 July 2005)

b. In Carriage of Passengers

The duty of a common carrier to provide safety to its passengers so obligates it not only
during the course of the trip but for so long as the passengers are within its premises and
where they ought to be in pursuance to the contract of carriage. (La Mallorca v. Navidad, G.R.
No. 145804, 6 February 2003)

The rule is that the relation of carrier and passenger continues until the passenger has
been landed at the port of destination and has left the vessel owner's dock or premises. Once
created, the relationship will not ordinarily terminate until the passenger has, after reaching
his destination, safely alighted from the carrier's conveyance or had a reasonable opportunity
to leave the carrier's premises. All persons who remain on the premises a reasonable time
after leaving the conveyance are to be deemed passengers, and what is a reasonable time or
a reasonable delay within this rule is to be determined from all the circumstances, and includes
a reasonable time to see after his baggage and prepare for his departure. The carrier-
passenger relationship is not terminated merely by the fact that the person transported has
been carried to his destination if, for example, such person remains in the carrier's premises
to claim his baggage. (Aboitiz Shipping Corporation v. Court of Appeals, G.R. No. 84458, 6
November 1989)

OBLIGATION OF PASSENGER

The Air Passenger Bill of Right mandates that the airline must inform the passenger in
writing of all the conditions and restrictions in the contract of carriage. Purchase of the contract
of carriage binds the passenger and imposes reciprocal obligations on both the airline and the
passenger. The airline must exercise extraordinary diligence in the fulfillment of the terms and
conditions of the contract of carriage. The passenger, however, has the correlative obligation
to exercise ordinary diligence in the conduct of his or her affairs. (Alfredo Manay, Jr. v. Cebu
Air, Inc., G.R. No. 210621, 4 April 2016)

Passengers who failed to exercise the necessary care in the conduct of their affairs were
without a doubt negligent. When the cause of petitioners’ injury was their own negligence,
there is no reason to award moral damages. The duty of an airline to disclose all the necessary
information in the contract of carriage does not remove the correlative obligation of the
passenger to exercise ordinary diligence in the conduct of his or her affairs. The passenger is
still expected to read through the flight information in the contract of carriage before making
his or her purchase. (Alfredo Manay, Jr. v. Cebu Air, Inc., supra.)

CONTRIBUTORY NEGLIGENCE

Contributory negligence is conduct on the part of the injured party, contributing as a legal
cause to the harm he has suffered, which falls below the standard which he is required to
conform for his own protection. It is an act or omission amounting to want of ordinary care on
the part of the person injured which, concurring with the defendant’s negligence, is the
proximate cause of the injury. Thus, there is no contributory negligence when the
passengers were not even aware of the forthcoming danger. (PNR v. Vizcara, G.R. No.
190022, 15 February 2012)

DOCTRINE OF LAST CLEAR CHANCE

The doctrine of last clear chance provides that where both parties are negligent but the
negligent act of one is appreciably later in point of time than that of the other, or where it is
impossible to determine whose fault or negligence brought about the occurrence of the
incident, the one who had the last clear opportunity to avoid the impending harm but failed to
do so, is chargeable with the consequences arising therefrom. Stated differently, the rule is
that the antecedent negligence of a person does not preclude recovery of damages caused
by the supervening negligence of the latter, who had the last fair chance to prevent the
impending harm by the exercise of due diligence. (Greenstar Express, Inc. v. Universal Robina
Corporation, G.R. No. 205090, 17 October 2016)

BILL OF LADING

A bill of lading operates both as a receipt and as a contract. It is a receipt for the goods
shipped and a contract to transport and deliver the same as therein stipulated. As a receipt, it
recites the date and place of shipment, describes the goods as to quantity, weight, dimensions,
identification marks and condition, quality and value. As a contract, it names the contracting
parties, which include the consignee, fixes the route, destination, and freight rate or charges,
and stipulates the rights and obligations assumed by the parties. (Iron Bulk Shipping
Philippines, Co., Ltd. v. Remington, G.R. No. 136960, 8 December 2003)

The general rule is that upon receipt of the goods, the consignee surrenders the bill of
lading to the carrier and their respective obligations are considered canceled. Article 353 of
the Code of Commerce, however, provides two exceptions where the goods may be released
without the surrender of the bill of lading because the consignee can no longer return it. These
exceptions are when the bill of lading gets lost or for other cause. In either case, the consignee
must issue a receipt to the carrier upon the release of the goods. Such receipt shall produce
the same effect as the surrender of the bill of lading. (Designer Baskets, Inc. v. Air Sea
Transport, Inc., G.R. No. 184513, 9 March 2016)

LIMITED LIABILITY RULE

“No vessel, no liability” expresses in a nutshell the limited liability rule. In this
jurisdiction, the limited liability rule is embodied in Articles 587, 590 and 837 under Book III of
the Code of Commerce. These articles precisely intend to limit the liability of the shipowner or
agent to the value of the vessel, its appurtenances and freightage earned in the voyage,
provided that the owner or agent abandons the vessel. When the vessel is totally lost in which
case there is no vessel to abandon, abandonment is not required. Because of such total loss,
the liability of the shipowner or agent for damages is extinguished. However, despite the total
loss of the vessel, its insurance answers for the damages for which a shipowner or agent may
be held liable. (Aboitiz Shipping Corporation v. Court of Appeals, G.R. No. 121833, 17 October
2008)

The limited liability rule has exceptions, namely: (1) where the injury or death to a
passenger is due either to the fault of the ship owner, or to the concurring negligence of the
ship owner and the captain; (2) where the vessel is insured; and (3) in workmen's
compensation claims. (Chua Yek Hong v. Intermediate Appellate Court, G.R. No. 74811, 30
September 1988)

Considering the “real and hypothecary nature” of liability under maritime law, the
provisions of the Civil Code would not have any effect on the principle of limited liability for
ship owners or ship agents. In other words, the primary law is the Civil Code, and in default
thereof, the Code of Commerce and other special laws are applied. Since the Civil Code
contains no provisions regulating liability of ship owners or agents in the event of total loss or
destruction of the vessel, it is the provisions of the Code of Commerce, more particularly Article
587, that govern in this case. (Chua Yek Hong v. Intermediate Appellate Court, supra.)

CHARTER PARTIES

American jurisprudence defines charter party as a contract by which an entire ship or

some principal part thereof is let by the owner to another person for a specified time or use.
(Puromines, Inc. v. Court of Appeals, G.R. No. 91228, 22 March 1993)

In modern maritime law and usage, there are three (3) distinguishable types of charter
parties: (a) the "bareboat" or "demise" charter; (b) the "time" charter; and (c) the "voyage" or
"trip" charter. (Litonjua Shipping Company Inc. v. National Seamen Board, G.R. No. L-51910,
10 August 1989)

A bareboat or demise charter is a demise of a vessel, much as a lease of an

unfurnished house is a demise of real property. The shipowner turns over possession of his
vessel to the charterer, who then undertakes to provide a crew and victuals and supplies and
fuel for her during the term of the charter. The shipowner is not normally required by the terms
of a demise charter to provide a crew, and so the charterer gets the "bare boat," i.e., without
a crew. Sometimes, of course, the demise charter might provide that the shipowner is to
furnish a master and crew to man the vessel under the charterer's direction, such that the
master and crew provided by the shipowner become the agents and servants or employees
of the charterer, and the charterer (and not the owner) through the agency of the master, has
possession and control of the vessel during the charter period. (Litonjua Shipping Company
Inc. v. National Seamen Board, supra.)

It is well settled that in a demise or bare boat charter, the charterer is treated as
owner pro hac vice of the vessel, the charterer assuming in large measure the customary
rights and liabilities of the shipowner in relation to third persons who have dealt with him or
with the vessel. In such case, the Master of the vessel is the agent of the charterer and not of
the shipowner. The charterer or owner pro hac vice, and not the general owner of the vessel,
is held liable for the expenses of the voyage including the wages of the seamen. (Litonjua
Shipping Company Inc. v. National Seamen Board, supra.)
 A time charter, upon the other hand, like a demise charter, is a contract for the use of
a vessel for a specified period of time or for the duration of one or more specified voyages. In
this case, however, the owner of a time-chartered vessel (unlike the owner of a vessel under
a demise or bare-boat charter), retains possession and control through the master and crew
who remain his employees. 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. (Litonjua Shipping Company Inc. v. National Seamen Board, supra.)

A voyage charter, or trip charter, is simply a contract of affreightment, that is, a

contract for the carriage of goods, from one or more ports of loading to one or more ports of
unloading, on one or on a series of voyages. In a voyage charter, master and crew remain in
the employ of the owner of the vessel. (Litonjua Shipping Company Inc. v. National Seamen
Board, supra.)

WARSAW CONVENTION

When the place of departure and the place of destination in a contract of carriage are
situated within the territories of two High Contracting Parties (contracting parties to the
Warsaw Convention), said carriage is deemed an "international carriage." Thus, the Warsaw
Convention applies when the air travel, where the alleged tortious conduct occurred, was
between the United Kingdom and Italy, which are both signatories to the Warsaw Convention.
Allegations of tortious conduct committed against an airline passenger during the
course of the international carriage do not bring the case outside the ambit of the
Warsaw Convention. (Lhuillier v. British Airways, G.R. No. 171092, 15 March 2010)